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Note: Mr. Abylazov (Former Owner) and Mr. Zharimbetov (Former Chairman) were the majority owner and Chairman of the Credit Committee of the JSC BTA Bank (Issuer) until February 2, 2009, when the government of Kazakhstan nationalized Issuer. Former Owner and Former Chairman then fled to England. Issuer brought a claim against Former Owner, Former Chairman, and others for the alleged misappropriation through fraud of US$1,031,263,000. Former Owner and Former Chairman applied for an order to both set aside the claim and to declare that the English courts have no jurisdiction to try the claim.

The alleged fraud involved four businesses (Applicants) for whom Issuer issued letters of credit in favor of four other businesses (Beneficiaries), ostensibly as payment for the purchase of oil drilling equipment. The sales contracts between Applicants and Beneficiaries had many peculiarities, including the requirement that payment be in the form of LCs, under which most of the payment was to be made up front. Both Applicants and Beneficiaries were solely owned and directed by Mr. Timichev (Intermediary). Applicants, Beneficiaries, and Intermediary were named in Issuer's claim. Intermediary claimed to have received instructions from Issuer that the proceeds of the LCs were to be forwarded to unknown parties (Ultimate Borrowers), who were supposedly borrowers who would not ordinarily qualify for loans under Issuer's regulations. Ultimate Borrowers were to repay Issuer, but no payments were received.

Issuer's evidence showed that the Applicants did not have the resources to repay the loans and that the Beneficiaries were not in the business of supplying oil drilling equipment.

Issuer claims Former Chairman approved the issuance of the LCs in bad faith, that the sales contracts between the Applicants and the Beneficiaries were a sham concocted by Former Owner and Former Chairman, and that the Ultimate Borrowers were in fact Former Owner and Former Chairman, or their associates.

The Queen's Bench Division, Commercial Court, Clarke, J., dismissed Former Owner and Former Chairman"s applications. The court ruled that Issuer stated an arguable claim that could not be set aside. The court also ruled that England was an appropriate venue for the trial because the two major defendants, Former Owner and Former Chairman, resided in England and none of the parties would have willingly litigated in Kazakhstan.

[JEB/pbl]

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