The emergence of the jurisdiction
In England, Section 25 of the Civil Jurisdiction and Judgments Act 1982 confers upon the English Court jurisdiction, in the power sense, to act in aid of foreign proceedings, but the major offshore centres were slow to legislate in quite the same way. Judicial innovation resolved the problem in the British Virgin Islands, through Bannister J’s decision in Black Swan Investments v. Harvest View 2009/399. To create a jurisdiction where none existed, Bannister J latched on to the dissenting speech of Lord Nicholls in Mercedes Benz v Leiduck and identified a lacuna which he proposed to fill in the BVI.
What resulted was a jurisdiction to grant injunctive relief against persons subject to the territorial jurisdiction of the BVI Court, which rested upon the willingness of the Court to act in aid of the putative enforcement of a foreign money judgment in the BVI. Less than a year later, the Court of Appeal in Yukos CIS Investments Limited v. Yukos Hydrocarbons Limited BVIHCVAP 2010/0028 appeared to embrace the jurisdiction, by expanding it further so that it applied not just to the enforcement of foreign money judgments but to any judgment capable of being enforced in the BVI. Over the decade that followed, the limits of the jurisdiction have been carefully tested.
The Decision in Convoy 1
Perhaps the lesson is that, like an elastic band, pushing the jurisdiction too far would inevitably cause it to snap. On 30 March 2020 the Court of Appeal delivered a judgment in Convoy Collateral v. Cho (Convoy 1). In that case, an ex-parte order had been obtained against a BVI company (Broad Idea) and against a Hong Kong resident (Dr Cho). The injunction against Broad Idea was in many ways unexceptional as an application of the Black Swan jurisdiction as it was then thought to exist: the Court made an order, as it had countless times before, restraining Broad Idea from altering its Register of Members or dealing with its assets. In Osetinskaya v. Usilett Properties BVIHCV 0037/2013 Bannister J saw no difficulty in principle with the latter order, holding that where a foreign court is prepared to restrain dealings in the assets of a particular defendant, it was just and convenient, at least in respect of companies wholly owned by the subject of the injunction, for the BVI Court to restrain the Company from disposing of its assets. The unusual features of the order against Broad Idea were that a foreign Court had not also been asked to make it, that when the foreign court was later asked to make it, the foreign Court declined to do so; and that Broad Idea was not solely an asset of Dr Cho.
The order against Dr Cho was of an altogether more unusual character. At the ex-parte hearing, the Judge was not told the Black Swan jurisdiction had never before been applied to a person not subject to the territorial jurisdiction of the Court. The Judge was persuaded to make an order for leave to serve the injunction out of the jurisdiction, despite the absence of any rule which would enable him to do so.
Dr Cho therefore challenged the jurisdiction and the Court’s power to have made the order at all. In Convoy 1, by a judgment dated 30 March 2020, the Court of Appeal held that Dr Cho was not subject to the jurisdiction of the BVI Court. The Court held that the CPR was not to be construed as permitting service of an application for injunctive relief in support of foreign proceedings out of the jurisdiction, and that the decision (of the majority) in Mercedes Benz v Leiduck compelled the conclusion that a freestanding injunction did not found a basis to obtain leave to serve out of the jurisdiction, because it was not based on any right asserted by a substantive claim.
History might have predicted this outcome: the decision was not far removed from a decision of the Cayman Islands Court of Appeal in VTB v Universal Telecom Investment Strategies Fund SPC (CICA, 5 June 2013, which ultimately led to the enactment of Section 11A of the Cayman Islands Grand Court Law (2015 Revision).
The Decision in Convoy 2
The result of the decision in Convoy 1 is that Black Swan relief was held not to be available against a person not subject to the territorial jurisdiction of the Court, but the decision clearly hinted at the possibility of a more radical outcome. Two months later, Convoy Collateral found itself before the Court of Appeal again on an appeal by Broad Idea (Convoy 2), this time defending the question of whether the Black Swan jurisdiction existed at all. In a rigorous judgment of the Chief Justice dated 29 May 2020 the Court of Appeal rejected the contention that Chabra relief was available to freeze the assets of a non cause of action defendant that was not “just a money box of the Defendant” (per Lakatamia v. Nobu Su [2014] EWCA 636), or that there was a risk of dissipation in circumstances in which the foreign court had found there to be none.
More significantly, the Court of Appeal unanimously held that Black Swan, and its earlier judgment in Yukos, had been wrongly decided. Convoy protested that such an outcome would be “Dickensian” and “retrogressive” but the retort of the Court of Appeal was to legal principle:
“as undesirable as it may be perceived in modern day international commerce, that the courts of the BVI, though having in personam jurisdiction over Broad Idea, being a BVI registered company, have no subject matter jurisdiction to grant a free standing interlocutory injunction against it in aid of foreign proceedings, there being no statutory basis for the exercise of such a jurisdiction. It is for the Legislature of the BVI to step in and clothe the court with such authority.”
What’s Next?
The significance of the decision in Convoy 1 was limited, in that it decided only that Black Swan relief was not available against persons outside of the territorial jurisdiction of the BVI Court. However, for over a decade litigants have survived quite happily without requiring the assistance of the BVI Courts to make orders against persons that are not even there. The better place to enjoin such litigants is in the place where they reside, a pact recognised by the Court of Appeal in Yukos which held that the Court would not usually (as a matter of discretion) make orders where the court with primary carriage of the litigation has declined to do so.
By contrast, the decision in Convoy 2 represents a significant change to the legal landscape in the BVI. However, its long term importance should not be overstated:
- The decision in Convoy 2 applies only to Court proceedings, and not to arbitral proceedings in respect of which there is a statutory scheme for intervention under Section 43 of the Arbitration Act 2013: Koshigi v. Donna Union Foundation BVIHCM 43/2018. The decision in Koshigi was specifically endorsed by the Chief Justice in Convoy 2.
- It will remain possible to obtain injunctive relief in support of domestic proceedings. Whilst that is a more cumbersome route, and may give rise to forum or limitation issues, in many of the cases where injunctive relief is currently obtained, it is also likely to be possible to obtain relief if a cause of action justiciable in the British Virgin Islands can be established.
Convoy Collateral has foreshadowed an intention to appeal against the decisions in both Convoy 1 and Convoy 2. However, a strength of jurisdictions such as the British Virgin Islands is that they have a nimble and responsive legislature that will act quickly to meet the needs of the users of its financial services industry. Whilst time will tell, it is probable that the legislature will respond to the needs identified by the Chief Justice, and introduce legislation which puts what was the Black Swan jurisdiction onto a more secure statutory footing. Whilst Black Swan may be dead, its legacy is not yet buried.
Appleby appeared for the successful respondents in Koshigi and in Convoy 1.
1Siskina (owners of cargo lately laden on board) and others v Distos Compania Naviera SA [1979] AC 610
