1. Introduction
Commercial law provides a legal framework for recognition and enforcement of contractual rights, trade-related customary practices, legal change and dispute resolution mechanisms for merchants who are parties to commercial contracts and transactions. In Europe, the down-fall of commercial activities started with the fall of the Roman Empire. However, swift expansion in agricultural productivity with less labour to produce sufficient food and clothing for community survival highlighted the importance of agricultural commodities for the urban population who moved into towns and cities of substantial size. The increased agricultural productivity in rural areas and rapid growth of urbanization gave rise to a class of professional merchants that flourished their trade across the region and conducted their commercial transactions around the world by overcoming significant trade barriers inclusive of culture, traditions, customs, different languages and lack of regular and direct communication due to geographic distances. In consequence, the services of middlemen were engaged for facilitation of cross-border trade.
The business community realized the need of uniform laws of commerce to facilitate international trade; in its result, modern Western mercantile law (i.e. the Law Merchant), having an integrated legal framework, was devised to regulate each aspect of commercial transactions in all of Europe after the eleventh century. The industrial revolution in Europe was not possible without the rapid development of mercantile law that was initially not only self-regulated but also voluntarily produced, adjudicated and enforced. Merchants took their own initiative to formulate self-regulatory principles for trade and commerce, whereas said trade practices attained uniformity of customary law by the merchants themselves in the light of the requirements of commerce and adoptability among the business community. With the development of new forms of commercial activity, evolved business practices which framed the new law.
2. Emergence of Commercial Courts
The Law Merchant governed and regulated all commercial activities without the use of any coercive power of a state, whereas merchants established their own courts to adjudicate disputes in accordance with their own formulated laws and devised customary practices. However, sanctity and acceptability of said decisions pronounced by the commercial courts were ensured by the merchant community through the threat of ostracism by the merchant community at large. The voluntary enforceability and acceptability of the court's decisions, having an effective mechanism of boycott sanction, warranted the merchant community that the breach of an agreement or violation of a court's decision would not allow a merchant, by his fellow merchants, to continue commercial activities for long. Any menace of a boycott of all future trade activities proved to be a more effective mode of enforceability of a decision than physical coercion.
Another reason for the progress of commercial courts was resolution of commercial disputes through professional experts (judges) of expertise in that particular area of commerce; unlike royal court judges not well equipped with mercantile law but who could adjudicate disputes without expertise in ordinary manner. Besides, the judges of a commercial court were always chosen from the relevant merchant community, having their own integrity and competency on the subject. The merchants wanted swift and informal resolution of their commercial disputes so that they could move to the next market. Therefore, participatory or communal adjudication through a swift and informal dispute resolution mechanism was a necessary feature of the Law Merchant. Court procedure and rules of evidence were kept simple yet formal, and lengthy procedures of testimony under oath, including a notary's attestation, were avoided.
3. Historical Development of the British Commercial Court
In England, many courts such as the Royal courts (e.g. Common Pleas, King's Bench, Exchequer), the canon law courts, the royal maritime courts and the merchant courts existed prior to the 17th century, when all were in competition for resolution of disputes. Neither the Law Merchant died in England nor did the merchant courts stop their working for resolution of commercial disputes until the early 16th century, when the use of private commercial courts virtually disappeared in England. In the 19th century, various desirable characteristics of the English Law Merchant, such as its universal character, flexibility and dynamic ability to grow, informality and speed, and reliance on commercial custom and practice, disappeared until Lord Mansfield appeared as the founder of commercial law in England, reintroducing the features and characteristics of the international Law Merchant into English law. Consequently, English commercial law attained its universality, flexibility, informality and swiftness for resolution of commercial disputes in accordance with law enacted by the legislature after due consideration of business practices, custom and usage.
Now the commercial courts in England are working within the Queen's Bench Division (QBD) of the High Court and therefore have jurisdiction to adjudicate only commercial disputes. In 1895, a commercial list was established in the QBD for handling of commercial disputes. Since 1971, specialized commercial courts comprising Puisne Judges of the High Court nominated by the Lord Chancellor were established to adjudicate the variety of complex and complicated commercial disputes involving large sums of money, knotty legal and factual issues regarding commercial transactions, parties' actions or arbitration matters. A Commercial Committee, established in 1977, oversees and reviews the working of commercial courts and reports to the Lord Chancellor. The commercial courts have jurisdiction on all "commercial actions," and the judges of commercial courts play a vital role to promote Alternative Dispute Resolution (ADR) mechanisms by inviting the parties to the suit to use ADR if it is appropriate.
