Arbitration Law in Underdeveloped Legal Systems:

Structural Barriers and the Special Problem of Family Law in South Asia

A Comparative Study of Pakistan, India, and Bangladesh

Abstract

Arbitration is widely promoted as a faster, cheaper, and more flexible alternative to litigation, and international financial institutions have long encouraged developing states to modernise their arbitration statutes to attract investment. Yet the diffusion of arbitration in underdeveloped legal systems has been uneven, and its limitations are most visible in family law, where courts in South Asia have consistently treated matrimonial and child-related disputes as non-arbitrable on public-policy grounds. This article examines the structural weaknesses that undermine arbitration generally in developing jurisdictions, namely outdated legislation, weak institutional infrastructure, judicial reluctance to relinquish supervisory control, inconsistent enforcement, and low public awareness, and then turns to the specific obstacles facing family arbitration: the doctrine of non-arbitrability, the overlap between statutory law and religious or customary personal law, unequal bargaining power between spouses, and the paramountcy of child welfare as a public interest that resists private ordering. Drawing on the arbitration regimes of Pakistan, India, and Bangladesh, the article argues that reform must be twofold: first, general modernisation of arbitration statutes along the lines already underway in Pakistan’s draft 2024 Act; and second, a distinct, carefully bounded framework for family-dispute resolution that preserves judicial oversight of status and welfare questions while allowing arbitration of the ancillary financial and property consequences of family breakdown.

1. Introduction

Arbitration occupies an increasingly central place in the architecture of commercial dispute resolution. Its appeal rests on party autonomy, confidentiality, procedural flexibility, and (at least in theory) speed and finality. For developing economies competing for foreign direct investment, a credible arbitration regime, harmonised with the UNCITRAL Model Law and backed by accession to the 1958 New York Convention, has become close to a prerequisite. Pakistan, India, and Bangladesh have each, at different paces, sought this credibility: India consolidated its law in the Arbitration and Conciliation Act, 1996; Bangladesh followed with the Arbitration Act, 2001; and Pakistan continues to operate under the colonial-era Arbitration Act, 1940, while a modernising bill remains before its National Assembly.

This article contends that the promise of arbitration in these jurisdictions is only partially realised, and that the gap between formal law and functioning practice is widest in family law. Two distinct but related problems are examined. The first is general: institutional immaturity, judicial habits formed under a litigation-first culture, and enforcement gaps that make arbitration a weaker substitute for courts than the statutes suggest. The second is specific to the family sphere: a settled doctrine across all three jurisdictions that disputes touching marital status, dissolution of marriage, and child custody are not proper subjects for private, binding arbitration, coupled with parallel religious and customary mechanisms that perform a reconciliatory rather than adjudicatory function. Together, these problems mean that the population most likely to need an accessible, low-cost, dignity-preserving dispute-resolution forum, namely parties to family breakdown, often women and children in economically precarious positions, has the least effective access to arbitration as understood in the commercial sense.

2. Conceptual Framework: Arbitration and the Doctrine of Non-Arbitrability

Arbitrability refers to whether a category of dispute is legally capable of being resolved through arbitration rather than reserved to courts. Even where an arbitration agreement is otherwise valid, a tribunal’s award can be set aside, or a court can refuse to refer the parties to arbitration, if the subject matter falls into a category the law treats as non-arbitrable. Because most arbitration statutes in the region, including India’s 1996 Act and Pakistan’s 1940 Act and its 2024 draft successor, do not enumerate non-arbitrable subjects, the doctrine has developed almost entirely through judicial interpretation of “public policy.” This has produced two connected effects relevant to this article: first, considerable unpredictability, since public policy is defined and redefined case by case; and second, a consistent judicial instinct, across otherwise different legal systems, to exclude matters of personal status (marriage, divorce, guardianship, custody) from the reach of private arbitration, treating them as questions in which the state, not merely the disputing parties, has a stake.

3. Legal Frameworks in South Asia

3.1 Pakistan

Pakistan’s domestic arbitration is still governed by the Arbitration Act, 1940, a statute inherited from British India that predates the UNCITRAL Model Law by decades. Pakistani courts have historically read an expansive public-policy exception into the Act, using it to deny enforcement of some high-value awards and to hold entire categories of dispute, including intra-company, bank-borrower, landlord-tenant, and family matters, outside the scope of arbitration where a special statute or specialised court already claims jurisdiction. The Supreme Court’s 2024 decision in Kausar Rana Resources v Qatar Lubricants Company signalled a possible retreat from this exclusionary approach in the commercial sphere, holding that disputes governed by special laws can still be arbitrated; whether this reasoning extends to family disputes remains untested. In parallel, an Arbitration Law Review Committee, formed in 2023 under the Chief Justice of Pakistan, has produced a draft Arbitration Act of 2024 intended to align the country with the Model Law, narrow the public-policy ground for challenging awards, and reduce judicial interference, but the bill remains pending before the National Assembly, leaving the 84-year-old statute in force in the meantime.

