EDITORIAL: Public money is again paying for a problem that should have been settled before it reached a foreign court. Two Pakistan National Shipping Corporation vessels, MV Chitral and MV Hyderabad, were detained in South Africa on the basis of a private claimant’s outstanding financial claims against Pakistan Steel Mills.
Their release required a court surety of USD 11.6 million, continuing insurance premiums, and significant legal expenses. The Economic Coordination Committee (ECC) of the Cabinet has now approved a further Rs330.526 million for reimbursement, taking reported outlays to Rs479.326 million on litigation and insurance alone. This is an avoidable drain that follows from delayed settlement of liabilities.
The facts are straightforward. PNSC is a statutory body in which the government holds 87.35 percent stake. The ships were arrested under the Admiralty Jurisdiction Regulation of South Africa on an application by Coniston Ltd, which is pursuing claims against Pakistan Steel Mills, not against PNSC itself. To secure release, PNSC deposited security, paid legal fees, and continues to pay an additional insurance premium of USD 290,200 as of July 2025 to keep the surety in place. T
he state had already assured indemnity for PNSC back in 2017, and multiple summaries have since moved through the ECC to reimburse costs and to guide a negotiated settlement. A negotiation committee recommended engaging the claimant within a counter-offer range of USD 6-11 million against a USD 15 million claim, and the ECC has now endorsed further funding while that process continues.
The economic and governance implications are clear. First, cash outflows of hundreds of millions of rupees for litigation, premiums, and guarantees are resources that could have supported operations, fleet renewal, or debt reduction.
Second, allowing a foreign court to encumber national shipping assets exposes Pakistan to reputational and commercial risk. Detention disrupts schedules, raises counterparties’ risk perceptions, and can widen insurance spreads for future calls. Third, the episode illustrates how unresolved liabilities in one state-owned enterprise can transmit to another, creating cross-contamination of balance sheets and forcing the exchequer to intervene repeatedly.
There is also a legal and policy lesson. Since 2017, the state has acknowledged exposure and provided indemnities, yet the matter remains open eight years later.
Each extension of the insurance guarantee and each reimbursement reflect time lost to fragmentation and delay. A disciplined timetable for closure, with a clear mandate on who leads negotiations and who bears residual risk, is needed to avoid indefinite premium payments and rolling supplemental grants.
Where the Attorney General’s office and sector ministries have already advised a negotiated path, execution should now be measured against defined milestones and reported transparently.
Ring-fencing needs to be more than a figure of speech. Operational assets that carry national trade should be insulated from attachment for unrelated obligations. That requires thorough mapping of contingent liabilities, timely disclosure of exposures that could trigger foreign proceedings, and the use of structures that separate commercial assets from disputed claims while remaining fully compliant with law.
Boards of state-owned enterprises should be required to maintain, and periodically test, legal contingency plans for arrests, liens, and injunctions in key jurisdictions.
The fiscal treatment should also be tightened. Technical supplementary grants may be unavoidable in emergencies, but repeated resort to off-cycle reimbursements signals absence of provision and weak risk management. Where indemnities have been issued, the budget should carry explicit contingencies so that Parliament understands the scale and timing of potential calls. A central register of sovereign assurances, with annual stress tests for legal exposures, would help prioritise settlements before enforcement becomes likely.
Most of all, the underlying liability must be disposed of. The government has already constituted a committee, consulted the Attorney General’s office, and signalled a counter-offer range. That sequence needs to culminate in a binding resolution that releases the court security and closes the premium meter. If a settlement at an economically rational amount is feasible, it should be concluded. If not, the state should prosecute its defence swiftly and decisively, rather than carry open-ended costs.
This episode is a small case study in the wider state-owned enterprise problem. Unresolved debts and disputes in one entity can jeopardise the assets and cash flows of another, with the taxpayer ultimately paying the bill.
The remedy is not complicated but it requires timely settlement, disciplined legal strategy, ring-fenced operations, and transparent fiscal provisioning. The cost of delay has already been demonstrated in a foreign court. It should not be demonstrated again.
Copyright Business Recorder, 2025
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