Between: IGCF SPV 21 Ltd Plaintiff/Respondent v AL Jomaih Power Ltd and Denham Investment Ltd Defendant/Appellants
| Jurisdiction | Cayman Islands |
| Judge | Smellie: JA,Field JA,Martin JA |
| Judgment Date | 02 July 2024 |
| Docket Number | CICA (Civil) APPEAL No. 0025 of 2023 |
| Court | Court of Appeal (Cayman Islands) |
and
The Hon John Martin KC, Justice of Appeal
The Hon Sir Richard Field, Justice of Appeal
The Hon Sir Anthony Smellie, Justice of Appeal
CICA (Civil) APPEAL No. 0025 of 2023
(Formerly Cause No. FSD 0269 of 2022 (NSJ))
IN THE CAYMAN ISLANDS COURT OF APPEAL
ON APPEAL FROM THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Stephen Rubin KC instructed by Laura Hatfield and Jonathan Stroud of Bedell Cristin Cayman Partnership for the Appellants
Graham Chapman KC instructed by Conal Keane and Niall Dodd of Dillon Eustace Cayman for the Respondent
This is an appeal against an anti-suit injunction imposed by order of Hon. Mr Justice Segal (“ the Judge”) in response to an application by the Respondent (“ SPV21”), restraining the Appellants from pursuing an action instituted by them in the Islamic Republic of Pakistan (“ the Pakistan Action” and “ Pakistan”, respectively).
The Pakistan Action was issued before the High Court of Sindh Province (the “ Pakistan Court”) against SPV21, as well as against Messrs. Alvarez and Marsal as managers of SPV21 (“ the Managers”), KES Power Limited (“ KESP”, about which more below), K-Electric Limited (“ KEL”), the operating utility company majority owned by KESP (and about which more below as well), and certain Pakistan Government and State regulatory authorities, namely:
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(i) The Government of Pakistan (through the Secretary Privatisation Commission) (the “ Privatisation Ministry”);
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(ii) The Government of Pakistan, (through Secretary of Ministry of Energy “ Energy Ministry”, and the National Electric Power Regulatory Authority “ NEPRA”); and
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(iii) The Securities and Exchange Commission of Pakistan (the “ SECP”).
In the Pakistan Action, the Appellants had obtained on 21 October 2022, an interim injunction against SPV21 and the Managers, prohibiting any changes to the Board of KEL (“ the Interim Injunction”).
The anti-suit injunction is aimed at restraining the Appellants from acting upon the Interim Injunction and from further pursuing in the Pakistan Action claims against SPV21 itself and the Managers, KESP and KEL but, for reasons also explained by the Judge, not those pleaded against the Pakistan Government and State regulatory authorities. The Action was permitted to continue against the Pakistan Government and State regulatory authorities but only on terms which seek to ensure that it did not breach the terms of a shareholders' agreement which governs the relationship between the Appellants, SPV21, KESP and KEL (further identified below as the “ SHA”) and which is central to this dispute.
SPV21's application for the anti-suit injunction was brought by way of Originating Summons dated 24 November 2022 (“ the Application”). In his judgment dated 1 February 2023 (“ the Interim Judgment”), the Judge granted SPV21 interim injunctive relief restraining the pursuit of the Pakistan Action, pending a trial of the Application which was heard on 31 March and 3 April 2023. The Judge set out in detail in the Interim Judgment the background to and the basis for SPV21's Application. This came to be incorporated by him in his judgment (the “ Main Judgment”), along with his further reasons for granting the anti-suit injunction, following the trial during which the Judge had taken the testimony of witnesses, including expert witnesses who gave competing evidence on applicable Pakistani law. Finally, in a third judgment, the “ Consequentials Judgment”, the Judge explained the orders he made consequentially upon the final grant of the anti-suit injunction explained in the Main Judgment.
The focus of this appeal has therefore been upon the final anti-suit injunction and the reasoning given in support of it in the Main Judgment.
Pursuant to a Shareholders' Agreement and Subscription Agreement dated 15 October 2008 (the “ SHA” and “ Subscription Agreement”, respectively) the Appellants and SPV21 are the three shareholders in KESP which is a company incorporated under the laws of the Cayman Islands. Together the Appellants hold 46.2% and SPV21 53.8%, of the shares in KESP.
KESP is itself a very valuable company, being the majority shareholder as to 64.4% in KEL which is a utility company incorporated under the laws of Pakistan and listed on the Pakistan Stock Exchange. KEL is the sole or main supplier of electricity to Karachi, the capital and largest city of Pakistan, with a population of more than 20 million.
