Category Archives: news story

We recently obtained an interim injunction against a regulatory penalty imposed by the State Bank of Pakistan (SBP) on PFB Pvt Ltd, a leading manufacturer of medium-density fiberboard operating under the brand name Patex. The order underscores the application of due process requirements to cases of violations of strict liability regulations under Pakistan’s foreign exchange laws.

The case arose when Patex, seeking to construct a manufacturing facility, secured syndicated financing to import plant and machinery from China. However, in response to Pakistan’s recent balance of payments crisis, the SBP imposed temporary prohibitions on banks opening letters of credit for such imports. These undocumented restrictions led to a lapse in the statutory import period under the Foreign Exchange Regulation Act, 1947 and Chapter 13 of the Foreign Exchange Manual. Consequently, the SBP imposed a fine on Patex, threatening to recover it directly from the company’s bank account without a hearing.

Pakistan’s exchange control regime, administered by the SBP under the Foreign Exchange Regulation Act 1947, grants the central bank broad powers to regulate foreign exchange transactions. The Foreign Exchange Manual provides detailed permissions and procedures for various types of foreign exchange dealings. Notably, the Act includes an ouster clause in Section 26, limiting judicial review of SBP’s actions.

Led by Shahbakht Pirzada, RIAA Barker Gillette’s team sought injunctive relief from the High Court to protect the Plaintiff from being penalized without any adjudication. We argued that this action violated principles of natural justice, as the company was not given an opportunity to present its case. We further emphasized that the delay was due to circumstances beyond Patex’s control. We also pleaded for an exception to the ouster of jurisdiction clause in section 26 of the Act.

Shahbakht Pirzada, Partner at RIAA Barker Gillette, lead counsel on the commented, “This interim order is significant as it reinforces the fundamental right to be heard before adverse regulatory action is taken, even in the context of the wide powers given to SBP under the Act. It also highlights the need to consider external factors and intent when determining regulatory penalties.”

The Single Bench of the High Court granted an interim injunction restraining the SBP from recovering the penalty until a final judgment is reached.

This case demonstrates the complexities of navigating regulatory landscapes in Pakistan’s business environment, particularly regarding foreign exchange controls during economic downturns. It also showcases our expertise in handling regulatory disputes and protecting clients’ interests against unilateral actions by state bodies.

Contact Pakistan Partner Shahbakht Pirzada should you require assistance with foreign exchange or other regulatory disputes.

This article is not legal advice; it provides information of general interest about current legal issues.

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RIAA Barker Gillette is Pakistan’s premier law firm, with an on-the-ground presence in four major cities in Pakistan: Karachi, Islamabad, Lahore, and Peshawar, and affiliated offices in Dubai (DIFC) and London.

The firm practices in all areas of corporate, commercial and dispute resolution law. Leading international legal directories consistently recognize the firm as a top-tier law firm in Pakistan.

RIAA Barker Gillette is the exclusive member firm in Pakistan for Lex Mundi, the world’s leading network of independent law firms with in-depth experience in over 125 countries worldwide.  

In a landmark decision, our client Star Hydro Power Limited (SHPL),  a 147 MW hydropower project in Azad Jammu and Kashmir, secured a crucial victory in its tariff dispute with the National Transmission and Dispatch Company (NTDC). As reported in the press, the recent award given in the London Court of International Arbitration (LCIA) arbitration proceedings confirmed the applicability of the contractual tariff under the Power Purchase Agreement (PPA) between SHPL and NTDC and awarded damages to SHPL.

The dispute arose when NTDC refused to adhere to the agreed-upon tariff following a one-time adjustment determination by the National Electric Power Regulatory Authority (NEPRA) at the commercial operation stage. In response, SHPL initiated arbitration proceedings under the LCIA rules.

RIAA Barker Gillette acted as Pakistan law counsel, working closely with the English law firm representing SHPL in the arbitration. Our team, led by Pakistan Partner Nadir Altaf and assisted by Senior Associate Fahim Khan, provided crucial advice on various aspects of Pakistani law throughout the proceedings. The dispute involved complex legal questions, including the arbitrator’s jurisdiction, NEPRA’s statutory role in tariff determination, and regulatory risk allocation under the PPA.

Independent expert witnesses, retired Supreme Court Justice Faisal Arab for SHPL and former Chief Justice Jawad S. Khwaja for NTDC, also provided evidence on Pakistan law during the arbitration proceedings.

The award was a significant victory for SHPL, as it confirmed the tariff under the PPA and awarded damages. It also addresses the increasing regulatory interference in the power sector, often conflicting with contractual promises made by the Government of Pakistan (GOP) and related entities.

