Evading enforcement by any means necessary


Peter Wood

A guest post by Peter Wood, Lesley Timms and Sonia Michaelides of London law firm Withers

After 22 years, Mr and Mrs Akhmedov’s marriage came to an end in 2015. This was a marriage like few others, resulting in two children and building up vast wealth, including a plane, a helicopter and a 115m-long super yacht called Luna.

Regrettably, the divorce was bitter. Mr Akhmedov fought hard and dirty to avoid having to share any of the family wealth with his wife. The English High Court found that he hid assets in a Bermuda trust with the intention of evading his legal obligations to his wife and even went so far as to invent stories that they had already divorced in Russia, producing forged documents to the court as ‘evidence’.

Mr Akhmedov was ordered to pay his wife in excess of £350m plus the art collection, worth at the time about £90m, a total amount equivalent to 43% of the family’s wealth.

The companies he had used to hide the family’s assets were declared his “ciphers” and “alter egos”, and any transfers to them were set aside. Bank accounts and assets were frozen, pursuant to worldwide freezing orders obtained in England, Liechtenstein and the Isle of Man.

But Mr Akhmedov is not one to be deterred by something as trivial as the law and transferred the family’s money and artwork to Liechtenstein. He created debts to himself and his other alter ego companies from his asset holding companies. He sailed Luna from Turkey to Dubai.

Lesley Timms

Piercing the corporate veil

Mr Akhmedov’s prized asset is the Luna, purchased from Roman Abramovich for €260m. At the time the court handed down its judgment, Luna was owned by a Liechtenstein anstalt, ‘Q’, whose assets were the subject of the court’s freezing order. In breach of that freezing order, Mr Akhmedov had already transferred the Luna from Q to another Liechtenstein anstalt, ‘S’.

Realising that S was the new owner of Luna, Ms Akhmedova returned to the English High Court seeking an order piercing S’s corporate veil. The court readily agreed to the order, stating that Mr Akhmedov had acted with “real impropriety” and that S’s entire raison d’etre was evasion of the subsisting judgment.

The DIFC court as a conduit jurisdiction

In the meantime, and prior to obtaining the judgment against S, Ms Akhmedova took steps in Dubai to ensure that the Luna could not be whisked away again by applying to the Dubai International Finance Centre (DIFC) court for a freezing order against both Mr Akhmedov and S (which, at the time, was not a party to the English proceedings or any judgment).

The intention was to use the DIFC court as a way into the Dubai courts, which will recognise a DIFC court order on the basis of comity.

The DIFC court granted a freezing order over the assets of both Mr Akhmedov and S. At a later hearing for the continuation of the freezing order, S sought to challenge the order on jurisdictional grounds.

S’s defence, amongst other things, was that it was not a party to any English court order that Ms Akhmedova was seeking to enforce and that, in any event, both S and Luna were outside the jurisdiction of the DIFC courts.

However, the DIFC court agreed with Ms Akhmedova, stating that, as a matter of “fundamental policy, the DIFC court, like any other court of justice, must be in a position to respond to fraud and deliberate evasion”. It was not prepared to allow a known fugitive from justice to avoid enforcement of a judgment simply by placing his assets into a company located in a ‘secrecy’ jurisdiction.

(It is important to note that the DIFC court granted the injunction in the expectation that a judgment from the English court against S was imminent.)

S then appealed the finding to the Court of Appeal. However, since the English court had both pierced the corporate veil and made S a judgment debtor, the Court of Appeal continued the freezing injunction in order to allow Ms Akhmedova to join S on that basis.

Sonia Michaelides

Enforcement in the Dubai court

Ms Akhmedova then applied to the Dubai courts for a precautionary attachment of Luna. Acting in association with the DIFC court and on the basis of the DIFC freezing injunction, the court duly granted the precautionary attachment, detaining the Luna pending the outcome of the main proceedings.

What happens next…?

Running out of options, Mr Akhmedov has now filed a claim with the Joint Judicial Committee – a body set up to decide on potential conflicts of jurisdiction between the onshore Dubai courts and the DIFC courts.

It is Mr Akhmedov’s hope that he can persuade the committee that his dispute with Ms Akhmedova is a matrimonial one and should therefore be determined by the Dubai courts in accordance with Sharia law.

Ms Akhmedova’s case is that this is a pure enforcement matter of a judgment debt which is owed to her and it is therefore right that the case can be heard by the DIFC Court. The committee’s decision is expected in the coming weeks.

Conclusions

The English High Court has welcomed and praised the DIFC court’s willingness to assist a victim of the wrongdoings of a serial evader and fugitive from justice.

In the meantime, and while he still can, Mr Akhmedov elects for the self-defeating option of “letting the boat rot” rather than paying Ms Akhmedova what she is owed.

Partner Peter Wood and associates Lesley Timms and Sonia Michaelides are members of Withers’ litigation team. Withers is instructed by Ms Akhmedova to manage and coordinate the global enforcement efforts.




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