May the following information be useful;
Virginia does not require a vapor retarder for exterior walls. It is recommended that a vapor retarder not be used in a wall that is partially or fully below grade.
ATTENTION: if the combustible paper facing is not in substantial contact with the backside of the wall finish i.e. gypsum or equivalent, the vapor retarder must be removed. Hence it cannot be left exposed to the interior. Also (foil) scrim paper is not an approved equivalent to gypsum.
The entire depth of this wall cavity should be insulated. This will insulate behind the studs thus reducing the thermal bridging of the wall. While it has been suggested that airspace should be maintained between the masonry wall and the stud wall insulation in order to keep the wall dry, in actuality this will make matters worse. This vertical airspace can lead to a convective air loop, thereby increasing not only the thermal but also the moisture transfer within the wall. If a full height stud wall is used in addition to the masonry wall, this stud wall is often inset an inch or more, increasing the depth of the cavity to be insulated .
If a stud wall is placed on a partially below-grade masonry wall, the stud wall should be insulated the same way as other above-grade walls in the house. When a vapor retarder is not desired, removal is recommended instead of slashing a faced product's sheathing, because narrow cuts are unlikely to significantly increase vapor transmission.