Bringing Dispute Resolution Out of the Dark With ADR and Pakistan’s First Commercial Courts

On the 17th of April, 2021, as a cool breeze blew and the sun set on the manicured lawns of Governor House Punjab, we bore witness, by the stroke of the Governor’s pen, to the reality of a changing course for this nation.

The Governor signs into law many instruments as part of his schedule, yet for one recent Ordinance in particular, a wonderful ceremony with magnificent ambience and décor had been organized to celebrate the occasion, graced by the presence of esteemed guests such as the Finance Minister, representatives of the World Bank and the Planning and Development Department and the humble authors of this article. It was a significant occasion for it is on that day that the promise of Pakistan’s potential could fully begin to be realized, as we lifted ourselves from the drudge of our troubled history to pave way for future. Readers of this article may or may not realize the importance of the momentous occasion, but the audience that was present certainly did, and it is hoped that the coming generations shall as well, as the occasion paves way for modernism and stability with the Governor signing into law the establishment of Pakistan’s first Commercial Courts in the province of Punjab.

The authors of this article are founders of the ADR Initiative (ADRi, an alternative dispute resolution platform in Pakistan) and Pakistan’s first and only nominees for the National Mediation Awards, UK. From November 2019 onwards, they have trained more than 50 accredited mediators through courses conducted under the ADR Initiative in collaboration with ADR-ODR International, which is another first for Pakistan. Syed Akbar Hussain is an advocate of the Lahore High Court, the Resident Representative of ADR-ODR International, an arbitrator, mediator and negotiator accredited by ADR-ODR International and Chair of the Lahore High Court Bar Association (LHCBA) Committee on Alternative Dispute Resolution (ADR). He is also a lecturer of ADR for the University of London and a local expert for the World Bank. Mehak Zaraq Bari is an advocate, trained mediator and negotiator accredited by ADR-ODR International, Vice Chair of the LHCBA Committee on ADR and member of the Singapore International Mediation Institute. She is also a published author and lecturer of law for LLB and LLM. Both authors are deeply honoured and privileged to be part of the historic occasion that will bring commercial matters and ADR to their full potential in Pakistan and finally enable the economic mechanism of the country to flourish with the support of a dedicated judicial body trained to avoid the pitfalls of the past.

The Punjab Commercial Courts Ordinance 2021 is a step towards resolving commercial disputes in an efficient, timely and cost-effective manner. The World Bank, the Lahore High Court and the Punjab Government are all in agreement that for economic growth and prosperity, the “ease of doing business” (EODB) in Pakistan has to be improved. One of the indicators of the ease of doing business is the enforcement of contracts. Pakistan currently ranks 156 out of the 190 economies on this global indicator. Hindrances to seeking justice, such as high costs caused by the delaying tactics of lawyers and inefficient disposal of cases, lead to justice being delayed and hence denied. Pakistan has over two million cases pending in its lower and superior courts, putting immense pressure on the legal system and as a result creating inefficient governance, doubts in the rule of law and various challenges to the development of a prosperous economy. Economic and social progress cannot be achieved without improving access to justice and effective protection for businesses. Economies with efficient judiciaries and effective enforcement mechanisms for contractual obligations have a high level of development, rapid growth of small firms and a business climate that fosters innovation and attracts foreign direct investment. Countries with effective judicial systems also have larger and more efficient firms as risks faced by these firms get reduced and the willingness to invest increases.

Background

A narrow meaning of ‘access to justice’ refers to improving an individual’s access to court or guaranteeing legal representation. A more modern interpretation in accordance with the United Nations Practitioner’s Guide defines it as an individual’s ability to seek remedy for grievances through formal or informal institutions of justice in compliance with human rights standards. This approach focuses on the inadequacies and limitations of the legal justice system and calls for reform by simplifying procedural and formal requirements as well as improving people’s awareness and knowledge. This approach has been reflected in the Ordinance.

The Ordinance has been drafted following a pilot study that had already been conducted after the Lahore High Court implemented several reforms to improve judicial processes, including the establishment of mediation centers to promote out-of-court settlement as well as the implementation of court management systems and court automation. After studying why such reforms had not been adequately improving Lahore’s performance in the enforcement of contracts, the Planning and Development Board and the World Bank Group persuaded the judiciary to address the issue and propose further reforms accordingly.

