“Building Regional Capacity Through Shared Expertise”
Mian Zafar Iqbal Kalanauri,
Advocate Supreme Court Pakistan, Arbitrator (Fellow CIArb), Barrister, Mediator (CEDAR, IMI, CMC, USA), Master Trainer in Mediation (CEDAR), Legal Educator, Reformist of Judicial System and Legal Education, White-Collar Crime Investigator
Introduction
The China-Pakistan Economic Corridor (CPEC), a flagship of the Belt and Road Initiative (BRI), is among the most significant transnational development programs of the twenty-first century. As CPEC 2.0 unfolds, the emphasis is shifting from infrastructure to industrial cooperation, legal institutionalization, and human capital development-requiring predictable laws, credible dispute resolution, and transparent governance.
Pakistan’s ability to attract sustainable foreign direct investment (FDI) depends on strengthening the rule of law through modern arbitration frameworks and enforceable contracts. Yet, despite its partnership with China, challenges persist-outdated arbitration laws, regulatory uncertainty, and inconsistent enforcement continue to undermine investor confidence.
China’s gradual reform of its arbitration regime and the success of jurisdictions such as Singapore, Hong Kong, and the United Kingdom under the UNCITRAL Model Law provide guiding models. This article examines these comparative systems, evaluates Pakistan’s legal deficiencies, and proposes a roadmap for reform-highlighting the need for a UNCITRAL-based arbitration regime, ratification of the Singapore Convention, and establishment of the Pakistan International Arbitration and Mediation Center (PIAMC) to transform Pakistan into a rule-based, investor-friendly economy.
Executive Summary
This paper examines how Pakistan can leverage CPEC 2.0 to attract sustainable foreign direct investment (FDI) through legal reform, institutional modernization, and regional collaboration.
Pakistan’s economic challenges-currency volatility, inflation, policy inconsistency, and energy bottlenecks-continue to deter investors. Weak enforcement mechanisms and an outdated Arbitration Act 1940 further erode confidence, underscoring the urgent need for legal modernization.
Comparative analysis of Singapore, Hong Kong, India, and China reveals that UNCITRAL-aligned arbitration laws, judicial restraint, and transparent enforcement have been central to investor trust. Pakistan must follow this trajectory by enacting a Pakistan International Arbitration and Mediation Act (PIAMA), ratifying the Singapore Convention, and establishing the Pakistan International Arbitration Centre (PIAC) and Pakistan–China Dispute Resolution Forum (PC-DRF).
The study also emphasizes institutional strengthening—transforming the Special Investment Facilitation Council (SIFC) into a statutory authority, creating a CPEC e-Window for digital governance, and harmonizing SEZ regulations.
CPEC 2.0 envisions a phased roadmap (2025–2030):
Consolidation (2025–26): Governance and utility reforms in SEZs.
Diversification (2026–28): Expansion into renewable energy, agritech, and EV manufacturing.
Integration (2028–30): Establishing Pakistan as a digitally connected regional logistics and industrial hub.
Collectively, these reforms aim to transform Pakistan into a predictable, transparent, and rule-based investment destination aligned with global standards of arbitration and economic governance.
Challenges and Constraints
1. Macroeconomic Environment
Persistent currency volatility and delayed profit repatriation deter long-term investors.
High cost of capital and IMF-linked fiscal adjustments limit domestic co-financing.
Inflationary pressures reduce industrial competitiveness.
2. Policy and Regulatory Uncertainty
Frequent tax and import-duty revisions erode investor confidence.
Lack of inter-agency coordination among BOI, SECP, provincial SEZ boards, and ministries.
Complex approval procedures increase time-to-market for SEZ entrants.
3. Infrastructure and Energy Bottlenecks
Utility delays (power, gas, water) in SEZs and ports slow operationalization.
Transmission and distribution losses inflate energy tariffs.
Transport logistics gaps persist beyond core CPEC corridors.
4. Security and Political Risk
Localized attacks near Gwadar and Western Corridor heighten insurance costs.
Political transitions often disrupt continuity of CPEC management structures.
5. Financing and Project Preparation
Declining Chinese concessional lending post-COVID and debt-sustainability concerns.
Limited pipeline of bankable PPP projects for multilateral participation.
6. Strategic Suggestions and Key Measures for Improvement
6.1. Institutional Reforms
Transform SIFC into a transparent, legally-mandated Investment Facilitation Authority with quarterly performance dashboards.
Introduce Commercial Courts within SEZs for expedited contract enforcement.
Digitize land and customs processes through a CPEC-eWindow Portal.
6.2. Investment Climate Enhancement
Establish a 10-year policy stability framework covering taxation and repatriation.
Offer political risk insurance in collaboration with MIGA and ICIEC.
Implement carbon-credit incentives for green industrial projects.
6.3. Infrastructure and SEZ Readiness
Guarantee utility service-level agreements (SLAs) for each SEZ.
Develop public-private logistics hubs around Gwadar and Pasni to anchor Western Corridor trade.
Fast-track ML-1 modernization through blended finance (China + ADB + GCC).
6.4. Human Capital and Technology
Launch CPEC Skills & Innovation Hubs inside priority SEZs for workforce training.
Promote university-industry collaboration under “Shared Expertise” partnerships with Chinese, GCC, and ASEAN institutions.
