Daily Times

No judiciary decision means anything unless it is enforced effectively. An honest and sound judiciary is key to enforcement. Many believe that some technical laws can be enforced by administrative means, but a rule of law, in the primary economic sense of protecting property and enforcing contracts, requires a judiciary to resolve disputes between private parties, and protection against the state itself stymie easier when the judiciary can resolve a controversy raised by a private party against the state based on constitutional provisions or parliamentary legislation. One conclusion widely agreed upon, not just in the economic literature but also among lawyers and legal scholars, is that the judiciary is a vital factor in the rule of law and more broadly in economic development. An effective, efficient, honest, and sound judiciary is essential for economic development. In other words, with a bad judicial system, economic development will be slow or non-existent.

Many studies show the positive benefits of strong effective judiciaries. The degree of honesty in the judiciary is correlated positively with economic growth. Better performing courts have been shown to lead to more developed credit markets. A stronger judiciary is associated with the more rapid growth of small firms as well as the formation of larger firms in the economy. Other studies have shown that countries with competent courts affect comparative economic competitiveness. Therefore, if Pakistan wants to achieve better economic growth, it must restructure and improve its judicial system.

An ineffective judiciary may have extraordinary and far-reaching effects on a country. Pakistan’s dysfunctional judiciary is increasingly seen as an obstacle to national development. It is a system that allows debtors of all kinds to abscond at will, knowing that none but the most determined of creditors will pursue them through the courts. It forces banks to lend at astronomical rates of interest because they cannot foreclose on debts. More worryingly, it means that vital infrastructure projects are stalled because investors cannot be sure the judiciary will uphold their rights. Lawyers in developed countries can point to numerous shortcomings in their own country. Yet judiciaries in developing countries frequently fall far short of standards for legal institutions in developed countries.

In his speech on November 14, 2003, Maria Dakolias stated that in the 21st Century, economic and social development is not just about the balance of payments or building roads or increasing tax collection. More and more it is about the rule of law. We believe that the rule of law is in effect when meaningful and enforceable laws assure transparency, fairness, and predictability in decisions; when contracts are enforced to promote business and commerce; when basic security and an independent judiciary protect personal safety and property; and when the people have access to justice. If we have these elements, the state can regulate the economy and empower private individuals to contribute to economic development by confidently engaging in business, investments, and other transactions. This, in turn, fosters domestic and foreign investment, creates jobs, and reduces poverty. If Pakistan wants sustainable development, it must implement the rule of law.

The Great Recession of 2008 provides an excellent example for considering the role of courts in the economy because, in truth, private law does have an effect beyond the affected parties. Businesses react to contract and tort cases. They often invest or not, innovate or not, based in part on how courts will treat them when deals go south or products fail. In the modern regulatory state, the law is completely interwoven with the economy, and business regulation has grown beyond merely settling disputes between feuding merchants, although settling contract disputes is still a core judicial function.

Pakistan’s political system is weak and corrupt so that instead of resolving its issues politically, politicians rely on the courts to resolve their disputes or resort to disruption by civil disobedience, costing the country billions

All this raises the question, “What can courts do to aid job creation and retention?” They can do three things without overstepping their limited role in popular governance. First, courts must aspire to treat similar cases comparably by using clear and predictable rules in tort and contract law. Second, courts must be impartial and treat all litigants alike whether they are corporations or individuals. Third, the judiciary must strive to resolve disputes quickly and without undue expense. These are respectable principles for approaching all sorts of litigation involving any citizens, but they impact economic enterprises in ways that affect all of us. It is no secret that companies will hesitate to innovate in the face of uncertain liability. Innovation is what drives economic growth and, thus, drives job creation. When companies are unsure of the outcome, when a deal sours, or when companies fear uncertain liability in tort, they are less likely to consummate some deals and more likely to keep some new products from the market.

If a country has a weak bureaucracy and legislature, the judiciary resorts to activism and usurps the role of both to the detriment of the economic and social structure. Most judges have a legal background with no training in economics and business. Therefore, when the judiciary usurps the power of other branches of the government, social and economic problems arise. Such a misstep stymies economic growth and hinders the normal operations of the executive and legislature branches, causing a tremendous cost to the society in terms of inefficiency, delay, and wrong decisions. Further, the judiciary is the unelected branch of government, answerable to no one and can make decisions that can cause lasting damage to society.

Pakistan’s political system is weak and corrupt so that instead of resolving its issues politically, politicians rely on the courts to resolve their disputes or resort to disruption by civil disobedience, costing the country billions. Thus, most of the time politicians fight among themselves and have no time to solve the problems of the country. That gives the judiciary the feeling that it is the only qualified body to solve all the problems in the country. Nonetheless, economic growth cannot happen until politicians learn to work together for the good of the country and stop relying on the courts or civil disobedience to settle their grievances. Unfortunately, Pakistan’s political system is still in its infancy and run by corrupt politicians and bureaucrats who have yet to learn how to work together. Therefore, unless they behave with maturity, Pakistan has no hope for stable economic growth.

P.S. Due to the restriction of OP.ED. in a newspaper, I could not give credit/reference to the writers whose writings are referenced here.

The writer is Ph.D. (USA), Professor Emeritus (USA)