The new proposed reforms included the establishment of Commercial Courts, training of judges and the upgradation of case management tools and court automation. They also aimed to increase the use of alternative dispute resolution methods, achieve uniformity in judicial decisions and reduce pendency of cases to increase investor confidence in the province by ensuring effective enforcement of contracts.

In April 2020, the new reforms were implemented at the Lahore High Court when the Chief Justice nominated three District Court judges in Lahore to exclusively hear and dispose of commercial cases. He further directed the District and Sessions judges of Faisalabad, Gujranwala, Multan and Rawalpindi to nominate judges in their respective districts to hear and dispose of commercial cases in District Courts. In September 2020, the judges received training through workshops to be equipped with the relevant laws and precedents falling under the jurisdiction of Commercial Courts. Due to a successful implementation of the updated reforms and developments such as the implementation of electronic reporting which had improved the efficiency of Commercial Courts, it was believed that Punjab should serve as a role model for all other provinces aiming to support the business community.

Research has shown that economies with a standalone commercial court (such as Austria and Belgium), or a commercial division within the courts (such as the UK and the United States, particularly New York), tend to benefit more by having an efficient contract enforcement mechanism which reduces the number of pending cases and shortens the resolution time of cases. Backed by research and empirical evidence, the drafting of the Commercial Courts Ordinance started in November 2020. It was promulgated in April 2021.

Salient Features of the Ordinance

The Ordinance, which came into force in mid-April 2021, extends to the whole of Punjab. It applies to commercial disputes which means any dispute, claim or counterclaim arising out of a contractual dispute where the value of a claim is over PKR 500,000. It excludes the sale and purchase of immovable property but includes any transaction related to trade and business. The Ordinance is applicable to domestic companies and firms doing business locally. It also applies to their commercial disputes with foreign companies and private individuals.

The Ordinance establishes Commercial Courts under Section 3 according to which the government may establish as many Commercial Courts as it deems fit for any area, defining their territorial jurisdiction and limits. Furthermore, with the consultation of the Chief Justice, the government can appoint a District Judge or Additional District Judge as a judge of the Commercial Court.

Other features include the introduction of a timeframe for the decision of suits, e-filing of pleadings and a limited number of adjournments to deliver speedy justice. Under Section 8, a defendant must obtain leave to defend. Under Section 11, the timeline of the entire suit must remain within a period of 180 days. To make this realistically possible, the court is required to not grant unnecessary adjournments – the maximum limit is two adjournments and any further adjournments are to be subject to costs determined by the court.

Under Section 12, the court shall have full powers to determine and award costs against a party, and where it has not awarded costs, it shall record reasons. Unfortunately, not much detail has been provided as to the grounds under which costs will awarded, yet it is foreseen that the same shall be provided within the Rules which shall accompany the Ordinance. Different jurisdictions around the world tend to favour the winning party in such matters and impose costs on the losing party, however, they may also take into account the parties’ conduct and adverse behaviour during the proceedings. In the UK for instance, costs are awarded even for non-consideration of ADR mechanisms.

Under Section 13, the execution of decrees and any required investigation shall be completed within 30 days. If any objection against this is found to be a mere delaying tactic or made with mala fide intent, then penalties shall be imposed against the party making such objections. It is to be noted that cost sanctions and penalties are foreseen to be a highlight of Commercial Courts for which substantial jurisprudence may have to be developed.

The Ordinance further provides for the establishment of a Secretariat, the functions of which shall be to maintain and update records, in both physical and electronic forms, on the status of all cases, maintain a case-law repository and arrange trainings and continuous education of judges. The Secretariat shall be overseen by a Registrar appointed by the Government in consultation with the Chief Justice.

For appeals, Commercial Appellate Tribunals shall be established under Section 15 of the Ordinance, headed by a Chair qualified to be a Judge of the High Court and appointed in consultation with the Chief Justice. According to Section 16, the Tribunal shall decide any appeal within 120 days. Only appeals involving substantial questions of law or public importance shall lie with the Supreme Court, subject to the Supreme Court’s satisfaction and grant of leave to appeal.

