With the advent of the World Trade Organization in the mid-nineties and increasing globalization in its wake, a number of developing countries have thought it incumbent upon themselves to upgrade their regulatory infrastructure. Whilst certain developing countries have sought technical assistance from multilateral organizations for borrowing laws, others have examined regulatory laws in force in other countries to identify the ones most appropriate for their needs. In both instances, developing countries appear to increasingly understand that if adopted laws are to be successful, they have to be compatible with the contexts in which they are injected. However, a closer look at the adoption processes employed by certain developing countries suggests that developing countries are less clear about aspects of adopted laws and developing country contexts that need to be compatible with each other, as well as the manner in which the desired compatibility between adopted laws and developing country contexts may be generated and enhanced.
In this article, I draw upon comparative law and development economics literature to understand the nature of compatibility between adopted laws and developing country contexts, and to argue that it is shaped by the interplay of institutions through which developing countries adopt laws. I also argue that in addition to compatibility, it is important that adopted laws enjoy a degree of legitimacy in the countries that adopt them. I explore the concept of legitimacy and its relationship with compatibility and argue that the very interplay of institutions that generates compatibility may also generate the necessary legitimacy for adopted laws. To examine the manner in which the interplay of institutions shapes the compatibility and legitimacy of adopted laws, I compare the interaction amongst legal and political institutions in India and Pakistan in the adoption of their competition laws. To assess the significance of legitimacy, I examine the manner in which legitimacy, in conjunction with compatibility, impacts the interpretation and, therefore, the implementation of the adopted laws in these two countries.
To this end, this article is organized as follows: in Part I, I outline the theoretical underpinnings of compatibility and the role of institutions in generating it with reference to comparative law and development economics literatures. I also define legitimacy and discuss its significance for borrowed laws with reference to political philosophy and explore the manner in which institutions that generate compatibility may also create legitimacy. In Part II, I examine the interplay of legal and political institutions engaged in the adoption of competition laws in India and Pakistan and evaluate their compatibility and legitimacy-generating potential. In Part III, I examine the manner in which the compatibility and legitimacy of the adopted Indian and Pakistani competition laws informs the manner in which these laws are interpreted in their respective contexts, and highlight the significance of interpretation for the overall implementation of these laws. In the final section, I conclude and draw attention particularly to the relevance of this analysis for other developing countries seeking to adopt regulatory laws or indeed any other laws that rely heavily on foreign models.
1. UNDERSTANDING COMPATIBILITY AND LEGITIMACY
Comparative law literature and the development economics discourse are generally considered distinct from each other. Whilst comparative law is most often invoked to study the borrowing of laws from one country to another, development economics has historically been preoccupied with examining factors that contribute to the success of economic institutions. Despite this distinction, there is an important commonality between these two sets of literature: both place considerable emphasis on the need for compatibility between the borrowed law (or ‘economic institution’, as per the terminology used in development economics literature) and the context of the country for which it is intended, and both consider compatibility to be a critical factor in the ‘success’ of the borrowed law. This commonality has become more pronounced in the post-Washington Consensus era, when development economics has become increasingly focused on the effect of political and legal institutions pre-existing in the context of the country on the success of economic institutions. Juxtaposing these two fields of study affords an insight not only into the correlation between compatibility and the success of borrowed laws, but also on the significance of the legitimacy of borrowed laws and its close, yet underexplored, relationship with compatibility.
A. Compatibility with Context and the Success of Borrowed Laws
Comparative law scholars have long underscored the significance of compatibility. For example, Montesquieu, writing as early as 1748, cautioned that ‘whenever there is a design of adopting the civil law of another nation, it would be proper to examine beforehand whether they have both the same institutions and the same political law’.Footnote 1 However, it was Kahn-Freund, writing more than two centuries later, who explicitly linked compatibility with the success of the borrowed law when he argued that ‘any attempt to use a pattern of law outside the environment of its origin continues to entail the risk of rejection’ because legal rules ‘which organize constitutional, legislative, administrative or judicial institutions and procedures … are … “organic” [to the context of the country of origin and, therefore,] … are most resistant to transplantation’.Footnote 2
Alan Watson became a significant outlier in this discussion by arguing that ‘a foreign rule can be successfully integrated into a very different system … which is constructed on very different principles from that of the donor’Footnote 3 because ‘usually legal rules are not peculiarly devised for the particular society in which they now operate’.Footnote 4 However, Watson was not as dismissive of the importance of compatibility as a first reading of his work may suggest. Like Montesquieu, Watson also recognized that the law of one country may diverge from that of another due to the impact of ‘the Spirit of a People’ on the law.Footnote 5 He also noted that for a borrowed law to be successful, it must continue to ‘grow in’ and become ‘part of’ the borrowing country.Footnote 6 Although he did not explicitly say it, arguably Watson was of the view that a borrowed law could only ‘grow in’ and become ‘part of’ the borrowing country if it was compatible with its context.Footnote 7
Scholars specifically discussing borrowed competition laws have also highlighted the need for compatibility of the borrowed law with the context of the adopting country. For instance, Trebilcock and Iacobucci urged the need for a ‘locally optimal substantive law’ because ‘no single institutional model of a competition agency will be optimal for all countries … given particularities of history, initial conditions, institutional traditions, and political economy considerations’.Footnote 8 Similarly, Gal, while discussing the Israeli competition law experience, argued that ‘the receiving state’s knowledge of and commonality with the state of origin’ are essential pre-conditions for it to be receptive to the legal transplant.Footnote 9 Shahein corroborated these views and confirmed that competition laws, like most other laws, were embedded in a specific political, economic, and social environment, and must be appropriately ‘contextualised’ for the purposes of the adopting country.Footnote 10
