Cayman Islands Court Of Appeal Rules On Limited Partner Derivative Actions

Law FirmCampbells
Subject MatterCorporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
AuthorMr Andrew Pullinger and Harry Shaw
Published date06 March 2023

The recent judgment of the Cayman Islands Court of Appeal ("CICA") in Kuwait Ports Authority & Ors v. Port Link GP Ltd & Ors1 , delivered on 20 January 2023, has clarified the test for limited partners in a Cayman Islands exempted limited partnership ("ELP") to bring derivative claims for and on behalf of the ELP pursuant to section 33(3) of the Exempted Limited Partnership Act (2021 Revision) (the "ELP Act").

The judgment is the first time section 33(3) of the ELP Act has been considered at appellate level and the CICA overruled the Grand Court's earlier decision in a number of important respects.

The CICA's judgment represents the leading jurisprudence on derivative claims by limited partners in an ELP and will therefore be of interest to private equity and other professionals and investors familiar with the widely-used Cayman ELP structure.


Two of the eleven limited partners in The Port Fund, L.P. (the "Fund") had filed direct and derivative claims against the Fund's general partner (the "GP") and three other defendants said to be related to management of the fund or involved in alleged wrongdoing ("D2-D4"). The defendants sought, inter alia, to strike out the derivative claims on the basis these were not permitted under the ELP Act.

Section 33 of the ELP Act provides that legal proceedings by or against an ELP may be instituted by or against a general partner only. Section 33(3) provides an exception to this, permitting a limited partner to bring an action on behalf of an ELP only if the general partner with authority to do so has, "without cause, failed or refused to institute proceedings".

In this case, the GP (under the control of independent directors with no connection to the alleged wrongdoing) had determined, following extensive investigations, that the claims sought to be brought by the limited partners lacked merit and should not be pursued in the interests of the Fund.

At first instance, the Grand Court (Parker J) had the unenviable task of considering the operation of section 33(3) of the Act for the first time (the provision having never been the subject of judicial consideration in the Cayman Islands or in any other commonwealth jurisdiction with equivalent legislation). A more detailed overview of the relevant facts and Campbells' analysis of the first instance decision is accessible here.

The test under section 33(3)

At first instance, Parker J held that:

  1. There is no "leave stage" under section 33(3) as in the case of...

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