JSC BTA Bank v Mukhtar Ablyazov & Ors (Rev 1)

Where a defendant breaches disclosure obligations ancillary to a worldwide freezing order, the court may make an unless order debarring a defence or permitting judgment, even while a jurisdictional challenge or application to discharge the freezing order remains pending.

The discretion requires a balance between the defendant’s prejudice if disclosure is later found unjustified and the claimant’s risk of losing the benefit of any judgment through dissipation of assets. The court may consider the strength of the claim, the urgency and purpose of the disclosure, the wider interests of justice and the overriding objective. A restriction on enforcement can preserve the effectiveness of the jurisdictional challenge.

The claimant alleged that more than US$1 billion had been misappropriated through sham loans, letters of credit and intermediary companies. Freezing orders required the defendants to disclose worldwide assets, answer tracing questions and provide supporting documents.

Most defendants failed to comply adequately. They then challenged the English court’s jurisdiction and sought to discharge the freezing order, contending that Kazakhstan was the appropriate forum. The claimant applied for an unless order debarring the defendants from defending and permitting judgment if disclosure was not provided. The central issue was whether such a sanction could properly be imposed before the jurisdictional challenge and application to discharge had been determined.

1. Power to impose an unless sanction. The court was entitled, in its discretion, to order that continued non-compliance with disclosure obligations ancillary to a freezing order would permit the claimant to enter or apply for judgment. Without such a sanction, disclosure orders might be ineffective.
2. Pending jurisdictional challenge. A challenge to jurisdiction did not prevent the court from requiring disclosure or enforcing the obligation. Grupo Torras v Sheikh Fahad established that ancillary disclosure could be ordered on the assumption that jurisdiction existed. It followed that a sanction could also be imposed to secure compliance.
3. Balancing exercise. The court had to weigh the prejudice to defendants compelled to disclose private information if the jurisdictional challenge later succeeded against the claimant’s risk that assets would be dissipated and any judgment rendered nugatory. The strength of the fraud case, the proprietary claims, the period of default, the inadequacy of the attempted compliance and the wider interests of justice strongly favoured the claimant.
4. Norwich Pharmacal information. Questions seeking information about other wrongdoers and the destination of the money raised materially similar considerations. The fact that some information was obtained under the Norwich Pharmacal jurisdiction did not prevent an unless sanction where the information also supported effective freezing relief and recovery.
5. Form of order. The order permitted judgment against a non-compliant defendant but restricted enforcement against defendants challenging jurisdiction until that challenge was determined. If jurisdiction failed, the judgment would fall away, and the defendants remained able to seek relief from sanction. The order was made with compliance required by 4 p.m. on 3 September 2010. A permission application would temporarily suspend the claimant’s liberty to enter or apply for judgment.

First-instance application in the Commercial Court. The judgment itself records related interlocutory and appellate decisions, but no appellate history for this judgment.