JSC BTA Bank v Ablyazov & Ors

A company officer who knowingly assists a controlling shareholder to misappropriate company funds may be liable for the resulting loss. Non-disclosure of an interested party’s connection with a transaction can constitute deception where it prevents the board from exercising its protective statutory function. A shareholder resolution authorising proceedings may be retrospective where the governing provision is directed to authorisation rather than prior approval. Under Kazakh law, an unjust enrichment remedy may extend to property acquired with misappropriated money where that construction is necessary to restore the victim’s rights. Under Russian law, deliberate damage requires subjective awareness of wrongdoing and foresight of the possibility or inevitability of damage.

The Bank brought three actions arising from alleged frauds committed by its former chairman, Mukhtar Ablyazov. The claims concerned loans to offshore companies in the Granton action, payments connected with the acquisition of interests in foreign banks in the Drey action, and a loan used to acquire the Vitino port in the Chrysopa action.

The Bank claimed against former senior officers and associated companies for knowing assistance, breach of statutory duties, and recovery of property or damages under Kazakh and Russian law. The central issues were whether the transactions were fraudulent, whether the defendants knowingly assisted the frauds, the effect of shareholder authorisation and foreign limitation rules, and whether the Bank could recover shares acquired with the loan proceeds.

1. Granton and Drey. The court found that Mr. Zharimbetov knowingly assisted Mr. Ablyazov’s frauds. He approved or facilitated substantial loans and transactions despite inadequate due diligence, concealed ownership information, and involvement in schemes designed to repay earlier loans or extract money for Mr. Ablyazov’s benefit. He was liable under Articles 62 and 63 of the Joint Stock Companies Law of Kazakhstan.
2. Article 63(2) did not require the shareholders’ resolution to precede commencement of proceedings. Its purpose was to ensure that proceedings were authorised by the shareholders. Retrospective authorisation was sufficient. The three-year limitation period under the Joint Stock Companies Law applied to claims against an officer for breach of statutory duties; the one-year employment limitation period did not displace it.
3. Chrysopa. The loan agreement was not a sham. The evidence instead established that Mr. Ablyazov procured the loan by withholding his interest in the transaction from the Bank’s board. That withholding was deception because the board was entitled to consider whether the related-party transaction was in the Bank’s interests. Mr. Khazhaev knowingly assisted the fraud. Under the Russian Labour Code, his conduct amounted to deliberate damage because he acted with subjective awareness of wrongdoing and foresaw damage to the Bank.
4. Usarel was liable under Kazakh law. Mr. Ablyazov’s acts and intentions were attributable to Usarel because he controlled it and the transaction was intended to benefit it. The term dokhody was construed to include the shares purchased with the Bank’s money, since that construction best restored the Bank’s violated rights. Usarel had to deliver up the shares acquired with the Bank’s funds, excluding the proportion acquired with the separate US$6 million contribution.
5. The claims succeeded subject to avoiding double recovery. Mr. Zharimbetov was liable for US$1,145,231,078.17 in Granton and US$401,508,769 in Drey. Usarel had to deliver up the specified shares and was liable for any shortfall in their value. Mr. Khazhaev was liable for any corresponding shortfall under Russian law.

Not stated in the judgment.