ABS & Co.

The Punjab Finance Act, 2025, presented to the Provincial Assembly of Punjab on June 16, 2025, has brought transformative changes to the sales tax regime under the Punjab Sales Tax on Services Act, 2012 (the “Act”). The most significant structural amendment is the shift from a positive list-based taxation model to a negative list regime.Under the pre-2025 structure, only those services explicitly listed in the Second Schedule of the Act were considered “taxable services”. This meant that non-listed services – including commercial property rental – were outside the purview of sales tax. Residential rentals for personal dwellings were already explicitly exempt.This article aims to present a comprehensive legal and practical analysis of how the Punjab sales tax on services is now applicable on rental of commercial (non-residential) properties.1. Legal Framework: Charging Provisions and Taxable ServicesThe original charging mechanism under Section 3 of the Act was based on a positive list model, whereby sales tax was levied only on those services explicitly specified in the Second Schedule to the Act. Section 3(1) used to state:Taxable service.- (1) Subject to such exclusion as mentioned in Second Schedule, a taxable service is a service listed in Second Schedule, which is provided by a person from his office or place of business in the Punjab in the course of an economic activity, including the commencement or termination of the activity.As the rental of non-residential (commercial) property was not included in the Second Schedule, such rentals were not subject to Punjab Sales Tax under the previous legal regime.However, under the amended Section 3, all services provided, rendered, received, or consumed in Punjab are now subject to sales tax by default, unless specifically mentioned in the new First Schedule as tax-free services. In other words, the burden of proof has shifted: rather than proving a service is listed to make it taxable, a service is now presumed taxable unless it is explicitly exempted.The new Section 3 states:Taxable service.– (1) Subject to [section 3A, all services are taxable under this Act, including but not limited to the services] listed in Second Schedule, which is provided by a person from his office or place of business in the Punjab in the course of an economic activity, including the commencement or termination of the activity.To operationalize this framework, the Act introduces Section 3A, which defines tax-free services as those listed in the newly substituted First Schedule. Among the listed exemptions is the “renting of personal dwellings for residential use” (Serial Number 19 of the First Schedule), thereby continuing the exemption for residential leases. However, there is no mention of non-residential or commercial rentals in the First Schedule. This omission seems intentional and has the legal effect of making rental income from commercial properties subject to Punjab Sales Tax under the revised regime.Therefore, as a consequence of the move to a negative list, all services that were previously outside the tax net are now brought within scope, unless explicitly declared tax-free. As commercial property rental services are not included among the exemptions, they are now presumed taxable under Section 3, with no need for specific inclusion in a schedule, thereby significantly expanding the tax base.2. Classification and Rate of Tax on Commercial RentalsWith the adoption of the negative list regime, the classification and applicable rates of sales tax on services have also been reorganized. The previously used Second Schedule, which listed taxable services along with their respective rates, has now been replaced with a restructured Second Schedule divided into three parts:Part I: Services subject to the standard rate of sales tax/other rates;Part II: Services subject to fixed tax rates; andPart III: Services taxed at reduced rates.Under this revised structure, the rent of commercial (non-residential) properties is not included in the First Schedule (which contains tax-free services) and therefore falls within the category of taxable services under Section 3 of the Act. Since commercial property rental is not assigned a reduced or fixed rate in Part II or Part III of the Second Schedule, it is subject to the standard rate of 16%.In practice, this means that rental income from the lease or license of shops, offices, warehouses, factories, malls, commercial buildings, and similar non-residential premises is now subject to Punjab sales tax on services at 16%, effective from the date the amended law comes into force. It is the responsibility of the service provider – in this case, the landlord or property manager – to charge, collect, and deposit the tax with the Punjab Revenue Authority. Section 11 of the Act states:11.Person liable to pay tax.–Where a service is taxable by virtue of sub-section (1) of section 3, the liability to pay the tax shall be on the registered person providing the service.Where a service is taxable by virtue of sub-section (2) of section 3, the liability to pay the tax shall be on the person receiving the service.The Authority may, by notification in the official Gazette, specify the service or services in respect of which the liability to pay tax shall be on any person, other than the person providing the taxable service, or the person receiving the taxable service.Nothing contained in this section shall prevent the collection of tax from a different person if that person is made separately or jointly or severally liable for the tax under section 19.This means that, in the case of taxable commercial property rentals, the landlord or property manager – as the registered service provider – is primarily responsible for charging, collecting, and paying the tax to the Punjab Revenue Authority. This stands in contrast to situations involving imported services or notified services under reverse charge, which fall under Section 11(2), where the recipient bears the liability.Further, Section 11A reinforces this framework by introducing the concept of joint and several liability. It provides that if the registered service recipient (i.e., the tenant) fails to pay the invoiced tax within 180 days and the service provider also fails to deposit the tax within the prescribed due date, both parties become jointly and severally liable for the outstanding tax. This provision is designed to ensure compliance and prevent tax evasion through delayed invoicing or mutual inaction. The section states:11A. Liability of a registered person.– Subject to the provisions of subsection (1) of section 11, where a registered person receiving the taxable service fails to make payment of the tax to a service provider within one hundred and eighty days from the date of the tax invoice and such service provider has also not made the payment thereof within the prescribed due date, the person providing and the person receiving taxable service shall, jointly and severally, be liable for payment of such tax.Thus, the combined effect of these provisions is that the burden of compliance squarely rests on the service provider, unless specific withholding or reverse charge notifications apply. For commercial landlords in Punjab, this creates a statutory obligation to ensure that all rental invoices for non-residential properties include 16% sales tax on services and that the amount is duly deposited with the PRA in accordance with the Act and applicable rules.3. Treatment of Unregistered Service Providers and Withholding RegimeWhile the liability to pay sales tax on services on commercial rentals ordinarily falls on the registered service provider under Section 11(1) of the Act, the law also explicitly addresses scenarios where the service provider is not registered with the Punjab Revenue Authority but is nevertheless providing taxable services. In such cases, the tax liability still arises – because the provision of a taxable service, not registration status, triggers the chargeability under Section 3.Under Section 25 of the Act, any person who provides a taxable service is legally required to register with PRA. The section reads:25. Registration.