May 23, 2018

U.K. Supreme Court Asserts Jurisdiction Where Conspiracy Was Hatched in England

Questions on conflict of laws can be fiendishly difficult to decipher. When the U.K. Supreme Court rules on this topic, it is important to take note.

In JSC BTA Bank v Khrapunov [2018] UKSC 19, the U.K. Supreme Court considered whether contempt of court can constitute “unlawful means” for the purposes of the tort of conspiracy, and which court had jurisdiction where the tort was “set in motion” within England but the subsequent relevant acts took place outside it.

The decision provides some reassuring clarification for situations where different elements of a tort occurred in different jurisdictions; the English court can now look at the formation of the conspiracy itself to find a U.K. nexus and assert its authority. This is particularly helpful in the context of enforcing freezing orders and obtaining injunctive relief from parties fleeing jurisdictions or flagrantly breaching court orders, occurrences all too common in cases set against a backdrop of fraud or unlawful means conspiracy.

The Facts

The case is part of a long-running saga of litigation between JSC BTA Bank (the Bank) and its former chairman and controlling shareholder, Mr Ablyazov, and his associates. The Bank claims that Mr Ablyazov embezzled over $6 billion during his tenure and has successfully obtained court orders against him, including a worldwide freezing order, a receivership order and default judgments totalling $ 4.6 billion. This has been a Pyrrhic victory as the Bank has not been able to trace Mr Ablyazov and is said to have recovered very little.

In 2015, the Bank brought a claim against Mr Ablyazov (who did not participate in these proceedings) and his son-in-law Mr Khrapunov, who lives in Switzerland. The Bank alleged that Mr Khrapunov, whilst aware of the freezing and receivership orders, entered into a “combination” or understanding to assist Mr Ablyazov in concealing and dissipating his assets. The Bank said Mr Khrapunov was in contempt of court and argued that such activity constituted the tort of conspiracy to cause financial loss by unlawful means.

The Legal Issues

Contempt as “Unlawful Means”
In bringing its claim of unlawful means conspiracy, the Bank sought to rely on Mr Ablyazov’s and Mr Khrapunov’s breaching of the freezing and receivership orders as the “unlawful means.” Although contempt of court, such as breach of a court order, is not in itself actionable by the beneficiary of the court order, the Supreme Court confirmed that contempt of court may constitute “unlawful means” for the purposes of the tort of conspiracy. Consequently, parties who assist in breaching court orders should now be aware that they may be liable for damages for conspiracy.

Since Mr Khrapunov lives in Switzerland, whether the court had jurisdiction over a tort claim depended upon the terms of the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

Mr Khrapunov argued that the English court lacked jurisdiction since the general rule in the Lugano Convention is that a person should be sued in their state of domicile. The Bank countered that in matters relating to tort, the general rule did not apply and it was free to sue Mr Khrapunov in the courts of another Convention state “where the harmful event occurred or may occur.”

The Supreme Court held that the event giving rise to, and being the origin of, the damage was the conspiratorial agreement in England. This set the tort in motion. In entering into the agreement, Mr Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help Mr Ablyazov to carry the scheme into effect. The alleged subsequent dealings with the assets subject to the freezing and receivership orders would have occurred pursuant to and in implementation of that agreement. Accordingly, the English court possessed the requisite jurisdiction to hear a claim of conspiracy to cause financial loss against the defendant appellants.

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