Increasing commercial confidence through mediation

Pakistan promotes mandatory mediation, boosting investor confidence and improving commercial dispute resolution.

Pakistan’s judicial system has recognized its importance in commercial and corporate matters.

The Supreme Court has increasingly endorsed mandatory mediation to reduce the burden on the judiciary and encourage quicker settlements.

Additionally, Pakistan’s potential accession to the Singapore Convention on Mediation would provide a globally recognized framework for enforcing mediated settlement agreements, further enhancing Pakistan’s attractiveness to international investors.

The Singapore Convention, ratified by key trading partners like Qatar, offers Pakistan a strategic advantage in promoting international trade while ensuring that it can include necessary reservations, such as those concerning national security, to safeguard state interests.

Alternative Dispute Resolution (ADR) provides an efficient, non-confrontational alternative to traditional litigation, using methods such as mediation, arbitration, and adjudication to resolve disputes.

Mediation, in particular, stands out as a flexible and cost-effective solution, fostering open communication and cooperation between parties. The growing complexities in international trade, coupled with the rise of specialised sectors like e-commerce, have underscored the need for efficient dispute resolution mechanisms.

Notably, mediation stands out as the most flexible, efficient, and user-friendly method among various ADR strategies.

Unlike formal court proceedings, mediation breeds a more informal environment, encouraging open communication and creative problem solving.

The mediator's role is not to impose decisions but to facilitate a dialogue that helps parties reach a mutual understanding and explore potential solutions.

In recent years, proactive steps have been taken to institutionalize mediation within the judicial process.

Courts, including the Supreme Court of Pakistan, have consistently encouraged mediation to avoid unnecessary delays and save both judicial time and the expenses incurred by the parties involved.

This approach has been endorsed in significant rulings, such as in M.C.R. (Pvt) Ltd, Franchisee of Pizza Hut Versus Multan Development Authority and Others, which held that “It is the duty of the Courts in Pakistan to see the rights of the parties and to protect their interest in order to build confidence of investors in Pakistan.”

The Lahore High Court has also implemented Court Backed Mandatory Mediation in landmark cases such as Faisal Zafar Versus Sirajuddin and Province of Punjab Versus Haroon Construction Company, signalling a transformative shift towards prioritizing mediation, particularly in complex commercial and contractual disputes.

Similarly, the Sindh High Court in Descon Engineering Limited Versus Cynergyico PK Limited has required parties to engage in mediation before pursuing arbitration, further reinforcing the judiciary's endorsement of mediation over other alternative dispute resolution methods.

From an international law lens, the Singapore Convention on Mediation offers a comprehensive framework for international commercial mediations.

It outlines specific requirements for mediators, including their qualifications and conduct during the mediation process.

Additionally, the Convention provides guidelines for the negotiation and execution of mediation agreements, which establish the terms and conditions of the mediation.

One of the most significant aspects of the Convention is its provisions for the enforcement of mediated settlements. Under the Convention, parties can seek court orders to enforce mediated

In terms of enhancing the business environment and attracting foreign investment, Pakistan’s participation in the Convention would allow mediated settlement agreements between Pakistani and foreign enterprises to be recognized and enforced in other member states, and vice versa.

Currently, several of Pakistan's key trading partners, including China have signed the Singapore Convention, while countries such as Qatar and Singapore have ratified the convention further highlighting the benefits of Pakistan’s accession in facilitating international trade and investment.

The Convention (Article 8) grants Contracting Parties the discretion to make reservations as deemed appropriate, allowing them to exclude mediation agreements involving the state, government entities, or individuals acting on behalf of government agencies, either fully or selectively.

For Pakistan, it would be prudent to include such reservations when acceding to the Convention, particularly in matters concerning national security and state interests.

By making targeted reservations, Pakistan can safeguard its national security interests while leveraging the Convention’s advantages in fostering international trade and investment.

However, Pakistani legislation remains silent on mandatory mediation. According to Article 189 of the Constitution of Pakistan “Any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other Courts in Pakistan.”

Hence, the judgments advocating for mandatory mediation become binding but it is important to formalize the concept, ensuring that it becomes a consistent and well-regulated practice across the country.

The writer is a lawyer, and expert on International Law