3.2 India

India’s Arbitration and Conciliation Act, 1996 was a deliberate break from its own 1940-era predecessor, built on the Model Law and amended in 2015, 2019, and 2021 to curb judicial delay and expand institutional arbitration. Yet the Act itself is silent on arbitrability, leaving the Supreme Court to define its boundaries. In Booz-Allen & Hamilton Inc v SBI Home Finance Ltd (2011), the Court set out a now-standard list of non-arbitrable categories, expressly naming matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, and child custody, alongside criminal matters, guardianship, insolvency, and tenancy disputes protected by special statutes. Family disputes in India are instead channelled toward the Family Courts Act, 1984, and toward court-annexed mediation and conciliation under Section 89 of the Code of Civil Procedure, mechanisms that emphasise reconciliation over binding third-party adjudication of the underlying status questions.

3.3 Bangladesh

Bangladesh replaced its own colonial-era arbitration law with the Arbitration Act, 2001, later amended in 2004, again modelled on the UNCITRAL framework and oriented chiefly toward domestic and international commercial disputes. Family-law dispute resolution runs on an entirely separate, older track: the Muslim Family Laws Ordinance, 1961 established Arbitration Councils at the union parishad (local council) level, but their function is reconciliatory rather than adjudicatory: they mediate between spouses before a talaq can take effect, arbitrate requests for permission to contract a polygamous marriage, and address maintenance disputes, without displacing the Family Courts Ordinance, 1985, which retains jurisdiction over dissolution of marriage, dower, maintenance, and child guardianship and custody. The result is a bifurcated system in which the word “arbitration” appears in family law but denotes something functionally distinct from arbitration in the commercial sense.

4. Structural Challenges to Arbitration in Underdeveloped Legal Systems

Several problems recur across Pakistan, India, and Bangladesh, and are characteristic more broadly of arbitration regimes in developing countries.

4.1 Outdated or Transitional Legislation

Pakistan’s continued reliance on the Arbitration Act, 1940 is the starkest example: a statute drafted for a colonial economy, without provision for emergency arbitrators, interim measures, or a codified definition of public policy, is left to govern a modern commercial environment through judicial improvisation. Even where legislation has been modernised, as in India and Bangladesh, implementing rules, institutional capacity, and judicial familiarity often lag behind the text of the statute itself, producing a gap between the law on paper and the law in practice.

4.2 Judicial Reluctance and the Litigation-First Culture

Courts across the region have been characterised, in both scholarly and practitioner literature, as prone to expansive interpretation of public policy and to accepting jurisdiction over disputes that an arbitration agreement was meant to remove from them. This undermines the finality that is arbitration’s central selling point: an award can be relitigated in substance through a broadly framed setting-aside application, and enforcement of foreign awards can be delayed for years.

4.3 Weak Institutional Infrastructure

Arbitration in all three jurisdictions remains predominantly ad hoc rather than institutional. Institutions such as India’s Mumbai Centre for International Arbitration or Bangladesh’s Council of Arbitration exist, but usage is concentrated in high-value commercial and investment disputes; there is little institutional infrastructure oriented toward smaller-value or personal disputes, and virtually none oriented toward family matters. Training programmes for arbitrators, particularly in specialised or sensitive subject areas, remain limited.

4.4 Enforcement Gaps

An arbitral award is only as useful as a state’s willingness to enforce it. Even where the New York Convention has been ratified, enforcement can be resisted through public-policy objections, procedural delay, or an under-resourced judiciary already burdened with a large backlog of ordinary litigation. This particularly disadvantages parties without the resources to sustain a prolonged enforcement contest, a group that disproportionately includes women pursuing maintenance or property awards arising from family breakdown.

4.5 Cost, Awareness, and Access

Arbitration is often marketed as cheaper than litigation, but arbitrator fees, institutional charges, and the need for specialised counsel can make it less accessible than an under-resourced but nominally free court system, especially for individuals rather than commercial entities. Public awareness of arbitration as an option, as distinct from informal community mediation (panchayat, jirga, salish), remains low outside the commercial sector.

5. Family Law: Why Arbitration Struggles Most Here

Family law exposes the structural weaknesses above most acutely, but it also raises problems that are conceptually distinct from ordinary institutional underdevelopment.

5.1 The Non-Arbitrability of Status Questions

Across Pakistan, India, and Bangladesh, courts treat questions of marital status (whether a marriage subsists, whether it should be dissolved, who a child should live with) as matters in which the state retains an irreducible interest, not merely a private dispute between two parties who could otherwise settle it however they choose. India’s Booz-Allen line of cases makes this explicit; Pakistani jurisprudence has reached a similar result through the special-court doctrine, even as it now reconsiders that doctrine for commercial matters. This means that even where an arbitration clause exists, or where parties actively wish to arbitrate, the core status determination remains for the courts.

5.2 Overlap With Religious and Personal Law

In all three jurisdictions, family law is substantially governed by personal-status regimes tied to religion or community: Muslim personal law, Hindu law, Christian and Parsi statutes in India, and analogous provisions in Pakistan and Bangladesh. Mechanisms that use the word “arbitration,” such as Bangladesh’s Arbitration Councils under the 1961 Ordinance, are reconciliatory bodies operating inside a religious framework, not neutral tribunals applying an arbitration statute to resolve a dispute on its merits. This creates conceptual confusion, since the same word describes two functionally different processes, and limits the extent to which reforms to commercial arbitration law can be expected to improve family dispute resolution, since the two systems are largely disconnected.

