Alternate dispute resolution mechanism | By Hafiz Ahsaan Ahmad


Alternate dispute resolution mechanism

ONE has to accept that our arbitration & mediation laws, court procedures, dispute resolution and mechanism for enforcement of different types of contracts including commercial and investment in Pakistan are weak, time taking but as well outdated and far behind from ranking of international community.

On average, a contract takes 1,071 days to settle a commercial dispute in court and then the case can go to appeal at stage first 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 a prosperous economy and for 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 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 on the inaction of our legislatures and by policy makers by not taking concrete steps on certain corporate legislation requiring early resolution of commercial disputes and investment, that when all those contracts which signed for big projects in Pakistan not only excluded the Jurisdiction of our laws but even when these disputes went to international arbitration forums, Pakistan had lost almost every arbitration and huge awards were issued for enforcement.

Simultaneously, non implementing strong legal and ADR system and by not taking the concept of modern legislation with international best practices is giving a huge constant loss to our economy, business and investment but the international and local investors are shy to invest in Pakistan in the present affairs of legal and absence of effective dispute resolution system.

The figures itself show that Overseas Pakistanis despite sending home remittances of more than 32 billion US dollars in recent years, there is less than one billion Dollar foreign direct investment from their side.

Alternate Dispute Resolution (ADR) is a good legal model to address out-of-court settlement throughout world of all types of disputes including the corporate disputes, conducted through various modes such as arbitration, mediation, conciliation and neutral evaluation.

The ADR offers quick resolution of all disputes providing a relief for the courts for handling bulk of cases which is beyond the human 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 in almost 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 the UK, US, Turkey and Singapore have all proven to be 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 there has been shown interest in Alternate Dispute Resolution mechanism somewhere in different legislation ie taxation, federal, provincial and local laws and even by a strong resolved for ADR by the top judiciary on many occasions including in recent judicial conference organized by law & justice commission of Pakistan but on ground desired results of implementation have not been achieved but resultantly showing huge pendency of cases before different courts and having question of credibility and effectiveness of our judicial and governance deliverance system.

Despite some arbitration processes taking place, awards of contracts in Pakistan have also taken years 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 giving rise to jobs and economic prosperity.

Investors and international organizations though 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 has 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 investment 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 a roadmap and through a separate institutional ADR mechanism.

The Honourable Supreme Court while deciding a recent case has also indicated its disappointment at the fact that it had not been incorporated/enacted yet remarked that: “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 favourable 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 through recognizing and preserving the rights of citizens, businessmen and investors with application of non-discriminatory laws and regulations in Pakistan.

Until we would not develop our all 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 has served on many important quasi judicial positions including Chairman, Customs, Excise & Sales Tax Appellate Tribunal.


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