Enforcement of foreign judgements in Pakistan

This paper examines the issue relating to the enforceability of foreign judgements in Pakistan. In the existing law, there are two categories of judgements, one passed by the courts of reciprocating states and the other by non-reciprocating states. The judgements of reciprocating states are enforceable per se, but for non-reciprocating states, the judgement creditor will have to seek enforcement by filing a suit in the appropriate court.
The procedure which exists for recognition and enforcement of foreign judgements is as under:
A creditor under a foreign judgement has three options:
(i) to seek direct execution under the relevant provisions of the Civil Procedure Code,1 1908(CPC), where the country rendering the judgement is designated by the Government of Pakistan as a reciprocating territory;
(ii) to file a suit in Pakistan on the basis of a foreign judgement, treating it as a cause of action2; or
(iii) to file a suit on the original cause of action.
Enforcement proceedings can only be challenged on specific grounds set out in the C.P.C3 and these include:
(i) where the judgement has not been pronounced by a Court of competent jurisdiction4;
(ii) where it has not been given on the merits of the case;
(iii) where it appears on the face of the proceedings to be founded on an incorrect view of international law or refusal to recognise the law of Pakistan in cases where such law is applicable;
(iv) where the proceedings in which the judgement was obtained are opposed to natural justice;
(v) where it has been obtained by fraud; and
(vi) where it sustains a claim founded on a breach of any law in force in Pakistan.
Answers to some frequently asked questions:
1. Once a judgement creditor provides a copy of the judgement, what is the process for having the said judgement domesticated in Pakistan?
Where the judgement is from a court belonging to country, which is not a reciprocating state, one will have to file a suit in the appropriate court of law for its execution.
2. Once the judgement is domesticated in Pakistan, what is the process for seizing the debtor's assets?
Once the suit is filed, objection to the suit can not be heard unless the defendant furnishes security. And where the party of other part fails to furnish security, application for seizure of property can be made to the court.
3. Which pieces of property owned by the debtor cannot be seized by the creditor or which assets are considered exempt property or in other words what property owned by a debtor in Pakistan is exempt from seizure?
Property which is not in his possession can not be seized but can be attached till the disposal of execution proceedings.
4. Can the debtor's bank accounts in Pakistan be seized?
Yes. Where the accounts are directly in his name, the same can be seized.
5. How long does the domestication process take?
Once the suit for execution is filed and objections are settled.
6. How long after domestication does the seizure of assets take?
If the objection are not relevant, immediately.
An important proposition was decided by the Karachi High Court.5 In that case a question was raised whether or not a decree passed by a foreign court under private international law can be executed under Section 44-A read with Rule 23-A of Order XXI of the Code of Civil Procedure 1908, and in case of objections, whether non-furnishing of security would not be fatal.
The facts of that case are that in June 1989, the respondents (Marfani and Company) filed a suit against the appellants claiming that the appellant (Munawar Ali Khan) had agreed to sell and the respondents had agreed to purchase certain immovable properties in Hyde Park Mansions, London. According to the agreement between the parties certain amounts by way of service charges under leases were required to be paid by the appellant to the respondents, which they failed to pay despite completion of sale and purchase in May 1986. The respondent-company filed a suit in the British Court and a Writ of Summons were issued to the appellants all of whom were residents of Pakistan. The British Court later on awarded decree in favour of the respondent.
The respondents sought to execute the decrees through the High Court of Sindh under section 44-A, C.P.C. The appellants filed objections but by an Order a learned Single Judge ruled that the objections could not be heard unless the appellants furnish security in terms of Order XXI Rule 23-A of the CPC. The appellants preferred appeals against the aforesaid order before a Division Bench which were disposed of by a consent order whereby the order of the learned Single Judge was set aside and the matter was remanded to the learned Single Judge. Upon remand the learned Single Judge hearing the execution applications noticed that the Appellate Bench had not decided the question of requirement of furnishing security under Order 21, Rule 23-A, C.P.C. and thereafter proceeded to consider the question of non-furnishing of security as well as the merits of the case. By the impugned order the Court held that furnishing security was a condition precedent for objecting to execution of any money decree including a decree of a foreign Court and therefore, the appellants' objections could not be heard.
The attention of the Court was invited to Cheshire and North's Treatise on Private International Law where the authors recorded their opinion in the following words:
"According to the decisions that have dealt with the matter up to the present, it is undoubted that the various circumstances considered above exhaust possible cases in which a foreign Court possesses international competence. Thus it is not sufficient that the cause of action, as for instance a breach of contract or a commission of a tort accrued in foreign country".
