The British Virgin Islands (BVI) passed a new arbitration law in December, including provisions for setting up a new international arbitration centre. Ben Knowles, global head of dispute resolution, considers some of the factors that may affect the success of arbitration in the territory.
The longer established arbitration centres such as London, Paris and New York have a framework that supports arbitration. They all have domestic legislation that provides for the practice of arbitration and are signatories to relevant treaties, most importantly the New York Convention, which ensures that their awards have a good chance of enforcement internationally.
They also have other key “infrastructure”, including the availability of capable, local lawyers and, especially, arbitrators; easy accessibility by international travel; as well as good facilities for hosting arbitrations.
In recent years, both Singapore and Dubai have emerged as growing arbitration centres. They appear to be capitalising on their “regional hub” status and have been able to exploit the fact that they are legally and financially secure “harbours” with neighbours that, for a variety of reasons, are less suitable for hosting arbitration.
More recently still, Mauritius has launched the LCIA-MIAC arbitration centre, seeking to exploit the growth of Mauritius as a financial and commercial centre supporting investment, particularly in southern Africa.
Of the arbitration centres mentioned, Mauritius has the greatest similarity with the BVI and might provide a blueprint for developing arbitration there. However, one significant difference is that Mauritius has partnered with the LCIA to develop its centre, whereas the BVI (to date) has not tied up with a well established international arbitral institution. Unless it does so, the BVI may struggle to attract notice in the increasingly competitive arbitration forum market.
The BVI is the world’s largest corporate domicile, with nearly one million companies incorporated in the territory since 1984. Its legal system is based on English common law. It offers a stable political and economic environment that attracts international companies to set up joint venture entities, hedge funds, holding companies and trusts to conduct commercial transactions and sign deals. With such a prevalence of commercial activity, there are bound to be disputes that need to be resolved within the territory. However, prior to its new arbitration act, BVI’s legal framework was not suitable for modern cross-border arbitration.
The BVI’s new arbitration law is based on the UNCITRAL Model Law. The territory is also expected to accede to the New York Convention, meaning that arbitral awards from the BVI will be recognised and enforced by the courts of contracting states. Most countries in the world are now signatories to the Convention. The BVI’s accession to the Convention will be handled by the UK Foreign & Commonwealth Office, which manages the BVI’s external relations.
During the debate on the new arbitration law, the BVI government recognised that it was coming from a position behind the other established arbitration centres around the world and that establishing proper facilities to host arbitration proceedings would be fundamental to success. The government seems to be committed to addressing this. It will be interesting to see whether businesses will use the new centre once it is set up.
The BVI has the potential to develop into an arbitration centre. However, in addition to establishing the legal framework, there is considerable legal expertise and infrastructure that will need to be developed to help international arbitration take-off in the BVI. Will the LCIA or ICC step forward to work with the new centre and help give it some momentum?
Khaled Moyeed co-authored this article with international arbitration lawyer, Ben Knowles. It was first published in the Global Arbitration Review.