US agrees to take disputes to Pakistani courts first

The Express Tribune | July 8th, 2012.

US agrees to take disputes to Pakistani courts first

By Shahbaz Rana

ISLAMABAD: Amid calls to make public the draft of bilateral investment treaty, the government claims that it has gained much and lost nothing to the United States as Washington has agreed to first taking any business dispute to Pakistani courts for settlement.

The US has agreed to a dispute resolution mechanism where local remedy will be sought first before opting for a state-to-state resolution mechanism or taking the matter to the international court of arbitration, said Saleem Mandviwalla, Chairman of Board of Investment.

Talking to The Express Tribune, Mandviwalla claimed that making the US agree on a local remedy was a victory for the country. For the last three years, the US was not ready to agree to take any disputed matter first to Pakistani courts.

He expressed the hope that after the resolution of a major issue, both the countries would sign the treaty before the end of this year. They have already agreed on the framework of the treaty and only less important issues are left, which may take some time, he added.

He expected that after signing the treaty, the US will at least sign a preferential trade agreement with Pakistan, if not a free trade agreement.

While the government claims victory, experts and former government officials, who were involved in negotiations, say the US has not budged from its original stance.

Both the countries had been negotiating the treaty since 2004, but the talks broke down in 2006 leaving many important issues unresolved. The biggest stumbling block was arbitration rules in case of any dispute.

The former officials were not ready to comment on record until they see the draft of the treaty. They called for making the draft public instead of keeping it secret.

From the beginning, the US wanted to include the option of arbitration even after a decision of the Supreme Court, said an official who had been involved in the negotiations.

He said according to recent decisions of international courts of arbitration, if the interest of an investor is harmed because of any of the reasons – a law, a judgment by a court or because of violation of treaty, the decision of the international arbitration will take precedent.

By agreeing to international arbitration, the sovereignty of the state has been compromised, he added.

The US has long been seeking extraordinary protection for American businesses including security, which has also been agreed.

Logistics firm Agility International and the Federal Board of Revenue (FBR) have been locked in a dispute over payments to the company against its services.

Agility has taken the matter to the International Centre for Settlement of Investment Disputes despite the FBR’s refusal to accept international arbitration. After Pakistan’s reluctance, the World Bank has already appointed arbiters and in case of any adverse judgment the state will have to pay the fines.

Independent experts have been raising voice against frequently signing bilateral investment treaties without protecting the interest of the state. So far, Pakistan has signed investment protection treaties with 47 nations.

source: Express Tribune