P L D 1961 Supreme Court 573 (PLP)

HAMOODUR RAHMAN, J.‑This is a certificated appeal from the judgment and order of a Division Bench of the High Court of West Pakistan sitting at Karachi whereby an order of a learned Single Judge of the Chief Court of Sind directing that an award of the London Court of Arbitration be made a rule of the said Court and a decree be passed in terms thereof was set aside. The appellant, which is a company registered in England under the English Companies Act and carries on business in London, entered into various contracts during the years 1948 to 1950 with the respondent firm carrying on business at Karachi for the purchase of sheep casings. These contracts were in the first instance made by cablegrams but some were consequently confirm by executing printed contract forms which used to be sent in duplicate by the appellant to the respondent firm for it to sign and return one of the said forms. In relation to six of these contracts, however, differences and disputes arose between the parties and the appellant in terms of the arbitration clause contained in each of the said printed contract forms referred the disputes relating to all the said six contracts to the arbitration of the London Court of Arbitration on the 12th April, 1961. The respondent firm, it appears, had not signed three out of the above‑mentioned six contract forms with regard to which disputes were alleged to have arisen though it does not deny having entered into the contracts which they purported to confirm. But when the London Court of Arbitra tion called upon the respondent firm to file its preliminary comments it denied having ever agreed to any arbitration or to have any knowledge of the nature of the disputes raised by the appellant and demanded photostaic copies of the confirmations of the said contracts in order to satisfy itself that they bore its signatures. The Court of Arbitration furnished the respondent firm with a copy of the appellant's letter concerning the disputes and the photostaic copies of the three signed contracts as also informed the respondent firm that after its statement is filed the said Court would decide as to whether it had jurisdiction to arbitrate in respect of the disputes arising from the unsigned contracts. The respondent firm neither filed any statement nor gave any reply to the Court of Arbitration which thereupon nominated an arbitrator and gave notice by registered post to the respondent firm to file its statement of defence. The latter refused to accept the registered notices and letters sent to it but in answer to a cablegram intima ting that the 28th February 1952 had been fixed as the date of hearing before the arbitrator maintained that even the three signed contract had become null and void as the appellant had failed to open the requisite letters of credit stipulated for in the said contracts. The respondent firm was again informed that all questions of jurisdiction sought to be raised by it would be decided by the arbitrator but the said firm thereafter neither acknowledged any of the communications received from the London Court of Arbitra tion nor took any part in the proceedings before the arbitrator. In the circumstances an ex pare award was made against the respondent firm on the 18th April, 1952 for 11,417‑13‑7d. with costs assessed at

378. This was the award which the appellant sought to enforce as a foreign award in the Sind Chief Court under the provisions of the Arbitration (Protocol and Convention) Act, 193 7 by applying on the 12th July, 1952 to file the said award in Court in terms of section 5 thereof. This application was opposed by the respondent firm on, inter alia, the grounds that the Arbitration (Protocol and Convention) Act, 1937 was not applicable to Pakistan and that in any event the award was not a foreign award within the meaning of the said Act. The Sind Chief Court took the view that the preamble to the Act itself clearly indicated that the Act applied to the Provinces and the Capital of the Federation of Pakistan and that the award was enforceable in Pakistan as the respondent firm had failed to show that it suffered from any of the defects, mentioned in section 7 (2) of the said Act, which alone could render a foreign award, to which the Act applied, unenforceable. Hence it ordered the award to be filed and passed a decree in terms thereof. The preamble to the said Act reads as follows: "Whereas India was a State signatory to the Protocol on Arbitration Clauses set forth in the first Schedule, and to the Convention on the Execution of Foreign Arbitral Awards set forth in the Second Schedule, subject in each case to a reserva tion of the right to limit its obligations in respect thereof to contracts which are considered as commercial under the law in force in the Provinces and the Capital of the Federation. And whereas it is expedient, for the purpose of giving effect to the said Protocol and of enabling the said Convention to become operative in the Provinces and the Capital of the Federation, to make certain further provisions respecting the law of arbitration." Presumably because the second paragraph of the Preamble quoted above manifested an intention to give effect to the Protocol on Arbitration Clauses and the Convention on the Execution of Foreign Arbitral Awards appended as schedules to the said Act in the Provinces and the Capital of the Federation the Sind Chief Court took the view that by such express adaptation the Act had been made applicable to Pakistan. Furthermore since under a Notification published by the Government of India in the Gazette of India on the 8th June, 1938 Great Britain was one of the countries declared by the Government of India to be a party to the Convention the award made in London was held to be enforceable in accordance with the provisions of the said Act, after its adaptation, in Pakistan also. On appeal, however, a Division Bench of the High Court of West Pakistan reversed this decision and held that the award in question was not enforceable in Pakistan. After a careful and exhaustive examination of certain rules of International Law and the provisions of the Protocol, the Convention, the Arbitration (Protocol and Convention) Act, 1937, the Indian Independence Act, 1947 and the Indian Independence (International Arrangements) Order, 1947, the learned Judges of the Division Bench came to the conclusion that even though the Act of 1937 as adapted continued as existing law for Pakistan it could not become operative until and unless the special conditions laid down in section 2 thereof for its own operation were fulfilled. Section 2 of the Arbitration (Protocol and Convention) Act provides "

