Under section 25 of the Civil Jurisdiction and Judgments Act 1982, the English courts have the power to grant interim relief, including freezing orders, in certain circumstances in aid of foreign proceedings (and in the absence of substantive proceedings in England).
Prior to section 24A of the Eastern Caribbean Supreme Court (Virgin Islands) Act, there was no equivalent statutory provision in the British Virgin Islands. Section 24, which was enacted on 7 January 2021, provides the BVI courts with express statutory jurisdiction to grant interim relief where proceedings are (or are about to be) commenced in a foreign jurisdiction. However, notwithstanding the historic lacuna in BVI legislation, on numerous occasions during the decade 2010-2020, the BVI courts did grant freezing orders in support of foreign proceedings against non-cause of action defendants located in the BVI (i.e. so-called “Chabra” defendants).
They did so on the basis set out by Justice Bannister in 2010 in the case of Black Swan Investment ISA v Harvest View Ltd (BVIHCV 2009/399) (unreported) 23 March 2010 (“Black Swan”). This case concerned a freezing order against two BVI companies that the applicant sought in order to assist related fraud proceedings on foot in South Africa. Despite the absence of substantive proceedings in the BVI, and despite neither of the BVI companies being party to the South African proceedings, Justice Bannister held that policy reasons required the BVI court to fill the legal lacuna, as failing to do so would damage the reputation of the BVI as an international financial centre. The ruling allowed claimants to seek freezing injunctions in the BVI without the need to bring a substantive claim in the jurisdiction, and accordingly, ‘Black Swan’ injunctions became a crucial tool in international asset tracing, preservation and recovery.
However, in May 2020, a decision handed down by the Eastern Caribbean Court of Appeal in the case of Broad Idea International Limited v Convoy Collateral Limited BVIHCMAP2019/0026, found that Justice Bannister’s decision in Black Swan was wrongly decided. The case concerned a claim brought in Hong Kong by the financial services company, Convoy Collateral, for damages against, amongst others, its former director, Roy Cho. Convey Collateral sought damages from Dr Cho, equivalent to some US$92 million, for allegedly making, broadly speaking, various inappropriate investments. In support of that action, in 2018 Convoy Collateral pursued a freezing order in respect of Dr Cho’s assets in the BVI, including BVI-incorporated Broad Idea. However, it was held that, given the lack of enabling legislation, the BVI court’s jurisdiction to grant a freestanding freezing injunction against a BVI company could not be invoked where such company was not party to the substantive proceedings and where no undertaking has been given to the court that substantive proceedings would be commenced. The Court went on to remark that this was the position, even though the Judge in Black Swan had been “very well intentioned” and notwithstanding that “the time has long come for the legislature to clothe the courts in the BVI with the jurisdiction to grant injunctions in aid of foreign proceedings”. However, pending enacting legislation to that effect, the judgment meant that, for that time being, Black Swan injunctions would no longer be possible in the BVI.
Following the Court of Appeal’s decision in Convoy Collateral, as indicated above, in early 2021, new legislation was enacted in the BVI granting the courts with jurisdiction to grant freestanding freezing orders and other interim relief in support of foreign proceedings. The sheer speed at which section 24 of the Eastern Caribbean Supreme Court (Virgin Islands) Act was subsequently enacted, following the decision in Convoy Collateral, is indicative of the issue’s importance, particularly to ensuring that the BVI courts can remain at the forefront of complex asset tracing proceedings on an increasingly international stage.
Common law developments
Further, the judgment in Convoy Collateral was subject to further appeal to the Privy Council, which handed down its landmark ruling on 4 October 2021. In doing so, it clarified by a 4-3 majority that, where the courts have personal jurisdiction over a respondent, they will have a common law equitable power to grant interim injunctions to assist enforcement of a prospective or existing foreign judgment where it is just and convenient to do so. Lord Leggatt, in delivering the judgment, confirmed that the confusion arose in light of The Siskina case (Siskina (Owners of cargo lately laden on board) v Distos Cia Naviera SA  AC 210), pursuant to which it was held that an interlocutory injunction could not be granted unless in support of a “pre-existing cause of action”. However, the majority ruling of the Privy Council has now clarified that The Siskina case concerned service out of the jurisdiction, and did not determine whether the court could grant a freezing injunction against a defendant on whom papers had been properly served. Crucially therefore, it remains the case that the BVI courts are unable to authorise service on a defendant outside the jurisdiction where a freezing injunction is the only relief sought.
The Privy Council’s judgment is important not just in clarifying the Black Swan jurisdiction and law on service outside the jurisdiction in these circumstances, but also because Lord Leggatt provided a summary of the test applicable to the grant of freezing injunctions. He explained that:
(a) the applicant has already been granted or has a good arguable case for being granted a judgment or order for the payment of a sum of money that is or will be enforceable through the process of the court;
(b) the respondent holds assets (or, as discussed below, is liable to take steps other than in the ordinary course of business which will reduce the value of assets) against which such a judgment could be enforced; and
(c) there is a real risk that, unless the injunction is granted, the respondent will deal with such assets (or take steps which make them less valuable) other than in the ordinary course of business with the result that the availability or value of the assets is impaired and the judgment is left unsatisfied.”
Overall, the Privy Council’s judgment is of great significance, even despite the recently enacted BVI legislation. Its importance arises not just in terms of clarifying the common law and detailing the applicable test to the grant of freezing injunctions, but also because the relevant BVI legislation does not expressly have retrospective effect, meaning that Black Swan injunctions granted before 7 January 2021 would have otherwise remained at risk of being set aside.