– A person shall register under this Act, who–(a) provides any taxable service from his office or place of business in the Punjab; or(b) is otherwise required to be registered under any of the provisions of the Act or the rules; or(c) fulfills any other criteria or requirements which the Authority may prescribe under sub-section (2).The registration under this section will be regulated in such manner and subject to such conditions and restrictions as the Authority may, by notification in the official Gazette, prescribe.A person who receives a service, which is a taxable service by virtue of sub-section (2) of section 3, and is not a registered person shall be deemed to be a registered person for the purposes of the tax period in which–(a) such person receives the service;(b) an invoice for the value of the service is issued or sent to or received by the person; or(c) consideration for the service is paid by the person – whichever is earlier, and all the provisions of this Act and the rules shall be applicable to such person for that particular tax period and any matters relating to, arising out of, or concerning that tax period as if that person had provided the service.The Authority may publish on its website a list of persons registered under this Act.It shall be reasonable for a person to believe that another person is registered under this Act if that other person is on the list placed on the website of the Authority.Thus, a person renting out commercial (non-residential) property is obligated to register with PRA, charge and collect sales tax at the applicable rate (currently 16%), and file periodic returns. Failure to register constitutes non-compliance and triggers a series of administrative and penal consequences under the Act.It is worth noting that, although, the primary liability to pay Punjab Sales Tax on commercial rentals lies with the registered service provider, as per Section 11(1) of the Act, the law also provides for mechanisms to ensure tax enforcement when the service provider is unregistered or when PRA considers it appropriate to assign the tax burden differently. These mechanisms are set out in Section 14 (Special procedure and tax withholding provisions) and Section 14A (Special procedure for collection of tax, etc.), which empower the Punjab Revenue Authority to appoint other persons – including recipients or even third parties – to withhold, collect, and deposit sales tax on taxable services.Section 14(1) authorizes the PRA to prescribe, through notification in the official Gazette, special procedures governing registration, invoicing, billing, return filing, and payment for any service or class of services. This gives PRA flexibility to tailor compliance mechanisms based on industry or service-specific risk assessments. It states:14. Special procedure and tax withholding provisions. –(1)  Notwithstanding anything contained in this Act, the Authority may, by notification in the official Gazette, prescribe a special procedure for the payment of tax, registration, book keeping, invoicing or billing requirements, returns and other related matters in respect of any service or class of services, as may be specified.Section 14(2) is particularly important in the context of commercial rentals, especially when the landlord or service provider is not registered. It states:(2)  Notwithstanding other provisions of this Act, the Authority may require any person or class of persons whether registered or not for the purpose of this Act to withhold full or part of the tax charged from such person or class of persons on the provision of any taxable service or class of taxable services and to deposit the tax so withheld, with the Government within such time and in such manner as it may, by notification in the official Gazette, specify.This effectively enables PRA to designate tenants or service recipients as withholding agents, requiring them to withhold the applicable tax from rent paid to unregistered landlords and deposit it directly with the government. The term “charged” used in this subsection means and includes the tax liable to be charged under this Act or the rules made thereunder.Further, Section 14(3) makes it clear that any person required to withhold tax but failing to do so (or to deposit it) becomes personally liable for the tax:(3)  Where a person or class of persons is required to withhold or deduct full or part of the tax on the provision of any taxable service or class of taxable services and either fails to withhold or deduct the tax or having withheld or deducted the tax, fails to deposit the tax in the Government treasury, such person or class of persons shall be personally liable to pay the amount of tax to the Government in the prescribed manner.This provision is applied in practice when commercial tenants (especially corporate entities) pay rent to unregistered landlords. If the tenant fails to withhold and deposit the tax, they can be directly assessed and penalized by PRA.Complementing this is Section 14A, which provides PRA even broader authority. It permits PRA to require third parties – not even directly involved in the service transaction – to collect and deposit tax. Section 14A (1) states:14A. Special procedure for collection of tax, etc.– (1) Notwithstanding anything contained in this Act, the Authority may require any other person or class of persons, not necessarily being a service provider or a service recipient in a particular transaction, to collect full or part of the tax charged from another person or class of persons on the provision of any taxable service or class of taxable services and to deposit the tax so collected, in the Government treasury within such time and in such manner as the Authority may, by notification in the official Gazette, specify.Section 14A (3) also creates personal liability for any third party who fails to collect or deposit such tax. It states:(3)   Where a person or class of persons is required to collect full or part of the tax on the provision of any taxable service or class of taxable services and either fails to collect the tax or having collected the tax, fails to deposit the tax in the Government treasury, such person or class of persons shall be personally liable to pay the amount of tax to the Government in the prescribed manner.In essence, registration with PRA is not merely procedural – it is central to legal compliance. A failure to register does not shield a landlord from tax liability. Nor does it release the recipient of the service from responsibility, especially if they fall within the withholding regime. The PRA may, at its discretion, pursue enforcement, impose penalties under Section 48 of the Act.Therefore, all commercial property owners, whether individuals or corporate entities, who lease out non-residential premises in Punjab are strongly advised to register with PRA, issue compliant tax invoices, and fulfill all obligations under the Act to avoid exposure to legal and financial risks.ConclusionThe reforms introduced through the Punjab Finance Act 2025 represent a landmark shift in the taxation of services in Punjab, transitioning from a positive list-based model to a negative list regime. This restructuring, implemented through amendments to the Act, has significantly broadened the scope of taxable services, with direct implications for the rental of commercial (non-residential) properties.Under the revised legal framework, all services are presumed to be taxable unless expressly exempted under the newly substituted First Schedule. While the renting of personal dwellings for residential use is explicitly listed as a tax-free service, commercial property rentals are not, and therefore now fall within the category of taxable services under Section 3, read with the new Second Schedule. The standard rate of tax applicable to such services remains 16%.Having said that, it is likely that this imposition will attract a constitutional challenge as there is essentially no provision of a service. It is unclear if under the federal scheme of the Constitution, a province can impose a tax on mere provision of rental space without providing any corresponding service such as building management and common areas maintenance. This issue has already been decided in Sindh in Young’s Pvt. Ltd v. Province of Sindh and others (2019 PTD 389) which was also upheld by the Supreme Court of Pakistan.However, till such time that the law is not set aside, residents in Punjab must comply with the provisions of the Punjab Sales Tax on Services Act, as amended in 2025.

ABS & Co has successfully advised on a PKR 100 million Shariah-compliant Murabaha financing facility for the procurement of raw materials. The transaction was meticulously structured as an asset-backed Islamic working capital facility, tailored to meet specific commercial requirements while ensuring full adherence to Islamic finance principles.The firm’s role included comprehensive advisory on the Murabaha structure, transaction sequencing, and Shariah-compliant risk allocation. ABS & Co provided critical legal oversight on the agency arrangements for the purchase of goods, the transfer of title and risk, and the establishment of pricing mechanics and payment obligations. Furthermore, the firm advised on the legal enforceability of the Murabaha Facility Agreement, associated declarations, security documents, and promissory notes.Throughout the process, ABS & Co supported the client in the drafting, review, and finalization of the full suite of Murabaha documentation. This ensured complete alignment with Pakistani law and commercial banking expectations. The successful implementation of this PKR 100 million facility underscores the firm’s specialized capability in providing bespoke Shariah-compliant financing structures for corporate clients in the industrial sector.This matter was led by Partner Bakhtawar Bilal Soofi.

