British Virgin Islands: Forum Non Conveniens - An Important Clarification By The BVI Court Of Appeal

Last Updated: 28 September 2018
Article by Andrew Chissick and Ben Mays

The BVI Court of Appeal has issued an interesting and timely judgment clarifying the principles applicable on a forum non conveniens challenge, in relation to claims alleging a multi-million dollar fraud purportedly involving a number of BVI incorporated companies and other foreign defendants. Carey Olsen acted for some of the successful appellants.

The Claimants in the proceedings were JSC MCC Eurochem ("Eurochem"), a company incorporated in Russia, and its Swiss affiliate Eurochem Trading GmbH. Eurochem is Russia's largest mineral fertiliser trader with a turnover of approximately US$7 billion in annual sales and operations worldwide.

Eurochem's case was that in 2014 it had discovered that certain senior members of its sales team had set up a web of companies in the BVI, Panama, Cyprus and Scotland, for the sole purpose of receiving, concealing and laundering the proceeds of over US$45 million in secret commission payments from Eurochem's trading partners. Shortly after making that discovery, Eurochem terminated those individuals' employment.

Eurochem issued proceedings in the BVI in August 2015. The defendants in those proceedings were the (now former) senior members of its sale team (who were Russian nationals), the alleged bribe payers, and the companies which were alleged to have received the secret commissions. A number of those companies were incorporated in the BVI (the "BVI Companies"). In this summary, the other defendants are referred to as the "Foreign Defendants".

Eurochem sought a broad range of relief, including declarations that the defendants who allegedly received payments of the secret commissions received such payments on a constructive trust for the claimants; liability to account as constructive trustees for all payments received and/or profits made from the receipt of such payments, liability to account for profits received; tracing of assets and monies held by or on behalf of certain of the Foreign Defendants derived from the secret commissions; and damages and interest.

In November 2015, Eurochem obtained permission to serve the proceedings out of the jurisdiction. Following service, certain of the Foreign Defendants applied for (amongst other things) a declaration that the Court did not have jurisdiction to try the claim and that the claim be struck out (the "Service Out Application"). Around the same time, certain of the BVI Companies applied for (amongst other things) a declaration that the claim should not exercise jurisdiction to try the claim and an order that the claims be stayed on forum non conveniens grounds (the "Forum Application"). The BVI Companies argued that the Russian Court was a more appropriate forum to hear the proceedings.

The Judge at first instance rejected the Service Out Application and Forum Application. The BVI Companies and Foreign Defendants appealed.

In his appeal judgment, Webster JA noted that the essence of the defendants' appeals was that the Judge at first instance had erred in his consideration and application of the principles relating to the determination of the appropriate forum for the trial of the claim to the extent that his decision exceeded the generous ambit within which reasonable disagreement is possible, and that the Court of Appeal should therefore set aside that decision and substitute its own discretion. Ultimately, the Court of Appeal agreed with that argument.

In respect of the appeal of the Forum Application, Webster JA affirmed that the Court is required to conduct a three stage enquiry to determine the most appropriate forum, per Lord Goff in the Spiliada case (adopted by the BVI Court in IPOC International Growth Fund). In essence, the Court should determine whether there is another available forum (stage 1), and whether that forum is more appropriate for the trial of the case (stage 2). If there is another forum that is more appropriate, a stay should be granted unless there is a risk that the claimant will not receive justice in that forum (stage 3).

The first instance Judge, having heard conflicting expert evidence, found that there were circumstances in which the Russian Court could hear the claims (perhaps involving some combination of proceedings) – thus satisfying stage 1. The Court of Appeal similarly found that Russia was an available forum with competent jurisdiction that was available for trial of the action.

As to stage 2, the Judge at first instance found that the BVI was the most appropriate forum for the trial of the case. The Court of Appeal found that he had erred in that conclusion. In particular, the Court of Appeal found that the Judge had:

  1. Failed to make a specific finding of the governing law of the claim and should have examined the evidence to determine the law with which the action has its closest connection. Had he done so he would have found that the claims had their closest connection with Russian law and the claims would be governed by Russian law, applying the exception to the "double-actionability" rule. This was an important factor weighing in favour of the claim being heard by the Russian Court;
  2. Incorrectly found that because Eurochem had not pleaded evidence of foreign law, BVI law should apply in respect of the claims. The Court of Appeal determined that this was not the proper approach as a) there was ample evidence of Russian law by the parties' experts; and b) Eurochem could not seek to benefit from their own default in not pleading and proving the governing law of the claims and then relying on that failure to try and take advantage of the more generous remedies available in the BVI. Contrary to the Judge's findings, the claims were governed by Russian law; and
  3. Attached too much weight to the use of BVI incorporated companies in the alleged scheme and to the fact that the claimants chose to sue in the BVI. These are neutral considerations in a forum application.

The Court of Appeal further found that although the remedies available in the Russian Court were more limited than those of the BVI Court, a party must take a forum as it finds it, and the lack of such advantages did not represent a risk that Eurochem would not receive justice in Russia. Accordingly, stage 3 of the Spiliada test was satisfied.

As a result the Court of Appeal set aside the exercise of the Judge's discretion and determined that Russia, not the BVI, was the most appropriate forum to hear the proceedings.

It followed that the claimants failed to satisfy an essential limb of the test for permission to serve out - whether in all circumstances the forum which has been seised is clearly or distinctly the appropriate forum for the trial of the dispute. As such, the order permitting Eurochem to serve the proceedings out of the jurisdiction on the Foreign Defendants was set aside.

This decision provides a very helpful summary of the issues the BVI Court must take into consideration when determining applications concerning forum non conveniens and the service of proceedings out of the jurisdiction. Amongst other matters it emphasises that the mere existence of a BVI incorporated company as a respondent to a claim which (as Webster JA put it) "has nothing to do with this jurisdiction" is not, in itself, a determining factor of whether the BVI Court will accept jurisdiction.

Carey Olsen successfully acted for five of the BVI Companies and one of the Foreign Defendants.

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
Events from this Firm
24 Oct 2018, Conference, St Peter Port, Guernsey

The Fund Finance Association is a non-profit industry association in the fund finance market that aims to educate members, legislators, regulators and other constituencies about the fund finance market.

13 Nov 2018, Conference, St Peter Port, Guernsey

SuperInvestor is part of the SuperReturn Series - the world's leading private equity events.

6 Dec 2018, Conference, St Peter Port, Guernsey

The definitive funds event of the year will include insights and predictions from over ten industry experts from both the Channel Islands and Europe

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
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