1. What is the current legal landscape for Project Finance in your jurisdiction?

Under the Constitution of the Islamic Republic of Pakistan, 1973 (the “Constitution”), legislative competence is divided between the Federation and the Provinces. The Parliament of Pakistan, comprising of the National Assembly and the Senate, has exclusive power to enact laws with respect to matters enumerated in the Federal Legislative List, while the Provincial Assemblies are empowered to legislate on matters not included therein (such as matters of mining, minerals, labour, trust, environmental protection, healthcare, education and local infrastructure). The Federal Legislative List includes, inter alia, foreign exchange, electricity, major ports, insurance, corporations and taxation- each of which are pertinent subjects for project finance (“PF”) transactions.

The PF regime in Pakistan is largely contract-driven. However, PF transactions operate within a well-established statutory framework, with several key laws governing their structuring, implementation, and enforcement. Principal statutes include the following:

(i) the Companies Act, 2017, which regulates the incorporation and existence of corporate entities and matters relating to, inter alia, the creation, registration and perfection of security interests, winding up proceedings, issuance and transfer of share capital and statutory hardening periods;

(ii) the Financial Institutions (Recovery of Finances) Ordinance, 2001, which provides the framework for financial institutions (as defined therein) to initiate recovery proceedings before specialised banking courts, including the enforcement of security, sale of mortgaged property and attachment of assets prior to the passing of a judgment;

(iii) the Financial Institutions (Secured Transactions) Act, 2016 (the “STA”), which relates to the creation, perfection and priority of security interests over property other than, inter alia, immovable property and book entry securities by entities (including foreign body corporates and natural persons), and subordination and enforcement mechanics;

(iv) the Transfer of Property Act, 1882, which is relevant in the context of mortgages over immovable property, the rights and liabilities of mortgagors and mortgagees and the transfer of actionable claims and beneficial interests in movable property (subject to statutory exclusions);

(v) the Contract Act, 1872, which sets outs general principles of contract law and governs, inter alia, bailments, guarantees, indemnities and other contractual principles applied in PF transactions;

(vi) the Foreign Exchange Regulation Act, 1947 and the Foreign Exchange Manual issued by the State Bank of Pakistan, which regulate foreign exchange matters, in particular, offshore remittances, registration of foreign loan agreements, opening and maintenance of foreign currency accounts, the creation of security interests and issuance of guarantees and letters of credit in favour of non-residents;

(vii) the Stamp Act, 1899, which provides for, inter alia, the payment and valuation of stamp duty in respect of certain instruments executed within or outside Pakistan and the consequences of non-stamping thereof; and

(viii) the Registration Act, 1908 which, inter alia, requires compulsory registration of certain documents (including non-testamentary instruments that create rights, title or interest in immovable property) and the manner of registration of instruments, including those executed outside Pakistan.

In addition to the foregoing, sector-specific legislation and regulatory authorities apply and govern depending on the nature of the project. In the power sector, Private Power and Infrastructure Board, the Government of Pakistan, and the Central Power Purchasing Agency (Guarantee) Limited play a central role, with project documents typically being entered into with such entities. In the mining sector, the relevant provincial mineral department of the provincial government is a key stakeholder, reflecting the devolved nature of mineral rights under the Constitution. The Board of Investment, Government of Pakistan and the Special Investment Facilitation Council have been established to promote and facilitate investments in Pakistan; the former is responsible for, inter alia, reviewing national investment policies and laws and granting permission to foreign companies to establish branch offices in Pakistan while the latter is primarily responsible for streamlining the investment process, removing bureaucratic hurdles and to expediting lengthy processes.

Industry-specific regulators are also integral to the PF landscape. These include, the National Electric Power Regulatory Authority, which regulates matters relating to electricity and the Oil and Gas Regulatory Authority, which oversees midstream and downstream oil and gas activities. Additionally, the State Bank of Pakistan, as the central bank, regulates and supervises the financial system, and the conduct of monetary policy and the management of foreign exchange, while the Securities and Exchange Commission of Pakistan (the “SECP”) regulates companies in Pakistan and maintains statutory records, including filings related to security interests. Each of these regulators plays a critical role in the structuring, oversight and execution of PF transactions in Pakistan.

