The business community hoped for an early resolution of commercial disputes when the government launched the Trade Dispute Resolution Organisation in 2014.
As many as 274 complaints involving $92.42m have been filed with the TDRO since its inception, but so far a mere 12 disputes have been resolved.
The dismal performance can be traced to administrative and policy issues which have turned the TDRO into a virtually moribund body. It is now merely an attached department of the ministry of commerce.
As many as 274 complaints have been filed with the TDRO since its inception, but so far a mere 12 disputes have been resolved
Out of court modes for dispute resolutions include arbitration, mediation, negotiation and personal meetings. Mediation usually comes under the alternate dispute resolution mechanism that any party can opt for.
For dispute resolution mediation is the first choice for 50pc of the trade bodies, followed by arbitration at 41pc. Litigation is preferred by only 4pc.
On the basis of this feedback from the business community, the core function of the TDRO is arbitration and mediation, not adjudication.
An officer of the organisation listed three factors that mar its performance.
The first challenge is the early finalisation of a trade dispute resolution law. “We have drafted a trade dispute resolution law which was sent to the law division for vetting”, a senior officer of the organisation said, adding they expect the law to be tabled in the National Assembly by the end of the current month so that it becomes an act of parliament.
With just four officers on its staff against the sanctioned 12 and no proper law for its functioning, the TDRO finds itself hamstrung. There has been no one to head the organisation for the last two years so that it functions on an ad hoc basis.
At best, it serves as a coordination office between the complainant (business) and respondent. The TDRO’s lone office is located in Islamabad, with no regional offices in the country’s business and industrial hubs — Karachi and Lahore.
According to the World Bank’s Doing Business Report 2016, contract enforcement rules in Pakistan require 46 procedures which take 993.2 days and cost 23pc of the value of the claim.
Globally Pakistan stands at 151 in the ranking of 189 economies on the ease of enforcing contracts.
As per a study of the commerce ministry, constraints to business growth occur due to delays in commercial dispute settlement.
The sector-wise analysis of dispute complaints received at the TDRO show that 50 cases were related to textiles, 30 edible items, 30 rice, 25 leather, 30 metal and minerals, 23 machinery, 20 surgical goods, 21 sports goods and 10 pharmaceuticals. As many 35 cases related to other sectors.
The highest number of reported cases of disputes have been recorded for China (39), followed by US (18), Italy (17), Iran (14), Canada (13), Spain (12), Russia (12), Portugal (11), Sudan (11), Switzerland (10), Mauritius (10) and the UAE (9). The lowest number of cases of trade disputes — eight — have been recorded for Afghanistan and India.
A TDRO survey based on the feedback from trade bodies listed quality and payment issues, lack of understanding of contract and agreement, price fluctuations and non-compliance as the main reasons of commercial disputes.
Almost 72pc of the trade bodies are not satisfied with the existing mechanism for trade dispute resolution. The lukewarm response of the concerned authorities, such as trade missions abroad and TDAP, do not lead to dispute resolution.
An official of the TDRO said that a Trade Dispute Resolution Performa (TDRP) is available on its website. A complainant in Pakistan or abroad is required to fill the Performa and submit it along with all relevant documents. After receiving the complaint, the TDRO starts the process of working towards an amicable solution.
Over the years, the business community has lost its confidence on the performance of commercial courts for dispute resolution.
Official data shows that the Lahore-based office of TDAP received 310 complaints against Pakistani businessmen, while 108 against foreign businessmen. Of these only 141 cases were filed in commercial courts of which 113 were disposed of. Only 12 cases were decided by commercial court in 2015, while 28 are currently in process.
The situation at commercial courts in Karachi was no better than Lahore. The Karachi-based TDAP office received 463 cases from 2008 to 2015. Of these only 44 were referred to commercial courts in which only eight were settled. The remaining 36 are currently in process.
In both Karachi and Lahore’s commercial courts, according to an official report, businesses face litigation for 5-10 years getting entangled in 46 procedures. There is a backlog of one million cases in courts of which 30pc are estimated to be commercial. The report further says the judicial system suffers from heavy case-loads because of a shortage of judges.
Published in Dawn, Business & Finance weekly, March 20th, 2017