British Virgin Islands: Game-Changer: Harneys Opens Door To Foreign Enforcement Actions In The BVI

Harneys has successfully brought an action that changes the law relating to the access of the BVI Courts to enforce a foreign judgment. The Court of Appeal victory was quickly followed by a change in the civil procedure rules to reflect the judgment.

Prior to the decision of the Eastern Caribbean Supreme Court in the Court of Appeal on 18 December 2013, a claimant who sought to enforce a money judgment from a non-recognised foreign court (recognised foreign courts defined below) against a foreign defendant would have encountered an insurmountable hurdle in obtaining leave to serve the claim out of the jurisdiction. Indeed, Westburg Anstalt (Westburg) faced such a hurdle when it obtained a final and conclusive monetary judgment from the Courts of Liechtenstein against Profitstar Anstalt (Profitstar). Westburg initiated a claim in the BVI 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 the provisions of Rule 7.3(5)(b) of the Civil Procedure Rules, 2000 (CPR) as it stood, to allow service out of the jurisdiction.

Prior to amendment, CPR Part 7.3(5) provided as follows:

Part 72 of the CPR outlines the procedure whereby judgments can be registered in the BVI arising from the terms of the Reciprocal Enforcement of Judgments Act (REJA). REJA recognises the judgments of only 15 countries¹ and therefore judgments from any other country could not be registered under Part 72 and thereby enforced in the BVI.

It meant therefore that on a literal reading of Part 7.3(5)(b), Westburg's money judgment was incapable of being registered and therefore could not be enforced. Westburg nevertheless relied on Part 7.3(5)(b) and argued that it could not have been intended by legislators that only judgments from REJA 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 draftsman's intention as Part 72 anyway 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)). Harneys argued that the intention behind adding 7.3(5)(b) must have been to allow enforcement of foreign judgments generally. The court ought therefore to apply a purposive interpretation and the mischief rule in construing the provision. The first instance court however rejected this argument. In the absence of any apparent gateways for Westburg, the guidance of the Court of Appeal (CA) was critical.

The CA 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 CA applied the English decision McMonagle v Westminster City Council which was relied on by Westburg and noted that the words "and registered in the High Court pursuant to Part 72" were to be ignored as mere surplusage which had been added in error.

On 4 February 2014 by an extra publication in the Official Gazette, the Eastern Caribbean Supreme Court Civil Procedure (Amendment) Rules 2013 was passed repealing Part 7.3(5) and replacing it with terms that accorded with the proper intention behind the rule. The amendment was noted to take effect on 1 February 2014.

CPR Part 7.3(5) now provides as follows:

The BVI 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.

Footnote

1. England, Northern Ireland, Scotland, Bahamas, Bermuda, Belize, Trinidad and Tobago, Nigeria, Grenada, St Lucia, St Vincent, Guyana, Jamaica, New South Wales

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