Welcome To Pakistan Neutral Legal Blog

This blog to allow members of the Legal fraternity to discuss individual cases of interest either in Pakistan or internationally. The blogs at the Pakistan Neutral Legal Forum are provided as a free service to the Legal fraternity mainly in Pakistan and across the globe.


The Axact vs. Student Network Resources (SNR) Case: A New Perspective

Viewed from a legal perspective the Axact vs. SNR case has opened a new dimension. Initial research pertaining to the case shows that Drier LLP the firm whose attorney represented Axact in the SNR case was itself charged with bankruptcy and its founder Marc Drier was sentenced to 20 years imprisonment due to his involvement in a massive investment fraud case. It seems that due to Drier LLP’s bankruptcy and Drier’s implication in a fraud case, Axact ended its legal relationship with Drier LLP and did not pursue the SNR case any further.

A recent article on Wikipedia is a testimony behind Drier’s tarnished image and the bankruptcy of Drier LLP. The facts outlined in this article are also supported by another article appearing on CNN.com which proves that Drier LLP indeed got bankrupt and Marc Drier is an international fraudster implicated in several scams and frauds. According to the article Drier had pleaded guilty on May 11, 2009 to eight charges in the United States District Court for the Southern District of New York.

To make matters worse Drier LLP’s attorneys abandoned Axact’s representation in a highly objectionable manner due to which the defendants reopened and reactivated the discussion forum at their website essaryfraud.org where major of the libelous material previously published against Axact appeared again.
Such events compelled Axact to consult its local lawyers in Pakistan and upon their advice Axact filed a lawsuit in Pakistan in order to recover the damages and injunctions the company received in relation to the case.

It seems that Axact was also disappointed with its attorneys from Drier LLP and thus the company filed a lawsuit in the High Court of Sindh at Karachi, Pakistan against the defendants and acquired a decree and judgment for damages amounting US $6million and other remedies since the defendants opted not to join the suit even after served with several court notices and summons.

In conclusion it is suffice to assume that the bankruptcy of Drier LLP along with its founder Marc Drier’s personal involvement in massive investment scams were the key reasons why Axact ended its legal relationships with Drier LLP and thus didn’t pursued the SNR case any further. It seems that the closure of the Essayfraud website also took place due to the local case filed by Axact at the Sindh High Court.

Finally Drier LLP’s bankruptcy clearly outlines the fact that any reputable company should consider all pros and cons while hiring a firm to fight its case as a wrong decision to hire a firm whose own credibility is at stake can lead to disastrous circumstances for the company in the future.

Work Place Accidents and UK labor LAWs

The Background
This case study highlights a case, focusing on a claim made by a worker to an employer, having an accident incurred due to un-safe working conditions at the production facility. This also shows the efficiency of the legal experts and UK LAW where protection to human lives at work place is extensively bonded under the law.

The Incident – PROBLEM
The plaintiff was aged 17, and was working in West Sussex in a timber yard as a laborer. He was supporting a colleague in the clean-up of a “chip silo”. This silo was used to mash pieces of wood into smaller chips for consequent dumping. The wood was broken down into chips by a rotating corkscrew-like blade at the base of the silo. At the same time as the plaintiff and his colleague were performing this work, the blade was continuing to rotate. His right leg became caught by the blade and he was then pulled over and ended up with his body and left arm twisted and crushed in the region of the blade.

The plaintiff was trapped for over an hour and continued to remain awake throughout. His left arm was severed below the elbow and he also suffered a closed brutal fracture to his left femur and a significant injury to his left knee. At the same time as attempts were made to save the left arm, it was surgically removed in hospital 18 days after the accident. The plaintiff also had to have a total left knee substitution operation.

The Legal Analysis
Given the plaintiff’s young age the legal experts in the case were asked to remark on how long the knee substitution would last. It was concluded that a knee substitution had a predictable life of between 10 to 20 years at which point the plaintiff would require a revision process. If a revision is not likely to possible, surgical removal of the organ would be obligatory. It was concluded that there would be a 20 / 30% chance of the revision surgery not going ahead in the future. Future losses were difficult to evaluate as the plaintiff was at the start of his career. He was working as a laborer but his purpose had been to apply to the Navy at the age of 18. If the plaintiff were to have a surgical removal on his left leg in the future, bearing in mind the loss of his arm, his mobility and broad level of disability would be critically compromised. The plaintiff would not be able to use crutches and would no doubt find it very difficult to handle two prostheses, one on the upper limb and one on the lower limb. It was clear that, should an above knee surgical removal turn out to be necessary, the impact upon the plaintiff’s life would be very serious indeed.

The Solution
An application was therefore made to the court to include a claim for provisional damages. A claim was made for lost income of over £500,000, and the claim for surgical removal and orthopedic treatment also exceeded £500,000. Transport costs were evaluated at £78,000 with equipment and care amounting to over £150,000. The trial was then started, and the parties attended all the sessions, a legal settlement was agreed at £1,340,000 plus the payment of legal costs, which thus went into the favor of the plaintiff.

Accidents can or may happen at work, and special care must be made to those areas of production where risk to human lives is to a greater extent. All the developed nations of the world have laws binding precautions at work place and is been constantly compliance by the related labor departments. What improvements are suggested to current legislation?

NOTE: I would request that you. Provide your name and email address when posting your comment (only visible to the moderator). This will make it easier for us all to coordinate, discuss and share topics of interest.

This indeed is very relevant in Pakistan with our heavy industries and manufacturing industries. Almost all companies have accident insurance. The case-study should also state the full details of the current laws in Pakistan.

Development of a Global Constitution

Understanding a Constitution
A constitution is a system for government which defines the fundamental political principles, and establishes the structure, procedures, powers and duties, of a government. The term constitution can be applied to any overall law that defines the functioning of a government.

Constitution of the United States of America
The Constitution of the United States of America is the supreme law of the United States. It provides the framework for the organization of the United States Government. It also reserves numerous rights for the individual states, thereby establishing the United States’ federal system of government. The way the Constitution is understood is also influenced by the decisions of the court system, and especially the Supreme Court. These decisions are referred to, collectively, as precedents.

Constitution in Europe
The Treaty establishing a Constitution for Europe (TCE), commonly referred to as the European Constitution, was an international treaty intended to create a constitution for the European Union. It was signed in 2004 by representatives of the then 25 member states of the European Union and needed to be ratified by all member states to enter into force. 13 member states completed the ratification procedure, but the rejection of the Constitution by French and Dutch voters in May and June 2005, called the future of the Constitution into question. In light of these developments three member states, Finland, Germany and Slovakia, abandoned their partially complete ratification procedures and a further seven member states indefinitely postponed consideration.
Following the period of reflection, the European Council meeting in June 2007 decided to start negotiations on a Reform Treaty as a replacement and from this date the Treaty for Constitution for Europe still needs to be finalized.

Constitution of Pakistan
The Constitution of Pakistan is the supreme law of Pakistan. There have been several documents known as the Constitution of Pakistan. The Constitution of 1973 is the existing constitution, which provides for a parliamentary system with a President as head of state and popularly elected Prime Minister as head of government.

The Constitution (Seventeenth Amendment) Act, 2003 was an amendment to the Constitution of Pakistan passed in December 2003 according to which the President regains the authority to dissolve the National Assembly and dismiss the Pakistani Prime Minister, but the power to do so is made subject to an approval or veto by the Supreme Court of Pakistan.

Role of a Constitution
Please discuss the role of a constitution today and what you believe should be included in a global constitution that can be applicable to all countries of the world. Please state the exact categories that the constitution should cover and your suggested framework for its implementation in all countries.

The Tax on Consumer Goods

An indirect tax, such as sales tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary, such as a retail store from the person who bears the ultimate economic burden of the tax, such as the buyer of the consumer goods. An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. Examples would be tax on fuel, liquor, and cigarettes. Thus, an indirect tax is such which can be shifted or passed on, and invariably, the end customer has to bear the burden.

Tax is high on the agenda for retail and consumer goods companies. Increasingly retail and consumer companies are focusing on maximizing value from their brands as part of strategic reviews of their businesses. Tax is an important part of this review. Key tax issues for retail and consumer goods companies span insurance issues and which includes a global product liability and recall team.

Some people feel excise taxes can achieve social goals such as lowering consumption of alcohol. The consumers can avoid taxes by avoiding consumption, but this is not the solution. These taxes are regressive, which means that everyone pays the same dollar amount regardless of wealth. The taxes on necessities such as utilities and gasoline impose a much heavier burden on the poor.

