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06 March 2014
The law relating to the BVI courts' authority to enforce a foreign judgment has changed due to a successful court action in the Court of Appeal. The decision was quickly followed by a change in the civil procedure rules to reflect the judgment.
Before the decision of the Eastern Caribbean Supreme Court in the Court of Appeal on December 18 2013, a claimant that sought to enforce a money judgment from a non-recognised foreign court against a foreign defendant would have encountered an insurmountable hurdle in obtaining leave to serve the claim out of the jurisdiction. Westburg Anstalt faced such a hurdle when it obtained a final and conclusive monetary judgment from the courts of Liechtenstein against Profitstar Anstalt. Westburg initiated a claim in the British Virgin Islands, intending to enforce its monetary judgment against shares held by Profitstar in a BVI company. The court at first instance dismissed Westburg's application for leave to serve out of the jurisdiction on Profitstar on the basis that the court had no power under Rule 7.3(5)(b) of the Civil Procedure Rules, 2000, as it stood, to allow service out of the jurisdiction.
Before the amendment, the Civil Procedure Rules Part 7.3(5) provided as follows:
"A claim form may be served out of the jurisdiction if a claim is made to enforce any judgment or arbitral award which was made:
1. Within the jurisdiction; or
2. By a foreign court or tribunal and registered in the High Court pursuant to Part 72."
Part 72 of the rules outlines the procedure whereby judgments can be registered in the British Virgin Islands arising from the terms of the Reciprocal Enforcement of Judgments Act. The act recognises the judgments of only 15 countries;(1) therefore, judgments from any other country could not be registered under Part 72 or enforced in the British Virgin Islands.
Therefore, on a literal reading of Part 7.3(5)(b), Westburg's money judgment was incapable of being registered and could not be enforced. Nevertheless, Westburg relied on Part 7.3(5)(b) and argued that the legislature could not have intended that only judgments from the act's recognised jurisdictions could be enforced under Part 7.3(5)(b). A purposive interpretation should therefore be applied. Without such a reading, there would be no gateway available to Westburg for obtaining leave to serve its claim out of the jurisdiction. This could not have been the legislature's intention, as Part 72 dispenses with the need for a claim form and the need for the court to give permission for service out of the jurisdiction. Part 7.3(5)(b) had in fact been added relatively recently to the pre-existing Rule 7.3(5) (which is retained as 7.3(5)(a)). Westburg argued that the intention behind adding Rule 7.3(5)(b) must have been to allow enforcement of foreign judgments generally. Therefore, the court ought to apply a purposive interpretation and the mischief rule in construing the provision. However, the first-instance court rejected this argument. In the absence of any apparent gateways for Westburg, the guidance of the Court of Appeal was critical.
The Court of Appeal agreed with the arguments put forward on behalf of Westburg and applied a purposive construction and the mischief rule to Part 7.3(5)(b). It therefore granted leave to Westburg to serve its claim abroad. The court applied the English decision McMonagle v Westminster City Council, which Westburg relied on, and noted that the words "and registered in the High Court pursuant to Part 72" were to be ignored as mere surplus which had been added in error.
On February 4 2014, in an extra publication in the Official Gazette, the Eastern Caribbean Supreme Court Civil Procedure (Amendment) Rules 2013 were passed, repealing Part 7.3(5) and replacing it with terms that accord with the proper intention behind the rule. The amendment was noted to take effect on February 1 2014.
The Civil Procedure Rules Part 7.3(5) now provides as follows:
"A claim form may be served out of the jurisdiction if a claim is made to enforce any judgment or arbitral award which was made by a foreign court or tribunal and is amenable to be enforced at common law."
The British Virgin Islands is home to some 500,000 active companies and is the fourth largest provider of direct foreign investment globally. The previous inability for foreign judgment creditors to unlock value in BVI assets, including valuable shareholdings in BVI vehicles, was the cause of widespread frustration. The recent change in the law provides access to a raft of enforcement provisions such as charging orders, orders for sale and attachment orders.
For further information on this topic please contact Andrew Thorp,Jeremy Child or Macia McFarlane at Harney Westwood & Riegels by telephone (+1 284 494 2233), fax (+1 284 494 3547) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Harney Westwood & Riegels website can be accessed at www.harneys.com.
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