The $6bn legal battle between Kazakhstan’s JSC BTA Bank and its former chairman Mukhtar Ablyazov is heading to the Supreme Court, where for the first time the justices will examine the standard form freezing injunction.
The legal pursuit of Addleshaw Goddard client Mukhtar Ablyazov, the former chairman of Kazakhstan’s JSC BTA Bank, has been ferocious from the get go.
The former bank manager, who is challenging an extradition ruling in France that could see him sent to Russia, stands accused of siphoning off in excess of $8bn during his time as BTA’s chairman.
It was the biggest case to hit the High Court in 2012. A $6bn claim was issued against Ablyazov issued by BTA’s London-based legal team, featuring Hogan Lovells partner Chris Hardman and New Square’s Stephen Smith QC (Smith has since moved to Erskine Chambers).
The firm is believed to have obtained judgments worth in excess of $3.5bn for its client through more than 200 court clashes resulting in more than 50 reported decisions so far, along with a whole body of new law regarding freezing injunctions. Whether any money has actually been repaid is unclear, with sources suggesting that no money has been handed over to BTA by the Ablyazov camp.
Now the litigation is about to take a new turn.
The Supreme Court last month accepted a request from BTA to examine how exactly Ablyazov funded his defence.
Those who regularly appear before the final court know just how important the permission to appeal (PTA) stage is. It is extremely rare for the Court of Appeal to send a case up to the final court as it did last month in the politically sensitive dispute over the correspondence between Prince Charles and the Government (12 March 2014). This means the decision of which cases to review is largely left to the discretion of the Supreme Court justices themselves.
In this instance the PTA decision was made by Lord Mance, one of the most senior justices; former Brick Court member Lord Sumption, who was famously leapfrogged onto the top bench; and a former head of Birmingham set No 1. Fountain Court, Lord Hughes, who joined the Supreme Court bench last April.
The final court will only busy itself with cases that are deemed to raise “a point of law of general importance”. Of the 26 PTA applications made in February, just eight were granted. This reflects a wider theme, with about a third of applications granted annually.
All this serves to highlight the importance of the Ablyazov appeal.
The case centres on the freezing order granted against Ablyazov back in August 2009 by Mr Justice Teare. The case specifically relates to the funding of the defence legal team and Ablyazov’s living expenses and whether he had breached the 2009 freezing order.
The order allowed the Kazakh billionaire up to £10,000 a week towards his individual ordinary living expenses as well as a “reasonable amount” toward his legal fees.
The injunction stated: “This order does not prohibit [Mr Ablyazov] from dealing with or disposing of any of [his] assets in the ordinary and proper course of any business conducted by [him] personally.”
The £40m loans in question, BTA contended, were in breach of the freezing order because they diminished Ablyazov’s net asset position, contrary to the primary purpose of the injunction.
At the High Court Mr Justice Christopher Clarke dismissed the application.
The Court of Appeal (CoA) threw out the subsequent appeal on the basis that the word “assets” within the freezing order should not be read to include borrowings of this nature, as a loan cannot be readily understood to be an “asset” against which the bank could ultimately enforce its judgments.
Addleshaws said the CoA ruling was an important victory for their client, one that would ensure he could continue to defend himself against politically motivated claims.
Indeed, the court has described the bitter dispute as “extraordinary litigation on a large scale”, which had been pursued with a vigour akin to “trench warfare”.
Should the Supreme Court quash the ruling of the lower courts it will have an impact on all freezing orders granted by the court in recent years, although whether it will have any impact on money already paid to his legal team remains unlikely. The firm has signalled intent to defend the claims rigorously.
In a statement the firm said: “If [BTA] successful in this appeal – which we do not expect to be the case – Mr Ablyazov’s current method of funding might no longer be appropriate, it will have no impact on the past funding of the litigation, given the clear and contemporaneous authority given to Mr Ablyazov’s arrangements by the Commercial Court and the Court of Appeal”.
When it gets an outing in the Michaelmas term it will be the be the first time the court has ever been required to interpret the wording of the standard form freezing injunction.
This is a case that will be watched closely at home and abroad.
For the claimant JSC BTA Bank
Hogan Lovells partner Chris Hardman, counsel to be confirmed (TBC)
For the defendant Ablyazov
Addleshaw partners Ian Hargreaves and Richard Leedham, counsel TBC