ABS & Co advised the Ravi Urban Development Authority in connection with the structuring and drafting of two hybrid inventory and sale-proceeds sharing joint venture arrangements entered into with Green Burg (Private) Limited and Greenland City Developer (Private) Limited for the implementation of large-scale urban development projects within RUDA’s notified jurisdiction. The transactions form part of RUDA’s broader strategy to implement master-planned housing schemes through structured private-sector participation under the RUDA Joint Venture Regulations, 2025.The mandate involved structuring the revenue-sharing development frameworks under which the private development partners were responsible for procuring and transferring the project land in favour of RUDA as a condition precedent to commencement of the projects.A central commercial feature of both transactions was the adoption of a controlled revenue-sharing structure supported through escrow-based collection mechanisms, ensuring transparency of project cashflows and alignment between development progress and entitlement of the respective parties. The agreements were designed to preserve RUDA’s institutional control over planning approvals, development, infrastructure provisioning, and issuance of allotment instruments to end purchasers.The transactions incorporated phased land transfer obligations together with a hybrid inventory and sale-proceeds sharing structure designed to provide commercial flexibility to the parties while ensuring that implementation progressed against agreed timelines and preserving RUDA’s planning control and statutory position. From a structuring perspective, the joint venture arrangements also incorporated contractual safeguards addressing implementation risk, discipline in inventory and sale-proceeds distribution, and structured termination consequences in the event of non-fulfilment of key development obligations, ensuring continuity of project and alignment with the applicable regulatory framework.ABS & Co advised RUDA on the structuring and drafting of both joint venture arrangements, with particular focus on aligning the commercial framework with RUDA’s statutory mandate and applicable planning controls. The matter was led by Partner Bakhtawar Bilal Soofi.

This second article in a three-part series, produced in collaboration with Penningtons Manches Cooper, examines the enforceability of take-or-pay clauses in Pakistan’s energy sector. In light of rising energy costs, declining demand for grid-based electricity, and the Government’s decision to prematurely terminate several Power Purchase Agreements (PPAs), it explores how Pakistani courts, including the Supreme Court, have addressed disputes arising from such clauses. By analyzing recent case law, including the landmark Orient Power decision, it highlights judicial trends that shape contractual risk allocation, investor protection, and the long-term sustainability of energy projects in a rapidly evolving market.Earlier this year, the Government of Pakistan announced the premature termination of Power Purchase Agreements (PPAs) with five independent power producers (IPPs), a move driven by soaring energy prices, which are amongst the highest in the region. With many households transitioning to solar energy, demand for grid-based energy has plummeted, resulting in a supply glut. This second article in a three-part series, authored in collaboration with the international disputes team at Penningtons Manches Cooper, examines the nature of ‘Take or Pay’ clauses in the context of recent judicial decisions.What is a take-or-pay clause?Under ‘take-or-pay’ contracts with many IPPs, the Government of Pakistan guaranteed to pay ‘capacity charges’ irrespective of whether it purchased energy units.Take-or-pay provisions are a common practice in long-term energy and infrastructure agreements, requiring the buyer to either take delivery of a specified quantity of a commodity (such as electricity or gas) or, alternatively, pay for the agreed-upon amount regardless of actual consumption. The purpose is to provide revenue certainty to the supplier and ensure the financial viability of large-scale energy projects, which require substantial upfront investment.Take-or-Pay provisions were introduced in Pakistan to attract private investment in the energy sector in the 1990s, particularly under the Power Policy 1994 and the Power Policy 1998, initiated in the 1990s. Given Pakistan’s history of energy shortages and inconsistent demand patterns, these provisions were designed to mitigate risks for investors and lenders by guaranteeing a minimum revenue stream. The objective was to encourage private sector participation in power generation and ensure the availability of sufficient energy capacity, even when demand fluctuated. However, this structure, while initially intended to attract investment and ensure energy security, has now become a significant financial burden. This is owing to  declining demand for grid-based electricity due to the widespread adoption of solar energy, coupled with the rigid take-or-pay commitments to IPPs under PPAs.While the termination of these IPPs appears to have happened with mutual consent, concerns have been raised about the Government’s broader approach to renegotiating contracts with other IPPs. In a letter to the Government of Pakistan on 18 February 2025, eight Development Finance Institutions (“DFIs“)—which have financed $2.7 billion in power projects over the past 25 years—criticised the Government’s handling of wind and solar contract revisions.[1] The lenders, including the World Bank’s International Finance Corporation, the Asian Development Bank, the Islamic Development Bank, and four European development finance institutions, cautioned that pressuring IPPs into accepting revised terms could undermine investor confidence. Their warning suggests that IPPs may not be renegotiating on an equal footing, and also raises questions about the circumstances in which these contracts have been terminated.This is not the first time that take-or-pay clauses have come under scrutiny. In fact, the enforceability of take-or-pay clauses has been litigated previously under Pakistan law. In a recent dispute between Orient Power Company Limited and Sui Northern Gas Pipelines Limited, the Supreme Court of Pakistan upheld a foreign arbitral award and held that take-or-pay clauses are enforceable under Pakistan law.[2]Enforceability of take-or-pay clauses in Pakistan: The Orient Power caseIn Orient Power Company (Private) Limited vs Sui Northern Gas Pipelines Limited, Sui Northern Gas Pipelines Limited (“SNGPL”), a government-owned gas supply company, entered into a Gas Supply Agreement (“GSA”)  with Orient Power Company Limited, a private IPP generating and selling electricity to the Government. In October 2016, the parties encountered a dispute regarding Orient Power’s responsibility to take or pay the gas supplied by SNGPL. This obligation was outlined in Clause 3.6 of the GSA (the “Take or Pay Clause”):“Section 3.6: Take or Pay/Make-Up Gas3.6(a): From and after the Commercial Operations Date and during a Month in the Firm Delivery Period, the Buyer shall take and if not taken pay for a minimum quantity of gas (the “take or pay Quantity”) equal to fifty percent (50%) of the Daily Contract Quantity multiplied by the difference between the number of days in that Month (or portion thereof) and (i) the number of days (or fractions thereof) of Force Majeure Events declared by the Seller or the Buyer in that month, (ii) the number of days (or fractions thereof) of non-delivery