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In an ICC arbitration dispute with a Bermuda-based claimant, we recently achieved a significant victory for our client, a leading Pakistani oil and gas exploration and production company. The tribunal ruled in favour of our client, finding that it lacked jurisdiction over the dispute under Pakistani law.

Our client had entered into Petroleum Concession Agreements (PCAs) with the Government of Pakistan and Joint Operating Agreements (JOAs) with the claimant for oil and gas exploration and production in Pakistan. The claimant initiated ICC arbitration proceedings against our client over alleged non-compliance with the JOAs.

We argued that the tribunal lacked jurisdiction because the arbitration agreement in the JOAs did not cover disputes between Pakistani and foreign working interest owners. We contended that Pakistani law governed the arbitration agreement and that under Pakistani law, the dispute should be resolved through Pakistani domestic fora.  The provision for ICSID and ICC arbitration applies to claims between the Government and foreign parties inter se.

A key issue in the case was determining the proper law governing the arbitration agreement. We asserted that Pakistani law should govern the arbitration proceedings, as neither the PCAs nor the JOAs explicitly stipulated the proper law of arbitration agreement. The ICC had designated Singapore as the “seat” of arbitration and the ”venue” where hearings took place in London. We argued that in terms of Pakistan law and Singapore law, the choice of law governing the main contract should also apply to the arbitration agreement in the absence of any indication to the contrary in the contract.

The tribunal agreed with our arguments, holding that Pakistani law was the proper law governing the arbitration agreement. It found that the JOAs did not provide for international arbitration of disputes between Pakistani and foreign working interest owners.

In reaching its decision, the tribunal considered the three-step test outlined in the English Court of Appeal’s judgment in Sulamérica Cia Nacional De Seguros S.A. and others v. Enesa Engenharia S.A. and others [2012] EWHC 42 (Comm); [2012] EWCA Civ 638. We argued that this test supported the application of Pakistani law, as there was no express choice of law, and Pakistani law was the implied choice given its status as the governing law of the PCAs and JOAs.

The tribunal also relied on the Singaporean cases of BCY v. BCZ [2016] SGHC 249 and BNA v. BNB [2019] SGCA 84, which held that choosing a different lex arbitri from the governing law is insufficient to outweigh the presumption favouring the latter as the proper law of the arbitration agreement.

Yousaf Khosa, the Partner, who led the firm’s team on this matter, commented:

“This award is a testament to our firm’s expertise in complex, multi-jurisdictional disputes in the oil and gas sector. It reinforces the importance of carefully drafting dispute resolution clauses.”

The award has significant implications for the oil and gas industry, particularly for foreign companies operating in Pakistan. It highlights the need for clarity in dispute resolution provisions and the interplay between PCAs and JOAs.

Our team was led by Pakistan Partner Yousaf Khosa and included Junior Associate Zubair Nasar. This success demonstrates our firm’s capability to handle high-stakes international arbitrations and our deep understanding of the energy sector.

Please contact Yousaf Khosa if you require assistance with complex disputes in the petroleum sector.

Grant Thornton Anjum Rahman (“GT”) is a leading professional services firm in Pakistan providing assurance, tax and advisory services. GT is organised as a partnership firm under the Partnership Act 1932. We have been advising GT on a dispute with one of its former partners (the “Disputing Partner”),

In early 2023, the Disputing Partner was found guilty of misconduct by GT and expelled. The Disputing Partner sought to challenge the expulsion by means of a suit at the Sindh High Court. In these proceedings, he sought an interim injunction, commonly known as a ‘stay order,’ suspending the expulsion. The High Court did not grant the stay order at the first hearing after our intervention.

Several months later, the Disputing Partner moved another such application before a different Judge and obtained an order suspending his expulsion at an ex parte hearing. The earlier application for interim injunction was not disclosed to this Judge at this hearing.

We moved an intra-court appeal challenging the grant of the stay order in June 2023, during the annual summer vacations of the High Court. On our urging, the Division Bench was minded to hear and decide the appeal as an urgent case during vacations.

As per judicial precedent, appellate Courts refuse to interfere with the grant of ad-interim relief in first-instance proceedings. The Courts take the position that only orders deciding applications for interim injunction can be challenged in appeal.

Shahbakht Pirzada, Partner in our Dispute Resolution practice, represented GT in the appeal, which was argued over the course of two months. The appeal confined itself to grounds of abuse of process, eschewing any argument on the merits of the expulsion. The Division Bench pronounced judgment in favour of GT and vacated the stay order granted to the Disputing Partner. The reasoned judgment of the High Court is a welcome addition to the substantial body of judicial precedent on abuse of process, requirements of fair disclosure and standards of propriety that a litigant applying for injunctive relief must observe, notwithstanding the merits of the underlying dispute.

Pakistan partner Shahbakht Pirzada argued the matter.

If you require advice on partnership or other commercial disputes, contact Shahbakht Pirzada today.