The Government of the Virgin Islands has successfully defeated a claim worth in excess of $10 million from those behind a project to connect Miami and Tortola with direct flights (“the Project”) following a seven day arbitration in March 2021.
In an arbitration award handed down today, 13 May 2021, the Arbitrator rejected all claims made against the BVI Government by BV Airways Inc (“BVIA”) and Colchester Aviation LLC (“Colchester”).
In particular, the Arbitrator concluded:
- The Government of the Virgin Islands properly performed all its obligations in relation to the Project.
- The Government of the Virgin Islands did not breach any of the terms of the Framework Agreement.
- The Government of the Virgin Islands was entitled to terminate the Framework Agreement in November 2017.
- There was no basis at all for the allegations of dishonesty or fraud made against the BVI Government.
- In addition, there was no basis for the allegation of defamation and no breach of any obligations of confidentiality by the Government of the Virgin Islands.
- The Government of the Virgin Islands has been awarded its costs of defending those very serious claims (fraud and defamation) – which were described as ‘frivolous’ following cross-examination of individuals connected with Colchester and BVIA at the March 2021 hearing.
Commenting on the findings of the Arbitration Award, the Premier and Minister of Finance Honourable Andrew A. Fahie said, “This is an important victory for the people of the BVI. Despite being provided with significant public backing, the parties behind BV Airways failed to get a single commercial flight off the ground or to repay any of the public funds invested. This ruling ensures that no further funds will have to be paid to these parties.”
Premier added, “I want to assure the people of the Virgin Islands that your Government will leave no stone unturned in its pursuit of the recovery of the sums paid to Colchester, BVIA and individuals connected with those companies. We are also seeking to recover the costs incurred in defending the wholly unjustified claims brought in this arbitration.”
He further stated, “Anyone legally responsible for the BVI’s loss will be held to account to the extent that the law permits; we will now move to the next phase of our recovery strategy, having successfully defended this claim.”
Premier Fahie explained that as a result, this is a very important victory for the people of the BVI, adding, “The BVI Government will not have to make any further payments to BVIA and Colchester in relation to the failed Project.”
The Government of the Virgin Islands also advanced a counterclaim based, in particular, on alleged dishonest conduct by Colchester and BVIA as a result of payments which they made to the BVI Government’s US legal counsel and agent (Mr Lester Hyman). The Arbitrator dismissed that claim, noting however that a civil claim in the BVI Courts may result in a different outcome, “particularly since the court has investigative powers that I do not have and may be able to gather a record more robust than this arbitral record.”
Premier shared that as a result, the Government of the Virgin Islands intends to pursue the wrongdoers in the BVI Courts to recover damages and losses suffered relating to the Project (a core part of the BVI Government’s strategy relating to the failed Project which is already being implemented).
The Government of the Virgin Islands was represented at the arbitration by George Spalton QC & Marie-Claire O’Kane of 4 New Square, London; and Martin Kenney, Andrew Gilliland, Andrew Blackburn and Hakim Creque of Martin Kenney and Co, Solicitors.
- The Government of the Virgin Islands entered into a Framework agreement with BVIA and Colchester in 2015. The Government advanced $7 million to assist in the startup of the project and BVIA and Colchester undertook to provide a direct airline service between Miami and Tortola.
- Despite the Government of the Virgin Islands providing the funds in accordance with its obligations under the Framework Agreement, flights between Miami and Tortola did not commence and the Government did not recover any of the funds paid in relation to the project. In November 2017 the Government terminated the Framework Agreement.
In accordance with the Framework Agreement disputes were subject to arbitration under the auspices of the American Arbitration Association, with BVI law applying to the substantive dispute. Mr Paul Klaas was appointed as arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The final hearing took place in March 2021.