In a recently handed down decision of Re Kirkland Intertrade Corp (BVIHCM 2019/0149), the BVI Commercial Court has confirmed that the BVI Arbitration Act 2013 (the "Arbitration Act") does not require an award made by a foreign Arbitration Tribunal to be registered in the BVI before the award creditor can proceed with an application to wind up. The decision of the Privy Council (on appeal from the BVI) in Vendort Traders Inc v Evrostroy Grupp LLC [2016] UKPC 15 which dealt with the position prior to the coming into force of the Arbitration Act 2013, therefore remains good law.
The application to wind up Kirkland Intertrade Corp
("Kirkland") was made on the basis of a
debt created by a partial final award (the
"Award") made in an arbitration between
(inter alios) the Applicant, Daselina Investments Ltd
("Daselina") and Kirkland before the
London Court of International Arbitration
("LCIA"). Under the terms of the Award,
Kirkland was liable to pay Daselina US$26 million principal plus
interest. Daselina served a formal letter of demand on Kirkland on
23 September 2019 and, no payment being made, on 4 October 2019
filed an application seeking the appointment of liquidators in the
BVI Commercial Court.
At the hearing of the winding up application, Kirkland argued that
the BVI Court has no jurisdiction to make an order winding up a BVI
company on the strength of a foreign arbitration award unless and
until the award is registered in the BVI in accordance with the New
York Convention. The Privy Council's decision in Vendort was to
be distinguished as having decided only the position which
prevailed prior to the coming into force of the Arbitration Act,
which had changed the law. Vendort had concerned an application to
set aside a statutory demand based on a debt arising under a
foreign arbitration award made at a time prior to the coming into
force of the Arbitration Act. It was argued in Vendort that the
award needed to be registered under section 28 of the Arbitration
Ordinance, the legislation which was then in force, before a
statutory demand could be served in respect of it. That argument
was rejected and it was held that it was not necessary for the
award to be registered before the creditor could serve a statutory
demand in respect of the debt created by it. Kirkland argued that
the law had changed: under the old law, it submitted, it was not
possible to register a foreign arbitration award under the New York
Convention[1]. However, the Arbitration Act had changed that with
the consequence that registration was now the required, and only
method of enforcing an award. Daselina's application to wind up
was therefore fatally flawed because the Award had not been
registered in the BVI and the Court should not entertain the
application.
The Judge rejected Kirkland's submissions. He held that seeking
to appoint liquidators is not properly to be regarded as a method
of enforcement (citing PT Ventures SGPS SA v Vidatel Ltd
BVIHC (Com) 2015/0117 per Gerard Farara QC), that recognition under
the New York Convention is not the only means by which the Court
can take cognisance of the debt created by the award, and that
registration of an award is not a necessary precondition to an
application to wind up a BVI company on the strength of the debt
created by the award. Accordingly, Daselina was entitled to file a
winding up application without first registering the Award and, in
the absence of a genuine dispute as to the debt credited by the
Award, it had a proper basis for seeking the appointment of a
liquidator.
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