PAKISTAN Law and Practice Contributed by: Faisal Daudpota, Daudpota International
1.7 Ship Ownership and Mortgages Registry In Pakistan, the ship ownership and mortgage registry, managed by the MMD, is not fully digitised or openly accessible to the public online. While public in nature, the register is maintained through a manual, paper- based system, making remote, instant viewing by third parties difficult compared to in other jurisdictions. How to View Registrations As the system is not fully digitised, viewing records requires direct interaction with the MMD. The regis - ter is maintained at the office of the Principal Officer (Registrar of Ships), Mercantile Marine Department, Karachi, and enquiries regarding ownership or mort - gages usually require a formal search request to be submitted at the MMD office. A manual search may then be undertaken for the vessel’s registration. Limitations The registry operates on an old, manual system rather than a modern, publicly accessible digital platform. Although information is generally accessible to con - cerned parties, searching requires physical presence or local representation in Karachi, which can be chal - lenging for international parties. In Pakistan, typical financing involves a high debt-to- equity ratio, with a heavy emphasis on secured lend - ing, primarily governed by the MSO 2001. Debt and Equity Financing • Debt financing structure: The most common structure for vessel acquisition is a long-term loan, frequently in a debt-to-equity ratio of around 80:20. • Key terms and operative provisions: (a) Loan-to-value (LTV) ratios: typically 50%–60%. (b) Interest rates/spreads: the State Bank of Paki - stan (SBP) allows refinancing under its long- term finance facility (LTFF), with a maximum spread (eg, up to 3% pa for ten-year loans). (c) Tenor: loans often match the useful life of the vessel or long-term charter commitments. (d) Currency: loans are often in foreign currency to match revenue, or PKR for local transactions, 2. Ship Finance and Leasing 2.1 Ship Loan Finance
backed by foreign exchange savings. (e) Key covenants: include maintaining loan-to- value insurance coverage, and compliance with environmental regulations (eg, the PEPA, 1997). • Equity/other financing: Private equity or internal accruals form the 20% equity portion. Shipping companies listed in Pakistan often raise capital through equity, although debt-based instruments (including through Islamic finance) are more com - mon. Ship Mortgages and Security Packages Ship mortgages are registered under the MSO 2001, providing a statutory lien. • Ship mortgages: A “simple mortgage” (no delivery of possession) is the most common form. Registra - tion must be done with the designated maritime authority/Registrar of Ships to be effective. • Security packages beyond mortgages: (a) Assignment of earnings – assignment of char - ter hire, freight, and earnings to the lender. (b) Insurance policies – mortgagee’s interest insur - ance (MII) and assignment of hull and machin - ery (H&M) and protection and indemnity (P&I) policies. (c) Corporate guarantees – from parent companies or sister companies. (d) Pledge of shares – pledging shares of the spe - cial purpose vessel-owning company. (e) Charge on accounts – a charge over the bor - rower’s bank accounts, often authorised under the Companies Act, 2017. Common Types of Transactions • Direct bank loan (term loan). • Long-term finance facility (LTFF/ILTFF). • Islamic finance. • Export finance schemes (EFS). 2.2 Ship Leasing Key Aspects of Ship Leasing in Pakistan • Market trends: The leasing industry in Pakistan has been a significant source of financing since the 1980s. While specific recent data on volume increases is not detailed in the provided search results, the global trend shows a shift towards
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