SHC refers petroleum, engineering companies’ cases for damages claim to mediation centre

The Sindh High Court has referred petroleum and engineering companies’ lawsuits on damages claims for mediation.

A petroleum company and an engineering firm had entered into contract for the turnaround of a refinery plant of the petroleum company and other various addendum contracts.

The counsel for the petroleum company alleged that works performed by the engineering firm under the turnaround contract and the electromechanical contract were not only defective and poor workmanship, but were also with a substantial delay, and hence causing losses to the petroleum company.

The engineering firm had a claim against the petroleum company for the amount not paid to it for works carried out under the three contracts.

A high court single bench headed by Justice Adnan Iqbal Chaudhry observed that all three contracts contain an arbitration clause; however, the parties have not been able to agree on a sole arbitrator.

The court observed that the dispute resolution clause in all three contracts of the parties stipulates that before arbitration the parties shall make an attempt in good faith to resolve their dispute amicably.

The court observed that counsel submitted that the parties did make such an attempt but failed.

The court observed that without entering into a discussion whether such a dispute resolution clause can be construed as a precondition to arbitration and before making a reference to arbitration, it would be worthwhile to refer the dispute to mediation.

It further said that even if the parties can settle a part of their dispute, that will still save them time and costs in arbitration.

The court observed that the counsel for the parties are not averse to mediation as long as a timeline is fixed. It said that benefits of mediation out of the other modes of alternative dispute resolution, and especially for businesses, have been highlighted by the Lahore High Court in various cases.

The SHC observed that the Supreme Court of Pakistan has also urged the courts to exhibit a pre-settlement and a pre-mediation bias.

The court ordered that in exercise of powers under section 89-A read with Order X Rule 1-B CPC, the dispute between the parties arising under the three contracts is referred for mediation to the arbitration and dispute resolution centre and fees of the mediation shall be shared equally between parties.

The court observed that if the parties fail to make any progress in 45 days, the matter shall be referred back to the court for appointing arbitrators and the fee of the mediator shall be treated as costs of arbitration. The court directed the parties to appear before mediator for preliminaries and for such purpose each party shall appoint an officer familiar with the facts of the dispute and authorised to make a settlement. The court observed that for mediation sessions, engineering firm which is based out of Karachi, may opt for on-line meetings. The court observed that office of the court shall use the referral form made for the purpose while remitting the matter to the mediator along with a copy of this order.