A few weeks ago we reported that Pakistan Stock Exchange (PSX) suffered losses and one of the underlying causes was the on-going hearing of Panama Papers case in Supreme Court of Pakistan involving Prime Minister and his family. Markets, after sustaining losses, seem to be back on the track and have demonstrated consecutive gains in the past few sessions. However, the Pandora’s Box that these Panama leaks have opened up won’t be shut anytime sooner.
Pakistan Peoples Party Senator Aitzaz Ahsan submitted the Panama Papers Inquiries Bill 2016 in the upper house of Parliament, which past with a majority vote on December 15, 2016. Despite the fact that PML (N) senators opposed the bill, all clauses of the bill has been approved along with the amendments suggested by Senator Siraj-ul-Haq. We have reviewed the bill clause-by-clause to infer subsequent implications on PSX, if the National Assembly ratifies the bill as well.
What is Panama Papers Inquiries Act 2016?
The bill demands the formation of a Commission of an Inquiry, headed by sitting judges of the Supreme Court. The commission will have all the powers of a Court under the Constitution, Civil Procedure Code, Code of Criminal Procedure and Supreme Court Rules.
All proceedings of the commission will be deemed equivalent to judicial proceedings. Moreover, with this bill, the commission will be mandated to:
- Form investigation teams
- Request cooperation from national and international agencies, which Government of Pakistan has to support
- Summon and enforce the attendance of any person to be examined under oath
- Receive evidence on affidavits
- Search and seize any premises that the commission believes hold valuable information pertaining to any case
- Order police investigations
- Punish for contempt of court (as per the rules of Supreme Court)
Who will be prosecuted first?
According to the bill, every person whose name appears in the Panama Papers leak will be prosecuted, but those who volunteer for accountability or have publicly (or through communication to the commission) admitted holding assets in other countries, will be prosecuted first. The commission is required to conclude such cases within three months, a deadline which can be extended by one if the commission considers appropriate.
Where does the burden of proof lie?
Panama Papers Inquiries Bill 2016 explicitly mentions that burden of proof lies on the respondents (i.e. Pakistani citizens or persons and their families of Pakistani origin who, notwithstanding dual nationality retain Pakistani nationality and whose names appear in the Panama Papers) to establish that the assets they are holding in other countries have been obtained using legal/reported income.
What does this bill mean?
The Prime Minister of Pakistan Mian Muhammad Nawaz Sharif and his son have publicly admitted that they hold assets in other countries through offshore companies. This public admittance by the Premier and his son make them high profiled target of this bill (if the bill gets approval from National Assembly) and they will be liable to establish the legality of the income used to purchase offshore properties.
Since the commission is also required to make every proceeding and related information public, the media, opposition parties and general public will have access to everything said/presented during the proceedings.
Implications of Panama Inquires Bill on PSX
This means that prime time news analysis shows will dissect every piece of information they get their hands on to provide their so-called unbiased opinions, which will further fuel political instability in the country.
Regardless of the outcome of the case against Premier and his family, investors will withdraw their profits and will show reluctance to invest in PSX during the course of investigation. Consequently, the market will respond based on these prime time anticipations and it is highly likely that PSX will suffer losses until the commission concludes the case.