Courts for businesses

The World Bank’s Doing Business Report (2019) ranked Pakistan at 156 out of 190 economies on the ‘enforcing contracts’ indicator, based on the cost and quality of judicial processes, and time.

The high pendency of cases, coupled with the delays caused by lawyers contributes to reduced access to justice in Pakistan. The report further noted that in 2019, it took 1072 days on average for the resolution of a commercial dispute, compared to 164 days on average in Singapore, 216 in New Zealand and 437 days in the United Kingdom.

The 2019 report could be seen as an indictment of our justice system, which is marred with procedural and systemic inefficiencies. The report further identified the lack of specialized commercial courts as one of the major reasons for the low ranking of Pakistan.

The speedy and expeditious disposal of commercial claims is critical for uplifting commerce, trade and ease of doing business within a country. Additionally, specialized Commercial Courts provide distinct expertise needed for the speedy disposal of such cases, facilitating investment in the country and provision of speedy justice.

The prompt resolution of commercial disputes leads to stability, which attracts domestic and foreign investment, thereby promoting business activity and contributing to the overall GDP of the country. Moreover, swift enforcement of contracts creates an environment for attracting foreign direct investment and contributes in generating employment opportunities.

In light of the above, the chief justice of the Lahore High Court issued a notification in April 2020 setting up commercial courts, after which district and civil judges were selected for the purpose of hearing commercial cases exclusively.

The establishment of commercial courts in five major commercial districts of Punjab has improved Pakistan’s reputation in the comity of nations and has led to an improvement in Pakistan’s ranking in the World Bank’s Ease of Doing Business. Pakistan was previously ranked at 136 out of 190 economies in 2019 and now holds the 108th rank. Commercial courts have been set up due to the successive collaboration of the executive, judiciary and private sector, which depicts that effective cross-institutional cooperation can achieve milestones. A key part of the Punjab government’s Ease of Doing Business Reforms Action Plan is improving the business environment of the province, and one of the indicators for its effective implementation is the enforcement of contracts.

Justice Shahid Karim of the Honorable Lahore High Court, in the case of Nestle Pakistan v Federation of Pakistan highlighted the need “for a body of accessible legal rules for the successful conduct of trade, investment and business generally.”

Therefore, subsequent to the establishment of the commercial courts, a working group headed by two judges of the Lahore High Court, Justice Shahid Karim and Justice Jawad Hassan was established. The working group consisted of members from the legal community, the executive and the World Bank and their efforts resulted in the promulgation of the Punjab Commercial Courts Ordinance 2021.

The Punjab Commercial Courts Ordinance 2021 was promulgated with the sole purpose of bolstering the rule of law and economic development in Pakistan through resolving commercial disputes in a timely and cost-effective manner. The ordinance provides for upgradation of case management tools and court automation, along with the promotion of alternative dispute resolution methods (ADR), thereby reducing the pendency of cases. Furthermore, the ordinance provides for a secretariat and registrar to ensure accountability and efficient governance of commercial courts.

Commercial courts established under the ordinance have jurisdiction over commercial disputes with claims having value of over Rs500,000. The sale and purchase of immoveable property is excluded from the jurisdiction of Commercial Courts; however, transactions relating to business and trade, as well as disputes between individuals, domestic companies or foreign companies are included.

Other key features of the ordinance include a set time limit for decisions of claims; in addition to e-filing of pleadings and limitation on the number of adjournments which will all contribute to a streamlined judicial process for the swift resolution of commercial disputes. Such reforms have proven to be effective in other jurisdictions, such as the UK, UAE and Singapore.

The Honorable Lahore High Court has already highlighted and stressed upon the need of having an efficient and structured platform for resolving commercial disputes. Justice Jawad Hassan while authoring a judgment pertaining to a commercial dispute of an international food chain pointed towards the critical role of commercial courts.

Justice Jawad stressed on the fundamental rights with respect to ease of doing business, which are enshrined in the constitution of Pakistan, and that commercial courts are empowered and compelled under the Ordinance to decide the cases within 60 days. He noted: “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.” The aforementioned judgment has been hailed both nationally and internationally as a stepping-stone towards judicial protection accorded to investors.

The establishment of commercial courts and the enactment of the Commercial Courts Ordinance 2021 is a milestone achievement which will strengthen the expertise of the judiciary, instil greater trust in the business community to invest, and provide some much needed impetus to the staggering economy of Pakistan.

The writer is a lawyer and an analyst. He tweets @UsamaMaalik1