Mandatory Mediation: Key to Boosting Investor Confidence in Pakistan
TL;DR
- Pakistan's courts face major backlogs, deterring investment due to delays in commercial dispute resolution.
- Existing ADR legislation enables mediation but does not require parties to attempt it before litigation.
- International models show that mandatory pre-litigation mediation increases settlement rates and investor confidence.
- Pakistan has signed the Singapore Convention, paving the way for global enforceability of mediation settlements.
Overview
A recent analysis highlights that Pakistan's progress in alternative dispute resolution (ADR) frameworks-especially mediation-remains incomplete without legislation mandating mediation as a first recourse in commercial disputes. The introduction of mandatory pre-litigation mediation is identified as a decisive reform for enhancing investor confidence and practical contract enforcement.
What Happened
Pakistan faces a chronic backlog of over 2.22 million court cases, most in civil and commercial domains, resulting in delayed justice and increased risk for investors.
While federal and provincial laws allow courts to refer commercial disputes to mediation and regulate its practice, no law requires mediation before litigation begins.
International evidence, from the UK and Türkiye, links mandatory mediation regimes to high settlement rates and improved investment climates. For instance, Türkiye's mandatory system achieved over 480,000 referrals in three years, with a 52% settlement rate.
Recent steps, like the 2025 signing of the Singapore Convention on International Settlement Agreements, mean that Pakistani-mediated settlements will soon be enforceable in all signatory countries, significantly reducing the risk of re-litigation.
Context
Pakistan has built a legislative foundation for ADR, including the ADR Act (2017) and various provincial amendments, with some courts regulating and promoting mediation. The Supreme Court has repeatedly endorsed a pro-mediation approach.
Despite progress, the lack of mandatory mediation and low awareness among commercial actors impedes full system effectiveness. Policymakers are urged to make pre-litigation mediation compulsory for certain disputes, modeling global best practices.
Why It Matters
- Faster dispute resolution lowers investor risk and can boost economic growth and foreign direct investment (FDI).
- Mandatory mediation before litigation has proven to increase settlement rates, reduce court burdens, and facilitate contract enforcement.
- Enforceability of mediated settlements under the Singapore Convention will enhance Pakistan's appeal as an investment destination, benefiting cross-border commerce.