Commercial Courts Ordinance – Significant Legal Reform for Businesses

“Time is money” is a phrase well known to the business world. It first appeared in 1748 in an essay titled Advice to Young Tradesman by Benjamin Franklin. This basically means that if time is not spent wisely and is wasted, then the opportunities to make money are lost as well.

I have both bad and good news to share in this article. As a personal choice, I always prefer the bad news before sharing the good news, maybe because I always like a happy end to a story.

The bad news is that our legal system is broken and almost anyone who has even remotely dealt with this system is already aware of it. For most businesses, especially smaller ones, any litigation pertaining to the enforcement of contracts is a doomsday scenario because the resolution in an ordinary civil court in Pakistan tends to take years if not generations. The agony is worse when financial interests are involved. Entrepreneurs cannot afford time-consuming litigation while cash flow is disrupted. It is because of this lethargic legal process that most businesses are terrified to legally fight for their just rights and rightly so.

As a commercial lawyer for the past 15 years, my standard advice to clients is this: only file a case if you have no other option left. Commercial contracts in Pakistan have become, by and large, unenforceable. If you have lent money or goods and the other person breaches the contract, you can either just forget about getting it back, or at least forget about getting it back through the formal legal system in a span of time that is worth pursuing the excruciatingly slow legal process for. Arbitration as an alternative has also failed as it does not free you from the dysfunctional system. One can go on and on about our legal system and the lack of meaningful reforms by successive governments but let’s hear the good news now.

The Government of Punjab, on 13th April, 2021, promulgated a new law for businesses called the Punjab Commercial Courts Ordinance, 2021. This law is a brainchild of a committee headed by Justice Shahid Karim and Justice Jawad Hassan of the honourable Lahore High Court. Both lordships understand the plight of the commercial world better than anyone in the country. The issue of commercial litigation being spearheaded by such leading and dynamic legal and judicial minds gives one a lot of hope for the future. The law could not have been drafted any better as it takes care of all the procedural and substantial issues arising in commercial litigation.

The main purpose of this law is expeditious disposal of claims arising from commercial transactions. As a result of the Ordinance, specialized Commercial Courts will be set up across Punjab to exclusively deal with commercial disputes between companies, firms and individuals. The law mandates Commercial Courts to decide all disputes within 180 days. The law specifically prohibits granting adjournments for more than 7 days and, where applicable, impose necessary costs if a party is delaying the proceedings. After the filing of the case, a defendant only has 30 days to file a reply in the form of a ‘leave to defend’. Moreover, only if the defendant raises substantial questions of law and fact will the case go into evidentiary matters otherwise the matter will be decided there and then on the basis of available record. The court will also have the power, on its own motion, to summon any record maintained by public authorities. Being mindful of the changing times, e-filing has also been permitted for all submissions. These are all revolutionary steps in the quick dispensation of justice and will go a long way in regaining the trust of the business world in our judicial system.

Justice Jawad Hassan in a recent case concerning an international food chain has most aptly held that,

“It is the duty of the courts in Pakistan to see the rights of the parties and to protect their interest in order to build confidence of investors in Pakistan.”

So not all is doom and gloom. The happy ending is that in the World Bank’s report on Doing Business, for the first time Pakistan has moved up to the 108th spot in the overall ranking for the ‘Contract Enforcement’ indicator in which it was previously holding the 156th position. If the new law is implemented properly, it is going to accrue far-reaching benefits for the economy of Pakistan as a whole.

An earlier version of this article appeared in Business Recorder. Republished here with permission.

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

Haris Azmat

Author: Haris Azmat

The write is an Advocate of the Supreme Court of Pakistan and Partner at Kilam Law. He tweets @harisazmat1 and can be reached at [email protected]