Exploring Offshore Litigation

In a recent decision of the Grand Court of the Cayman Islands, a US$87 million claim for "specific performance" of share redemption rights was found to be what it really was: a claim for money, caught by a Hong Kong arbitration clause. The action was stayed. Investors and companies in Asia involved in redemption disputes should take note. Calling a payment claim something else will not take it outside an arbitration agreement, and wording that lets parties go to court for certain relief may be far narrower than it looks. In TB MGMT LLC v Taibang Biological Ltd, the Plaintiffs were holding vehicles through which Joseph Chow held shares in Taibang, a Cayman Islands company. Mr Chow was removed as chairman in December 2024. The Plaintiffs said this was without "Cause", which entitled them to have Taibang redeem their shares at fair market value. Taibang said he was removed for Cause, so no redemption right arose. The shareholders' agreement provided for HKIAC arbitration in Hong Kong. It also allowed either party to seek "an injunction, temporary restraining order or other equitable relief" in court. The Plaintiffs relied on that wording and sued in the Grand Court for specific performance of the redemption provisions, asking to be paid over US$87 million. Three days later, Taibang began the arbitration. It then applied to stay the Cayman Islands action. Justice Doyle granted a mandatory stay under section 4 of the Foreign Arbitral Awards Enforcement Act. The real dispute was whether Mr Chow had been removed without Cause. The specific performance claim was held to be "entirely artificial and a mere device" to get around the arbitration clause. Even if it had been genuine, the court-relief wording only covered interim relief "enjoining" a breach, not a full claim to be paid. An argument that Taibang had waived arbitration also failed, and the judge said he would have granted a discretionary stay in any event. The Plaintiffs, whose attorneys had come off the record, did not attend the hearing and were ordered to pay Taibang's costs. Redemption and put rights in Cayman Islands companies backed by PRC and Hong Kong investors are often paired with an arbitration clause in the shareholders' agreement. For anyone holding or facing those rights, five points stand out. 1. Substance wins over form: The Court will look past the label to the real dispute. If what you are really after is the redemption price, assume the claim will be treated as a claim for money, however you plead it. 2. Read the court-relief wording closely: Here, a right to seek "an injunction, temporary restraining order or other equitable relief" in court was confined to genuine interim relief. It did not open the door to a full payment claim. Nor did the clause heading, "Specific Performance", help, because the agreement said headings were not to be used in interpreting it. If you want redemption claims heard in court, say so clearly. 3. The articles may not offer a way out: The redemption rights and the definition of Cause appeared in both the shareholders' agreement and the articles, but only the shareholders' agreement had an arbitration clause. The Plaintiffs argued that their claims under the articles did not need to be arbitrated. That did not help them, because the substance of the dispute still fell within the arbitration agreement. The simplest fix at the drafting stage is to make the dispute resolution provisions match. 4. Do not go quiet: A company can only appear in the Grand Court through an attorney. If its attorneys come off the record and it does nothing, the Court can carry on without it and order it to pay costs. The judge described the approach taken by the Plaintiffs as an "unhelpful and potentially abusive strategy of non-engagement" and remarked that burying your head in the sand "is rarely, if ever, a good litigation tactic". 5. Move quickly: Taibang started its arbitration three days after the writ was issued and applied for a stay before fili...

In the recent decision of BTA Bank v Mamesh, the BVI Court of Appeal rejected BTA Bank's attempt to use restored BVI shell companies as anchor defendants for an alleged US$230 million fraud claim against foreign defendants, and upheld the order setting aside permission to serve out. The decision, which turns largely on appellate deference to the judge's evaluative assessment, illustrates that a claimant relying on the necessary or proper party gateway must show that there is genuine utility in the BVI Court trying the claim against the anchor defendant(s). It is also a stark reminder of the consequences of failing to give full and frank disclosure on an ex parte service out application. BTA Bank, a Kazakhstani financial institution, alleges that it was the victim of a fraudulent scheme orchestrated by its former chairman and employees between around 2005 and 2009, involving around 100 letters of credit to fund purported commodity sales, with the money diverted through offshore special purpose vehicles and on to foreign entities. Some of those vehicles were BVI companies. In September 2021, the bank issued proceedings against 54 defendants in the BVI after restoring eight BVI companies that had been struck off and dissolved years earlier. In May 2022, it obtained permission ex parte to serve the foreign defendants out of the jurisdiction, relying principally on the necessary or proper party gateway, with the BVI companies as the anchor defendants. The BVI companies never engaged with the claim and were struck off again in 2022 and 2023. Several foreign defendants applied to set aside the permission to serve out and Justice Wallbank granted the application. He found that (i) even assuming there was a real issue between the bank and the BVI companies, it was not reasonable for the court to try it; (ii) the company gateway was not engaged; (iii) the BVI was not clearly or distinctly the appropriate forum; and (iv) the bank had breached its duty of full and frank disclosure in ways that were not innocent. The bank appealed and argued that the judge was wrong in (i) finding that there was no real issue that was reasonable for the court to try; (ii) deciding that the BVI was not clearly and distinctly the most appropriate forum; and (iii) concluding that there was a breach of the duty of full and frank disclosure. The Court of Appeal dismissed the bank's appeal on all grounds. As a starting point, the Court confirmed that, as an appellate court, it ought to be slow to interfere with the judge's decision where the appeal involves an evaluation of the facts and law and exercise of discretion. Applying the principles set out in its decision in Dufour v Helenair and the English Court of Appeal's decision in Re Sprintroom, the Court reaffirmed that it would only interfere if the judge's decision could be shown to be wrong by reason of some identifiable flaw in his treatment of the question to be decided, such as a gap in logic, a lack of consistency or a failure to consider a material factor, which undermines the cogency of the conclusion. In recognising the appellate court's deference to the evaluative assessment undertaken in the court below, the Court also gave weight to the fact that the same judge had heard both the ex parte application and the set-aside applications. The Court of Appeal disagreed with the bank's argument that the judge had misapplied the gateway. Relying on the Privy Council's decisions in Nilon Ltd v Royal Westminster Investments SA and Altimo Holdings and Investment Ltd v Kyrgyz Mobile Tel Ltd, the Court restated the principles, including the following, applicable to the necessary or proper party gateway: Caution must always be exercised in bringing foreign defendants within the jurisdiction under that gateway, and it should never become the practice to bring them in as a matter of course on the ground that the only alternative requires more than one suit in more than one jurisdiction. The fact that an anchor d...

