News and developments
Will the “Black Swan” fly over to Cyprus?
The Black Swan jurisdiction provides that BVI Courts have jurisdiction/power to issue stand-alone freezing injunctions against Respondents residing within the jurisdiction of the BVI Courts in aid of foreign proceedings so as to ensure that any final judgement to be issued in favour of the applicants within the framework of those foreign proceedings (and which could be recognised and enforced in the BVI) would not be left unsatisfied due to dissipation of assets by the BVI Respondents.
The Black Swan judgement was praised at the time it was issued for departing from the notion that freezing injunctions could only be issued within the framework of substantive proceedings pending before the same Court – an established common law principle emanating from the well known judgement of the House of Lords in the Siskina (owners of cargo lately laden on board) and others v Distos Compania Naviera SA [1979] AC 610. The reasoning in the Siskina, which has since been adopted by Cyprus Courts at first instance, provided that: “A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the Defendant.”
The Black Swan had therefore expanded a much needed power of the BVI Courts, while making waves in all common law jurisdictions, to provide assistance to proceedings pending abroad on, what was universally deemed to be, sound policy grounds. As Bannister J stated in the judgement:
“The business of companies registered within such jurisdictions is invariably transacted abroad and disputes between parties who own them and others are often resolved aboard. It seems to me that when a party to such a dispute, is seeking a money judgment against someone with assets within this jurisdiction, it would be highly detrimental to its reputation, if potential foreign judgment creditors were to be told that they could not, if successful, have resort to such assets, unless they were to commence substantive proceedings here, in circumstances where, in all probability, they would be unable to obtain permission to serve them abroad - thus presenting them with an effective brick wall”.Much to the disappointment of legal practitioners dealing with international asset recovery in common law jurisdictions where such power was not regulated by express statutory provisions (such as the BVI and Cyprus and unlike the UK where the Siskina reasoning was promptly dealt with by Section 25 of the Civil Jurisdiction and Judgments Act 1982), a decade later, on 29 May 2020 the BVI Court of Appeal issued its judgement in the Broad Idea International Limited v Convoy Collateral Limited (BVICMAP 2019/0026) (the “Convoy 2”), abolishing the Black Swan jurisdiction as wrongly decided and hinted at the need for the legislature to extend the powers of the Courts to that effect. It was held:
“as undesirable as it may be perceived in modern day international commerce, that the courts of the BVI, though having in personam jurisdiction over Broad Idea, being a BVI registered company, have no subject matter jurisdiction to grant a free standing interlocutory injunction against it in aid of foreign proceedings, there being no statutory basis for the exercise of such a jurisdiction. It is for the Legislature of the BVI to step in and clothe the court with such authority.”Shortly thereafter, the question was brought before the Judicial Committee of the Privy Council - the court of final appeal for the UK overseas territories and Crown dependencies as well as those Commonwealth countries that have retained the appeal to Her Majesty in Council or, in the case of republics, to the Judicial Committee. With its judgement in the Broad Idea, the majority of the Privy Council, embarking on a very useful historic exploration of the development of the common law principles relating to Mareva injunctions, has now gloriously resurrected the Black Swan jurisdiction while casting doubts on the limitations deriving from the Siskina reasoning, effectively stating that it constitutes an anachronistic approach which was led down at the time where Mareva freezing injunction where still at their infancy. Effectively the Privy Council limited the Siskina principles to the interpretation of the relevant Civil Procedure Rule and did not extend it to cover the jurisdiction to issue injunctions under the broad powers of the Court. Cementing the “enforcement principle” underpinning freezing injunctions, the Privy Council held that Courts have power to issue stand-alone freezing injunctions, regardless of the lack of statutory provisions to that effect, since “the purpose of the injunction is to prevent the right of enforcement from being rendered ineffective by the dissipation of assets against which the judgment could otherwise be enforced. Once it is appreciated that the essential purpose of a freezing injunction is to facilitate the enforcement of a judgment or other order to pay a sum of money, it is apparent that there is no reason in principle to link the grant of such an injunction to the existence of a cause of action.” The Privy Council referred to the power granted to the Courts since 1873 to issue interim injunctions whenever it was just and equitable to do so. A power that has been retained throughout all the amendments of the relevant acts and which is directly reflected in the similar provisions of several common law and/or commonwealth countries, including Cyprus. In a useful summary of the (now) rediscovered powers of the Courts set out in the Broad Idea, the Privy Council held that a Court with equitable or statutory jurisdiction to grant injunctions (subject to the fulfilment of the standard requirements regulating such power based on the specific facts of each case– e.g. demonstration of good cause of action/possibility of success, balance of convenience, compliance with the duty for full and frank disclosure etc.) “has power to grant freezing injunctions against a party (the respondent) over whom the court has personal jurisdiction provided that:
- the applicant has already been granted or has a good arguable case for being granted a judgment or order for the payment of a sum of money that is or will be enforceable through the process of the court;
- the respondent holds assets against which such a judgment could be enforced; and
- there is a real risk that, unless the injunction is granted, the respondent will deal with such assets (or take steps which make them less valuable) other than in the ordinary course of business with the result that the availability or value of the assets is impaired and the judgment is left unsatisfied.”