Saudi Group initiates legal action in Pakistan for enforcement of LCIA Award

LONDON: Aljomaih Group of Saudi Arabia, which is an investor in the Infrastructure Growth Capital Fund (IGCF Fund), has launched legal proceedings in Pakistan against Infrastructure Growth Capital Fund General Partner (IGCF GP) to enforce an arbitration award issued by the London Court of International Arbitration (LCIA).

This action is taken under the New York Convention which deals with the recognition and enforcement of foreign arbitral awards and the convention is contracted by over 150 countries, including Pakistan.

Aljomaih Group seeks redressal in the High Court of Sindh under Section 6 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act of 2011.

As reported in The News and Geo last week, the arbitration award, which prompted the Enforcement Order, stemmed from findings of LCIA and the Grand Court of Cayman Islands that the IGCF GP breached its statutory and contractual duties to a Limited Partner (investor) in IGCF Fund, White Crystals Ltd (WCL), a subsidiary of Aljomaih Group of Kingdom of Saudi Arabia. Central to the dispute were concerns regarding Mr Shaheryar Chishty, allegedly gaining control of IGCF GP and the Fund subsidiaries to serve his own interests rather than those of WCL and a pool of over eighty other Limited Partners (investors) from all across the globe, raising serious concerns regarding breach of fiduciary duties.

The LCIA tribunal was satisfied that White Crystals’ concerns about these matters were genuinely held and ordered that the books and records should be turned over within five days of the award. It rejected IGCF GP’s defence that White Crystals was being used as a “cypher” to obtain information to be used by third parties in separate litigation.

According to a copy of the LCIA Award obtained by this reporter, the arbitral tribunal determined that the concerns of WCL are legitimate.

The LCIA award says: “It was disclosed by the GP in its annual report to the Limited Partners that in July 2022 just before the takeover by Sage the GP had entered into a loan facility for up to $4 millions.” Furthermore it added: “The interest rate was stated in the report to be 15 percent payable and compounded monthly. This rate of interest was later by its defence in this arbitration corrected to 15 percent per annum compounded monthly but examination of the actual agreement in this arbitration reveals that the actual rate was a rate of 20 percent per annum if the loan was paid up before the end of the first year but increasing by steps each year to reach the alarming rate of 60 percent per annum (all compounded monthly) if not paid off until the end of the fourth year. As security for the loan AsiaPak was granted a charge over all of the Fund’s remaining assets.”

The LCIA Award says: “The transaction is potentially a loan facility prohibited by the terms of the LP Deed and is described in the Fund’s accounts as a related party transaction which under the terms of the LP Deed requires the consent of the “Advisory Board” which seems not to have been obtained.

“In 2021 the Fund sold a significant holding in this company for a sum in Pakistani rupees equivalent to $66 million.” It also added: “However it appears that since the takeover by Chishty the money has been moved from bank to bank and has ended up in a bank account in the name of one of Chishty’s companies pursuant to some sort of “escrow” arrangement.

“In addition SPV21, acting presumably at the direction of Chishty, has presented a Petition in the Cayman Court for the winding up of KES Power on the just and equitable ground based inter alia on the deadlock in its board.”

The award says: “This prima facie gives credence to the concern of WCL that since the takeover the Fund may have been administered for the benefit of Sage/ Chishty rather than for the benefit of the Limited Partners as a whole.”

Furthermore, it stated: “WCL is entitled as a Limited Partner to access the books and records of the Partnership to satisfy itself that its affairs are being properly managed by the GP in accordance with its contractual and fiduciary duties.”

Despite LCIA ruling in favour of the investor and directing IGCF GP to provide access to its books of accounts, the IGCF GP failed to comply within the specified time. Now, Al-Jomaih has obtained enforcement orders in the UK and Cayman courts. However, with IGCF GP’s directors located in Pakistan and the dispute revolving around Pakistani entities, the Saudi groups has also opted to file enforcement proceedings before the High Court of Sindh.

The Saudi investor contends that the Foreign Arbitral Award is final in the UK and the Cayman Islands, and is hence enforceable in Pakistan, according to the argument before the Sindh High Court. They argue that IGCF GP’s actions, including non-disclosure of material information and refusal to provide access to records, warrant enforcement in Pakistan to protect the interests of Limited Partners.