British Virgin Islands: Eastern Caribbean Court Of Appeal Stays BVI Unfair Prejudice Proceedings In Favour Of Chinese Courts

Last Updated: 25 March 2014
Article by Andrew Willins

What is the appropriate forum for a shareholder dispute over a shipping joint venture, conceived in China and brought to fruition through the medium of BVI and Singapore companies?

The joint venture parties incorporated a series of companies in Singapore and the BVI. Included in the network of companies was Nasbulk Limited, incorporated under the BVI Business Companies Act 2004. Pursuant to the suite of joint venture agreements, Nasbulk was to function as the ship operating company, with management functions to be provided by a related company, incorporated in Singapore. The joint venture parties installed their nominees on the boards of Nasbulk and the Singapore company.

Disputes broke out between the joint venturers. These included controversies over the management of Nasbulk and the Singapore company, and precipitated a claim by Mr Gao – as a nominal shareholder in Nasbulk – for relief under section 184I of the BCA, on the grounds of unfair prejudice, on behalf of his principal (a Mr Hu). As part of his claim Mr Gao sought, alternatively, the winding up of Nasbulk on just and equitable grounds, an order that his shares be purchased, and permission to bring a derivative action, amongst other relief.

Nanjing Ocean (BVI) Limited ("Nanjing") – another BVI company, holding a majority interest in Nasbulk on behalf of its parent – met that claim with an application for a stay of the proceedings on the grounds of forum non conveniens. In brief, Nanjing contended that the centre of gravity of the dispute was in the People's Republic of China, where the joint venture had been conceived; that the vast majority of witnesses and documents were situated in either the PRC or Singapore; that a trial in the BVI would necessitate translation of documents and evidence; that the joint venture agreements were (largely) governed by PRC law; and most fundamentally that the joint venture agreements contained jurisdiction clauses in favour of the PRC.

The stay application came before Mr Justice Bannister in the BVI Commercial Court in May 2013. Bannister J held:

  • There was no evidence that Nasbulk itself had any connection with the PRC;
  • Apart from its place of incorporation (BVI), Nasbulk's closest connection appeared to be with Singapore; and
  • The joint venture agreements contained PRC choice of law clauses, and a non-exclusive jurisdiction clause in favour of the PRC.

On the basis of the jurisdiction and choice of law clauses, he expressed a preliminary view that the "natural" forum for the resolution of the joint venture disputes was the PRC. At that stage, however, Bannister J held that the case had features which took it outside of the Spiliada line of authority, and which justified an alternative approach. Noting that the vast majority of reported appellate forum decisions have dealt with straightforward contractual or tort claims, Bannister J held that the claim for specific statutory relief, enacted for the benefit of shareholders in BVI companies, justified the refusal of a stay, despite his finding on the "natural" forum:

"I accept that if I had evidence (which I do not) that on the allegations presently advanced by Mr Hu there is available to him in the courts of the PRC a remedy which for all practical purposes is identical to that offered to a successful claimant in this jurisdiction by section 184I, then there might be a case for considering the grant of a stay. In my judgment, however, it would still be a very serious matter for this Court to drive away a claimant who wished to make a case under a provision of a BVI statute which had been enacted for his potential benefit."

This decision was heralded at the time as one which which would make it difficult for the shareholders in BVI companies to avoid litigation before the Courts of the British Virgin Islands. Nanjing appealed to the Eastern Caribbean Supreme Court, on the central basis that Bannister J had failed to correctly apply the Spiliada principles.

The Court of Appeal agreed with Nanjing that the Spiliada framed the test to be applied. It noted that neither party had challenged Bannister J's assessment of the "connecting factors", or his finding on the "availability" of the PRC forum on appeal. Nevertheless, it reviewed those findings and found no reason to disturb them.

It was the question of remedy that had led Bannister J to decline a stay. But Nanjing successfully contended that this is an issue to be considered under the second limb of the Spiliada test. The Court of Appeal therefore held that Nanjing had satisfied the first limb of that test, by establishing an available forum which – ignoring the question of remedies – was "clearly the more appropriate" for the trial of the action.

That hurdle cleared, Nanjing had made out a prima facie case for a stay, and the burden shifted to Mr Gao to establish that he would be deprived of some personal or juridical advantage if the matter were tried in the PRC, and that it would be unjust to grant a stay. This he was unable to do, having adduced no evidence in relation to the laws or civil procedure of the PRC, and the proceedings were stayed on the grounds of forum non conveniens in favour of the courts of the PRC.

The case reaffirms that the Spiliada remains the point of departure in forum challenges in the BVI, even where local shareholder remedies are claimed. It qualifies the remark by the Court of Appeal in Royal Westminster Investments SA v Nilon Limited that "if foreigners incorporate companies here they must expect to have to come here to litigate disputes going to the membership and administration of such companies." And it contrasts with the decision in Re Yung Kee Holdings Ltd ([2012] 6 HKC) – cited to the Court of Appeal – in which the Hong Kong Companies Court declined jurisdiction to hear unfair prejudice and winding up petitions in respect of a BVI holding company which existed only to hold (indirect) interests in operating companies domiciled in Hong Kong; Harris J commenting "generally the most appropriate jurisdiction in which to decide whether any company should be wound up is the jurisdiction of its incorporation".

The case also serves as a useful reminder of the incidence of the burden of proof on forum applications. Whereas Mr Gao had argued that it was incumbent upon Nanjing to adduce expert evidence to establish that his claim could be brought in the courts of the PRC, Nanjing relied on the existence of the non-exclusive jurisdiction clause, and its own submission to the PRC jurisdiction, as prima facie evidence of the availability of that forum. Approving a passage from Dicey, Morris & Collins, the Court of Appeal agreed that Nanjing had thereby discharged the burden of proof. Since Mr Gao did not rely on his own expert evidence to counter the effect of the jurisdiction clause and undertaking, the enquiry ended there.

Appleby represented Nanjing Ocean (BVI) Limited in the Commercial Court and in the Court of Appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions