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CYPRUS: English Court guidance on the wording of a Freezing Order

 

Recently the Supreme Court of the United Kingdom in the case of JSC BTA Bank v Ablyazov [2015] UKSC 64made a landmark decision on the construction of freezing orders. 

 

Facts of the case

 

The Plaintiff in this case, JSC Bank claimed that the Respondent Mr. Ablyazov who was the former chairman of the JSC Bank had misappropriated US$10 billion of the Bank’s funds.  As a result, the Respondent was made subject to a freezing order preventing him from removing his assets from England and Wales or in any way disposing of, dealing with or diminishing the value of those assets.  In particular the freezing Order stated that “it applies to all the Respondent’s assets whether or not they are in their own name and whether they are solely or jointly owned and whether or not the Respondent asserts a beneficial interest in them. For the purpose of this Order the Respondent’s assets include any asset which they have the power, directly or indirectly, to dispose of, or deal with as if it were their own…... ”.

 

Despite the terms of the freezing order, in 2010 the Respondent entered into four loan agreements and drew down US$40 million.  As a result of the above, the Plaintiff applied to the Court for a declaration that the Respondent was in breach of the Freezing Order and argued that the ability to directing payments to be made under the loan agreements meant that the funds in question should be construed as assets for the purposes of the order.Both the High Court, and later the Court of Appeal, confirmed that the Respondent’s right to borrow, which was unsecured and non-assignable, was not to be regarded as an “asset”.

 

The Bank has appealed these findings and the Supreme Court was asked to consider whether the Respondent’s right to borrow under an unsecured loan agreement is the kind of “asset” which can be caught within the ambit of a standard form freezing order. Finally the Supreme Court overturned the Court of Appeal decision and held that although the Respondent “did not legally or beneficially own the money held by a lender under a loan facility, he had the power to direct the lender to dispose of, or deal with those funds as if they were his own,” and as such concluded that the proceeds under the loan agreements constituted an asset.

 

 

 

For further information on this topic please contact

Ms. Nada Starovlah (nstarovlah@pittaslegal.com) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.