In this regard the High Court observed that indeed it appear to be correct in asserting that under the traditional Common Law rules of private international law an action on the basis of a foreign judgement could only be maintained if the defendant in the aforesaid judgement was a resident or at least physically present in the foreign country at the time of commencement of proceedings or had submitted to or agreed to submit to the jurisdiction of such foreign Court. The mere fact that the cause of action had accrued within the jurisdiction of such Court would not confer competence upon such Court in an international sense so as to make its judgements recognisable and enforceable in Britain.
From what has been stated above, it is evident that there are many slips in getting a foreign judgement enforced.
1. Section 44A of the C.P.C 'reciprocating territory means any country or territory outside India which the Central Government may, be notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section; and 'superior Courts', with reference to any such territory, means such Courts as may be specified in the said notification.
2. Under Section 14 of the CPC courts in Pakistan shall upon the production of a certified copy of the foreign judgement presume that it has been given by a court of competent jurisdiction, unless the contrary appears form the record (a). The onus of proving that the foreign court was not a court of competent jurisdiction, will lie on the party asserting the same.
3. See Section 13 of CPC.
4. The Court giving the judgement or passing the decree shall be considered to have jurisdiction only if the defendant had, at the time when the proceedings were instituted, his habitual residence in the state of the Court which gave the judgement or passed the decree. A decree of a foreign Court in action in persnam in which the court assumed jurisdiction under its own system of laws on any ground other than the presence of the defendant within the jurisdiction, such as locality of cause or action or forum of convenience, shall not be recognised and enforced under the Convention. Although Pakistan is not a Contracting State of the Hague Convention but its provision relating to jurisdiction of foreign Courts can usefully be referred to support the view in accord with the international view on the subject.
5. Munawar Ali Khan v Marfani and Co PLD 2003 Ka 382.
Text of the bill [AS PASSED BY THE SENATE]A BILL further to amend the State Bank of Pakistan Act, 1956
WHEREAS it is expedient further to amend the State Bank of Pakistan Act, 1956(XXXIII of 1956), for the purpose hereinafter appearing.
It is hereby enacted as follows:
1. Short Title and commencement. (1) This Act may be called the State Bank of Pakistan (Amendment) Act, 2011.
(2) It shall come into force at once.
2. Amendment of section 9, Act XXXIII of 1956.- In the State Bank of Pakistan Act, 1956 (XXXIII of 1956), hereinafter referred to as the said Act, in section 9A, in sub-section (2), for clause (c) the following shall be substituted, namely:
"(c) eight directors, including at least one from each province, who shall be eminent professionals from the fields of economics, finance, banking and accountancy, to be appointed by the Federal Government. Those appointed to the Board shall have no conflict of interest with the business of the Bank.".
3. Amendment of section 9B, Act XXXIII of 1956.-In the said Act, in section 9B, in sub/section (1), after clause (v) the following shall be added, namely:-
"(vi) two eminent macro or monetary economists with proven record of research and teaching to be appointed by the Federal Government.".
4. Insertion of new section 9C, Act XXXIII of 1956.- In the said Act, after section
9B, the following new section shall be inserted, namely:
"9C. Limitation on Federal Government borrowing .- (1) Notwithstanding anything contained in sections 9A and 9B, the Federal Government borrowing from the Bank shall be such that at the end of each quarter they shall be brought to zero barring the ways and means limit that shall be determined by the Central Board from time to time.
(2) The debt of the Federal Government owed to the Bank as on 30th April, 2011, shall be retired not later than eight years from that date.
(3) If any of the provisions of sub-sections (1) and (2) are not observed by the Federal Government, the Finance Minister shall place before the Parliament a statement giving detailed justification for the said failure.".
5. Substitution of section 18, Act XXXIII of 1956.- In the said Act, for section 18 the following shall be substituted, namely:
"18. Open Market and Credit Operations.- (1) The Bank may operate in the financial markets by buying and selling outright (spot or forward) .or under repurchase agreement of Government securities purchased in the secondary market or such other means as may be deemed expedient, and by lending or borrowing claims and marketable instruments, as well as precious metals and conduct credit operations with banks operating in Pakistan, with lending based on adequate collateral.
