Foreign investors get immunity

Cabinet dismisses proposal of issuing binding instructions for commercial deals

Zafar Bhutta August 11, 2022
The enactment of the proposed bill is imperative to attract and encourage foreign countries to have economic and business relations with Pakistan. PHOTO: FILE


The cabinet has turned down a proposal of issuing binding instructions regarding commercial transactions with foreign countries and agreed to give immunity to foreign investors by placing a bar on court jurisdictions under the Inter-Governmental Commercial Transactions Act 2022.

Sources told The Express Tribune that cabinet members expressed reservations about Clause 5 of the proposed bill, pertaining to powers of issuing binding instructions.

They observed that the clause was against the spirit of the 18th Amendment to the Constitution and was open to misuse as it undermined the provincial autonomy.

In a recent meeting of the cabinet chaired by Prime Minister Shehbaz Sharif, the minister of law and justice explained that the clause had “limited invocation”, only to the extent of particular transactions to facilitate foreign investors and obviate delays in the execution of projects.

Cabinet members were, however, of the view that sub-clause 2 and word “binding” in Clause 5 should be deleted.

Expressing their views on Clause 8 of the proposed bill regarding bar on the jurisdiction of courts, some cabinet members felt that its insertion was futile as it would not bar superior courts from taking cognisance under their original jurisdiction.

The law minister explained that it was a standard clause present in many other laws, which helped mitigate frivolous litigation.

Furthermore, similar clauses already exist in the Special Economic Zone (SEZ) and Special Technology Zone (STZ) laws. He advocated that its inclusion was necessary to provide protection and comfort to the foreign investors.

While agreeing that the immunity to foreign investors was necessary, the cabinet members felt that Section 8 may be revisited.

The law minister suggested that the observation may be taken up by the National Assembly standing committee, where members of all parliamentary parties had representation, while discussing the proposed legislation, which was agreed.

The cabinet considered a summary titled “Inter-Governmental Commercial Transactions Act 2022”, submitted by the Law and Justice Division.

It approved the proposal with the stipulation that in Clause 5 the word “binding” in marginal heading and expression “(1)” shall be deleted; and sub-clause (2) of Clause 5 shall be deleted.

The Law and Justice Division briefed the cabinet that there was no legislation for authorising, negotiating and supervising inter-governmental agreements between the government of Pakistan and the government of a foreign state for the purpose of entering into business agreements.

As a result, the cabinet in its meeting held on July 4, 2022 constituted a sub-committee to establish a statutory framework for inter-governmental commercial transactions.

The sub-committee prepared a draft ordinance titled “Inter-governmental Commercial Transactions Ordinance 2022” and finalised its report for submission to the cabinet for approval.

The cabinet, in its meeting held on July 15, 2022, considered the report and accorded its approval, in principle, to the draft ordinance.

Later, a summary was introduced by the Cabinet Division for the Cabinet Committee on Legislative Changes (CCLC) and a draft was approved by the CCLC in its meeting on July 20, 2022. Subsequently, it was ratified by the cabinet.

A summary was initiated by the Cabinet Division on July 22 for the promulgation of the draft ordinance but the prime minister directed that instead of promulgation of the ordinance, a bill may be introduced in the National Assembly.

Consequently, the draft ordinance was converted into a bill for its presentation in a National Assembly session.

Under the proposed law, the federal government will constitute a cabinet committee on inter-governmental commercial transactions comprising members of the cabinet. The committee’s primary function will be to authorise negotiations and execution of inter-governmental agreements.

It will allow state-owned enterprises of both countries to form a commercial venture either in Pakistan or in a foreign country. The enactment of the proposed bill is imperative to attract and encourage foreign countries to have economic and business relations with Pakistan.

The Law and Justice Division requested that the vetted and improved draft titled “Inter-governmental Commercial Transactions Act 2022” may be exempt from placing before the CCLC again as its ordinance had already been considered by the forum and may be approved by the federal cabinet in terms of its mandate under Rule 16(a) read with Rule 27 of the Rules of Business 1973.­­

Published in The Express Tribune, August 11th, 2022.

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