Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings

On 4 October 2021, the Privy Council handed down its decision on Convoy Collateral Ltd v Broad Idea International Ltd [2021] UKPC 24. The judgment confirms that where the British Virgin Islands (BVI) High Court has personal jurisdiction over a party, the court has power to grant a freezing injunction against a party to assist with the enforcement of an existing or prospective foreign monetary judgment through the process of the BVI court. Here, we summarise the history leading up to the decision and consider what the decision's impact could be on both the BVI courts and beyond.

Background

Litigation which is proceeding in the BVI courts and which involves applications for freezing order relief regarding assets in the local jurisdiction will also often involve offshore respondents who are subject to other proceedings outside of the BVI. In Investment ISA v Harvest View Limited, Black Swan, it was decided that the BVI courts (without any statutory authority) had the power to grant injunctive relief in support of foreign proceedings like this (similar to the jurisdiction conferred on the English courts by s25 of the Civil Jurisdiction and Judgments Act 1982) . This became known as the "Black Swan" jurisdiction and was widely applied by the BVI court for many years. 

In 2019 the Eastern Caribbean Court of Appeal overruled the Black Swan jurisdiction and held that the Court had no power to grant a freezing injunction in the absence of a substantive cause of action against the respondent issued in the BVI. In coming to that decision, the Court relied on The Siskina [1979] AC 210 case which held that the court has no authority in exercising equitable jurisdiction to order an interim injunction where the claimant has no underlying cause of action against the respondent.

Following the Court of Appeal's ruling, the BVI legislature stepped in and enacted the Eastern Caribbean Supreme Court (Virgin Islands) (Amendment) Act 2020 which conferred statutory jurisdiction on the Court to grant this relief. This provided welcome clarity following the end of the Black Swan jurisdiction. The Act provided that the High Court could grant this relief where proceedings had been or were about to be commenced in a foreign jurisdiction.

It also provided that the High Court retained the power to refuse to grant this relief where – in its opinion – it had no jurisdiction, apart from the Act, over the subject matter of the proceedings in a foreign jurisdiction and it was inexpedient in the circumstances to grant such relief. It was unclear how "inexpedient" would be interpreted and this clearly gave the Court a wide discretion.

Then along came Broad Idea International Limited v Convoy Collateral Limited, in which the BVI Court of Appeal held that the BVI courts did not have any jurisdiction to grant interim relief in aid of foreign proceedings where the test for statutory authority was not met, and that Black Swan was wrongly decided. The decision was appealed to the Privy Council and became widely known as the "Black Swan appeal".

The majority judgment

In the Privy Council's decision, the majority (4-3) held that Black Swan was correctly decided and that the BVI Court of Appeal was wrong to overrule that decision. It also overruled The Siskina to dispel any continuing uncertainty and to make clear that the constraints on the power to grant freezing injunctions articulated in that case were "not merely undesirable in modern day international commerce but legally unsound". The judgment also makes clear that the rationale for obtaining injunctive relief, as set out in the ruling, is applicable not only to the BVI but also to all other jurisdictions "where courts have inherited the equitable powers of the former Court of Chancery". So, this calls into question the scope and applicability of this judgment in other jurisdictions.

What's the impact of the decision?

This is a very significant decision with the potential to redefine injunctive relief far beyond the BVI. The relief, however, is limited to the enforcement of a monetary judgment and available only against those subject to the personal jurisdiction of the BVI court. There is also a question about the interplay between statutory and non-statutory powers to grant this relief. In any event, while it has put to bed the "Black Swan" debate for now, there remains room for further issues likely to be the subject of more litigation in the BVI court and beyond.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Disputes & Investigations team.