“This landmark victory for Star Hydro Power Limited sets a precedent for upholding the sanctity of contracts in the face of regulatory challenges,” commented Nadir Altaf, Partner at RIAA Barker Gillette. “We are proud to have played a key role in securing this favorable outcome for our client, an international investor in Pakistan’s power sector.”

The arbitral award demonstrates the importance of international arbitration in resolving disputes arising from conflicts between regulatory actions and contractual obligations. It also highlights the need for clear and consistent regulatory frameworks to minimize such disputes and protect investments in Pakistan’s power sector.

Don’t hesitate to contact Nadir Altaf for more information on our capabilities in assisting with disputes involving Pakistan’s power sector.

This article is not legal advice; it provides information of general interest about current legal issues.

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RIAA Barker Gillette is Pakistan’s premier law firm, with an on-the-ground presence in four major cities in Pakistan: Karachi, Islamabad, Lahore, and Peshawar, and affiliated offices in Dubai (DIFC) and London.

The firm practices in all areas of corporate, commercial and dispute resolution law. Leading international legal directories consistently recognize the firm as a top-tier law firm in Pakistan.

RIAA Barker Gillette is the exclusive member firm in Pakistan for Lex Mundi, the world’s leading network of independent law firms with in-depth experience in over 125 countries worldwide.  

Successful defence of SIAC award against invalidity, incapacity and public policy challenges

The Lahore High Court recently recognized a foreign arbitral award favouring Cargill International Trading Pte. Ltd., rejecting arguments by the award debtor, BBJ Steel Limited, that the signatory lacked authority. The RIAA Barker Gillette team, led by Mayhar Kazi, successfully argued for the recognition and enforcement of the award.

The dispute arose from a sales contract between Cargill and BBJ Steel for the steel coils supply. When BBJ Steel failed to establish the requisite letter of credit, Cargill terminated the contract and commenced arbitration proceedings before the Singapore International Arbitration Centre (SIAC). We assisted with Pakistan law submissions in the capacity and corporate authority arbitration. The sole arbitrator rendered an award in Cargill’s favour.

In the enforcement proceedings brought under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, BBJ Steel argued that the employee who signed the contract lacked authority from its board of directors, invoking the invalidity and incapacity defences under Article V(1)(a) and the public policy defence under Article V(2)(b) of the New York Convention. Denial of the signatory’s authority is a common defence in Pakistani enforcement proceedings.

The Court examined the issue of signatory authority, noting its importance in determining whether BBJ Steel agreed to the arbitrator’s jurisdiction. Importantly, the Court held that while an arbitrator’s decision on jurisdiction generally binds the parties, a party resisting enforcement has the right to have the enforcing court determine this issue. Relying on the UK Supreme Court’s decision in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan  [2010] UKSC 46, the Court affirmed that under the New York Convention, even if a party can no longer challenge the arbitrator’s jurisdiction at the arbitral seat, it can still do so before the enforcing court.

In a nuanced and well-reasoned judgment, the Lahore High Court upheld the award, even though it disagreed with the arbitrator’s “flimsy” reasoning that BBJ Steel’s signatory had implied or ostensible authority. The Court held that the invalidity defence under Article V(1)(a) must be established under the law governing the arbitration agreement, which the arbitrator had determined was Singapore law in this case. The Court upheld BBJ Steel’s right to challenge the arbitrator’s jurisdiction before the enforcing court but found it failed to make out the invalidity defence on the facts. The Court also rejected the public policy defence, noting its narrow scope.

“This judgment is a landmark decision that will boost confidence in Pakistan’s arbitration framework,” said Mayhar Kazi, the lead partner on the case. “It sends a strong signal that Pakistani courts will not lightly interfere with foreign awards on technical grounds.”

The case is notable for its nuanced treatment of the signatory authority issue in the context of the New York Convention defences. By focusing on the law governing the arbitration agreement, the judgment promotes consistency with international standards and enhances Pakistan’s reputation as an arbitration-friendly jurisdiction. It shows the courts’ pro-arbitration approach and reluctance to reopen the merits of awards. Parties seeking to enforce foreign awards in Pakistan can take comfort from this decision.

For expert guidance on cross-border commercial disputes, please contact Mayhar Kazi.

This article is not legal advice; it provides information of general interest about current legal issues.

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RIAA Barker Gillette is Pakistan’s premier law firm, with an on-the-ground presence in four major cities in Pakistan: Karachi, Islamabad, Lahore, and Peshawar, and affiliated offices in Dubai (DIFC) and London.

The firm practices in all areas of corporate, commercial and dispute resolution law. Leading international legal directories consistently recognize the firm as a top-tier law firm in Pakistan.

RIAA Barker Gillette is the exclusive member firm in Pakistan for Lex Mundi, the world’s leading network of independent law firms with in-depth experience in over 125 countries worldwide.