INTERNATIONAL TRADE DISPUTE RESOLUTION MECHANISM
Commercial relationship between Pakistani firms and their foreign counter-part firms is hampered by complex contractual disputes, which has badly affected the environment of trust between partners, discourages investment in Pakistan and reflect poorly on business climate in Pakistan. They ultimately lead to the loss off image of Pakistani and reduction in trade flows.
Trade Dispute Resolution Organization has been established as attached department of Ministry of Commerce in 2014 under Strategic Trade Policy Framework 2012-15 to resolve international Trade disputes. The mandate of TDRO is as follows:
- Take a swift action for early resolution of trade disputes
- Act as a bridge between bodies responsible for standard and quality
- Establish a database of ‘High Risk’ places with high prevalence of disputes &frauds in international markets
- Improve quality standards
- Ensure that foreign importers are not cheated by Pakistani exporters
- Prepare database of exporters with confirmed cases of disputes
- Provide assistance to Pakistani exporter who are defrauded in international trade, and
- Educate and train exporters and importers to avoid disputes
In 2018 TDRO initiated a consultation process by engaging with trade bodies in Pakistan through a questionnaire to understand the nature of reasons of commercial disputes between Pakistani and foreign businessmen. All 140 Trade Bodies registered with DGTO were requested to provide information such as reasons for trade disputes; the existing organizations dealing with dispute resolutions; level of satisfaction of the trade bodies with the existing mechanisms; the weaknesses of the current dispute resolution mechanism and suggestions to improve trade dispute mechanism in Pakistan. However, it is unfortunate that only 39% of the trade bodies responded in two months’ time (55 responses) dispute many efforts from TDRO office. Many large and export oriented trade bodies like All Pakistan Textile Mills Association, Pakistan hosiery manufacturers association(PHMA), Pakistan Knitwear &sweaters Exporters Association(PAKSEA) Pakistan Association of Automotive parts Accessories (PAPAAM), Pakistan Ready made Garments Manufacturers &Exporters Association (PRGMEA),and few others did not respond and failed to provide their input for revamping of mechanism of trade dispute in Pakistan.
Reasons for Disputes
According to the trade bodies response, the nature of the disputes mostly fall under the quality issues, which includes faulty products, non-conformity to international standard, short life of product and damaged products. The responses indicated that most of the time product got damaged due to mishandling in the process of inspection. In the words of Pakistan canvas and Tents Manufacturers &Exporters Association, “the consignments get damaged in the process of inspection by ANF due to mishandling, As a result of this the buyers either refuses to accept damaged consignment or deduct payments”.
Second reason as per the survey is payment issue that include non-recovery of advance payment, partial payment or no payment at all. Important input were received on reasons like legal aspects of sale contract, transaction through non-banking channel, non-understanding and use of pre-shipment inspection facilities, Non verification of credit worthiness and legal status of opposite party and lack of knowledge about appropriate forum of referral of such dispute as multiple forum exit and lot of confusion where to go and sometime period of limitation also expires, Non documentation of transaction etc.
Nine responses indicate that they encounter dispute due to issues related to contracts and agreements such as lack of identification of dispute resolution in an agreement, incomplete or vague agreement, breach of contract and non-conformity to standard contract for instance, Rice Exporters Association of Pakistan responded to this as,: on-use of standard contract covering every aspect of the deal and the remedies in case of dispute like The grain and feed trade association (GAFTA) contract.
Current Mechanism for Trade Dispute Resolution (TDR)
Only 26% of the trade bodies claimed that dispute are looked after by chambers of commerce, Some large chamber, such as Pakistan-Saudi Arabia Joint Chamber of Commerce &Industry, have a separate trade dispute resolution section and they resolve the dispute themselves, some chamber have a designated committee or section to undertake trade dispute such as, International Trade Dispute Committee at Faisalabad chamber of commerce & industry and mediation center at Lahore chamber of commerce &industry.
Weaknesses of Trade Dispute Resolution Mechanism in Pakistan
Most of the trade bodies believe that the problem lies in the absence of a legislative authority, rules and structural framework for dispute resolution. For example, Lahore Chamber of Commerce & Industry informs that lack of Authority and judicial powers is the basic problem due to which the respondent takes under leverage and shows minimal interest in solving the dispute, Similarly, Pakistan jute mills association responded that as there is no legal body which can make it mandatory for every dispute to be resolved through mediation/conciliation, the TDR mechanism is weak.
Furthermore, lack of interest and response from the concerned organization involve in resolution of trade disputes adds to non-satisfaction about mechanism of dispute resolution. In addition, lack of coordination between the parties and relevant authorities who are involved in dispute resolution in Pakistan and abroad and lack of interest of commercial consulate abroad are few other significant issues. Talking fir instance the responses from Pakistan Afghanistan joint chamber of commerce & industry;” Trade dispute mechanism is very weak in Pakistan. Most of the trade disputes are not even reported and majority of the trade dispute remain unsettled due to lack of centralized authority, which can settle disputes impeccably.”
Some of the respondent also said that dispute are not resolved because the litigation is expensive and time consuming and since there is no proper mechanism for dispute resolution, it leaves the complainant with unsatisfactory results.
Improving Trade Dispute Resolution Mechanism
According to the responses from trade bodies, are the step that can be taken to improve the current mechanism for trade disputes resolution in Pakistan. The first and foremost way to bring improvement is by relevant authority, laying down the rules and providing a structural framework.
The American business council of Pakistan also provided a similar responses that revamping of the mechanism of TDRO may bring in the changed required to this end.
In addition, providing proper training and creating awareness regarding the dispute resolution mechanism can also help in improving the existing system. “Training workshop on latest frauds bad practices may be arranged frequently to create awareness”
The system can also become effective by improving existing trade dispute mechanism such as implementation of certain term and condition regarding, mechanism clauses in contract, As said by Pakistan canvas and tents manufacturer & exporters association states that arbitration committee should be empowered and their recommendations/ decisions should be time bound.
The responses from the trade bodies indicate that there is a need for a legislative body to resolve dispute and the method which most of the trade bodies preferred for such dispute resolution in mediation.
- The law must provide for punitive fines, compensation, liquidated damages and enforcement of decision.
- The law must provide that any complaint who acted in violation of laid down law i.e. transaction without contract, agreement, non-banking channel etc.
- The law must be given legal cover to the Arbitration committees of the chamber.
- All trade dispute should be compulsory referred to TDRO before they are entertained by any court of law
- The law must provide for appeal to courts.
- The law must provide period of limitation
- Please define trade dispute clearly and simply in terms of value, nature and parties.
- The party must be member of trade organization
- Proper and simple procedure for filing application
- Simple filing procedure
- Small filing fee
- The law must provide for appeal to courts
- The law must provide period of limitation
Endeavor for prompt settlement of trade disputes to develop the confidence of foreign businessmen and bridge trust gap with their Pakistani counterparts for creating business friendly environment in the country
Working Since 2014
Trade Dispute Resolution Organization has been established as attached department of Ministry of Commerce in 2014 under Strategic Trade Policy Framework 2012-15 to resolve international Trade disputes.