Confidentiality club defeats self-incrimination exception under freezing order

Anna Caddick

This is the latest of the BTA Bank/Ablyazov cases on interim relief.  Mr Justice Phillips held that a confidentiality regime, whereby disclosure under a worldwide freezing injunction was to be given only to solicitors “directly concerned with the case” and instructed counsel, overcame the defendant’s claim to privilege against self-incrimination.  The defendant was therefore ordered to provide the information sought, subject to the confidentiality regime.

The freezing order had been made against Mr Khrapunov, the son-in-law of Mr Ablyazov, in support of claims that he had conspired with Ablyazov to injure the Bank by unlawful means, in particular by assisting Ablyazov to conceal assets.  The freezing order, which included a requirement for supporting disclosure, contained the following exception: “If the provision of any of this information is likely to incriminate the Respondent in any jurisdiction, he may be entitled to refuse to provide it…“.  Khrapunov wrote to the Bank’s solicitors inviting them to agree that the asset disclosure be limited to named solicitors and counsel.  The Bank agreed to such a club (albeit not restricted to named individuals).  However, Khrapunov then (at this stage with solicitors on the record) sought to rely on the privilege against self-incrimination to avoid any disclosure, referring to on-going investigations and proceedings against him in Kazakhstan, Switzerland and the US.

It was common ground that there is no automatic right to privilege against self-incrimination in relation to overseas prosecutions, but that the Court has a discretion to allow it.  This discretion requires the circumstances to be scrutinised to ascertain if “there are reasonable grounds to apprehend danger to the witness from his being compelled to answer. If the facts of the witness being endangered be once made to appear, great latitude should be allowed to him in judging the effect of any particular question” (R v Boyes [1861] 1 B&S 311, as cited by Mann J in Phillips v Newsgroup Newspapers [2010] EWHC 2952).

Given the backdrop of the wide-ranging and serious charges against Khrapunov in various jurisdictions, Mr Justice Phillips concluded that it was “certainly not fanciful that the disclosure of assets will increase the risk of criminal charges and the likelihood of incrimination” and that he should be accorded the latitude referred to.

However, Mr Justice Phillips then asked whether the implementation of the confidentiality club (which added a further layer to the standard protection in the freezing injunction that information obtained could not be used for other purposes without the permission of the Court) removed the risk “to such a degree that it becomes merely fanciful and ceases to be a real risk”.

Evidence was heard as to the possible ways in which the disclosure could be obtained by overseas authorities, but Mr Justice Phillips concluded that the possibility was remote and fanciful and that the confidentiality regime was sufficient to remove any real risk to Khrapunov.  The solicitors for the Bank were said to have a “broad mandate from the Bank to take measures to protect assets” and thus could police the freezing injunction within the confidentiality regime and should have the opportunity to do so.  It was also noted that there “had been no problems” with the operation of the confidentiality club in relation to disclosure by Mr Ablyazov.

The confidentiality club is therefore a powerful tool to defeat an established risk of overseas prosecution.  It won’t be every case where a claimant is able to work effectively within a confidentiality club, and no doubt Khrapunov did his position some considerable damage by at first conceding that a confidentiality regime would be sufficient.  That said, this mechanism appears a ready means to quash many such claims, let alone where the risk of self-incrimination which can be demonstrated is far lower than on these facts.

JSC BTA Bank v Mukhtar Ablyazov and Illyas Khrapunov [2016] EWHC 289 (Comm).  The judgment in this case is available on Westlaw.

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