BVI Case Notes - July 2014

Recent cases before the British Virgin Islands courts include matters dealing with arbitration agreements and awards, and default judgments.

Arbitration Agreements:

BVIHCMAP0013/2014: Anzen Ltd and others v Hermes One Ltd: On Paper, 11 June 2014

Applications to enforce arbitration awards or to stay of proceedings in favour of arbitration are regularly entertained by the BVI Courts. There has been a recent decision of the Court of Appeal which affirms that the language of an arbitration clause must be one that makes arbitration mandatory rather than optional. Facts: The Court of Appeal had to construe whether an arbitration clause merely gave the parties an option to arbitrate or was mandatory in nature therefore preventing a party from resorting to the court to have his dispute resolved. The Appellants contended that the learned trial judge was wrong to refuse their application to stay the proceedings holding that the arbitration clause did not make arbitration mandatory but merely optional. The Court of Appeal upheld the decision of the High Court finding that an arbitration clause which gives an option to arbitrate does not create an immediately binding contract to arbitrate. The Court of Appeal ruled that with arbitration clauses of this nature, there is only a binding agreement to arbitrate when one party refers any dispute arising to arbitration. If a party by-passes the arbitration clause and files a claim in court, the other party still has the option to invoke the arbitration clause by referring the matter to arbitration and apply for a stay of the court proceedings. If however the party against whom court proceedings were initiated does not refer the dispute to arbitration and does not submit to the court's jurisdiction, the dispute will continue under the court's jurisdiction. Outcome: The Court of Appeal therefore dismissed the application finding that there was no binding agreement between the parties to arbitrate as the Appellants had failed to refer the dispute to arbitration. Therefore the remedy of a stay given by section 6(2) of the Arbitration Act was not available to them. Costs were awarded to the Respondent.

Enforcing an Arbitration Award:

BVIHC (COM) 115 of 2013: Conocophillips China Inc v Green Dragon Gas, Ltd, 29 April 2014

On the other hand, BVI courts respect the finality of arbitration awards and once satisfied that an award has been properly granted, it will not deprive the recipient from being able to enforce the award. Facts: Conocophillips China Inc (CCI) a Liberian company, obtained an arbitration award against Green Dragon Gas Ltd (Green Dragon), a Cayman incorporated company and Greka Energy International BV (Greka) for breaches by Greka of contractual representations, warranties and undertakings contained in a mineral exploration agreement and guaranteed by Green Dragon to the limit of US$20 million plus interest and costs. The arbitration agreement was governed by the Rules of Arbitration of the Singapore International Arbitration Centre. CCI applied to both the BVI and Cayman courts to enforce its award against Green Dragom while Green Dragon applied to the Singapore High Court to have the award set aside on the basis that there was a breach of natural justice and or that it was unable to present its case before the tribunal. Both the BVI and Cayman courts adjourned the applications seeking to enforce the award pending the determination by the Singapore High Court of whether to set aside the award. The Singapore High Court dismissed the application and found that the award was properly granted and did not breach natural justice principles. Green Gas and Greka appealed the decision of the Singapore High Court and CCI proceeded to apply for enforcement of the award in the BVI and the Cayman Islands together with the payment of security in the sum of the award in the event that the Court was minded to stay enforcement pending the appeal. Green Gas opposed the enforcement application seeking a stay pending the appeal. Issues: The BVI court therefore had to determine whether it should stay the enforcement of the arbitration award pending Green Gas's appeal to the Singapore Court of Appeal. The BVI court considered the discretion given to it under sections 36(1), 36(2)(f) and 36(5) of the Arbitration Act which provide as follows: "36 (1) Enforcement of a Convention award shall not be refused except in cases mentioned in this section (2) Enforcement of a Convention award may be refused if the person against whom it is invoked proves- (f) that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made. (5) Where an application for the setting aside or suspension of a Convention award has been made to such a competent authority as is mentioned in subsection (2)(f), the court before which enforcement of the award is sought may...