Friday, December 05, 2008Putting Down Deep Roots

Staff WriterThe Development of the BVI Commercial Court

BBVI: What is the origin of the Court’s establishment?

LPL: The whole idea of a Commercial Court for the BVI has its origins in the development of the jurisdiction as an offshore financial centre, in particular, the growth in company formations and the use of those companies in myriad structures from holding companies for significant assets and large enterprises including real estate developments worldwide to mutual funds and other high end investment vehicles. A commercial court was almost inevitable given that our financial services sector really took off twenty years ago, with several company management firms from abroad being set up in BVI. The BVI then introduced other legislation to complement the growing sector (such as financial services regulation, mutual funds legislation in 1996, limited partnership legislation in that same year, segregated portfolio legislation for insurance companies in 2002 and insolvency legislation in 2003) but there is no gainsaying the fact that the origins of the heightened demand for a commercial court really goes right back to the passage of the International Business Companies Act in 1984. Claims before the court involving such companies most often have to do with shareholder disputes, insolvency, the interpretation and enforcement of contracts and are invariably complex and multi-jurisdictional and involve highly-reputed foreign and local counsel alike. Invariably, multiple interlocutory applications are made, including urgent injunctions, requests for disclosure to aid in proceedings elsewhere, and freezing orders. Many applications continue to be made under the Insolvency Act 2003, and the BVI Business Companies Act, 2004 (the BVI BCA) which legislation wholly repealed and replaced the International Business Companies Act, 1984. The BVI BCA completely modernised the concept of the BVI Company including the introduction of modern provisions dealing with minority shareholder protection.

BBVI: Why was the decision taken to establish the court and what process was followed?

LPL: It is accepted that one of the important elements necessary for the success of any financial services sector is a well structured, organized and efficiently run judicial system; one staffed by an independent judiciary responsive to the litigation demands of such an industry. The BVI, as a world-renowned jurisdiction for the provision of offshore financial services, is no different in this respect to any other offshore jurisdiction. In the BVI, the need for a judicial system and judges sensitive to this need and cognisant of its important role in providing that level of judicial service, has been well recognized for some time. These issues have been considered and talked about by successive governments and the private sector alike, as detailed in the “Report of the Committee to Review the Courts System in the British Virgin Islands “The Courts Systems Review Committee” July 2004”

Work towards the establishment of a Commercial Court really began in earnest when the then Executive Council in February 2003 advised that a Committee be established, among other things, to “review the adequacy of the present arrangements for commercial litigation in the Territory, recommending such changes as it considers desirable, with an indication of potential cost and other resource implications”. The Courts Systems Review Committee set to work in May 2003 and reported in July 2004. It was the Committee’s considered view that the BVI ought not to move to establish its own independent commercial court but rather that the BVI should support the creation of a separate “commercial division” within the Eastern Caribbean Supreme Court as proposed by the Chief Justice as part of the continuing reform process.

Around the same time, the then Chief Justice of the Eastern Caribbean Supreme Court appointed a committee to develop a design for a commercial division pilot project that would serve the entire OECS. Under the pilot project, a test would be conducted to determine the feasibility of establishing a commercial division within the BVI and assigning a specialized commercial judge on a full-time basis to hear all BVI commercial cases and to take charge of the division. The Chief Justice’s Committee reported (the Lipscher Report) in February, 2004. One of the interesting features of the Lipscher Report is the acknowledgment of the important contribution that domestic commercial cases make to the overall commercial calendar and how domestic cases would also benefit from any specialised court services for international commercial cases as both types of cases require the application of the same or similar legal principles. (This is even now more so with the repeal of the former International Business Companies Act and the scheduled repeal of the Companies Act (primarily focusing on domestic companies) and the passage in 2004 of a single piece of corporate legislation to deal with all types of companies.) The report concluded that with the combined domestic and offshore commercial cases on BVI’s calendar, it was sufficient to justify the creation of a Commercial Division of the Eastern Caribbean Supreme Court.

The University of Essex was then engaged by the Government to conduct a more extensive technical review and analysis for the potential commercial court. The Essex University consultants in their March 2006 Report recommended as the most favoured option, the establishment of a Commercial Division of the High Court of the Eastern Caribbean Supreme Court situated in BVI, with BVI remaining in the Eastern Caribbean Supreme Court This recommendation was accepted by the Executive Council on 21 June, 2006. At the same time, the Executive Council also recommended a Steering Committee to oversee the implementation of Council’s decision. One of the first tasks of the Territory’s present Governor was to chair the Committee dubbed the Judicial Reform Steering Group which had its inaugural meeting on 24 October, 2006. The present President of the BVI Bar Association, Ms Tana’ania Small, represents the Bar Association on this Committee.

BBVI: How much work has been completed to date towards the setting up of the Court and what are the attendant cost estimates for its establishment?

