Breach of freezing order is grounds for conspiracy claim

18 May 2018

Upholding a decision of the Court of Appeal, the Supreme Court has determined that, in cases involving conspiracy to injure, acting in contempt of court amounts to “wrongful means”, whilst the place of the “event giving rise” to the damage suffered, for the purposes of determining jurisdiction, is the place where the conspiratorial agreement was hatched.

In JSC BTA Bank v Khrapunov the Supreme Court was asked to consider:

  1. whether entering into an agreement to assist in putting assets out of the reach of a claimant in breach of a worldwide freezing injunction could give the claimant a cause of action against the person assisting with those breaches; and
  2. whether the English court has jurisdiction to hear that claim where the agreement to conceal the assets took place in England, but the implementation of that agreement took place out of the jurisdiction.

The defendant to these proceedings, Mr Khrapunov, is the son-in-law of Mr Ablyazov, a Kazakh national who fled to England when he was accused by the JSC BTA Bank (Bank) of embezzling US$6 billion. Mr Ablyazov was made the subject of a High Court worldwide freezing order in 2009 and a search and disclosure order the following year. The Bank claimed that Mr Khrapunov entered into an unlawful means conspiracy with Mr Ablyazov to dissipate and conceal his assets in contempt of court.

Mr Khrapunov, who is domiciled in Switzerland, resisted the claim on two bases:

  1. the Bank did not have good cause of action: contempt of court (by assisting in the breach of the freezing order), he argued, did not amount to “unlawful means” for which the Bank could bring a claim for conspiracy; and
  2. the English courts did not have jurisdiction: Article 5 of the Lugano Convention, which allows a person domiciled in one convention country to be sued in the courts of another country where the harmful event occurred, did not apply because the damage caused was not the conspiratorial agreement itself but the acts done pursuant to that agreement, which were all outside England.

The Supreme Court rejected Mr Khrapunov’s arguments.

It ruled that the Bank had a good arguable case that criminal contempt of court amounted to an unlawful conspiracy against the Bank as it had the effect of preventing the Bank from enforcing its judgments against Mr Ablyazov.

The English courts have jurisdiction because Article 5 provides for jurisdiction of the country where the harmful events originated. Here the origin of the damage suffered was the place where the conspiratorial agreement was made, as it was this event (i.e. the scheme by which Mr Khrapunov agreed to assist Mr Ablyazov’s breach of the freezing order) which gave rise to and caused the Bank loss. The fact that the implementation of that agreement took place overseas was not relevant.

Anyone on notice of a freezing order, best take note: breaches of these orders are not only criminal matters, claims for damages may follow.