With the use of British Virgin Islands ("BVI"), Bermuda and Cayman Islands entities continuing to grow in popularity in Asia, the ability of a party to freeze a party’s assets pending the outcome of litigation or arbitration is a crucial tool, and an increasing number of litigants are seeking the assistance of the BVI, Bermuda and Cayman Islands courts to grant urgent injunctive relief in support of proceedings initiated in foreign jurisdictions.
Unlike England & Wales, Hong Kong and the Cayman Islands, Bermuda and the BVI have no legislation in force giving their courts jurisdiction to grant freestanding freezing injunctions in aid of foreign court proceedings; in Bermuda and the BVI the jurisdiction to make such orders derives from decided cases.
The British Virgin Islands
Until Bannister J's decision in Black Swan Investment ISA v Harvest View Limited (BVI HCV (Com) 2009/399) in 2009 ("Black Swan"), the House of Lords’ decision in The Siskina  AC 210 ("Siskina") had been interpreted to mean that the BVI court had no jurisdiction to grant freezing injunctions against legal persons over which it had no in personam jurisdiction without the applicant having first issued substantive proceedings in the BVI.
The Black Swan case concerned an application to continue an injunction that had been obtained by a South African insolvency practitioner in support of insolvency proceedings against a Mr. Rautenbach in South Africa. It was alleged that Mr. Rautenbach was personally liable for the debts of the insolvent company over which the insolvency practitioner had been appointed and that Mr. Rautenbach owned or controlled two BVI companies, which were the legal owners of valuable assets. The applicant insolvency practitioner sought to freeze those assets in aid of the South African proceedings. At the time the application was made there were no pending proceedings in the BVI against Mr. Rautenbach or the BVI companies to support the grant of a freezing injunction and the cause of action being pursued against Mr. Rautenbach was not a cause of action that was recognised in the BVI. The BVI respondent companies relied on the principles established in Siskina to dispute the BVI court’s jurisdiction to grant the relief sought. They submitted that not only was there no extant claim against them in the BVI but there was no pre-existing cause of action in respect of which a claim against them could be brought.
In Black Swan, having considered Lord Nicholls' dissenting Judgment in the Privy Council decision of Mercedes Benz AG v Leiduck (PC)  AC 284 ("Mercedes Benz"), Bannister J found that the question as to whether the BVI Court could make an order for a freezing injunction in support of foreign court proceedings without the applicant having first issued substantive proceedings in the BVI was “open” and that on the state of the authorities there was a lacuna in the law. The Judge went on to distinguish the decision in Siskina by finding that, unlike the defendants in Siskina, which were not subject to the English Court’s in personam jurisdiction, the defendants in Black Swan, being BVI companies, were subject to the BVI court’s in personam jurisdiction. He accordingly found that where the BVI court would permit the enforcement of a subsequently obtained money judgment from a foreign court (in this instance the South African court), it had the power to grant a freezing order in support of the claimant’s prospective right to that money judgment.
The principles in Black Swan were approved by the Eastern Caribbean Supreme Court, Court of Appeal in the case of Yukos CIS Investments Limited et al v Yukos Hydrocarbons Investments Limited (HCVAP 2010/028) (“Yukos”). In that case, the Court of Appeal gave the following guidance:
- the BVI court will need to be satisfied that there is a good arguable case that the applicant will obtain a judgment which will be enforceable in the foreign court;
- the BVI court will want to see that a freezing injunction is necessary in aid of the relief that the applicant is likely to obtain from a competent foreign court;
- although there is no requirement to show that the foreign cause of action will result in a monetary judgment, the applicant will need to show that the foreign judgment will entitle it to a monetary judgment or the control of an asset sought to be frozen;
- the applicant must show there are assets in the BVI against which it can enforce; and
- the applicant's failure to seek equivalent interim relief in the foreign jurisdiction will militate against the BVI court granting a freezing injunction.