A BVI derivative action lets a minority shareholder sue on behalf of the company when those in control will not, but leave is far from automatic. The Court of Appeal's recent decision in Dekel v Clerkenwell Lifestyle Ltd is a timely reminder of how high the bar is. It also provides a good opportunity to recap how the derivative route differs from the more familiar unfair prejudice claim. Minority shareholders who are unhappy with how a BVI company is run usually have two main statutory options under the BVI Business Companies Act, Revised Edition 2020 (BCA). An unfair prejudice claim (governed by s184I of the BCA) is a personal claim: the shareholder complains that the company's affairs have been conducted in a way that is unfairly prejudicial to them as a member, and the court has wide powers to remedy that, often by ordering a buy-out. A derivative action is different. The claim belongs to the company, the shareholder is simply the vehicle for bringing it, and any recovery goes to the company rather than to the shareholder personally. That distinction matters. Where directors have caused loss to the company itself, for example through breaches of duty, conflicted transactions or diverting value to connected parties, the shareholder's own loss will usually just reflect the company's loss. The reflective loss rule, as explained in the UK Supreme Court case of Sevilleja v Marex, generally prevents a shareholder recovering that loss in its own name. In that situation the derivative action is often the only way to get the claim in front of a court. A shareholder cannot bring a derivative claim without the court's leave under section 184C of the BCA. The power is discretionary and the court must consider a series of statutory factors, including: whether the member is acting in good faith; whether the proceedings are in the company's interests taking account of the views of the company's directors on commercial matters; whether the proceedings are likely to succeed; the costs of the proceedings compared with the relief likely to be obtained; and whether an alternative remedy to the derivative claim is available. The availability of an alternative remedy is where the two routes meet. If the shareholder's complaint can properly be addressed through an unfair prejudice claim, that may weigh against leave for a derivative action, although the Court of Appeal in Dekel did not rule on this point. The judge did, however, take the parallel English proceedings and the availability of alternative remedies into account. Although there is no strict merits threshold, the court must be satisfied, on an evaluative assessment of the evidence, that the proposed claim has a realistic prospect of success. The Court of Appeal endorsed the judge's approach. In Dekel, a shareholder in a BVI holding company that had raised investor funds for a failed London hotel development sought leave to sue directors, service providers and connected lenders in proceedings in England and Wales. He had invested about £4 million, of which about £2.8 million was lost. The BVI Commercial Court refused leave, and the Court of Appeal upheld that decision. The decision in Dekel gives several practical lessons for shareholders considering this route: Dishonesty needs evidence. Dishonesty is rarely proved directly at an early stage, but conflicts of interest, related-party loans and expensive financing will often be consistent with commercial decisions that went wrong. Without primary facts capable of supporting an inference of dishonesty, the claim will not get off the ground. A failed project is not negligence. The shareholder must show why decisions were negligent when they were made, not just unsuccessful in hindsight, and link the breach to identifiable loss. Check the company's articles. An indemnity in the articles that mirrors section 132 of the BCA can give directors a broad defence to non-fraudulent claims, including claims brought derivatively in the company's na...

