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29 June 2017
On May 11 2017 the British Virgin Islands adopted new guidelines for communication and cooperation between courts in cross-border insolvency matters.
The initiative was the result of work by the Judicial Insolvency Network(1) and has proven popular. The British Virgin Islands is the latest key commercial jurisdiction to adopt the guidelines this year, joining New York, Delaware, Singapore and Bermuda. It is likely that others will follow shortly.
The guidelines are designed primarily to enhance communication between courts, insolvency representatives and other parties in the context of global restructurings and insolvency. As a result of the increased efficiency, it is hoped that stakeholders will see a reduction in delays and costs.
The key elements of the guidelines are as follows.
Communication between courts
Courts are encouraged to communicate directly with each other. There has traditionally been inconsistency and caution in communication between judges, and a question as to its appropriateness. The guidelines actively promote discourse which:
Concerns that parties might have private communications are largely addressed by a guideline which provides that parties are entitled to be present during discussions. Communications will be transcribed and form part of the record in the relevant proceedings.
The guidelines provide for foreign parties or appropriate persons to appear before a local court. The standard guidelines provide a safe harbour for appearances in foreign courts without submission to jurisdiction. However, importantly, in the BVI version the rules relating to submission are not waived and the normal principles of private international law apply. Further, foreign counsel will be heard according to existing practices.
Acceptance of foreign process
The guidelines provide a default setting that foreign laws, regulations and orders have been properly enacted or made. This is designed to streamline the unnecessary baggage of additional evidence in confirming the validity of a foreign proceeding. A provision is also included for courts to provide any updates to other courts involved in parallel proceedings.
Perhaps the most ambitious aspect of the guidelines is the provision for joint hearings. An annex to the guidelines predicts contemporaneous hearings via video, with the ability for counsel to be heard and make submissions in the parallel proceedings court. Unlike the safe harbour provided for those appearing in a domestic court, it will be considered whether a party appearing in a joint hearing will have submitted to the other jurisdiction.
The courts will also have greater autonomy to communicate with each other to establish procedure for joint hearings and subsequent issues without the attendance of counsel.
The guidelines should be implemented by way of either an agreed protocol or, if required, by court order. It is likely that existing legislative frameworks, with or without adoption of the model law on cross-border insolvency, will support the guidelines. As a judge-led initiative, it is expected that the guidelines (which are a template only and can be tailored per jurisdiction) will be adopted via practice direction or commercial guides rather than secondary legislation.
The guidelines are deliberately flexible and do not transgress local laws and sovereignty. However, they are reflective of the judiciary's desire to enhance coordination and cooperation in a manner that will streamline proceedings for the benefit of stakeholders. For example, the first guideline encourages practitioners from the outset of proceedings to communicate and cooperate with their foreign counterparts.
While the guidelines may not end turf wars between appointees, they are likely to bring such disputes before the courts at an earlier stage, and that alone may well promote the culture of cooperation envisaged by the drafters.
For further information on this topic please contact Phillip Kite or Andrew Thorp at Harneys' Tortola office by telephone (+1 284 494 2233) or email (firstname.lastname@example.org or email@example.com ). Alternatively, contact Ian Mann at Harneys' Hong Kong office by telephone (+852 3195 7200) or email (firstname.lastname@example.org). The Harneys website can be accessed at www.harneys.com.
(1) The Judicial Insolvency Network last met in 2016 in Singapore. Judges participating at the Singapore Conference hailed from Australia (Federal Court and New South Wales), the British Virgin Islands, Canada (Ontario), the Cayman Islands, England and Wales, Hong Kong Special Administrative Region (as an observer), Singapore and the United States (Delaware and Southern District of New York).
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