Goods and Services Tax (GST)
It is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade (downstream taxes levied on upstream taxes). Value added taxation has been gaining favour over traditional sales taxes worldwide. In principle, value added taxes apply to all commercial activities involving the production and distribution of goods and the provision of services. VAT is assessed and collected on the value added to goods in each business transaction. Under this concept the government is paid tax on the gross margin of each transaction. Revenues from a value added tax are frequently lower than expected because they are difficult and costly to administer and collect. In many countries, however, where collection of personal income taxes and corporate profit taxes has been historically weak, VAT collection has been more successful than other types of taxes.

Effect of Tax on Consumer Goods
Goods and Service Tax is a tax on goods and services, which is leviable at each point of sale or provision of service, in which at the time of sale of goods or providing the services the seller or service provider can claim the input credit of tax which he has paid while purchasing the goods or procuring the service. The sellers or service providers collect the tax from their customer, who may or may not be the ultimate customer, and before depositing the same to the exchequer, they deduct the tax they have already paid. The net effect is that dealers charge GST but do not keep it, and pay GST but get a credit for it. This means that they act essentially as collecting agents for the Government. The ultimate burden of the tax falls on the last and final consumer of the goods and services, as this person gets no credit for the GST paid by him to his sellers or service providers.

Please post your comments below on
(a) The current systems for VAT collection and how they can be improved.
(b) What standard legal structure should be for such systems, and
(c) How should such a system be developed in light of increasing cross-trading of consumer goods between different countries and between consumers themselves.

Regulatory Framework in Pakistan for Fisheries

The Fishing Industry in Pakistan
Pakistan has a fish and seafood industry worth US$1.2 billion. Exports alone are worth nearly US$200 million. More than 800,000 people rely directly or indirectly on the industry for their livelihoods or family income.

The major issue for Pakistan is over fishing, a result of a failure to manage the fisheries correctly. Management failures in fisheries are not peculiar to Pakistan by any means. The most significant feature of marine fisheries in Pakistan, is that it is an “open entry system”. According to classical resource economics, since the point of un-profitability lies beyond the point where the fishery is at it Maximum Biological Sustainable Yield, there will be over fishing in a common property resource with open entry. This is exactly what has happened in Pakistan, the catch is declining and incomes are reducing.

The Regulatory Framework in Pakistan for Fisheries
The current legislative framework dealing with fisheries in the country is the Exclusive Fishing Zone (Regulation of Fishing) Act, 1975 as amended in 1993. This extends to the whole Pakistan and to waters within the exclusive fishery zone of Pakistan beyond the territorial waters. It regulates the management of fishing in exclusive economic zone of the country. The provisions of the law cover:
• Licensing and management of fishing operation
• Fishing craft subject to navigational regulation
• Prohibiting illegal, dynamite and poisoning fishing
• Closed season and prohibited area
• Penalties in contravention of any provisions such as seizure and disposal of fishing craft, fishing gear and fish catch.

The Marine Fisheries Department (MFD) of the federal government performs the functions of conservation of fisheries resources, management and development of resources along scientific lines, training of fisheries and fish farmers and in-service training, extension services of the private sector, revenue earning through auctioning/licensing of water resources and supplies of quality fish-seed to private fish farmers on subsidized rates.

Currently the only local legislation directly related to fish quality is the Pakistan Fish Inspection and Quality Control Act of 1998, which was adopted in response to WTO regulations. This legislation gives the ministry wide ranging powers and lays down rules for the handling of fish, on-board, in landing areas and auction halls and in processing units. The Agriculture Produce (Grading and Marketing) Act, 1937 also provides authority and control for the grading and marketing of the agricultural produce including dry fish, shellfish, and fishmeal.

Pakistan is also bound by the Precautionary Approach to Sustainable Fisheries, part of the Code of Conduct for Responsible Fisheries, as part of the Rome Convention of 1999. The Code in itself is not binding, but is enshrined in other treaties to which Pakistan is a signatory. The Code provides principles and standards applicable to the conservation, management and development of all fisheries. It also covers the capture, processing and trade of fish and fishery products, fishing operations, aquaculture, fisheries research and the integration of fisheries into coastal area management. The code contains many clauses detailing responsible ways to manage fish stocks including:-

“States should prevent over fishing and excess fishing capacity and should implement management measures to ensure that fishing effort is commensurate with the productive capacity of the fishery resources and their sustainable utilization.”

