Pakistan International Airlines Secures Discharge Of Receivers In $6bn Dispute.
Legal News & Analysis - Asia Pacific - Pakistan - Dispute Resolution
10 June 2021
On 25 May 2021 the Commercial Division of the Eastern Caribbean Supreme Court set aside ex-parte orders which had been obtained by Tethyan Copper Company (TCC) against the Islamic Republic of Pakistan (Pakistan), Pakistan International Airlines Corporation (PIA) and various of its subsidiaries. Those orders had been obtained in support of the enforcement of a US$6bn ICSID Award (the Award) which TCC had obtained against Pakistan.
In December 2020, TCC obtained an ex-parte order recognizing and enforcing that Award against Pakistan (the Registration Order). In addition, it obtained a Provisional Charging Order over the BVI assets of PIA, purportedly under the provisions of a statute, the Charging Orders Act 2020 (the 2020 Act), which had not been brought into force. Despite the fact that PIA did not have any liability to TCC, TCC contended that the effect of the 2020 Act was to enable the Court to ignore the separate corporate personality of PIA, and to render the assets of its subsidiaries (and in respect of one company, its sub-subsidiary) amenable to execution. In addition, TCC contended that PIA was so closely associated with Pakistan that its assets were amenable to execution pursuant to the jurisdiction recognized by the Judicial Committee of the Privy Council in La Générale des Carrières et des Mines v. FG Hemisphere Associates LLC  UKPC 27 (Gécamines).
The Court’s judgment is notable for being the first reported consideration of questions of state immunity in the BVI, and in considering the extent of the Court’s jurisdiction in Gécamines for the first time.
The Court held that a series of (serious) failures to properly address the Court on questions of State Immunity and in relation to the procedural privileges afforded to a State on questions of service, should lead to the Registration Order being set aside, and to the Court declaring that it consequently had no jurisdiction over Pakistan or the PIA.
The Court also held that the jurisdiction recognized by Gécamines could have no application to a company whose shares were traded on an international stock exchange which had its own body of independent shareholders that would be disadvantaged by the expropriation of the assets of the company in which those shareholders have an interest: such a company could never be treated as “assimilated into the State for all purposes”. The Court also held that TCC’s presentation to the Court at the ex-parte hearing was seriously deficient: principally, by the erroneous implication that the 2020 Act was in force, by TCC’s failure to properly articulate the limits of the jurisdiction in Gécamines, its failure to draw the Court’s attention to the “strong presumption” that the separate corporate personality of PIA was to be respected, and to the evidence which went to the improbability of a public traded company having “no separate effective existence.”
The applications were heard over 4 days in April 2021. Andrew Willins of Appleby appeared on behalf of PIA, working alongside John Terry, Stefan Case and Myriam Seers of Torys LLP. Pakistan appeared by Vernon Flynn QC, Lucas Bastin, Cameron Miles, Angeline Welsh, Mubarak Waseem, Grant Carroll and Daniel Mitchell, whilst the subsidiaries of PIA appeared by Stephen Moverley Smith QC and Tim Wright.
For further information, please contact:
Andrew Willins, Partner, Appleby