When loans become assets to freeze

Posted on 03 November 2015 by Naomi Simpson & Richard Leedham. Source: Law Gazette

When loans become assets to freeze

The effect of a recent judgment on freezing orders is far-reaching for clients and lawyers.

Few litigation practitioners will have failed to take note of the long-running JSC BTA Bank v Ablyazov dispute that has been in the courts for nearly six years.

The bank alleged that it was defrauded by Ablyazov of c.$6bn and began a stream of hard-fought litigation against him to recover it, involving various jurisdictions around the world. However, the litigation may have produced one of its final judgments – albeit because Ablyazov is in a French prison without English representation, rather than because all of the legal issues have been resolved.

The Supreme Court has handed down judgment on the funding application, a piece of satellite litigation regarding the construction of the freezing order at the heart of the dispute, and specifically the clauses relating to the assets covered by the order.

Ablyazov’s assets were frozen and under the control of receivers, so he funded his lifestyle and lawyers via loan agreements from third parties. The bank sought to challenge these arrangements claiming the monies should fall within the terms of the freezing order. The order against Ablyazov contained the following wording at paragraph 5 (which is almost identical to the current Commercial Court wording):

‘Paragraph 4 applies to all the respondents’ 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 respondents’ assets include any asset which they have power, directly or indirectly, to dispose of, or deal with as if it were their own. The respondents are to be regarded as having such power if a third party holds or controls the assets in accordance with their direct or indirect instructions.’ (emphasis added)

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