of Gas by the Seller in that Month for any reason, including a breach or default by the Seller or maintenance undertaken by the Seller pursuant to Section 12.1, and (iii) the number of days of Scheduled Outages in that Month notified to the Seller pursuant to Section 12.2.” “Section 3.6(c): Except for the Gas taken or paid by the Buyer pursuant to Section 3.6(b) above, any Gas paid for by the Buyer pursuant to this Section 3.6(a) above during a Contract Year but not taken prior to the time of payment (“Make-Up Gas”) may be taken with payment by the Buyer of the difference between the Gas Price prevailing at the time the Make-Up Gas is taken by the Buyer and the Gas Price used to determine the payment for the Take or Pay Quantity, using the “first in, first out” method and any increase in taxes on the sale and purchase of Gas applicable to Gas sales hereunder, during the Firm Delivery Period of the immediately following one (1) Contract Year of the Term, provided that the Buyer shall have first taken and paid for a quantity equal to but not less than the Take or Pay Quantity in the applicable Contract Year and provided further that in no event shall the Seller’s obligation to deliver the Gas hereunder on any Day exceed the Daily Contract Quantity. At the end of the Gas Allocation, the Buyer shall be entitled to the Make-Up Gas during the immediately following twelve (12) Months on as-available basis.”The dispute was referred to arbitration at the London Court of International Arbitration (the “LCIA”), which rendered Interim and Final Awards in 2017 (the “Awards”). The Arbitrator upheld the take-or-pay clause, rejected Orient Power’s jurisdictional challenge, and awarded SNGPL Rs. 104,133,296 in Late Payment Surcharge. Orient Power’s claim of Rs. 603,202,083 under six invoices was recognized, with 6% simple interest awarded from October 31, 2011, until payment.SNGPL sought, and was granted, recognition and enforcement of the Awards from the Lahore High Court under Section 11 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 (the “2011 Act”).Orient Power appealed the recognition and enforcement of the Awards. It argued that enforcing the take-or-pay clause led to unjust enrichment, violating Section 74 of the Contract Act, which allows an injured party to claim reasonable damages for loss incurred, limits the recovery to actual damages proven, and prohibits penal or excessive compensation. It claimed Clause 3.6 of the GSA was penal and that it was entitled to make-up gas beyond the March 2011 cut-off date. It was, therefore, argued that enforcing the take-or-pay clause was against the public policy of Pakistan. In response, SNGPL asserted that Clause 3.6(c) only allowed make-up gas until March 2011, which Orient Power failed to utilize.The court, relying on Amoco v Teesside Gas, dismissed Orient Power’s appeal and ruled that the take-or-pay clause was a standard contractual term, valid under Section 74, and that the terms of the GSA were negotiated and agreed upon by both parties, including the take-or-pay clause.Supreme Court of Pakistan’s ruling on the take-or-pay clauseOrient Power then appealed to the Supreme Court of Pakistan, which considered the application of Section 74 vis-à-vis the take-or-pay clause, along with the question of public policy.The Supreme Court interpreted Section 74 of the Contract Act and in this light, discussed the claim for unjust enrichment. The Court observed that for a claim of unjust enrichment to succeed, it must fulfil the following ingredients[3]:The plaintiff must prove that the defendant has become enriched by the receipt of a benefit;This enrichment is at the expense of the plaintiff;The enrichment and/or its retention is unjust (absence of “juristic reason”); andThe defendant can legally be compelled to compensate the plaintiff.Furthermore, it affirmed that “[u]njust enrichment occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else… The doctrine of unjust enrichment, therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of “unjust enrichment” arises where retention of a benefit is considered contrary to justice or against equity.”.[4]The court maintained that “for a claim of unjust enrichment to succeed, there must be enrichment at the expense of the plaintiff and this enrichment must be unjust in such a way that there should be no lawful justification for the same.”. [5]The Supreme Court held that there was a valid ‘juristic reason’ for SNGPL’s enrichment in this case, as SNPGL was entitled to forfeit the Make-Up Gas amount paid as the cut-off date had expired. While it may appear, prima facie, that SNGPL was receiving payment for the same gas twice, the situation stemmed from Orient Power’s failure to take the gas. Orient Power was entitled to receive the make-up gas, under the take-or-pay clause, until the cut-off date only. Therefore, Orient Power’s claim that SNGPL had been unjustly enriched by the gas which Orient Power had paid for but not received  under the take-or-pay clause was not justified. The Supreme Court assessed the take-or-pay clause in light of Section 74 and determined that one of the four necessary conditions for a “claim of unjust enrichment was not satisfied”, thereby ruling that the case on this issue was not established. Thus, the take-or-pay clause was found not to be a penal clause. The public policy ground was important for the reason that it is one of the few grounds available under Article V of the New York Convention, under which foreign arbitral awards may be challenged.Implications of the Supreme Court’s ruling in Orient Power for investorsThe High Court used freedom of contract as its basis for the ruling noting that “the policy of the law is to uphold freedom to contract.”[6]. The Supreme Court’s approach was different where the Court relied upon the jurisprudence of the claim for unjust enrichment and used non-fulfilment of an essential ingredient, i.e. the absence of juristic reasons for the enrichment, as its basis for upholding the take-or-pay clause in the GSA.This may imply that a take-or-pay provision would be strictly interpreted within the context of the agreement, leaving room for the claim of unjust enrichment to be successful, in the absence of juristic reason to forfeit money. The interpretation depends upon the specific facts and circumstances of this case to determine whether, and if so, the take-or-pay Clause offends against Section 74 of the Contract Act.Accordingly, while a thorough understanding of Pakistan’s legal framework governing take-or-pay clauses is essential for structuring robust supply contracts, it is equally critical to consider the enforceability of contractual rights through arbitration mechanisms. This is particularly relevant in cross-border energy transactions, where the recognition and enforcement of foreign arbitral awards can be decisive in safeguarding investor interests.This article was co-authored by Kamran Rehman and Richard Raban-Williams of Penningtons Manches Cooper.References[1] A copy of this letter is not available, however, this has been reported by print and electronic media at the following link: https://www.dawn.com/news/1894232.[2] Orient Power Company (Private) Limited vs Sui Northern Gas Pipelines Limited, reported as 2021 SCMR 1728.[3] Arabian Sea Enterprises  v. Abid Amin Bhatti (PLD 2013 Sindh 290)[4] Sui Northern Gas Pipelines v. DCIR (2014 PTD 1939)[5] 2021 SCMR 1728 / 2021 CLD 1069 SC – Orient Power Company (Pvt) Ltd. Vs Sui Northern Gas Pipelines Limited, para 96.[6] Esso Petroleum Co. v. Harper’s Garage (Stourport) Ltd., [1967] 1 All E.R. 699 at 712 (H.L.).

