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Litigation update: free-standing relief under Black Swan orders - International Law Office

International Law Office

Litigation - British Virgin Islands

Litigation update: free-standing relief under Black Swan orders

March 27 2012


Before 2010, freezing injunctions in the British Virgin Islands were available only as an ancillary measure to a substantive domestic cause of action against the respondent. It was impossible to seek an injunction ancillary to foreign proceedings. This was the result of a restrictive interpretation of Lord Diplock's speech in The Siskina.(1) The defendant in that case was not within the court's in personam jurisdiction and the House of Lords therefore had to consider whether an injunction could form the basis for the grant of service outside the jurisdiction. Since The Siskina the English courts have not had to decide whether they have jurisdiction to grant a freezing injunction against a defendant within the territorial jurisdiction in aid of foreign proceedings. This is due to the passing of Section 25 of the UK Civil Jurisdiction and Judgments Act 1982, which gives the court express power to make orders in aid of foreign proceedings.

The restrictive BVI approach was overturned by the High Court, Commercial Division in Black Swan Investment ISA v Harvest View Limited.(2)The court in that case held that it was within its discretion to grant a standalone freezing injunction in support of foreign proceedings where the respondent was within the in personam jurisdiction of the BVI court.(3) The court followed the English decision in Channel Tunnel Group v Balfour Beatty Ltd(4) and held that The Siskina did not prevent a court from granting an interlocutory injunction that was ancillary to a claim for substantive relief to be granted by a foreign court or arbitral body. Lord Mustill held that:

"the court has power to grant interlocutory relief based on a cause of action recognised by English law against a defendant duly served where such relief is ancillary to a final order whether to be granted by the English court or by some other court or arbitral body."

Since there was no reason in principle why a claimant could not enforce a foreign money judgment in the BVI courts, there was no logical reason why such a person could not make a claim for relief ancillary to a foreign award or judgment which would lead to a money judgment.

The injunction was in fact granted against a third party to the proceedings; the respondents were two BVI companies wholly owned by the wrongdoer, who was being sued in South Africa. The assets held by the two companies were frozen on the basis that a South African judgment could potentially be brought to the British Virgin Islands and enforced against those assets by reason of the wrongdoer's sole beneficial ownership of the respondent companies.

Subsequently, in Yukos CIS Investments Limited v Yukos Hydrocarbons Investments Limited(5) the Court of Appeal approved the Black Swan decision. The court held that the following principles apply to the grant of Black Swan orders:

  • The jurisdiction to grant an interim freezing order is not ordinarily exercised unless it is necessary to do so in aid of relief that the applicant is likely to obtain from either the local court or a competent foreign court;
  • The relief that the applicant is likely to obtain from a foreign court must lead to a foreign judgment which may be enforceable, by whatever means, against BVI assets owned or controlled by the defendant;(6)
  • In appropriate cases, interim relief may be granted to an applicant in support of a foreign claim against third parties to the foreign proceedings where such third parties are resident in the British Virgin Islands. However, it is difficult to envisage circumstances in which such relief would be available;(7) and
  • A failure to seek equivalent injunctive relief in the foreign proceedings is a discretionary factor which militates against relief being granted. Ordinarily, one would expect a freezing order to be obtained initially in the main litigation court with a duplicate application in satellite proceedings (the satellite court's role being to assist the principal court by making an order designed to ensure that any judgment entered by that court will not be rendered nugatory).(8)

The BVI Commercial Court and Court of Appeal have therefore given very helpful guidance in this vital area for claimants seeking to freeze assets. However, the saying that "each case depends on its own facts" is more true than ever, especially in this area. Parties to cases which are going through the courts at present might give further guidance.

For further information on this topic please contact Phillip Kite or Claire Robey at Harney Westwood & Riegels by telephone (+1 284 494 2233), fax (+1 284 494 3547) or email (phillip.kite@harneys.com or claire.robey@harneys.com).

Endnotes

(1) [1979] AC 210.

(2) BVI HCV (Com) 2009/399. This is in line with modern decisions in other parts of the common-law world; see Solvalub Limited v Match Investment (1996 JLR 361), a decision of the Jersey Court of Appeal.

(3) Although not discussed in Black Swan, the old equitable remedies of a bill of discovery, a bill to perpetuate testimony and a bill to take testimony de bene esse (ie, provisionally or conditionally) pending a suit (Story, Commentaries on Equity Jurisprudence, 13th ed 1886 para [1480] ff) provide examples of remedies available in chancery in aid of proceedings in another court before the other court has heard a suit.

(4) [1993] AC 334.

(5) HCVAP 2010/028.

(6) Id, at [147].

(7) Id, at [149].

(8) Id, at [160].


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