2. In this Act "foreign award" means an award on differences relating to matters considered as commercial under the law in force in the Provinces and the Capital of the Federa tion, made after the 28th day of July, 1924, (a) in pursuance of an agreement for arbitration to which the Proto .‑ol set forth in the First Schedule applies, and (b) between persons of whom one is subject to the jurisdiction of some one of such Powers as the Central Government, being satisfied that reciprocal provisions have been made, may by notification in the Official Gazette, declare to be parties to the Convention set forth, in the Second Schedule and of whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and (c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may by like notifications, declare to be territories to which the said Convention applies, and for the purposes of this Act an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made." It will be observed from this that before an award can be enforced as a "foreign award" under the said Act it must be shown, amongst other things (i) to have been made in respect of differences between persons who are subject to the jurisdiction of Powers which have been declared by notification published in the Official Gazette by the Central Government to be parties to the Convention mentioned in the Act, and (iii) to have been made, in a territory which has been similarly declared to be a territory to which the said Convention applies. No such notification was produced either before the Chief Court or the High Court. In the absence, therefore, of any such notification it was presumed that reciprocal provisions for the enforcement of awards made in Pakistan did not exist in England, where the award under consideration was made and hence the main condition for the operation of the Act in Pakistan had not been fulfilled. The High Court appears, furthermore, to have held the view that since Pakistan was a separate international entity it had to ratify the Convention and adhere to the Protocol independently, for according to the rules of International law Pakistan did not automatically succeed to all the international rights and obligations of British India. It is against this decision that the appellant has now come up on appeal to this Court and it is contended on its behalf that the High Court had erred in taking the view that notwithstanding the provisions of section 18 of the Indian Independence Act and clause 4 of the Indian Independence (International Arrangements) Order, 1947, the Arbitration (Protocol and Convention) Act, 1937 was not operative in Pakistan or that any fresh notification was required to be issued in Pakistan under section 2 of the said Act. According to the appellant's contention by reason of the above mentioned provisions the rights and obligations arising out of all international agreements to which British India was a party devolved upon both India and Pakistan and such agreements should have been treated as operative in Pakistan as if she was a party‑to the same. This argument though apparently plausible does not bear scrutiny. It fails to take into account that under the system of law which prevailed in British India and now prevails in this country international arrangements affecting private rights and obligations do not become operative of their own force but require some legislative or other sanction. Such international arrangements are recognised and enforced in our national Courts only to the extent they are incorporated into the municipal or domestic laws of our country and subject to the conditions, if any, therein specified. Thus the Protocol on Arbitration Clauses and the Convention on the Execution of Foreign Arbitral Awards had to be incorporated in the Arbitration (Protocol and Convention) Act, 1937 and the conditions therein prescribed had to be complied with, by issuing the notification of the 8th June, 1938, before they could become operative even in British India. The question now is 'whether having become operative in British India the said Protocol and Convention were also operative in Pakistan after she was carved out of the parent State of British India and established as an independent State. The learned counsel for the appellant has, of course, argued that that is what was sought to be achieved by the provisions of section 18 of the Indian Independence Act and clause 4 of the Indian Independence (International Arrangements) Order, 1947. The first provided that the law existing in British India before the appointed day i.e. 15th August 1947, shall continue, with necessary adaptations, as the law of Pakistan until repealed or altered by a competent authority. The second incorporated an agreement arrived at between India and Pakistan for the devolution of international rights and obligations whereby it was inter alia, agreed that rights and obligations arising under international agreements which did not have an exclusive territorial application will devolve on both India and Pakistan and will, if necessary, be apportioned between the two. It is no doubt correct that the Arbitration (Protocol and Convention) Act, 1937 was an existing law so far as British India was concerned and, as such, it was continued in force in Pakistan by reason of the provisions of subsection (3) of section 18 of the Indian Independence Act. Indeed it was even suitably adapted for the avowed purpose of giving effect to the said Protocol and to enable the said Convention to become operative in the Provinces and the Capital of the Federation under the Pakistan (Adaptation of Existing Pakistan Laws) Order, 1947. But this by itself was not