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.

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