Development economics literature approached the idea of compatibility through its discussion of factors that contribute to the success of economic ‘institutions’.Footnote 11 Trubek, for instance, traced the cause of the ‘failure’ of the 1960’s Law and Development movement to the misplaced belief – of developed nations and multilateral organizations – in the workability of legal transplants that had not been expressly adapted for the context for which they were intended. He noted that the movement had encouraged developing countries to transplant laws without requiring, let alone insisting, that these be adapted for their particular contexts. He further stated that this failure to contextualize generic transplants meant that some laws did not ‘take at all’, others ‘promoted by the reformers remained on the books but were ignored in action’, whilst others still ‘were captured by local elites and put to uses different from those the reformers intended’.Footnote 12
B. Creating Compatibility
Whilst both the comparative law and development economics literature agree on the importance of compatibility between borrowed laws and the pre-existing context of the adopting country, the comparative law literature is somewhat vague about the manner in which compatibility may be generated. Whilst Kahn-Freund acknowledges that institutions may have a role to play in determining compatibility, Montesquieu and Watson are more focused on the role of people in the adoption of laws. In the case of Montesquieu, this role is recognized but not analyzed, and it appears that, despite his emphasis on the ‘spirit of the people’ in shaping the laws of a country, Montesquieu views adoption almost as a disembodied process. He certainly does not explore the mechanisms through which the ‘spirit’ of a people may have its impact felt on the adoption process or on the laws proposed to be borrowed.Footnote 13 Whilst Watson is somewhat more insightful in this regard, he appears to be more interested in the role of people (or ‘actors’, as he calls them) in the post-adoption or implementation stage than in generating compatibility in the course of adoption.Footnote 14
As compared with the comparative law literature, the development economics literature provides real insight into the processes through which a borrowed law may be made compatible with the context for which it is intended. According to North, for instance, economic institutions (or laws, which are included in North’s definition of ‘institutions’) are more likely to be compatible with the context of a country if they emerged organically from it, through an evolutionary process.Footnote 15 He argues that laws or institutions that are introduced by ‘a discontinuous change’ – that is, a change brought about by revolution or conquest rather than through organic evolution – are likely to be incompatible with the context of the country and, therefore, are not able to perform in a way that contributes to economic growth in that country.Footnote 16
Rodrik extends North’s work by offering insight into the links between the institutions through which a country borrows economic laws and the compatibility of these laws with the context of the adopting country. He is of the view that economic laws are a form of ‘technology’.Footnote 17 This technology may be ‘general purpose … codified and … readily available on world markets’,Footnote 18 or it may be ‘highly specific to local conditions’ and containing ‘a high degree of tacitness’ due to the fact that ‘much of the knowledge that is required [about the technology] is in fact not written down’.Footnote 19 He argues that if the desired ‘technology’ is of the generic variety, a country may simply import it through a ‘largely top down’ approach which relies ‘on expertise on the part of technocrats and foreign advisors’; if the technology is highly specific to context, however, the country must adopt it through ‘bottom up’ mechanisms capable of eliciting and aggregating local information in order to make the ‘technology’ appropriate for the context for which it is intended.Footnote 20
Rodrik also explains that the binary categories of generic or highly specific technologies are ‘only caricatures’, and that most borrowed laws lie between these two extremes. He argues that ‘an imported blueprint [requires] domestic expertise for successful implementation’, and even ‘when local conditions [differ] greatly, it would be unwise to deny the possible relevance of institutional [or legal] examples from elsewhere’.Footnote 21 Rodrik, therefore, suggests that even when a country acquires a blueprint from another country, it is incumbent upon it to adapt it to the local context, in light of local knowledge, aggregated through bottom-up participatory institutions. Rodrik further states that although the institutions through which a country may elicit and aggregate local information may be ‘as diverse as the institutions they help create … the most reliable forms of such mechanisms are participatory political institutions’,Footnote 22 because whilst authoritarian regimes are not restricted from or incapable of using local knowledge, ‘nothing compels them to do so’.Footnote 23
Acemoglu and Robinson offer a further attribute of institutions engaged in the adoption of borrowed laws. They are of the view that, in addition to employing participatory and bottom up processes, it is also desirable that political institutions engaged in the creation or adoption of economic institutions be ‘inclusive’ rather than ‘extractive’.Footnote 24 They argue that extractive political institutions concentrate power in the hands of a narrow elite and create economic institutions organized along extractive lines which in turn extract resources from the rest of society. In contrast, inclusive political institutions, which distribute power more broadly in society, are able to create economic institutions with an inclusive ethos that are capable of distributing resources more equitably throughout.Footnote 25 In effect, Acemoglu and Robinson’s ‘inclusivity’ is an important factor in the creation of compatibility. It calls for political institutions that employ participatory processes to engage in law reform and thereby creates an opportunity for the law or institution proposed to be adopted to be contextualized in light of local knowledge and information.
C. Legitimacy: An Underexplored Dimension of the Success of Borrowed Laws
A closer examination of the processes that generate and create compatibility between a borrowed law and the context for which it is intended suggests that compatibility may not be their only outcome. It appears that the very interplay of institutions that creates compatibility between a borrowed economic law and the context of the country for which it is intended may also generate legitimacy for the borrowed law in that country. This legitimacy, whilst distinct from compatibility, is not only inextricably related to it, but also has a significant and discernible impact on the implementation of the borrowed law in that country.
