ISLAMABAD, Jan 20: The Supreme Court on Monday reversed its judgment in which it had directed a US-based multinational company to furnish a bank guarantee of one billion dollar for qualifying itself to defend a suit for damages.
The Supreme Court bench, headed by Chief Justice Shaikh Riaz Ahmad, has reversed the judgment. The same bench had passed a judgment on Aug 12, directing the Westinghouse Electric Corporation to furnish a bank guarantee of one billion dollar for allowing it the right of defence in a suit for damages instituted by a Pakistani company for its alleged failure to honour the contract.
The US government had sought the reversal of the judgment and the matter was raised with the Pakistan government at the highest level. The Pakistan government was asked to get it reversed “if it was interested in foreign investment and economic development.”
The apex court had taken up the civil miscellaneous application on Dec 12, 2002, few days before the visit of the US assistant secretary. The order was announced in open court but its copy was made available to the parties on Monday.
The Supreme Court in its judgment observed: “We would in these circumstances withdraw the orders as to the furnishing of bank guarantee equivalent to the suit amount. In case the court (trial court) concludes that it had the jurisdiction, then it can direct the furnishing of security instead of bank guarantee.”
The apex court stated that the crucial question which escaped the notice of the court was with regard to the jurisdiction. “Therefore, we would amend the order dated 12.7.2002 with the direction that the trial court shall first determine the question of its jurisdiction in the light of section 34 of the Arbitration Act and if the trial court decides in the affirmative, then it would pass the appropriate order.”
The US and the World Bank had raised objections to five lines of the judgment, saying that “at the end of the computer-generated Supreme Court order, someone has typed (with a typewriter and apparently after the judges had signed the documents), extremely prejudicial language that could be read to require the US company to put a bond of potentially one billion dollar before they can even present their defence in court.”
The US government had asked that there was no legal basis or precedent under the Pakistani laws that required defendants to post a bank guarantee even before they were allowed to defend the case.