4. Need for Specialized Commercial Courts in Pakistan
Globalization brought an increase in foreign direct investment (FDI) and trade around the world. It resulted in an enormous upsurge in cross-border trade transactions in various areas. Asia seems to be the largest recipient of FDI and a significant hub of cross-border trade transactions and commercial activities. According to UNCTAD's Investment Trends Monitor of January 2021, Pakistan has seen an 88% increase in foreign direct investment, from 1.36 billion USD in 2019 to 2.56 billion USD in 2020. The growth in cross-border trade also gives an awakening call to merchants, investors and traders for resolution of their disputes through an effective and efficient dispute resolution mechanism.
In addition to amicable settlement or compromise, two modes of dispute settlement are applicable: first is the formal mode of litigation through the judicial hierarchy, and second is ADR, particularly arbitration. The formal mode of dispute resolution through litigation in ordinary courts of law is lengthy and tiresome for traders and investors. An ADR mechanism has its disadvantage: it cannot be used for settlement of all disputes. Lack of judicialization and ethical standards, unpredictability in arbitral decisions due to lack of jurisprudence, and problems in execution of arbitral awards due to the ad hoc nature of courts' oversight discourage parties to commercial disputes to avail the ADR mechanism. Whereas the formal mode of litigation through domestic courts does not attract merchants, investors and the business community because of non-familiarity of judges with commercial laws and prevailing trade practices, lengthy and unreliable proceedings, inefficiency of courts, and lengthy cause-lists — compelling the parties to prefer private conflict resolution over public trials through domestic courts.
The increasing need and demand for resolution of commercial disputes through an effective and reliable forum required the establishment of specialized commercial courts which should provide a new, swift and informal mechanism of dispute settlement by offering visible advantages over both litigation and arbitration mechanisms. As China launched the Belt and Road Initiative (BRI) in 2013, and the China-Pakistan Economic Corridor (CPEC) is also a way forward for regional connectivity and economic development, both are not only providing trading channels but also flourishing a new strategy to facilitate greater Chinese and Pakistani participation and engagement in the global economy. Due to this new initiative, economic expansion and significant overseas investment, Pakistan and China are facing an increasing number of civil and commercial disputes with domestic and foreign dimensions. Therefore, an effective, efficient, neutral, and reliable dispute resolution mechanism is desirable to address the inevitable commercial disputes, to boost investors' and traders' confidence, and to ensure economic stability in domestic and regional markets.
The establishment of commercial courts definitely ensures a reliable business dispute resolution market, protection of investments, and uniformity or harmonization of substantive international business law. China has already developed its own international commercial courts, but economic development and stability in Pakistan is possible through FDI and maximization of exports, for which a reliable and robust legal framework for enforcement of commercial contracts and settlement of disputes through establishment of specialized commercial courts is necessarily required. For this, the judiciary took a lead role and formulated a National Judicial Policy for effective administration of justice, particularly resolution of disputes through specialized courts, without unnecessary procedural delay.
The Lahore High Court (LHC) took an innovative step to redress the issues of overseas Pakistanis by establishing a cell for overseas Pakistanis, and constituted a special bench for adjudication of their cases. The LHC also realized the need for specialized commercial courts in Punjab; therefore, the honourable Chief Justice established commercial courts in Punjab in April 2020, and district judges were empowered to cherry-pick the dynamic judges in their respective districts to envisage them with the responsibility of adjudication of commercial cases exclusively. The LHC played a marvellous role in the training and expertise of the judges of commercial courts through tremendous input, initiating intensive rounds of specialist training lectures and workshops at the judicial academy on national and international commercial law and practice. Two High Court judges, Justice Shahid Karim and Justice Jawad Hassan, headed a working group comprising members of the legal fraternity, the Punjab Government and the World Bank to explore and chalk out the statutory mechanism for establishment of specialized commercial courts in Punjab. Almost two years of efforts and contribution of the working group resulted in the promulgation of the Punjab Commercial Courts Ordinance 2021 on 13th April 2021.
