A competent, fair, and reliable judicial system, especially at the grassroots level, is crucial to encouraging investment in any country. For many years now, investors looking at Pakistan were discouraged by political instability and the threat of terrorism. However, a new report by the U.S. State Department ‘2021 Investment Climate Statements: Pakistan’ paints the judiciary of Pakistan in a negative light. “Pakistan’s judiciary is influenced by the government and other stakeholders. The lower judiciary is influenced by the executive branch and seen as lacking competence and fairness. It currently faces a significant backlog of unresolved cases.”
The report notes that while “Theoretically, Pakistan’s judicial system operates independently of the executive branch.” However, “the reality is different, as the establishment wields significant influence over the judicial branch. As a result, there are doubts concerning the competence, fairness, and reliability of Pakistan’s judicial system. However, fear of contempt of court proceedings inhibit businesses and the public generally from reporting on perceived weaknesses of the judicial process.”
Further, the report points out that “While Pakistan’s legal code and economic policy do not discriminate against foreign investments, enforcement of contracts remains problematic due to a weak and inefficient judiciary.”
Further, Pakistan ranks 124 out of 180 countries on Transparency International’s 2020 Corruption Perceptions Index. “Although the higher courts are widely viewed as more credible, lower courts are often considered corrupt, inefficient, and subject to pressure from prominent wealthy, religious, political figures and the establishment. Political involvement in judicial appointments increases the government’s influence over the court system.”
Finally, the report notes that Pakistan’s courts “do not recognize and enforce foreign arbitral awards” eg the Reko Diq mining dispute. This is the best example where an international arbitral award against Pakistan was not enforced by local Pakistani courts and remains unresolved.