Claim No: ARB 002/2023
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
MUFRA
Claimant
and
MAPART
Defendant
REASONS FOR THE ORDER OF H.E. JUSTICE SHAMLAN AL SAWALEHI DATED 13 JUNE 2023
1. The Claimant (“Mufra”) applied for an interim injunction preventing the Respondent (“Mapart”) from enforcing a Kuwaiti judgment (the “Judgment”). On 13 June 2023 I dismissed that application (the “Order”). These are my reasons for doing so.
A legal question
2. The application began with a legal question.Where there is no defence established to the underlying claim, is the Court entitled to enter a prohibitory injunction without further enquiry?Mufra said “yes,” relying onSeries 5 Software v Clarks [1996] FSR 273 andQuick Draw LLP v Global Live Events LLP [2012] EWHC 233 (Ch). Mapart said there is doubt as to whether these decisions are correct or can be applied beyond their facts, relying on the White Book at [15-15] and the unreported English Court of Appeal judgmentGuardian Media Group plc v Associated Newspapers Ltd(20 January 2000) at [18]. In the end I did not need to decide this question as, I found, Mapart had demonstrated a possible defence to the claim. For whatever it is worth, however, I am inclined to agree with Mufra’s position, for the reasons set out in the final paragraph under the heading ‘(a) Principles—a serious question to be tried’ on page 689 of the White Book (2022).
Mufra’s case
3. Pursuant to the Promissory Note Deed of Release dated 27 July 2011 (the “Deed of Release”), Mapart agreed that any liabilities owed to it under or in the connection with the convertible loan and note entered into between Mapart and Mufra in 2007 (the “Convertible Loan” and the “Convertible Note,” respectively) were discharged. Mapart further promised that it would not bring any direct or indirect claim of any kind “arising out of” or “in connection with” the Convertible Loan and Convertible Note.
4. Mufra submits that Mapart breached those obligations by pursuing claims against the Kurdish Regional Government (the “KRG”) in its capacity as guarantor in support of the Convertible Loan. Mapart successfully obtained judgment from the Court of Kuwait against the KRG (the “Kuwaiti Judgment”) and now seeks an order for recognition and enforcement of that judgment from the US District Court for the Southern District of New York (the “SFNY”). Mufra says that Mapart obtained the Kuwaiti Judgment by “fraudulently and in express terms” informing the Kuwaiti Court that (i) the Convertible Loan had never been repaid and remained outstanding, (ii) the undischarged loan had continued to accrue contractual interest to the present day and (iii) Mapart continued to be a creditor of Mufra.
5. The parties agreed that any dispute arising under the Deed of Release would be resolved by ICC arbitration, with its legal seat in the DIFC. Mufra has commenced such an arbitration (the “Release Arbitration”) and constitution of that Tribunal was at the time of making the Order still pending. As final relief in the Release Arbitration, Mufra says it will seek declarations of breach and a permanent injunction restraining Mapart from taking steps to recognise and enforce the Kuwaiti Judgment.
Mapart’s possible defence
6. Mapart intimated several potential defences to Mufra’s claims. The following two were sufficient for me to form the view that Mapart at least has a possible defence to the claims, or in other words that the arguments advanced on behalf of the Defendant raise a serious issue to be tried. This is not to say that I think the other potential defences do not fall into this category. I am inclined to think they do, but any one possible defence would be sufficient to take the case outside the operation of any rule that the Court is entitled to enter a prohibitory injunction without further enquiry where there is no defence to the claim established. The two possible defences I will discuss now were, in my view, the two lowest hanging fruits.
7. Mapart says that the Deed of Release is ineffective due to the decision of the Iraqi Communications and Media Commission (the “CMC Decision” and the “CMC,” respectively). In my judgment this case is persuasive, not least because it provides one explanation for the whereabouts of the consideration of the shares in Mufra acquired by Mitri Limited as part of the Investment Transaction. This includes the benefit of the USD 250 million which Mapart had lent to Mufra by means of the Convertible Loan. That the CMC Decision had the effect of invalidating only contractual provisions for the transfer of shares by which Mitri acquired its shareholding indirectly in Mufra, but not any of consideration of the same in either the transfers of the Convertible Loan and Promissory Note and their release by the Deed of Release or the injection of USD 195m into Mruk as part of the equity restructuring seems to me to be improbable.
8. Mapart says, moreover, that even if this Court did find those arrangements to be valid, there is no ground on which it could make the very serious finding that Mapart considered them valid and deceived the Court in relying on them. In my judgment this is also a persuasive argument. Mufra apparently proceeds on the basis that Mapart had something comparable to a duty of full and frank disclosure to present to the Court arguments and evidence that the Defendant might have run if it had engaged with the proceedings. Mufra, however, has not identified any such duty. Mapart says that none exists as a matter of Kuwaiti law.