sufficient to make the Protocol and Convention operative as the Act itself prescribed that before an award can be treated as a "foreign award" for the purposes of the said Act it must have been made in a territory declared by notification to be a territory to which the Convention applied and upon differences between persons who are subjects of Powers declared by notifica tion to be parties to the said Convention. No such notification has been published as yet by the Government of Pakistan but it is contended that no such notification was necessary for the Act having been continued in Pakistan as an existing law the notifica tions issued thereunder prior to the appointed day must also be deemed to have been continued, particularly, since under the Indian Independence (International Arrangements) Order, 1947 the rights and obligations arising under the Protocol and Convention had also devolved upon Pakistan. With this, however, we are unable to agree for more than one reason. Firstly, because, the Indian Independence (Inter national Arrangements) Order, 1947 did not and, indeed, could not provide for the devolution of treaty rights and obligations which were not capable of being succeeded to, by a part of a c country, which is severed from the parent State and establishing as an independent sovereign Power, according to the practice of States. We advisedly use the expression "practice of States" in this regard for there appear to be no settled rules of International law governing the succession of States. But as far as it can be gathered the consensus of opinion amongst international jurists seems to be in favour of the view that as a general rule a new State so formed will succeed to rights and obligations arising only under treaties specifically relating to its territories e.g., treaties relating to its boundaries or regulating the navigation of rivers or providing for guarantees or concessions but not to rights and obligations under treaties of alliance, arbitration or commerce. An examination of the provisions of the said Order of 1947 also reveals no intention to depart from this principle. The relevant provisions thereof are as follows: Agreement as to the devolution of international Rights and Obligations upon the Dominions of India and Pakistan.

1. The international rights and obligations to which India is entitled and subject immediately before the 15th day of August 1947, will devolve in accordance with the provisions of this agreement.. 2. (1) Membership of all international organisations together with the rights and obligations attaching to such membership, will devolve solely upon the Dominion of India. For the purposes of this paragraph any rights or obliga tions arising under the Final Act of the United Nations Monetary and Financial Conference will be deemed to be rights or obligations attached to membership of the Inter national Monetary Fund and to membership of the Interna tional Bank for Reconstruction and Development. (2) The Dominion of Pakistan will take such steps as may be necessary to apply for membership of such international organisations as it chooses to join. 3. (1) Rights and obligations under international agree ments having an exclusive territorial application to an area comprised in the Dominion of India will devolve upon that Dominion. (2) Rights and obligations under international agree ments having an exclusive territorial application to an area comprised in the Dominion of Pakistan will devolve upon that Dominion.

4. Subject to Articles 2 and 3 of this agreement, rights and obligations under all international agreements to which India is a party immediately before the appointed day will devolve both upon the Dominion of India and upon the Dominion of Pakistan, and will, if necessary, be apportioned between the two‑Dominions." Under these provisions it is significant that Pakistan does not succeed to the membership of international organisations or the rights and obligations attaching to such membership but has to apply to become a member of any organisation she chooses to, join. Thus she did not automatically become a member of the United Nations nor did she succeed to the rights and obligations which attached to India by reasons of her membership of the League of Nations at Geneva or the United Nations. It is difficult therefore, to appreciate how clause 4 of the said order can be said to be applicable to all kinds of international agreements or that it intended to provide for the succession to rights and obligations of the parent State which did not normally devolve upon a State established by secession from the parent State under the rules of International Law or which attached to the parent State as a consequence of her membership of international organisations. The Protocol on Arbitration Clauses, it appears, was filed sometime in the year. 1923 with the League of Nations at Geneva but then it was only in the nature of a proposal. which was to remain open for acceptance by ratification by any member State wishing to avail of it and until at least two States so ratified the same it could not come into effect. It was at a much later stage that the Convention on the Execution of Foreign Arbitral Awards came to be adopted for the ratification of the Protocol by member States desiring to adhere to it and it was only thereafter that the Protocol was ratified and the ratifying States took steps to give effect to it in their own respective territories by suitable legislation. The ratification could thus be made by only a member State and had to be deposited with the Secretary General of the League of Nations. In the circum stances if Pakistan could not, under the Indian Independence (International Arrangements) Order succeed to the rights and obligations acquired by British India by virtue of her member. ship of the League of Nations or its successor organisation‑‑the United Nations it follows that Pakistan could not be deemed to have succeeded to the right of ratification that British India possessed as a member of the League of Nations and the ratification of the Protocol by British India could not enure to the benefit of Pakistan. The earlier notification of 