British Virgin Islands: Foreign Arbitration Award Sufficient Basis For A BVI Statutory Demand

The Eastern Caribbean Court of Appeal ("ECCA") has held¹ that there is no need for a creditor with the benefit of a foreign arbitration award to register or obtain permission to enforce the award within the BVI before proceeding by way of statutory demand.

The case concerned a monetary award made in an arbitration before the London Court of International Arbitration. The creditor served a Statutory Demand on the Debtor, a BVI company, in the BVI.

The Debtor applied to set the demand aside on the basis (inter alia) that there was no debt due because an unenforceable award could not form the basis of a statutory demand. It founded its case on Section 10(3) of the BVI Insolvency Act, 2003 which excludes from the definition of liabilities for the purpose of the Act "an illegal or unenforceable liability". The Debtor argued that a foreign award is unenforceable within the meaning of Section 10(3) unless or until it is declared by the BVI Court to be recognised and enforceable and, accordingly, could not form the basis of a Statutory Demand.

The Court of Appeal held, dismissing the appeal, that there is no statutory provision or common law principle in the Virgin Islands which prohibits an award holder from serving a statutory demand or a winding up petition based on an unenforced foreign arbitration award or judgment. The word "unenforceable" as it is used in Section 10(3), properly construed, means "unenforceable as a judgment" or "not actionable in law" and so does not exclude an unenforced but enforceable arbitration award. Further, the Court rejected the Debtor's argument that the arbitration award was only enforceable by recognition under statute: Section 28 of the BVI Arbitration Act merely sets out the procedure for enforcing a non-Convention arbitration award and is not to be read as compelling the award holder to enforce the award before relying on it for the purpose of serving a statutory demand or presenting a winding up petition.

This Judgment now clears up any remaining doubt as to the remedies available to the holder of a foreign arbitration award within the BVI. It is now clear that a binding arbitration award issued by a tribunal of competent authority to whose jurisdiction both parties had submitted, constitutes a present, due and enforceable liability and, as such, provides sufficient basis for a Statutory Demand.

Footnote

1 Vendort Traders Inc. v Evrostroy Grupp Llc BVIHCVAP 2012/0041 26/05/2014

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.