In Khrapunov v. JSC BTA Bank [2017] EWCA Civ 40, a unanimous Court of Appeal has ruled as strongly arguable a claim of a conspiracy to injure by unlawful means, where the unlawful means consist in a breach of a worldwide asset freezing order (“WFO”). The Court also ruled that where the conspiracy is made (“hatched”) in England, the English Court has jurisdiction under the Lugano Convention to try the claim even though the aim of the conspirators was to procure disposals of or dealings with assets located in many other countries.

The case is of general significance because:

(i) it decides that contempt is sufficiently unlawful to constitute unlawful means for the purposes of the conspiracy tort,

(ii) it confirms that whilst the Babanaft proviso may protect a foreigner from punishment for contempt if he assists with knowledge a breach of a WFO, he may still be sued for substantial damages in respect of such assistance, and

(iii) it decides that any such suit may be brought in England if the conspiracy was “hatched” here or if the assets which are dealt with are located in England.

The case arose from the well-known proceedings between JSC BTA Bank and Mukhtar Ablyazov. In those proceedings the Bank has obtained judgment against Ablyazov for over US $4bn, and has secured his conviction for numerous contempts of court, which include dealings with assets overseas. Ablyazov fled the jurisdiction on the eve of his sentencing to 22 months’ imprisonment (on 16.2.12).

The new proceedings concern Ablyazov and his son-in-law Ilyas Khrapunov, who is resident in Switzerland. The Bank alleges that when Ablyazov was still living in London, he and Khrapunov conspired to effect dealings in assets which Ablyazov owned (typically secretly) in Russia and Switzerland and elsewhere. Those dealings constituted further breaches of the WFO.

For the purposes of his challenge to the Court’s jurisdiction, Khrapunov did not deny the factual allegations on which the claim was founded, but asserted that a contempt of court did not amount to unlawful means for the purposes of the tort of conspiracy to injure; he also claimed that even if there was a valid cause of action in conspiracy, the fact that the conspiracy was hatched in England did not entitle the English court to try the case against him: the Bank’s claim arose, and the loss it claimed was suffered, abroad and not in England.

At first instance ([2016] 3 WLR 659), the Commercial Court Judge held that the claim did amount to a valid cause of action. He rejected the Bank’s arguments on jurisdiction, but nonetheless held that the English Court did have jurisdiction for as long as the conspiracy was “implemented” from London (ie until Ablyazov fled in February 2012). This ruling, whilst in favour of the Bank, imposed a serious limitation on the quantum of the Bank’s claims, because much of the Bank’s evidence concerned dealings by Khrapunov with Ablyazov’s assets after February 2012.

Khrapunov appealed against both aspects of the Judge’s ruling (cause of action and jurisdiction) and the Bank cross-appealed against the limitation on jurisdiction. The Court of Appeal dismissed Khrapunov’s appeals and allowed the Bank’s cross-appeal.

Stephen Smith QC and Tim Akkouh acted for JSC BTA Bank.

Stephen Smith QC