1938, therefore, even under the scheme of devolution incorporated in the above‑mentioned Order, could not continue to be operative in Pakistan which had to signify its adherance to the Protocol after becoming a member of the United Nations and acquiring the right to so adhere to the Protocol. So far, however, as the national Courts of Pakistan are concerned they could be made aware of such adherance only by the issuance of the notification mentioned in section 2 of the Arbitration (Protocol and Con vention) Act, 1937 by the Central Government of Pakistan. Secondly; because, the said Order being in the nature of an agreement between India and Pakistan was not binding upon other States which may have earlier adhered to the Protocol and ratified the Convention. They‑may or may not have chosen to enter into .the reciprocal arrangements contemplated thereunder with the newly established State. Thus the Indian Independence (International Arrangements) Order, 1947, even if it intended to lay down a different rule of devolution, could not effectuate that purpose unless and until the other contracting States agreed to have such reciprocal arrangements with Pakistan. The old notification of 1938, therefore, could not by any means be treated as continuing to be valid in spite of such a vital change of circumstance. A fresh notification was, in this view of the matter; necessary to indicate that the foreign Power whose subject wished to enforce an award made outside Pakistan was a party to the Convention and the place where the award was made was situated in a territory to which the Convention applied. In the absence of such a notification it is not possible for the national Courts of Pakistan to hold that the award sought to be enforced is a "foreign award" within the meaning of section 2 of the Arbitration (Protocol and Convention) Act, 1937, for the satification thereunder as to the existence of reciprocal provisions has to be of the Central Government of Pakistan and not of the Courts. Unless such satisfaction is evidenced in the manner indicated in the Act the Courts in this country are helpless and are not in a position to hold that the conditions necessary for making such an award enforceable in Pakistan under the provisions of the said Act have been shown to have been fulfilled by party seeking to enforce the award, on whom the initial onus clearly lies to show that the award is a "foreign award" of the nature con templated under the Act. In this connection it might also be pointed out that for determining if the conditions mentioned in section 2 of the Act have been fulfilled it is neither necessary nor proper for the national Courts to enter upon any investigation as to whether reciprocal provisions have in fact been made in the country where the award sought to be filed was made for the enforcement of awards made in Pakistan. In matters pertaining to international arrangements the Courts should act in aid of the executive authority and should neither say nor do anything which might cause embarrassment to that authority in the conduct of its international relations. Thus if the notification contemplated under the Act had been issued the national Courts would have been bound to hold that the conditions prescribed for treating an award as a foreign award had been fulfilled and would not have been entitled to go behind the notification and investigate whether reciprocal provisions did in fact also exist in the notified country. In this view of the matter it is not necessary for us, in the present case, to go into the question as to whether reciprocal provisions have in fact been made in England for the enforce ment of awards made in Pakistan or whether Pakistan considers herself to have adhered to the Protocol of become a signatory to the Convention. It is sufficient for us to say that in the absence of any notification by the Central Government of Pakistan declaring England to be a party to the Convention and her territories to be territories to which the said Convention applies the award in question cannot be held to be a "foreign award"' within the meaning of section 2 of the Arbitration (Protocol and Convention) Act, 1937 and cannot, therefore, be allowed to be filed in any Court in Pakistan or enforced like an award made in an arbitration proceeding in Pakistan. Another reason that has weighed with us for coming to the conclusion that the notification of the 8th June 1938 cannot be treated as continuing in operation is that to hold otherwise would be tantamount to denying to Pakistan her sovereign right as a "power" to decide for herself as to which of the signatory States, if any, she would like to continue to have reciprocal arrangements with for the enforcement of arbitral awards made in each others territories in accordance with the simplified procedure indicated in the Arbitration (Protocol and Convention) Act, 1937. It may well be that Pakistan may not, on becoming an independent State, have chosen to continue to have diplomatic relations with one or the other of the countries mentioned in the earlier notification and in such event could she, nevertheless, be considered to be still bound to enforce awards made in such countries merely because the name of such a country appeared in the notification issued by the Government of India in 1938? We think, not. This does not, however, mean that the appellant has no remedy open to it, for, awards made by foreign arbitrators could, even before the Arbitration (Protocol and Convention) Act, 1937 was enacted, be enforced by action on the award provided the agreement to submit the differences to arbitration was made within the jurisdiction of the local Courts. Having held that the award sought to be filed by the appellant in the then Sind Chief Court at Karachi was not enforceable in Pakistan in the same manner as an award to which the Arbitration Act, 1940 applied we do not propose to express any opinion on the other point raised in the grounds of appeal as it was not argued at the Bar and a decision thereon is not necessary for the disposal of this appeal. The result, therefore, is that this appeal is dismissed with costs. A. H. Appeal dismissed.