JSC BTA Bank v Mukhtar Ablyazov

JurisdictionEngland & Wales
JudgeMr. Justice Teare
Judgment Date16 July 2010
Neutral Citation[2010] EWHC 1779 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: 2009 Folio 1099
Date16 July 2010

[2010] EWHC 1779 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

IN PRIVATE

Before: Mr. Justice Teare

Case No: 2009 Folio 1099

Between
JSC BTA Bank
Claimant
and
Mukhtar Ablyazov
Defendant

Stephen Smith QC, Clive Jones and Tim Akkouh (instructed by Hogan Lovells International LLP) for the Claimant

Anthony Trace QC, Duncan Matthews QC, Lawrence Akka, Thomas Grant and Alexander Winter (instructed by Stephenson Harwood) for the Defendant

Hearing dates: 25–28 May and 8 June 2010 (with further evidence and written submissions being completed on 7 July 2010)

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic. I further direct that this judgment, having been redacted pursuant to paragraph 24 of my Order dated 6 August 2010, may be made publicly available.

MR.JUSTICE TEARE

Mr. Justice Teare

Mr. Justice Teare:

1

This is an extraordinary case.

2

The Claimant (“the Bank”) is a bank in Kazakhstan, 75.1% of whose share capital has, since 2 February 2009, been owned by the State of Kazakhstan through a sovereign wealth fund, Samruk-Kazyna. On that date the State effectively took control of the Bank when, according to the evidence of the Bank, there was significant concern as to the ability of the Bank to continue as a going concern. The Bank's accounts for the year ending 31 December 2008 recorded a negative equity of about US$6.1 billion. Its debts, which are said to amount to US$12 billion, are being restructured pursuant to the law of Kazakhstan.

3

The Defendant (“Mr. Ablyazov”) is the former chairman of the Bank and is accused by the Bank of “widespread misappropriation of the Bank's funds.” It is said that he has treated the Bank “as if it were his own private source of funds”. Four claims have now been issued in this jurisdiction against Mr. Ablyazov. The total sum claimed is in excess of US$1.8 billion. Further claims are anticipated which I was told will bring the total sum claimed to US$4 billion.

4

Mr. Ablyazov denies these claims. He states that the claims are an attempt by the President of Kazakhstan, Nursultan Nazarbayev, to take control of his assets in support of a politically motivated claim against Mr. Ablyazov, who is a leading figure in Kazakhstan's democratic opposition. His evidence paints a chilling picture of life in Kazakhstan where power resides with the President and the members of his family and close associates, where the rule of law is not respected and where dissent is ruthlessly eliminated. In 2003 Mr. Ablyazov was arrested and imprisoned and his assets seized after what he and others have said was a politically motivated trial. Whilst imprisoned on what he says were “trumped-up” charges he says that he was subjected to mistreatment, torture and an unsuccessful plot to assassinate him and that his assets were “distributed to the President's coterie”. He says that political assassination is used in Kazakhstan as a means of silencing opposition and that there was a further attempt to assassinate him in 2004 in Moscow. His evidence suggests that Kazakhstan has much in common with Ancient Rome.

5

In late January 2009 Mr. Ablyazov was forced to leave Kazakhstan hurriedly. He arrived in London where he now lives with his wife and three of his four children in a house in Bishop's Avenue. He is seeking permanent leave to remain in this country. In August 2009 these proceedings were commenced and a Freezing Order was issued against him together with an order restraining him from leaving the jurisdiction and requiring him to surrender his passport.

6

When he disclosed his assets pursuant to the Freezing Order they were said to be worth, in total, several billion US dollars. Since then, as a result of corrections and further evidence, he appears to value his assets in a somewhat smaller figure but the valuation is still in excess of one billion US dollars.

7

Mr. Ablyazov does not hold his assets in his own name. Rather, a trusted associate appears to hold shares in a holding company on his behalf and by that means controls the shareholdings in a chain of other companies at the bottom of which chain is an operating business. The use of a nominee and of companies registered in offshore jurisdictions makes it difficult to trace his assets. He says that the elaborate scheme by which he owns his assets is necessary to protect him from unlawful depredations by the President of Kazakhstan.

8

The Court has to determine three applications. The first is an application by the Bank for the appointment of a receiver over Mr. Ablyazov's assets in support of the Freezing Order (“the receivership application”). The second is an application by Mr. Ablyazov for clarification as to the ambit of the Angel Bell liberty to deal with assets in the ordinary course of business (“the clarification application”). The third is an application by Mr. Ablyazov for the return of his passport (“the passport application”).