7. A Centralized Digital “One-Window” Operation
The single most effective measure would be the creation and implementation of a fully integrated, bilingual (Mandarin/Urdu/English) digital platform for all trade and investment.
What it is: A single online portal where companies can complete all necessary procedures, from business registration and securing licenses to customs clearance and tax filing.
Why it helps: This would replace the current system of navigating multiple, often uncoordinated, federal and provincial departments. It would significantly cut down on paperwork, reduce processing times, and increase transparency, thereby minimizing opportunities for corruption and bureaucratic delays. For example, a Chinese tech firm wanting to set up in a CPEC Special Economic Zone (SEZ) could upload all its documentation to this single portal and track its application status in real-time.
8. Financial and Currency Integration
Simplifying financial transactions is crucial for seamless business operations.
RMB-PKR Swap Agreement: While a currency swap agreement exists, its use should be expanded and made more accessible for private sector businesses, not just for government-to-government transactions. This would reduce the reliance on the US dollar, minimize exchange rate risks, and lower transaction costs for traders and investors on both sides.
Banking Channels: Encourage major Chinese banks to establish more branches in Pakistan and vice-versa. Direct banking links would facilitate easier Letters of Credit (LCs), direct transfers, and project financing.
9. Uniformity and Clarity in Policies
Policy predictability is a cornerstone of investor confidence.
Harmonized SEZ Policies: Ensure that the policies, incentives, and regulations across all nine CPEC SEZs are uniform and consistently applied. A foreign investor should not face a completely different set of rules when choosing between an SEZ in Punjab versus one in Sindh.
Stable Tax Regime: Avoid sudden and retroactive changes to tax laws. A long-term, predictable tax framework allows businesses to plan their investments with greater certainty.
To overcome these challenges and unlock the full potential of CPEC 2.0 and FDI, a multi-pronged and proactive approach is essential.
10. Enhancing the Investment Climate:
Streamline Regulations: Simplify investment procedures through one-window operations and reduce bureaucratic red tape. The recent “Pakistan Investment Policy 2023” is a step in the right direction, but effective implementation is key.
Ensure Policy Consistency: Provide a stable and predictable policy environment to build investor confidence. Frequent changes in regulations and tax regimes create uncertainty and deter long-term commitments.
Strengthen Legal Frameworks: Improve legal protections for foreign investments, ensure the sanctity of contracts, and establish efficient dispute resolution mechanisms.
11. Bolstering Security Measures:
Comprehensive Security Plan: Implement a robust and intelligence-driven security strategy to protect CPEC projects and foreign personnel.
Community Engagement: Foster positive relationships with local communities to address their concerns and gain their support, which can be a crucial element in ensuring the security of projects.
12. Promoting Transparency and Inclusivity:
Open and Transparent Agreements: Make the terms of CPEC and other investment agreements public to foster trust and accountability.
Equitable Project Distribution: Ensure that the benefits of CPEC and other FDI projects are distributed fairly across all provinces to mitigate regional grievances and promote national unity.
Third-Party Participation: Welcome investment from countries other than China in CPEC projects to diversify funding sources and enhance the project’s international legitimacy.
13. Focusing on Sustainable Development:
Green Corridor Initiatives: Prioritize investments in renewable energy and environmentally friendly technologies to align with global sustainability goals.
Technology Transfer and Skill Development: Actively seek technology transfer from foreign partners and invest in vocational training to create a skilled workforce that can meet the demands of new industries.
14. Future Roadmap: A Vision for Growth
The future roadmap for CPEC 2.0 and FDI in Pakistan is centered on a strategic shift from infrastructure development to industrial and socio-economic uplift.
14.1. The Five New Corridors: The recently announced five new corridors under CPEC 2.0 provide a clear roadmap for future development:
Growth Corridor: Focusing on industrial cooperation and the development of Special Economic Zones (SEZs).
Livelihood Corridor: Aimed at poverty alleviation and improving the quality of life for ordinary Pakistanis.
Innovation Corridor: Promoting cooperation in science, technology, and the digital economy.
Green Corridor: Encouraging investment in sustainable development and renewable energy.
Open Corridor: Enhancing regional connectivity and trade.
14.2. Key Sectoral Focus: The future of FDI in Pakistan is expected to be driven by key sectors including:
Information Technology and Telecommunications: Capitalizing on Pakistan’s young and tech-savvy population.
Agriculture: Modernizing the agricultural sector to enhance productivity and food security.
Mines and Minerals: Exploring and developing Pakistan’s rich mineral resources.
Manufacturing and Industry: Leveraging the SEZs to attract export-oriented industries.
14.3. Long-Term Vision (up to 2030): The long-term plan for CPEC envisions a fully connected and industrialized Pakistan, serving as a hub for regional trade and commerce. Key long-term projects include the complete overhaul of Pakistan’s railway network and the development of a comprehensive logistics and transportation infrastructure.
By proactively addressing the existing challenges, implementing pragmatic policy suggestions, and staying committed to its long-term vision, Pakistan can transform CPEC 2.0 into a true engine of sustainable economic growth and prosperity for its people.
