The Commercial Court of the British Virgin Islands was established in 2009 and since then it has dealt with a high volume of financial services work. The most regular disputes involve BVI companies which are owned by clients in Russia and the CIS, the Far East, and Africa, however, the BVI ultimately has a truly international client base and BVI practitioners deal with litigation which originates from around the world. To find out more, Lawyer Monthly benefits from an article from Oliver Clifton from Walkers. Oliver joined Walkers' British Virgin Islands office in 2006 and is a Partner in the firm's Commercial Litigation & Dispute Resolution Group.
Since joining Walkers, Oliver has worked on disputes which involve the enforcement of share security, the ownership and control of BVI companies, and claims against trustees. Oliver regularly acts for clients based in the CIS, in particular Russia, Kazakhstan, and Azerbaijan, as well as Africa and the Middle and Far East. Since 2007 Oliver has acted in the on-going Alfa Telecom v Cukurova litigation. He has recently been involved in substantial disputes concerning oil terminals in Russia and the Caucuses.
In the litigation space, the BVI was once best-known for its fraud work. Although hard-fought shareholder disputes continue to be a main-stay of the Commercial Court, BVI litigation now encompasses large-scale commercial disputes, complex insolvency proceedings, as well as trust matters. The Commercial Court frequently hears urgent ex parte applications but now also often hears lengthy trials. Some of the most significant litigation before the Commercial Court relates to the enforcement of security over the shares in BVI companies.
Appeals from the Commercial Court are first sent to the Eastern Caribbean Supreme Court and thereafter to the Privy Council. In recent years commercial disputes originating in the Commercial Court have given rise to authorities in all of the key areas of BVI practice.
Commercial disputes
The focus of commercial disputes in the BVI is often on the ownership or control of BVI companies.
Disputes between shareholders are often dealt with under the provisions of the BVI Business Companies Act, 2004. Where a minority shareholder has been unfairly prejudiced, the Commercial Court may make a wide range of orders for relief including the buy-out of shares, the appointment of a liquidator, and the regulation of the future conduct of a company's affairs.
Where shareholder disputes are subject to an arbitration clause contained in a shareholders' agreement, the Commercial Court may nevertheless hear urgent ex parte applications for preservative relief under the provisions of the Arbitration Act 2014. These provisions give the Commercial Court wide-ranging powers to assist parties to arbitrations heard either in the BVI or overseas.
Disputes as to the ownership of BVI companies may be the subject of substantive proceedings in the Commercial Court or so-called 'Black Swan' proceedings intended to preserve the company's underlying assets. These disputes are often aggressively fought and sometimes involve the indirect ownership of very substantial assets.
Insolvency proceedings
In the wake of the financial crisis the Commercial Court appointed liquidators to a number of distressed companies. The Commercial Court and the Court of Appeal have also established various authorities concerning the liquidation of BVI-registered investment funds. The Commercial Court has been an important forum for the determination of a number of Madoff-related disputes.
Where a creditor can show that an insolvent company's assets are being dissipated the Commercial Court may appoint a provisional liquidator. Upon appointment the provisional liquidator will then take steps to secure the company's assets pending the Commercial Court's determination as to whether a liquidator should be appointed. In certain circumstances, the Commercial Court will jointly appoint an insolvency practitioner based in the BVI and an insolvency practitioner based overseas.
Trust matters
The Commercial Court hears a range of trust disputes. These disputes often concern claims by beneficiaries against trustees or by third parties seeking to assert claims against trust assets. The Commercial Court also regularly hears applications by trustees for directions. Where appropriate trust matters are heard in camera and members of the public are excluded.
Enforcement of share security
The Commercial Court often hears disputes concerning the enforcement of security over shares in BVI companies. These disputes usually arise out of attempts by both institutional and private lenders to enforce security granted in support of substantial financings. Often at issue is the ownership and control of very significant underlying assets which include substantial stakes in telecoms companies or energy interests.
There is also considerable scope of lenders to enforce their security following an event of default without recourse to the Commercial Court. Where the grant of share security is accompanied by a suitable package of ancillary documents a lender may take effective steps to perfect its security and take control of the underlying company. The lender may thereafter seek to enforce the security by way of sale either directly or through the appointment of a receiver. Where the governing law of share security is not BVI law, the Commercial Court will give effect to the rights and remedies available to the lender under the foreign governing law of the security. This will be the case even where the lender's rights and remedies are not available under BVI law.
This article was first published in Lawyer-Monthly.
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