As Pakistan moves toward a comprehensive digital economy, the legal framework for data privacy is undergoing a seismic shift. For organizations handling citizen data, the transition from voluntary best practices to mandatory legal obligations is now a critical business imperative. This note outlines the salient features of the pending Personal Data Protection Bill (“PDPB”), 2023 (latest published draft, May 2023), and the “Mandatory Data Protection Measures for Organizations Handling PII” issued in August 2025 by the National Cyber Emergency Response Team (“PKCERT”) (the “PKCERT Advisory”).For any entity – whether a private company, a firm, or a government body termed as a public service provider – that has the legal authority to decide why and how personal data is collected and used (acting as a Data Controller), the transition will require a fundamental shift in operations. Similarly, service providers who handle data solely on behalf of another organization (acting as Data Processors) will soon face independent statutory liabilities and compliance obligations.While the PKCERT Advisory primarily refers to “entities” and “organizations,” it aligns with these definitions by imposing mandatory security measures on any entity – public or private – that collects, processes, or transmits Personally Identifiable Information (“PII”). This includes third-party and outsourced service providers, who typically function as data processors.The Personal Data Protection Bill (PDPB), 2023: Future ObligationsIf enacted, the Personal Data Protection Bill, 2023 will comprehensively regulate the collection and processing of personal data – covering activities from collection and storage to use, sharing, and deletion – while recognising informational privacy as a fundamental right.1. ApplicabilityFor companies, the Personal Data Protection Bill, 2023 has a broad territorial reach. It applies to any organisation that is established, registered, or operating in Pakistan and processes personal data. It also covers:Foreign-incorporated entities that offer goods or services to persons in Pakistan or otherwise carry out activities directed at Pakistan (including profiling individuals in Pakistan), even where the processing is carried out digitally or from outside the country.Organisations with no physical presence in Pakistan where their processing activities are subject to Pakistani law under applicable contractual or international law arrangements (for example, where data or infrastructure is located in Pakistan).Any entity that collects or processes personal data of individuals who are physically present in Pakistan at the time of collection (including foreign nationals temporarily in Pakistan), subject to consistency with the privacy laws of the entity’s home jurisdiction.2. Key Legal Definitions (Section 2)Personal Data: Information that identifies a natural person, excluding anonymized or pseudonymized data.Data Subject (Section 2(j)): A Data Subject is any natural person – whether a Pakistani citizen or a foreign national – whose personal information is collected, used, or stored by an organization.Profiling (Section 2(dd)): Profiling is the automated use of personal data to evaluate or predict a person’s behavior, economic status, health, or social preferences.Sensitive Personal Data (Section 2(kk)): Specifically includes financial records, health data, CNIC or passport numbers, biometric/genetic data, religious beliefs, criminal records, political affiliations, and ethnicity.Critical Personal Data (Section 2(g)): Data retained by public service providers, identified by sector regulators, or classified by the Commission as critical to national interest.3. Establishment of the NCPDP (Section 35)The Bill creates the National Commission for Personal Data Protection (NCPDP) (“Commission”), an autonomous body with powers to enforce the Act, issue regulations, and decide on complaints.4. Mandatory Registration & GovernanceAll data controllers and processors must register with the Commission. Organization Entities identified as “significant” must appoint a Data Protection Officer (DPO) as per Section 5(4).5. Strict Breach NotificationIn the event of a data breach, Data Controllers must notify the Commission and the affected individuals within 72 hours of becoming aware of the incident. Data Processors are similarly obligated to inform the Controller and the Commission immediately upon discovering a breach within their systems.6. Data Residency & Cross-Border Transfer (Sections 31-32)A critical compliance hurdle is the localization of Critical Personal Data – which includes data retained by Public Service Providers (entities handling personal data while working under the government). This data must only be processed on servers or digital infrastructure located within the territory of Pakistan. Commission may allow for other data can only be transferred abroad if the destination country offers an adequate legal regime or through approved binding contracts.7. Operationalizing Data Subject RightsYour internal systems must be capable of honoring citizen rights within statutory timelines:Right to Erasure (Section 26): You must delete a person’s records within 14 days if the data is no longer necessary or if consent is withdrawn.Right to Access (Section 16): You must confirm if data is being processed and provide a copy in an intelligible form within 30 days of a request.Right to Data Portability (Section 29): You must provide data in a machine-readable format so the subject can transmit it to another provider.8. Enforcement and PenaltiesThe PDPB 2023 introduces a tiered penalty structure to ensure compliance:General unlawful processing: Processing or disclosing personal data without lawful basis or required safeguards may attract fines up to USD 125,000, increasing to USD 250,000 for repeat violations.Sensitive personal data breaches: Unlawful handling of highly private data (e.g., financial, health, biometric, or identity data) may result in fines up to USD 500,000.Critical personal data breaches: Violations involving nationally sensitive or regulator-designated data, including localisation requirements, may incur fines up to USD 1,000,000.Revenue-Based Fines: For corporate entities, the Commission may impose fines up to 1% of their annual gross revenue in Pakistan or $200,000 USD, whichever is higher.Failure to comply or remedy: Non-compliance with Commission directions or failure to rectify violations may lead to fines up to USD 2,000,000, along with possible suspension or cancellation of registration.9. The PKCERT Advisory: Mandatory Security MeasuresWhile the Bill provides the legal framework, the PKCERT Advisory establishes the immediate technical and process-oriented mandates for organizations handling Personally Identifiable Information (PII).Mandatory Data Classification: Organizations must categorize all datasets into four sensitivity tiers: Public, Internal, Confidential, and Restricted. This prevents the vulnerability of “treating all records equally”.Encryption Standards: Organizations are required to are required to implement Encryption to scramble data and make it unreadable to unauthorized parties. You must secure PII “at rest” (stored on databases/hard drives) using AES-256 standards and “in transit” (moving across networks) using TLS 1.2+ protocols.Access Management & MFA: To prevent unauthorized access, you must enforce Multi-Factor Authentication (MFA) – a security process requiring two or more proofs of identity – for all administrative or privileged accounts.Identity & Access Management:Role-Based Access Control (RBAC): Access to the employee of the Organization must be granted based on the principle of “least privilege”.Access Management & MFA: To prevent unauthorized access, you must enforce Multi-Factor Authentication (MFA) – a security process requiring two or more proofs of identity – for all administrative or privileged accounts.Password Security: Plaintext storage is prohibited; passwords must be stored using salted hashing methods like bcrypt or Argon2.Operational Requirements:Data Minimization: Entities must only collect the minimum PII required for their specific business needs.Incident Response: Organizations must maintain and regularly rehearse a documented breach response plan, including protocols for communicating with PKCERT.Vendor Risk Management: Third-party providers handling PII must be audited and bound by strict contractual data protection obligations.10. Strategic RecommendationsIn light of these developments, we advise our clients to immediately initiate a Data Classification Audit. This strategic step resolves the critical vulnerability of treating all data records equally, which significantly increases exposure risk. By operationalizing the PKCERT sensitivity tiers – categorizing information as Public (for general disclosure), Internal (organizational use), Confidential (moderate harm if leaked), or Restricted (highly sensitive PII) – organizations can focus their highest security resources on their most sensitive assets.Crucially, this audit allows for the specific identification of data categories that carry the highest legal and financial risk. In particular, organizations can isolate datasets that are subject to heightened regulatory controls such as localization mandates, explicit consent thresholds, enhanced security safeguards, and breach-notification sensitivities. These include:datasets whose compromise could trigger national-interest or sector-regulatory implicationshighly private personal datasets whose misuse or disclosure would expose the organization to the highest penalty tiers under the forthcoming lawIdentifying these specific categories ensures they are processed in accordance with strict localization and explicit consent requirements, reducing the risk of statutory penalties and regulatory action. Classification results can also be applied to access controls, vendor arrangements, retention schedules, and breach-response procedures, so that the highest-risk data is consistently handled within strong governance frameworks.An effective audit also supports data minimization by highlighting outdated, duplicative, or unnecessary records for secure disposal. This reduces risk, improves data quality, and streamlines readiness for mandatory registration and oversight by the forthcoming Commission, as organizations can clearly demonstrate what personal data they hold, why it is held, where it is stored, and how it is protected.

