Tether Investments, S.A. de C.V. & Anor v Electric Solidus, Inc. (t/a Swan Bitcoin)

A contractual anti-suit injunction requires an established breach of the relevant covenant. A prohibition preventing a company from instituting legal proceedings does not ordinarily prevent a shareholder from bringing a derivative claim in the company’s name. The substance of the proceedings, rather than the procedural form or the identity of the named claimant, is decisive. Clear words would be required before a shareholders’ agreement was construed as removing a statutory derivative remedy. Differences between the procedure of the jurisdiction of incorporation and the governing procedural law do not alter that construction. The court declined to restrain the foreign leave application and made no finding that it breached the shareholders’ agreement.

The claimants sought declaratory and anti-suit relief against the defendant’s proposed derivative proceedings in the British Virgin Islands and related discovery applications in Delaware and New York. The defendant had applied under s184C of the BVI Business Companies Act 2004 for leave to bring proceedings in the name and on behalf of the second claimant, a BVI company.

The claimants relied principally on a shareholders’ agreement prohibiting any group company from instituting specified legal proceedings without investor consent. They argued that the proposed derivative proceedings fell within that prohibition. The central issue was whether a derivative action brought by a shareholder, using a company’s cause of action and possibly its name, constituted proceedings instituted by the company.

1. Application dismissed. The court refused the declarations and anti-suit injunction concerning the BVI leave application. The related Delaware and New York relief was premised on success concerning that application and therefore also failed. The claimants were ordered to pay the costs.
2. Section 37 of the Senior Courts Act 1981 gives jurisdiction to grant anti-suit relief, but contractual relief depends on proving that the foreign proceedings breach the contractual covenant. Where the covenant is established, the fact that enforcement prevents a remedy available in the foreign forum is not itself a strong reason to refuse relief: Donohue v Armco Inc & Ors [2001] UKHL 64.
3. The Litigation Prohibition prevented a group company from actively instituting, settling or compromising specified proceedings. The word “institute” meant commencing or bringing proceedings. It did not extend to every form of participation in litigation, to being sued, or to proceedings commenced by another person.
4. A derivative claim is brought by the shareholder, although it uses a cause of action vested in the company and may be brought in the company’s name. It is therefore not properly characterised as proceedings instituted by the company. The court adopted the reasoning in SDI Retail Services Limited v King & Ors [2017] EWHC 237 (Ch), which was persuasive though not binding.
5. The procedural form required by BVI law did not alter the substance of the transaction. Whether the company was named claimant or defendant, the active step was taken by the shareholder with the court’s permission. The wording did not clearly remove the minority shareholder’s statutory derivative remedy, and the commercial background did not justify an expansive construction.
6. The costs indemnity provision in s184D(1) of the BVI Business Companies Act 2004 supported the conclusion that the proceedings were instituted by the shareholder. It did not make the company the instituting party.
7. The court refused indemnity costs. Late abandonment of the vexatious limb did not establish that the application was hopeless. The high threshold for showing foreign proceedings to be vexatious was not met on the material before the court. An interim payment on account of costs of £200,000 was ordered.