The writer is a lawyer based in Islamabad.
Prudence (ie showing care or thought for the future) is generally perceived as a virtue. But can ethical standards of a society decline in a manner that making money through corruption come to be seen as a form of prudence? Is the ordinary prudent man in Pakistan now corrupt? These questions are relevant not just from a sociological perspective but also from a legal one. One of the grounds for challenging executive and administrative decisions as being illegal is to argue that they are unreasonable. Even in cases where the executive has wide discretion to reach decisions, the court will strike down a decision if it is so unreasonable that no reasonable person could have made it.
In determining the reasonableness and legality of decisions, courts in common law jurisdictions apply the ‘ordinary prudent person’ standard. So then what happens to standards of legality in a society where the ordinary prudent person becomes corrupt?
This is no abstract or academic debate. The Supreme Court recently decided the rental power case and found that the agreements entered between the state and the rental power projects (RPPs) were neither transparent nor in compliance with the PPRA law that regulates public procurement, and the breach of the law and the rules by public office holders and the approval and grant of up to 14 percent cash advance against project cost to non-performing RPPs (as opposed to the 7 percent advertised in the request for proposals) seemed prima facie fraudulent and a consequence of corruption. Is the Supreme Court overstretching here? Should it apply a more deferential standard of scrutiny when it comes to executive discretion in the realm of economic policy-making? Should it allow the collective weight of a shared decision of powerful ministers and the cabinet to influence its decisions?
Did we need a rental power policy at a time when our installed capacity was ample to deal with our energy needs is not for the Supreme Court to decide. Ruling on the wisdom of policies doesn’t fall within the mandate of the judiciary. But in the name of restraint or deference to the executive, can the court turn a blind eye when it comes to the implementation of policies marred by illegality, irrationality and procedural impropriety? It is settled law that addressing questions about compliance with law, and the reasonableness and integrity of the decision-making process falls squarely within the judiciary’s province. What could the Supreme Court do other than declare that the RPP contracts are invalid once it was clear that they have been awarded in breach of mandatory provisions of the law and through a non-transparent procedure tainted with impropriety?
While the recent Supreme Court decisions in corruption cases have not clearly articulated the applicable standard of judicial review and the legal test to be applied by courts in such cases, there are two dominant themes emerging in the law being laid out by the apex court. One, public office holders cannot treat authority as their handmaiden and state assets as their personal fortune to be dispensed at their whims, and that they are fiduciaries who must exercise authority as a sacred trust for the benefit of citizens in an efficient manner, after following due process and giving reasons for their decisions.
And two, when it comes to (i) the sale of public assets and (ii) the purchase of goods and services and setting up of infrastructure and development projects on the basis of state funds, public functionaries are under a singular duty to get the best price in the interest of the public.
In a landmark judgment, the Delaware Supreme Court held in the matter of Revlon Inc. vs. MacAndrews & Forbes Holdings, Inc that where the sale or break-up of a company is inevitable, the discretion of the board of directors is narrowed considerably and they are under a fiduciary duty to seek the maximum price for the company up for sale in the best interest of shareholders.
Our Supreme Court appears to be imposing a similar fiduciary duty on public office holders in the event of sale of state assets, and applying the converse rule in cases of public procurement from state funds. We are being told that the Supreme Court’s activism and intervention in the realm of business will discourage direct foreign investment in the country, reduce the price of state assets as all potential purchasers will need to build within their bids the cost of potential litigation, and enhance the cost of doing business in Pakistan.
These arguments are not without merit. When courts strike down contracts that are the product of mis-procurement, potential bidders will inevitably share the burden of public officials’ non-compliance with the law and due process. But public contracts around the world contain standard anti-graft representations stating that the private party has used no unlawful means in procuring the contract. This is in recognition of the fact that there is the problem of commissions and grease money whenever public authority meets private businesses. However, in an insidious environment where the foremost criterion for conception of public projects is the quantum of graft involved and the windfall it will produce for public officials approving contracts and their cohorts being awarded such contracts, the twin outcome is proliferation of unfeasible and undesirable projects and the shrinkage of legitimate businesses.
In such environment grease money doesn’t facilitate business and expedite development, but amounts to an outright confiscation of taxpayers’ money. Businesses suffer not because courts insist on enforcing the law, scrutinising the integrity of decision-making processes and creating a level-playing field for competitors, but because public officials refuse to do business with those interested in winning contracts on merit and making profits on the basis of superior expertise and business models. The solution to this malaise doesn’t lie in courts applying deferential standards of review and making allowance for corruption. We are in distress because since this country’s inception public office holders have not been held to account personally for the choices and decisions made in exercise of public authority. This has nurtured a culture where public office is desirable only because it translates into private gain.
There is little doubt that the Supreme Court’s intervention is the paramount factor applying some restraint on schemes of corruption entertained by public officials. But will occasional judicial scrutiny of mammoth public scandals be enough to stem the rot? Who for example will hold the new holy cows to account? There are growing rumours about judges (even at the high court level) putting a price on their conscience and favourable rulings. Are these rumours not reaching the Supreme Judicial Council? Who will question the lawyers whose professional fees can by no stretch of imagination amount to compensation for their advocacy skills and the time expended in assiduously defending legitimate client interests? Who will hold to account the journalists who are recipients of secret funds or media moguls who won’t allow a word to be uttered against powerful business interests?
Would you qualify as being corrupt if you don’t take hard cash but accept ‘fringe benefits’ such as plots etc.? What if you allow political or professional influence or such extraneous considerations to influence your judgment and the choices you make? Is intellectual corruption any less damaging for the society? And so if all of us have sinned, who will cast the first stone?
The crisis of governance crippling Pakistan at present appears to be entwined with a crisis of conscience rooted in the declining ethical standards within the society. While we would all like to see ourselves as victims of corruption, we must consider if we have individually endorsed a certain view of the utility of public authority and benefits to be derived from it and internalised such notions of loyalty, camaraderie, honour and ambition that strengthen the foundations of corruption.
Email: sattar@post.harvard.edu
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