14.4. Future Road Map (2025 – 2030)
Phase
Time Frame
Key Deliverables
Expected Outcomes
Phase I — Consolidation
2025–2026
Complete utilities and governance in 3 priority SEZs; finalize ML-1 financing
Restored investor confidence; operational export zones
Phase II — Diversification
2026–2028
Expand to EVs, agritech, renewable clusters; activate SIFC’s PPP unit
Diversified FDI inflows from China, GCC, ASEAN
Phase III — Integration
2028–2030
Connect SEZs with Gwadar/Pasni logistics; launch CPEC Digital Corridor
Pakistan positioned as regional industrial and logistics hub
I5. China’s Legal Framework for Arbitration and ADR
China’s journey toward a modern arbitration regime began with the enactment of its Arbitration Law in 1994, which laid a solid foundation for the country’s dispute resolution framework. The law firmly established institutional arbitration as the primary mechanism for resolving disputes, requiring parties to enter into a written agreement to submit their disputes to arbitration. Its scope is broad, covering contractual and property disputes between parties of equal legal standing, whether they are individuals, legal persons, or organizations.
Under this law, arbitration must be conducted through recognized commissions such as CIETAC, BAC, or SCIA, ensuring consistency and administrative oversight. Arbitral awards issued under these institutions are final and binding, and parties may seek enforcement through the People’s Courts if needed. Judicial intervention is deliberately limited: courts can only set aside awards on procedural grounds, with the Supreme People’s Court retaining the final authority to refuse enforcement of foreign-related awards.
China’s dispute resolution landscape extends beyond arbitration. It incorporates people’s mediation, labor dispute arbitration, and an innovative med-arb mechanism, allowing arbitrators to serve as mediators within the same case-an approach that reflects China’s preference for amicable settlement.
This framework offers several strengths. The “single and final award” mechanism ensures speed and efficiency, helping parties achieve resolution without prolonged appeals. The confidential nature of arbitration proceedings safeguards commercial secrets, an essential factor in high-value disputes. As a signatory to the New York Convention, China ensures that arbitral awards are enforceable internationally, making it a viable venue for global commerce. Finally, the widespread use of mediator-facilitated settlements has significantly reduced court backlogs and encouraged more collaborative, less adversarial outcomes.
15. Challenges and Critique
Despite progress, several systemic challenges remain:
15.1. Over-Reliance on Institutional Arbitration
China’s law largely excludes ad hoc arbitration, limiting party autonomy compared to jurisdictions like Hong Kong (UNCITRAL Model Law) and Singapore (International Arbitration Act) where parties enjoy greater flexibility to design procedures
15.2. Enforcement Difficulties
While China is a New York Convention signatory, enforcement of foreign awards can be delayed due to local protectionism, protracted judicial review, or refusal on vague “public policy” grounds.
15.3. Judicial Involvement and Inconsistencies
Although judicial review is limited, inconsistencies in local court interpretation sometimes undermine confidence. The reporting mechanism requiring lower courts to consult higher courts before refusing enforcement of foreign-related awards is a safeguard, but it can delay resolution.
15.4. Party Autonomy and Third-Party Joinder
China’s institutional model restricts parties’ ability to consolidate proceedings or join third parties not bound by the arbitration clause-an increasingly common need in multi-contract and multi-party disputes.
15.5. Limited Recognition of Ad Hoc Awards
Unlike Singapore, which actively promotes ad hoc arbitration under the UNCITRAL Rules, China has only cautiously piloted ad hoc arbitration in Free Trade Zones, limiting its broader acceptance.
6.15.Comparative Perspectives
Singapore
Singapore’s pro-arbitration judiciary, flexible ad hoc framework, and support for international commercial courts make it a global hub for dispute resolution. The Singapore Convention on Mediation, which China has signed but not ratified, is another step toward enforceable mediated settlements.
Hong Kong
Hong Kong’s Arbitration Ordinance fully incorporates the UNCITRAL Model Law, offers strong confidentiality protections, and allows broad party autonomy. Courts are famously “pro-enforcement,” with minimal intervention except where absolutely necessary.
United Kingdom
The UK Arbitration Act 1996 provides a balance between party autonomy and judicial support, allowing challenges on points of law only in limited circumstances, which enhances predictability while upholding fairness.
16. Recommendations for Reform
Formalize Ad Hoc Arbitration – Provide statutory recognition for ad hoc arbitration, especially for international commercial disputes, aligning with UNCITRAL standards.
Ratify the Singapore Convention – This would enhance the enforceability of mediated settlements and promote mediation as a primary ADR tool.
Strengthen Judicial Training – Uniform application of arbitration law across provinces would reduce inconsistency and delay in enforcement.
Promote Transparency – Publish anonymized awards and key judicial decisions to develop persuasive precedent and improve predictability.
Expand Multi-Party and Multi-Contract Arbitration Rules – Facilitate joinder and consolidation to handle complex commercial disputes efficiently.
Encourage Technology Use – Develop online arbitration and ODR platforms for cross-border disputes, enhancing accessibility and efficiency.
17. Policy and Practice Recommendations for Beltway Project Dispute Resolution
17.1. Agreement Drafting and ADR Clauses
To minimize disputes and avoid lengthy litigation, contract drafters should adopt internationally recognized ADR-friendly clauses.
17.2. Key Elements of Recommended Clauses
Multi-tier Dispute Resolution Clause:
Tier 1: Amicable settlement and negotiation between senior executives.
Tier 2: Mediation using an accredited mediator or a recognized institutional framework (e.g., CIETAC, ICC, PCA).
