Ensuring sovereign default

By Mansoor Hassan Khan
Published in Dawn on April 15, 2023

THE most conspicuous aspect of our national discourse on the imminent sovereign default of the country is an absence of any discussion on how we reached this point and the way out.

The prescribed remedy is that Pakistan should borrow its way out of its foreign debts. Further loans from friendly countries are seen as the cure rather than a stop-gap arrangement which will allow Pakistan breathing space to address the fundamental flaws that landed it in this quagmire.

We are told that if we only double our exports and just the inflows of foreign direct investment increase, our economy will stabilise. Sadly, no one tells us how we achieve these and similar simple objectives.

Regrettably, the theory of law and development never received attention or recognition in Pakistan as we are unable to appreciate that a robust legal system plays a major role in the economic development of a country.

The economy is too serious a matter to be solely left to a few bureaucrats, bankers and economists, which is the case in Pakistan. Pakistani lawyers don’t bother to participate in the economic policymaking processes since more than 99 per cent of them are litigators and a defective court system assures them more work — any litigation, no matter how frivolous, is always welcome.

Why would they reform a system whose deficiencies keep them in business? Only the litigators become law ministers, attorney generals, advisers to the government, and the judges of the Supreme Court and the high courts who have thrived on litigations all their lives and who do not wish to rock the boat.

Pakistan has one of the highest per capita number of lawyers in the world. If you have a hammer in your hand, then everything looks like a nail — if litigation is all that you know, then everything has to end up in a court. Litigation means a dispute, and disputes are never good for businesses.

In advanced economies, litigation is just one area of law practice — it is never the entire law practice. Since litigation is not the livelihood of those lawyers, instead of disputes, they want more and more business transactions which generate more and more fees for them. More business transactions translate into more economic growth for the country and more prosperity for the lawyers. The legal practice in Pakistan is yet to catch up with this reality.

Pakistan desperately requires trained commercial lawyers and judges.

Our judges generally lack independence and capacity. In the World Justice Project’s Rule of Law Index, Pakistan’s overall ranking is 129 out of 140 countries. In the fundamental rights category, it is 123/140 while in civil justice it is 125/140.

Although the canons of professional conduct require lawyers to plead their client’s cases with zeal, devotion, and fearlessness, this is only a myth in Pakistan. On account of the lack of accountability of judges, our lawyers have become dependent on their goodwill to win cases instead of fighting on the merits of their cases.

It is not uncommon for a lawyer to throw his client’s case or not to vigorously pursue it, if the judge is predisposed. A lawyer has several cases fixed before the same judge and it may be sensible for him not to displease him.

At times, the lawyers are reluctant to even go into appeal, fearing the displeasure of the judge against whose decision the appeal is being filed. Sadly, the clients remain clueless about these invisible dynamics.

The enforcement of contracts is virtually non-existent in Pakistan. Except for Karachi, where the high court has the original civil jurisdiction for any civil dispute of a certain monetary threshold, in the rest of the country, even the most complex and challenging contractual and commercial disputes worth billions of dollars come before the civil courts whose judges are inexperienced and frequently perceived as tainted. In commercial matters, these judges lack the ability which can be gleaned from their judgments.

The assignment of complex cases to them is analogous to asking a cyclist to fly a jet. Regrettably, many judges in the superior judiciary too, are perceived as lacking expertise in commercial laws. One example is the Supreme Court’s inept handling of the Reko Diq case, culminating in an international arbitral award against Pakistan of more than $6.5 billion.

Not many lawyers will publicly comment on the capacity of our judges for some of the reasons explained above. A judge who dislikes a lawyer can effortlessly destroy his career by denying relief to his clients or by simply keeping his cases pending indefinitely. The ultimate remedy, although illusionary, is before the Supreme Court and now there is a waiting period of around three years before an appeal comes before it so a smart lawyer would simply keep his mouth shut.

The biggest obstacle to Pakistan’s economic growth is our outdated and ineffective judicial system. Pakistan needs sophisticated foreign investors who come here with capital, superior technology, and management skills. Such investors don’t pay bribes, no matter how large or small the quantum, and cannot wait forever for justice from the local courts. These investors expect a dependable legal system that ensures to their investments a minimum level of protection — unlike local investors, foreign investors have 195 other countries to choose from!

Pakistan desperately requires trained commercial lawyers and judges, now. If we can allow the UK universities to offer English law LL.B. degrees to Pakistan-based law students which are also recognised by our Bar Councils, what stops us from establishing specialised commercial courts staffed by retired and serving competent judges from other common law jurisdictions?

There is a convention in the common law countries where judges can rotate from one jurisdiction to another — what stops us from adopting this convention only to save Pakistan from economic collapse?

As an experienced lawyer, I can assure the nation that the existing legal set-up can only guarantee the economic collapse of the country and that too in perpetuity.

Your Comment:

Related Posts


Print Media

Concessions, debt & reforms

By Riaz Riazuddin Published in Dawn on April 16, 2024 THE FBR had been publishing its Tax Expenditure Report since 2020. Each report estimates the ‘tax expenditure’, ie, the tax foregone or the revenue loss because of the built-in tax concessions and exemptions in our federal tax laws. Such concessions are legally doled out to various power […]


Print Media

Time to act is now

By Stefan Dercon Published in Dawn on April 09, 2024 OVER the last three decades, including as the chief economic adviser for the UK’s development work, I have witnessed economic transformation across large parts of the developing world. This transformation manifested itself in various forms, such as rapid income rises of Ghanaian farm workers, education access for[…]