The British Virgin Islands (BVI) sets itself apart from other offshore and onshore centres through the speed, efficiency and flexibility with which it deals with matters, especially those arising from fraud. Absent a statutory gateway for standalone injunctive relief, the Courts in the BVI have long grappled with extending relief to an aggrieved party who has, after suffering a fraud, commenced proceedings in a foreign jurisdiction and pending judgment wished to prevent the wrongdoer from dissipating assets. The wrongdoer may hold assets via a BVI entity, and the claimant in the foreign proceedings will look to those assets to satisfy any judgment. Prior to 2010 BVI practitioners were forced to adopt inventive ways (such as founding claims on the operation or management of the BVI company) to pursue injunctive relief to protect such assets, but absent being able to establish a substantive action in the BVI, relief was often denied.
The BVI Court is well known to be solution driven and in 2010 in the case of Black Swan Investment ISA v Harvest View Limited BVIHC (Com) 2009/399, resolved this problem. Applying the minority decision in Mercedes Benz AG v Leiduck AC 284, Bannister J held:
“Lord Nicholls points out that freezing orders are unlike ‘ordinary’ interlocutory injunctions, because they bear no relation to the subject matter of the proceedings. Their only purpose is to prevent dissipation of assets available to satisfy a money judgment. In particular, Lord Nicholls held that they do not depend upon there being a pre-existing cause of action. Moreover, there is no logical distinction between the grant of such relief in aid of a domestic money judgment and a grant in aid of a foreign one, unless the foreign judgment is such that the domestic court would decline to enforce it.”
In extending standalone injunctive relief over the BVI companies Bannister J further observed that:
“…there are sound policy reasons why important offshore financial centres, such as Jersey and the BVI, should be in a position to grant [standalone] orders in aid where necessary. The business of companies registered within such jurisdictions is invariably transacted abroad and disputes between parties who own them and others are often resolved abroad. It seems to me that when a party to such a dispute is seeking a money judgment against someone with assets within this jurisdiction, it would be highly detrimental to its reputation if potential foreign judgment creditors were to be told that they could not, if successful, have resort to such assets unless they were to commence substantive proceedings here in circumstances where, in all probability, they would be unable to obtain permission to serve them abroad – thus presenting them with an effective brick wall or double bind…”
The decision in Black Swan was limited to assets in BVI, namely shares of a BVI company. The relief available under the Black Swan jurisdiction continues to develop. In Osetinskaya v Usilett Properties Inc BVIHC (Com) 2013/0037 (25 July 2013) the Court granted Black Swan relief against not only the shares of a BVI company, but also assets of the BVI company which were located outside the jurisdiction. InYukos CIS Investments Ltd & Another v Yukos Hydrocarbons Investments Ltd BVIHCVAP2010/018, Court of Appeal, 16 September 2011 the Court held that Black Swan relief was available where relief other than a monetary judgment was sought.
However, Black Swan relief does have its limitations. Originally the Court held that Black Swan relief was only available where in personam jurisdiction can be established. In personam jurisdiction is easily established for a BVI company and its shares (under BVI law, for the purposes of determining matters relating to title and jurisdiction, the situs of ownership of shares of a BVI company is the BVI, irrespective of where its shareholder may be located) but not for the underlying wrongdoer who may have no other connection to the BVI. The Court has been willing to extend the limits of Black Swan relief where the wrongdoer behind the BVI company has disappeared from the substantive jurisdiction and his whereabouts is unknown. In such circumstances the Court has granted not only Black Swan relief against the shares of the BVI company and its assets, but also the personal assets of the wrongdoer. This extension of the relief is currently subject to appeal.
The second limitation on Black Swan relief concerns ancillary orders. The BVI Court and the Court of Appeal have confirmed that disclosure orders are not available on gaining Black Swan relief. Although the Court will grant standalone injunctive relief it will not compel the BVI company or those behind it to then verify the nature and location of the company’s assets on affidavit, as would be common practice for other courts granting mareva-style relief. Without being able to verify the location and nature of the assets of the BVI company, the Black Swan relief is at risk of becoming a lame duck.
Whilst the BVI has found a common law solution to standalone injunctive relief, the development of this relief is ongoing. It is anticipated that the legislature will move to give statutory recognition to Black Swan relief and in doing so will clarify the extent of the relief available, which should broaden the scope to include ancillary relief such as disclosure.
Julie Engwirda, Partner at Harneys.