Tier 3: Final and binding arbitration, preferably under the UNCITRAL Arbitration Rules.
Choice of Law: Explicitly state governing law (Pakistani law, or a neutral international law such as English law for cross-border finance contracts).
Language of Arbitration: English or bilingual (English + Mandarin/Urdu, depending on parties’ needs).
Seat of Arbitration:
Recommend a neutral, arbitration-friendly jurisdiction like Singapore, Hong Kong, or London for investor confidence.
Alternatively, designate Islamabad or Karachi as the seat but align procedural rules with UNCITRAL Model Law to ensure neutrality and enforceability.
d).Institutional vs. Ad Hoc Arbitration:
Prefer institutional arbitration under ICC, SIAC, HKIAC, or CIETAC for predictability, transparent procedures, and administrative support.
Ad hoc arbitration may be used under UNCITRAL Rules if parties want greater control but should include an appointing authority (e.g., PCA or CIArb).
18. Development of ADR Forums and Centers
Pakistan should invest in specialized dispute resolution forums to cater to large-scale infrastructure disputes:
Pakistan International Arbitration and Mediation Center (PIAMC):
Establish a flagship national center in Islamabad, with regional hubs in Lahore and Karachi, modeled on Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC).
Integration with Belt & Road Dispute Resolution Mechanisms:
Align Pakistan’s forums with China’s Belt & Road International Commercial Mediation Center to encourage mutual recognition of mediated settlements and arbitral awards.
Technology-Enabled ODR Platforms:
Develop online dispute resolution portals to handle cross-border investor disputes efficiently and cost-effectively.
18.1. Training and Certification of Mediators/Arbitrators
Capacity building is critical for credibility and investor trust.
Accreditation Standards:
Adopt international benchmarks (IMI, CIArb, CEDR) for mediator and arbitrator accreditation.
Specialized Training Modules:
International commercial arbitration (UNCITRAL Model Law, New York Convention).
FIDIC contract dispute resolution (for infrastructure projects).
Investor-State Dispute Settlement (ISDS) and ICSID procedures.
Cross-cultural negotiation and mediation (especially for Chinese–Pakistani joint ventures).
Continuous Professional Development (CPD):
Require regular refresher courses and mock hearings to maintain competence.
Panel Creation:
Maintain a roster of accredited mediators and arbitrators who are bilingual (English/Urdu/Mandarin) and trained in large-scale infrastructure and energy project disputes.
19. Institutional and Governmental Support
Legislative Reform:
Amend Pakistan’s Arbitration Act to incorporate UNCITRAL Model Law provisions, ensuring neutrality and enforceability of awards.
Judicial Training:
Train judges in arbitration law to minimize judicial intervention and promote pro-enforcement policies.
Public–Private Partnerships:
Engage chambers of commerce, law firms, and academia to co-develop training curricula and case management protocols.
International Cooperation:
Sign cooperation agreements with SIAC, HKIAC, ICC, and CIETAC for knowledge-sharing, joint conferences, and panel exchanges.
20. Risk Mitigation and Investor Confidence
Transparency: Publish anonymized awards and mediation outcomes to build trust and predictability.
Funding Mechanisms: Explore third-party funding (TPF) options and cost-capping measures to ensure access to justice for smaller contractors.
Belt & Road Legal Database: Maintain a database of past disputes, awards, and settlements to guide future project stakeholders and prevent repetitive claims.
21. Strengthening the Legal and Institutional Framework for CPEC 2.0 : Toward a UNCITRAL-Based Arbitration Regime and Integrated Investment Facilitation System
20.1. Dispute Resolution Mechanisms
The current dispute resolution framework is often seen as slow and complex. A specialized, multi-tiered system is needed.
Tier 1: CPEC Business Mediation Council
Establish a permanent mediation council specifically for CPEC and other bilateral projects.
Composition: Comprised of legal and industry experts from both Pakistan and China.
Function: Act as the first port of call for any commercial dispute. The goal would be to facilitate a mutually agreeable settlement quickly and amicably, avoiding lengthy court battles. This is a common practice in international business and aligns with a cultural preference for non-confrontational solutions.
Tier 2: Specialized Commercial Courts
For disputes that cannot be mediated, specialized commercial courts should be established.
Jurisdiction: These courts, based in major commercial centers like Karachi, Lahore, and Gwadar, would have exclusive jurisdiction over Sino-Pak commercial disputes.
Judiciary: Judges would need specialized training in international commercial law, arbitration, and the specific legal frameworks governing CPEC.
Efficiency: These courts should have a strict, fast-track timeline for resolving cases to prevent them from getting bogged down in the traditional court system’s backlog.
Tier 3: The Case for a UNCITRAL-Model Arbitration Act
The Arbitration Act, 1940-still in force in Pakistan is outdated and inconsistent with modern standards of neutrality, enforceability, and party autonomy.
To attract credible foreign direct investment under CPEC Phase II, Pakistan urgently requires a comprehensive reform aligned with the UNCITRAL Model Law on International Commercial Arbitration (as amended in 2006).
21. Proposed Reforms
Adopt a “Pakistan International Arbitration and Mediation Act” (PIAMA) modeled on UNCITRAL principles.
Incorporate provisions ensuring:
Party autonomy, including freedom to choose governing law, language, and arbitral rules.
Recognition and enforcement of foreign arbitral awards in line with the New York Convention (1958).
