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Ed Kemp on Private International Law in BVI

In September 2018, the Eastern Caribbean Supreme Court – Court of Appeal (BVI) handed down an important judgment on the principles applicable to the stay of proceedings on the ground of forum non conveniens in Livingston Properties Equities Inc and others v. JSC MCC Eurochem and others BVIHCMAP 2016/0042.

Background

This was a claim pursued in the BVI by a Russian company (“Eurochem”) in tort and restitution in respect of an alleged $45 million bribery scheme against two of its former Russian employees employed under service agreements governed by Russian law (“the Russian defendants”) and BVI companies alleged to have been recipients of bribes.

Eurochem commenced proceedings against the defendants in the BVI Commercial Court in August 2015. A number of the defendants applied to get the proceedings struck out or stayed on the basis that BVI was not the appropriate forum to hear the dispute.

At first instance, Wallbank J dismissed both applications concluding that the BVI was the most appropriate forum for the trial. In exercising his discretion as to the connecting factors to BVI as the most appropriate forum for the claim, Wallbank J:

• relied on rule 18(2) of Dicey, Morris and Collins on the Conflict of Laws that “In the absence of foreign law, the court will apply English [BVI] law to such a case”. Eurochem’s failure to plead evidence of foreign law meant that the court applied BVI law by default; and
• found that the Russian defendants’ choice of BVI companies to perpetrate the alleged bribery scheme meant that they should be tried by the BVI courts.

A number of defendants appealed against those orders. The BVI Court of Appeal allowed the appeal and granted a stay of the proceedings in the BVI.

Legal framework

In order to determine what is the most appropriate forum for trying the case, the Court applied the well-known three-stage inquiry in Spiliada Maritime Corporation v. Cansulex Ltd [1987] AC 460:

• whether there is another available forum;
• whether that forum is more appropriate for the trial of the case;
•  if there is another forum that is more appropriate, a stay should not be granted unless there is a risk that the claimant will not receive justice in the more appropriate forum.

The burden of proof in the first two stages is on the defendant seeking the stay, and on the claimant at the third stage.

At the second stage of the inquiry, the Court applied the following guidance from the UK Supreme Court in VTB Capital v. Nutritek [2013] 2 AC 337:

• a good starting point in the exercise of determining the most appropriate forum in a case involving torts and breaches of trust is to determine the place where the torts and breaches of duty were committed [40];
• the governing law of the claims, like the place of commission of the claims, is an important consideration in determining the most appropriate forum for the trial of the claim [46].

 The Court’s decision 

The Court held (Webster JA giving judgment for the Court) that the first instance judge had erred in law at the second stage of the inquiry in the following respects [71]:

• the judge did not make a specific finding of the governing law of the claims in the action. He should have examined the evidence to determine the law with which the action has its closest connection.
• the judge should not have relied on rule 18(2) of Dicey, Morris and Collins to find that BVI law applied to the claims. This was not a case where there was no satisfactory evidence of foreign law.
• the judge attached too much weight to: (i) the use by the Russian defendants of companies incorporated in the BVI – what is important is where the company and its agents carried out the activities that led to the claim [68]; and (ii) the “unilateral and self-serving” decision that the claimants chose to sue in the BVI [69]. These are both “neutral considerations” in a forum application. 

The Court applied the three-stage inquiry and carried out a rigorous analysis of the factors at the second stage.

Of note, on the issue of governing law, absent any evidence as to where the alleged torts were committed, the Court applied an exception to the general rule that the applicable law is that of the foreign country where the act was done.

The Court concluded that the dispute arose out of the employment relationship between the Russian defendants and the claimants [56]. The choice of law clause in the Russian defendants’ service agreements was widely-drafted such as to suggest that both direct and indirect relations arising from the contracts were governed by Russian law.

At the third and final stage of the inquiry, the Court concluded that although the claimants would not have the array of remedies available to them in the BVI, they would not be left without a viable claim before the more appropriate forum, Russia.

Impact

This is very important decision on the application of forum non conveniens principles in the BVI. The decision underscores the need for claimants to plead and advance a positive case on the governing law of the dispute which will be an important factor.

In rejecting reliance on the default provision in rule 18(2), the Court stated [49]:

“the claimants cannot seek to benefit from their own default in not pleading and proving the governing law of the claims and then relying on that failure to take advantage of the more generous remedies available in the BVI. This is patently self-serving and bears some resemblance to forum shopping”

The decision also relegates the place of incorporation of defendant to a mere “neutral consideration” even where the companies are alleged to be instruments used in an international fraud.

This case heralds the start of a more conservative approach to the determination of the correct forum on BVI. The effects can be seen in a recent unsuccessful ex parte application for permission to serve out of jurisdiction in Best Grain and others v. Emerwood Ventures Ltd and others BVIHC (COM) 153 of 2018.

However, this may not be the last word on the matter. It is understood that the Court has granted Eurochem leave to appeal to the Privy Council.

Ed Kemp (2005 call) has significant experience of private international law. Ed is a member of Littleton’s Offshore Group.