This third article in a three-part series, prepared in collaboration with Penningtons Manches Cooper, focuses on the enforcement of foreign arbitral awards in Pakistan and the scope of the public policy exception. It traces the evolution of Pakistan’s arbitration framework following the enactment of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, examines the Supreme Court’s landmark clarification in Taisei Corporation vs. A.M. Construction Company, and highlights how recent jurisprudence has aligned Pakistan with international enforcement standards under the New York Convention. Against the backdrop of ongoing disputes in the energy sector and the termination of Power Purchase Agreements, the article also considers the implications for investors, particularly the role of Bilateral Investment Treaties in safeguarding cross-border energy investments.Pakistan became a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) in 2005, committing itself to recognizing and enforcing foreign arbitral awards in accordance with international standards. However, enforcement required domestic legislation, as the Arbitration (Protocol and Convention) Act, 1937, which was previously in force, did not align with the Convention’s requirements. To address this gap, Pakistan enacted the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (the “2011 Act”), which provides the necessary legal framework for enforcing foreign arbitral awards. The 2011 Act designates the High Courts as the exclusive forums for enforcement, preventing lower civil courts from interfering in the process. Moreover, it explicitly restricts the grounds for refusing enforcement to those specified in Article V of the New York Convention, ensuring that Pakistani courts follow international arbitration norms.Despite the enactment of the 2011 Act, Pakistan’s legal landscape remained plagued by inconsistencies, as many litigants continued to challenge foreign arbitral awards under the Arbitration Act, 1940 (the “1940 Act”), which applies only to domestic arbitrations. The 1940 Act allows broader judicial intervention, including challenges under Sections 30 and 33, which permit a court to set aside an arbitral award on grounds of error of law or fact – a standard inconsistent with the New York Convention. The misapplication of the 1940 Act by lower courts led to prolonged litigation, conflicting rulings, and uncertainty regarding the enforcement of foreign arbitral awards in Pakistan. In many cases, parties would challenge foreign awards in civil courts under the 1940 Act, even though the 2011 Act mandated that such challenges be heard only by the High Courts. It did not help that in an earlier decision titled Hitachi vs. Rupali, reported as 1998 SCMR 1618, the Supreme Court held that, in the absence of an express agreement to the contrary, an arbitration agreement embedded in a contract governed by Pakistani law was itself subject to Pakistani law. The Court concluded that, since the arbitration agreement was governed by Pakistani law, the 1940 Act applied, giving Pakistani courts “concurrent jurisdiction” over the arbitration proceedings and awards. This interpretation blurred the distinction between domestic and foreign awards, allowing civil courts to entertain challenges that, under the 2011 Act, fell within the exclusive jurisdiction of the High Courts. As a result, enforcement proceedings were delayed, and Pakistan’s obligations under the New York Convention were undermined by excessive judicial interference.The Supreme Court of Pakistan addressed these inconsistencies in its landmark ruling in Taisei Corporation vs. A.M. Construction Company. The Court firmly held that foreign arbitral awards fall exclusively under the 2011 Act, thereby overruling the wrongful application of the 1940 Act by lower courts. It clarified that the seat of arbitration (not the governing law of the contract) determines whether an award is foreign, aligning Pakistan’s jurisprudence with international best practice. Additionally, the Court emphasized that only the High Courts have jurisdiction over foreign arbitral awards, preventing civil courts from interfering in enforcement proceedings.The Taisei ruling represents a significant shift in Pakistan’s arbitration jurisprudence, removing the loopholes that previously allowed parties to delay enforcement. With the Supreme Court’s clarification, Pakistan now has a clear and consistent framework for enforcing foreign arbitral awards, aligning itself with global arbitration-friendly jurisdictions.It is worth noting that under Article V(2)(b) of the New York Convention, public policy is one of the limited grounds on which a court may refuse to enforce a foreign arbitral award. However, this exception is narrowly construed and applies only when enforcement would violate the fundamental principles of morality and justice in the enforcing state. Courts worldwide, including in Pakistan, have emphasized that public policy cannot be used as a pretext for reviewing the merits of an arbitral award, ensuring that the pro-enforcement bias of the Convention remains intact. This consideration is especially relevant in Pakistan’s energy sector, where the premature termination of contractual arrangements could expose the Government to significant legal and financial risks, as explored in our previous article here.Consequences of termination of Power Purchase Agreements (PPAs)As outlined in our previous article, the Government of Pakistan has recently announced the premature termination of PPAs with five independent power producers (“IPPs”), a move driven by soaring energy prices, which are amongst the highest in the region. With many households transitioning to solar energy, demand for grid-based energy has plummeted, resulting in a supply glut. Should the Government of Pakistan choose this course of action, the termination of PPAs with IPPs is likely to trigger legal disputes, with affected investors pursuing remedies through arbitration and enforcing sovereign guarantees.Several PPAs include dispute resolution clauses under the International Centre for Settlement of Investment Disputes (“ICSID“) or other international arbitration forums, where IPPs may claim compensation for lost revenues and damages. Given past precedents, such as the Reko Diq case, adverse arbitration awards could impose substantial financial liabilities on the Government of Pakistan, including penalties, legal costs, and interest payments. Additionally, many of these projects were backed by sovereign guarantees, obligating the government to cover unpaid capacity charges. If the government fails to honour these commitments, investors may invoke these guarantees, potentially leading to enforcement actions against Pakistan’s offshore assets.This could further weaken Pakistan’s fiscal position, limit access to international financing, and increase borrowing costs. The perception that Pakistan does not uphold its contractual obligations may also deter future investment in energy and infrastructure, particularly from foreign lenders and development finance institutions that prioritize regulatory stability.In light of these potential financial and reputational risks, it becomes imperative for foreign investors to adopt strategies that mitigate exposure and safeguard their interests in Pakistan’s energy sector. One of the most effective mechanisms for achieving this is through the strategic use of Bilateral Investment Treaties (“BITs“), which offer critical protections against regulatory uncertainty and adverse state actions.Protecting foreign investments in Pakistan’s energy sector: the role of BITs and structuring FDI for maximum protectionFor foreign investors in Pakistan’s energy sector, BITs provide crucial protections against regulatory uncertainty, expropriation, and breaches of contractual commitments, including disputes over Take-or-Pay clauses in PPAs. With the recognition of Take-or-Pay clauses as enforceable under Pakistani law (see our article here), and the recently established pro-enforcement stance of Pakistan’s superior courts towards foreign arbitral awards in cases such as Taisei Corporation vs. A.M. Construction Company, the legal landscape for energy investments has improved significantly. However, BITs continue to offer an additional layer of security by guaranteeing fair and equitable treatment, protection against expropriation, full protection and security, free transfer of funds, and most importantly, access to international arbitration under ICSID or UNCITRAL rules. These protections ensure that foreign investors have recourse beyond domestic courts and can safeguard their rights in the event of regulatory changes, contract disputes, or other state actions that could impact their investments.In fact, potential claims under BITs cannot be ruled out even in those cases where the Government of Pakistan has successfully settled or revised PPAs with IPPs. This is based on the principle set by the ICSID tribunal in CMS v. Argentina holding that a shareholder has “a separate cause of action under the Treaty in connection with the protected investments, which can be asserted independently from the rights of [the company]”. Similarly, another ICSID tribunal in Sempra v. Argentina recognized that the “procedural independence” exists between an investor and the local company.To avail these benefits, investors must ensure their investment qualifies for protection under a BIT between Pakistan and a favorable jurisdiction. One key strategy is to incorporate the investment vehicle in a country that has a strong BIT with Pakistan. This ensures that in case of a dispute, the investor can seek recourse under the treaty’s provisions rather than relying solely on Pakistan’s local legal system. Investors should also structure their transactions to clearly qualify as a protected investment under the relevant BIT, ensuring that contractual rights, equity stakes, and energy projects fall within the treaty’s scope.This article was co-authored by Kamran Rehman and Richard Raban-Williams of Penningtons Manches Cooper.

