Gibraltar Court of Appeal dismisses Otkritie Bank’s appeal in alleged money-laundering case

16/12/16

A strong Gibraltar Court of Appeal (Sir Maurice Kay P, Sir Mark Potter JA and Sir Colin Rimer JA) has dismissed an appeal in a case alleged to relate to a large-scale $170m fraud carried out by Georgy Urumov and Yulia Balk against Otkritie, the well known Russian financial services provider. The fraud was the subject of an English High Court judgment – see [2014] EWHC 191 (Comm).

In these proceedings, Otkritie contended that certain of the proceeds of the fraud had been laundered by the Defendant (‘IK’) in order to shield them from execution. They relied upon the alleged facts, in particular, that IK - or rather the settlor of the IK Trust, Mr A, -  had (whilst proceedings were on foot) destroyed his server which covered the relevant period of the dispute and that IK had failed to called certain witnesses whom it ought to have called on the central issues in the case.

Jack J, sitting in the Supreme Court of Gibraltar, had earlier found after a trial that the Claimants had failed to prove that IK had laundered money for Mr Urumov and Ms Balk (see earlier news item for the Judgment). On the contrary, the Judge found that IK had provided the Court with a paper-trail demonstrating that the funds in question were derived from a legitimate Russian construction project, and were therefore ‘clean’.

The Gibraltar Court of Appeal dismissed Otkritie’s appeal. The case is of legal significance in that Sir Colin Rimer, giving the judgment of the Court, analysed the current state of English case law in respect of (i) when the court will draw adverse inferences as a result of the destruction of documents or the failure to call certain witnesses and (ii) when the court will overturn the trial judge’s findings of fact, when the credibility of a witness is in issue. 

As a result of the dismissal of Otkritie’s claim there is a pending claim by IK against it under the cross-undertaking in damages which Otkritie gave when it obtained its original freezing order against IK. 

The Judgment is here and the Court of Appeal’s Order is here.