Under Section 20, an order of the Commercial Court shall not be subject to revision or review, or called under question, which provides a conclusive ambit to the proceedings of the court.

ADR and Commercial Courts

The most important provision in the Ordinance, at least from the authors’ perspective, is the provision regarding ADR under Section 17, which states that any suit or appeal shall be referred to alternative dispute resolution in accordance with the provisions of Order IX B of the Civil Procedure Code. This is the necessity of the land which the court has employed for speedy justice in order to correct the existing inadequacies of the legal system through ADR, a mechanism which has proven to be time-efficient and cost-friendly across the globe. ADR mechanisms in the UK, USA, Turkey and Singapore have all proven to be successful in making justice more accessible.

It is no secret that past attempts at infusing ADR into our legal system have not entirely been successful and have eventually been abandoned. Perhaps it is because of a shift in the mindset or the effects of globalization in Pakistan that the ADR Initiative has found success since its inception a couple of years ago.

ADRi has continued to provide training to delegates who have readily paid subsidized course fees. It has also been successful in creating a network of ADR stakeholders through its advisory panel, consultants and review board. The number of law firms that have collaborated with ADRi in the hopes that ADR will flourish in Pakistan is unprecedented. These firms include the stalwarts of arbitration practice such as CLM, Axis Law, Mandviwalla & Zafar and many more who have set aside competitive interests for one common goal.

Similarly, members of the advisory panel come from various sectors and fields such as manufacturing, pharmaceuticals, telecom, microfinance, banking, accounting and others. While they share a common belief that ADR is the future, everyone from the legal profession to the business sector who procures the services of mediation and arbitration through the platform is fearful of one inevitability: what will happen if a need arises for the judicial system i.e. the courts?

There are enough horror stories of all the years wasted in the appointment of arbitrators by courts or the filing of arbitration awards. It has taken years for awards to get executed, which has caused billions in financing to be trapped in limbo, delaying in the payment of damages from a dispute decided in arbitration. Each mediation that has been conducted has been settled under the fearful belief that challenging the mediated settlement in court would prolong the matter for another eternity.

Such problems have also prevented foreign direct investment from entering the country and giving rise to jobs and economic prosperity. Investors and international organizations have a standard contractual requirement for a dispute resolution clause covering mediation and arbitration, yet they have no faith in the legal system of Pakistan and its ability to actually respect these dispute resolution clauses and allow a dispute to be managed expeditiously and efficiently. When advocating for our wonderful nation on international forums such as the International Chamber of Commerce, it has always been a painful moment for the authors to hear from foreign dignitaries negative things about the ADR regime in Pakistan and the role of courts in hampering the ADR process.

With the promulgation of the new Ordinance, we can confidently hope to highlight a better image of Pakistan, especially since Commercial Courts are required to decide a case within the timeframe prescribed by the Ordinance. It is also our distinct honour and privilege to be working with the judiciary to provide training on ADR and avoid pitfalls of the past. Our advisors will share practical experiences of the old courts with the new judges. The judges will also have complete access to our platform and accredited mediators, arbitrators, negotiators and experts at their disposal for swift referral to ADR. The Ordinance shall bring the promise of ADR to fruition and facilitate the judiciary and the ADR world to work together and resolve the mountainous backlog of cases so that Pakistan no longer remains a nation where the rule of law is said to be flouted by the few at the expense of the many. Commercial Courts are required to refer matters to ADR so that they can be resolved expeditiously. As is the case in the UK, there will be cost sanctions for refusing to consider ADR. This can stamp out frivolous litigation. The Ordinance has also provided Commercial Courts with ample powers to award costs against a party, which has been an essential feature required in the judicial system.

Lahore High Court’s Promising Support in the Pizza Hut Judgment

Faith in the new Commercial Courts has been amplified by the support of the Lahore High Court through its judgment in the Pizza Hut case. The judgment penned by the honourable Justice Jawad Hassan in W.P. 2761/2021 has empowered and enforced the values and virtues of Commercial Courts.