The subsequent case of Osetinskaya v Usilett Properties Inc (BVIH (Com) 2013/0037, 25 July 2013) (“Osetinskaya”) is helpful in clarifying the parameters of the Court's Black Swan jurisdiction. In that case, the BVI court found that shares in a BVI company represented assets for the purposes of the Black Swan jurisdiction, with Bannister J finding that "it would usually also be just and convenient to prevent the shares from being rendered worthless by restraining the company from disposing of its property, whether that property is situate in the BVI or abroad.” What is noteworthy from this judgment, however, is that Bannister J found that disclosure that would ordinarily be ordered when a freezing injunction is made so as to enable the applicant effectively to police the order, is not available under the Black Swan jurisdiction. He found that "the Black Swan jurisdiction applies to prevent … defendants from disposing of identified assets which might be available to satisfy a future judgment of a foreign Court in proceedings … It does not entitle the claimant in the Black Swan proceedings in this jurisdiction to interrogate them about its assets generally. That will be the function of an order made in the foreign proceedings.”
In the recent case of Bascuñan and others v Elsaca & ors (BVIHC2015/0128), which was handed down in February 2016 (“Bascuñan”), Bannister J reasserted the finding in Osetinskaya that foreign litigants could not rely on the Black Swan jurisdiction to interrogate BVI entities about their assets. The Judge also made it clear that the Black Swan jurisdiction was not coextensive with the English Civil Jurisdiction and Judgments Act 1982, which gives the English Courts statutory jurisdiction to grant interim relief in aid of foreign proceedings. This is significant because it means that BVI litigants will need to be careful when seeking to rely on the English authorities when asking the BVI court to exercise or to expand the exercise of its Black Swan jurisdiction.
In ERG Resources LLC v Nabors Global Holdings II Limited  SC (Bda) 23 Com (“ERG”), Kawaley CJ confirmed the common law position in Bermuda that interim injunctive relief is available in support of foreign proceedings wherever the Bermuda Court has personal or territorial jurisdiction over the defendant. In doing so, he cited with approval the BVI decisions in Black Swan and Yukos.
The Chief Justice went on to say that in circumstances where the Bermuda Court has the jurisdictional competence to grant relief (where both personal and territorial jurisdictional exists over the defendants and where a prima facie case to grant such relief is made out pursuant to Bermuda law) the Bermuda Court maintains a residual discretion to decide whether the relief would properly serve to assist the foreign court. Considering that residual discretion, the Bermuda Court will typically assess:
- whether an application has been made to the foreign court so its position in relation to interim relief can be ascertained;
- if an application has been refused by the foreign court whether it was refused on the merits or merely because it lacked the jurisdiction to grant such relief; and
- in general terms whether the grant of interim relief by the "ancillary" court would be justified with a view to assisting the foreign court in its adjudication of the substantive dispute.
In ERG, the plaintiff had obtained an ex parte order in Bermuda restraining the defendant from disposing of shares in a Bermuda domiciled company in support of substantive proceedings in Texas. The defendant applied to set aside the freezing order and the Bermuda Court engaged in a careful factual analysis of, among other things, what had taken place in the foreign proceedings in Texas. As a matter of fact, the Bermuda Court determined that:
- the Texas Court had refused urgent relief in Texas in the form of a temporary restraining order;
- the Texas Court seemed unlikely to grant interlocutory relief; and
- the Texas Court had given no indication that it supported ERG obtaining interlocutory relief from the Bermuda Court in aid of the substantive claim in Texas.
In these circumstances, based largely on the Bermuda Court's determination that the Texas Court would not grant interlocutory relief and would not view interlocutory relief in Bermuda as "assisting" its primary jurisdiction in relation to the dispute, the freezing order obtained ex parte was set aside. That decision however turned on its own facts and there is no doubt the requisite jurisdiction (comparable to the Black Swan jurisdiction in BVI) exists in Bermuda for the court to grant freestanding injunctive relief in suitable cases.
The Cayman Islands
In the Cayman Islands, s. 3 of the Grand Court (Amendment) Law 2014 (the “Amendment Law”) has now placed the Grand Court's power to grant interim relief in aid of foreign proceedings on a statutory footing. The Amendment Law introduced a new s. 11A into the Grand Court Rules (2008 Revision). Section 11A(1) is similar but not identical to s. 25 of the English Civil Jurisdiction and Judgment Act 1952 and gives the Grand Court the jurisdiction to grant freezing orders in aid of foreign proceedings, providing that:
“The Court may by order appoint a receiver or grant other interim relief in relation to proceedings which (a) have been or are to be commenced in a court outside of the Islands, and (b) are capable of giving rise to a judgment which may be enforced in the Islands under any Law or at common law.”
