Matthew Hardwick KC Success in $230m BTA Bank Jurisdiction Battle

In a win as emphatic for the Defendants as it is excoriating of the Claimant Bank, Matthew Hardwick KC (instructed by Walkers, co-defending with Maples, Carey Olsen and Conyers) succeeded in persuading the BVI Commercial Court to set aside service on all the foreign defendants in this mammoth USD $232m fifty-four defendant claim.

In his judgment delivered on Thursday 31 January 2024, in BTA Bank v Timur Sabyrbaev & 53 Others BVIHCM2021/0171, Wallbank J. found that the BTA Bank (1) had failed to satisfy the service gateways; (2) had failed to show that the BVI was the appropriate forum for trial; and (3) was guilty of “blatant” misrepresentations and other “deliberate” omissions such that it had breached its duty of full and frank disclosure.

Mr Ablyazov’s alleged central role in the USD $6bn fraud on the BTA Bank of Kazakhstan from 2005 to 2009 is one of political and legal infamy. Mr Ablyazov (one-time political adversary of President Nazarbayev, imprisoned in 2001 only to be pardoned in 2003) served as the Chairman of the BTA Bank from 2005 to 2009 (at that time the largest commercial financial institution in Kazakhstan). However, in 2009, PWC discovered a USD $10bn shortfall in the bank’s books. Criminal and civil actions in Kazakhstan and 11 sets of proceedings in England (including the appointment of receivers recognised in the BVI and the Seychelles) followed from 2009 to 2013 (when Mr Ablyazov was arrested in France).

But it was only in 2021, 12 years later, that the BTA Bank saw fit to issue this allegedly related claim in the BVI: seeking USD $232m (in a juggernaut 445-page statement of claim) against 54 defendants including a number of foreign commodity sellers.

The foreign defendants refute the Claim in every particular. However, the first issue that arose was the basis upon which the BTA Bank had obtained permission to serve the foreign defendants in the BVI Commercial Court. The BTA Bank had identified 9 BVI Special Purpose Vehicles (“the BVI SPVs”) as “anchor” defendants in the BVI: it claimed that they were “key to the present claim” – such that the foreign commodity sellers could be served as “necessary or proper parties” to the same claim (“the NPP Gateway”).

The foreign defendants cried foul. They adduced evidence that in fact the BVI SPVs were long defunct shell companies, without assets, that had been restored to their respective company registers just 3 days before the Claim had been issued (and struck off again and dissolved thereafter). Accordingly, the BVI SPVs had only been restored and served in an improper attempt to anchor jurisdiction against foreign defendants without any connection to the BVI.

The Judge agreed. In a judgment highly critical of the BTA Bank and its representatives, the Judge:

  • (J/157) concluded that the BTA Bank had “restored and joined the BVI SPVs as Defendants purely to serve as anchor defendants in order to get through the NPP Gateway…so that it could bring perceived ‘deep-pocket’ defendants…here to sue them. I do not believe BTA’s unconvincing blandishments to the contrary”;
  • (J/192) criticised as “primordial” the BTA Bank’s omission to provide evidence that  there was a claim against the BVI SPVs that it was “reasonable for the court to try “ (as required by the NPP Gateway (BVI CPR 7.3(2)(a)(i)) and the relevant authorities);
  • (J/213-214) accepted that BTA’s reliance on the BVI SPVs was “no more than an artifice”: “BTA’s words to the contrary sound as hollow as the corporate husks they briefly resurrected wherewith to accomplish their sole purpose of opening the gates of litigation against their real targets”;
  • (J/158) found that “BTA failed in it is duty and full and frank disclosure and fair presentation at the Ex Parte Hearing in significant and material ways and such failure was not innocent”, (1) identifying (J/210) a statement by the BTA’s lay deponent that “was a blatant and telling example of misrepresentation”; and  (2) accepting (J/221) “that the Court had been misled into believing that the BVI SPVs ‘are key to the present claim’”;
  • (J/216-220): described BTA’s failures to draw to the Court’s attention the principles set out in the key authorities as “both extremely serious and…inexcusable”; and
  • (J/226-227): concluded that these “omissions” “were not innocent” and “must have been deliberate”.

The decision is of real interest for English and BVI litigators. As well as being the first BVI Commercial case to apply the English law principles in relation to the NPP Gateway in Erste Group Bank AG, London Branch v (1) JSC “VMZ Red October” [2015] EWCA Civ 379 and Gunn v Diaz [2017] EWHC 157, it provides a particularly striking illustration of the exercise of judicial “caution” in the use of this “anomalous” jurisdictional gateway (6BPD.3 3.1(3)). The Judgment can be found here.

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