The fact is that the constitutionality of the Competition Ordinance, 2007 is under challenge through petitions filed by various banks, including the Pakistan Banks' Association and the Institute of Chartered Accountants of Pakistan (ICAP). A similar challenge to the constitutionality of this Ordinance is also under consideration before the Lahore High Court.
I believe therefore that it is important that the reasons why I believe that the Ordinance is constitutionally invalid should be addressed/rectified before the Ordinance is referred to Parliament for consideration. In any federal system like Pakistan, legislative power is distributed among various state entities (ie the Federation on the one hand and the Provinces on the other).
Article 142 of the 1973 Constitution makes provision for the division of legislative powers between the Federation and the Provinces. It provides, insofar as is presently relevant, that the Federation can make laws only with respect to matters listed on the Federal Legislative List or the Concurrent Legislative List.
All other matters fall outside the domain of the Federation and no federal law (whether an Act of Parliament or an Ordinance) can be made with respect thereto. Therefore, for a federal law to be constitutionally valid it must in pith and substances fall under an entry of either of the two Legislative Lists. I understand that the pith and substance of the Competition Ordinance, 2007 does not fall under any of the entries on either of the aforesaid Lists.
The Competition Ordinance, 2007 is therefore beyond the legislative competence of the Federation and is ultra vires the Constitution. In this context, it may also be noted that the Indian Constitution has a specific entry in its Concurrent List (Entry 21) which deals with competition matters and reads as follows: 'Commercial and industrial monopolies, combines and trusts'. Similarly, the late 1956 Constitution in its Concurrent List (Entry 10) had an identical provision.
Thus, under those constitutional provisions, the Federation had the power to make competition laws, and indeed, the (Indian) Competition Act, 2002 has been made with reference to this power. No such power has been vested in the Federation under the 1973 Constitution because there is no such entry in either of the two Lists. Hence, the Federation cannot promulgate or enact any law of the nature of the Competition Ordinance, 2007.
It may further be noted that the previous law on the subject, namely the Monopolies and Restrictive Trade Practices (Prevention and Control) Ordinance, 1970 ("1970 Ordinance"), was promulgated within the framework of the late 1962 Constitution. That Constitution had its own peculiar and unique features (including especially Article 131 thereof) in terms of, and with express reference to, which the 1970 Ordinance was promulgated.
These features are completely absent in the 1973 Constitution. Each law must be examined in the context of its own constitutional provisions and there is a complete absence of any such power vesting in the Federation under the 1973 Constitution.
Moreover, the said Ordinance suffers from following inherent legal flaws:
a. The Ordinance provides for taking cognisance of alleged violations, its investigation/enquiry and also adjudication and imposition of penalty by a single authority ie Competition Commission. This is against the basic spirit of law which provides for investigation by one authority and adjudication by another independent authority to meet the ends of justice.
b. Not only the above-referred powers have been conferred on the Commission but the right to hear appeal against order of a member of the Commission has also been bestowed on its Appellate Bench. This is also against the basic principle of law which requires separation of original jurisdiction to appellate jurisdiction in the interest of justice. It is for this reason that under the predecessor 1970 Ordinance, the appeal lay to the High Court from any decision of the Monopoly Control Authority.
c. The 1973 Constitution only permits filing of appeals to the Supreme Court from judgements, decrees, final orders and sentences of a High Court. Section 42 of the said Ordinance providing for appeal to the Supreme Court against order of Appellate Bench of Commission is ultra vires of Constitution.
No federal law can be made under the constitution which confers a jurisdiction in the Supreme Court to hear appeals from any court, tribunal, authority or body other than a High Court. It follows from the foregoing that competition matters under the 1973 Constitution fall exclusively within the domain of the Provinces and ought to be the subject of provincial, and not federal, legislation.