“Show me the money” – Asset Disclosure Orders as an aid to enforcement of unpaid arbitration awards
/Whilst the majority of Gafta Arbitration Awards are, in the in the writer’s experience, honoured by the losing parties, there will always be a small number that are not.
Whilst Gafta does administer a list of defaulters which may be checked by members and may influence adecision whether to do business with a proposed counterparty, that does not really assist the party to whom substantial amounts of damages may be due.
This problem arose in a recent case in which the author was instructed, albeit that it involved FOSFA, rather than Gafta contracts.
Ten FOSFA Arbitration Awards had been obtained by five Claimants against Astagra Ltd (also known as Astagra LLP or Astagra TOO) ("Astagra"), a Kazakhstan company, but Astagra did not honour any of the Awards. FOSFA runs a similar scheme to Gafta for reporting defaults. Accordingly, the Claimants reported the defaults and Astagra was listed.
As this did not result in payment the Claimants applied to the Commercial Court in London under s.66 of the Arbitration Act 1996 to register the Awards in the same manner as a judgment or order of the court to the same effect. That application was granted and five orders (one for each of the Claimants) were made by the Court. At the same time an application for an Asset Disclosure Order ("ADO") was made to seek to identify assets of Astagra.
The application for an ADO was heard in November 2023. Despite being notified of the hearing, no-one from Astagra attended. His Honour Judge Pelling KC granted the ADO requiring Astagra to provide an affidavit of assets worldwide within 14 days. The ADO included a Penal Notice addressed to:
a. the Directors and Officers of Astagra, including Mr Kanat Shaikh in, the current Director of Astagra;
and
b. any other person who knows of the Order, including Mr Tair Batalov, the former Director of Astagra, who the Claimants believed still retained de facto control over Astagra, and does anything which helps the Defendant to breach certain terms of the order.
The Penal Notice explained the serious consequences for non-compliance with the Order, including the risk of being held in contempt of court and imprisoned, fined or having assets seized. Astagra failed to provide the affidavit required by the ADO.
Before the return date the Claimants sought to identify the prospect that officers of Astagra would visit the UK or had assets within the jurisdiction of the court that could be sequestered. Such investigations gave no direct results and, to avoid unnecessarily utilising court time and in an effort to retain the possibility of sanction, the Claimants wrote to the Court requesting an Order that the ADO be discharged prospectively, on the basis that continuing the ADO in the hope of "voluntary" compliance was unlikely to have a meaningful effect.
However, the Claimants also asked that the discharge be expressly without prejudice to any extant breaches of the ADO or related contempt/s of court or any application which the Claimants may wish to make at a later date. In particular, the Claimants explained that they wished to preserve their ability to bring contempt proceedings or other related applications in the event that this was likely to have a meaningful effect, e.g., in the event that Mr Shaikhin or Mr Batalov were to travel to England.
An order was granted by the Court on these terms.
It is too early to say whether this form of order will result in any recovery for the Claimants, but it emphasises that the English Commercial Court is willing to do what it can to aid innocent parties in seeking recovery of sums due under arbitration awards.
