According to the Statement submitted by the British government to the UN Secretary General on 24th of February in 2014, the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“1958 New York Convention”) shall be applicable to British Virgin Islands (“BVI”) from 25th of May in 2014. There are great chances that BVI can become one of emerging international commercial arbitration centers within upcoming years.
1958 New York Convention
The 1958 New York Convention entered into effect from 7th of June in 1959, having 159 contracting parties. The main purpose of the Convention is no discrimination between foreign and domestic arbitrations, requiring member states to ensure that foreign arbitral awards can be recognized and enforced compulsorily as domestic arbitral awards. The Convention encourages courts in contracting parties to recognize and enforce arbitral awards. According to the article 5 of the Convention, when courts in contracting parties recognize and enforce arbitral awards, the courts shall not launch substantial review, and can only refuse to recognize and enforce the arbitral awards made in another contracting party under limited circumstances (e.g. invalidity of arbitral agreement, parties having no chance to defend, arbitration cannot be applied to the disputed items, enforcement of arbitral awards violates public interest). An additional purpose of the Convention is requiring courts of contracting parties to fully enforce the arbitral agreement to refuse parties when they violating the agreement of submission of disputes to arbitration by submitting the dispute to courts. The Convention seeks to provide common legislature standards for both recognition of arbitration agreement and courts’ recognition and enforcement of foreign and non-domestic arbitral awards. Non-domestic awards refers to the awards which are made in the nations where compulsory enforcement can be applied, while such awards should be treated as “foreign” awards for some foreign-related factor in the procedural law of another country which shall be applied.
In consideration of lower requirement of written formality in arbitration agreement in modern development of commerce, UNCITRAL passes the Recommendation regarding the interpretation of article II, paragraph 2, and article VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958, with the purpose of recognition of the widening use of electronic commerce and enactments of domestic legislation as well as case law, which are more favorable than the New York Convention in respect of the form requirement governing arbitration agreements, arbitration proceedings, and the enforcement of arbitral awards. The Recommendation encourages States to apply article II (2) of the New York Convention “recognizing that the circumstances described therein are not exhaustive”. In addition, the Recommendation encourages States to adopt the revised article 7 of the UNCITRAL Model Law on International Commercial Arbitration. Both options of the revised article 7 establish a more favorable regime for the recognition and enforcement of arbitral awards than that provided under the New York Convention. By virtue of the “more favorable law provision” contained in article VII (1) of the New York Convention, the Recommendation clarifies that “any interested party” should be allowed “to avail itself of rights it may have, under the law or treaties of the country where an arbitration agreement is sought to be relied upon, to seek recognition of the validity of such an arbitration agreement”.
45 years after the exercise of the New York Convention, arbitration agreement has been widely recognized. The arbitral awards can be conveniently enforced all over the world. The Convention is legislature standards of every nation and therefore greatly promote the development of domestic and international arbitration. In handling international commercial disputes, international arbitration has become parties’ choice for resolving disputes for the fact that awards of arbitration can be recognized and enforced due to 1958 New York Convention. The 1958 New York Convention thus is regarded one of the most successful international treaties made by the United Nations.
British Virgin Island
BVI is located in Caribbean Sea area. The BVI is an area protected by England, belong to the Commonwealth. The BVI announced self-governing in 1967, and democratically selected the Legislative Council which consists of 11 people. The Legislative Council generated the Executive Council formed by the Governor and 4 head of department. The laws in the Island is English Common Law. The Supreme Appeal Court is Privy Council in London.
Two pillar industries in BVI are tourism and offshore registration of company. The BVI has become an ideal overseas offshore Financial Center for many world large banks and high-end communication and transportation facilities. There are 250,000 overseas offshore companies having registered in BVI, which makes it one of the overseas offshore investment centers with fastest development in the world. The official language is English.
Due to relatively relaxed company law and tax policy, approximate 40% offshore companies registered in BVI. It is also the most favorite offshore financial center of Chinese investors and the registered place of many Chinese companies’ offshore company. Being an investment tool, the BVI is always used to set up joint venture within China’s territory. Now BVI has become the second biggest originations of overseas investment. According to the statistics of the government of BVI, more than 40% offshore company business come from China and other Asian countries and areas. The widely-used BVI company and trust mean that such structure will derive many disputes. Many trans-national commercial disputes may involve international arbitration or litigation which is raised or against BVI companies.
International Arbitration Center of BVI
BVI originally applied 1976 Arbitration Act. In 2010, BVI established the Commercial Court. However, its commercial arbitration still lags behind. On 17th of December of 2013, the Congress passes the new Arbitration Act, which is mainly based on the UNCITRAL Model Rule. According to the newly-revised Act, BVI shall establish a new international arbitration center, providing better conditions for it becoming the place of arbitration of international commercial arbitration.
After the New York Convention can be applied in BVI, the arbitral awards made in BVI can be enforced in other contracting parties of the Convention. Conversely, the arbitral awards made in other contracting parties can be enforced in BVI. This will bring more conveniences and predictabilities for the recognition and enforcement of the arbitral awards made in BVI, and also provide local choice for BVI companies’ disputes. In consideration of the large numbers of commercial company, controlling company, joint ventures and funds, the BVI international arbitration center is bound to rise.