(2) The Central Board shall determine the types of instruments and activities and other operational methods of monetary control including Shariah-based instruments to be used for open market and credit operations and it shall announce the conditions under which the Bank stands ready to enter into such transactions.
(3) For the purpose of regulating the monetary and credit system the Bank may issue certificates of deposit and new instruments including those that are Shariah compliant.".
6. Substitution of section 23, Act XXXIII of 1956.-In the said Act, for section 23 the following shall be substituted namely: -
"23. International reserves portfolio.-(1) The Bank may directly or indirectly purchase, hold, and sell currencies, financial and capital instruments, including indices and derivatives, issued by governments, agencies, local authorities, corporate, and supranational in countries, wherever issued, whose currency has been declared, as approved foreign exchange and the remaining effective maturity of which is determined to be of not more than thirty years at the time of purchase:
Provided that the restrictions relating to maturity shall not apply to securities held by the State Bank on the date on which this Act comes into force or any securities that may be received as assets under the Pakistan (Monetary System and Reserve Bank) Order, 1947. The permissibility of each of asset class shall be determined by the Central Board.
(2) The Bank may appoint managers, custodians, consultants, and any other professional advisors for the effective management of Foreign Exchange Reserves of the country.".
7. Substitution of section 36, Act XXXIII of 1956-In the said Act, for section .36 the following shall be substituted, namely:-
"36. Minimum Reserves.-(1) The Bank may require banks or financial institutions to hold minimum reserves on, deposit accounts with the Bank in pursuance of its monetary policy objectives.
(2) The Bank may require the banks and financial institutions to hold special reserves on deposit accounts with the Bank in pursuance of its monetary policy or risk management of banking or financial sector and may' provide for any remuneration or return on such special reserves.
(3) The Bank shall, by regulation, establish the method for calculating the minimum reserves required to be maintained under sub-section (2).".
8. Amendment of section 46B, Act XXXIII of 1956.- In the said Act, in section 46B,-
(a) the existing section shall be renumbered as sub-section (1) of that section and in sub-section (1), renumbered as aforesaid for the words, commas, brackets and figures "this Act, the Banking Companies Ordinance, 1962 (LVII of 1962) or any other law in force" the words "or in exercise of its powers under this Act or any other law in force" shall be substituted; and
(b) after sub-section (1), re-numbered as aforesaid, the following new sub-section shall be added, namely:-
"(2) The Bank, the members of the Central Board or the staff of the Bank, shall not take instructions from any other person or entity, including government or quasi government entities. The autonomy of the Bank shall be respected at all times and no person or entity shall seek to influence the members of the Central Board and Monetary Policy Committee or the staff of the Bank in the performance of their functions or interfere in the activities of the Bank.".
9. Amendment of section 47, Act XXXIII of 1956.- In the said Act, in section 47 after the word "pensions", wherever occurring, a comma and the words ",gratuity and provident fund", shall be inserted.
10. Deletion of section 52, Act XXXIII of 1956 - In the State Bank of Pakistan Act, 1956 (XXXIII of 1956) section 52 shall be omitted.
STATEMENT OF OBJECTS AND REASONS The 'State Bank of Pakistan Act, 1956, being an old law would benefit from being updated to bring it closer to the :current emerging functions of a modem central bank and to better conform to best international practice.
2. The Monetary and Fiscal Policies Co-ordination Board is redundant in terms Of current practice. it is proposed to replace it and give the current Monetary Policy Committee statutory status, with external experts to be appointed by the Federal Government. The Central Board will be represented by two members on the Committee which will be responsible to formulate, decide and implement the monetary policy and decide on matters such as those relating to Key interest rates, supply of reserves, exchange rate policy, and the limits and nature of advances and loans to the Government. The main object for introducing this statutory Committee is to facilitate the State Bank's autonomy in performance of its essential functions in the changing financial environment. Consequently, various sections in the Act have also been amended in order to bring them in line with the role of the Monetary Policy Committee.
3. Lending to the Government has been restricted by' insertion of a new section (Section No 20A).
4 Emergent functions pertaining to open market and credit operations and international reserves 'have been elaborated and clarified by substitution of the existing sections.
5. Section 52 of the SBP Act which provided for the supersession of the Central Board by the Federal Government since the time the State Bank was privately owned, has been repealed in conformity with the, current autonomy of the Central Bank, and international practice.
6. These amendments will make the law more conducive to the changing global economic and regulatory environment and will better enable the modern functions of the Central Bank.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates)