Sanctity of contracts

Published January 4, 2021

THE Pakistani taxpayer has to foot yet another bill. The government is paying a whopping $28.7m from the national treasury to a Washington-based asset recovery firm Broadsheet LLC because it reneged on a contractual agreement. At the centre of this debacle is the National Accountability Bureau that had signed the original agreement with the company to recover stolen assets stashed in various offshore accounts.

The disagreement between the two parties ended up in court which ruled against NAB and the government of Pakistan, resulting in the payment of damages. It is a familiar story of official incompetence, poor judgement, irresponsible handling and shoddy legal defence leading to a steep cost being paid by the country. If this were a one-off issue, perhaps it could have been attributed to one department’s blunder. Sadly, it has now become a trend. There is a long list of cases where Pakistan has lost in international courts and is either appealing the judgements or negotiating with the aggrieved party on the amount to be repaid. The most glaring example is of the Tethyan Copper Company which won an award against Pakistan totalling nearly $6bn. The story of the blunder was similar: a contract agreed upon and then reneged upon.

Read: Mining firm moves Virgin Islands court for enforcement of Reko Diq award against Pakistan

At play is a deeper malaise — the inability of Pakistani officialdom to recognise the sanctity of contracts. This grave weakness — perhaps bordering on criminal apathy and negligence — manifests itself in the casualness with which such disputes are handled. It is also reflective of a deeply flawed understanding of how disputes of an international nature should be tackled and what could be the costs of blundering on the legal front. A similarly cavalier approach is visible in this latest case. Officials of the federal government and NAB are, as usual, blaming previous governments instead of pinning specific responsibilities, learning the right lessons, and putting in place a corrective mechanism that ensures such huge blunders are not repeated. The unavoidable conclusion at this stage, however, is that soon this too will become business as usual in order to cover up internal weaknesses and systemic inadequacies. No one will be held accountable for the steep cost that Pakistan has been compelled to pay for official incompetence.

There is, however, an opportunity for the PTI government. If it really means what it says about fixing this broken system, it could treat this latest issue as a diagnostic and prescriptive test case. Prime Minister Imran Khan is in the unenviable position of having to pay these enormous damages under his watch, and therefore, instead of just signing the cheque and moving on, he should order a thorough inquiry at all levels to determine what went wrong, who made it go wrong and what can be done to fix the loopholes in the system. Pakistan cannot afford this trend any longer.

Published in Dawn, January 4th, 2021

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