Overview of the Global Fishing Industry
The fishing industry (or fishing sector) is extraordinarily diverse. At one extreme are large, multinational joint ventures, utilizing large factory trawlers and numerous other vessels, employing thousands of workers on several oceans. At the other are small, wooden canoes and other boats used by individual fishermen to catch sufficient food for their families and perhaps more to sell in their local communities. The technology used can be simple and traditional, or it may be highly sophisticated, incorporating the most advanced electronic and other equipment. Some parts of the fishing industry are under social and economic pressures resulting from declines or sudden disappearances in certain stocks of fish (and other living marine resources) due to over fishing and other reasons and to loss of access to fishing grounds.

The Global Fishing Regulations
The world’s fisheries have come under increasing control. International Conventions, Agreements, Codes and activities have had, and are having, a major impact on where and how fishing takes place.

The United Nations Convention on the Law of the Sea gives coastal States the authority to manage fisheries within their jurisdiction.

The EU Code of Practice for Fish and Fishery Products has been developed by the EU Codex Committee on Fish and Fishery Products and gives general advice on the production, storage and handling of fishery products on board fishing vessels and on shore. It also deals with the distribution and retail display of fish and fishery products. It is incorporated as a fundamental operating procedure.

In USA, the Magnuson-Stevens Fisheries Conservation and Management Act (MSA) of 1996 provides the legislative framework for the fishing industry determining the allowable catch limits and habitat-protection rules and so forth.

There are no binding harvesting standards in the fishing industry. However, various organizations have attempted to introduce voluntary harvesting standards that promote sustainable fisheries. The Marine Stewardship Council (MSC), based in the UK, is one such organization.

The Future of Fisheries
Enforcement of regulations is an often-neglected aspect of fisheries management. Setting catch regulations is of little use if they are not enforced and similarly the quality of fish will not be consistent without adequate enforcement of the laws.

The Need for a comprehensive Global Standard for Financial Markets

The Stock Market Crisis
Pakistan stock exchange has been facing crisis since the last year. The outflow of foreign portfolio investment from the country’s equity market continued as the offshore investors withdrew $36.464 million during the third week January in 2009. The outflow of foreign investment from the country’s equity market started in 2008 due to political uncertainty, weakening economic indicators and the law and order situation in the country. The falling returns in the stock market have also forced many brokers and investment houses to lay off staff.

The Karachi Stock Exchange (KSE) ordered the establishment of a floor to stop its benchmark index from falling any further. It stops share prices from dipping any further and in effect prevents the value of their stock wealth from dipping any further. The Securities and Exchange Commission of Pakistan (SECP), the stock market regulator, was obliged to step in and enforce removal of the floor from December 15th, 2008. This was because of the IMF conditions of a ‘free falling market’ set out in a crucial loan agreement with the IMF. The period the floor was in place was a time of much anxiety for Pakistan’s equity investor community.

Steps to curtail the crisis
The Securities and Exchange Commission of Pakistan (SECP) has attempted to deal with the situation through new ordinances and measures. It amended section 95A of the Companies Ordinance 1984 through Companies (Amendment) Ordinance, 2009 to allow listed companies to buy back their own shares and hold them as treasury shares, which may be re-issued under the regulations being prescribed by the Commission. The amendment states:

‘Power of a company to purchase its own shares. (1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, a listed company may, subject to the provisions of this section and the regulations prescribed by the Commission in this behalf, purchase its own shares.’

The SECP also wanted to incorporate three new sections in the Modaraba Ordinance, through amendments in Modaraba Ordinance 1980 and addition of new section 41A, for improving regulatory framework of the Modaraba sector, empowering the commission to issue regulations for this sector. Modaraba is a kind of partnership, wherein one party provides finance to the other for the purpose of carrying business.

The international scenario
In 2008, failures of large financial institutions in the United States, due primarily to exposure to securities of packaged sub-prime loans and credit default swaps issued to insure these loans and their issuers, rapidly evolved into a global crisis resulting in a number of bank failures in Europe and sharp reductions in the value of equities (stock) and commodities worldwide. The economic crisis caused countries to temporarily close their markets.

