ISLAMABAD: The Ministry of Industries and Production is to lead a committee to deal with a nearly decade-old case related to M/s Coniston Ltd regarding its alleged claim of USD 15 million against Pakistan Steel Mills (PSM) as SAPM on Industries and Production has reiterated the need for prompt disposal of the case through judicious and proactive arbitration at the international level, in order to avoid further financial loss to the national exchequer, well-informed sources told Business Recorder.
The Ministry of Maritime Affairs (MoMA) informed the ECC that the Pakistan National Shipping Corporation (PNSC) is a statutory body governed under the Pakistan National Shipping Corporation Ordinance 1979. The Government owns 87.3 percent (as per the latest audit report) of the company’s shares.
M/s Chitral Shipping (Pvt) Limited and M/s Hyderabad Shipping (Pvt) Limited—100 percent owned subsidiaries of PNSC—owned bulk carriers MV Chitral and MV Hyderabad, respectively, which were arrested by a South African court on the application of M/s Coniston Ltd under Section 5(3) of Admiralty Jurisdiction Regulation in South Africa.
PIDC asked to retain PSM liabilities
The vessels were arrested because M/s Coniston had an outstanding alleged claim against PSM. Subsequently, the vessels were released after PNSC provided security under the Government of Pakistan’s assurance to indemnify PNSC.
MoMA further informed the forum that the Finance Division, in its letter of August 3, 2017, conveyed the Government of Pakistan’s assurance to indemnify PNSC against the amount of security placed through international sureties in case of an adverse decision against PSM, which had been unable to fulfill its obligations, subject to subsequent approval of the ECC.
In pursuance of the ECC’s decision, MoMA submitted a summary to the ECC on August 30, 2017, duly endorsed by the Ministry of Industries & Production, for confirmation of the Finance Division’s decision to indemnify PNSC for guarantees placed/costs incurred for the release of PNSC’s arrested vessels in South Africa on account of M/s Coniston’s alleged claim against PSM.
The ECC, while endorsing the Finance Division’s decision, directed that legal advice be obtained with regard to safeguarding PNSC’s assets abroad through its decision dated September 14, 2017.
MoMA approached the ECC again through a summary, which on February 19, 2020 directed MoMA, the Ministry of Industries & Production, and the Office of the Attorney General to review the latest court order on the issue and recommend a way forward with viable proposals in the following ECC meeting, besides Rs 149 million reimbursement to PNSC for the next financial year. Subsequently, Rs 149 million was reimbursed by the Finance Division in FY 2020-21.
According to sources, on the recommendations of the Attorney General’s Office, the Prime Minister constituted a negotiation committee on August 10, 2023, to engage with M/s Coniston to work out an amicable way forward to settle the liability-related dispute between PSM and M/s Coniston.
The committee held multiple meetings and recommended that MoMA move a summary seeking approval for a mandate to negotiate with the claimants, in respect of a counter-offer between $6 million and $11 million against the $15 million claim as full and final settlement. The minutes were approved by the Prime Minister.
Pursuant to the Committee’s recommendations, MoMA sent a summary to the Cabinet Division on January 10, 2025, for placement before the ECC. The Cabinet Division, however, advised MoMA to obtain views/comments from the Ministry of Industries and Production, the Ministry of Law and Justice, and the Ministry of Finance. The summary was accordingly circulated.
The Finance Division endorsed the draft summary and agreed to provide a Technical Supplementary Grant (TSG) amounting to Rs 330.526 million for reimbursement to PNSC, to be met from the savings available with the Finance Division.
MoMA shared with the forum that the summary was resubmitted to the Cabinet Division on July 4, 2025, for submission to the ECC. However, the Cabinet Division again advised obtaining fresh views/comments from the Finance Division.
The Finance Division advised MoMA to meet the expenditure from its own budgetary allocation. However, in case an exemption from the release strategy was required or in case of any shortfall, the Finance Division would assist MoMA.
MoMA further informed that PNSC, in a communication of June 12, 2025, conveyed that an additional insurance premium of USD 290,200 was due as of July 2025. PNSC had already incurred total expenditure of Rs 479,526,120 in connection with legal costs for the release of its vessels and premium payments related to the surety amount of USD 11.6 million deposited by PNSC in the South African Court. If the case had been decided against PSM, M/s Coniston would have forfeited the surety amount of USD 11.6 million.
It was further noted that PNSC had been regularly paying the premium of the insurance guarantee. Since the last reimbursement of Rs 149 million, PNSC had made additional payments amounting to Rs 330.526 million.
Given the public importance and sensitivity of the matter, it was deemed appropriate to present the issue to the ECC for consideration of the recommendations of the committee constituted by the Prime Minister on the proposal of the Attorney General for Pakistan. Based on the Committee’s recommendations, MoMA submitted the following proposals: (i) ECC may direct the Finance Division to reimburse the remaining amount of Rs 330.526 million to PNSC through a TSG, in accordance with the ECC decision of September 14, 2017, from the lump-sum provision allocated in the current fiscal year’s budget; (ii) PSM shall expedite the finalization of the arbitration case in court.
Meanwhile, PSM may be directed to contest the case in South Africa by placing its own security and absolving PNSC from the case; and (iii) ECC may allow the Ministry of Industries & Production/Negotiation Committee to negotiate with M/s Coniston in respect of the counter-offer between USD 6 million and USD 11 million, as recommended by the committee headed by the Additional Secretary, Ministry of Industries and Production, formed under the Prime Minister’s directive.
During the ensuing discussion, the forum emphasized the closure of this matter. Based on the earlier precedent of Finance Division’s assistance through disbursement of Rs 149 million to MoMA, it was suggested that the Finance Division again indemnify PNSC through reimbursement of Rs 330.526 million. The Ministry of Industries and Production, taking ownership of the case, fully endorsed the proposal and offered to lead the negotiation/arbitration process.
Citing considerable delay since 2017 and consequent damages caused, the SAPM on Industries and Production, Haroon Akhtar Khan, reiterated the need for prompt disposal of the case through judicious and proactive arbitration at the international level, in order to avoid further financial loss to the national exchequer.
The Finance Division agreed to indemnify PNSC by arranging the requisite amount in the fourth quarter of the current financial year. After detailed discussion, the ECC approved MoMA’s proposal for reimbursement of Rs 330.526 million to MoMA as a TSG in the fourth quarter of the current financial year. The ECC further directed MoMA to submit a progress report on the matter within three months.
Copyright Business Recorder, 2025
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