Islamabad – The Commerce Ministry’s Trade Dispute Resolution Organisation (TDRO) has been unsuccessful in offering any relief to exporters or importers facing disputes with their foreign counterparts, despite being established several years ago.
With the expansion of Pakistan’s foreign trade due to liberalisation, the number of disputes has increased. Efficient resolution of these disputes is crucial to prevent economic damage and to maintain Pakistan’s international reputation. An effective trade dispute resolution system is a key component of a business enabling environment (BEE).
To address this need, the TDRO was established under the Strategic Trade Policy Framework (STPF) 2012-2015, during 2013-2014, to settle private foreign trade disputes through Alternative Dispute Resolution (ADR). However, the law underpinning TDRO’s operations is still awaiting approval.
Stakeholders have pointed out that no current law in Pakistan adequately addresses disputes between Pakistani exporters and their foreign buyers. The Imports & Exports Control Act 1950 only addresses disputes from foreign buyers against Pakistani exporters, and it relies on litigation, which is costly, time-consuming, and lacks confidentiality. Best global practices favor ADR, which is more cost-effective, quicker, and confidential.
The existing law does not provide any relief for Pakistani exporters against their foreign buyers or for foreign exporters against Pakistani importers. Without an ADR system, foreign traders may be hesitant to engage with Pakistan due to the perceived bias of foreign courts in favor of their own citizens. Historically, litigation involving Pakistani traders abroad rarely results in favorable outcomes for them, highlighting the need for a fair dispute resolution system.
Under the current act, commercial courts can only take action based on a complaint from an authorized officer of the TDAP or the Secretary of the State Bank of Pakistan. Exporters who face genuine defaults or frauds often have to deal with legal proceedings, which serves as a significant deterrent.
A new ADR system, if the draft law is passed, would allow Pakistani exporters to file claims in Pakistan against foreign respondents. Arbitral awards obtained in Pakistan would be enforceable in any of the 167 member countries that have ratified the UN Arbitration Convention. This system is swift, relatively inexpensive, expeditious, and confidential, and would improve the trust of foreign buyers in Pakistan’s trade system.
The ADR system would enhance contract enforcement, provide a level playing field for Pakistani exporters, and reduce the burden on courts. It could also be managed by traders’ associations, further streamlining the process.
The proposed Trade Dispute Resolution Bill (TDR) 2023, once enacted, will repeal Section 5 of the Imports & Exports Control Act 1950 and introduce an ADR system meeting UN standards. The United Nations Commission on International Trade Law (UNCITRAL) was established to harmonize and modernize international trade laws, which the new ADR system will align with.
The TDR Bill 2023 proposes an independent five-member Trade Dispute Resolution Commission (TDRC), headed by a Chairman appointed from among its members. However, no commission has been set up yet, and the TDRO is almost dormant due to the lack of appointments, including that of a Director General after the retirement of Umar Dad Afridi.
The Commerce Ministry has been urged to appoint a Director General and establish the TDRC to make the TDRO functional and effective in resolving trade disputes.
