The Arbitration Act comes into force on 1st October 2014. In the article below, senior partner, Paul Webster, Q.C. and associate, Rhonda Brown set out the key features of the new Act.

The Modern Approach: BVI passes new Arbitration Act

In the last 30 years the British Virgin Islands (“BVI”) has evolved into a thriving commercial centre where substantial commercial disputes are resolved by an efficient court system. In order to cope with the increased volume of commercial litigation the Territory established a specialized commercial court dedicated to dealing with high value and complex commercial matters. While there has been no shortage of commercial litigation, in recent times, there has been a noted trend towards arbitration as a means of resolving commercial disputes.

The BVI has had legislation governing arbitration for almost three decades. However, the 1976 Arbitration Ordinance (Cap.6) (“the 1976 Act”) was in dire need of revision as it was inadequate to deal with modern international arbitration. On January 23, 2014 the long anticipated Arbitration Act, 2013 (“the 2013 Act”) was published in the Virgin Islands Official Gazette. It will come into force by proclamation of the Governor of the Virgin Islands on October 1, 2014.

The 2013 Act makes provision for the conduct of both domestic and international commercial arbitration. Its objective, as expressed in section 3, is to “facilitate and obtain fair and speedy resolution of disputes without unnecessary delay or expense.” It gives high priority to the arbitration process, providing that, subject only to the public interest, the right of the parties to determine the manner of resolution of their dispute is to be honoured. The 2013 Act strictly limits the circumstances in which the BVI Court may interfere in the arbitration of a dispute to those expressly stated in the 2013 Act. Additionally, even where the Court is compelled to interfere, it must, as far as possible, give due regard to the wishes of the parties and the provisions of the arbitration agreement.

A recent example of the Court’s pro-arbitration approach is the 2013 decision of the Commercial Court in Applied Enterprises Limited v Interisle Holdings Ltd, in which O’Neal Webster was involved. In that case the Court granted a stay of the court proceedings in favour of arbitration.

SOME KEY FEATURES OF THE 2013 ACT

[1] Incorporation of the UNCITRAL Model Law

One of the key features of the 2013 Act is that, subject to minor modifications, it explicitly incorporates the UNCITRAL Model Law on International Commercial Arbitration (1985), as amended in 2006 (the “UNCITRAL Model Law”) into British Virgin Islands law. The UNCITRAL Model Law governs the conduct of international arbitration proceedings. It is internationally regarded as the accepted framework to govern the arbitration of disputes. As explained by the UNCITRAL Commission the model law on arbitration “…reflects worldwide consensus on key aspects of international arbitration practice having been accepted by States of all regions and the different legal or economic systems of the world”.

Incorporation of the UNCITRAL Model Law ensures that arbitration in the BVI will be conducted in accordance with internationally accepted standards, principles and practices. This will, in turn, increase the BVI’s attractiveness as a venue for international commercial arbitration.

[2] Extension of the New York Convention

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) provides for reciprocal enforcement of arbitral awards andis a key instrument in international arbitration. The text of the New York Convention was incorporated in its entirety in the 1976 Act, with the effect that, as expressly provided in section 34, a Convention Award (an award made under an arbitration agreement in a state which is party to the New York Convention) is enforceable in the BVI. However, as an overseas territory, the BVI could not itself become a party to the New York Convention. As a result, until recently, New York Convention arbitration awards emanating from the BVI were unenforceable in other territories that are party to the New York Convention.

Since May 25, 2014 the New York Convention has been fully extended to the BVI. Accordingly, arbitration awards emanating from the BVI are now enforceable in all other territories that are party to the New York Convention.

[3] International Arbitration Centre

The 2013 Act also makes provision for the establishment of a corporate body known as the BVI International Arbitration Centre (the “BVI IAC”), its function will be to promote and facilitate arbitration in the BVI. The BVI IAC will be tasked with, among other things, providing all the facilities and services necessary for the conduct of arbitral proceedings and mediation in the British Virgin Islands.