9

Although this case is still only at an interlocutory stage it is apparent that it is being fought by means of the forensic equivalent of trench warfare. Very considerable evidence in writing has been exchanged. A great many points have been taken. Every response is met with a determined counter attack on a related but different point to which in turn a response is provided. And so the process goes on. Progress, if any, is slow. The Skeleton Argument of Mr. Smith QC on behalf of the Bank ran to some 91 pages. The Skeleton Argument of Mr. Trace QC for Mr. Ablyazov on the receivership application ran to some 110 pages and the Skeleton Argument of Mr. Matthews QC on behalf of Mr. Ablyazov on the clarification and passport applications ran to a modest 30 pages. The hearing required 4 and half days. Liberty was given for further evidence on discrete topics, together with further written submissions, to be filed after the hearing.

10

Whilst I have attempted to consider all of the many points canvassed in evidence and argument I have restricted this judgment, in order to ensure that it is of manageable size, to the principal points taken by the parties and in particular to those points which have enabled me to decide the applications before the Court.

The Receivership Application

11

Pursuant to a judgment and order of mine dated 17 March 2010 this application is being heard in private.

12

The court's power to order the appointment of a receiver derives from section 37 of the Supreme Court (now Senior Courts) Court Act 1981. The court may appoint a receiver “in all cases in which appears to the court to be just and convenient to do so.”

13

In deciding whether it is just and convenient to make the order all the circumstances of the case must be considered. Those circumstances cannot be exhaustively defined but the context of the present case, where a Receivership Order is sought in support of a Freezing Order, suggests, as a matter of principle, that at least the following matters should be considered.

14

The appointment of a receiver prior to judgment displaces the defendant as the person in control of his assets. It is therefore an invasive remedy. When a Receivership Order is sought in support of a Freezing Order the court should therefore ask itself whether the Freezing Order has provided the claimant with adequate protection against the risk that the defendant's assets may be dissipated prior to judgment. For if it does provide adequate protection the Receivership Order will not be necessary and it will therefore be neither just nor convenient to grant the invasive remedy of a Receivership Order.

15

In a case where there is evidence that a defendant has breached or is about to breach the terms of a Freezing Order the court may well conclude that the Freezing Order does not provide the claimant with adequate protection against the risk that a defendant's assets may be dissipated before judgment. It was suggested that such evidence is the only evidence capable of founding such a conclusion. I disagree. There may be other circumstances which show that the defendant cannot be trusted to obey the Freezing Order. In the present case reliance is placed on the defendant's inadequate disclosure of his assets. In my judgment inadequate disclosure may, depending on the circumstances of the case, enable the court to conclude that the Freezing Order does not provide the claimant with adequate protection.

16

The risk that the appointment of a receiver may cause harm to the interests of the defendant will also have to be considered as will the adequacy of the claimant's undertaking in damages and any fortification of that undertaking which is offered. The potential for harm is greater where, as in this case, the application is to appoint a receiver over all of a defendant's assets. In such a case precisely how the receivers plan to take control of the defendant's assets will be a material consideration because it will have a bearing upon the damage likely to be caused to the defendant's interests.

17

In all cases the court will have to weigh the competing factors in order to determine whether the making of a Receivership Order is just and convenient.

18

I have been referred to two cases in which the power to make a Receivership Order has been exercised in support of a Freezing Order prior to judgment; Derby v Weldon (Nos. 3 and 4) 7 November 1988 (unreported at first instance) and [1990] Ch.65 in the Court of Appeal and ICIC v Adham [1998] BCC 134. In Don King Productions Inc. v Warren [1999] 2 Lloyd's Reports 392 the court decided not to exercise the power.

19

Since both parties have relied upon these cases it is necessary to note the approach of the court in each of those cases.

20

I...

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18 cases
  • JSC BTA Bank v Ablyazov and Others (No 4)
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 10 February 2011
    ...will then be possible to consider how what remains of the Stay Applications should be dealt with. 2 In my judgment dated 16 July 2010 [2010] EWHC 1779 Comm ("the receivership judgment") I summarised the claims in these actions and the response of Mr. Ablyazov to them as follows: "2. The Cl......
  • Salim Shalabayev v JSC BTA Bank
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 7 October 2016
    ...three matters. The first is the manner in which Mr. Ablyazov "holds" his assets. In my judgment on the receivership application, [2010] EWHC 1779 (Comm) at paragraph 7, I described it in these terms: "7. Mr. Ablyazov does not hold his assets in his own name. Rather, a trusted associate app......
  • JSC BTA Bank v Mukhtar Ablyazov (Recusal)
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 28 November 2012
    ...assets the judge has appointed receivers on the basis that Mr Ablyazov could not be trusted to comply with the court's orders: [2010] EWHC 1779 (Comm), [2010] EWCA Civ 1141. 4 In March 2011 the judge dealt with a lengthy case management conference. As a result three of the eight cases pro......
  • Ilyas Khrapunov v JSC BTA Bank
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 2 February 2017
    ...On 6 August 2010 Teare J made an order appointing receivers to control such assets as had been disclosed by Mr Ablyazov: see [2010] EWHC 1779 (Comm). It contained a similar Babanaft proviso in relation to persons outside England and 17 The Bank has adduced evidence which suggests that sinc......
  • Request a trial to view additional results

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