International Arbitration 2020 - Trends And Developments

• Published date: 21 September 2020
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Carey Olsen
• Author: Mr Sam Dawson, Jan Golaszewski, Denis Olarou and Matthew Crawford

The Cayman Islands remains a pro-arbitration jurisdiction, with recent court decisions demonstrating the judiciary's readiness to engage with the difficult nexus between arbitration and insolvency. These and other developments discussed below increasingly bring the Cayman Islands in line with the criteria for an effective and efficient seat of international arbitration promulgated by the Chartered Institute of Arbitrators in its London Centenary Principles. While the jurisdiction continues to develop and improve, parties can legitimately start considering the Cayman Islands as a potential choice of seat for arbitrating disputes in the international financial services industry.

Cayman has been a major centre of the global financial services industry for decades. It hosts nearly 11,000 hedge funds, which constitutes more than 60% of the world's hedge funds by number and by net assets. Cayman is also the world's second largest captive insurance centre, and is the domicile of 50% of the companies listed on the Hong Kong Stock Exchange. Of the world's 50 largest banks, 40 have a presence on the Islands.

Consequently, Cayman is home to a legal profession, judiciary, and a body of accountancy, audit and other financial professionals with unique and extensive expertise in the resolution of funds and other complex financial services disputes - a concentration of know-how which belies the Islands' diminutive size and idyllic location. To give but one recent example, in 2018 the Grand Court delivered a 1,300-page judgment in the landmark trial of AHAB v Al-Sanea, which lasted for a little over a year and concerned claims in excess of USD9 billion in relation to what has been called "one of the largest Ponzi Schemes in history". On a daily basis, the legal profession and the courts of the jurisdiction deal with numerous other high-value multi-jurisdictional financial services disputes, ranging from contract claims to fraud, and involving parties the world over: New York to Beijing, and Buenos Aires to Moscow.

This deep sectoral expertise and breadth of experience are grounded on a stable democratic government and an independent legal and judicial system based on English common law and offering ultimate recourse to the Privy Council in London (which is comprised of the same Judges who sit in the Supreme Court of England and Wales). Despite this, to date, the Cayman Islands has not been known as a seat of international arbitration.

However, with the introduction of the modern Arbitration Law, 2012 (the Arbitration Law), which is based on the UNCITRAL Model Law and the English Arbitration Act 1996, and the subsequent development of the jurisdiction, the Cayman Islands measures up increasingly well against the ten benchmarks laid down for an effective and efficient seat of international arbitration by the CIArb London Centenary Principles. This increasingly positions the jurisdiction to deploy its expertise in financial services disputes in the context of international arbitration.

Law

The first of the London Centenary Principles is that the arbitration seat should offer a clear, effective and modern international arbitration law that recognises and respects the parties' choice of arbitration as the method for settlement of their disputes by providing the necessary framework for facilitating fair and just resolution through arbitration, limiting court intervention, and striking an appropriate balance between confidentiality and appropriate transparency.

The Arbitration Law meets all of these criteria, and the manner in which the Cayman Courts have interpreted and implemented it over the years is consistent with the spirit of the London Centenary Principles.

The Arbitration Law provides the essential framework for a fair and just arbitration process, but without unnecessarily impinging on the parties' freedom to contract a procedure of their own design or adopt one from an established arbitral institution, while providing fall-back default rules for use where parties fail to address a key area. The parties are free to agree their own procedures for selecting arbitrators. The Cayman Islands Association of Mediators and Arbitrators (CIAMA - http://ciama.ky/) will act as appointing authority if called upon to do so (and it continues to be designated as such in arbitration agreements). Alternative appointment procedures under the Arbitration Law are available in default of such agreement, with the Grand Court having the power to designate the appointing authority as a last resort. The Arbitration Law also imposes disclosure requirements on arbitrators with regard to circumstances that might reasonably compromise their impartiality or independence, and provides for a procedure by which an...