Stash cloud

As the authorities probe the bond dealings of JSC BTA Bank’s ex-chairman, Catherine Newman QC highlights some legal aspects of the saga that appear to add up to a near-reversal of the burden of proof

Every now and then a saga occupies the courts with a large number of applications, many of which publicise not only the antics of the alleged rogues against whom the case is brought, but also the gentle inventiveness of law teams pushing remedies to meet the justice of the case.

The JSC BTA Bank series of cases is one such story. JSC BTA Bank is a large ­Kazakhstan bank with a cheerful website populated by smiling young people. Its ­chairman used to be Mukhtar Ablyazov, a man whose lending policy is said to have been suspect and damaging to the interests of the bank. One of the contested claims against him states that he fraudulently misappropriated funds and bonds worth billions.

Ablyazov has been made the subject of a worldwide freezing order on a non-­proprietary basis and has also been required to state the source of the funds being used to pay his legal expenses (JSC BTA Bank v Ablyazov & Ors (2011)). The bank is, of course, keen to trace or follow the bonds or their proceeds. To that end it has sought and obtained wide-ranging ancillary relief in the form of disclosure and other orders.

Applying an earlier decision of the court, Mr Justice Christopher Clarke said that if the defendant were to have the benefit of spending money that would otherwise be frozen, he must show that there is no possibility of the money being the subject of a claim by the bank from a tracing point of view.

Cache questions

Notwithstanding the fact that this is a case in which judges have repeatedly said there is strong evidence of wrongdoing and a series of orders that have not been complied with, this is almost tantamount to a reversal of the burden of proof and thus a powerful order to make. Ablyazov was also ordered to answer a list of questions about his funding arrangements, it being suspected that nominees were making payments out of assets that were, in reality, his.

Missing persons

One of Ablyazov’s colleagues, Syrym Shalabayev, is said to have concealed the proceeds of the realisation of missing bonds.
This leads us to another of the interesting uses of the court’s interim jurisdiction for which this story is responsible: the court has made orders ancillary to worldwide freezing orders, requiring Shalabayev not only to disclose the details of his assets, as is commonplace, but also to answer a list of questions that have been designed to assist the bank in following the proceeds of the bonds so that it can ascertain whether it can bring a tracing and following claim.

This too is a use of the court’s jurisdiction that is highly favourable to the claimant bank and veers sharply away from the notion that a defendant does not have to help a claimant make out a case against themself. Shalabayev has gone missing and is subject to an order for imprisonment for contempt of court, made in his absence, for failing to comply with more than one of these court orders. At the end of October Henderson J made an unless order in ­relation to his defence.

His solicitors have also been the subject of an order requiring them to disclose the ­contact details they hold for him, an order that was the subject of a careful judgment weighing up the importance of maintaining confidential information against the interests of justice. An application to require the solicitors to disclose what they knew about Shalabayev’s assets failed as being likely to trespass on privileged communications.

Trouble agent

The litigation has overseas elements too. In JSC BTA Bank v Fidelity Corporate ­Services Ltd (2010) the British Virgin Islands (BVI) Court of Appeal allowed an appeal against a first-instance refusal to require registered agents in the BVI to ­disclose information concerning certain BVI-registered companies using the ­Norwich Pharmacal jurisdiction. Although the BVI court could exercise a freestanding Norwich Pharmacal jurisdiction in a ­suitable case, the report indicates that there are substantive proceedings ongoing there. It was said that the information would or could assist in the recovery of assets.

The BVI Court of Appeal held that the role of a registered agent is more than that of a mere onlooker and, by maintaining companies, they could well become mixed up in wrongdoing, albeit innocently.

A weekly Lawtel search for the JSC BTA Bank name frequently throws up yet ­another interesting episode to follow in this saga, but whether there will ever be a trial remains to be seen.

Catherine Newman QC is a barrister at Maitland Chambers