Security for costs against claimants resident outside the BVI

In a recent decision of the High Court of the British Virgin Islands (“BVI”) with important implications for claimants resident in the PRC (Wang Zhongyong & Others v Union Zone Management Limited & Others BVIHC (COM) 0126 of 2011), the judge declined to grant security for the defendants’ costs against PRC resident claimants, despite provision in the BVI Civil Procedure Rules (“CPR”) allowing for the court to grant security for costs where inter alia “the claimant is ordinarily resident out of the jurisdiction” (CPR 24.3(g)).

Justice Bannister held that the Courts of the BVI would need compellingly persuasive reasons to award security for costs on the ground of foreign residence alone.

He affirmed the application of the European Convention on Human Rights in the BVI. The modern English approach to security for costs, developed in light of the Convention, and set out in Nasser v Bank of Kuwait [2001] EWCA 556, is to allow only the additional costs of overseas enforcement as security, rather than the full costs of the substantive proceedings, so as to avoid discrimination against claimants on the basis of foreign residence. However, in the BVI the CPR permits the costs of the BVI proceedings alone to be held as security, and therefore the approach in Nasser could not be followed.

Justice Bannister held that (1) the underlying risk against which an order for security is made is that enforcement in the foreign jurisdiction will be so problematic that it is necessary to protect the defendant; and (2) the absence of reciprocal enforcement provisions between the BVI and the jurisdiction in which the claimant is ordinarily resident cannot of itself be a ground for ordering security.

Applying this reasoning, and relying on evidence from PRC lawyers stating that (1) enforcement of a BVI judgment may be sought in the PRC, and (2) a party who has successfully sought enforcement is able to recover the costs from the other side, the application for security was refused.

 

- Contributed by Harneys

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