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A Step Too Far

by Feisal Naqvi
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Farooq Naeem—AFP

The Iftikhar Chaudhry-led Supreme Court’s ruling against JJVL isn’t in the realm of controversy; it is in the realm of absurdity

Retiring jurists normally prefer to fade away, their last days marked by encomiums and laudatory speeches. Chief Justice Iftikhar Chaudhry, however, chose not to go gentle into the good night and opted to end his tenure with a bang, rather than a whimper.

By the end of his tenure, the lines between supporters and opponents of the former chief justice’s jurisprudence had become firmly drawn. His supporters argued that the chief justice was the only one who had the courage to speak truth to power and to hold the powerful accountable for their misdeeds. His opponents argued that the chief justice seemed driven more by a desire to make headlines than to help the oppressed, and that his legacy was an unsustainable shambles.

At first sight, the Supreme Court’s judgment declaring invalid the agreement between Jamshoro Joint Venture Limited (JJVL) and Sui Southern Gas Company Limited (SSGC) appears to be at par with many of the former more controversial judgments passed during the former chief justice’s tenure. But a closer analysis shows that this judgment ventures far beyond its ignominious predecessors.

The facts in the JJVL case are that in September 2001, SSGC invited bids to set up a plant for the extraction of liquefied petroleum gas. The only entity to submit a bid was JJVL, which was subsequently awarded the contract. In 2011, PMLN stalwart Khawaja Asif challenged the contract on the grounds that it had not been awarded in a transparent manner.

The Supreme Court agreed with Asif and held that the contract was invalid. More specifically, the court held that the contract had not been awarded on a transparent basis in that the JJVL bid had not been accompanied by a bid bond and because the agreement eventually signed by JJVL was different in material particulars from the draft agreement appended to the bid documents. While the Court’s conclusions in this regard are highly dubious, at least there is precedent for this line of reasoning.

What makes the JJVL judgment utterly indefensible though are the two further conclusions the Supreme Court then draws. First, the Supreme Court jumps from the supposed lack of transparency to the entirely unsustainable conclusion that this nontransparent process was deliberately procured by JJVL for its benefit. Second, the Supreme Court not only sets aside the contract as actually signed by JJVL and SSGC but then implements a different contract which the court thinks the parties should have signed. This jurisprudence is no longer in the realm of controversy. It is in the realm of absurdity.

Let’s start with the obvious fact: the Supreme Court has no jurisdiction to find someone guilty. Till date, the court has always tempered its conclusions regarding criminal intent by using the phrase “prima facie” and by referring matters to investigating agencies for further action in accordance with law. In the case of JJVL, the court has dispensed with that fig leaf altogether. The JJVL judgment states bald conclusions: that the contract in question was not transparent and that it was illegally changed at the behest of JJVL and for the benefit of JJVL. The judgment therefore does not ask the FIA to investigate and see whether a crime has been committed. Instead, it directs the FIA to submit a report within 30 days and “identify” the persons responsible for the crimes in question.

What’s so wrong with that conclusion, you may ask? After all, isn’t the Supreme Court the highest court in the land? Does it not have the power to do “complete justice”?

The short answer to that question is, no. Like any other court, the Supreme Court can only exercise such powers as are given to it by the Constitution or by a statute. There is no power in the Constitution that allows the Supreme Court to declare any person guilty of a crime. And there is no law that gives the Supreme Court the power to conduct criminal trials.

More importantly, even if the Supreme Court did have the power to conduct a criminal trial, it certainly did not hold a trial in the case of JJVL. No witnesses were allowed. No cross-examinations were conducted. No evidentiary hearings were held. No charge was framed. And the accused were never granted the presumption of innocence.

The right to a fair trial has existed for as long as there has been law. As far back as 1215, the Magna Carta provided that no man may be imprisoned except on the basis of the judgment of his peers. More recently, the 18th Amendment to the Constitution inserted a new fundamental right (10A) in the Constitution recognizing the right to fair trial.

In any event, there is no connection between transparency and criminality. Transparency has to do with process. Criminality has to do with intent. A process can be both transparent and criminal just like a process can be nontransparent and yet devoid of criminality. One has nothing to do with the other.

For example, it is fairly evident that the Supreme Court did not treat JJVL in a “transparent” manner. At the same time, there is no evidence to show that the Supreme Court deliberately set out to destroy JJVL.

The supporters of the former chief justice have normally justified his jurisprudence on the basis that the Supreme Court exercises an inquisitorial jurisdiction in matters of public importance and fundamental rights. The first response to this contention is that the common law system, to which Pakistan certainly belongs, has traditionally not recognized any such jurisdiction. Instead, inquisitorial jurisdiction is exercised by magistrates within European style civil law systems. However, even in those cases, the inquisitor is always the first level of the judicial system, not the highest. More importantly, there is an appeal provided against the judgments of the inquisitor. To simply appropriate the term “inquisitorial jurisdiction” from civil law countries and to apply it without any of the safeguards and processes found in those countries is a farce.

The second conclusion reached by the Supreme Court is equally unsustainable. Once the court had decided the contract between JJVL and SSGC had been illegally procured, its next step should have been to say that both parties (i.e. JJVL and SSGC) be returned as nearly as possible to their status prior to the signing of the contract.

