On April 17 2021, on the manicured lawns of the Governor’s House, by the stroke of the Governor’s pen came the realisation of the Punjab Commercial Court Ordinance 2021. In economies where there are standalone Commercial Courts (such as Austria and Belgium) or where there is a Commercial Division within their court system (such as the UK), there tends to be a benefit of having more efficient contract enforcement mechanisms, less number of cases pending and shorter resolution time.
The Punjab Commercial Court Ordinance 2021 (henceforth referred to as the Ordinance) has been introduced to resolve commercial disputes efficiently in a cost-effective and timely manner. The Planning and Development Board, Government of the Punjab in collaboration with World Bank Group, Board of Investment and multiple Provincial Departments are implementing the Ease of Doing Reforms Action Plan to improve the business environment of the province. One of the indicators of ease of doing business is the enforcement of contracts. The Ordinance is a key component of increasing ease of business as it will facilitate businesses by providing regulations that help with the enforcement of contracts, hence encouraging domestic and foreign investments. Economies with efficient judiciaries and effective enforcement mechanisms of contractual obligations have high levels of development, rapid growth of small firms and a business climate that fosters innovation and attracts foreign direct investment.
Currently Pakistan ranks 156 out of the 190 economies on this indicator. The indicator is measured by looking at the time and cost for resolving disputes as well as looking at the quality of the judicial process of each economy. Hindrances to access to justice such as high costs due to delaying tactics of lawyers and inefficient disposal has led to over two million cases pending in lower and superior courts of Pakistan. This has led to impediments in development of a prosperous economy, doubt in rule of law and inefficient governance. Economic and social progress cannot be achieved without improving the access to justice and the effective protection of the rights of businesses.
The Ordinance promises precisely that by introducing new reforms including the establishment of the Commercial Courts, training of judges, upgradation of case management tools and court automation. It also aims to increase use of Alternate Dispute Resolution Methods (ADR), increasing uniformity of judicial decisions, and reducing the pendency of cases.
The Commercial Courts established under the Ordinance shall have jurisdiction over commercial disputes where the value of the claim is over 500,000 rupees. While it excludes sale and purchase of immovable property, it includes any transaction related to trade and business and is applicable to disputes arising between individuals, domestic companies or foreign companies.
The features of this Court include introduction of a timeframe for the decision of suits, e-filing of pleadings, and a limited number of adjournments to deliver speedy justice. These concepts of speedy justice through case management, deterrents through costs and increased practice of ADR have proven to be successful in other countries such as the UK after the Woolf and Jackson Reforms, however, there is no such precedent for them in Pakistan.
Though these are all welcome developments, the Ordinance still leaves gaps which will have to be filled in with jurisprudence. In essence the crux of the Courts’ ambitions depend on the sanctions of costs on parties attempting to delay the proceedings. Yet Pakistan does not have the established jurisprudence for awarding costs that other countries have, such as the UK. Hence it is expected that there will be significant friction in the beginning on how these costs are applied and, in time, enforced by Superior Courts. The silence of the Ordinance on these matters shall have to be carried by judicial training and subsequently, the rules established under the Ordinance.
Similarly, the Ordinance has insisted that ADR be utilised by the parties but has fallen short of imposing strict sanctions for refusing the same. ADR has proved to be time efficient and cost effective globally and in countries such as the United Kingdom, USA, Turkey, and Singapore has proven to be successful in making justice more accessible. Yet in Pakistan it is unchartered waters and time and again attempts by foreign donors to introduce ADR have failed. One would hope because this is a judiciary led effort the result would be different.
Comparatively, jurisdictions around the world tend to favour the winning party with costs imposed on the losing party. They also consider behaviour by the parties. For example, in the United Kingdom, costs are also awarded for non-consideration of alternative dispute resolution mechanisms to discourage unnecessary litigation. It is expected that the legal fraternity may soundly object to these impositions as the modus operandi of delays and hindrances has seeped deep into the DNA of legal practice of Pakistan. Yet if the judiciary stays strong and insists on establishing jurisprudence to support these measures, then one can see hope that the ambitions of the Ordinance may be realised.
Indeed, the success of any law is heavily dependent on how the judiciary receives it and implements it. This Ordinance’s success can already be celebrated by the evident support of the Lahore High Court in the “Pizza Hut judgment”. Justice Jawad Hassan in this judgement (W.P. 2761/2021) has empowered and enforced the values and virtues of the Commercial Courts. The case was about an arbitration clause, against which civil cases were pending in the Commercial Courts. The Honourable Court while deciding of the maintainability of the writ, also expanded in detail about the fundamental rights in context of the ease of doing business enshrined by the Constitution. The Court held that the Commercial Courts have been empowered and compelled by law to decide the matter on a day-to-day basis within 60 days.
Historically we have seen that Pakistan’s legislature makes many laws but there is often weak implementation which further serves to burden the legal system. Hence the commercial courts will have to inspire confidence in rule of law by deciding cases within the timelines strictly, enforcing contracts and encouraging ADR. While the Ordinance has provided for a Secretariat and Registrar to ensure accountability and efficient governance, only time will tell how effective it is. Nevertheless, optimism is strong, as in this rare trifecta of judiciary, government and the World Bank, there is hope that the right direction has been taken. One can dream that this judgment paired with the current Ordinance are the ammunition practitioners need to change the dispute resolution landscape of Pakistan.