JSC BTA Bank v Khrapunov: UK Supreme Court Decision Could Have A Ripple Effect In Jersey

Introduction

In JSC BTA Bank v Khrapunov1 the UK Supreme Court ("UKSC") has provided a stir of excitement for civil fraud practitioners which will, no doubt, sustain many conference speeches over the coming months. Might it rival the industry sensation that was Prest v Petrodel Resources Ltd2? Watch this space.

I am not going to address every part of the judgment. In particular I leave it to others to analyse the establishment of jurisdiction under Article 5(3) of the Lugano Convention in circumstances where the only act in England was the conspiratorial agreement3. From a Jersey perspective the two most interesting aspects are that (i) contempt of court can constitute unlawful means for the purpose of the tort of conspiracy and (ii) the UKSC left open the possibility that damages could be available for contempt per se (i.e. without a claimant having to rely on an established cause of action).

Background (in brief)

Mr Mukhtar Ablyazov used to be the chairman and controlling shareholder of a Kazakh bank, JSC BTA Bank ("the Bank"). When the Bank was nationalised he fled to England. The Bank subsequently commenced proceedings in the English High Court claiming that Mr Ablyazov had embezzled approximately US$6bn. These included a worldwide freezing order ("WFO") and an order requiring Mr Ablyazov to disclose the nature and location of his assets. Mr Ablyazov failed to comply with this order and, instead, sought to conceal undisclosed assets through various corporate structures. He was held in contempt of court and sentenced to 22 months in prison, however he fled the country just before this decision.

The Bank obtained default judgments for US$4.6 billion but recovered very little. The present proceedings are against Mr Ablyazov's son in law, Mr Khrapunov, who allegedly conspired with him to conceal his assets.

Conspiracy and Contempt

English law recognises two forms of the tort of conspiracy; "lawful means" and "unlawful means" conspiracy. The claim against Mr Khrapunov was brought in the latter which the Court defined as a "conspiracy to do by unlawful means an act which may be lawful in itself, albeit that injury to the claimant is not the predominant purpose"4. Mr Khrapunov submitted that contempt of court did not constitute unlawful means as the necessary conduct had to be independently actionable. The Court rejected this argument.

It held that the proper test to apply was whether there is a just cause or excuse for the defendants...