New BVI Arbitration Act now in force


On 17 December 2013 the British Virgin Islands House of Assembly had the third and final reading of the new Arbitration Act 2013, which came into force on 23 January 2014. 

The new Arbitration Act was part of the work produced by the Arbitration Focus Group, a committee comprised jointly of public and private sector representatives tasked with modernising the jurisdiction’s arbitration framework. The main focuses of the committee were:

  • Updating the Territory’s arbitration legislation (which ultimately resulted in the new Act)
  • Procuring the extension of the New York Convention to the BVI
  • Creating an administrative body to facilitate arbitration in the jurisdiction

Modernising the legislation

Prior to the current enacted, arbitration in the British Virgin Islands was regulated under the Arbitration Act (Cap 6), which was a synthesis of the English Arbitration Acts of 1950 and 1975.  The previous legislation was regarded as unsuitable for modern cross-border arbitration.  Previous attempts at reforming the jurisdictions arbitration laws were not successful.

The new Arbitration Act broadly has three key features:

  • It incorporates the UNCITRAL model law on arbitration (as amended, at 7 July 2006) into British Virgin Islands domestic law (with certain minor modifications)
  • It modernises the provisions for the enforcement of foreign arbitration awards in the British Virgin Islands
  • It contains provisions for the creation of a new statutory body: the BVI International Arbitration Centre (or BVI IAC).

To bolster the UNCITRAL provisions (which essentially relate to the proper conduct of an arbitration) the new Act also confers various additional powers on the British Virgin Islands courts to support and assist the conduct of arbitration proceedings.  However court proceedings which are commenced in defiance of a valid arbitration clause will still be subject to an automatic stay.

Enforcement of foreign awards

Under the old Arbitration Act there were multiple mechanisms for enforcing foreign awards, of which only some were available in reference to awards from particular jurisdictions.  Sensibly the new Act simply make provision for a single test for enforcement, predicated on the New York Convention requirements.

New York Convention

The external relations of the British Virgin Islands are managed by the Foreign & Commonwealth Office and so the accession of the British Virgin Islands to the New York Convention is not dealt with directly in the new Act.  However, the statement of objects and reasons annexed to the Bill in the House of Assembly notes “it is critical that the New York Convention is extended to the Virgin Islands. This process is already in trend [sic] in liaison with the Governor’s Office and the Foreign and Commonwealth Office and it is the hope that the extension of the Convention to the Virgin Islands would be achieved by the time the Bill (upon enactment) is brought into force. The Bill fully complies with the requirements of the New York Convention.”

Exemption from stamp duty and local taxes

Under the old Act, arbitration awards were subject to stamp duty at 0.1% of the amount of the award.  The new Act provides that awards are exempt from local stamp duty and from any charges imposed under either the Income Tax Act (although income tax is presently assessed at zero per cent. in the Territory) or the Payroll Taxes Act. 

The incoming tide

Although many offshore and midshore jurisdictions are seeking to market themselves as arbitration centres, reform in the British Virgin Islands was more pressing.  For many years it was standard to include in the memorandum and articles of association of a British Virgin Islands an arbitration provision in the event of a dispute.  In Zanotti v Interlog Finance (BVIHCV 2009/0394) the British Virgin Islands Commercial Court confirmed that such arbitration provisions are valid as a matter of British Virgin Islands law, and in appropriate cases will oust the jurisdiction of the court.  Accordingly, having a robust and modern framework within which to resolve such disputes is welcome.

Colin Riegels of Harneys was one of the members of the Arbitration Focus Group.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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