Judicial non-interference, limiting courts to supportive, not supervisory, roles.
Digital arbitration mechanisms (e-filing, virtual hearings, electronic signatures).
Replace section-heavy domestic laws with a single, modern statute compatible with global arbitral institutions (LCIA, SIAC, HKIAC, CIETAC).
21.3. Establishment of the Pakistan International Arbitration Centre (PIAC)
Rationale : Pakistan lacks a credible institutional “seat” of arbitration. Foreign investors still prefer Singapore, Hong Kong, or London for neutrality and enforceability.
CPEC 2.0 offers the perfect timing to institutionalize a permanent seat of arbitration within Pakistan-a regional hub for Belt and Road disputes.
Key Features of PIAC
Legal Status: Statutory authority under the new UNCITRAL-model Act.
Scope: Domestic and international commercial disputes, including CPEC-related contracts, PPPs, infrastructure, construction, and technology.
Panel Composition: Jointly accredited Pakistani and Chinese arbitrators; inclusion of regional experts (ASEAN/GCC).
Operational Model: Independent secretariat, transparent fee structure, and digital case management.
Location Options: Islamabad (federal), Karachi (commercial), Lahore (industrial & legal training hub).
21.4 . Creation of a Pakistan–China Dispute Resolution Forum (PC-DRF)
Purpose
To provide a joint institutional mechanism for CPEC and BRI-related commercial, contractual, and investment disputes, ensuring confidence and neutrality for both states and private parties.
Structure
Bilateral Treaty Basis: Established through a Pakistan–China CPEC Dispute Resolution Framework Agreement.
Hybrid Mechanism: Combines mediation, conciliation, and arbitration panels.
Rules: Based on UNCITRAL Arbitration and Mediation Rules and CICC/CIETAC best practices.
Secretariat: Shared administrative unit with bilingual operations (English/Chinese).
Optional Clause: Parties may opt for PC-DRF arbitration seat instead of foreign forums.
21.5. Ease of Doing Business Measures for CPEC
Legal and Regulatory Reforms
FBR (Taxation) Reforms:
Simplify tax registration and refund procedures for CPEC companies through a dedicated CPEC Tax Facilitation Cell.
Introduce advance tax rulings for long-term projects.
Streamline withholding tax exemptions and import-related clearance delays.
Visa and Mobility Facilitation:
Create a CPEC Business Visa-on-Arrival Program for approved investors, experts, and technical staff.
Develop an e-Visa platform linked to BOI’s investor database.
Introduce multiple-entry, long-term visas for project consultants and arbitrators.
Institutional Streamlining:
Establish a CPEC One-Stop Investment Facilitation Portal, integrating BOI, FBR, SECP, and immigration services.
Adopt digital signatures and e-filing for all investor registrations, arbitration submissions, and contract filings.
21.6. Road Map for Legal and Institutional Reforms (2025–2030)
Phase
Period
Legal/Institutional Milestone
Expected Outcome
Phase I – Legal Foundation
2025–2026
Draft and enact Pakistan International Arbitration & Mediation Act based on UNCITRAL Model Law
Establishment of modern legal framework and investor confidence
Phase II – Institutionalization
2026–2027
Launch Pakistan International Arbitration Centre (PIAC) and Pakistan–China DR Forum (PC-DRF)
Accessible dispute resolution within Pakistan for CPEC investors
Phase III – Integration & Facilitation
2027–2030
Implement FBR reforms, e-Visa facilitation, and digital arbitration systems
Seamless business environment and reduced investment risk
21.7 . Cross-Border Construction Disputes: A Framework for ADR and Arbitration under the Beltway/BRI Projects
Model Contract Clauses for Construction Disputes
Multi-Tier Dispute Resolution Clause
Adopt a step clause that integrates negotiation, mediation, and arbitration for construction contracts (FIDIC-based or bespoke):
Negotiation: Senior representatives meet within 14–21 days of a dispute notice.
Mediation: If negotiation fails, refer the dispute to institutional mediation (CIETAC Mediation Center, SIAC-SIMC Protocol, or a proposed Pakistan International Mediation Center).
Arbitration: If mediation fails within a fixed period (e.g., 45 days), disputes proceed to final and binding arbitration under UNCITRAL Arbitration Rules or ICC/CIETAC Construction Arbitration Rules.
Seat of Arbitration
Neutral Venue: Singapore, Hong Kong, or Kuala Lumpur for cross-border projects.
Domestic Option: Islamabad or Karachi, provided Pakistan updates its Arbitration Act to align with the UNCITRAL Model Law and ensures judicial non-interference.
Governing Law
Hybrid Approach: Choose Pakistani substantive law for local construction compliance +internationally accepted procedural rules (UNCITRAL). For EPC/turnkey projects, consider English law or FIDIC-based contractual terms for predictability and uniform interpretation.
UNCITRAL Model Law Adoption and Harmonization
For Pakistan
Legislative Reform: Modernize Pakistan’s Arbitration Act 1940 to fully incorporate UNCITRAL Model Law (as done by Singapore, Hong Kong, India).
Recognition of Foreign Awards: Strengthen enforcement under the New York Convention by removing procedural hurdles and standardizing timelines.
For China
Expand pilot programs for ad hoc arbitration and foreign-related disputes.
Promote mutual enforcement agreements with Pakistan under the Belt & Road legal cooperation framework to streamline recognition of arbitral awards and mediated settlements.
