Freezing orders and the restriction on the disclosure of information

04/02/2010

The claimant bank made a successful application to release the restrictions on the disclosure of information in the first defendant's ("Mr Ablyazov") affidavit and exhibit, which had been provided pursuant to a freezing order.

The Bank had obtained a freezing order against Mr Ablyazov on the basis that he had misappropriated large sums of its money, totalling approximately £175 million. Under the terms of the freezing order information relating to the misappropriation of the funds was to be disclosed to the Bank's solicitors and counsel, but not the Bank itself. This was, as Mr Ablyazov argued, to prevent the inevitable dissemination of the same information from the Bank to the prosecuting authorities in Kazakhstan. There was a fear that if the identities of the representatives of the companies related to Mr Ablyazov and the alleged misappropriation of the funds were revealed, then they would be at risk of unlawful imprisonment and torture.

The Bank wanted to remove the restriction so that it could check the validity of Mr Ablyazov's claims as to the movement of the money and thus trace any misappropriated money. Crucially, Mr Ablyazov had asserted that he had returned substantial parts of the misappropriated sums. He resisted this application because of the risk to individuals in Kazakhstan and also because the application was unnecessary and misconceived. This was argued to be so because the Bank's solicitors had access to a facility which enabled them to check the Bank's automated banking system, which would show whether and on what dates the sums of money had been paid to the Bank.

Mr Justice Teare allowed the application for a number of reasons. Mr Ablyazov disclaimed an interest in all but four of the relevant companies, the identities of three of which had already been disclosed to the Bank in his defence. This meant that the number of potentially at-risk company representatives was small. Further, the Bank had previously known about three of the companies and there was no evidence, or indeed suggestion, that any harm had befallen representatives of those companies. The application was deemed necessary because the facility available to the Bank's solicitors offered unrealistically narrow scope for performing the requisite checks. Given the level of detail that is needed to pursue proprietary and tracing claims, it was also likely that the investigations of the Bank's solicitors would result in the bank becoming aware of the information and there being a breach of the original restriction.

This case is of interest because it balances the potential risk to third parties against the claimant's, in this case the Bank's ability to trace and preserve the money allegedly misappropriated from it. The action is particularly interesting when read in conjunction with an earlier hearing in the same matter, [[2010] EWHC 60 (Comm)], in which the Commercial Court varied the standard terms of a worldwide freezing order to prevent the defendant from dealing with assets outside the jurisdiction if he did not keep assets of equal value in the jurisdiction. Whilst this variation does not amount to security for the claimant, it does afford greater protection in respect of its interest and increase the chance of successfully recovering misappropriated sums.

Contact: henryfarris@city-law.net

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