ISLAMABAD, Feb 1: Pakistan has ratified the Convention on the Enforcement of Foreign Arbitral Awards to attract overseas investment. Pakistan had been signatory to the New York convention since long , but had not ratified the convention which was being demanded by the foreign investors.

After this ratification by the Federal cabinet on Wednesday, the role of civil courts of the country has been curtailed which were being used by the local partners to thwart arbitration proceedings outside Pakistan.

Those who supported the signing of the convention say that it would lead to direct foreign investment on a massive scale. The ratification of the convention would redress the grievances of the foreign investors regarding the delay, cost and uncertainty involved in litigation in the ordinary courts of the country.

This convention will apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal.

The convention will apply to awards not considered as domestic awards in the State where their recognition and enforcement are sought. Because, of bilateral investment treaties, Pakistan is facing three proceeding at International Chambers for Settlement of Investment Disputes (ICSID), for an accumulative amount of US $ one billion.

The SGS company of Switzerland, Bayinder of Turkey, and Impregelo of Italy, have all taken Pakistan to ICSID for its alleged failure to protect their investments.

Pakistan, despite having a favourable judgement from the Supreme Court of Pakistan, had decided to appear before ICSID, and challenge its jurisdiction on the ground that the Swiss firm had brought no investment in Pakistan and it was only contracted to provide a "service" in the form of pre-shipment inspection.

The convention provides that at the time of ratification, any state may, on the basis of reciprocity, declare that it will apply the convention to the recognition and enforcement of awards made only in the territory of another contracting state.

After ratification of this convention, in a situation like Hubco dispute, the local courts would have no say at all and the contracting party would be bound to go for arbitration.

The court of a contracting state, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this Convention, shall at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Each contracting state shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon and under the conditions laid down in the convention.

Pakistan is already in the difficult position, because of the casual manner in which investment treaties are signed. Pakistan has bilateral investment protection treaties with 40 countries of the world.