According to political philosophy,Footnote 26 ‘legitimacy’ is ‘the belief that a rule, institution or leader has the right to govern’.Footnote 27 ‘Legitimacy’, so defined, is essentially a subjective concept. It may derive from the ‘legality’Footnote 28 or ‘authority’Footnote 29 of the procedure through which the rule or institution is created, from the ‘justness’ or ‘fairness’ of the rule or institution, or from an amalgamation of these factors.Footnote 30 However, there is some disagreement amongst political philosophers as to the appropriateness of including ‘justness’ and ‘fairness’ within the ambit of legitimacy: whilst some argue that fairness (or justness) is a critical component of legitimacy,Footnote 31 others suggest that the concept of legitimacy is weaker than that of justness and that laws or decisions can be legitimate without being just.Footnote 32
Even while accepting the broader definition of ‘legitimacy’, which includes legality, authority, and justness in its scope, it may be possible to distinguish between procedural and substantive legitimacy. I argue that procedural legitimacy relates to a belief in the legality of the procedures through which rules or institutions are created and in the authority of the creating institutions, whilst substantive legitimacy relates to a belief in the justness of the rule or institution.Footnote 33 I further infer from the literature that whilst a rule or institution may only be truly legitimate when it has both procedural and substantive legitimacy – ie, it embodies fairness (or justness), efficiency, expertise, and accountability (where fairness relates to the substantive goals of a policy, law, or legal system, while efficiency, expertise, and accountability relate to its effectiveness), and has been created through processes which have legality and authorityFootnote 34 – it is possible, in actual fact, that a rule or institution has procedural legitimacy without having substantive legitimacy.Footnote 35
The importance of legitimacy (whether procedural, substantive, or both) of a borrowed law in the adopting country – ie, its domestic legitimacy – whilst underexplored in both comparative law and development economics literatures, is alluded to in the diffusion and policy transfer literature (from political science) with reference to its counterpart: international legitimacy. Specifically, the diffusion and policy transfer literature suggest that whilst countries borrow laws because they are seeking international legitimacy, harnessing international legitimacy may be a means of gaining domestic legitimacy for the state, and by extension for its laws.Footnote 36 The significance of international legitimacy is evident in the works of Weyland, who argues that the need to ‘look good before global public opinion’ and concern for ‘international legitimacy’ is an important factor that motivates a country to adopt outside influences,Footnote 37 and in those of Marsh and Sharman, who assert that ‘emulation [of laws from the developed world] may be a deliberate ploy by governments to acquire legitimacy’.Footnote 38 Giraldi, however, highlights the link between international and domestic legitimacy by arguing that states ‘are sensitive to the reaction of the international community because it can affect their domestic legitimation and power’.Footnote 39
However, according to Linos, international legitimacy is not the only possible route to domestic legitimacy.Footnote 40 She argues, much like Rodrik, that laws spread more effectively – and with greater legitimacy – when they are adopted through domestic democratic institutions rather than when introduced as foreign blueprints through elite networks of internationally networked technocrats.Footnote 41 She explains that democratic processes have the potential to create greater legitimacy because elected leaders need the support of ordinary citizens and domestic interest groups to win re-election and, therefore, must at least appear to pay greater attention to their interests and to seek their consent to their agendas.Footnote 42 She argues that technocrats, despite their skill and specialist knowledge, neither have such a need nor consider themselves accountable to the public and may, therefore, follow their foreign colleagues or international organizations with impunity.Footnote 43
Whilst Linos stops short of suggesting that laws that spread through democratic networks are ‘better’ than laws introduced through elite networks,Footnote 44 she does hold that adoption of laws through democratic institutions and networks allows the engagement of a broader range of stakeholders in the country, and thereby confers ‘critical domestic legitimacy’ on the adopted law.Footnote 45 This is understandable because the need for elected leaders to gain the support of their voters means that they are likely to encourage stakeholders to give their consent to the proposed legislative or policy measures. And whilst, in the case of the majority of emerging democracies whose electoral processes and electorate have not yet achieved maturity, this consent is only formal and constructive rather than actual, it generates a degree of procedural, if not substantive, legitimacy which may be entirely lacking in a situation where laws are introduced in a country without any attempt at harnessing public consent.Footnote 46
Domestic legitimacy, whether substantive or simply procedural, and whether a by-product of international legitimacy or generated through democratic processes in the country, has considerable bearing on the implementation of the borrowed law in the adopting country. Whilst a borrowed law that is compatible with the context of the country is more likely to be understood, applied, and utilized in the country,Footnote 47 only a law that has legitimacy is more likely to engage productively with the ‘machinery of justice’ of the countryFootnote 48 rather than being challenged through the machinery of justice for absence of authority, legality, or indeed justness. Further, and more interestingly, legitimacy also bolsters the compatibility of the borrowed law because it gives authorities engaged in interpreting and implementing the law the autonomy to interpret the law with reference to the specific text of the statute and the exigencies of the particular situation before them, rather than compelling them to compensate for the lack of domestic legitimacy by focusing on international precedents in an attempt to harness greater international legitimacy.
II. ADOPTING COMPETITION LAWS IN INDIA AND PAKISTAN
Both India and Pakistan engaged their legislatures, executives, and judiciaries in the adoption of their respective competition laws. However, the nature of these institutions in either country and the manner in which they engaged and interacted with each other were remarkably different. In this section, I examine and compare the interplay of institutions in the two countries in order to assess the compatibility and legitimacy likely to have been generated by these interactions. In order to do so, however, it is important to contextualize this analysis and to understand the constitutional landscape in which these institutions were operating.
