30 July, 2012
Overview
Corruption in Pakistan is recognised to be widespread and increasingly presents difficult political challenges for the country.
In a recent survey on corruption in South Asia published in December 2011, Transparency International reported that nearly 80% of Pakistani respondents said that levels of corruption in the country had increased over the last three years. Around half of the Pakistani respondents in the same survey reported that they had themselves paid a bribe to a public official or service within the last year.
The Supreme Court has assumed an active profile in the fight against corruption and many of the most notable domestic cases have been argued before the Court. As noted below, the Court struck down as unconstitutional the National Reconciliation Ordinance (“NRO”) in a landmark decision in December 2009. However, the Court has found itself in direct conflict with the Government on a number of occasions. Most recently, the Court and the Pakistani Government clashed in the contempt proceedings against the Prime Minister.
Recent international corruption cases
Cricket spot-fixing case
On 1 November 2011, following a jury trial at Southwark Crown Court in London, two players in the Pakistani national cricket team, including the former team captain, Salman Butt, were convicted of conspiring to accept unlawful payments and conspiring to cheat at gambling. The bribes were paid in exchange for bowling three “no balls” at prearranged times during a test match against England played at Lord’s Cricket Ground. The two men were sentenced to imprisonment along with two other conspirators, another cricketer of the Pakistan national team and a sports agent, Mazhar Majeed, who had earlier pleaded guilty to the offences.
On 23 November 2011, the Court of Appeal dismissed an appeal against sentencing by two of the cricketers. Of note, the Court upheld the trial judge’s decision to impose custodial sentences on all participants in the conspiracy and the judge’s differentiation between the different conspirators when determining sentences. In particular, the Court upheld the imposition of a greater sentence on the team captain, as he was viewed as being key to the conspiracy and in a position to influence his fellow cricketers.
The prosecution, being a domestic bribery case, was conducted by the Crown Prosecution Service rather than the Serious Fraud Office (“SFO”), which is responsible for international bribery prosecutions. As such, it does not offer any direct insight into the SFO’s strategy for prosecuting offences under the Bribery Act. However, the case does signal a preparedness on the part of the English courts to impose significant custodial sentences for corruption offences.
Recent domestic corruption cases
The NRO judgments
In December 2009, the Supreme Court declared the NRO to be unconstitutional and purported to strike it down. That law, adopted in 2007 by former President, Pervez Musharraf, had purported to grant an amnesty to politicians and bureaucrats (around 8,000 in all) who had been accused of a variety of serious crimes, including corruption, embezzlement and money laundering between January 1986 and October 1999. The law was reportedly promulgated by the former President as part of a political bargain to allow the head of the Pakistan Peoples’ Party, the late Benazir Bhutto, and the now-current President, Asif Ali Zardari, to return to Pakistan.
The Court gave various directions seeking to revive investigations and prosecutions that had been terminated following the promulgation of the NRO, and to establish court supervision over those investigations and prosecutions.
In November 2011, the Court dismissed a petition by the Government seeking to review its December 2009 judgment.
Contempt proceedings against Prime Minister Yousaf Raza Gilani
In February 2012, the Supreme Court of Pakistan charged the Prime Minister, Yousaf Raza Gilani, with contempt of court. The alleged contempt consisted of his failure to adhere to an order made in the 2009 NRO judgment requiring the Government to request Swiss authorities to reopen an investigation regarding corruption and money laundering before the Swiss courts.
In 2007, Swiss authorities were reportedly investigating allegations of corruption against the now-current president, President Zardari, having frozen around US$60 million in accounts in Switzerland. Following the enactment of the NRO, the Attorney-General wrote to the Swiss authorities to withdraw Pakistan’s request for assistance in investigating the corruption and money laundering allegations, and to terminate its status as a party to the pending civil proceedings in Switzerland. The Swiss authorities reportedly released the frozen funds following this request.
In December 2009, as part of its NRO decision, the Supreme Court declared that the decision to withdraw the request for assistance from the Swiss authorities was invalid and required the Government to revive its request for assistance in Switzerland and its status as party to civil proceedings. As of January 2012, this had not occurred, prompting the Supreme Court to order that the Prime Minister show cause as to why contempt proceedings should not be initiated against him for failing to comply with the order in its 2009 judgment. The Prime Minister did not submit a reply.
In April 2012 Gilani was convicted of contempt, but the court imposed only a symbolic custodial sentence, requiring Gilani to remain in court for the duration of the hearing.
Cases regarding corruption at state-owned companies
The Supreme Court is currently hearing a number of cases regarding alleged corruption and fraud in the management of various state-owned companies.
In March 2012, the Court held its latest hearings into allegations of corruption at Pakistan Steel Mills (“PSM”), the state-owned steel producer. The Court had instigated the review of PSM of its own motion in 2009. According to a forensic audit report provided to the Court, PSM sustained losses of 26.5 billion rupees in 2008-9 alone, over 20 billion rupees of which was attributed to corrupt practices and mismanagement. The Court demanded that the Ministry of Industries explain what actions it has taken following the provision of the audit report, and reserved the matter for further judgment.
In the same month, the Court also held hearings concerning allegations of corruption and mismanagement at state-owned railway operator, Pakistan Railways (“PR”). The National Accountability Bureau (“NAB”) has a number of ongoing cases concerning corruption at the railway company. The Court has at various times directed the NAB to investigate or complete its various investigations of the corruption allegations as a matter of priority.
Recent developments in domestic anti-corruption legislation
In March 2012, the Securities and Exchange Commission of Pakistan proposed new corporate governance rules for public sector companies. Amongst other matters, the new rules would provide that the majority of directors on the boards of public sector companies be independent and the chief executive officers be selected by the board rather than the Government as is currently the case. The proposed rules are seen as a step towards addressing perceived levels of nepotism and corruption in the management of public sector companies.
For further information, please contact:
Mark Johnson, Partner, Herbert Smith