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Pakistan faces payout over Sharif asset hunt

20 July 2018

Pakistan faces payout over Sharif asset hunt

Pakistan's former prime minister Nawaz Sharif

A hearing on damages has taken place this week in a politically sensitive case against Pakistan worth at least US$600 million, brought by a company that was hired to track down the assets of the country’s disgraced former prime minister Nawaz Sharif.

Asset recovery firm Broadsheet’s claim against Pakistan and its anti-corruption body the National Accountability Bureau (NAB) had a four-day hearing on quantum this week at the London office of Allen & Overy, the law firm representing the respondents.

Former English Court of Appeal judge Sir Anthony Evans QC is hearing the case as sole arbitrator in a London-seated proceeding under the rules of the Chartered Institute of Arbitrators.

GAR has seen a copy of the award on liability issued by Evans in August 2016, in which he found that Pakistan and the NAB had wrongfully repudiated an asset recovery agreement with Broadsheet and committed a tort of civil conspiracy by entering into a sham settlement with a former Broadsheet executive. He ruled that Broadsheet was entitled to damages in an amount to be determined.

Broadsheet is represented by Stuart Newberger of Crowell & Moring in Washington, DC. Counsel to both sides declined to comment.

The timing of the hearing has been particularly sensitive, coming only days after Nawaz Sharif returned to Pakistan to begin a 10-year prison sentence for corruption. The hearing also came a week before Pakistan holds national elections on 25 July, where Sharif's party, the Pakistan Muslim League-Nawaz now led by his brother Shahbaz Sharif, is competing against the Pakistan Justice Party led by former cricketer Imran Khan, who has been fiercely critical of the former leader.

The saga began in 1999 when General Pervez Musharraf established NAB to investigate corruption allegations against public officials in the wake of a military coup that deposed Sharif as prime minister.

Isle of Man-registered Broadsheet entered into the agreement with NAB in the following year, in which it agreed to help track down assets of Sharif and more than 200 other politicans, generals and officials at its own expense – in return for 20% of any sums recovered from the designated targets.

NAB terminated the agreement in 2003 but Broadsheet said it later learned that NAB had entered into settlements with Sharif and other targets without notifying it. The company said the agreement entitled it to a commission on any settlement with the targets, even if Broadsheet was not involved in procuring them.

After seven years of exile in Saudi Arabia, Sharif was allowed to return to Pakistan and was elected for a third term as prime minister in 2013. But Pakistan’s Supreme Court disqualified him from public office in July 2017 in the wake of revelations in the Panama Papers – the trove of leaked data from law firm Mossack Fonseca – about offshore holdings by members of his family. The court ruled in April this year that his disqualification should be for life.

Sharif and members of his family now face multiple criminal proceedings relating to different assets. On 6 July this year, an accountability court convicted him, his daughter Maryam and son-in-law Safdar Awan of corruption relating to the acquisition of luxury flats in Avenfield House on London's Park Lane. Sharif and Maryam were arrested on 13 July after landing in Lahore and are now in prison as they pursue an appeal. They deny wrongdoing.

In its quantum claim in the arbitration, Broadsheet is relying in part on information gathered by a joint investigation team (JIT) established by the Pakistan Supreme Court to examine evidence concerning the Sharif family’s holdings. Broadsheet has submitted a forensic report by expert firm Stroz Friedberg analysing those parts of the JIT report that are public, while Pakistan has submitted a counter-report prepared by FTI Consulting.

The claimant has also petitioned the Supreme Court to unseal a final volume of the JIT report that could potentially serve as a basis for further damages claims. The court has scheduled a hearing on that request for the week of 30 July.

GAR understands Broadsheet is claiming approximately US$600 million including interest in the arbitration but that this figure does not include potential claims based on the volume of the JIT report still under seal.

Broadsheet’s dispute with NAB has a convoluted and colourful history. The company was established by Colorado businessman Jerry James and entered liquidation proceedings in the Isle of Man in 2005, before being dissolved and then revived.

Meanwhile James established a Colorado company of the same name and negotiated an agreement with NAB in 2008 that purported to settle the dispute for US$2.25 million, which NAB paid. He died in 2011, reportedly by jumping from the fifth-floor balcony of a Paris hotel.

In his award on liability, Evans upheld Broadsheet’s arguments that the 2008 settlement was not binding on it, as James had no authority to act on the company’s behalf at the time. He also found that NAB was liable for the tort of conspiring to cause unlawful economic loss to Broadsheet because of its “reckless” conduct in entering into the settlement when it knew the company’s liquidator was not a party to the negotiations.