A. The Institutional Contexts in India and Pakistan
1. Common Beginnings
At the stroke of midnight on 14 August 1947, India and Pakistan were created as independent ‘dominions’ of the British Empire. Under the terms of the Indian Independence Act 1947 (1947 Act), the countries were to be governed by their respective constituent assembliesFootnote 49 and the Government of India Act 1935 (1935 Act). Other British laws in force in undivided India at the time of independence were to remain applicable in both countries.Footnote 50
Under the 1935 Act, India and Pakistan were organized as federations divided into provinces.Footnote 51 The governor general of either country, assisted by a council of ministers,Footnote 52 led the executive.Footnote 53 The federal legislature comprised an upper house and a lower house,Footnote 54 either of which could initiate federal legislation.Footnote 55 If the federal legislature was not in session, the governor general had the power to promulgate law in its stead.Footnote 56 The provincial executives and legislatures mirrored those of the federation albeit the remit of the provincial executives and legislatures differed from that of the federation.Footnote 57 Each country had an apex ‘Federal Court’Footnote 58 and provincial high courts. Appeals from decisions of the Federal Court of either country were referred to the King’s Privy Council.Footnote 59
2. Institutional Evolution in India
India adopted its Constitution on 16 November 1949, which remains in force to date. Under the terms of the Constitution of India 1950 (1950 Indian Constitution), the executive is led by the President, who is assisted, as before, by a Council of Ministers headed by the Prime Minister.Footnote 60 The legislature still comprises an upper house and a lower house.Footnote 61 Either house may initiate legislation (other than a money bill),Footnote 62 which passes into law if both houses agree and with the assent of the President.Footnote 63 If the legislature is not in session, the President has the power to promulgate an ordinance, provided he is satisfied that it is immediately necessary to do so. However, presidential ordinances lapse if they are not submitted to the legislature for approval within six weeks of its reassembly.Footnote 64 The executives and legislatures of the provinces mirror that of the federation;Footnote 65 however, the matters in respect of which the federation and the provinces may legislate remain different.Footnote 66
The judicature comprises a Supreme Court and provincial high courts. The Supreme Court has original jurisdiction (to hear disputes between the federation and provinces or between provinces, and to enforce fundamental rights provided in the Constitution) and appellate jurisdiction (in respect of orders of the high courts).Footnote 67 The high courts also have original, appellate, and writ jurisdiction within their territories,Footnote 68 and each high court is also required to superintend subordinate courts and tribunals in its territory.Footnote 69 Judges of the Supreme Court and high courts are appointed in accordance with the qualifications and procedures stipulated in the Constitution.Footnote 70 The law as declared by the Supreme Court in its decisions is binding on all courts, and that declared in the decisions of the high courts is binding on all courts and tribunals subordinate to the high courts.Footnote 71
The 1950 Indian Constitution was suspended on three occasions: from 1962 to 1968 (due to war with China), from 1971 to 1977 (due to war with Pakistan), and from 1975 to 1977 (due to internal disturbances). However, on each of these occasions the suspension was partial: only some of the fundamental rights provided in the Constitution were suspended, martial law was not declared, and the judiciary was not co-opted to support the emergency. In fact, on more than one occasion, the Indian judiciary acted to circumscribe the powers of the executive during an emergency.Footnote 72 At the end of each period of emergency, the Constitution was fully restored. This has allowed Indian constitutional institutions to not only operate uninterruptedly since their creation, but also maintain their legality and authority within the country.
3. Developments in Pakistan
Pakistan’s first constitution was not adopted until 1956, nine years after the country’s creation. In 1958, within two years of its adoption, Pakistan’s first constitution was abrogated in the wake of a military takeover and replaced in 1962 by a second constitution framed by the military establishment.Footnote 73 However, even the second constitution was abrogated in 1969, pursuant to a second military takeover.Footnote 74 While still under military rule and without a constitution, Pakistan’s eastern and western provinces went to war with each other in 1971. This resulted in the eastern province, East Pakistan, being created as the independent ‘Bangladesh’, and the western province, West Pakistan, succeeding as ‘Pakistan’. In 1973, a somewhat diminished Pakistan adopted its third and final constitution.Footnote 75
To the extent of the institutions it creates, the Constitution of the Islamic Republic of Pakistan 1973 (1973 Pakistani Constitution) is similar to the 1935 Act and, therefore, to the 1950 Indian Constitution. It restores the bicameral legislature comprising an upper house (ie, the ‘Senate’) and a lower house (ie, the ‘National Assembly’);Footnote 76 each house has the power to initiate a bill (except a money bill) which may be made into law when passed by both houses and upon receiving presidential assent.Footnote 77 The President is designated the head of state and the Prime Minister, head of the executive.Footnote 78 The President has the power to promulgate ordinances provided the Parliament is not in session and he is satisfied that immediate action is required. However, any ordinance promulgated in this manner has a life of only 120 days unless approved by the Parliament within that period.Footnote 79 The political and legislative structures of the provinces mirror those of the federation,Footnote 80 albeit with distinct legislative powers.Footnote 81
The 1973 Pakistani Constitution also establishes the Supreme Court as the apex court of the country and sets up high courts in each of the provinces. The Supreme Court has original jurisdiction in disputes arising between governments as well as for the enforcement of fundamental rights. It has appellate jurisdiction in respect of all decisions of the high courts.Footnote 82 The high courts also have original and appellate jurisdiction as well as the jurisdiction to issue writs against the government in appropriate cases.Footnote 83 Decisions of the Supreme Court are binding on all courts in the country, and those of the high courts are binding on all courts subordinate to the high courts.Footnote 84 The Constitution also stipulates the qualifications and mode of appointment of judges.Footnote 85
Like its Indian counterpart, the 1973 Pakistani Constitution has also been suspended. However, unlike in India, these suspensions (from 1977 to 1981 and then from 1999 to 2002) have come in the wake of military takeovers (justified on the basis of internal disturbances in the country);Footnote 86 they have also been linked to martial law and the suspension of all fundamental rights provided in the Constitution. In both cases, members of the judiciary have been required to take fresh oaths of office affirming their support for the military takeovers. Historically, the majority of judges not only took these fresh oaths of office on military orders, but also provided legal cover to the takeovers by issuing judgments justifying these takeovers on the basis of the doctrine of necessity.Footnote 87 The combination of these oaths and the justifying judgments had the effect of creating a hierarchy in state institutions in which the judiciary was deferential to the executive. This hierarchy appeared to persist at all times rather than only in periods when the executive was led by a military-chief-turned-President.Footnote 88
By 2007, the cordial relationship between the judiciary and the executive had become deeply strained. In March 2007, Pakistan’s military-chief-turned-President, General Pervez Musharraf, suspended the Chief Justice of Pakistan on grounds of professional misconduct. This led to protests from the legal community and political parties, and culminated in an unprecedented display of independence on the part of the judiciary when, in July 2007, it restored the suspended Chief Justice to office.Footnote 89
This tension between the judiciary and the executive reached a boiling point in October 2007, just as the Competition Ordinance 2007 (2007 Ordinance) was introduced. In November 2007, President Musharraf declared an emergency throughout the country and once again required the judiciary to take an oath of office in which the judiciary would expressly declare its support of the military takeover. This time, however, the majority of the judges did not comply with the orders of the military-chief-cum-President and were automatically dismissed from office. The President also issued the Constitution (Amendment) Order 2007 (2007 Order) and thereby saved ‘all actions taken and all Ordinances promulgated by him in the weeks leading up to the declaration of emergency’.Footnote 90 The 2007 Ordinance was amongst these ‘saved’ ordinances.Footnote 91
In early 2008, President Musharraf’s government was replaced by a democratically elected government. However, the tussle between the judiciary and the executive continued for some time after, even when President Musharraf was himself replaced by President Asif Zardari,Footnote 92 and even after the judges removed by President Musharraf were restored to office.Footnote 93 It was around this period that a petition challenging Musharraf’s 2007 Order was filed before the Supreme Court. In its decision in this petition, the Supreme Court struck down the 2007 Order and directed the Zardari government to place all laws ‘saved’ by it, including the 2007 Ordinance, before the Parliament for ratification.Footnote 94
However, the government of President Zardari displayed little urgency in enacting the competition law for reasons which had less to do with the government’s views on competition and more with the fact that the government wanted to buy time for placing the National Reconciliation Ordinance 2007 before the Parliament for its approval. Once again, competition law was merely caught in the power struggle between the institutions.Footnote 95 It was only after the 2007 Ordinance had already lapsed and been repromulgated as the Competition Ordinance 2009 (2009 Ordinance) and Competition Ordinance 2010 (2010 Ordinance) that it was finally ratified and approved by the Pakistani Parliament and enacted as the Competition Act 2010 (2010 Act).
