Arbitration Offshore: Comparing Recent Developments In BVI And Cayman

Both the British Virgin Islands (BVI) and the Cayman Islands have recently updated and modernised their arbitration regimes. The Cayman Islands passed their legislation first, and in Cayman the process of arbitration is now governed by the Arbitration Law 2012 (the Cayman Law). The BVI followed approximately 12 months later passing the Arbitration Act 2013 (the BVI Act) which now regulates the process.

Both the Cayman Law and the BVI Act are largely based on the UNCITRAL Model Law on International Commercial Arbitration, as updated in 2006 (the Model Law), and in the case of the Cayman Law this includes elements from the English Arbitration Act 1996. The BVI Act expressly includes Article 2A of the Model Law requiring the BVI courts to interpret the legislation with regard "to its international origin and to the need to promote uniformity",1 whereas the Cayman Law does not make express provision for this. To facilitate the operation of the Cayman Law, the Cayman Islands also introduced procedural rules regulating the practice and procedures of the Grand Court (the Cayman Rules). The BVI has also drafted subsidiary legislation (the BVI IAC Arbitration Rules 2015), but these have not yet been circulated for public consultation much less brought into force. The Cayman Rules provide a mechanism by which parties to arbitration may refer discrete issues to the Grand Court for determination. The Cayman Rules also govern the procedure that a party to an arbitration must follow when seeking to enforce an award. Awards made by an arbitral tribunal may, with leave of the Grand Court, be enforced in the same manner as a judgment or court order.

In very general terms the Cayman Law tends to be more flexible and more protective of party autonomy, whereas the BVI Act clings more rigidly to the UNCITRAL Model Law template. The Cayman Law largely operates on the principle that most arbitrations will be on an ad hoc basis, whereas the BVI Act is geared towards working with arbitrations under the proposed BVI International Arbitration Centre (BVI IAC). The BVI Act also makes some small provisions for mediations, whereas the Cayman Law focuses solely upon arbitration.

Both the BVI and the Cayman Islands operate arbitral regimes which comply with widely accepted international arbitration practice. In each case the regime governs both domestic and international arbitrations and provides a modern and adaptable alternative to resolving disputes by litigation in the courts.

Guiding principles

The Cayman Law is expressly founded on the following three principles:2

impartiality and the fair resolution of a dispute by a neutral tribunal without any undue delay or expense; party autonomy subject only to a public policy restriction;3 and limited court intervention. The BVI Act also includes a statement of principles.4 After stating that the object of the BVI Act is to "facilitate and obtain the fair and speedy resolution of disputes by arbitration without unnecessary delay or expense", the statute similarly lists three guiding principles:

that subject to the observance of the safeguards that are necessary in the public interest, parties to a dispute should be free to agree on how the dispute should be resolved; the courts should not interfere in the arbitration of a dispute, save as expressly provided in the legislation; and where the court does interfere in an arbitration pursuant to the expressed provisions of the statute, it shall, as far as possible, give due regard to the wishes of the parties and the provisions of the arbitration agreement. Arbitration agreement

Section 4(1) of the Cayman Law provides that an arbitration agreement may be in the form of:

an arbitration clause within an agreement or set of agreements pursuant to which the parties agree to submit to arbitration any dispute that has arisen or may arise in the future; or a standalone agreement. In order to bind the parties, an agreement must be in writing and signed by all the parties or must be an exchange of letters, facsimiles, telegrams, electronic communication or other means of communication that evidence agreement.

In the BVI Act the requirements for an arbitration agreement are set out in section 17 which adopts option 1 from Article 7 of the UNCITRAL Model Law (which includes the use of wholly electronic arbitration agreements), reflecting existing provisions in the BVI's Electronic Transactions Act 2001.

Appointment of an arbitrator

In circumstances where the parties fail to agree on a procedure for the appointment of an arbitrator, or require a neutral, third arbitrator to be appointed, they may...