Singapore Convention on Mediation (SCM) Integration
Ratification and Implementation: Both China (signatory, not yet ratified) and Pakistan should ratify the Singapore Convention to allow cross-border enforcement of mediated settlements without the need for separate litigation.
Regional Mediation Panels: Create a Joint China–Pakistan Construction Mediation Panel with experts in FIDIC contracts, PPP financing, and large infrastructure projects.
Hybrid Med-Arb Mechanisms: Integrate mediation within arbitration proceedings (as allowed under Chinese law) to encourage settlement and reduce costs.
Development of Dispute Resolution Forums
National Centers
Pakistan International Arbitration & Mediation Center (PIAMC): Dedicated hub for construction and infrastructure disputes with bilingual (English/Urdu) panels.
Training Facilities: On-site mock arbitration rooms, mediation chambers, and digital case management systems.
Regional Cooperation
Establish a Beltway Dispute Resolution Forum (BDRF) in collaboration with:
CIETAC (China International Economic & Trade Arbitration Commission)
SIAC (Singapore International Arbitration Centre)
HKIAC (Hong Kong International Arbitration Centre)
ICC International Court of Arbitration
Develop a joint code of best practices and maintain a shared roster of accredited arbitrators/mediators.
Stakeholder Engagement
Business & Chambers of Commerce: Regular ADR awareness sessions, contract drafting clinics, and dispute-prevention workshops.
Government & Regulators: Ensure supportive legal frameworks and tax incentives for ADR participation.
Financial Sector: Encourage banks, insurers, and multilateral lenders to require ADR clauses in project finance agreements.
Lawyers’ Associations: Offer CIArb/IMI-accredited training programs and create panels of construction law specialists.
Academia: Introduce construction arbitration and mediation courses in LL.M./LL.B and Business Law curricula, sponsor research on comparative dispute resolution.
Training and Certification of Neutrals
Accreditation: Use CIArb Fellowship, IMI-certified mediation programs, and FIDIC adjudicator training.
Cross-Cultural Skills: Include modules on Chinese business culture, negotiation psychology, and Belt & Road legal frameworks.
CPD & Mock Hearings: Require annual participation in simulated arbitrations/mediations to maintain panel eligibility.
Diversity: Promote inclusion of women professionals and young practitioners to expand the talent pool.
Regional and Multilateral Coordination
Model Bilateral/Multilateral Treaties: Create a China–Pakistan–Central Asia–Middle East dispute resolution cooperation treaty covering recognition of arbitral awards, mediated settlements, and interim measures.
Shared Case Law Database: Maintain a cross-border construction dispute jurisprudence repository accessible to practitioners and arbitrators in the region.
Funding & Cost Allocation: Explore third-party funding (TPF) and capped costs regimes to make international arbitration affordable for local contractors.
Cross-Border Construction Dispute Resolution: Comparative Analysis and Recommendations
Comparative Table: Arbitration & ADR Frameworks in Regional Jurisdictions
Jurisdiction
Arbitration Law
Model Law Adoption
Mediation / ADR Mechanisms
Enforcement of Awards
Unique Features / Challenges
China
Arbitration Law 1994 (Draft Amendment ongoing)
Partial (institutional arbitration only; ad hoc allowed in FTZ pilots)
People’s Mediation, Labor Dispute Arbitration, Med-Arb within proceedings
Party to New York Convention; SPC reporting mechanism ensures consistency
Court/tribunal-led mediation is prominent; enforcement delays possible
Pakistan
Arbitration Act 1940 (outdated)
No; needs UNCITRAL Model Law incorporation
Court-annexed mediation (Punjab ADR Act 2019); ad hoc arbitration common
NYC implementation weak but improving; enforcement can be delayed
Judicial intervention frequent; reforms in progress to modernize framework
Singapore
International Arbitration Act (UNCITRAL Model Law based)
Yes (fully aligned)
SIMC Mediation; Arb-Med-Arb Protocol
NYC signatory; very pro-enforcement judiciary
Global hub for arbitration; SIAC highly preferred by investors
Hong Kong
Arbitration Ordinance (UNCITRAL Model Law based)
Yes (fully aligned)
Court and institutional mediation; HKIAC-administered procedures
NYC signatory; very efficient enforcement
Strong confidentiality protections; ad hoc & institutional options available
India
Arbitration and Conciliation Act 1996 (amended 2015, 2019)
Yes (based on UNCITRAL Model Law)
Court-annexed mediation; commercial mediation bill pending
NYC signatory; enforcement improved after 2015 amendments
Judicial delays still common but slowly improving
Cross-Border Construction Dispute Resolution under Beltway/BRI Projects
Comparative Analysis
China’s Arbitration Law (1994) institutionalizes arbitration, with pilot programs allowing ad hoc arbitration in Free Trade Zones.
Mediation is widely encouraged, with mediators often being arbitrators in the same matter (med-arb). Pakistan, however, still operates under the Arbitration Act 1940, which lacks UNCITRAL alignment and results in frequent judicial interference. Singapore and Hong Kong are fully aligned with the UNCITRAL Model Law, with strong pro-enforcement judicial policies, making them preferred seats for international construction arbitration.
UNCITRAL Model Law and Singapore Convention
Harmonization of Pakistan’s arbitration law with UNCITRAL Model Law would bring neutrality, predictability, and enforceability to awards.
