Quite a few unfortunate incidences have happened in the recent past that call for judiciary capacity building in handling commercial cases. The lack of capacity has invariably cost the country a massive opportunity cost.

Contract enforcement has always been weak in the country and that has eluded the domestic economy from tapping its potential; but in case of giant companies or contracts’ decision making, without proper commercial appraisals, there are international ramifications in the form of low foreign direct investment and losses to national kitty through penalties.

Let’s attempt to start a debate on the issue by giving a few examples. For instance, on 26th September, 2017, Supreme Court of Pakistan took a decision favouring pensioners of National Bank of Pakistan costing Rs47.7 billion to the bank.

This amounts to 27 percent of the bank’s equity. What is the decision about? And how was it not commercially appraised? In 1977, then federal government directed that all the nationalized banks, effective from May 1977, to pay pension at the rate of 70 percent of average emoluments on completion of 30 years of service.

Twenty years down the road in 1997, Banking Nationalization Act was amended and board of directors of nationalized banks was empowered to take personnel decisions. Many banks have been privatized in the deregulated regime, and salaries of executives have significantly increased since then.

The NBP followed the suit of privatized banks and increased its salary packages significantly and adjusted the pension benefits accordingly. However, a few retired officers went to the litigation in Lahore and Peshawar high courts in 2000s to get the pension benefits in accordance with the 1977 circular.

And today, the bank has lost the case in Supreme Court as well. In simple words, what is happening that the NBP is paying salaries benchmarking to say Standard Chartered Bank, while its pension benefits are according to old government style organization. In private sector, where salaries are high, pension is less while it is vice versa for a few government run organizations, probably including judiciary.

Unfortunately, NBP is sandwiched between private companies and public entities norms, and the biggest public sector bank is losing one fourth of its equity accumulated over decades on a commercially unviable decision. The point is none of the High courts or Supreme Court commercially appraised the case.

There are other examples where domestic judiciary system could not resolve issues between governments and international organization and eventually the cases went to international arbitration and fiscally strapped government ought to pay damages.

The damage of around $700 million to be paid to Turkish contractor by government of Pakistan is a case in point. The Turkish contractor was awarded to set up rental power plants by previous PPP government and the project was perceived to be a scam from day one in local media. The Turkish company filed the damages suit against Pakistan in Feb 13 after the Supreme Court’s ruling in 2012.

Had the Supreme Court settled the case then, the damages would have been much less, and more importantly, there would be no embarrassment to Pakistan. Similar is the case of Reko Diq. Then there is a precedence of mishandling Pakistan Steel Mills privatization deal, a decade ago. The cost national exchequer has paid in bailing out PSM runs in tens of billions rupees, and the company is still eating government resources.

These are a few macro level examples demonstrating the courts lack in commercial cases handling capacity. While at micro level, banking courts are in shambles eluding loaning to expand to SMEs. The weak land property rights are not letting unlock the economic potential. And the list goes on.

The macro problems are reflected by low foreign direct investment in the country; and a few of those who come, knowing the weak contract enforcement reality, focus on short-term gains.

While the low domestic investment to GDP and low private credit to GDP is partially attributed to poor systems at lower courts.

There is an Access to Justice Development Fund which was created many years ago to build the capacity of the judiciary, and the endowment is growing as the money kept on been invested in government bonds while not much is spent on the development. It is right time to construct a narrative of building judiciary commercial handling capacity, as for the economy to grow sustainable and to attract foreign direct investment, contract enforcement is the key.