ABS & Co has secured a significant appellate victory before the Lahore High Court, successfully setting aside an order that referred disputes exceeding PKR 2 billion to a composite arbitration proceeding across multiple contracts.The firm acted for Habib Construction Services Limited in FAO No. 72813 of 2025, where the appeal arose from an order of the Civil Court allowing a Section 20 application under the Arbitration Act, 1940 and directing a consolidated reference of disputes spanning ten separate projects. The impugned order had effectively compelled arbitration across a matrix of contracts, joint venture arrangements, and project-specific engagements, notwithstanding the absence of uniform arbitration agreements.ABS & Co.’s case on appeal was anchored in three principal jurisdictional challenges.First, statutory requirement of a written arbitration agreement had not been satisfied in respect of the majority of the disputes. Of the ten projects in issue, only three contained arbitration clauses, while the remaining arrangements were governed by documents that did not incorporate any agreement to arbitrate.Second, the trial court’s reliance on “without prejudice” correspondence to infer the existence of an arbitration agreement was misplaced. Such communications, exchanged in the course of settlement discussions, were privileged in nature and could not constitute or evidence a binding arbitration agreement in the absence of formal consensus reduced to writing. We relied on the judgment of the Supreme Court of Pakistan in Muhammad Hanif Abbasi v. Jahangir Khan Tareen (PLD 2018 SC 114), which affirms that without-prejudice communications are legally insulated and inadmissible for establishing rights.Third, a composite reference could not be made under the existing facts as the ten projects were independent in nature, involving distinct scopes of work, separate contractual frameworks, and, in certain instances, different parties, including third-party joint venture partners.The High Court accepted our submissions and held that “without prejudice” communications cannot be relied upon to create arbitration rights or satisfy statutory requirements.In addition, the High Court found that the trial court had failed to discharge its judicial function by deferring foundational questions—including the existence and scope of arbitration agreements—to the arbitral tribunal, rather than determining these issues as jurisdictional prerequisites. In light of these findings, the High Court set aside the impugned order and remanded the matter for fresh determination in accordance with law, directing the trial court to examine each agreement independently and proceed strictly within the confines of the statutory framework.This decision constitutes an important reaffirmation of the principle that arbitration is a matter of consent, not convenience, and that courts must rigorously scrutinize the existence and scope of arbitration agreements before making any reference. It provides timely guidance on the limits of composite arbitration in Pakistan, particularly in the context of multi-project and joint venture arrangements.The ABS & Co team was led by Bakhtawar Bilal Soofi before the High Court.

This first article in a three-part series considers recent decisions by the English courts on the enforcement of arbitral awards from Pakistan. Produced in collaboration with leading English law firm, Penningtons Manches Cooper, it examines the volatile nature of the energy sector in Pakistan, highlighting the risks arising from the termination of Power Purchase Agreements (PPAs) with the Government of Pakistan or its state-owned enterprises, in a period where the country is transitioning towards solar power and the contractual terms (including Take-or-Pay clauses) are proving to be financially unsustainable.We focus on recent decisions of the English courts and London-seated arbitrations on disputes in the sector, in particular the recent decision of the Court of Appeal in Star Hydro Power Limited -v- NTDC.Arbitration of PPAs in England & WalesArbitration is typically the forum selected for the resolution of disputes arising from the operation of PPAs. Similarly, Bilateral Investment Treaties (BITs) generally include a provision that disputes incapable of resolution between an investor and a state shall be submitted to international arbitration.Arbitrations are well suited to resolve quarrels stemming from PPAs, and disputes in the energy sector more generally, for a number of reasons:proceedings are generally confidential which protects the commercial and politically sensitive subject matter of energy disputes;the parties can select the arbitrator(s), ensuring that candidates have the necessary experience and proficiency in the relevant industry;the arbitrator(s) should be entirely independent (indeed, arbitrators are often based outside the jurisdiction in which the dispute is centred);arbitrations can be concluded much quicker and arbitral awards can typically be enforced more efficiently than judgments handed down by courts; andthe parties can agree the location of hearings (the seat of the arbitration) and the arbitral institutions that will administer the proceedings and whose rules will govern them.London remains an extremely popular seat for arbitrations generally, and those involving energy disputes. In 2023, 9.5% of energy arbitrations were based there, placing it ahead of both Paris and New York City[1]. Reasons for its popularity include the integrity of its legal system, the expertise of legal professionals and arbitral bodies, the reputation of its judiciary, and London’s geographical location. English arbitral awards are directly enforceable in over 160 jurisdictions under the New York Convention (the Convention) and the impending implementation of the Arbitration Act 2025 (on 1 August 2025) will serve to reinforce London’s prominent position as a favoured seat for energy disputes and international arbitrations more broadly.Recent decisions of the English courts on PPAsAlthough arbitral proceedings benefit from confidentiality, they sometimes spill out into the domestic courts. This usually happens when a party seeks to appeal a tribunal’s award, or where issues concerning enforcement arise.The English courts have considered several disputes arising from London-seated arbitrations concerning PPAs in recent years and these are considered below.Anti-suit injunctionsAtlas PowerIn Atlas Power Limited & Others -v- National Transmission and Dispatch Company Limited[2] a group of Pakistani IPPs successfully obtained an anti-suit injunction against the National Transmission and Dispatch Company (NTDC) of Pakistan in the English High Court. The injunction prevented NTDC from challenging an LCIA award elsewhere than the courts of England and Wales. The underlying dispute concerned sums NTDC owed to nine IPPs in respect of Pakistani law governed PPAs entered into between 2006 and 2008.The matter was initially referred for determination by an expert who found that NTDC was liable to the IPPs (the Determination). The Pakistani Government went on to obtain an injunction from the Pakistani courts which prevented the parties from acting upon the Determination. However, following further jurisdictional challenges, the IPPs ultimately succeeded in obtaining a partial final award (the Award) from the London-seated arbitration. NTDC then applied to the Pakistani courts for an order to set aside the Award. The IPPs responded by successfully applying to the High Court of England for an anti-suit injunction. The High Court agreed that the Award had correctly held that the seat of the arbitration was London and that the English courts had