With the objective of improving Pakistan’s exports capacity and strengthening its infrastructure and technology base, the Government of Pakistan, with the relevant provincial governments, supports the establishment of export processing zones, special economic zones and special technology zones. The Export Processing Zone Authority is primarily mandated to accelerate industrialisation and increase export volumes by creating a facilitative and investor-friendly environment for the establishment of export-oriented projects within designated export processing zones, with an emphasis on attracting foreign direct investment. In respect of special economic zones, the relevant provincial special economic zone authorities process and forward applications for the establishment of such zones, to the Board of Investment for approval. Similarly, the Special Technology Zones Authority is a statutory body established to promote technology-driven investment, innovation and knowledge-based industries in Pakistan through the development, regulation and administration of designated technology zones. Approved zones benefit from certain fiscal and regulatory incentives, including tax exemptions and other concessions, including exemptions from foreign exchange laws to eligible entities operating within such zones to encourage investment in certain sectors, which have rendered PF structures within such zones to be attractive to stakeholders.

From a financier perspective, Pakistan’s legal regime recognises and provides a relatively robust framework for the creation, perfection and enforcement of security interests over both movable and immovable assets. Perfection requirements depend on the nature of the obligor and the collateral, with companies incorporated in Pakistan and entities other than Pakistani companies (such as foreign bodies corporate and natural persons) generally being required to perfect prescribed security interests by registering the same with the SECP and the secured transactions registry, as applicable. Failure to perfect security interests, as required under applicable law, renders it void against a liquidator in the event of the obligor’s insolvency.

Secured creditors may enforce security interests created in their favour without court intervention by exercising contractual remedies and rights under the relevant security documents, including the power of sale and the right to appoint a receiver. Alternatively, creditors may initiate recovery proceedings under the Financial Institutions (Recovery of Finances) Ordinance, 2001, before specialised banking courts that have jurisdiction to adjudicate claims for recovery and enforcement of security. In practice however, enforcement without court involvement is often constrained by procedural delays, including on account of the grant of interim injunctions, or objections or resistance by obligors in handing over possession of secured assets to secured creditors. Resultantly, recourse to court proceedings is frequently the preferred and often the only effective method of enforcement. Notwithstanding the foregoing, the STA permits a secured creditor to enforce certain security interests (such as a security interest in title documents perfected by possession) without court intervention, subject to compliance with such Act. Furthermore, a secured creditor may also petition in court for the winding up of a company and seek enforcement of its security on account of, inter alia, it being unable to pay its debts.

While foreign investment in PF transactions is generally supported by Pakistan’s foreign exchange regime, government policies, bilateral investment treaties, special statutes governing foreign investors, and contractual protections under transaction documents entered into with governmental entities, including protection against expropriation and assurances regarding repatriation of profits and capital, enforceability and recognition of submission to foreign courts and foreign arbitral awards, certain macroeconomic issues persist. In particular, issues such as foreign exchange volatility, liquidity constraints in the domestic banking sector, and stringent regulatory policies are prevalent. Against such backdrop, reforms aimed at improving the ease of doing business, support for renewable energy initiatives and encouraging private sector participation in infrastructure development, continue to present opportunities for PF transactions, particularly in the energy, mining and infrastructure sectors.

2. What three essential pieces of advice would you give to clients involved in Project Finance matters?

Clients should conduct comprehensive due diligence across legal, regulatory, financial, environmental, and commercial aspects. For such purpose, and for all compliance-related workstreams and closing matters, experienced experts and advisors in the relevant jurisdiction and regime should be engaged. Understanding risks, enforceability issues, land related matters, operational and market considerations and timelines (including engagement with relevant authorities), identifying regulatory and operational hurdles, and establishing clear internal and external processes, allows clients to structure the transaction effectively, allocate responsibilities, prevent disputes, draft and negotiate balanced contracts (including covenants and security packages), achieve successful closing and safeguard stakeholder interest. Large-scale PF transactions in Pakistan often involve multiple regulatory and public bodies, often established and operating within statutory frameworks and from whom project-specific approvals and filings are required. Therefore, in certain sectors, transactions are guided by administrative practice and precedent and by applicable law.

