Supreme Court finds loan agreement payments to third parties amounted to a breach of worldwide freezing order

The Supreme Court has decided unanimously that the proceeds of loan agreements were “assets” within the meaning of a freezing order because the respondent had the power “directly or indirectly to dispose of, or deal with [the proceeds] as if they were his own”.

What was this decision about?

This judgment, which is the latest in the long-running litigation involving Mr Ablyazov, concerned an application by JSC BTA Bank (the Bank). The Bank was seeking a declaration that rights which Mr Ablyazov had under loan agreements with other lenders, which were drawn down and paid to third parties, were covered by a worldwide freezing order in place at the time.

The Supreme Court held that loan proceeds drawn down by third parties were “assets” for the purposes of the freezing order and the draw down amounted to a “disposing of” or “dealing with” the assets in breach of the freezing order. The judgment of the Supreme Court (here) overturned both the first instance and Court of Appeal judgments on the same issue.

Lord Clarke, who gave the leading judgment, focussed on the construction of the freezing order and made specific reference to the fact that Mr Ablyazov’s conduct in respect of the freezing order (which had not been good) was not a relevant factor in determining the question before the court.

What does this mean for enforcing parties?

The judgment is of great significance for parties seeking or enforcing a freezing injunction. It makes it clear that whilst freezing orders will be restrictively construed, the expression “assets” appearing in the Commercial Court’s standard form freezing order is capable of a wide meaning.

The judgment should also serve as a warning to those parties who find themselves the subject of freezing orders, and who seek to use loan or credit facilities that they are able to direct or control in order to get around the effect of the order made against them and their assets.