SECTION P - FOREIGN/CROSS-BORDER ELEMENTS

P1. Claims of foreign creditors:

(a) In relation to each type of insolvency procedure available in the legal system of this country, to what extent are the claims of foreign creditors recognised in the context of administration of that procedure?

The insolvency procedures under the Companies Ordinance do not differentiate been local and foreign creditors, and the claims of foreign creditors are recognised in Pakistan. However, actual payment to foreign creditors will depend upon the exchange control regulations of Pakistan and as to whether any applicable permissions for obtaining of loans from foreign lenders were obtained. Furthermore, under the laws of Pakistan, State Bank of Pakistan's permission is required for execution of a decree obtained by a foreigner. This permission should be forthcoming in normal course.

(b) What principles or rules apply to the recognition and admission of claims by foreign creditors? (for example)

(i) Are claims by foreign creditors subject to particular rules in relation to priority of payment?

No - please see our reply at P1(a) above.

(ii) Do foreign creditors have to satisfy special or additional requirements in order for their claims to be admitted?) No - please see our reply at P1 (a) above.

(c) What law is applied to establish the validity of foreign claims?

The governing law agreed upon in the agreement under which the debt arose or if none is stated, Pakistan law, being the law of the country closest connected with the debt.

P2. Jurisdiction over foreign assets :

(a) To what extent does the insolvency law of this country claim jurisdiction over assets of a corporate debtor situated abroad?

Under the insolvency laws of Pakistan, a claim can be asserted over the assets in Pakistan of a corporate debtor situated abroad.

P3. Foreign insolvency procedures :

(a) To what extent do the rules of private international law of the legal system of this country recognise insolvency procedures commenced in foreign jurisdictions?

The Supreme Court of Pakistan has held that in Pakistan every law should be so interpreted and applied, so far as the language admits, as not to be inconsistent with the comity of nations or with the established rules of international law. Therefore, the insolvency procedures initiated outside Pakistan should be recognised in Pakistan. However, the liquidator or receiver appointed outside Pakistan may be required to institute legal action in Pakistan for recovery or for enforcement of security.

(b) Under what circumstances, if any, may orders of judgements resulting from foreign insolvency procedures or administations be recognized or enforced in the legal system of this country?

Any foreign judgement or order including a judgement or order resulting from foreing insolvency proceedings may be recognised in one of two ways under the CPC: (a) if the judgement or order is a money decree passed by a court in a state which is a reciprocal territory notified as such by Pakistan, then the judgement or order can be directly enforced as a decree or (b) in all other cases through proceedings filed in Pakistan on the basis of the judgement or order, which judgement or order will be deemed to be conclusive unless the defending party can show that the order or judgement was not pronounced by a court of competent jurisidction; or not given on the merits of the case; or where it appears on the face of the proceedings to be founded on an incorrect view of international law; or a refusal to recognise the law of Pakistan; or the proceedings in which the judgement was obtained are opposed to natural justice or has been obtained by fraud.

P4. Foreign insolvency administrators :

(a) What recognition is accorded in the legal system of this country to the status and capacity of insolvency administrators (for example trustees, liquidators, receivers) appointed in foreign insolvency procedures?

In view of the decision of the Supreme Court of Pakistan above mentioned, Pakistani Courts would grant recognition to the trustees, liquidators, and receivers.

(b) To what extent are foreign insolvency administrators entitled to claim, take control of, and realise or deal with property of the corporate debtor situated within the jurisdiction of the legal system of this country?

Foreign insolvency administrators would be, as mentioned above, recognised but will be required to institute legal proceedings for taking control of, realising or dealing with property of corporate debtors situated in Pakistan.

P5. Foreign security holders :

(a) To what extent does the legal system of this country recognise the validity of rights of security asserted by foreign creditors over assets of the corporate debtor?

To the same extent as of any local creditor. However, as mentioned above, remittance from Pakistan will be subject to the exchange control regulations of Pakistan. Furthermore, execution of any decree obtained by any foreign creditor will require the approval of the State Bank of Pakistan which should ordinarily be forthcoming.

(b) Are any special rules applicable to determine the validity, extent and ranking of such security rights? Subject to our answer at P1 (a) and P5(a) above, no special rules apply.

P6. International conventions :

(a) To which international conventions having some application in insolvency matters is this country a party?

To our knowledge, Pakistan may not be a party to any convention having application in insolvency matters. To our knowledge, no such convention has been made part of any law in Pakistan.

(b) When were these conventions entered into, and what other states are parties?

See (a) above.

(c) What observations can be made about the practical results achieved under these international instruments?

See (a) above.

P7. Cross-border insolvency :

(a) Are there any other particular issues or special problems in the field of cross-border insolvency, not included in the answers supplied above, which have presented themselves before the courts of the legal system of this country?

On the basis of our general knowledge of the situation obtaining in Pakistan, we would say that no particular issues could have arisen. Cases of insolvency and especially cross boder insolvency are a rarety in Pakistan. Therefore, it would be difficult to find a precedent.

P8. UNCITRAL Model Law on Cross-Border Insolvency

(a) Is the government of this country aware of the UNCITRAL model law on cross-border insolvency, appointed by the United Nations in June 1997?

Our inquiries have revealed that the Ministry of Law and the Ministry of Foreign Affairs are aware of this model law. However, we have not seen any public acknowledgment of this fact.

(b) If so, are you aware of whether the government has any proposals to enact the terms of the model law?

Our inquiries could not establish as to whether the Government of Pakistan has any proposals to enact the terms of the model law.