On Friday 2 February 2024, the Grand Court of the Cayman Islands rejected an application by the Cayman general partner (“IGCF GP”) of an investment fund (“IGCF”) to set aside an Enforcement Order in relation to an arbitration award. IGCF’s remaining primary asset is a substantial stake in K-Electric, a vertically integrated utility company in Karachi, Pakistan.
The arbitration award found that the IGCF GP was in breach of its statutory and contractual duties to a limited partner in the fund (White Crystals Ltd: “WCL”) by refusing to grant access to the books and records relating to the fund. The arbitral tribunal concluded that WCL had genuinely held concerns that Shaheryar Chishty, a Pakistan businessman, had acquired control of the IGCF GP and IGCF SPV 21 Limited (an entity in which the Fund held a 70.6% interest) and is now running the IGCF for his own benefit and not for the benefit of WCL and the other limited partners, which would be in breach of fiduciary duties. In particular, the arbitral tribunal concluded that those concerns were genuinely held including because it was said that:
- the IGCF GP had entered into a loan agreement with one of Mr. Chishty’s entities (Asiapak Investments Limited) at an “alarming” rate of interest of up to 60% per annum compounded monthly and that Asiapak had obtained security over all of the Fund’s remaining assets;
- since the takeover of the IGCF GP by Mr. Chishty, approximately $66 million belonging to the Fund has been “moved from bank to bank” in Pakistan and has ended up in a bank account in the name of one of Mr. Chishty’s companies; and
- Chishty was suing KES Power Limited (the majority shareholder in K-Electric through which the Fund holds its interest) through another of his entities (Sage Venture Group Limited) in the English Commercial Court and that he had exercised the control that he had acquired to prevent the board from resolving to appoint solicitors to advise and defend against the claim in the Commercial Court. SPV 21, presumably at the direction of Mr. Chishty, presented a Petition in the Cayman Court for the winding up of KES Power based inter alia on the contrived deadlock in its board.
Consequently, the IGCF GP was ordered by the tribunal to give WCL access to the books and records within 5 days of the Award.
The IGCF GP had previously refused to comply with the Award, and so WCL brought enforcement proceedings in the Cayman Islands, obtaining the Enforcement Order on 5 January 2024.
The IGCF GP applied: (i) to discharge or vary the Enforcement Order on the grounds of public policy; and/or (ii) for a quia timet injunction against WCL to restrain the use of the books and records once obtained, on confidentiality grounds.
At a hearing in person on Friday 2 February 2024, the Chief Justice of the Cayman Islands (Hon. Margaret Ramsay-Hale, sitting in the Grand Court) rejected those applications. The Judge held that the IGCF GP was looking to amend the Award by adding a confidentiality rider, which the Court did not have jurisdiction to do and which was not required as a matter of public policy. On the contrary, public policy required the Court to enforce the Award on its terms.
The Hon. Margaret Ramsay-Hale also affirmed the open justice principle by refusing the IGCF GP’s application to sit in private.
The Grand Court’s written judgment will be handed down at a later date.
Iain Quirk KC and Daniel Fox represent WCL, instructed by Leigh Mallon, Michael Workman and Mariya Lazarova of Steptoe International (UK) LLP; and Laura Hatfield and Jonathan Stroud of Bedell Cristin Cayman Partnership.
