Overseas banks beware as the tort of unlawful means conspiracy could open up new ways of punishing those who aid defendants aiming to evade freezing orders.
Between 2005 and early 2009, Mr Ablyazov was chairman and majority shareholder of JSC BTA Bank (BTA), one of Kazakhstan's four systemic banks. In February 2009, when BTA was effectively nationalised because of the impact of the global financial crisis, Mr Ablyazov fled to England amid allegations that during 2008 and 2009 he and the other defendants misappropriated BTA funds in excess of US$ 10 billion. In August 2009, BTA obtained a worldwide freezing injunction over Mr Ablyazov’s assets and an order for disclosure of his assets. In 2012, on the eve of committal to prison for contempt of court relating to breaches of those orders, Mr Ablyazov fled the jurisdiction, following which, BTA obtained judgments in default for a sum exceeding US$ 4.6 billion. To date, BTA has made no significant recoveries against those judgments.
Claim in conspiracy
JSC BTA Bank v Ablyazov  EWHC 230 (Comm) considered below, relates to proceedings instituted by BTA against Mr Ablyazov and Ilyas Khrapunov, Mr Ablyazov’s son-in-law, for the tort of unlawful means conspiracy. BTA alleges that Mr Ablyazov and Mr Khrapunov conspired to breach the freezing orders (ie act in contempt of court) on multiple occasions since 2009. In deciding whether the English court has jurisdiction to hear the case against Mr Khrapunov (domiciled in Switzerland) the court considered:
- whether BTA had a good arguable case that it could make out the case, in particular, that contempts of court were 'unlawful' so as to constitute the tort; and
- whether either (a) Mr Ablyazov was domiciled in England, and could be sued as of right in the jurisdiction, with Mr Khrapunov then brought into proceedings as a 'necessary and proper party' to the action or (b) the place where the harmful event (the tort of conspiracy) occurred, was England.
Freezing orders and contempt of court
A freezing order contains a penal notice which warns recipients that breaching the order, or assisting another to do so, it is a contempt of court, punishable by fine, seizure of assets and/or imprisonment.
Anyone served with or on notice of the order can be in contempt if they assist with disposal of assets or transfer of assets out of the jurisdiction. This includes banks, their officers and those with authority to transfer funds held on client accounts.
However, as no duty of care exists between the person obtaining the freezing order and the bank on which it is served, the person serving the order cannot claim in damages for negligence if a bank fails to enact appropriate controls (see Customs and Excise Commissioners v Barclays Bank  1 AC 181). Remedies for breach of a freezing order are penalties for disobeying the courts, and do not enable a claimant to recover damages from third parties.
In this case, BTA has had to show an independent cause of action arising from breaches of the freezing order. The court found that the conspiracy to dispose of frozen assets amounted to "very serious interference with the administration of justice" and could be considered "unlawful" for the purposes of unlawful means conspiracy.
As Mr Ablyazov fled to avoid imprisonment, the court found him not domiciled in England, and therefore the English courts did not have jurisdiction as of right. However, as BTA gave evidence that instructions relating to a number of the transactions forming the conspiracy must have been given from London, the court found that it had jurisdiction to hear the claims relating to those transactions.
Implications for banks served with orders freezing a client’s assets
Banks in England have always had an imperative to ensure accounts are frozen when notified of a freezing order because of the risk of being found in contempt of court if they do not. Following this judgment, banks will want to ensure that they have in place appropriate policies and safeguards to prevent circumstances of freezing orders of which they are notified, as a bank employee intentionally aiding a party subject to a freezing order before controls have taken effect could expose himself to a claim in conspiracy.
Freezing orders will not typically be served on banks overseas because English court orders do not in general affect persons not subject to the jurisdiction of the English court and in those circumstances there will be no penalty for that overseas bank failing to prevent transfers from its accounts. This may change following this the BTA case; if an overseas bank were in the place of Mr Khrapunov and one of its employees conspired with the fraudster to move monies it could be subject to proceedings here if the fraudster is subject to English jurisdiction as of right (being domiciled here) or the conspiracy originated in (or instructions were given from) England.