Foreign clients should structure PF transactions with a clear understanding of Pakistan’s foreign exchange regime of Pakistan and the role of the State Bank of Pakistan. Issues such as offshore remittances, foreign financing, foreign currency accounts, creation of security interests in favour of non-residents, issuance of letters of credit and guarantees and repatriation mechanics and the applicable laws surrounding each of such issues should considered from a practical, legal and commercial perspective, in the context of each transaction to ensure bankability and minimise regulatory and operational risks.

PF transactions in Pakistan often involve complex arrangements for creating and perfecting security interests and the enforcement thereof under applicable law. Clients should be mindful from an early stage that the practical enforceability of security is shaped not only by law but also by practice, procedural timelines and sector-specific precedents, including understanding registration and perfection requirements, priority and intercreditor dynamics, the treatment of security in insolvency or restructuring scenarios, and the realistic mechanics and timing of enforcement through courts or contractual remedies (as also discussed in 1 above). A clear, jurisdiction-specific assessment of enforcement risk, rather than a purely contractual or theoretical approach, is critical to achieving a bankable and commercially viable PF structure in Pakistan.

3. What are the greatest threats and opportunities in Project Finance law in the next 12 months?

Over the upcoming year, Pakistan’s PF market presents significant opportunities alongside certain challenges. With respect to opportunities, increased focus on the development of Pakistan’s natural resources, particularly in renewable energy (wind and solar) and in mining (coal and minerals) and infrastructure, continues to drive demand for PF transactions. ESG-linked financing structures, including sustainability-linked loans and green bonds are also gaining traction. Such initiatives are typically capital-intensive and are supported by long-term concessions and offtake arrangements, and therefore, remain well suited to structured and limited-recourse financing, while attracting foreign investment.

Public-private partnership frameworks continue to mature, particularly in the power and infrastructure sectors, with incremental legislative improvements and enhanced institutional capacity contributing to, and presenting opportunities in the expansion and bankability of such projects. In parallel, the development of export processing zones, special technology zones and special economic zones offering regulatory and fiscal incentives, including tax and customs concessions, presents opportunities to stakeholders to set up business in such zones and structure efficient financing models that integrate the available incentives.

From a risk perspective, macroeconomic volatility remains a key challenge for PF transactions in Pakistan, particularly currency devaluation and exchange-rate risk, which direct impacts debt serviceability, tariff calculations and overall bankability. This necessitates increasingly sophisticated risk-allocation mechanisms, regulatory support and credit enhancement structures.

Another pertinent area of uncertainty for foreign financiers arises from Pakistan’s evolving regime surrounding riba (considered as interest) and the constitutional mandate to eliminate interest from the financial system. The Federal Shariat Court’s expansive interpretation of riba, creates legal uncertainty for long-tenor, conventionally financed projects. The aforesaid continues to apply notwithstanding that the law on such subject has not yet fully crystallised nor have existing laws been amended to abolish riba, and particularly given the pending appeals before the Shariat Appellate Bench of the Supreme Court. While certain protections are currently in place for foreign and cross-border financings, it cannot be ruled out that future PF structures may need to adapt to alternative or Shariah-compliant financing models.

Overall, while the PF environment in Pakistan remains complex and sensitive to macroeconomic and legal developments, the convergence of regulatory evolution, sectoral growth, and diversified financing structures continues to create a challenging yet opportunity-rich landscape for PF transactions.

4. How do you ensure high client satisfaction levels are maintained by your practice?

Kabraji & Talibuddin is widely recognised as a market-leading law firm and is consistently highly ranked, together with its partners, by leading international legal directories— recognition that reflects the high levels of client satisfaction delivered by the practice. The firm brings together an award-winning team with extensive experience and deep industry knowledge across corporate, commercial and dispute resolution matters, which underpins its ability and supports its ethos to deliver commercially focused, solution-oriented and high-quality advice.

