Author

Eleanor Morgan

Eleanor Morgan

BVI
Partner

Shane Donovan

Shane Donovan

BVI
Partner

Black Swan may yet prove to be a phoenix rising from the ashes

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22 June 2020

In our recent legal update Black Swan has its wings clipped we considered the decision by the Eastern Caribbean Court of Appeal (the Court of Appeal) in Broad Idea International Limited v Convoy Collateral Limited (Appeal No. BVIHCMAP2019/0026, 29 May 2020) in which the Court of Appeal held that BVI courts have no jurisdiction, absent statutory authority, to grant interlocutory injunctions in aid of proceedings in a foreign country. This decision is significant as for the past 10 years the courts of the British Virgin Islands have regularly granted freezing orders under the so-called Black Swan jurisdiction which enabled the court to grant free-standing freezing orders over non-cause of action defendants located in the BVI where the substantive cause of action was being litigated in a foreign court.

Commercial Bank of Dubai v 18 Elvaston Place Ltd

A matter of days prior to the handing down of the Court of Appeal's decision in Broad Idea, the BVI Commercial Court granted a Black Swan injunction at a without notice hearing against two BVI companies in support of a debt claim made by the Commercial Bank of Dubai (the Bank) against Mr Khaleefa Butti Omair Yousif Almuhairi (KBO) in the United Arab Emirates (the UAE). The matter was brought back before the Commercial Court in advance of the return date hearing to reconsider the question of jurisdiction.

The Bank contended that the injunction should be continued as –

(a) the enactment of legislation giving a statutory basis for the grant of freezing orders in support of foreign proceedings was imminent.

(b) KBO should be added as a defendant to the BVI proceedings so that the injunction could be continued against the BVI companies under the court's Chabra jurisdiction; and

(c) Any order discharging the Black Swan injunction should be stayed pending a "leapfrog appeal" to the Judicial Committee of the Privy Council (BVI's highest court of appeal).

The imminence of remedial legislation

The Commercial Court objected to the continuation of the injunction, finding that it simply did not have jurisdiction to do so. The court acknowledged the existence of English authorities in which the imminence of new legislation had been taken into account, but in none of those authorities was there any doubt that the English courts had the jurisdiction to make the orders sought. The court was also not satisfied that the enactment of remedial legislation was imminent. Although the Commercial Court Users' Group had drafted a proposed amendment to the Supreme Court Act, the drafting had not yet been finalised, the Attorney-General was still to indicate his support for the current draft, and the matter was still to be broached before Cabinet.

Adding KBO as a defendant

The Commercial Court considered that, whilst a satellite debt claim to that being litigated in the UAE could potentially be commenced in the BVI and stayed pending the outcome of the UAE proceedings, there were no jurisdictional gateways for permitting service of such a claim on KBO out of the jurisdiction. The court considered whether it might be possible to make an order for alternative service on KBO within the jurisdiction, but did not need to decide the issue because the Bank sought to add KBO as a defendant to a claim for enforcement of any UAE judgment which may be obtained. A jurisdictional gateway for service out of the jurisdiction exists where a claim is made to enforce any judgment … which was made by a foreign court … and is amenable to be enforced at common law. However, the court decided that this gateway requires there to be an existing judgment which is to be enforced. The gateway does not permit service out in respect of a future judgment.

Stay pending a leapfrog appeal to the Privy Council

The Commercial Court considered that there were properly arguable grounds for an appeal to the Privy Council (there would be no point going to the Court of Appeal first given its definitive ruling in Broad Idea). The court nevertheless decided that it would be premature to determine the application for a stay pending appeal of the discharge of the Black Swan injunction. That determination would need to await the return date hearing when issues such as the substantive merits of the injunction and issues of non-disclosure would be considered afresh.

It is hoped that the Commercial Court's doubt as to the imminence of remedial legislation to confer jurisdiction on BVI courts to grant interlocutory injunctions in aid of foreign proceedings proves to be wrong. Nevertheless, given that the court has expressed the view that there are properly arguable grounds of appeal, it may well be that the existence of the court's common law jurisdiction to make such orders is reconsidered by the Judicial Committee of the Privy Council in the not too distant future.

 

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