The matter pertained to an arbitration clause against which civil cases had been filed. The civil cases had been pending with the Commercial Courts. The petitioner also moved a writ petition during pendency of the same. The court, while deciding upon the maintainability of the writ, also expanded on fundamental rights in the context of the ease of doing business. The judgment opined that Pakistan had been suffering an abysmal ranking for “enforcement of contracts” as per the World Bank’s Ease of Doing Business project, but the country had slowly edged above its previous ranking of 156 to 108. According to the court, the Constitution of Pakistan also sought to create a favourable environment to conduct business as part of the fundamental rights of citizens:

“Undoubtedly freedom of trade, business and commerce is a fundamental right guaranteed under Article 18 of the Constitution which states that every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business. One of the basic purposes behind provision of this fundamental right is certainly to advance culture of socio-economic progress and to protect and promote business and trade activities and, at the same time, to encourage simplification of the process of establishing and carrying out new business ventures throughout the country because activities of business and trade create opportunities for the masses around and provide job options, financial stability and progress in the area.”

Citizens deserve to be treated in accordance with the law, but the constant delays and inefficiencies inherent in our legal system impinge upon this right. The judgment held that the Constitution placed a responsibility upon the High Court as well as the state to prevent such a state of affairs and directed the Commercial Court to follow Rule 10 and 11, Chapter 1-k, Volume 1 of the Lahore High Court Rules and Order mandating the following:

“All cases which have been marked as `commercial cases’ under the preceding paragraph shall be brought to a hearing as early as may be practicable. Such cases shall be given priority on the day of hearing over other cases, except part-heard cases, and shall, so far as possible be heard from day to day until they are finally decided.”

In its conclusion, the judgment directed the Commercial Courts to decide the matter expeditiously within 60 days.

The Pizza Hut judgment, paired with the newly promulgated Ordinance, is the ammunition we as practitioners of ADR need in order to change the dispute resolution landscape in Pakistan. The judgment has provided the grounds according which all lower courts, including Commercial Courts, are bound to operate for the expediency of dispute resolution and benefit to economy.

Way Forward

From the discussion above, it may seem that a lot of work has been done for the better, yet there is still so much more to do. Nevertheless, the direction taken by the Governor, the Lahore High Court, the Punjab Planning and Development Department and the World Bank has certainly changed the course of Pakistan’s future and it has been the honour of the authors to be allowed to play a role in it as well.

The World Bank and the Program Implementation Team within the Planning and Development Department, as well as the Lahore High Court under the auspices of Chief Justice Qasim Ali Khan, Justice Jawad Hassan and Justice Shahid Karim must be lauded for this difficult yet historic step. The future certainly holds more opportunity and promise. This may be an open invitation to everyone who wishes to work for the betterment of Pakistan to take the opportunity to work with us, or the Lahore High Court, or the World Bank, or any other forum, so that we consistently move in a progressive direction and not lose faith in the promise of a better Pakistan. There is so much that we owe to this country which is giving us the tools to contribute. There is great hope that in just a few years the narrative on international forums will be different when we represent our country. Optimism is high, as you may have noticed. We look forward to the day it converts to reality. The times ahead promise a lot of excitement. The authors of this article look forward to it.


The views expressed in this article are those of the authors and do not necessarily represent the views of CourtingTheLaw.com or any organization with which they might be associated.

Syed Akbar Hussain

Author: Syed Akbar Hussain

The writer is an advocate of the Lahore High Court, the Resident Representative of ADR-ODR International, an arbitrator, mediator and negotiator accredited by ADR-ODR International and Chair of the Lahore High Court Bar Association Committee on ADR. He is also a lecturer of ADR for the University of London and a local expert for the World Bank.

Mehak Zaraq Bari

Author: Mehak Zaraq Bari

The writer is an advocate, trained mediator and negotiator accredited by ADR -ODR International, Vice Chair of the Lahore High Court Bar Association (LHCBA) Committee on Alternative Dispute Resolution (ADR) and member of the Singapore International Mediation Institute. She is also a published author and lecturer of law for LLB and LLM.

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