The BVI Commercial Court has recently granted orders on enforcement of judgments delivered by the Court of the People’s Republic of China (“PRC”). The Court awarded a default judgment putting into effect a multi-million dollar judgment from the PRC Court arising out of the defendant’s unpaid debts. This marks what is believed to be one of only a handful of times that the BVI Court has enforced a PRC judgment, showing that contrary to the belief that it may be difficult to enforce judgments issued by the PRC in the BVI, the BVI Court has now demonstrated that it is increasingly willing to enforce such judgments. This is relevant to creditors holding judgments not just in the PRC but also potentially to those holding judgments from other jurisdictions which similarly have no specific mutual enforcement treaty with the BVI.
In the past few decades, the rapid growth of the Chinese economy and its investments and capital flows abroad has led to the BVI being one of the favourite offshore jurisdictions that Chinese companies use to structure corporate groups and transactions. As a result, the BVI has played an increasingly important role, with more and more BVI companies having established ties with PRC individuals and companies through shareholding or control structures. Correspondingly, obtaining enforcement of PRC judgments in the BVI has become an important tool for asset enforcement and recovery for creditors.
In the case of the PRC, as there are currently no mutual enforcement treaties between the BVI and the PRC governing the enforcement of judgments, all PRC judgments need to be enforced by way of the common law route in the BVI. The new decision represents the most recent successful example of such enforcement of a PRC judgment in the BVI.
Prior to the ruling, the BVI courts had also recognised and enforced a PRC judgment arising from outstanding debts stemming from 2020 in the case of Industrial Bank Financial Leasing Co Ltd and Xing Libin (BVIHC (COM) 0032 of 2018). The factual matrix of that case involved a judgment debtor who held an interest in shares in a BVI company, which in turn held valuable assets overseas. In Industrial Bank Financial Leasing Co Ltd and Xing Libin, the BVI court also showed its flexibility in the enforcement of PRC judgments. In addition to granting an order for sale, the Court also appointed post-judgment equitable receivers over the shares, as the Court concluded that this approach would be more advantageous to the creditors than selling the shares of the BVI company. The order gave the court-appointed receivers the power to exercise voting rights for the limited purpose of appointing a new director who would then take steps to administer the BVI company to maximise its value.
The recent developments in case law have continued to demonstrate the BVI court’s pro-enforcement approach and highlighted the BVI’s well-established rules for enforcement of foreign awards and judgments. It has also helped dispel any previous doubts about the enforcement of PRC judgments at common law. The Court’s decisions will certainly be welcomed by judgment creditors in the PRC, as well as in other foreign jurisdictions that do not have mutual enforcement treaties with the BVI. This means that these creditors can now take a more proactive approach in investigating the judgment debtor’s assets in the offshore jurisdictions, with the confidence that enforcing foreign judgments against assets in the BVI to maximise recovery is possible.
Carey Olsen acted for the successful claimant seeking to enforce the PRC judgment. Nothing in this article constitutes legal advice and advice should be taken on your particular situation.
Authors: Jeremy Lightfoot, Xia Li, Yi Yang
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Jeremy Lightfoot is the head of Carey Olsen’s litigation team in Hong Kong. He focuses on commercial and corporate litigation, insolvency and restructuring under the laws of Bermuda, the BVI and the Cayman Islands.
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Xia Li is a counsel in Carey Olsen’s Dispute Resolution and Litigation practice, based in Hong Kong. She has worked in multiple major legal and financial centres, including the Cayman Islands, the BVI, London, New York, Beijing, Singapore and Hong Kong
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Yi has a wide range of experience assisting in cross-border commercial litigation, including shareholder disputes, derivative actions, contentious insolvency and appraisal actions involving offshore companies.