Court's Analysis of arbitration act

Justice Ahmad Nadeem Arshad of the Lahore High Court issued a significant ruling that provided a detailed examination of important legal points and judicial precedents related to arbitration. The main point of the case was that the petitioner objected to the impartiality of the appointed arbitrator and requested the court to appoint an independent arbitrator, which the court rejected. This report sheds light on the facts of the case, the reasons provided by the court, and the judicial precedents applied in the decision.

**Background of the Case:**

The petitioner, Stacco Shahid Builders Joint Venture (JV), was awarded a contract by the Lahore Cantonment Board for constructing a 250-bed hospital, which was later expanded to a 500-bed hospital. Due to the project's increased scope and cost, a dispute arose between the parties. The petitioner filed an application in court seeking the appointment of an independent and impartial arbitrator to resolve this dispute, arguing that the arbitrator mentioned in the contract, the Director of Military Lands and Cantonments, Lahore, could not be considered impartial due to his association with the opposing party.

**Petitioner's Arguments:**

The petitioner contended that the arbitrator named in the contract, the Director of Military Lands and Cantonments, Lahore, was a representative of the opposing party (Lahore Cantonment Board) and, therefore, could not render an impartial decision. The petitioner argued that no one could be a judge in their own case and requested the court to appoint a new, independent, and impartial arbitrator.

**Court's Analysis:**

The court thoroughly reviewed the fact that the arbitrator was pre-determined in the agreement between the parties, which was made by mutual consent. Justice Ahmad Nadeem Arshad clarified that when parties choose an arbitrator themselves, they should abide by the agreement unless solid and credible evidence is presented against the arbitrator.

The court stated that although the petitioner claimed bias on the part of the arbitrator, no evidence was provided to support this claim. It was further noted that if bias is known or becomes apparent to the parties and they still accept the arbitrator, the agreement remains legally binding.

**Judicial Precedents and Their Significance:**

The court incorporated several important judicial precedents in this decision:

1. **Messrs Commodities Trading International Corporation v. Trading Corporation of Pakistan:** Emphasized the principle of appointing a neutral arbitrator.

2. **Engr. Inam Ahmad Osmani v. Federation of Pakistan:** Focused on the authority of the appointed arbitrator, asserting that an arbitration agreement chosen by the parties is enforceable.

3. **Lahore Stock Exchange Ltd. v. Fredrick J. Whyte Group:** Established that allegations of fraud or coercion should be presented before the arbitrator, not the court.

These precedents strengthened the court's decision that parties cannot change their chosen arbitrator without a solid basis, and bias on the arbitrator's part is acceptable unless there is clear and proven prejudice.

Rejecting all the petitioner's arguments, the court ruled that the matter should be referred to the Director of Military Lands and Cantonments, Lahore, under the pre-existing arbitration agreement. The court clarified that when parties agree on an arbitrator at the time of the contract, they cannot legally change this arbitrator unless there is a clear irregularity in the arbitration process.

Furthermore, the court stated that if any issues of bias or impartiality arise during the arbitration process, a complaint can be filed according to the law, but the agreement itself cannot be disregarded.

This decision highlights the necessity of maintaining the legal status of arbitration agreements and asserts that courts should not allow the replacement of an arbitrator chosen by the parties without a substantial reason. The court emphasized that the parties should adhere to their agreed-upon terms and allow the arbitration process to be completed, after which any irregularities may be legally challenged.