The United Nations Convention on International Settlement Agreements Resulting from Mediation was adopted on 20th December, 2018 by the UN and opened for signature in Singapore on 7th August, 2019. Popularly called the Singapore Convention on Mediation, it was signed by 51 countries, including Pakistan’s traditional allies such as Saudi Arabia, China, Malaysia, Turkey, Iran and other major international players such as India and the USA. But why was Pakistan not present at its signing? What reason did Pakistan have for ignoring this major development in international law and trade?
It is natural for contractual disputes to arise over a wide range of matters when two parties sign a contractual agreement. Conflict is inevitable, after all. It is how one tackles it is what matters. The ratification of the Convention is inevitable too and Pakistan seems to be depriving itself of a significant method of conflict resolution by being oblivious to it, or worse, ignoring it.
Pakistan cannot afford to be arrogant in this regard. Shedding light on Pakistan’s recent experience with arbitration, our go-to method of conflict resolution, will help explain why.
On 22nd August, 2017, the International Centre for Settlement of Investment Disputes (ICSID) gave its judgment in favor of the Turkish power company, Karkey Karadeniz Elektrik Uretim AS, in what is famously known as the Karkey case. Pakistan was to pay USD 760 million in damages, excluding penalties, and it was only through extensive negotiations with Turkey that Pakistan was able to escape the penalty amounting to USD 1.2 billion. The government’s efforts to get an arbitral award in its favour failed.
On 14th July, 2019, ICSID announced an award of USD 5.976 billion against Pakistan in the Reko Diq case. William Hayes, Chair of Tethyan Copper Company (TCC), who lodged the case against Pakistan, later stated that they were still willing to strike a deal with Pakistan but would not stop protecting their legal and commercial interests.
The Attorney-General for Pakistan, Anwar Mansoor Khan, tried to challenge the award in a federal court in Washington DC, USA. However, legal experts such as Barrister Masroor Shah, Advocate of the Supreme Court of Pakistan, told Arab News that Pakistan’s arguments for the review petition were very weak. The Government of Pakistan did not have any objections to the contractual agreement, nor had the contract been terminated due to any violation of the agreement. Perhaps it would have been better if Pakistan had accepted TCC’s offer.
Engaging in mediation at that point through a professional body such as the Centre for Effective Dispute Resolution (CEDR), the Singapore International Mediation Institute (SIMI), or the ADR ODR International (providers of trained mediators), could have saved Pakistan billions of dollars by having reached a settlement. Foregoing mediation cost Pakistan a penalty of nearly USD 6 billion, the equivalent of returning the latest International Monetary Fund (IMF) bailout package lest Pakistan’s foreign assets and funds be seized to compensate TCC. Mediation could have fulfilled the role of damage control to some extent. Alas, that ship has sailed. Pakistan must now brace itself for paying a penalty of USD 6 billion.
On 2nd January, 2020, reports emerged that Pakistan’s government might accept UAE based Etisalat’s final offer of USD 275 million out of the remaining USD 800 million for acquiring a 26% stake in Pakistan Telecommunication Company Limited (PTCL) for USD 2.598 billion. The Advisor to the Prime Minister on Finance and Revenue, Dr. Abdul Hafeez Shaikh said it would be better to accept a reasonable payment than pursue an amount that has taken 13 years to settle with no success. Pakistan is likely to settle for a total of USD 1.935 billion.
Pakistan’s concurrent losses in international arbitration cases are due to its lackluster policies for formatting contractual agreements with the international firms it engages with. The selection of arbitration counsels is not based on a transparent process. The government often prefers foreign law firms to fight its cases and often ends up losing because Pakistan’s national laws do not cater to arbitral dimensions as modern domestic legal systems do around the globe. Arbitration clauses are almost always included in contracts before they are signed and they specifically mention the jurisdiction whose laws will be followed, the laws themselves and the seat of arbitration. Successive governments have willingly set aside their sovereignty in matters of enforcement of arbitral awards in order to sign financial deals, which prevents disputes from landing in local courts.
This must stop and contracts must be drafted after gaining necessary legal advice from experts who have command over both domestic and international rules of arbitration. It is also the responsibility of Parliament to draft arbitration laws in line with international conventions on arbitration, such as the New York Convention on Arbitration, and the duty of courts to apply such laws so that past mistakes are not repeated.
In hindsight, perhaps it is a blessing in disguise that Pakistan has not yet signed and ratified the Singapore Convention on Mediation. It allows Pakistan to learn from its long list of mistakes in pursuing arbitration to settle its international commercial disputes and do better by using mediation as a method of resolving any future claims that may arise. There are several policies that the government should pursue to achieve this goal.
Firstly, the government’s legal arm must thoroughly understand what international mediation is by seeking guidance and training from experts in the field. The aforementioned bodies, such as CEDR, SIMI and ADR ODR International Ltd, have Pakistani legal experts associated with them who understand the dynamics of international mediation, possess the necessary qualifications and training to represent Pakistan and can train Pakistan’s litigation experts in this modern field of dispute resolution. The ADR Initiative (ADRi) is a Pakistan-based initiative that promotes and trains mediators with ADR ODR International and provides CMC and SIMI accredited qualifications.
Secondly, the government should send its own officials to receive mediation training through courses offered by these bodies and encourage these bodies to expand their services in Pakistan by collaborating with them. An added benefit would be of Pakistan being able to enhance the quality of ADR centres established by the provincial governments of Sindh and Punjab in the High Courts of their respective provinces.
Thirdly, the government should set up a body for experts offering ADR services, equivalent to the Pakistan Bar Council. All ADR groups operating in Pakistan must be approved by this body. By doing so, the government will be able to keep a check on their quality.
Fourthly, the government should engage the services of expert bodies to draft any potential mediation agreements. Pakistan cannot afford any more blunders arising from drafting errors.
Finally, Pakistan should draft its own Acts of Parliament on mediation to ratify the Singapore Convention, just like it ratified the New York Convention on Arbitration through the Recognition And Enforcement (Arbitration Agreements And Foreign Arbitral Awards) Act 2011.
Pakistan should follow these steps to maximize the benefits it can reap from signing the Singapore Convention on Mediation and enhance its chances of success in disputes with international firms through mediation.
The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any organization with which he might be associated.