B. Institutional Interplay in the Adoption of Competition Laws
1. The Indian experience
The Indian executive and legislature were instrumental in India’s initial adoption of its Competition Act 2002 (2002 Act), whilst the executive, legislature, and the judiciary are responsible for its amendment by the Competition (Amendment) Act 2007 (2007 Amendment), which substantially brought the 2002 Act into the form that is in force in the country today. The Indian executive had a tradition of establishing committees to evaluate India’s domestic, economic, and legislative needs, especially in light of external developments. As early as 1977, the Indian government had established committees to review its monopoly regulation regime.Footnote 96 This process gained momentum after India joined the World Trade Organization in the mid-90s, and India seriously considered a domestic competition regime for the dual purpose of protecting the Indian economy from infiltration by international cartels and for ensuring its relevance as a destination for foreign investment. Consequently, in 1999, the Indian government set up a ‘High Level Committee on Competition Law and Policy’ – the Raghavan Committee – to propose to the government the most appropriate competition law for the country.Footnote 97
Members of the Raghavan Committee ranged from former Indian government and World Bank officials to lawyers and academics, and whilst they belonged to different epistemological communities, they were all of Indian origin, the majority also being Indian nationals. In the course of its deliberations, which lasted for nearly two years, the Raghavan Committee engaged with, and obtained evidence from, representatives of chambers of industries and commerce, professional institutes, consumer organizations, experts, academics, and government officials throughout India.Footnote 98 The Raghavan Committee also consulted competition laws of nearly eighty countries – including competition or antitrust laws of the European Union (EU), the United Kingdom (UK), the United States (US), and Japan – and examined competition reports and texts authored by leading Indian and international scholars and competition experts. In 2000, the Raghavan Committee submitted its report to the government.Footnote 99
The Indian Parliament arrived on the scene when the government introduced the competition bill (based on the recommendations of the Raghavan Committee) in Parliament, along with a statement of objects and reasons for enacting the Law. The Parliament remitted the draft bill to the relevant Standing Committee for scrutiny, and the Standing Committee met with representatives of financial institutions, chambers of industry and commerce, consumer organizations, professional institutes, experts, academics, and relevant ministries of the government before presenting its report to the Parliament. In December 2002, after considering the recommendations of the Standing Committee, the Parliament passed the bill with some modifications. On 13 January 2003, the President granted his assent to the bill and the 2002 Act was formally enacted.Footnote 100
The judiciary joined the competition debate soon after, when a petition was filed before the Indian Supreme Court challenging the 2002 Act for not being in conformity with the principle of separation of powers enshrined in the 1950 Indian Constitution.Footnote 101 On 20 January 2005, the Indian Supreme Court disposed of this petition on the assurance and commitment of the executive or government that it would separate the executive and judicial function of the Competition Commission of India (CCI) by forming a specialized tribunal to hear appeals from CCI’s decisions. On 9 March 2006, in compliance with the order of the Supreme Court, the government introduced the Competition (Amendment) Bill, which, among other amendments, provided for the establishment of a Competition Appellate Tribunal with the mandate to hear appeals from CCI’s decisions. On 27 September 2007, after considerable deliberations, the legislature or Parliament enacted this as the Competition (Amendment) Act 2007.Footnote 102
The competition law that emerged as a result of this interplay of institutions reflected the contribution of each of them. Provisions related to CCI’s mandate, which had initially been adapted to the Indian context by the executive (through the Raghavan Committee), remained substantially as recommended by the Committee. The structure of the CCI, as the first-tier competition implementation authority, was informed by deliberations in Parliament and of the judiciary. It evolved from a single authority with separate investigative, prosecutorial, and adjudicative wings,Footnote 103 and powers of advocacy, adjudication, and implementation of its decisions,Footnote 104 to a collegial, regulatory body whose adjudicatory function was made subject to the review of the Tribunal. CCI’s composition (including the mechanisms for appointing and removing its members) also changed dramatically due to the interplay of institutions: although the executive (through the Raghavan Committee) had recommended a ‘Collegium Selection Process’ that would ensure that qualified persons would be appointed,Footnote 105 the Parliament initially vested the power of appointing CCI members exclusively in the government,Footnote 106 and later reverted to a version of the recommended ‘Selection Committee’ in the 2007 Amendment.
2. The interplay in Pakistan and its impact on legal content
A cursory review of the interplay of institutions in Pakistan suggests that the Pakistani executive, legislature, and judiciary have all participated in the adoption of the Pakistani competition law. However, this cursory review overlooks the fact that the 2007 Ordinance was introduced only by the executive without any input from the legislature or the judiciary. It further overlooks the fact that, even when the legislature and the judiciary became engaged, the grounds on which they did so and their histories and relationships inter se were remarkably different from those amongst institutions in India, and, therefore, their interplay as well as their impact on the adopted competition law was also different.