KEL was formerly in public ownership until 14 November 2005 when KESP acquired its 64.4% majority interest from the Government of Pakistan, pursuant to a Share Purchase and Subscription Agreement of that date (the “ SPA 2005”). The SPA 2005 is governed by the laws of Pakistan and provides in Clause 8.3, that the Courts of Pakistan shall have exclusive jurisdiction in relation to disputes arising in relation to it. The parties to the SPA 2005 were the President of Pakistan, KESP and two others, not including the Appellants themselves or SPV21.
KEL is an entity in which the Pakistan Government and State regulatory authorities also continue to have a national security interest, in light of its importance as a major utility company.
Prior to KESP acquiring its interest in KEL, the Appellants, who were then the original holders of the shares in KESP, were therefore required to obtain clearances and/or approvals from the Government of Pakistan, through the Privatisation Ministry and the SECP.
Clause 5.2 of the SPA 2005 provides that KESP, as the purchaser of shares in KEL, was precluded from selling or transferring any shares in itself to any person prohibited by the laws of Pakistan from acquiring them and that any transfer in breach of Clause 5.2 would be void.
Clause 5.3 of the SPA 2005 provides categories of exceptions to the restrictions of Clause 5.2. These are set out below as they came to be relied upon in the Plaint in the Pakistan Action by the Appellants.
A central issue raised by the Appellants in the Pakistan Action is whether a subsequent transfer by SPV21 of its shares, which it had come to acquire in KESP from the Appellants (then the Original Shareholders and acting with the certified approval of the Pakistan Government), is in breach of the restrictions imposed by Clause 5.2 of the SPA 2005 and to be regarded as invalid for failure to have obtained the certification required by Clause 5.3(b). The circumstances of that transfer will also be discussed below.
Abraaj Investment Management Limited (in official liquidation) (“ AIML”), is the registered holder of the sole voting share in SPV21. SPV21 was incorporated in the Cayman Islands on 26 February 2008 by the Abraaj Group for the purpose of acquiring the majority interest in KESP, that interest which SPV21 came to acquire from the Appellants.
As already mentioned, on 15 October 2008, KESP, the Appellants and SPV21 entered into the SHA and the Subscription Agreement. The SHA and the Subscription Agreement govern the acquisition of the shares in KESP by SPV21 and the regulation of the parties' conduct in relation to both KESP and KEL, including in respect of the composition and appointment process to the Boards of Directors of both KESP and KEL.
Upon the execution of the SHA, the Appellants along with SPV21 became the shareholders of KESP, with each holding Class O shares, respectively in the proportions of 46.2% and 53.8% mentioned above.
On 30 April 2009 and 5 January 2021, KESP, SPV21 and the Appellants entered into deeds of amendment to the SHA and the Subscription Agreement (the “ First Amendment” and “ Second Amendment” respectively).
The SHA also contains a number of provisions relating, as between the parties, to the governance and management of KEL. Specifically, Clause 5.7 of the SHA (as amended by the Second Amendment) sets out a contractual framework governing the appointment of directors to the Board of KEL, providing as follows (with the Appellants identified in it as the “ Original Shareholders” and SPV21 as “ Abraaj”):
“ Abraaj and the Original Shareholders shall procure that the directors of KESC [now KEL] to be nominated or appointed by the Company [KESP] shall comprise:
(a) Five persons nominated by Abraaj (the Abraaj nominees); and
(b) Four persons nominated jointly by the Original Shareholders (the “Original Shareholders' nominees”).
Clause 17.1 of the SHA further provides:
“Each of the parties (other than the Company) undertakes to the others that it will exercise all powers and rights available to it as a director, officer, employer or shareholder in the Company (or in any other Group Company) in order to give effect to the provisions of this agreement and to ensure that the Company complies with its obligations under the agreement”.
As a result of the Second Amendment, the SHA also contains provisions regarding the jurisdictions in which the parties may issue proceedings in relation to disputes arising in relation to it. Paragraph 14 of Schedule 1 to the Deed of the Second Amendment states in this regard and also with central importance to the present dispute, that:
“ Sub-clause 25.2 of the Shareholders Agreement shall be deleted in its entirety and replaced with the following clause 25.2:
“Any dispute arising out of or in connection with this agreement, including any question regarding its existence, validity or termination, shall be settled by the English courts or the Grand Court of the Cayman Islands and those courts alone shall have exclusive jurisdiction to settle any such dispute.”
Prior to the Second Amendment, Clause 25.2 had required the parties to refer disputes arising under the SHA to arbitration.
Clause 25.1 of the SHA as...
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