PAKISTAN: An Introduction to Dispute Resolution: General Commercial

Chambers Asia-Pacific 2021: Practice Area Overview

Pakistan: Dispute Resolution: General Commercial

1. Current Economic Conditions Affecting Clients or the Legal Profession

The current Prime Minister of Pakistan, in his first address to the nation, highlighted his government’s commitment to improving the investment environment of the country. The Prime Minister approved the setting up of the Steering Committee on Pakistan Regulatory Modernization Initiative. The purpose of the committee is to simplify the regulatory framework to facilitate business and investment. The government’s 'Doing Business Reform Strategy 2018-21' is aimed at creating an environment that fosters foreign as well as domestic investment.

The World Bank Group’s 'Doing Business' project measures a country’s 'ease of doing business' through numerous factors and various indicators including assessing the impact of stringent commercial laws and regulations and their enforcement. According to the Board of Investment, over the last four years, Pakistan has implemented almost 300 reforms to boost investment. As a result, Pakistan has jumped 39 positions in the 'ease of doing business' rankings.

The Board of Investment (BOI), in collaboration with the World Bank, International Finance Corporation and Foreign and Commonwealth Office of the United Kingdom, organised a seminar on 'Doing Business Reforms in Pakistan' and launched the '6th Ease of Doing Business Reforms in Pakistan' in August 2020.

The government is working to make Pakistan an investment-friendly country.

2. The level of activity, trends, and developments in your area

(i) Doing Business Report 2020 

The Doing Business Report 2020 recognised and appreciated major reforms implemented in Pakistan including the following: First, the process of starting a business was made easier by expanding online procedures for registering a company. Second, authorities made the process of obtaining a construction permit simpler. It now takes 108 days in Lahore and 134 days in Karachi to obtain a construction permit, compared to 266 and 261 days previously. Third, commercial electricity can be obtained in 73 days in Lahore and 134 days in Karachi as compared to 117 and 185 days previously. Fourth, the process for paying taxes was made easier by introducing online payment modules for value added taxes and corporate income taxes. The government also lowered the corporate income tax rate for the 2018 fiscal year. The total number of hours required to comply with tax requirements per year reduced from 294 to 283.

(ii) Commercial Courts 

The Planning and Development Board and the Government of Punjab in collaboration with the Lahore High Court and Punjab Judicial Academy inaugurated Commercial Courts in September 2020. The aim is to expedite and improve commercial dispute resolution.

(iii) E-Courts 

On 27 May 2019, the Supreme Court through a press release stated, “for the first time in judicial history of Pakistan that cases in the Supreme Court are heard through videolink connectivity.” Additionally, amid the coronavirus pandemic the Islamabad High Court also launched an e-court service in June 2020. A notification dated 11 June 2020 states that “in order to facilitate the learned lawyers and to ensure social distancing, Islamabad High Court and its District Courts have started operating E-Courts and the facility has already been availed by counsels.” Certain benches of the Lahore, Sindh and Peshawar High Courts also have an e-court facility.  

3. New legislation that will have an effect on clients

(i) Code of Civil Procedure 

The Code of Civil Procedure 1908 (CPC) was recently amended. One of the key amendments encourages mediation.

According to Order IX-B, “Except where the Court is satisfied that there is no possibility of mediation or an intricate question of law or facts is involved, the Court shall refer the case for mediation.” Order IX-B Rule 2 states, where a case is referred to for mediation, the court shall stay the proceedings for a period not greater than thirty days. The parties will be required to appear before the mediation centre set up by the Lahore High Court. Order IX-B Rule 3 states, if the mediation process has been successful, the mediator shall “cause the same to be recorded in writing, signed by the parties or their recognized agents or their pleaders and attested by two independent witnesses.” The insertion of this Order in the CPC shows the trend towards alternative dispute resolution.

(ii) Arbitration  

(a) Foreign Arbitral Awards – The New York Convention

Pakistan promulgated the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011. This law governs foreign arbitral awards and gives effect to the New York Convention in Pakistan’s municipal law. The case of Orient Power Company (Private) Limited v Sui Northern Gas Pipelines Limited through its Managing Director, Lahore is a landmark judgement relating to the enforcement of foreign arbitral awards. In this case the Lahore High Court held that the High Court has exclusive jurisdiction to recognise and enforce arbitral awards.

Additionally, the court stated the use of public policy as a ground to refuse to recognise foreign awards under the New York Convention is extremely restricted. The court stated, “Consequently, we find that the public policy exception should not become a back door to review the merits of a foreign arbitral award or to create grounds which are not available under Article V of the Convention as this would negate the obligation to recognize and enforce foreign arbitral awards.”

4. Potential hurdles or difficulties faced by clients and how these can be overcome

(i) Pendency of cases 

According to data issued by the National Judicial Policy Making Committee (NJPMC) in 2020, there are more than two million cases pending in the Supreme Court, Federal Shariat Court, High Courts and the District judiciary. Delay is the main challenge facing parties and it continues to be a problem.

(ii) Lack of Female Representation in the Judiciary

As per statistics by the Ministry of Law, only 6 out of 113 judges of High Courts across the country are women. There is not one female judge on the Supreme Court. 

(iii) Appropriate Dispute Resolution Clauses

It is important for clients to have appropriate dispute resolution clauses included in contracts to ensure that their interests are protected. To this end, they should obtain professional advice prior to finalisation of agreements.