The country was on the verge of default and still faces a devastating polycrisis. However, there appears to be no discernible effort to rethink state institutions’ fault lines, umbrella protections and turmoil. Due to poor governance and inefficient state machinery, feeble enforcement of state laws is considered the biggest concern.

This multiplies the overall effect in business dealings in case of default or breach by any party. As per the World Bank Report, Doing Business 2020, it takes 1,096 days in Pakistan to resolve a business dispute, from filing a suit until the payment to an aggrieved party, compared to only 120 days in Singapore.

In terms of cost, an 18.1 per cent value of the claim (in the shape of court fee and attorney fee) is required to recover the amount using existing legal mechanisms. Even in the quality of the judicial process from zero to 18, Pakistan scored only six based on court structure and proceedings, case management, court automation and alternate dispute resolution.

Too many adjournments, absence of automation and improper out-of-court settlements are key issues identified by this document. The further situation can also be assessed through recently collected statistics of the Law and Justice Commission of Pakistan (LJCP) that, overall, superior and lower judiciaries are dealing with a backlog of 2.14 million cases, including matters of business transactions.

Even in this digital age, little effort has been made to upgrade the legislative landscape of business transactions

Over time, this is causing frustration and a lack of trust in the justice system of Pakistan, not only in the business circles here but outside the country as well. Protecting business dealings through enforcement is a key element and may be a good starting point to have the trust of business entities, as exhibited in functional economies.

The absence of proper legal exposure destroys the economic and social fabric, which will also have a deep-rooted effect in the future. Even in this digital age, no or little effort has been made to upgrade the legislative landscape of business transactions to protect individuals and business entities in the competitive business world.

It can be seen as a breakdown of state pillars by keeping such a key fundamental right on the back burner as enunciated in the constitution of the Islamic Republic of Pakistan. The sluggish legal system, corruption, limited representation, and absence of transparency act as catalysts of this issue.

Electronic Transactions Ordinance 2002 is the only law that covers the subject of online transactions with limited scope and no integration into other conventional or colonial laws (like Contract Act 1872, Sales of Goods Act 1930, Civil Procedure Code 1908, etc).

These laws are outdated, have limited coverage, lack clarity, carry inadequate enforcement mechanisms, have a low level of vigour, are inconsistent with modern business practices and have no proper alternate dispute resolution, keeping in view cultural and language barriers.

Cross-border transactions and new business models have changed the world. It compelled international organisations (like the World Bank, Organisation for Economic Co-operation and Development, etc) and multiple jurisdictions (like the EU, USA, etc) to introduce new arrangements to create legal harmony among states.

After discontinuing the Doing Business index, the World Bank Group plans to introduce a new benchmarking as Business Enabling Environment (BEE). As per the concept note 2022, it will assess regulatory farmwork, public services and efficiency based on the firm’s life cycle and participation in the market.

In this document, dispute resolution has been inducted as the major indicator in the checklist of 10 points on the card to rank all economies of the world. The main attributes to measure the strength of dispute resolution in each country are the regulatory framework, public services, and ease of resolving disputes (efficiency).

Pakistan cannot live in isolation and needs to change its tag from a debt-ridden economy to one connected with the global economy. So, in the quest for solutions to existing issues to fulfil the revenue shortfall of the country, there is a need to reevaluate highlighted points to have a good standing among nations. It will restore the confidence of investors and business entities.

For this sake, it is vital to introduce new legislation and enforcement measures to promote accessible justice, out-of-court settlements, and technological solutions to dispute resolution. Modern business laws, especially contract law, based on the elements of flexibility, fairness, efficiency, recognition, globalisation and alternate mechanisms are required to establish it.

It is crucial to expand the coverage of existing laws by addressing modern business practices through clear provisions to increase efficiency and promote business activities in multiple streams. The footsteps of leading countries (like Singapore, New Zealand, the United Kingdom, and the United States etc) having the strongest enforcement mechanism for business dealings can be used for the greater good of the economy.

While assessing the existing system to reform, the focus should be on the loopholes right from the review of terms to identify breaches, the possibility of Alternate Dispute Resolution through technology, initiation of legal action, collection of evidence, filing a claim, procedure of hearings and award of decision.

Without these measures and by ignoring best practices, business trust cannot be revived to operate and compete with companies in other economies.

The writer is an advocate of the high court and an expert in corporate and financial law from the University of Liverpool, UK. Email: mnav.chohan@gmail.com

Published in Dawn, The Business and Finance Weekly, November 13th, 2023