PAKISTAN Law and Practice Contributed by: Faisal Daudpota, Daudpota International
Valid Grounds Recognised events include acts of God (severe floods), government actions (embargoes), war/hos - tilities, perils of the sea (extreme weather), and wide - spread, unavoidable strikes. Exclusions (Commercial Risks) Routine port congestion, ordinary bad weather, and technical breakdowns do not excuse non-perfor - mance. Similarly, “self-induced” issues like negligence or poor planning are not valid grounds for frustration. Demurrage In cases of slow loading/discharging, the rule “once on demurrage, always on demurrage” typically applies, holding the charterer liable unless the contract explic - itly provides a force majeure exemption. 9.2 Enforcement of the IMO 2020 Rule Limiting the Sulphur Content of Fuel Oil Pakistan integrates United Nations Security Coun - cil (UNSC) resolutions into domestic law through the United Nations (Security Council) Act, 1948. This allows the Ministry of Foreign Affairs to enforce measures like asset freezes, arms embargoes, and travel bans. Additionally, the Anti-Terrorism Act, 1997 is used by the Ministry of Interior to apply targeted financial sanctions against proscribed entities. Maritime Sulphur Regulations (IMO 2020) Since January 2020, Pakistan has enforced the “IMO 2020” global standard, capping marine fuel sulphur content at 0.5%. Enforcement The Ministry of Maritime Affairs and PSC monitor vessels. The carrying of non-compliant fuel without approved exhaust scrubbers is prohibited and can lead to detention or fines. Supply As of late 2025, local initiatives have been actively supplying very low sulphur fuel oil (VLSFO) to ensure industry compliance.
be filed before submitting a defence. Additionally, the 2011 Act mandates that courts refer interna - tional disputes to arbitration unless the agreement is void or inoperative. • Return of plaint (foreign jurisdiction) – if a contract specifies a foreign court, the defendant can apply under Order VII Rule 10 of the CPC, 1908 to have the plaint returned. Pakistani courts generally uphold these clauses and will direct the plaintiff to file in the agreed-upon foreign jurisdiction. 8. Ship-Owners’ Income Tax Relief 8.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Pakistan offers significant tax relief to resident ship - ping companies and those flying the Pakistani flag. • Tonnage tax regime – instead of standard corpo - rate tax, ship-owners pay a fixed rate based on Gross Registered Tonnage (GRT): USD0.75 per GRT for the first five years, rising to USD1.00 per GRT thereafter. • Key exemptions – income generated from ship operations (including tugs and dredgers) and the import of vessels are exempt from income and advance taxes until 2030. • Depreciation – companies not using the tonnage tax regime can claim a 25% initial depreciation allowance on the cost of ships put into service. • Seafarer relief – salaries of Pakistani seafarers working on foreign vessels are income tax-exempt, provided the funds are remitted through banking channels within two months of the tax year’s end. 9. Implications of Non-Performance, IMO 2020, Trade Sanctions and International Conflict 9.1 Force Majeure and Frustration Under the Contract Act, 1872 (Sections 32 and 56), parties can be excused from shipping contracts if an unforeseeable event creates “supervening impossibil - ity” (making performance illegal or physically impos - sible), rather than just a commercial hardship.
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