It should be noted that both elements of this section need to be satisfied before an order will be made. Section 11A(2) further provides that the Grand Court may grant interim relief of any kind which it would have power to grant in proceedings relating to matters within its jurisdiction and s. 11A(4) confirms that the jurisdiction applies notwithstanding that (i) the subject matter of the proceedings would not have given rise to a cause of action over which the Court would have jurisdiction but for the application of s. 11A(1); and (ii) the interim relief sought is not ancillary or incidental to any proceedings in the Islands. Section 11A(5) allows the Court to refuse an application for interim relief if "in its opinion, it would be unjust or inconvenient to grant the application". Finally, ss. 11A(6) reinforces that the Grand Court, in exercising its power under s. 11A(1), shall have regard to the fact that the power is ancillary to foreign proceedings and is for the purpose of facilitating the process of a foreign court, which has primary jurisdiction over the proceedings.
The first exercise of this new jurisdiction was in the recent decision of Classroom Investments Inc v (1) China Hospitals Inc and (2) China Healthcare Inc 2015 (1) CILR 451 (“Classroom Investments”), where the Chief Justice found that the gateway test in s. 11A(1) (quoted above) had been met. The foreign proceedings in that case were Hong Kong proceedings, which were capable of giving rise to a money judgment enforceable in the Cayman Islands at common law. The Chief Justice found that “the interests of comity suggest to my mind that it is altogether expedient, just and convenient that relief should be granted”. He also accepted that any suggestion that the Court would be exercising an “exorbitant jurisdiction” in granting the relief merely because the main proceedings were in Hong Kong would be contrary to the public policy underlying s. 11A, which was designed to aid those foreign proceedings.
In applying s. 11A, of the Grand Court Law (2008 Revision) and having considered the English case law on the equivalent English legislation, the Chief Justice said that the court should be cautious but not reluctant to exercise its jurisdiction and that it should consider the following factors:
- the reaction of any foreign court seised of the dispute;
- whether it would have granted the order sought if proceedings had been initiated within the jurisdiction; and
- whether it would be inexpedient or unjust to grant the order or injunction.
These considerations indicated that the Grand Court had jurisdiction as the Hong Kong court itself had approved of proceedings being brought in the Islands and that the Grand Court was best placed to make the orders sought, as the defendants were Cayman-registered companies. Further, the dispute concerned alleged fraudulent behaviour and the court took the view that it should be ready to use its powers to assist the victim of such a fraud. The fact that the defendants might not have assets in the Cayman Islands did not prevent the Grand Court from making the orders sought, particularly as the plaintiff had sought disclosure of the location of the defendants’ assets. In the words of the Chief Justice:
“The fact that the Defendants are Cayman companies over whom this Court has personal jurisdiction, means that this Court is not exercising an exorbitant jurisdiction, and to consider it exorbitant merely because the main proceedings are in Hong Kong would be contrary to the policy underlying section 11IA – namely, to aid foreign proceedings (which policy is expressly referred to in section 11A (6)). Indeed, the fact that the Defendants are Cayman companies renders it "most appropriate that protective measures should be granted by those courts best able to make their orders effective" (ie, the Grand Court).
As the decisions in Black Swan, ERG and Classroom Investments demonstrate, the BVI, Bermuda and Cayman Islands courts will carefully consider the facts of each case before granting freestanding freezing injunctions in aid of foreign proceedings. If the prospective foreign judgment is not one that is capable of being enforced in the jurisdiction, it is unlikely that freestanding injunctive relief will be available but the Court's power to grant such relief has been established in all three jurisdictions and now has a statutory footing in the Cayman Islands.
 In the words of the Chief Justice, “Section 11A(5) represents the Cayman legislature's recognition of the doctrine of comity which, while having no corresponding statutory expression in the English provision is, of course, recognized throughout the English case law as the primary guiding principle, that is: the mutual obligation of the courts of all friendly states to assist each other in the administration of justice while not interfering unduly with each other's jurisdiction.”