The court, however, decide to rewrite the law. It therefore decided that JJVL should be held accountable not on the basis of the contract as signed (which would have been odd enough), but on the basis of the clauses deliberately agreed to be changed or excluded by the parties.

To put it mildly, this makes no sense. It is one thing to declare decades later that all bidding documents are sacrosanct and that government owned entities may not enter into negotiations ever. It is another thing entirely to punish one party on the basis of clauses to which it never agreed. Contracts are enforced because the parties have agreed to them. There is no legal basis for enforcing clauses never agreed to by a party.

Criminal jurisprudence has not changed much in centuries. If you want to punish someone, you must give them a trial. You must afford them the presumption of innocence. And you must give them the right to present evidence and cross-examine witnesses. Popular societal beliefs are no basis for guilt.

It is also difficult to see why the Supreme Court found itself so morally outraged by the JJVL deal. Yes, the bid submitted by JJVL was not accompanied by a bid bond and the judgment waxes eloquent about this travesty and how other bidders might also have bid, if only they had known that a bid bond was unnecessary.

But while the JJVL bid was not accompanied by a bid bond, the bond was certainly delivered to SSGC the next day. More importantly, the absence of a bid bond was taken into account by the board of SSGC when considering bids and their conclusion was that the discrepancy was minor. What weighed upon the minds of the board was that for 15 years, SSGC had already been doing nothing except wasting the gas emerging from the Badin field because it did not have the money or the capability to set up an LPG extraction plant. Moreover, SSGC had even been unable to get outside investors to put up an LPG extraction plant because it was considered too risky.

Let’s look at this objectively: between 1988 and 2005, SSGC did nothing with the gas it had except burn it in the open air. Net loss to the exchequer: approximately $200 million. In 2001, the SSGC board decided to accept the only bid they had ever received in multiple attempts and to ignore the fact that the bid bond had arrived one day late. From 2003 till date, SSGC has been paid more than Rs. 34 billion by JJVL and the state exchequer has benefitted by additional tax revenue of Rs. 10 billion.

In most countries, that decision by the SSGC board to allow tendering to continue would have been hailed. In Pakistan, those board members worry about being criminally prosecuted!

The Court’s conclusions regarding the changes in the implementation agreement are also difficult to accept.

According to the Court, there were two changes that rendered the subsequent implementation agreement illegal. The first change was regarding the agreed basis on which royalty payments were to be made. The second change was the deletion of a clause providing that SSGC could repossess the LPG extraction plant if JJVL defaulted in payment of royalty.

So far as the first point is concerned, what the Supreme Court somehow—repeat, somehow—overlooked is that the draft implementation agreement did not contain any agreed basis for payment of royalty. Instead, the tender documents clearly specified that the winning bidder would need to propose a royalty formula acceptable to SSGC. And that SSGC would be free to negotiate with the winning bidder.

The Court tries to gloss over this problem by saying that the royalty formula was agreed between the parties prior to the signing of the Implementation Agreement and further refers to various letters as well as a letter of intent issued to JJVL. However, the letter of intent contains no mention of a royalty rate, let alone an agreed rate. In any event, every first year law student learns that when the terms of an agreement are clear, one cannot refer to earlier correspondence between the parties. Apparently this is something that the Supreme Court of Pakistan still needs to be reminded of.

Fine, you may say, but what about the deletion of the expropriation clause? Was that not in the draft Implementation Agreement? And was that not deleted later on at the insistence of JJVL?

The short answer to this query is, yes. There was a clause in the original Implementation Agreement that provided for expropriation. And yes, it was deleted. As noted in the judgment itself, JJVL’s lenders did not want to invest in a project where the Government of Pakistan could waltz in at any time and simply grab all the assets. Given what has now happened, the financiers’ insistence on deleting the expropriation clause seems both sensible and extremely far-sighted.

More generally, the question to ask is whether it is necessary or even advisable to bind the Federal Government into a straitjacket when it comes to procurement issues. Because what the Supreme Court has now held is that in the case of any government procurement process, any amendment to any draft document will negate the whole process of procurement.

The problem here is that while we may be blessed with a cabinet full of crooks and an administrative apparatus full of morons, the process of governance still leaves us with no option but to trust them, just like the concept of democracy leaves us with no option but to trust the electorate. One cannot elevate the concept of transparency into a fetish. Instead, it is imperative for some degree of common sense to be applied.

To repeat, it is not in dispute that between 1988 and 2005, SSGC did nothing with the gas it had except let it go to waste. It is not in dispute that SSGC was unwilling to invest in setting up an extraction plant. It is not in dispute that since 2005, SSGC and the federal government have together been paid approximately Rs. 60 billion by JJVL. It is not in dispute that the 2001 tender was open to the general public and that besides JJVL, no other party ever submitted a bid. And yet none of this has carried any weight with the Court.

History is no stranger to absurd legal doctrines. English law, for example, used to presume that a wife always acted under the direction of her husband. But as Mr. Bumble remarked in Oliver Twist, “If the law supposes that… the law is a ass—a idiot.” It appears now as if we are living again in Dickens’ world of the absurd.

Naqvi is a senior lawyer based in Lahore

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