The BVI IAC’s work will be critical to the BVI’s attempt to establish the Territory as a successful commercial arbitration centre. In addition to modern legislation the BVI must have the necessary administrative regime to facilitate arbitration in the Territory.

Importantly, the 2013 Act provides for the appointment of a board to assist the BVI IAC in carrying out its functions under the 2013 Act. The BVI IAC is also empowered to issue guidelines with respect to the conduct of arbitration proceedings. These guidelines, while not taking effect as law, will be considered best practice and, in appropriate cases, be taken into account by an arbitral tribunal in the conduct of its proceedings. The BVI IAC is also required by the 2013 Act to keep a register of approved arbitrators from which it must appoint an arbitrator when the need arises.

[4] Definition of Arbitration Agreement

The definition of a valid arbitration agreement has been significantly widened under the 2013 Act. Both the 1976 Act and the 2013 Act mandate that an arbitration agreement be in writing. However, the new Act extends the definition of “in writing”. It provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement and is considered to be “in writing” if:

  1. the content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means;
  2. it is contained in electronic communication which is accessible so as to be useable for subsequent reference. It expressly includes electronic mail;
  3. in an exchange of statements of claim and defence the existence of an arbitration agreement is alleged by one party and not denied by the other.
  4. reference is made in a contract to any document containing an arbitration clause provided that the reference is such as to make that clause part of the contract;
  5. the arbitration agreement is in a document, whether or not the document is signed by the parties to the agreement;
  6. the arbitration agreement, although made otherwise than in writing, is recorded by one of the parties to the agreement, or by a third party, with the authority of each of the parties to the agreement.
  7. reference is made in an agreement to a written form of arbitration clause and the reference is such as to make that clause part of the agreement.
  8. The definition of arbitration agreement is adopted, without modification, from article 7 of the UNCITRAL Model Law. This wholesale inclusion demonstrates the BVI’s commitment to giving effect to the desire of the parties to resolve disputes by arbitration.

[5] Appointment of Arbitrators

The 1976 Act dictates the procedure for selecting arbitrators where an arbitration agreement does not stipulate the number of arbitrators that must be used. It also makes provision for circumstances where, though an arbitration agreement outlines the procedure to be adopted in selecting an arbitrator, that procedure is not followed.  The 1976 Act is notably silent, however, on the procedure for appointment where an agreement dictates the number of arbitrators but does not indicate the procedure for such appointment.

The 2013 Act seeks to remedy this defect. It stipulates the appointment procedure to be utilized in all circumstances, that is, where an agreement calls for a sole arbitrator, even numbers of arbitrators or uneven numbers of arbitrators.

[6] Appointment and Function of Umpires

Interesting modifications have been made to provisions relating to the appointment and functions of an umpire.

The 1976 Act provides that (unless indicated otherwise) an arbitration agreement referring to two arbitrators is deemed to include a provision that the two arbitrators must appoint an umpire immediately after their appointment. The 1976 Act makes no provision for circumstances where there are even numbers of arbitrators greater than two.

This lacuna is remedied in the 2013 Act. It provides that, subject to agreement by the parties, once there are even numbers of arbitrators, the arbitrators can appoint an umpire at any time after their appointment. In contrast to the position under the 1976 Act, the 2013 Act: (i) does not limit application of the section to situations where there are two arbitrators. Rather, quite helpfully, once there are even numbers of an umpire may be appointed; (ii) arbitrators are not mandated to appoint an umpire; and (iii) the umpire need not be appointed immediately.

CONCLUSION

Recent case law has demonstrated that there is scope for greater use of arbitration in commercial disputes in the BVI. An established, fully functioning commercial arbitration centre and modern arbitration laws will make the BVI an attractive and suitable destination for cross-border commercial arbitration. The Arbitration Act, 2013 is an important first step in this direction.