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Note: When DIF III Global Co-Investment Fund (Foreign Investors) sued BBLP LLC and others (Australian Investment Companies) to recover losses from an investment, Australian Investment Companies moved to require Foreign Investors to provide security for costs. The Judge stated that it is the practice in Victoria, Australia to require overseas plaintiffs with no assets in Victoria to cover costs in the event of an adverse judgment due to the difficulty of enforcing judgments in foreign jurisdictions. Foreign Investors did not dispute the need to secure funds to cover costs, but requested an alternative to paying the security into the court or obtaining a guarantee from an Australian bank which is the conventional means of creating a security. Instead, Foreign Investors wished to provide deeds of indemnity from an English insurance company in favor of Australian Investment Companies. The Victoria Supreme Court, Landsdowne, J., ruled that Foreign Investors must pay the security in the form of money obtain a guarantee from an Australian bank or other authorized deposit-taking institution located within the jurisdiction of the court.

The Judge explained “that the purpose of security for costs in the case of an overseas plaintiff is to provide a fund within the jurisdiction.” In making a determination of whether it is required, “All relevant circumstances must be considered in determining both whether to order such security, and its form. The ultimate question for the court in relation to both issues is - how is justice best served in the particular circumstances of the case?”

The Judge expressed concerns over exactly what the English insurance company had agreed to provide and whether the deeds would be enforceable in foreign jurisdictions. The Judge was also concerned by the form of security and ruled that Foreign Investors could not force Australian Investment Companies to accept a security with which they were unfamiliar and uncomfortable.

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.