The gravity of any arbitration award lies in its successful enforcement. The enforcement process may be frustrated and produce little result if the winning party does not identify at the outset the assets against which the successful arbitral award may be enforced and/or does not secure the assets in dispute, only to find out later that the disputed assets have been dissipated. This is especially relevant when the opponent who was entrusted to manage money or property on someone's behalf and at someone's direction breached that trust in a manner contrary to their fiduciary duties. A good starting point if the assets have disappeared is to first to investigate the affairs of the possible rogue fiduciary and other closely connected persons. This exercise can often determine whether an action starts, continues or settles.
An aggrieved client would want to first secure the asset that is the subject matter of the arbitration dispute. In the BVI, this can be done by applying for interim measures in support of arbitration proceedings under section 43 of the BVI Arbitration Act 2013 (as revised). Although the Act allows for the application to be made on an urgent basis and ex-parte, the court will decline to grant interim relief if it considers that it is more appropriate for the arbitral tribunal to deal with such an application. Furthermore, under some arbitration rules the applicant may first be obliged to seek permission from an arbitrator, removing the element of surprise. The court may order various measures aimed at preserving the assets until the arbitral award is made, with proprietary and freezing injunctions being the most popular measures in asset tracing and recovery. The court may also order disclosure of the information and documents if such disclosure is necessary to identify wrongdoers in order to bring future proceedings, or the applicant may seek an ancillary disclosure order as part of the injunction requiring the wrongdoer to identify their assets. If the injunction proves to be ineffective in preserving the assets, the application could seek the appointment of receivers.
If there is a reason to think that the rogue fiduciary has dissipated the assets or breached the injunction, the aggrieved client would want to conduct an investigation in order to follow and possibly trace the money and/or property or in the event of damages being the ultimate relief. This may take the form of a simple search of registers or the more sophisticated approach of commissioning an investigation report from relevant forensic experts. The latter option would be justified if the rogue fiduciary is a particularly wealthy person or manages personal assets through opaque company structures located in various offshore and onshore jurisdictions. Often, assets belonging to a rogue fiduciary might be held by third persons, making the identification and tracing more challenging and necessitating the bringing of satellite proceedings in order to secure the assets.
If the facts of the case warrant appointment of receivers, this would enable the aggrieved party to have some visibility as to the means of dissipation and assist in asset tracing. The appointment of receivers could be an important contributing factor to a successful asset identification and preservation strategy. It should be remembered, however, that the receivers' primary role is to preserve the assets pending the outcome of arbitration and any assistance they can offer must be incidental to that role. Upon obtaining a successful award and converting the same into a BVI judgment by way of enforcement under the New York Convention (as implemented by the Act), the applicant will have access to all tools of enforcement available in support of any BVI judgment and the receiver may of course be converted to an appointment to assist execution and enforcement.
It seems that any strategy to collect on an arbitral award, domestic or foreign, in circumstances where the opponent is potentially dishonest and acting in breach of fiduciary duties, must carefully consider at the outset how to preserve the assets in dispute. It may need to go even further and investigate the assets of the wrongdoer if the said assets have been dissipated and are not immediately identifiable.
The BVI International Arbitration Centre is accustomed to dealing with a wide variety of cases involving asset tracing and recovery, as is the BVI Commercial Court in granting orders assisting arbitrations here and overseas.
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.