The fact that in Pakistan it was the executive that led the initiative to adopt a competition law was not very different from the manner in which the adoption process was initiated in India. What was different, however, was that Pakistan, despite having had an anti-monopoly legislation on its books for decades, had not systematically reflected on the importance and appropriateness of regulating monopolies. It was in 1993 when the Pakistani government first expressed some interest in competition matters; however, this interest only gained momentum after the Doha Ministerial Conference in 2001.Footnote 107 Even then, Pakistan sought assistance from the United Nations Conference on Trade and Development (UNCTAD) for developing its domestic competition regime.Footnote 108 However, it was only in 2006 that Pakistan, with the support of the World Bank, seriously pursued its objective of developing a new competition law and policy framework.Footnote 109 In 2006, the World Bank set up and led a team comprising World Bank officials and international consultants and also including some Pakistani economists, lawyers, academics, and chartered accountants.Footnote 110 The team’s report, titled Pakistan: A Framework for a New Competition Policy and Law, was submitted to the Pakistani government in 2007.Footnote 111
In the course of its deliberations, the World Bank-led team relied on ‘perception indicators’ and ‘broad indicators from the market’ rather than on sectoral surveys, citing the lack of necessary dates for such surveys as its reason for doing so.Footnote 112 The team also drew upon its experience and understanding of the competition regimes of the EU, UK, and the US,Footnote 113 and consulted competition laws that had been designed for other developing countries.Footnote 114 Throughout the process, the team worked closely with the Pakistani government (Ministry of Finance) and with the anti-monopoly authority. The team also consulted a number of international and Pakistani experts,Footnote 115 and held public consultation workshops in May 2006 and a Growth and Competitiveness Conference in Lahore in December 2006.Footnote 116 In January 2007, the team commissioned a Brussels law firm to prepare a draft competition law based on its recommendations.Footnote 117
Upon receiving the draft law, the Pakistani government, instead of submitting it to the Parliament for deliberation, submitted it directly to the military-chief-turned-President, who promulgated it as the 2007 Ordinance.Footnote 118 In the ordinary course, the Ordinance would have lapsed in 120 days unless approved by Parliament during this period. However, a month after the promulgation, the military-chief-turned-President declared an emergency in the country, which triggered a chain of events that led to the President saving the Ordinance from lapsing.Footnote 119
The judiciary engaged with competition law for the first time in 2009. By this time the military-chief-turned-President had left office, and the Supreme Court was hearing a petition challenging the legality of orders passed by him in pursuance of the declaration of emergency. In deciding this petition, the Pakistani Supreme Court directed the Zardari government, which was then in office, to place all ‘saved’ ordinances for approval before Parliament.Footnote 120 Interestingly, however, this order of the Supreme Court only dealt with the 2007 Ordinance generally as part of a group, and not individually on its own merits.Footnote 121
Despite this order of the Pakistani Supreme Court, it was only in 2010 that the executive placed the competition law before the Parliament.Footnote 122 Although the Parliament did debate the provisions of the proposed law and also referred it to the relevant Standing Committee for discussions with stakeholders, its deliberations were of necessity circumscribed by the three competition ordinances that had preceded the enactment of the proposed competition law (ie, the 2007 Ordinance, 2009 Ordinance, and 2010 Ordinance). Consequently, the 2010 Act bore the unmistakeable stamp of the World Bank-led team, both in what was included in it and what remained excluded.
The structure and mandate of the Competition Commission of Pakistan (CCP) particularly reflected the express recommendations of the World Bank-led team. The World Bank-led team had recommended that the CCP be structured as a ‘quasi-autonomous, quasi-judicial institution’; ‘a collegial body with a minimum of five and a maximum of seven members’.Footnote 123 Each of the three successive competition ordinances, and the 2010 Act, followed this recommendation and established the CCP as a collegial body with perpetual succession and with not less than five and no more than seven members.Footnote 124 Similarly, the successive competition ordinances and the 2010 Act adhered to the mandate and composition of the CCP that had been recommended by the World Bank-led team. The only change in this regard was made by the Parliament when it introduced the Competition Appellate Tribunal in the 2010 Act.
On the other hand, the CCP’s composition reflected the omissions of the World Bank-led team. Interestingly, although the World Bank-led team had highlighted the importance of the ‘quality of appointments’ to CCP and prescribed the qualifications of its members, it had not prescribed a mechanism for the appointment or removal of such persons.Footnote 125 Consequently, whilst each successive competition ordinance and the 2010 Act adopted provisions reflecting the recommendations of the World Bank-led team with regard to the necessary qualifications of members, it followed the established Pakistani practice of vesting exclusively in the government the power to appoint all members.Footnote 126 It also conferred upon the government the power to remove a CCP member from office on any of the grounds for which such a person may have been ineligible for appointment in the first place,Footnote 127 or upon an inquiry conducted by an ‘impartial person or body of persons’,Footnote 128 without providing specific qualifications of such impartial persons or persons. Neither the Parliament nor the judiciary made any observations regarding these appointment and removal mechanisms.Footnote 129
C. Assessing the Compatibility & Legitimacy of Indian & Pakistani Competition Laws
It is evident from the preceding discussion that, in adopting and amending the 2002 Act, India engaged all three constitutional legal and political institutions: the executive, the legislature, and the judiciary. Further, the fact that these institutions employed bottom-up, participatory and inclusive processes allowed India to aggregate local knowledge and to adapt and ‘Indian-ize’ the language and content of foreign blueprints to construct a competition law that was compatible with its particular needs. Further, these institutions and the specific bodies created or authorized by them enabled the participation of a considerably diverse and significant segment of Indian society in the process of adopting the 2002 Act, and thereby garnered their constructive, if not actual, consent for the adoption of the law. This consent, combined with the legality and authority of the institutions engaged in the adoption process, bolstered the legitimacy of the 2002 Act.