exclusive supervisory jurisdiction over the LCIA arbitration.The decision in Atlas Power emphasises the importance of parties clearly defining the seat of arbitration in a dispute resolution clause and the value of clear drafting where parties seek to tailor an arbitration clause. A failure to do so can, as in this case, lead to expensive delays in the form of satellite litigation.Star HydroNTDC has more recently once again found itself a party to proceedings in the English courts where it has been resisting an application against it for an anti-suit injunction.In Star Hydro Power Limited -v- NTDC[3], Star Hydro, the claimant, had been awarded various monetary sums against NTDC in 2024 following another LCIA arbitration. In not dissimilar circumstances to the dispute between Orient Power Company (Private) Limited -v- Sui Northern Gas Pipelines Limited (which will be covered in more detail in the second article in this series), NTDC brought proceedings in Lahore under the Convention seeking partial recognition of certain findings in the award and a declaration of non-enforceability of other parts (including on the basis that the tribunal’s findings were contrary to both Pakistani law and public policy). Crucially, the proceedings in Pakistan were issued prior to Star Hydro seeking to recognise the arbitral award in any jurisdiction. Star Hydro sought an anti-suit injunction to restrain the proceedings in Pakistan on the basis that they were a disguised challenge of the award. Star Hydro argued that the Pakistani proceedings breached an implicit ancillary agreement that such challenges should only be brought under English law as the curial law of the arbitration and in the English courts.At a first instance hearing in November 2024 the High Court refused to grant an anti-suit injunction to Star Hydro and found in favour of NTDC[4]. It held that it must be assumed that a court will only recognise or enforce an award in compliance with the provisions of the Convention. Further, a losing party is not bound to bring any challenge to the arbitral award in the courts of the seat (in this case, England). Additionally, the right to resist recognition or enforcement of an award under the Convention is a right which may be asserted pre-emptively (i.e. where the successful party in an arbitration has not yet sought recognition or enforcement). Accordingly, NTDC was entitled to seek recognition of parts of the findings in the award in Pakistan. The court noted that it was up to the Pakistani courts to determine if parts of the award were unenforceable in Pakistan as a matter of Pakistani public policy.However, Star Hydro appealed and the Court of Appeal overturned the High Court’s decision, granting the anti-suit injunction. In its judgment[5], the Court of Appeal held that it was the English court, as the supervisory court of the arbitration, which had exclusive jurisdiction over any challenges to the award. It characterised NTDC’s application in the Lahore proceedings as a ‘full-throated challenge’ to the award, brought in breach of the arbitration clause and the exclusive jurisdiction of the English court. The appeal court interpreted NTDC’s challenge to the award in Lahore as the same type of challenge injuncted in Atlas, where NTDC attempted to avoid the supervisory jurisdiction of the English court by arguing the Pakistani courts had concurrent supervisory jurisdiction. The Court of Appeal has now confirmed the significant obstacles to mounting a challenge to a London seated award in Pakistan. This may not represent the end of the story as an appeal to the Supreme Court by NTDC remains a possibility.Parties to PPAs which contain clauses referring disputes to arbitration will await the conclusion of any further appeal with interest given the potential implications it will have for litigants post-award.Appeals under the Arbitration Acts 1996 and 2025The Arbitration Act 1996 (the predecessor to the Arbitration Act 2025 which comes into force on 1 August 2025) allowed a party on the receiving end of an unfavourable arbitral award to challenge it in the English courts. While the new Arbitration Act 2025 limits a party’s entitlement to a full rehearing of evidence heard by the original tribunal, it remains possible to challenge an arbitral award on the grounds that the tribunal did not have substantive jurisdiction. There have been two notable decisions in recent years involving attempts to challenge awards made in LCIA arbitrations relating to PPAs in Pakistan.Sui Northern Gas Pipelines Limited -v- National Power Parks Management Company (Private) Limited[6] concerned two Gas Supply Agreements (GSAs) under which the claimant (SNGPL) agreed to supply and the defendant (NPPMCL) agreed to take or pay for gas to be used at two power plants it operated in Pakistan. A dispute arose between the parties concerning invoices issued by SNGPL. NPPMCL commenced LCIA arbitration proceedings in which it sought a declaration that SNGPL had not been entitled to issue the invoices. SNGPL counterclaimed, seeking arrears it alleged were owed to it by NPPMCL. The tribunal ultimately found in favour of NPPMCL.SNGPL challenged the award in the English High Court under section 68(2) of the Arbitration Act 1996 on the basis of a serious irregularity in the arbitration proceedings. The challenge centred on the tribunal’s finding that each of SNGPL’s invoices had to be issued before the end of the relevant month. SNGPL argued that this had not been pleaded before the tribunal by either party and was a commercially unworkable interpretation of the GSAs. SNGPL also mounted a secondary challenge, arguing that the tribunal’s award of interest in favour of NPPMCL was too high.The court found against SNGPL on both issues. First, it was held that SNGPL’s position concerning the tribunal’s finding as to the timing of invoices was not the true effect of the tribunal’s award. Second, SNGPL’s challenge of the rate of interest failed as the court found that the tribunal had discretion as to the rate of interest it awarded and had exercised this properly.The judgment in Sui demonstrates the inherent difficulty in challenging an arbitral award on the basis of irregularity. This is especially so, as in this case, where the matters which form part of the challenge were in play during the arbitration. The new Arbitration Act 2025 will make it even more difficult to challenge an award for lack of substantive jurisdiction. Interestingly, in a judgment handed down by the High Court a year later, SNGPL successfully defended a s.68 challenge to an award made in its favour by a different LCIA tribunal, again in relation to a take or pay provision in a GSA[7].ConclusionThe decisions considered above demonstrate the continued appeal of London-seated arbitrations for the resolution of disputes arising from the operation of PPAs in Pakistan. The attractiveness of London as a hub for international energy arbitrations looks set to continue. Where necessary, the English courts can go on to play an active role in resolving disputes that emanate following the issuing of arbitral awards – though successfully overturning awards under the Arbitration Act 2025 clearly remains a high hurdle to overcome.Parties to IPPs would be well-advised at the drafting stage to ensure that dispute resolution clauses and arbitration agreements are thoroughly and clearly defined. This will help avoid surplus and costly litigation. Where parties to PPAs spot a dispute on the horizon they should swiftly seek local and, if appropriate, English advice to ensure best protection.This article was co-authored by Kamran Rehman, Richard Raban-Williams and Harriet Campbell of Penningtons Manches Cooper.