Ratification of the Singapore Convention on Mediation by both China and Pakistan would enable cross-border enforcement of mediated settlements, thereby encouraging amicable dispute resolution.
24. Recommendations
24.1. Model multi-tier clauses (negotiation-mediation-arbitration) for FIDIC contracts should be made mandatory in BRI projects.
24.2. Establishment of Pakistan International Arbitration and Mediation Center (PIAMC) with specialist panels on construction law.
24.3. Judicial training to reduce intervention and support speedy enforcement.
24.4. Regional collaboration with SIAC, HKIAC, CIETAC, and ICC for joint panels and capacity building.
24.5.Comprehensive mediator and arbitrator accreditation program (CIArb, IMI, CEDR standards) with modules on cross-cultural negotiation.
25. Model Multi-Tier Dispute Resolution Clause for Construction Contracts
The following model clause is drafted for FIDIC-based and other large construction contracts in the context of Beltway/BRI projects.
It is consistent with UNCITRAL Arbitration Rules, the New York Convention, and the Singapore Convention on Mediation.
25.1. Model Clause
25.2. Negotiation Phase
In the event of any dispute arising out of or in connection with this Contract, including any question regarding its existence, validity, or termination,
the parties shall first seek to resolve the dispute amicably through good faith negotiations between their senior executives within fourteen (14) days of a written notice of dispute.
25.3. Mediation Phase
If the dispute is not resolved within thirty (30) days after commencement of negotiations, the parties agree to refer the dispute to mediation administered by an
internationally recognized mediation institution such as the Singapore International Mediation Centre (SIMC), CIETAC Mediation Center, or a Pakistan International Mediation Center (PIAMC),
under its Mediation Rules in effect on the date of the request for mediation. The mediation shall be conducted in English, and if a settlement is reached, the settlement agreement shall be binding and enforceable under the Singapore Convention on Mediation (if ratified).
25.4. Arbitration Phase
If the dispute has not been settled by mediation within forty-five (45) days from the commencement of mediation, the dispute shall be referred to and finally resolved by arbitration
administered by the chosen arbitral institution (ICC, SIAC, HKIAC, or CIETAC) in accordance with its arbitration rules in effect at the time of the notice of arbitration,
which rules are deemed to be incorporated by reference into this clause. The seat of arbitration shall be [Singapore/Hong Kong/Islamabad], the language of arbitration shall be English,
and the governing law shall be [Pakistani law or other agreed governing law]. The arbitral award shall be final and binding on the parties and enforceable under the New York Convention.
25.5. Interim Measures and Consolidation
The arbitral tribunal shall have power to order interim measures and to consolidate proceedings or join additional parties, subject to the consent of the parties, to ensure efficient resolution of multi-contract disputes.
This model clause is designed to promote dispute avoidance and early settlement, while preserving the parties’ right to final and binding arbitration. It is compatible with FIDIC dispute resolution mechanisms and can be adapted for PPP, EPC, and turnkey contracts. The explicit reference to the Singapore Convention ensures cross-border enforceability of mediated settlements, thereby reducing enforcement risk.
Conclusion
CPEC 2.0 must progress beyond infrastructure to become a comprehensive framework for industrial growth, legal reform, and knowledge exchange. Its long-term success depends on policy predictability, legal certainty, and investor confidence-foundations that transform Pakistan from a recipient of investment into a regional production and dispute resolution hub.
By aligning its arbitration regime with UNCITRAL standards, ratifying the Singapore Convention, and institutionalizing mediation and arbitration through PIAMC and the Pakistan-China Dispute Resolution Forum (PC-DRF), Pakistan can establish itself as a credible, rule-based jurisdiction comparable to Singapore or Hong Kong. Complementary reforms in taxation, visa facilitation, and digital investment governance will strengthen this legal ecosystem.
For both China and Pakistan, harmonized ADR systems will not only mitigate cross-border disputes but also create a sustainable, transparent, and investor-friendly environment across the Belt and Road region. With coordinated efforts by governments, legal institutions, and academia, CPEC 2.0 can evolve into a model of equitable, legally resilient economic cooperation for the Global South.
References
https://www.linkedin.com/posts/zafar-kalanauri-0728539_cross-border-construction-disputes-and-bri-activity-7373626604238831616-dWfV?utm_source=social_share_send&utm_medium=member_desktop_web&rcm=ACoAAAG6GZYBmCOKd74tE7_ogmeO0vy9TCmT0pQ
https://www.linkedin.com/posts/zafar-kalanauri-0728539_draft-arbitration-act-pakistan-activity-7368116777031073793-yqNM?utm_source=social_share_send&utm_medium=member_desktop_web&rcm=ACoAAAG6GZYBmCOKd74tE7_ogmeO0vy9TCmT0pQ
See Article 48 of the CIETAC Arbitration Rules (2024).
See Article 50 of the CIETAC Arbitration Rules (2024).
See Article 41 of the CIETAC Arbitration Rules (2024).
See Article 26 of the CIETAC Arbitration Rules (2024).
See Article 27 of the CIETAC Arbitration Rules (2024).
See Article 86 of the CIETAC Arbitration Rules (2024)
See https://www.bjac.org.cn/news/view?id=4989
“International awards” refer to the awards made outside China. If the 2024 Draft takes effect, “international awards” will refer to the awards with foreign arbitration seats.