In sharp contrast, Pakistan adopted its three competition ordinances through the executive, which employed largely exclusive and top-down processes for this purpose. The executive, by its very nature, was neither equipped nor attempted to aggregate local information from within Pakistan. Consequently, the 2007 Ordinance merely reproduced the content and language of international blueprints without any real concern for the compatibility of the competition law with the Pakistani context. Further, whilst legislation through the executive had legality and authority due to being recognized as constitutionally valid,Footnote 130 it did not have a mechanism for garnering the consent of stakeholders. This suggests that the ordinances enjoyed only limited legitimacy. Whilst Pakistan did eventually engage a wider range of institutions and employed a somewhat more bottom-up, participatory, and inclusive processes in the adoption of the 2010 Act, the ability of these institutions to enhance the compatibility and legitimacy of the law remained circumscribed as much by the content of the three ordinances as by their own institutional infancy and inexperience.
III. RELATIONSHIP BETWEEN COMPATIBILITY AND LEGITIMACY
Whilst the interplay of institutions in the adoption of the Indian and Pakistani competition laws suggests that the Indian 2002 Act is more compatible with and enjoys greater legitimacy in the Indian context than its counterpart (ie, the Pakistani 2010 Act) does in Pakistan, the actual compatibility and legitimacy of these laws is not measurable except through its effects on the implementation of these laws in either country. Whilst a full-scale review of the effects or manifestations of compatibility and legitimacy is beyond the scope of this article, I examine here the more limited issue of the effect of legitimacy upon compatibility: does it enhance compatibility, reduce it, or is there no discernible impact? To address these questions, I review the CCI and CCP’s interpretation of comparable provisions of their respective competition laws.
A. Relevant Provisions of the Indian and Pakistani Competition Acts
Section 3 of the Indian 2002 Act empowers the CCI to take action against anti-competitive agreements, whereas section 4 of the Pakistani competition ordinances (of 2007, 2009, and 2010) and the Pakistani 2010 Act enables the CCP to take action against prohibited agreements. The concept and prescribed treatment of ‘anti-competitive agreements’ in the 2002 Act and that of ‘prohibited agreements’ in the Pakistani competition laws are comparable. Both section 3(1) of the Indian 2002 Act and section 4 of the Pakistani 2010 Act address agreements that relate to the production, supply, distribution, storage, acquisition, or control of goods or provision of services in the country. However, whilst India prohibits such agreements if they cause or are likely to cause ‘an appreciable adverse effect on competition within India’,Footnote 131 Pakistan proscribes them if they have ‘the object or effect of preventing, restricting or reducing competition within the relevant market’.Footnote 132
The distinction in the analytical tests reflects the effect of the interplay of institutions in the two countries: a closer reading of section 3 of the Indian 2002 Act reveals that it combines elements from the US a Antitrust laws, Article 81 of the Treaty Establishing the European Community (now Article 101 of the Treaty on the Functioning of the European Union), and the OECD-World Bank Model Competition Law, albeit ‘Indian-ized’ through the interaction of Indian institutions engaged in the adoption of the 2002 Act. A similar close reading of section 4 of the Pakistani 2010 Act reveals that it almost exactly reproduces Article 101 TFEU. This reflects the absence of a meaningful engagement of Pakistani institutions in the adoption of the competition laws, and an almost wholesale borrowing of foreign blueprints without a discernible attempt at making them compatible with the Pakistani context. Further, whilst not evident from the text of the provisions, these provisions also reflect the overall legitimacy of the statutes of which these form a part. Specifically, the Indian provision has greater legitimacy than its Pakistani counterpart due to having been scrutinized and consented to by a range of institutions and by the public.
B. CCI and CCP’s Strategy for Interpreting These Provisions
A review of the final orders of the CCI from the commencement of operations up to December 2017 suggests that, in interpreting section 3 of the 2002 Act, the CCI places very limited express reliance on foreign precedents and materials.Footnote 133 Further, the foreign precedents and materials it does cite in its orders are derived from diverse competition jurisdictions. However, this review reveals that the CCI implicitly relies on foreign precedents and materials and adopts foreign analytical strategies for its use without expressly acknowledging these. In its implicit reliance, the CCI appears to especially lean towards an EU style of reasoning: it prefers to examine allegedly anti-competitive agreements in the local economic and legal context in which these agreements are to operate and in light of their objectives; it acknowledges and applies the de minimis rule in respect of vertical agreements;Footnote 134 and often balances anti-competitive and pro-competitive factors even in respect of agreements presumed to be anti-competitive within the scheme of section 3.Footnote 135
In contrast, in the majority of its final orders, the CCP relies expressly and extensively on foreign precedents and materials and draws most of its citations from EU and US precedents, with far fewer citations from other jurisdictions. Moreover, despite the Pakistani competition laws’ leanings towards EU competition law, in the course of its interpretation of the Pakistani laws, the CCP follows the analytical approach adopted by the EU and the US, often conflating the two. The EU effect is evident when, in a number of its orders, the CCP asserts that it is incumbent upon it to examine ‘the object or effect’ of an agreement and that ‘object’ and ‘effect’ are disjunctive concepts, whilst the US influence is manifest when the CCP interprets ‘object’ to mean ‘per se’;Footnote 136 when it refers to an effect-based enquiry as a rule of reason enquiry;Footnote 137 when in a majority of its orders it does not consider the context or possible legitimate objectives of an agreement;Footnote 138 and when it does not allow a de minimis style exception in any of its orders.Footnote 139 It follows that in a majority of its decisions, the CCP leans more towards legal analysis (anchored expressly in foreign precedents) than towards a factual analysis of the economic and legal circumstances in which the agreement operates.
