Pakistan News

TDRO drafting new law for trade dispute resolution

TDRO drafting new law for trade dispute resolution

WHEN the government launched the Trade Dispute Resolution Organisation in 2014, the trading community responded warmly but administrative and policy issues have eventnually turned it into a virtually moribund body.

Despite its limited mandate, more than 300 complainants have so far approached the TRDO for resolving commercial disputes between trading firms of various countries. However, with just 12 officers on its staff and no proper law for its functioning, the TDRO finds itself hamstrung.

At best, it functions as a coordination office between the complaining business firm and the respondents. The TDRO’s lone office is located in Islamabad, with no regional offices even in the country’s businesses and industrial hubs — Karachi and Lahore.

Its limited human resource in Islamabad is required to tackle a wide range of issues in commercial disputes involving non-payment, poor quality, non-compliance, bankruptcy/insolvency, delay/non-shipments etc.

Given the experience gained since its inception, the TDRO has now also been tasked to draft new trade dispute resolution law and rules to make the organisation effective..

A TDRO official said the draft law is being finalised and will be shared with trade bodies to get their feedback on it. He said the organisation has hired an international consultant not only to draft the new law but also to frame rules for the organisation.

There is very little effort at mediation and arbitration while there is also no administrative solution. Generally, cases go straight to commercial courts and are dealt at a very slow pace.

In the commercial courts at Karachi and Lahore, according to an official report, businesses face litigation for 5-10 years getting entangled in 46 procedures. There is a backlog of 1m cases in courts. Of these 30pc are estimated to be commercial. The report further says the judicial system suffers from heavy case-loads because of shortage of judges..

As per the study of commerce ministry, constraints to business growth occur due to delays in commercial dispute settlement.

According to the World Bank Doing Business Report 2016, the contract enforcement rules in Pakistan require 46 procedures, which takes 993.2 days and cost 23pc of the value of the claim. Globally Pakistan stands at 151 in the ranking of 189 economies on the ease of enforcing contracts.

The trade dispute resolution process is initiated mostly by filing a complaint with the relevant Pakistani diplomatic mission. The missions initially negotiate, consult and investigate on their own to resolve the issue. Many of the cases sent to TDAP are still pending and very few are resolved. The country’s chambers of commerce in Pakistan also indicated limited success in resolving the disputes.

According to a TDRO survey report based on the feedback from Pakistan’s trade missions abroad, most of the cases pertain to non-payment by both Pakistani and foreign firms. Other trade disputes relate to non-shipment of the ordered consignments.

The highest number of reported cases of disputes has been recorded in the UK (887), followed by Iran (100). The lowest number of cases of trade disputes are recorded for Portugal, Yemen and Sudan. Many countries such Algeria, Serbia, Tanzania, Turkmenistan and Tajikistan reported no trade dispute.In many cases, the number of cases filed by Pakistani firms is more than that of foreign firms.

For example, in case of Britain there were 287 cases against Pakistani firms whereas Pakistani firms filed 600 cases against British importers.

Another TDRO survey based on the feedback from trade bodies listed quality and payment issues, lack of understanding of contract and agreement, price fluctuations and non-compliance as main reasons of commercial disputes.

Almost 72pc of the trade bodies are not satisfied with the existing mechanism of trade dispute resolution. The lukewarm response of concerned authorities such as trade missions abroad and Trade Development Authority of Pakistan do not lead to dispute resolution.

Mediation is the first choice of 50pc of trade bodies for dispute resolution, followed by arbitration (41pc). Only 4pc prefer litigation. Out of court modes for dispute resolutions include arbitration, mediation, negotiation and personal meetings. Mediation usually comes under alternate dispute resolution mechanism that a party can opt for.

The trade bodies have also advised government to take all trade and legal bodies on board with the objective of providing maximum safeguard to Pakistani businessmen before finalising the new draft law.

Published in Dawn, Business & Finance weekly, April 18th, 2016

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