The English High Court in Bourlakova v Estate of Bourlakov has confirmed that an order to disclose arbitral material is to be honoured even where the arbitral tribunal has refused permission to do so. The judgment is also a timely reminder that arbitral confidentiality is not a trump card, and that collateral use must be justified document by document. The case forms part of long-running litigation over assets of the late Oleg Bourlakov. Edelweiss, one of the defendants, had promised the English court not to deal with its assets outside the ordinary course of business. When Edelweiss faced a Moscow arbitration claim of over US$101m, the English court ordered it to give the Bourlakovas documents from the arbitration, including a recording or transcript of the main hearing, so that the undertaking could be policed. The arbitral claim was dismissed in January 2026, although the claimant in those proceedings sought to challenge the award. Meanwhile, Mr Korovin, who had given evidence for the claimant in that arbitration, then commenced a new arbitration claiming around US$272.4m from Hermitage One, one of the claimants in the English proceedings. Hermitage One said the new claim bore striking similarities to the first. A number of applications ensued. The order required Edelweiss to ask the arbitral tribunal for permission to record the hearing and to provide a copy of the recording. The tribunal had already allowed recording but refused permission to disclose it, so Edelweiss argued that its obligation to disclose fell away. The English court disagreed: Construed objectively, the order imposed two separate obligations. The word "and" was disjunctive and the duty to disclose was not subject to the tribunal's permission. There was no ambiguity to resolve in Edelweiss's favour, and the context of the original hearing confirmed that permission was only ever in issue for making the recording. There was no material change of circumstances which would justify variation of the disclosure order. The order existed to protect Edelweiss's assets and, while the arbitration was ongoing, the threat remained. The tribunal's refusals were not sufficiently material. The apparent refusal of Edelweiss's Russian lawyers to hand over the recording was no answer without cogent evidence that they were entitled to refuse to provide a copy to their own client. Edelweiss also sought an order that the documents provided under the disclosure order be deleted by the Bourlakovas. The court adjourned that application. The court considered that deletion is best considered once the arbitration has ended, as the documents may become public or fall to be disclosed in the English proceedings. Hermitage One sought permission to use the disclosed material to defend the Korovin arbitration. Permission requires special circumstances giving a cogent reason to release the party from the collateral use restriction. Edelweiss wanted permission limited to three documents. The court considered: Cogent reasons existed. The Korovin arbitration claimed very substantial sums, there were very substantial similarities between the arbitrations and it would be relevant to see what Mr Korovin and the other witnesses did and did not say in the first arbitration. Arbitral confidentiality was relevant but not of great weight. Both sides accepted the first arbitration was bogus, its claimant was unlikely to complain about further use, and there was a real prospect of the documents being aired in open court in Russia. Separately, the way both claims were made – under English law, in foreign arbitral tribunals, long after the relevant limitation period would have expired and without prior warning – heightened the need for the tribunal in the new arbitration to have access to all of the relevant material. Without deciding whether the Bourlakovas had breached their undertaking on use, the court held that the alleged breaches were no reason to penalise a separate entity, Hermitage One. Ther...

The British Virgin Islands is set to expand its specialist commercial litigation offering. At its meeting on 19 August 2026, Cabinet approved the expansion, together with funding through to 2029 for an additional Commercial Judge, supporting court administration staff and commercial rental space. It is expected this expanded Court will commence hearing matters in the fourth quarter of 2026. The announcement reflects a broader investment in the capacity and infrastructure of the BVI's commercial justice system at a time when the disputes arising from the jurisdiction's role as an international financial centre are increasingly complex, cross-border and time-sensitive. The BVI Commercial Court was established in 2009 and has developed into a specialist forum for commercial disputes. The Court has jurisdiction to hear commercial matters across the nine member jurisdictions of the ECSC, although its work is predominantly BVI-focused. Claims ordinarily falling within its jurisdiction have a minimum value of US$500,000, with many matters significantly exceeding that threshold. The nature of the Court's work reflects the international use of BVI corporate structures. The ECSC has itself described the BVI Commercial Court's caseload as consisting of "high value, complex, cross-border litigation", with particular concentrations in company, insolvency, trusts, asset recovery and enforcement matters. Its recruitment materials also recognise the wider significance of the Court's work, noting that its decisions are influential in other common law jurisdictions. For a dispute involving a BVI company, the issues rarely stop at the BVI's borders. Parties, assets, witnesses, financing arrangements and related proceedings may be spread across multiple jurisdictions. The Court must therefore be equipped not only to determine substantive commercial disputes, but also to deal efficiently with the procedural and interim issues that commonly arise in international litigation. Commercial proceedings may require urgent injunctive relief, applications concerning assets located overseas, service outside the jurisdiction, evidence from foreign witnesses, recognition of foreign insolvency officeholders or coordination with proceedings in another jurisdiction. The addition of an expanded Commercial Court will provide further capacity to support these objectives. The Cabinet announcement is also notable because the investment extends beyond the Judge, Court space and staff. In addition, the Government's 2026 budget programme identifies a number of technological developments intended to improve the wider court experience. These include the continued development of the electronic case management platform, additional training for Judges and support staff, voice-to-text technology for Court reporters and work towards an improved electronic search facility for Registry records. For businesses and investors using BVI structures, access to the BVI's specialist Commercial Court which is familiar with complex corporate, insolvency and cross-border issues can be an important consideration. An expanded Commercial Court, together with investment in court administration, technology and physical infrastructure, represents a further strengthening of that framework and ensures the BVI will continue to be a significant centre for the resolution of international commercial disputes.