One of the most dramatic court battles of the past couple of years, and certainly the most prolific in terms of rapid generation of judgments, is the set of proceedings between JSC BTA Bank (the Bank) and Mr Mukhtar Ablyazov and various of his associates and associated companies.
In its most recent judgments, the English court has had to consider the range of tools which were available to it in the face of what it had found to be a wilful contempt of the court’s authority by the defendant, Mr Ablyazov. In doing so, the armoury available to those seeking to enforce the terms of interlocutory orders such as worldwide freezing orders has been expanded.
Those proceedings concerns allegations of frauds which are said to have been carried out by the former chairman of the Kazakh bank on an epic scale (several billion dollars). Mr Ablyazov denies these allegations. He claims to be the victim of a conspiracy headed by the President of Kazakhstan which is seeking to confiscate his assets and neuter him as a political rival to the President. Mr Ablyazov has been resident in England for some time, having claimed political asylum.
At the outset of proceedings, the bank sought worldwide asset freezing orders against Ablyazov and various of his associates who were said to be holding assets on his behalf. It is common ground that Ablyazov holds his assets through placemen – he says he has to do this to shield them from the conspiracy to confiscate them. The bank says he does so to try to conceal the present whereabouts of the assets obtained through the alleged frauds, in the hope of evading enforcement. Many of the reported decisions have concerned the attempts to enforce those freezing orders, and not least the asset disclosure provisions incorporated to assist the capturing of assets within the freezing provisions.
In a series of judgments, the courts have found Ablyazov and his associates to be flouting the terms of the asset disclosure orders. Committal orders for contempt of court have previously been made against some of Mr Ablyazov’s associates. In December 2011, there was a hearing of a committal application against Mr Ablyazov himself, which lasted over two weeks and for which he was present. At the end of the trial, he was asked by the judge to confirm that he would attend the handing down of judgment, which he did. However, when Mr Justice Teare came to deliver his judgment on 16 February 2012, Mr Ablyazov did not attend. His legal team was still receiving instructions from him, but he was concealing his whereabouts from them. It was not clear whether he had fled the country. In his absence, Ablyazov was sentenced to 22 months imprisonment for contempt of court.
The ancillary powers
Ablyazov having become fugitive, the bank applied for three further orders against him.
The first order sought was seemingly novel. The bank asked the court to grant a mandatory injunction that Ablyazov surrender himself to the Tipstaff, an officer of the High Court with a power of arrest, to enforce Ablyazov’s committal to prison to serve his sentence for contempt.
The second order the bank sought was that Ablyazov should again have to make disclosure of his asset position by swearing another affidavit. Ablyazov had of course previously been ordered to make such disclosure – it was for failure to comply with that prior order for which he was being committed.
The third order was the real motivation for the application, and would provide its real force in circumstances where the bank and the court were dealing with someone who had already flouted the authority of the court. The application was for an unless order, which would apply if Ablyazov failed to comply with either of the first two orders.
The judge had no hesitation in granting the injunction that Ablyazov surrender himself to the Tipstaff. Given that Ablyazov had sought to evade his imprisonment for contempt by disappearing, it was perhaps no surprise that the judge found it just and convenient under section 37 of the Senior Courts Act 1981 to make such an injunction. Alternatively, he found it was simply an ancillary order which he could make pursuant to the court’s inherent jurisdiction in order to make its previous orders effective. In reality, it is difficult to see that the injunction was any more likely to persuade Ablyazov to surrender to imprisonment. He was already flouting the court’s orders, and evading the sentence of imprisonment which that had resulted in. So it seems the only real purpose of this order was as a tag on which to pin the consequences of the unless order.
Much the same went for the order that Ablyazov make a renewed and proper disclosure of his asset position. It was argued, amongst other things, that this was unnecessary – Ablyazov was already under a duty to do that under the previous order that he disclose his assets. The judge was unimpressed with all of the arguments put forward by Ablyazov’s counsel.
Again, in reality, the real purpose of the order lay elsewhere. If Mr Ablyazov was already in breach of one order to make proper disclosure, to the extent that he had been sentenced to imprisonment (which he had then sought to evade by fleeing) the mere making of another disclosure order was likely to have very little effect on him, either as a matter of conscience or out of respect for the authority of the court. This order was a platform for the third order.
The third order was the unless order. An unless order, for those not familiar with English procedure, is an order which provides that if it is not complied with, the party which fails to comply will have its case struck out and judgment entered against it on a summary basis. So, the application was for an order that unless Ablyazov complied with the first two orders by surrendering to the Tipstaff and making a fresh and proper disclosure of his assets, his defence to the substantive action should be struck out. This would then enable the bank to enter summary judgment against him, and move straight to enforcement (which would no doubt be an elongated saga of its own).
This is of course a draconian measure, and by no means without controversy. Ablyazov had been found to be in wilful, deliberate and continuing contempt of court. He could hardly expect sympathy from the court. Nevertheless, the application would result in the removal of his right to defend the substantive fraud claims being brought against him. His contempt flowed from the court’s making of an interlocutory order against him, which order was aimed at freezing assets to ensure that if the bank succeeded it would, as far as possible, be able to enforce its judgment. There is a burden which the bank as the applicant for the freezing order had to satisfy at the outset, but that falls far short of the rigour required to secure a judgment at trial. Yet, the course which the bank sought to persuade the court to take would have the result that Ablyazov’s contempt of that preliminary protective measure would lead to a final judgment of the underlying matter in the bank’s favour.
Ablyazov argued that there was no reason to deny him the ability to defend the action simply because he was in contempt of the freezing order – the breach of that order did not, he argued, reduce or affect the ability to hold a fair trial of the issues. To the contrary, to deny him the right to a fair trial was a breach of his human rights under Article 6 of the European Convention.
As his client was a fugitive from the authority of the court, Ablyazov’s counsel also did not have the most attractive starting position from which to advance his arguments. The judge gave them short shrift. Ablyazov was not being denied the right to a fair trial – all he had to do was surrender and serve the sentence for contempt and make a proper disclosure of his assets. He was free to do those things. If it was his choice not to do so, but instead to continue to defy the authority of the court, it was that decision which would deny him the right to defend the claims against him at trial. The purpose of the freezing orders which had been made, and flouted, was to serve the interests of fairness and justice in the proceedings, and to protect the bank, if it eventually established a right to recover losses, against the risk of dissipation of assets.
The balance of fairness, the judge held, was in favour of attaching the unless order to both the disclosure order and to the order to surrender to the Tipstaff.
In most usual circumstances, the English civil courts are able to rely on respect for the rule of law to maintain their authority over civil disputes. The Ablyazov litigation, like the Masri litigation before it, exemplifies the new tests faced by the courts, at least in part because of the increasingly internationalised nature of the disputes over which they are required to adjudicate. In circumstances where so much of the substance underlying the dispute is held (and indeed hidden) in structures outside of the jurisdiction, the normal tools and sanctions the courts use to maintain their authority are diluted.
In responding to those tests, the English courts (prompted by English civil litigators) have again shown that they are prepared to sanction very muscular and innovative approaches in order to give best effect to their authority.
That said, and given the path of the litigation to date, it seems clear that the decision will be appealed. The validity of the approach taken at first instance to these issues will no doubt come under the closest further scrutiny, and the appeals process may well itself turn into another extended detour in the course of these rather extraordinary proceedings.