5. Significance of the Newly Devised Mechanism for Resolution of Commercial Disputes
Establishment of specialized commercial courts through promulgation of the Ordinance 2021 will ensure a drastic change in the settlement of commercial disputes — a step towards resolving commercial disputes in an efficient, timely and cost-effective manner. All the institutions and donor agencies, such as the World Bank, the Lahore High Court and the Punjab Government, have perceived that the mechanism for 'ease of doing business' (EODB) is necessary for economic growth and prosperity, for which enforcement of commercial contracts and resolution of disputes through an effective, efficient, neutral and reliable legal framework is required to enhance the confidence of investors and the merchant community. The British model of the London Commercial Court inspires common law countries to establish their specialized commercial courts; as the London Commercial Court is very much a national court in its operation and structure, it fuelled the establishment of commercial courts in Punjab.
Firstly, the main purpose of this law is to enhance economic growth and prosperity of the people through commerce and trade; therefore an expeditious disposal of claims arising from trade activities or commercial transactions is a vital element of socio-economic development through investment and ease of doing business. Specialized commercial courts are established across Punjab which will exclusively deal with commercial disputes comprising any dispute, claim or counterclaim arising out of contractual disputes, having the value of five hundred thousand rupees or more, specifically related to any transaction of trade, business or commerce (except sale and purchase of immoveable property) between companies, firms and individuals.
Secondly, the law mandates the commercial courts and appellate tribunals to decide all disputes within 180 days and 120 days respectively. As time is considered an essence of commercial contracts, it would also be an essence for resolution of disputes. Thirdly, the grant of more than two adjournments, each for more than seven days, is prohibited; however, the court may impose necessary costs if a party is delaying the proceedings. Fourthly, the defendant only has 30 days after filing of the case to file a reply in the shape of 'leave to defend' on the basis of substantial questions of law and fact to adduce evidence, otherwise the suit will be concluded on the basis of the available record submitted by the plaintiff. Fifthly, the parties to the dispute are permitted to submit electronic pre-filing of pleadings, and evidence is also permitted for all submissions, introducing modern technologies for expeditious disposal of cases.
Another significance of this law is a simple execution procedure, wherein the execution proceeding and any investigation on an objection petition shall be concluded within 30 days; the court may also impose a penalty against the party who uses delaying tactics to prolong the execution proceedings. Lastly, the settlement of a dispute through the alternative dispute resolution (ADR) mechanism provides a choice to the parties to resolve their dispute privately with confidentiality rather than publicly. The law clearly provides that 'any suit or appeal shall be referred to alternative dispute resolution in accordance with the provisions of Order IX-B of the Civil Procedure Code'; however, said choice of ADR shall be exhausted in pre-trial proceedings rather than trial proceedings. The role and contribution of the working group should be appreciated and acknowledged, as its work made possible the promulgation of the Ordinance 2021 — a new beginning in the administration of justice in Pakistan through specialized commercial courts for expeditious disposal of commercial disputes with effective manners.
6. Conclusion
The working group, under the guidance of the honourable judges of the LHC, took revolutionary steps for expeditious and quick dispensation of justice which ensured comfort and reliability of investors and traders in our judicial system. The promulgation of the Ordinance 2021 and establishment of specialized commercial courts witnessed significant progress of our judicial system to make it more attractive in the eyes of investors, traders and the rest of the stakeholders of commercial markets. Said innovation in our existing judicial system, by way of an alternative dispute resolution mechanism through commercial courts, would prove to be sufficient measures to respond to the expectations and concerns of litigants, and a milestone towards ease of doing business in Pakistan. The success of said judicial mechanism for settlement of commercial disputes may be used as a model for effective and quick dispensation of justice to the ordinary citizen through existing courts. As the possibility of electronic filing and technological developments increased the confidence and trust of national and international investors and businessmen, the created environment in which dispute settlement and judicial services seem to be entirely feasible within a short span of time. Although the ADR mechanism will continue to play an important role, commercial dispute resolution will likely long remain dominated by commercial courts that have the advantage to render principled adjudication, which is a necessary element for the performance of contractual relations or obligations.