THE second centre for resolution of business disputes through mediation, set up in Lahore, has begun receiving initial response from the corporate sector.

It was launched by Lahore Chamber of Commerce and industry in December last year with the backing of International Finance Corporation.

As many as seven leading banks have shown interest in the centre and intend to forward their disputes to it. The banks are Al Baraka, Standard Chartered, Bank Al Habib, United Bank, Punjab Bank, Summit Bank and Industrial Development Bank of Pakistan.

The centre was established on July 25, 2012 but became operational five months later. In February this year, the chamber said that it has now finalised all the rules and regulations and is ready to work. It urged its members to bring their disputes, if any, even the ones with their global partners, to the centre for out-of-court settlement.

The business community is waking up to the benefits of mediation or alternate dispute resolution (ADR), for it saves time and money wasted in court battles. In April, the economic reforms unit of the ministry of finance in collaboration with the IFC, private sector arm of the World Bank, organised an awareness seminar at Islamabad Chamber of Commerce and industry to mobilise support for opening of the third alternate dispute resolution centre in Islamabad region.

In March, the Securities and Exchange Commission of Pakistan (SECP) amended relevant rules to promote alternative dispute resolution mechanism in the corporate sector. The amendments seek to “encourage directors, shareholders and other stakeholders to solve their disputes without recourse to courts of law,” says an official of the SECP.

In January, the then prime minister had asked the ministry of commerce to prepare a plan for establishing trade dispute resolution councils, as proposed by a delegation of UK-Pakistan chamber of commerce which came to meet him, for resolving disputes/complaints lodged by importers of Pakistani goods in the UK.

Delays in settling commercial disputes cast a negative effect on the investment climate. Pakistan has a large private sector which faces difficulties in contract enforcement. Several years are consumed in litigation. The procedures for settling the disputes are slow and inadequate and, hence, they discourage market-based growth and domestic and foreign investments.

The Investment Climate Advisory Services of IFC has extended assistance to several countries in introducing ADR mechanisms for commercial disputes. In 2005, IFC began working with the ministry of justice in Pakistan and jointly drafted legislation in support of ADR.

The IFC then worked with the High Court of Sindh in establishing mediation services in Karachi. According to its website, its investment climate advisory services contributed to the training and accreditation of 49 mediators and 13 master trainers. Forty judges were also trained in managing mediation cases. Over 2,500 members of the legal profession and the private sector attended study tours, conferences, seminars, and workshops organised to increase awareness and understanding of mediation.

The Karachi Centre for Dispute Resolution, Pakistan’s first mediation center and training institute, opened in 2007. By late 2009 the centre had received over 924 mediation cases. To date, IFC claims, more than $27 million of disputed funds have been released as a result of out-of-court settlement, which also saved years in time not spent on litigation proceedings.

Similar reasons led to adoption of alternative dispute resolution methods in India but, unlike Pakistan where the IFC took initiative, it was the government of India itself which took steps to provide a new forum and procedure for resolving international and domestic commercial disputes quickly. It set up the International Centre for Alternative Dispute Resolution (ICADR) in 1995 which is an autonomous organisation working under the aegis of the ministry of law and justice with its headquarters at New Delhi and regional centres at Hyderabad and Bengaluru, which are fully funded and supported by their respective state governments.

Although the need and desire for mediation to settle disputes has always prevailed over court battles, the institutional services for the purpose have been few and disorganised. In developing countries, there is excessive over-burdening of courts with a large number of pending cases which can be settled by using ADR mechanisms.

However, international arbitration services are equally as time-consuming and expensive as are court proceedings. But there is no campaign against them because they tackle disputes between governments and big corporations.

Of late, developing countries have started showing anger against them. These centres are backed by the World Bank. Most prominent among them are International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL), International Chamber of Commerce (ICC) and International Court of Arbitration (ICA).