9. If the KRG wanted to contend for the validity of the Deed of Release, it could presumably have done so. When it did not, there was unlikely any requirement that Mapart should make that case against its own case in order to avoid an allegation that it was acting fraudulently. Moreover, while Mapart did not advance submissions to the Kuwaiti Courts with regard to the Investment Transaction, the CMC Decision, the Administrative Decision and/or the Deed of Release, the claim was considered by each of the Court-appointed expert, the Court of First Instance and the Court of Appeal, each of which could have requested information and evidence from the parties.
10. In other words, in my judgment Mapart demonstrated possible defences to Mufra’s claims that Mapart breached the Deed of Release and improperly obtained the Kuwaiti Judgment. In these circumstances, it was necessary to continue the enquiry and in particular, first, determine whether damages would be an adequate remedy to Mufra in respect of any loss that it could suffer if the Court refused to grant the injunction sought.
Damages an adequate remedy
11. The judgment debtor under the Kuwaiti Judgment is of course not Mufra but the KRG. Mufra contended that damages would still not be an adequate remedy to Mufra if Mapart is permitted to pursue enforcement of the Kuwaiti Judgment for reasons which include the following. The KRG has informed Mufra that in the event it incurs financial loss to Mapart, it will seek to make Mufra responsible to meet those liabilities, while, Mufra says, there is no evidence that Mapart would thereafter be able to satisfy any judgment for damages in Mufra’s favour. (2) And in addition to any financial risk for Mufra, Mufra contends, it will endure unique reputational and political harm if the KRG Guarantee is successfully called. In particular, it will cause significant harm to Mufra’s relationship with the KRG.
12. As to any financial harm Mufra could suffer, in my judgment such harm is self-evidently capable of being compensated in damages,being financial.Insofar as Mufra may suffer any financial loss, it would necessarily be by reason of a payment by the KRG in the same amount and to Mapart, which would suggest that Mapart would have funds in at least the amount of Mufra’s loss. And even if there were any remaining loss to Mufra, Mapart owns 54% of the shares in Mitri which is owed sums of money in excess of USD 1 billion by Mufra.
13. Mufra has criticised Mapart for not giving Mufra an undertaking that any funds recovered from the KRG will be held by Mapart pending the outcome of the Release Arbitration and says that Mapart has already shown it has engaged in fraudulent behaviour in the way it obtained the Kuwaiti Judgment and that it is reasonable to expect that any funds paid to Mapart will be immediately distributed. My response to all this is that it has not been established that Mapart engaged in fraud in obtaining the Kuwaiti Judgment. That remains to be seen. As to any expectation of Mufra’s that Mapart will not hold onto any funds it obtains from the KRG, I think this is properly to be regarded as mere speculation. The speculation appears to rely on Mapart’s conduct in the Kuwaiti Courts which I do not make conclusions on. The Court has not been put in a position to make something like a finding of a real risk of dissipation against Mapart if and when it receives funds from the KRG. And there is no obligation on a respondent to an interim injunction application to offer or give a cross-undertaking to pay damages or to freeze its assets. If Mufra considers that the requirements for the grant of, say, a freezing order are or become met, in my judgment it can make the appropriate application. In conclusion, Mufra not shown that damages for its alleged financial risk would not be an adequate remedy, nor that Mapart would not be in a financial position or have sufficient funds or assets to pay such damages.
14. As to any reputational or political harm Mufra might suffer, Mufra’s assertions appear to me to be speculative and, moreover, are given by Mufra’s London-based lawyer, without citing any source of information. The letter from the KRG to Mufra dated 5 February 2023 does not indicate any breakdown in relations or significant damage to Mufra’s existing commercial relationship with the KRG. Mufra is referred to as an “esteemed” company, for example, and the letter is signed “cordially.”
15. In view of the apparent close relationship between Mufra, by its majority owner, Mr Mirin, and the KRG, which the Mirin family has provided both its prime minister (Mirin, 1999-2009 and 2012-2019) and both of its two presidents (Mutro, 2005-2017, and Mirin, 2019 to the present)—a close relationship which may be reflected in the fact that the KRG guaranteed a loan to Mufra—I think it was for Mufra to provide a detailed and substantiated explanation of how it is suffering or might suffer reputational or political harm in the circumstances of this case. For example, to the extent anything can be inferred from the fact that the KRG is taking steps to challenge the Kuwaiti Judgment on the basis, it says, that it was not notified and was therefore unaware of the Kuwaiti proceedings, and presumably also on the more fundamental basis that it considers the Kuwaiti Judgment to be wrongly decided, it is not clear how these matters reflect badly on Mufra and might reasonably or otherwise be the cause of harm to its relationship with the KRG. That, in my view, should have been explained.
16. In other words, I conclude that Mufra has only established risk of financial harm and one highly capable, on the submissions and evidence before me, of being adequately compensated by damaged.
Conclusion
17. The application was dismissed for these reasons.
Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 26 June 2023
At: 12pm