The British Virgin Islands (BVI) Court tightens up on creditors
raising spurious disputes and relying on arbitration clauses to
avoid insolvency.
There has been a recent trend in the BVI whereby debtor
companies have sought to identify what appear to be spurious
disputes and then rely upon arbitration clauses in order to strike
out or stay winding up proceedings. While this could be regarded as
an attempt to capitalise on the wider global trend towards giving
absolute primacy to arbitration agreements the tactic is often
deployed to frustrate creditors legitimately seeking to wind up
insolvency companies and buy time for debtors.
In two key recent decisions, the Eastern Caribbean Court of
Appeal (the CA) examined attempts by debtors to rely on the
mandatory stay provisions in the BVI's arbitration legislation
and avoid liquidation. On both occasions they came down decisively
against the debtor companies who were unable to show a substantive
dispute to the debt.
