Asset recovery roundtable: Post-pandemic trends in offshore markets

Last month, leading litigation funder and asset management firm Burford posed questions on major legal developments in the offshore markets over the past 18 months and economic trends that will play out in the markets post-pandemic to leading litigators, insolvency practitioners and financial professionals in the region. Partner John O’ Driscoll, who leads the Insolvency and Dispute Resolution (IDR) team at Walkers in London and practices BVI and Cayman law, took part in a round-table with onshore and offshore counsel to explore the most recent changes relevant to offshore practitioners.

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A recent act in the Cayman Islands, the Private Funding of Legal Services Act 2020 (PFLSA), which came into force in May 2021, permits third-party funding in a much wider range of proceedings and allows law firms to enter into contingency fee agreements. How do you anticipate this law changing the way law firms interact with their clients and how will it benefit both the claimant and the representing attorney?

John O’ Driscoll: The issue prior to PFLSA was that litigation funding agreements were subject to advance approval by the Grand Court on a heavily restricted basis. They were all but unknown in commercial cases as a result of the continued existence of maintenance and champerty as criminal offenses, and the availability of litigation funding remained scarce. With the increased certainty provided by PFLSA, we anticipate an increase in claims. However, there is likely to be a short delay in uptake initially as the act specifically applies only to causes of action which have accrued since it came into force.

Chapter 15 filings dramatically increased in 2019 and 2020, including in the Cayman Islands and BVI. For example, Caribbean telecommunications provider Digicel filed in 2020 with $7.4 billion in outstanding debt. Could you talk more generally about bankruptcy and insolvency trends in offshore markets in 2021?

John O’Driscoll: In general, across both the Cayman and BVI, we are seeing creditors explore their options in terms of enforcement. Many creditors are not yet pulling the trigger on enforcement but have well formulated plans if they decide to go down that route. From a Cayman perspective, following the presentation of a winding up petition against a company without leave of the Grand Court, a secured creditor will be entitled to enforce its security without leave of the Grand Court and without reference to any appointed liquidator. In terms of the type of companies that we have seen in distress, we have seen activity in the resources, aviation and retail sectors. In terms of regions, we have seen an uptick in resources work out of Africa and the Middle East.

Earlier this year, the BVI amended a Supreme Court Act (Section 24A) to confirm that its court has the authority to grant injunctive relief in support of foreign proceedings. With the BVI arbitral seat increasingly popular, what effects does the amendment have to arbitral proceedings in the region?

John O’ Driscoll: It is true that this is a positive development for the BVI. Section 24A remedies a lacuna in the BVI legislation which did not previously provide for the court to grant interim remedies in support of proceedings on foot outside the BVI.

With the Charging Orders Act 2020 as an example, do you anticipate further pro-creditor legislation in the BVI? Is the region’s shift to becoming less debtor-friendly a positive development for business?

John O’ Driscoll: The Charging Orders Act 2020 is a strong message that the BVI’s policy and intention is to ensure that rogue judgment award debtors cannot use asset protection structures to evade enforcement. It is a positive message for the BVI to send at this time.