Hogan Lovells has won a landmark judgment for its client BTA Bank in one of the largest fraud trials ever to come before the English Courts.
The dispute arose in 2009 when BTA Bank launched global legal proceedings against its former chairman Mukhtar Ablyazov and his associates after its auditors at PwC identified a $10bn hole in the bank’s balance sheets, leading to the discovery of large-scale fraud committed by Ablyazov. Proceedings in the UK consisted of 11 claims filed by the Kazakhstan bank in the English High Court seeking the recovery of more than $6bn in misappropriated assets.
On Wednesday the Supreme Court ruled in favour of BTA on its appeal of Ablyazov’s use of unusual loan arrangements to circumvent spending restrictions contained in the English standard form freezing order, relating to four loan agreements with two BVI companies. Worth around £40m, Ablyazov took out the loans while assets were frozen in a worldwide freezing order obtained by BTA at the outset of English proceedings.
Ablyazov directed the lenders to pay money to fund his solicitors, the solicitors of other defendants and other third parties without disclosing details of those payments to BTA Bank or the court.
The Supreme Court unanimously ruled Ablyazov’s funding arrangements were captured by the terms of the freezing order, and were therefore subject to the restrictions and disclosure obligations contained within it.
The decision means the Supreme Court has overturned the previous judgments at first instance and in the Court of Appeal, and was the first time the Supreme Court has been asked to interpret the standard form freezing injunction. As such, the ruling sets a precedent for future English freezing orders.
BTA Bank has so far secured judgments for more than $4.5bn and wants to enforce those judgments against assets currently held in receivership. Having been found guilty of contempt of court in 2012, Ablyazov fled the jurisdiction before sentencing and was debarred from defending various claims brought against him by BTA Bank. He is currently in prison in France.
Hogan Lovells has advised the bank since 2009 in its series of fraud trials before the English courts, and on this occasion the team was led by London litigation partners Chris Hardman and Alex Sciannaca. Erskine Chambers duo Stephen Smith QC and Tim Akkouh were instructed by Hogan Lovells.
Ablyazov had stopped instructing Addleshaw Goddard in 2014 so was not represented at the hearing. However 20 Essex Street pair Duncan Matthews QC and Charlotte Tan had previously been instructed for him and made written submissions in opposition at the permission to appeal stage.
At the court’s request, the Attorney General appointed independent counsel, 4 Stone Buildings duo Jonathan Crow QC and Adam Holliman, as advocates to the Court.
Commenting on the judgment, Sciannaca said: ‘This is the first time the Supreme Court has been called upon to rule on the bank’s continuing proceedings to recover the billions of dollars stolen from it by Mr Ablyazov. The Supreme Court’s judgment closes a loophole in the freezing order regime that unscrupulous defendants such as Mr Ablyazov have previously sought to exploit.’
Read the full Supreme Court decision here.