For more than two years, Pakistan has deliberated over a reform that should have been among the least contentious items on its legal agenda: replacing an arbitration law enacted in 1940 with one suited to 21st-century commerce.

In April 2023, an Arbitration Law Review Committee chaired by Justice Syed Mansoor Ali Shah, then a Supreme Court judge, was set up to fix the existing framework. By May 2024, the Law and Justice Commission of Pakistan had presented the Arbitration Bill 2024 to the federal law minister, describing the current regime as marked by the "absence of arbitration-friendly rules and time-consuming procedures." With 2027 approaching, the bill has still not been enacted.

Investors have been told to expect it. Nothing has moved. The question is no longer whether Pakistan knows how to modernize its arbitration law, but who benefits from leaving it as it is.

An award that has to be fought over a second time before it can be enforced has lost much of what arbitration promises.

- Muhammad Siddique Ali Pirzada

The status quo is not neutral. It preserves familiar room for discretion while shifting uncertainty onto businesses whose contracts depend on reliable dispute resolution. No one has to decide to block reform for an outdated system to survive. Institutional incentives can keep it alive on their own.

Arbitration is not procedural housekeeping. It decides who has the authority to settle a dispute, how courts and tribunals relate to each other, how far parties can set their own terms, and whether an award is actually final.

The 1940 Act’s flaws are structural, not just a matter of age. It gives courts several ways to step in before, during and after an arbitration. They can intervene when disputes are referred to arbitration, send awards back for reconsideration, extend the time for making an award, and rule on questions about the award or the arbitration agreement itself. Together, these powers undermine the autonomy, efficiency and finality that arbitration is meant to provide.

The Act also lacks a clear statement of a principle that modern arbitration laws take for granted, known as competence-competence: a tribunal decides in the first instance whether it has jurisdiction, and courts supervise within defined limits. The real question is when courts should intervene, on what basis and how far. Disciplined supervision discourages obstruction and tactical litigation. Undisciplined supervision invites both.

This is where Pakistan’s position has become incoherent. Its courts increasingly embrace the principles of modern arbitration, while its statute remains out of step with them.

In Taisei Corporation v. A.M. Construction Company, decided in 2024, the Supreme Court held that an award made in Singapore was a foreign award under Pakistani law even though Pakistani law governed the contract, because the seat of arbitration was decisive. The court stressed restraint in recognizing and enforcing such awards. In Kausar Rana Resources v. Qatar Lubricants Company, decided in December 2024, it went further, holding that courts should support rather than pre-empt the arbitral process. It also noted that the draft law had reached the federal government in May 2024 and expressed hope that it would be prioritized.

Other jurisdictions point the same way. India’s Supreme Court, in the Bharat Aluminium case, limited Indian courts’ power over arbitrations seated abroad, while Singapore and the United Kingdom confine judicial intervention to grounds set out in law. Their experience shows that arbitration works not because courts stay out of it, but because the limits on their involvement are clear.

Investors do not commit capital on the strength of legislative promises. They price predictability. They want to know whether arbitration agreements will be respected, whether tribunals can decide their own jurisdiction, whether courts will intervene only on principle, and whether awards will be final.

Pakistan does have a law for recognizing and enforcing foreign awards, the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011, which implements the New York Convention. But being enforceable on paper is not the same as being final in practice.

The World Bank’s 2025 Business Ready data estimates that recognizing a foreign arbitral award in Pakistan takes 383 days and costs about 11 percent of the claim’s value. An award that has to be fought over a second time before it can be enforced has lost much of what arbitration promises.

A new law alone would not transform the system. Dubai, Qatar and Singapore did not become arbitration hubs through legislation alone. They built competent institutions, modern rules, specialist lawyers, experienced tribunals and courts willing to treat finality as the point of arbitration. That kind of credibility is earned over time, not announced.

The delay, then, is more than legislative inertia. It exposes a gap between Pakistan’s ambitions in cross-border commerce and the institutional discipline needed to support them. The jurisprudence has moved. The flaws have been identified. The cost of delay can be measured.

What remains is whether Pakistan is prepared to remove the incentives that keep an outdated law in place and bring its statute into line with the principles its own courts already embrace.

- Muhammad Siddique Ali Pirzada is an LLM candidate in international and comparative law at George Washington University Law School. X: @msapirzada