Over time the CCI’s interpretation of the analytical test for anti-competitive agreements has become increasingly consistent and predictable,Footnote 140 unless the sectorFootnote 141 or practiceFootnote 142 under review merits a flexible or novel approach. In the majority of its final orders, the CCI begins by considering whether there is an agreement. If it establishes that an agreement exists, it considers whether it is horizontal or vertical with reference to the economic and legal context within which the agreement operates. In case of horizontal agreements, the CCI most often requires the respondent to rebut the presumption of appreciable adverse economic effect with reference to factors listed in section 19(3) of the 2002 Act, whereas in respect of vertical agreements, it considers the effect of the agreement itself taking into account possible pro-competitive factors. CCI also allows for an exemption from the operation of section 3 on the basis of the de minimis rule. Footnote 143
In contrast, the CCP’s approach remains less consistent and structured except to the extent that the CCP prefers to align its interpretations with EU and US precedents rather than anchoring them in the wordings of the provisions of the Pakistani competition ordinances or the 2010 Act or in the economic circumstances of the case. In its earliest orders, the CCP first categorized an agreement as anti-competitive by object (which term it regularly conflates with the per se rule), or by effect (which term it uses interchangeably with the rule of reason). The CCP then analyzed the agreement, most often with reference to EU and US precedents.Footnote 144 Over time, however, the CCP appears to either skip the categorization step altogether,Footnote 145 or to categorize an agreement without establishing or stating its basis for doing so.Footnote 146 The CCP’s approach towards bid-rigging agreementsFootnote 147 and agreements for allocating market sharesFootnote 148 and its stance towards the exemption provision (section 5) are some examples of the lack of consistency in its approach.Footnote 149
C. Insights into the Relationship Between Compatibility and Legitimacy
A review of the manner in which the CCI interprets section 3 of the 2002 Act suggests that the CCI’s strategy is to continue to ‘Indian-ize’ the language as well as the meaning of its provisions. In doing so, the CCI enhances the pre-existing compatibility of the provision with the Indian context, which in turn means that the provision is better understood, more utilized, and perhaps better applied in the Indian context. However, the review of the manner in which the CCP interprets section 4 of the Pakistani 2010 Act suggests that the CCP keeps the provision suspended in a certain legal and linguistic limbo between the text of the Pakistani competition law and the international precedents it emulates, thereby, at best, keeping it only as compatible with the Pakistani context as it was at the time of adoption, and certainly doing little to improving the extent to which it is understood, utilized, and applied in the country.
Arguably, the relatively higher legitimacy of the Indian 2002 Act, generated through the engagement of a range of bottom-up, participatory, and inclusive institutions, made the law more accepted within the Indian context. It is likely that, given that the 2002 Act and the implementing authority it had established (CCI) had acquired legitimacy through the interplay of domestic institutions, the CCI did not feel constrained to expressly and overtly rely on international precedents to affirm the international legitimacy of the 2002 Act and to leverage it to gain domestic legitimacy. The domestically generated legitimacy of the 2002 Act and of the CCI, therefore, allowed the CCI the leeway to adopt a more domestically comprehensible approach in interpreting the provisions of the 2002 Act, and to rely upon foreign materials and precedents only to the extent it was necessary for it to do so for greater clarity.
The relatively lower legitimacy of the Pakistani competition law manifests itself in the CCP’s almost compulsive reference to foreign precedents and materials in its orders. This need to draw support from EU and US competition and antitrust jurisprudence (as well as regulatory guidelines and precedents from the OECD and other jurisdictions), even when not strictly warranted by the nature of the case before it, reflects the CCP’s need to assert not only the international antecedents and pedigree of the Pakistani competition law, but also its international legitimacy, and, by extension, that of the CCP itself. Regardless of whether and the extent to which the CCP succeeds in apportioning international or domestic legitimacy for the law, the CCP’s interpretive strategy not only fails to give precise and clear meaning to the text of the statute, but also fails to anchor competition principles firmly in the Pakistani context. This, in turn, prevents the Pakistani competition law from being coherently and systematically understood, applied, and utilized in the Pakistani context.
IV. CONCLUSION
It is evident from the above discussion that the nature and interplay of institutions through which India and Pakistan adopted their respective competition laws had a clear and discernible impact on the compatibility of these laws with the contexts for which these were intended as well as on their legitimacy in these contexts. In India, the interplay of a range of bottom-up, participatory, and inclusive institutions generated a higher degree of compatibility and legitimacy for the Indian 2002 Act compared to that created in Pakistan by the adoption of the competition ordinances through exclusive, top-down processes employed by the executive. Although the 2010 Act was adopted through a wider range of institutions which claimed to employ bottom-up, participatory, and inclusive processes, its quality of legitimacy improved only marginally because the deliberations of these institutions were circumscribed by the ordinances as well as their own infancy and inexperience.
The discussion further suggests a positive correlation between compatibility and legitimacy to the extent that legitimacy enhances the compatibility generated in the course of the adoption. For instance, the already higher compatibility of the 2002 Act was further bolstered by its legitimacy, which allowed the CCI the freedom and independence to interpret provisions of the competition law in accordance with the circumstances of each case before it. In Pakistan, the absence of a significant interplay of institutions and the near exclusion of even such participatory institutions that existed in the country (except to a limited extent in the enactment of the 2010 Act) kept the competition law, as well as its subsequent interpretation by the CCP, not only tethered to its international antecedents and, therefore, distant from the Pakistani context, but also anxious to assert its international legitimacy.
These findings have important practical implications for other developing countries seeking to adopt competition (and indeed other regulatory) laws in that they demonstrate that compatibility, whilst necessary, is not a sufficient condition for the meaningful implementation of an adopted law in a new context, and especially for its gradual integration into the pre-existing legal system. It suggests that the adopted law must also enjoy a degree of legitimacy to be truly successful in that context. Notwithstanding the significance of these findings, they are not intended to detract from the need for countries to adopt laws based on foreign models, even if they do so for the purposes of gaining or re-asserting their foothold in the international community, and to strike a balance between their international and domestic legitimacy.
These findings further suggest that overly focusing on maintaining domestic legitimacy, as appears to be the case in the interpretation of competition law in India, may have the effect of detaching and isolating the adopted law from international developments and, in the worst-case scenarios, distorting or confusing the very principles on which the law is based. On the other hand, fixating on bolstering international legitimacy, as appears to be the case in the interpretation of competition law in Pakistan, may or may not generate international legitimacy for the borrowed law (and, by extension, for the state), but it will certainly fail to create jurisprudence that is firmly anchored in the domestic context and accessible to domestic users of the law, and thereby do very little to enhance its domestic legitimacy.
