Bank’s claim justiciable


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The Commercial Court in JSC BTA Bank v Mukhtar Ablyazov and others [2011] EWHC 202 (Comm) has refused to stay proceedings brought by a Kazakh bank against its former Chairman.

The bank had been nationalised in February 2009, and the defendant was previously its Chairman and a political opponent of the Kazakh government. The claim was for monies allegedly taken by the defendant.

The defendant argued that proceedings should be stayed as an abuse of process and contrary to public policy. There had been a flagrant breach of international law and proceedings were brought for the collateral purpose of political oppression. They mounted to an indirect enforcement of a penal, revenue or other public law, which could not therefore be entertained, and in all the circumstances they were a breach of the defendant’s rights under Article 6 of the European Convention on Human Rights, as it would not be possible to have a fair trial.

The court directed that two issues be determined first: (1) whether it was arguable that the proceedings involved indirect enforcement of a foreign penal, revenue or other public law; and (2) whether the stay application raised issues which were not justiciable.

On the first issue, the court considered whether the central interest in bringing the claim was governmental in nature. It drew a distinction between the bank and its shareholders, and took the view that the bank’s claims had potentially existed before the bank was nationalised and had not changed. The claim appeared to be in the interests of the bank. A large proportion of any recovery would go to the bank’s creditors rather than to the government. Accordingly, the court was not prevented from dealing with the claim.

On justiciability, the bank argued that the application for the stay would require the court to rule on the legality of the nationalisation of the bank, which involved the exercise of sovereign power within a state’s territory. The court agreed that the circumstances did not fall within any exceptions to the act of state doctrine and so the court would not hear claims that involved inviting the court to decide whether the nationalisation of the bank was valid.

Paul Howcroft, Partner, Fladgate LLP (phowcroft@fladgate.com)

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