Maintaining high client satisfaction and legal excellence is a core priority of the firm. For such purpose, clearly defined practices and policies are implemented and consistently applied, with a particular emphasis on delivering timely, detail-oriented and strategic advice, especially in the context of complex domestic and cross-border transactions (which usually involve stringent timelines and transactional pressures). Advice is tailored to clients’ objectives, instructions and risk appetite, with a focus on innovation, reliability and the efficient execution of matters. Clear and proactive communication is prioritised, with regular status updates and fee management, ensuring that clients are fully informed of developments and potential issues, enabling informed decision-making at every stage. This client centric approach underpins long-standing client relationships and repeat instructions, which are regarded by the firm as a key measure of client satisfaction.

The firm’s experience in a wide range of matters is leveraged to provide interdisciplinary advice, that is commercially grounded, practical and market focused, whilst remaining mindful of risk allocation and enforcement realities. This ensures that legal solutions are not only technically robust and theoretical in nature, but also workable in practice.

All matters are led by experienced partners who remain closely involved throughout each engagement, providing strategic oversight, commercial insight and continuity; supported by dedicated, well-structured teams. Ongoing training, mentoring and supervision by senior lawyers and knowledge sharing across teams, ensures consistently high standards of service and fosters critical thinking, commercial awareness and professional development. The firm operates under strict internal standards and policies, including performance evaluations, quality control (of drafting and advice) and adherence to agreed response times.

In addition, the firm has assisted government entities in developing legislation in the corporate and financial sectors, contributing to the evolving regulatory landscape of the country. Regular monitoring of regulatory developments, emerging risks and market trends, together with constructive working relationships with regulators and industry specialists, enables the firm to provide advice that is both, legally sound and practically feasible.

5. What technological advancements are reshaping Project Finance law and how can clients benefit from them?

Technological developments in Pakistan, while progressing within a challenging regulatory and implementation environment, are increasingly affecting PF transactions (including their execution and management), reflecting the broader digitalisation initiatives in the corporate and financial sectors. A key advancement is the transition from manual, paper-based regulatory processes to electronic filing systems and digital recordkeeping. Regulators such as the SECP, have implemented platforms such as eZfile, which enables online corporate filings and related submissions, creating and supporting a standardised and harmonised regulatory and supervisory framework. In addition, publicly accessible online searches and conducting digital searches of records maintained by the SECP have enhanced transparency and accessibility of corporate information. Notably, the SECP has developed an electronic register for security interests created by companies, enabling banks and non-banking finance institutions to expeditiously verify the status of security interests, facilitating more informed decision making and fostering trust in the financial sector.

In addition, the secured transactions registry, an online register established under the STA, has also introduced a searchable, standardised and centralised mechanism for the registration of certain security interests, improving transparency, priority analysis and risk allocation in PF transactions, particularly from a secured party perspective.

These developments affect PF transactions, where pre-closing and post-closing conditions, covenant compliance and ongoing monitoring often depend on corporate authorisations, regulatory filings, registrations and periodic updates. Digital filings and evidence thereof benefit clients by reducing time and administrative delays, improving document tracking, reducing the risk of documentation gaps and providing a clearer record and trail for compliance and project governance teams.

Deal management platforms such as Legatics and similar transaction tools are also being increasingly used in PF transactions, and replace fragmented email correspondence and manual checklists by centralising the tracking and completion of conditions precedent and subsequent. For complex PF matters involving multiple stakeholders and workstreams, such tools enhance project management and coordination, streamline due diligence processes, reduce the risk of missed deliverables and contribute overall to more efficient closings.

Artificial intelligence-enabled tools are also beginning to supplement legal work in PF matters, particularly in the preliminary review of documents, summarising complex information and due diligence findings and assisting in identifying issues. When used appropriately, such tools may improve the speed, consistency and efficiency of transactions; however, their effective use remains dependent on experienced legal judgment, particularly in evaluating enforceability, structuring risk allocation and ensuring compliance with Pakistan law, in light of commercial and practical considerations. Therefore, such tools should be decision-support mechanisms, subject to clear guardrails relating to confidentiality, data protection and correctness, rather than as substitutes for legal analysis.

Overall, clients may benefit from technological advancements when they are properly integrated into transaction strategy and execution, whether through the adoption of digital compliance processes, maintenance of structured data rooms, implementation of disciplined filings and monitoring calendars. Together, such measures enhance governance, transparency and execution efficiency, which are material to the interests of sponsors, lenders and other stakeholders in modern PF transactions.