LPL: A significant step towards the Court becoming operational is the existence of rules governing the practice and procedures of this specialised Court. The BVI Law Reform Commission with the able assistance of retired Appellate Judge, Justice Michael Gordon, have, in fact, completed these rules.

The Judicial Reform Steering Group has identified and recommended a building that formerly housed one of the local commercial banks, to be used temporarily as the Commercial Court building. This is a stand-alone building that is in close proximity to the High Court Registry. The Steering Group approached architects in the BVI and a selection of specialist court architects in London to move forward the rehabilitation of the old building. A feasibility study of the building has been undertaken and the architect’s report is under consideration by the Cabinet. Work is presently underway to fit out the building as designed by the architects. The projected completion date is May 2009. I understand that phase 3 of the construction project is underway.

Efforts are presently underway to recruit a highly qualified and experienced Judge for the Commercial Court. In an answer given by the Premier in response to a question posed in the House of Assembly during its sitting on 24 January, 2008, the Premier stated that “due to the specialist nature of the role of the Commercial Judge, and if the BVI Commercial Court is to be regarded as dispensing world class commercial justice, it will be necessary to attract a judge with the right qualities and experience from outside of the Territory (and also possibly from outside of the Caribbean). The Steering Committee has been working closely with the Chief Justice on this initiative. Mr. Speaker, I am pleased to report that Cabinet has recently given approval on the Judge’s remuneration package and to initiate the recruitment process to appoint the First Commercial Court Judge. The position is shortly to be advertised. In addition to the Judge, a staff of nine will be required. Cabinet approved the operational budget for the Commercial Court and for the recruitment of staff. Presently, plans are underway to advertise the positions.”

Regarding the cost attendant on establishing the Commercial Court, it is estimated that the rehabilitation and outfitting of the building will cost approximately $3.67m with a transitional cost of $1m, followed after year four by an annual operating cost of $4m.

BBVI: Will the Court be a stand-alone court or will it be part of the OECS circuit and, if so, why?

LPL: The decision was taken that the Court will constitute the Commercial Division within the Eastern Caribbean Supreme Court. The Eastern Caribbean Supreme Court is a tried and proven institution and its judges have been recognised and applauded worldwide for their significant and competent contributions to the development of jurisprudence throughout the Caribbean and abroad. The Court is sensitive to the special needs of the BVI having a very vibrant and sophisticated commercial landscape in the practice of law and had early on developed the concept of a Commercial Division of the Court, set up in the BVI to serve mainly the BVI. The advantages of supporting a Commercial Division appear to outweigh the disadvantages of the BVI going it alone, as it were, by setting up a separate institution outside of the sphere of the Eastern Caribbean Supreme Court comprising the Commercial Court. Going it alone would have generally been a much more expensive option and may have led to misperceptions of BVI’s judicial and legal systems by the international community.

BBVI: What is the timeline for the Court becoming operational?

LPL: The intention is to have the Commercial Court fully functional in 2009.

BBVI: How does the BVI Court compare with others in the region or internationally?

LPL: The classic and longest established commercial court in the Americas is, of course, the Court of Chancery of Delaware which has been in existence since 1792. Regionally, there are no separate specialized Courts in the Commonwealth Caribbean, nor Bermuda, established for commercial matters, outside of industrial matters, that I am aware of.

BBVI: How has the decision to establish the court been hailed by the lawyers?

LPL: The Territory’s legal practitioners are very excited by the developments and have been very supportive from the outset. Many of them served or continue to serve on various committees and have worked very hard to see that the Commercial Court gets off to a positive start and remains a model of success. Many regional lawyers already attend to matters in the BVI courts and see the development of the Commercial Court in the BVI as yet another attractive prospect for them.

BBVI: Has there been opposition to the court and if so why?

LPL: There has not been any opposition to a BVI Commercial Court of which I am aware. Of course, there are some who differ as to how such a Court should be set up. For example, there is the minority view that BVI ought to have given greater consideration to the Court being set up independently of the Eastern Caribbean Supreme Court, which, it is thought by some, rightly or wrongly, is not as challenged by the commercial cases emanating from the other OECS jurisdictions, as it is by the regular and complex commercial litigation flowing from the BVI due to its success as a financial services centre. This may appear to be the case superficially. However, one should not lose sight of the fact that, notwithstanding the fact that there are varying jurisdictional development of companies legislation, the basic principles of commercial law in the Commonwealth Caribbean are similar to UK companies legislation on which all our company legislation is built; and certainly, our civil court procedures are even more similar to those of the UK courts. What is required, therefore, is not a new institution, but rather more simply, commercial judges who are experienced in dealing with more weighty commercial matters. The Eastern Caribbean Supreme Court has an Appellate Judge whose background is very strongly commercial and we need to encourage more such persons to aspire to the bench.

