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11 October 2018
A BVI court has appointed Grant Thornton as a receiver over a BVI company under Section 43 of the Arbitration Act 2013 in order to preserve the value of the company pending the determination of foreign arbitration proceedings. The defendant in the arbitration owned the shares of the company.
Section 43 of the Arbitration Act provides that the courts may grant an interim measure in respect of any arbitration proceedings that have been or are due to be commenced in or outside the British Virgin Islands. Section 33(2)(c) of the act defines 'interim measure' as any temporary measure by which, at any time before the issuance of the award, the tribunal orders a party to provide a means of preserving assets out of which a subsequent award may be satisfied.
This is a key tool in the judgment creditor's arsenal and demonstrates the pro-arbitration approach taken by the BVI courts to preserve the value of assets pending the outcome of foreign arbitration proceedings.
The creditor needed to show a real risk of significant loss in value if a receiver was not immediately appointed to oversee the underlying business and take active steps to preserve its value. The court was convinced and appointed receivers over the shares of the defendant company on an interim basis for the purpose of preserving its value (including its subsidiary and its assets).
The order provided that the receivers could exercise all the powers and authorities which they would be capable of exercising (including without limitation of voting rights) if and as if they were the absolute beneficial owners of the shares. In practice, this allowed the receivers to change the directors of the subsidiaries, change legal representation and borrow funds (with the court's sanction) to ensure that the business remained a concern and a valuable asset against which the subsequent award could be enforced.
The decision illustrates the effectiveness of the interim relief provided under the Arbitration Act to preserve assets against which an arbitration award will be enforced. This is a useful tool for parties to bear in mind when commencing arbitration if they will ultimately be seeking to enforce against the debtor's shares in a BVI company. Section 33 of the act is clear that interim measures are available before issuance of the award. This is a reminder to parties to seek advice on enforcement and options for preserving assets while arbitration is ongoing, rather than waiting until they have an award – by which time it may be too late.
For further information on this topic please contact Vicky Lord or Paula Gibbs at Harneys' Hong Kong office by telephone (+852 5806 7800) or email (email@example.com or firstname.lastname@example.org). Alternatively, Alternatively, contact Peter Ferrer or Stuart Cullen at Harneys' Tortola office by telephone (+1 284 494 2233) or email (email@example.com or firstname.lastname@example.org). The Harneys website can be accessed at www.harneys.com.
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