Evans also upheld Broadsheet’s reading of the asset recovery agreement as entitling it to 20% of any assets recovered from the targets, regardless of whether the assets were located in Pakistan or abroad.

Broadsheet remains under the supervision of a court-appointed liquidator and is beneficially owned by Kaveh Moussavi, an Iranian-born former Oxford University academic who initially funded the arbitration and previously served a year-long prison sentence in England for contempt of court in unrelated proceedings.

In its initial dealings with the NAB and in the early stages of the arbitration, Broadsheet was represented by one of James’ former business associates, William Pepper, an English barrister with offices in New York who is better known in the US for his efforts to prove the innocence of the convicted killers of Martin Luther King and Robert Kennedy. His son Liam Pepper was also at one time a beneficial owner of Broadsheet. They are understood to be no longer involved in the case.

Broadsheet commenced the arbitration in 2009 but Evans was not appointed until three years later, after the company applied to the Chartered Institute. The agreement provided for arbitration seated in Dublin but the parties agreed to move the seat to London.

By this time, Broadsheet had instructed Patton Boggs in DC as its counsel and had secured third-party funding from BlackRobe Capital Partners. But BlackRobe closed down in 2013 and Patton Boggs withdrew as counsel in the following year when it was absorbed by Squire Sanders.

The two Patton Boggs partners who had worked on the case, Ken Reisenfeld and James Tyrell, left before the merger, Tyrell having fallen out with the partnership over the firm’s representation of Ecuadorean plaintiffs in a high-profile dispute with Chevron, which ended in the firm agreeing to pay a US$15 million settlement to the oil company. 

Crowell & Moring took over as counsel to Broadsheet in September 2014. The claimant has also been using former Pakistani attorney general Latif Khosa in the Pakistani courts.

Pakistan and the NAB were initially represented in the arbitration by Colorado firm Sherman & Howard and Samuel Wordsworth QC of Essex Court Chambers, with Allen & Overy coming on board shortly before a two-week hearing on liability in January 2016.

The A&O team included Judith Gill QC before her departure for 20 Essex Street earlier this year, and Mark Levy. Wordsworth is understood to have withdrawn as counsel in around March this year. Another barrister from Essex Court, Adam Board, appeared at the damages hearing.

Some details of the dispute entered the public domain after Broadsheet applied to a Colorado court in 2011 for discovery from James’ estate and former associates in support of the arbitration. In those filings Broadsheet said it was also contemplating a claim under the UK-Pakistan bilateral investment treaty, though this was never initiated.  

There were further revelations in November last year thanks to the Paradise Papers, a release of hacked data from Appleby, the offshore firm which Pakistan had retained to provide expert testimony on Isle of Man law during the liability phase of the arbitration. The Pakistani press has reported extensively on the case in the past few months, Evans’ award on liability having come to light after being filed as evidence in the Supreme Court proceedings against Sharif.

Broadsheet LLC v The Islamic Republic of Pakistan and National Accountability Bureau of Pakistan

Tribunal

  • Sole arbitrator Sir Anthony Evans QC

Counsel to Broadsheet

  • Crowell & Moring (from September 2014)

Partner Stuart Newberger in Washington, DC, and counsel Ashley Riveira and associates Edward Norman, John Laird and Gordon McAllister in London

  • Patton Boggs (from 2011 until August 2014)

Partner Kenneth Reisenfeld and associate Craig Gaver in Washington, DC; partners James Tyrell and Lisa Ann Ruggiero and associate Patrick Gilmartin in New Jersey

  • Baker Botts (until 2011)

Partner Seth Taube in New York

Counsel to Islamic Republic of Pakistan and National Accountability Bureau of Pakistan

  • Allen & Overy (from November 2015)

Partners Judith Gill QC* in Singapore and Mark Levy in London

* Until her move to 20 Essex Street in April 2018

  • Samuel Wordsworth QC (until around March 2018) and Adam Board of Essex Court Chambers

  • Sherman & Howard

Partner David Wilson in Denver, Colorado*

* Brought the case over from Bryan Cave in 2013

Expert witnesses (liability phase)

For Broadsheet

  • Paul Beckett, senior counsel at MannBenham Advocates in Douglas, Isle of Man (on Isle of Man law)
  • John Moye of Moye White in Denver (on Colorado law)
  • Ayesha Siddiqa of SOAS South Asia Institute in London (on history/political background)

For Pakistan/NAB

  • Christopher Cope of Appleby in Douglas (on Isle of Man law)
  • Judge Boyd Boland, former US magistrate judge for District of Colorado (on Colorado law)
  • Aqil Shah of the University of Oklahoma (on history/political background)

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