On October 8 2008, the Indonesian stock market halted for two days after a 10% one day drop.
The same day, the Icelandic government shut down the stock market and brought trading in the country’s currency to a halt. Similarly, Kuwait’s and the Russian stock markets were also shut down.

Many of the world’s stock exchanges experienced the worst declines in their history, with drops of around 10% in most indices. To counter the crisis, the Federal Reserve of USA announced a multibillion dollar emergency loan to rescue insurance giant AIG. The Fed continued to take unprecedented actions. After deep rate cuts, the Fed’s key rate now stands practically at zero, effectively retiring it as a tool of monetary policy.

There should be a consistent legal & judicial framework prevalent in all countries to protect the stock markets. The framework should:
1. Limit the number of direct foreign investments flowing into the local stock market
2. Limit the amount of short selling to discourage speculation of stocks
3. Regulate bigger investment companies on their portfolio diversifications & ratings to prevent the market monopolization
4. Regulate the transformation of repayments and installments into marketable securities

The governments around the world should also update their legal frameworks regarding their stock exchanges. The legal infrastructure needs to empower the exchange regulatory bodies by ensuring:
1. Tougher penalties for listed companies to ensure compliance with securities laws
2. Stronger powers to review the information that public companies disclose to investors
3. Greater clarification of offences such as securities fraud and market manipulation
4. Broader rights for investors to sue if companies make misleading or untrue statements or fail to give full and timely information
5. Internationally coherent standards of accounting for companies

What are your thoughts? Please share what you think are the best policies and legal frameworks to put into place to establish a Global Standard for Financial Markets.

Intellectual Property Laws & the Internet

The growth of the Internet has put pressure on traditional intellectual property protections such as copyright and patent. Some forms of information, when made accessible on the Internet, are easily copied. Because the costs of copying are low and because copying is often anonymous, publishers have often responded with more aggressive enforcement of existing intellectual property rights and with calls for extensions of those rights to cover additional content, new media and new forms of access.

Copyright Issues Related to the Internet
The technology of the Internet provides a new medium for dissemination of information, and this new medium presents numerous challenges to traditional norms of copyright law. Most fundamentally, the Internet provides a means of nearly effortless and essentially perfect duplication and dissemination of works such as texts, pictures, audio-visual material, and other authorship for which copyright law provides certain exclusive rights to owners.

Trademark and Related Issues
Businesses and other organizations are accessible to one another over the Internet by particular World Wide Web addresses, known as “domain” names. Because of the unstructured nature of the Internet and particularly the Web, users often locate organizations by searching for domain names that correspond to the organization’s name. Not surprisingly, numerous disputes have arisen where companies with similar names, or manufacturing the same types of products, have wanted to adopt similar or identical domain names.

Patent Law and the Internet
Unlike the copyright and trademark issues brought to the fore by the rising popularity of the Internet, fundamental patent law norms are not subject to challenge by the Internet. The Internet’s popularity has spawned tremendous interest in certain patents related to enabling technology for the Internet. The growth of the Internet has provided certain new tools for patent research and analysis that were not previously available.

Trade Secret Law Developments
The law of trade secrets continues to have strong application in Internet-related industries, but the very nature of the Internet makes maintenance of trade secret information inherently difficult. Since information can be disseminated over the Internet almost effortlessly, once information finds its way onto the Internet it will be extremely difficult to claim trade secrecy for such information.

In conclusion
Different treaties have provided different levels of protection or address only specific limited issues in countries around the world. In some countries, the signing of the treaty is sufficient to give direct effect to the protections, which can then be relied on by nationals of other states. The internet so far lacks the infrastructure to fully secure ones’ intellectual property rights.
Q. Who would police the implementation of intellectual property laws worldwide?
Q. Which nation’s law will take precedence over the other in case of infringements?
Q. Why doesn’t UN create a global infrastructure to combat the issue?
Q. What are the qualifications for protection?
Q. What are the possible limitations on rights?
Q. What steps can individuals take to protect their creation?
Q. What technological advancements have been made to identify and block copied content of various media?

What is your view on the benefits of such legal procedures and what is the gain to the business community in general? Please share your comments.