A Pakistani software house delivers a project to a client in Dubai, London or Texas. The final invoice goes unpaid. Emails are answered vaguely, then not at all.
The instinct is to threaten legal action. Before doing that, it is worth being honest about what legal action against a foreign company actually costs and achieves — and about what leverage you still hold.
Use the leverage you have, first
The strongest position is almost always before you hand everything over.
- Withhold what is not yet delivered — final deliverables, source, credentials, DNS control, or the production deployment. If you are still hosting or operating something, you have leverage. Check your contract before suspending, and give contractual notice
- Do not transfer IP. If your agreement assigns IP on payment, then unpaid means unassigned. Say so, plainly and in writing
- Suspend support and maintenance in accordance with the contract
- Stop further work — continuing to build for a client who has stopped paying is the single most common way firms turn a recoverable amount into an unrecoverable one
Then send a proper demand: the amounts, the dates, the contractual basis, a deadline, and what happens next. See legal notices — how and when.
Then be realistic about forum
Where is the client, and what does the contract say? Three common positions:
Arbitration with a specified seat. The best outcome, if you have it. An award is enforceable in most countries under the New York Convention, including against the client's local assets. Institutional arbitration is not cheap, so it makes sense for larger claims — but the existence of the clause alone frequently produces a settlement.
The client's home courts. Slow and expensive from Pakistan, and you will need local counsel. Sometimes unavoidable, and sometimes surprisingly practical — some jurisdictions have fast, low-cost procedures for undisputed debts.
Pakistani courts. You can sue here, but a Pakistani judgment is difficult to enforce abroad, so unless the client has assets or a presence in Pakistan, the decree may be of limited practical use.
See enforcing foreign judgments and arbitral awards in Pakistan and drafting an arbitration clause.
Options that cost less than litigation
For the small and mid-sized claims that make up most of these disputes:
Negotiated settlement. Unglamorous and usually correct. A discounted payment now beats a full claim in two years, particularly where the client is genuinely short of cash rather than dishonest.
Payment plan with an acknowledgement of debt, signed. This preserves your limitation position and turns a disputed invoice into an admitted debt, which is a much stronger claim if it fails. See limitation and the deadlines that end claims.
Mediation, where the relationship has value.
Local counsel demand letter in the client's own jurisdiction. Often disproportionately effective — a letter on local letterhead reads very differently from an email from overseas. We coordinate with counsel abroad routinely.
Platform escrow or dispute processes, where the work came through Upwork, Fiverr or a similar marketplace. Use them; they are faster than anything else available.
Insolvency-style statutory demands in jurisdictions that have them, for undisputed debts. A powerful tool where available.
Debt collection agencies in the client's country, on commission.
What we generally advise against: public naming and shaming. It rarely produces payment, and it exposes you to defamation and confidentiality claims. See what is actionable as defamation.
The other side of it: when the client alleges defects
Non-payment is frequently accompanied by a complaint about the work — sometimes genuine, sometimes constructed to justify not paying.
Your position depends on records:
- The specification and every change request
- Acceptance — did the client accept, or is there deemed acceptance after a period of silence? This is why the clause matters
- The defect list and what you did about it
- Evidence the client used the deliverable in production, which is difficult to reconcile with a claim that it was worthless
See software development and SaaS agreements.
The banking and tax side
Two Pakistani-specific points that catch firms out.
Export proceeds must be reported and reconciled. An invoice raised and never collected still has to be dealt with in your records, and unrealised export proceeds are a documented problem, not something to ignore. Address it properly rather than leaving an unexplained gap.
Do not accept payment through informal channels to resolve a dispute quickly. Money arriving outside the banking channel creates a worse problem than the one it solves. See setting up a software house and freelancers and IT exporters.
Making the next invoice collectable
Almost all of this is fixed at contract stage:
- Milestone payments, with work stopping if a milestone is unpaid
- Advance covering at least the early phase — for a new client, one third is not unreasonable
- IP assignment on payment, expressly
- Retention of access to hosting, credentials and deployment until final payment
- Interest on late payment, and recovery of collection costs
- Suspension rights on non-payment, with short notice
- Acceptance and deemed acceptance provisions
- Arbitration with a specified seat, and governing law
- For larger engagements: a parent guarantee, or payment secured through escrow. See escrow arrangements
And do basic diligence on new clients. A company that cannot be found in any register, with no verifiable address and a personal email, is a credit decision — not a contract problem.
When it is worth fighting
We give clients a direct answer on this. It is generally worth pursuing formally when:
- The amount is material relative to the cost of pursuing it
- The client has assets or a presence somewhere you can reach
- Your documentation supports the claim — signed contract, accepted milestones, no substantive defect complaint at the time
- You have a workable clause — arbitration with a good seat, or a jurisdiction with an efficient debt procedure
And generally not worth it when the amount is modest, the client is offshore and asset-light, and the paperwork is thin. In that case, settle for what you can get, and fix the contract for next time.
How the firm can help
We assess quickly whether a claim is worth pursuing and where, send demands that carry weight, run arbitration under Pakistani and foreign seats, coordinate with counsel in the client's jurisdiction, negotiate settlements and acknowledgements of debt, and — more usefully — draft the payment, acceptance and IP terms that prevent the next one.
See corporate and commercial or arbitration and ADR, or contact the firm.