5.3 Unequal Bargaining Power

Even where ancillary matters (division of property, maintenance amounts, the mechanics of custody arrangements) are treated as arbitrable, family arbitration raises a bargaining-power concern that commercial arbitration does not: spouses, and particularly wives in patriarchal social contexts, may enter arbitration agreements, or accept unfavourable settlements within an arbitral process, under social, familial, or economic pressure that a facially neutral procedural framework does not correct. Confidentiality, one of arbitration’s core attractions, can compound this by removing the disputes from public and appellate scrutiny that might otherwise expose coercion or unequal outcomes.

5.4 The Best-Interest-of-the-Child Standard

Custody and guardianship determinations are governed by a best-interest-of-the-child standard that courts regard as a matter of ongoing public supervision rather than a one-time private settlement: circumstances change, and a court (unlike a functus officio arbitral tribunal) can revisit an arrangement as a child grows. This is a principled, not merely institutional, reason for the persistence of non-arbitrability in this specific area, and helps explain why even jurisdictions that have modernised their general arbitration law have made no parallel move to open custody disputes to binding arbitration.

5.5 Enforcement and Follow-Through in Family Matters

Where ancillary financial awards are arbitrated, or where a private settlement is later given effect through a family court, enforcement suffers from the same delay and resource constraints as commercial awards, but with a claimant population less able to absorb the cost of prolonged enforcement litigation. A maintenance or property award that cannot be enforced promptly offers little practical protection to the party it was designed to benefit.

6. Toward Reform: A Two-Track Approach

Addressing these problems requires distinguishing between the general modernisation of arbitration law and the specific needs of family dispute resolution.

• Complete the modernisation of arbitration statutes, prioritising Pakistan’s stalled 2024 draft Act, to bring definitional clarity to public policy and reduce inconsistent judicial interpretation.
• Invest in institutional arbitration capacity beyond high-value commercial disputes, including training for arbitrators in areas that require sensitivity to power imbalances and welfare concerns.
• Preserve judicial oversight of marital status and custody determinations, while creating a clearly bounded, statutorily defined space for arbitration of ancillary financial and property consequences of family breakdown, with mandatory independent legal advice and safeguards against unequal bargaining power.
• Formally distinguish reconciliatory religious mechanisms, such as Bangladesh’s Arbitration Councils, from adjudicatory arbitration under general arbitration statutes, so that the same terminology does not obscure two different processes with different guarantees.
• Streamline enforcement procedures for family-related awards and settlements, recognising that delay disproportionately harms economically dependent parties, typically women and children.
• Expand public legal awareness of the boundaries of family arbitrability, so that parties do not mistake informal community mediation for a binding legal process, or vice versa.

7. Conclusion

The arbitration regimes of Pakistan, India, and Bangladesh illustrate a broader pattern in developing legal systems: reform efforts, driven substantially by the demands of international commerce, have modernised the law governing high-value disputes while leaving family dispute resolution largely untouched, governed either by decades-old religious ordinances or by a firm judicial doctrine of non-arbitrability. This is not simply a gap to be closed by extending commercial arbitration reforms into the family sphere; the reasons courts give for excluding status and custody questions from arbitration (the state’s interest in marital status, the welfare of children, and the risk of unequal bargaining power) are substantive, not merely institutional. A more productive reform agenda would pursue general modernisation of arbitration law on its own terms, while separately and deliberately building a bounded, safeguarded framework for arbitrating the ancillary consequences of family breakdown, without attempting to privatise the status and welfare questions that courts are, for good reason, reluctant to relinquish.

References

Arbitration Act, 1940 (Pakistan).

Draft Arbitration Act, 2024 (Pakistan), Arbitration Law Review Committee.

Kausar Rana Resources v Qatar Lubricants Company, CPLA 4468 of 2024 (Supreme Court of Pakistan).

Arbitration and Conciliation Act, 1996 (India), as amended 2015, 2019, 2021.

Booz-Allen & Hamilton Inc v SBI Home Finance Ltd, (2011) 5 SCC 532 (Supreme Court of India).

Family Courts Act, 1984 (India).

Code of Civil Procedure, 1908 (India), s. 89 (as amended 1999).

Arbitration Act, 2001, as amended 2004 (Bangladesh).

Muslim Family Laws Ordinance, 1961 (Bangladesh/Pakistan).

Family Courts Ordinance, 1985 (Bangladesh).

Family Courts Act, 1964 (Pakistan).

Kluwer Arbitration Blog, “Pakistan’s Draft Arbitration Bill 2024: Change After 84 Years?” (2024).

Kluwer Arbitration Blog, “From Fluidity to Clarity? Pakistan’s Arbitration Act of 2024 and the Future of Public Policy” (2024).

Lexology, “Arbitration in India” and “In brief: arbitration agreements in Pakistan” (country Q&A guides).

Law Over Borders, “Bangladesh: Arbitration,” The Global Legal Post.