New Commercial Courts in Punjab: Strengthening the Rule of Law in Pakistan

As I inched my way slowly through the emotionally charged, albeit restrained crowd of TLP protestors outside the Governor House, Punjab on 12th April, 2021 and passed through the gates, I saw through the looking glass of hope into a future where there could be peace and stability on both sides of the wall. At that moment, what was happening outside the walls of Governor House was in sharp contrast to with what was happening inside. Inside, on the sprawling lawns, Ali Jalal, Hassan Tariq, Mishka Khan, Haram Ajmal, Eiraj Hassan and other team members of the Planning and Development Board, Government of the Punjab, had organized an elegant evening to mark the historic signing of the new Punjab Commercial Courts Ordinance 2021. Against the backdrop of giant flatscreens charting out the last 18 months of intensive work carried out by the Lahore High Court, Punjab government and World Bank, the Governor, Mr. Muhammad Sarwar signed the Ordinance. The stroke of the pen at sunset gave way to the sonorous call of the muezzin calling for maghrib prayers. Under the light of the new moon of Ramzan 1442 Hijri, there was hope that the new law would benefit people on both sides of the wall and herald a new chapter into the rule of law and economic development in Pakistan.

Under this law, new commercial courts have been established in five major commercial districts of the Punjab. This is a first for Pakistan. It is the culmination of slow and steady steps taken by the judiciary, the executive and the private sector in collaboration with each other over the last few years. Overseas Pakistanis have also made a major contribution towards this. It was in response to the complaints of overseas Pakistanis to the Chief Justice of Lahore High Court that a dedicated cell had been established to deal exclusively with their issues, many of which were commercial in nature. The Pakistani diaspora around the world amounts to over 11 million people. That is 3 times the populations of Singapore, Denmark and Finland and equals all of Belgium or Tunisia. This diaspora is a national asset which should be appreciated and catered to in the development of commercial courts, rule of law and economic development – exactly what the Lahore High Court has done. Setting up the Overseas Pakistanis Cell had a positive impact on Pakistan’s international standing in the World Bank’s Ease of Doing Business Index where Pakistan had previously ranked at a dismal 136 out of 190 economies (till 2019). Since then, we have jumped up to the 108th ranking in the ease of doing business. The World Bank, seeing the proactive initiative of the Lahore High Court, offered to assist the court through the Punjab government. What followed was a series of swift measures to improve the forum for commercial dispute resolution in Punjab.

First came a notification from the Chief Justice in April 2020 setting up commercial courts. Next, dynamic district judges were picked to hear commercial cases exclusively, followed by intensive rounds of specialist training lectures and workshops on national and international commercial law and practice. Simultaneously, a working group had been formed headed by two High Court judges, Justice Shahid Karim and Justice Jawad Hassan, comprising members of the legal community, the Punjab government and the World Bank. The result was the Punjab Commercial Courts Ordinance 2021.

Whilst these commercial courts promise to ease the path of business and commerce gradually (Rome wasn’t built in a day, after all), the greater impact will be in the realm of the rule of law. There is a strong belief that it is not democracy which strengthens the rule of law, it is presence of strong, efficient courts which enforce contracts that strengthen it. This leads to economic development and, in turn, a potentially stronger democratic system. Rule of law and economic development are cogs in the same wheel. The two critical factors in economic development are (i) the enjoyment of property rights; and (ii) the enforcement of contracts. Social philosophers and economists argue that the rule of law in a country can precede or even operate independently of democracy if two components in a legal system are strong: efficient courts and a robust commercial code.

In a country like Pakistan which lacks institutional memory and is weak in ‘follow-ups’, passing law upon law in the legislature only serves to burden the legal system, not facilitate it. We are already an over-legislated country. It neither inspires confidence in people nor establishes stability required by government and investment. However, if courts are efficient and commercial law is effective, practical, user-friendly and able to secure property rights and enforce contracts, then rule of law and economic development have space to flourish. Enforcing contracts is of utmost importance. Without the security provided by contracts, modern day commerce will not be possible.

The new Ordinance supplements the year-old commercial courts exclusively designated to hear commercial disputes. Several procedures have been included in the Ordinance to ensure efficiency, for example tighter deadlines in disposing of cases and appeals, e-filing of pleadings, recording of evidence, court-ordered alternative dispute resolution (mediation, negotiation, arbitration), limited number of adjournments that can be sought and wider discretion to judges to award costs if parties try to delay proceedings unreasonably.

Fortune indeed favours the bold and two recent bold decisions by the judges spearheading the commercial courts project, J. Shahid Karim and J. Jawad Hassan, have given hope of good fortune. In a judgment passed in December 2020 in the case of Nestle Pakistan v Federation of Pakistan, J. Shahid Karim while striking down certain statutory regulatory orders of the Federal Board of Revenue, analysed the rule of law in detail and stated the need for,

“…a body of accessible legal rules for the successful conduct of trade, investment and business generally. It is universally accepted now that all official acts must conform to rules which are published and accessible. Any exercise of powers without framing rules to regulate them is arbitrary and capricious.”

Similarly, in March 2021, in the case of Pizza Hut v Multan Development Authority, J. Jawad Hassan stressed that,

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.

Judgments like these give a decisive nod of encouragement to the domestic and international investment community regarding a judicial climate that is in favour of the rule of law.

A journey of a thousand miles begins with a single step. This single step taken by the Punjab Commercial Courts Ordinance 2021 is a step in the right direction. With the hope of commercial disputes being resolved faster and in a better way, there is a greater chance of investors within and outside the country feeling more confident in doing business and creating more jobs, thereby reducing risks of civil unrest. It is hoped that the next time the Planning and Development Board organize an event on the lawns of Governor House, some of the TLP protestors outside the walls will be inside, having benefitted from these business reforms.

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

Nudra B Majeed Mian

Author: Nudra B Majeed Mian

The writer is a Barrister and Advocate Lahore High Court. She holds a BA Hons (Juris.) degree from Oxford, LL.M degree from the London School of Economics and Bar-at-Law from Lincoln’s Inn. She also serves as a lecturer at Kinnaird College University and the Civil Services Academy. She was a member of the Working Group drafting the Punjab Commercial Courts Ordinance 2021.