The writer is former governor of the state bank of Pakistan

WHAT do we mean by the rule of law? Allow me to explain this by reference to cricket. The rules of

the game are the same for all-when you are bowled or caught, you go back to the pavilion. You

Cannot stay at the crease because you are someone's son. Similarly, you cannot claim exemption and

demand to be allowed to bowl from both ends of the pitch. Unfortunately, the indiscriminate

application of rules is anathema for our elite, which has contaminated our culture of governance.


Our ethos of governance gives the ruling elite the power to ride roughshod over laws, rules and

regulations, facilitated by the deficiencies in the design of the legal framework and the way it works.

All these affect the performance of the economy. Many laws and regulations are poorly designed and

are hence complicated or even defective. Moreover, these are administered in ways contrary to their

intent and spirit. Defects in laws are compounded by weak enforcement which, in part, reflects the

difficulties of monitoring compliance. And this is the more worrying aspect.


It is, of course, reassuring that we now have a judiciary that is asserting itself and providing justice to

all, by ensuring the equality of all before the law. Since other institutions of the state, especially

parliament, have tailed to perform some of the functions expected of them, the courts do provide a

ray of hope, having done well in recent years in gaining public trust and confidence that it will protect

them from the excesses of state functionaries.


However, a judiciary upholding its independence alone is not enough. In the absence of informed

public opinion, backed by a strong civil society, it will not be possible to mobilise the resources and

effort needed to ensure corrective actions. But then the bulk of the population has to deal with the

subordinate judiciary, where the key areas of concern are corruption and lack of competence.


The judicial system needs judges with a better understanding of commercial regulations and

practices.

In this writer's opinion, more important for economic development are not just the laws and their

predictable application but the degree of effectiveness and efficiency of the judicial system to enforce

contractual obligations and resolve commercial disputes in a timely manner. In our case, it takes on

average three years to resolve a commercial dispute in the courts compared with less than half this

time in most other jurisdictions.


These factors move the wheels of the economy and weaknesses restrict the scale of business

transactions, and thereby growth, through reduced economic activity, with firms being forced to

diversity operations into activities not their core competence. This lowers the efficiency of, and the

return on, investment

Since it takes years to get disputes resolved through the courts, contract violators gain simply by getting a case stuck in the court queue. The courts oblige, especially by liberally granting stay orders,which facilitate, if not actively encourage, the illegal occupation of property testing the fundamental principle/right of security of one's property. Not surprisingly, business transaction restricted among parties having trust in each other's business ethics.

Development of trust requires long-term stable interactions. If trust cannot be established, contracting

remains restrained, the cost of conducting transactions remain high, discouraging business

development and growth. Both economic actors and the economy remain small. The ease contract

repudiation increases the costs and uncertainty of investment. Pakistan, therefore, finds itself

constrained by a culture of low trust, in which neither the regulatory environment nor the unregulated

market is conducive to dynamic change.

The solution is not what is most widely propagated more judges'. The judicial system needs

Judges With a better understanding of commercial regulations and practices. The lack of an adequate

Skill set/skill mix is a major issue. To illustrate, the Islamabad high court, which has been given

original jurisdiction, would be adjudicating important commercial and economic cases, especially

Since a key institution, the Federal Board of Revenue, is also located there. But this court seemingly

has no Judge with experience/background of commercial law/practices on its bench

We also need to look at the judicial system which permits conflicting judgments does not overrule

one as would be expected in other common law jurisdictions. Coordination between courts or

benches of the same court needs improvement for clear guidelines to flow to the subordinate courts.

The resulting confusion incentives corrupt practices. Moreover, what is one to make of a system in

which 15pc of the cases filed in the apex court are on matters like rent ? And what about a system

that fails to discourage frivolous litigation and permits liberal double-digit adjournments, etc.? All

these factors result in low disposal rates and are costly for the economy.

Through the recent use of suo motu jurisdiction the courts rendered some far-reaching decisions but

as the Supreme Court leadership now realises itself, all this has come at a price. Judicial activism

through stay orders, or worse still, the overturning or economic decisions (eg rulings on the

privatisation of the Steel Mills, the LNG project and the domestic price o Sugar) that essentially lie in

the domain of the executive has added litigation risk to the already high-risk profile of the country

from the poor law and order situation and political uncertainty to the unpredictability of policy

decisions.

These judgments ended up contributing to policy paralysis and postponement of urgent economic

decisions, which drove away potential investors while the country spent millions of scarce dollars to

defend such actions in international courts. Mercifully, steps are now being taken by the

check its activism and intrusiveness in areas that cross its institutional mandate although in recent

months the perception of it having the stomach to take on the executive has suffered significantly.