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Effective alternate dispute resolution mechanism

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Ahsaan Ahmad

Pakistan has over two million cases pending in lower and superior courts, putting immense pressure on the legal system and as a result thereof creating inefficient governance and various challenges to the development of economy and inflow of foreign direct investment

One has to accept that our arbitration and mediation laws, court procedures, dispute resolution and mechanism for enforcement of different types of contracts including commercial and investment in Pakistan are not only week and time taking but also outdated and far behind the international standards. On average, it takes 1,071 days to settle a commercial dispute in court in Pakistan, and then the case can go to appeal at stage one in a high court and then to the Supreme Court. It is not unusual for a contract case to take many years to be decided.
Pakistan has over two million cases pending in its lower and superior courts, putting immense pressure on the legal system and as a result thereof creating inefficient governance, doubts in the rule of law and various challenges to the development of economy and inflow of foreign direct investment. According to the World Justice Project’s latest Rule of Law index, Pakistan ranks near the bottom in its ability to ensure protection of fundamental rights and advancing civil and criminal justice. One of the indicators of the ease of doing business is the enforcement of contracts where Pakistan ranks 156 out of 190 economies on this global indicator.
Pakistan has also faced legal consequences of inaction of our legislatures and policymakers by not taking concrete steps regarding corporate legislation requiring early resolution of commercial disputes and investment. When all contracts which signed for big projects in Pakistan, those not only excluded the jurisdiction of our laws but even when these disputes went to international arbitration forums, Pakistan lost almost every arbitration and huge awards were issued for enforcement.
Simultaneously, non-implementation of strong legal and ADR system and by not taking the concept of modern legislation with international best practices is giving a constant loss to our economy, businesses and investment. Moreover, the international and local investors are also shy to invest in Pakistan in the current affairs of legal system and absence of effective dispute resolution system. The figures itself show that despite overseas Pakistanis sending home remittances of more than 32 billion dollars in recent years, there is less than one billion dollars of foreign direct investment from their side.
ADR is a good legal model for out-of-court settlement throughout world for all types of disputes including the corporate disputes. It is conducted through various modes such as arbitration, mediation, conciliation and neutral evaluation. The ADR offers quick resolution for all disputes and provides a relief to courts from handling bulk of cases which is beyond the physical capacity to deal with. The process of arbitration, mediation, conciliation and neutral evaluation are generally confidential, less formal/stressful than the traditional court proceedings and has also been well recognized almost in every country.
There are various models of ADR working successfully in many countries, and this system has evolved over a long period of time by providing early relief to different nature of disputes including commercial and investment and minimizing the burden of regular courts. ADR mechanisms in UK, US, Turkey and Singapore have all proven to be the successful in making justice more easy and accessible. Dubai and China are widely regarded amongst the leading emerging economies due to their rapid economic progress through steady investment flows facilitated by open door policies towards investment and supportive modern general and arbitration specific infrastructure.
In recognition of the globalization of International Commercial Arbitration, these countries have adopted or are in the process of adopting the United Nations Commission on International Trade Law (UNCITRAL) model law and the most prominent international conventions on recognition and enforcement of arbitral awards. With the effective implementation of these modern arbitral laws, these countries have created internationally recognized and respected arbitral institutions which embody their own unique historical approaches to dispute resolution. In recent reports, Turkey received 30,828 mediation petitions and had a 72 per cent arbitration record. In Italy, almost everybody now believes that the new mediation model has shown promising outcomes.
Though in recent years, interest has been shown in ADR mechanism in taxation, federal, provincial and local laws and even by a strong resolve for ADR by the top judiciary on many occasions including in the recent judicial conference organized by the Law & Justice Commission of Pakistan but on ground, the desired results of implementation have not been achieved, resulting in huge pendency of cases before different courts and having the question of credibility and effectiveness of our judicial and governance system.
Awards of contracts in Pakistan also takes years in Pakistan to get executed, which has caused billions in financing to be trapped in limbo, delaying the payment of damages from a dispute decided through arbitration. Such problems have also prevented foreign direct investment from entering the country and boosting economy. Investors and international organizations have a standard contractual requirement for a dispute resolution clause covering arbitration and mediation yet they have no faith frankly in the legal system of Pakistan.
Countries with effective judicial systems and efficient dispute resolution mechanism definitely have inclined and willingness for investors to increase their investment. Therefore, for reducing the backlog of cases and for giving credibility of our judicial system both on enforcement of rights and for commercial & investment rights/obligations and for attracting more international investment, the legislatures should redraft the Arbitration laws and courts procedures in Pakistan by adopting best international practices and to create such institutional mechanism for implementation through independent and professional experts which can conveniently decide different methods of Arbitration matters with timeline in Pakistan.

It is also important and imperative for addressing international investments concerns that the United Nations Commission on International Trade Law (UNCITRAL) model Law as amended 2006 be implemented through the Act of the Parliament in Pakistan. Another area is important to highlight here that wherever there is a provision presently available in existing laws regarding Alternate Dispute Resolution, this should be invoked and encouraged by setting up road map and through separate institutional ADR mechanism.

The Supreme Court while deciding a recent case has also indicated its disappointment at the fact that it had not been incorporated/enacted yet. “In a commercially fast paced world, where the world is essentially a global village, it is regrettable that Pakistan, although a signatory to UNCITRAL, has till date not incorporated the provisions of the Model Law into its domestic law and the Foreign Arbitration Act makes no mention of incorporation by reference.”

It is also a proven fact that in order to create a favorable business, investment climate, economic and social progress, there is dire need to improve access to justice and to have strong, independent, vibrant, effective judicial governance and dispute resolution mechanism. Until we develop our laws, courts procedures and disputes resolution techniques for improving business and investment climate like other countries of the world, Pakistan would constantly face the vicious circle of current deficit, currency devaluation, unemployment, delaying justice, poor governance and lack of availability of resources for social, justice and development sectors in Pakistan.

The writer is a practicing lawyer at Supreme Court and has served as Chairman, Federal Excise & Sales Tax Appellate Tribunal and Senior Advisor Federal Ombudsman. He can be reached at: hafizahsaan47@gmail.com.