BRITISH VIRGIN ISLANDS: An Introduction to Dispute Resolution

DISPUTE RESOLUTION GLOBAL GUIDE 2022  

Business as usual 

The British Virgin Islands (BVI) is a self-governing overseas territory of the United Kingdom. It is a leading international finance centre, which is tax neutral, politically stable and economically secure. There are approximately 400,000 active companies. British Virgin Islands entities are often used as joint venture vehicles, holding companies and investment special-purpose vehicles with particular exposure to Chinese, Russian and South American investors.

The legal system is based on English common law and supplemented by British Virgin Islands legislation including a modern Business Companies Act 2004, Insolvency Act 2003 and an Arbitration Act 2013 based on UNCITRAL Model Law principles.

The British Virgin Islands also has the benefit of a specialist Commercial Court established in 2009 for dealing with high-value and complex litigation, with two full-time judges together with part-time judges appointed on an ad hoc basis from among leading commercial law practitioners from the UK and the Caribbean. As a member of the Eastern Caribbean Supreme Court, the British Virgin Islands has a highly experienced Court of Appeal drawn from across the Caribbean with the final appellate court being the Privy Council in London (made up of members of the UK Supreme Court).

Considerable investment has taken place in legal infrastructure including the commissioning of an electronic litigation portal to enable claims and evidence to be filed and accessed remotely. This proved to be invaluable during the global pandemic and the BVI courts proved their resilience by continuing to hear trials and applications remotely, the courts often sitting outside of usual hours to accommodate witnesses in different time zones, particularly Russia and the Far East.

Notable legal developments 

The majority of the disputes which the BVI Commercial Court deals with relate to shareholder disputes, insolvency and restructuring, fraud, trust disputes, and the enforcement of foreign judgments and arbitral awards. There has been a considerable increase in shareholder activism with a willingness to force changes at board level by means of legal action including in IsZo Capital LP v Nam Tai Property Inc & ors (judgment 3 March 2021), a British Virgin Islands company listed on the New York Stock Exchange. Claims against directors for breaches of fiduciary duty have also proved popular (see Green Elite Ltd (in liquidation) v Fang Ankong & ors (judgment 17 January 2022)) and unfair prejudice claims against shareholders (see Soemarli Lie v Ng Min Hong & Ors (judgment 23 November 2021) both of which concerned unlawful appropriation of the relevant company’s assets.

Asset tracing remains another significant practice area. The Commercial Court has developed a body of jurisprudence in relation to asset tracing and enforcement which in some respects departs from the English position. The ability of the court to grant Norwich Pharmacal relief against innocent service providers was broadened in Wallbank J.’s decision in UWV v XYZ. The Eastern Caribbean Supreme Court (Virgin Islands) (Amendment) Act 2020 (commonly referred to as the Black Swan Act) put on a statutory footing the ability of the courts to grant interim relief in support of foreign proceedings in the absence of a substantive claim in the Territory. The eponymous case of the Black Swan was finally proven to the correct as a matter of common law in any event in the seminal Privy Council decision of Convoy Collateral Ltd v Broad Idea, a case which is essential reading for all common law lawyers in relation to the basis of the jurisdiction of the court to grant interim relief. The Black Swan Act also dealt with the Ramilos problem to enable Norwich Pharmacal relief to be granted in circumstances where the court has power under the common law to make an order for the provision of documents or information, notwithstanding the power to make an order under the Evidence (Proceedings in Foreign Jurisdictions) Act.

The Commercial Court has also not shied away in recent years from exercising its powers to ensure compliance with its orders. In Sang Cheol Woo v Charles Spackman (judgment dated 3 March 2021), the Commercial Court determined that it had an inherent power to issue a bench warrant for the arrest of an individual resident outside the jurisdiction, supplemental to its power to punish for civil contempt. In J Trust v Mitsui Konoshita (judgment 4 February 2022), the Commercial Court imposed a fine of USD4 million in relation to failure to disclose and dealing with assets in breach of a freezing injunction and receivership order.

Insolvency and Restructuring Developments 

The Commercial Court has also taken considerable steps in developing the jurisprudence relating to light touch provisional liquidations. Previously the provisional liquidations had only been granted in circumstances where there was a risk of dissipation of the assets of the estate prior to the full application to appoint liquidators. In Constellation Overseas Limited, Justice Adderley concluded that the court had a wide common law jurisdiction to appoint provisional liquidators in support of a restructuring plan. This was followed by Justice Jack in Century Sunshine in relation to a USD563 million Singapore bond issue. The schemes of arrangement pursuant to section 179A of the British Virgin Islands Business Companies Act 2004 have also proved popular in the light of financial constraints caused by the global pandemic. The Commercial Court approved the scheme of arrangement in Rock International Investment Inc in relation to a USD300 million bond issuance under a New York law-governed indenture which was subsequently recognised in the USA.

Arbitration  

Arbitration work, both substantive and enforcement, continues to develop at a pace in the British Virgin Islands since the adoption of the Arbitration Act 2013. The New York Convention on the recognition and enforcement of foreign arbitral awards has been extended to the British Virgin Islands by the UK Government. Equally, in the context of ICSID awards, the Washington Convention by virtue of the UK Arbitration (International Investment Disputes) Act 1966 is also applicable to the British Virgin Islands. The BVI International Arbitration Centre has recently updated its procedural rules (the 2021 Rules) to include provisions relating to emergency arbitrator proceedings, expedited procedures, joinder and consolidation of proceedings.