BBVI: What will be the practical benefits to practitioners of having this court established in the territory?

LPL: There are several benefits to practitioners but perhaps the greatest will be not having to compete with non-commercial matters on the court’s calendar. This is, of course, of bilateral advantage to each as neither would non-commercial matters have to compete with commercial matters on the calendar! Having a dedicated judge for commercial matters should also lead to even greater efficiency. It is to the credit of the court that, with commercial matters accounting for such a significant portion of the courts civil calendar and judicial time, all matters are accommodated in a timely fashion and there is really no backlog of cases like there were during the growth spurt that we had at the turn of 1990s when BVI had to hire a specially assigned judge as well as request a permanent second resident judge. BVI has really adapted well to growing demands for judicial services.

BBVI: How will the court be funded?

LPL: Costs will be shared by the Government of the BVI and the Eastern Caribbean Supreme Court.

BBVI: How will the establishment of this court enhance the jurisdiction’s reputation?

LPL: More and more, the BVI court is the forum for litigating issues involving international business, cross-border liquidations and contractual disputes and it is not uncommon to have parties use BVI law the governing law for complex transaction documents or for BVI to be the forum for the settlement of disputes. The judiciary plays a significant role in reinforcing international reputation of the Territory as a premier financial jurisdiction. With a dedicated court and a specialist judge for commercial matters, the BVI will be demonstrating its commitment internationally to maintaining its strategic position as an international finance centre and, moreover, to providing its clients not only with an attractive financial product but with a legal system that is even more capable of servicing their needs.

BBVI: Which other jurisdictions in the region are forerunners in the establishment of such courts?

LPL: In the Commonwealth Caribbean, and in Bermuda, there are no separate Courts established for the hearing of commercial matters, other than industrial matters. However, for some years now, Cayman Islands have had special administrative arrangements in place for the handling of commercial matters and these seem to work well. They include strict time frames for the determination of commercial matters and the delivery of judgments, to ensure that commercial matters there are dealt with expeditiously.

BBVI: What does the establishment of this court mean for the future of the BVI as an offshore Financial Services Jurisdiction?

LPL: Simply put, the establishment of a dedicated Commercial Court in the BVI will help buttress the Territory’s well-earned reputation as a sound and sophisticated international financial centre where there are competent and efficient court structures to adjudicate over disputes in the event that things go wrong.

BBVI: How would you illustrate the development of the commercial cases in the BVI?

LPL: The 1990s saw the BVI take off as a maturing and competitive international financial services centre and the Territory’s court never without weighty commercial matters to keep it busy. In the landmark case now known as Pagarani there were, at one of the hearings, some 20 counsel in the court room at the same time and the court room proved much too small for the number of counsel and court staff as well as the documents. I can recall also the story from Jack Husbands, one of our long-standing civil litigators, how in 1992 in BVI’s leg of the internationally celebrated KDDL cases, there were significant delays as a result of there being only one judge to hear both the criminal and the civil aspects of the case and sit periodically in Anguilla as well. Additionally, at that time, there was no system of court reporting in use in the BVI, so the Judge had to record the evidence and submissions by hand.

Two full-time judges were swiftly assigned to the BVI and a Court Reporting Unit with trained stenographers was established for recording the notes in both trial and chamber hearings. With the millennium came the adoption of an attitude to seriously address these shortcomings once and for all.

BBVI: Will the establishment of this court create or expand entrepreneurial opportunities in the territory and if so, in what areas?

LPL: One really tries to avoid litigation, but clients, when selecting a jurisdiction, like to know that a reputable court manned by experienced specialist judges will be available to hear and help settle disputes, should they arise. The establishment of a Commercial Court would be an obvious sign post in this regard. However, as to the development of other entrepreneurial opportunities in the BVI, it will take more than just the development of the Commercial Court to create or expand these opportunities, of course, such as a targeted programme involving input from the relevant trade and labour authorities. The successful establishment of the Commercial Court could attract new international law firms to the BVI (although it is noteworthy that several are already here) and increased financial business. In my regular discussion with Ms Small, for example, I know that she feels that the establishment of the Commercial Court would have impact by the creation of additional entrepreneurial opportunities such as professional copying, collating, and binding of documents for use in court. BVI commercial cases are notorious for the volume of paper they spawn and there is a large gap in the provision of such services for law offices. It could also create a wider need for translators and interpreters since at present those services are in the majority of cases are imported.

With the BVI’s unstinting reputation as a preferred company formation jurisdiction, more and more the courts of the BVI are the forum for litigating issues involving offshore companies, trusts and succession issues, share disputes, and cross-border insolvencies; to name but a few. The establishment of a dedicated court to compliment these developments is, uncompromisingly so, a real and present need which successive Governments in the Territory have wisely embraced.

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