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International judicial assistance in bank fraud saga

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UK court refuses to send back letters from America

One of the largest frauds in his­to­ry — the mis­ap­pro­pri­a­tion of more than US$10bn by the for­mer Chairman of JSC BTA Bank of Kazakhstan, Mukhtar Ablyazov — has tak­en a new turn in the UK.

The auda­cious fraud, which has pre­vi­ous­ly been the sub­ject of more than 100 deci­sions by judges in the UK, cur­rent­ly forms the back-drop to acri­mo­nious pro­ceed­ings in New York involv­ing claims made against the Bank by Panamanian enti­ties said to be linked to Mr Ablyazov and his co-con­spir­a­tors. In January, the pre­sid­ing judge in New York acced­ed to a Motion by the Panamanian enti­ties that he should issue Letters of Request, seek­ing the English Court’s assis­tance to com­pel oral depo­si­tions of wit­ness­es based in the UK. The wit­ness­es were senior indi­vid­u­als, includ­ing a for­mer man­ag­ing direc­tor of the Bank, said to have been involved in the asset recov­ery process insti­gat­ed by the Bank in 2009 once Mr Ablyazov’s fraud had come to light.

Between 2010 and 2012, the Panamanian enti­ties had acquired sub­or­di­nat­ed debt in the Bank as part of two restruc­tur­ings, and claimed that the Bank had know­ing­ly caused the val­ue of the sub­or­di­nat­ed debt to plum­met sub­stan­tial­ly by engag­ing in deals that were ulti­mate­ly to the ben­e­fit of its major­i­ty share­hold­er, a sov­er­eign wealth fund, and to the immense detri­ment of bond­hold­ers and cred­i­tors.

The indi­vid­ual wit­ness­es and the Bank chal­lenged the Order which the English Court had made allow­ing the depo­si­tions to take place in London, on the basis that they were oppres­sive, and irrel­e­vant to the US lit­i­ga­tion. At the same time they argued that because Mr Ablyazov and his co-con­spir­a­tors were effec­tive­ly behind the depo­si­tions, they were mere­ly seek­ing to gath­er infor­ma­tion rel­e­vant to their per­son­al inter­ests in impugn­ing judg­ments obtained against them by the Bank as part of the Bank’s recov­ery of US$5bn. In short, the depo­si­tions were noth­ing more than a “fish­ing expe­di­tion”.

On 21 February 2019, Mr Justice Knowles, who, in mid-January, had dis­missed the Bank’s and the wit­ness­es’ appli­ca­tion to stop the depo­si­tions, released detailed rea­sons in a writ­ten judg­ment [2019] EWHC 319 (QB).

It has long been recog­nised by the English Court that the need for inter­na­tion­al coop­er­a­tion through judi­cial comi­ty is espe­cial­ly acute in cas­es of inter­na­tion­al fraud.

Knowles J ruled that the depo­si­tions were not oppres­sive because there was plen­ty of time for the wit­ness­es and their lawyers to pre­pare, par­tic­u­lar­ly since the num­ber of doc­u­ments on which ques­tions were to be asked had dropped from around 1,800 to less than 200. In addi­tion, the top­ics which the Panamanian enti­ties wished to ques­tion the wit­ness­es about were clear­ly rel­e­vant to the US lit­i­ga­tion, since the pre­sid­ing judge in New York had said as much in the Letters of Request. In these cir­cum­stances, it was not for the English Court to deter­mine whether the top­ics and ques­tions were rel­e­vant to the issues in the US lit­i­ga­tion. As far as the alleged ulte­ri­or motive of “fish­ing” was con­cerned, the judge con­sid­ered that it was “far-fetched” to sug­gest this when the US judge had sat­is­fied him­self that the depo­si­tions were rel­e­vant and nec­es­sary for the forth­com­ing tri­al in New York.

It has long been recog­nised by the English Court that the need for inter­na­tion­al coop­er­a­tion through judi­cial comi­ty is espe­cial­ly acute in cas­es of inter­na­tion­al fraud.

Original arti­cle source: MACFARLANES blog

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