See Article 248 of the Civil Procedure Law.
See Article 291 of the Civil Procedure Law.
See Article 77 of the 2021 Draft.
See Article 68 of the 2024 Draft.
A foreign-related civil relation may be identified by a People’s Court if: (1) one of the parties concerned or both parties concerned are foreign citizens, foreign legal persons or other organisations or stateless persons; (2) the habitual residence of one of the parties concerned or of both parties concerned is outside the territory of the PRC; (3) the subject matter is outside the territory of the PRC; (4) the legal fact that causes the civil relation to create, change or terminate occurs outside the territory of the PRC; or (5) there is any other circumstance which can be identified as a foreign-related civil relation.
Arbitration Law of the People’s Republic of China 1994 (PRC).
UNCITRAL Model Law on International Commercial Arbitration 1985, with amendments as adopted in 2006.
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
Singapore Convention on Mediation 2019 (United Nations Convention on International Settlement Agreements Resulting from Mediation).
Arbitration and Conciliation Act 1996 (India).
International Arbitration Act (Singapore).
Arbitration Ordinance (Hong Kong).
Punjab ADR Act 2019 (Pakistan).
ADR Act 2017.
Glossary of Legal Terms
This glossary provides definitions of key legal and institutional terms used throughout the article ‘CPEC 2.0 and the Future of FDI in Pakistan: Building Regional Capacity Through Shared Expertise’. .
Arbitration: A private dispute resolution process where parties agree to submit their dispute to one or more arbitrators whose decision (the award) is binding and enforceable under law.
Ad Hoc Arbitration: An arbitration conducted independently by the parties without the administration of an arbitral institution.
Institutional Arbitration: Arbitration administered by a recognized arbitral institution (e.g., CIETAC, SIAC, ICC), which provides procedural rules and administrative support.
Arbitral Award: A legally binding decision rendered by an arbitral tribunal determining the rights and obligations of the disputing parties.
Seat of Arbitration: The legal jurisdiction where the arbitration is based, determining the procedural law governing the arbitration (lex arbitri).
Party Autonomy: The principle that parties are free to agree on key elements of arbitration, such as rules, seat, and governing law.
UNCITRAL Model Law: A model legislative framework by UNCITRAL to harmonize national arbitration laws with international standards.
New York Convention: The 1958 treaty requiring signatory states to recognize and enforce foreign arbitral awards.
Singapore Convention on Mediation: A 2019 UN treaty enabling direct enforcement of international mediated settlements across jurisdictions.
Med-Arb: A hybrid process where the same neutral first mediates and, if settlement fails, arbitrates the dispute.
Mediation: A voluntary, confidential process where a neutral mediator helps parties reach a mutually acceptable settlement.
Multi-Tier Dispute Resolution Clause: A contractual clause providing successive stages—negotiation, mediation, arbitration-before litigation.
Conciliation: A flexible process similar to mediation, where a conciliator may propose settlement terms without imposing a decision.
Arbitration Act 1940 (Pakistan): The current statute governing arbitration in Pakistan, criticized for being outdated and inconsistent with UNCITRAL standards.
Pakistan International Arbitration and Mediation Act (PIAMA): A proposed modern law aligned with UNCITRAL standards for arbitration and mediation in Pakistan.
Pakistan International Arbitration Centre (PIAC): A proposed institutional hub for arbitration and mediation in Pakistan operating with international best practices.
Pakistan–China Dispute Resolution Forum (PC‑DRF): A proposed bilateral mechanism for resolving CPEC and BRI-related disputes through mediation and arbitration.
Special Economic Zones (SEZs): Designated areas offering tax incentives and regulatory flexibility to attract foreign investment.
Special Investment Facilitation Council (SIFC): A government body to streamline FDI approvals and monitor CPEC implementation.
Foreign Direct Investment (FDI): Investment made by an entity from one country into business interests in another country.
Investor-State Dispute Settlement (ISDS): A mechanism allowing foreign investors to bring claims against host states for breaches of investment treaties.
Bilateral Investment Treaty (BIT): A treaty establishing terms and protections for private investment between two countries.
Public–Private Partnership (PPP): A cooperative arrangement between public and private sectors for infrastructure or services.
Force Majeure: A contractual clause excusing performance obligations when extraordinary events beyond the parties’ control occur.
Enforcement of Awards: The process by which an arbitral award is recognized and executed by national courts.
Judicial Non‑Interference: A principle limiting court involvement in arbitration to supportive roles such as enforcement or appointment.
Interim Measures: Temporary relief granted by tribunals (e.g., injunctions or asset freezes) to preserve rights pending the final award.
Public Policy Exception: A ground for courts to refuse enforcement of an arbitral award if it conflicts with the state’s fundamental principles.
Lex Arbitri: The procedural law governing arbitration determined by the legal seat of arbitration.
Online Dispute Resolution (ODR): Technology‑based systems enabling mediation or arbitration through digital platforms.
Third‑Party Funding (TPF): A financing arrangement where an external party funds arbitration costs for a share in the outcome.
Transparency in Arbitration: Publishing anonymized awards and judicial decisions to improve predictability and accountability.
Cross‑Cultural Negotiation: Negotiation that considers cultural, linguistic, and legal diversity, critical in cross‑border projects.