The Arbitration Review Of The Americas 2016: The Cayman Islands

The Arbitration Law 2012 (the Law) provides a modern statutory regime based largely on the UNCITRAL Model Law and the English Arbitration Act (1996 Act).

The enforcement in the Cayman Islands of agreements to arbitrate in countries that are parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), and arbitral awards made in such countries, remain largely governed by the Foreign Arbitral Awards Enforcement Law (the Foreign Awards Law). That legislation incorporates the provisions of the New York Convention relating to such matters into Cayman Islands law.

Key features of the Law

The Law is founded upon three main principles:

the fair resolution of disputes by an impartial tribunal without undue delay or expense; party freedom to agree how their disputes are resolved, subject only to safeguards deemed necessary in the public interest; and limits on the scope for court intervention in arbitration proceedings. The Law applies to all arbitrations where the seat of the arbitration is the Cayman Islands (regardless of where the parties are based) and governs the conduct of the arbitration, challenges in the Cayman Islands courts and the enforcement of Cayman Islands arbitral awards within the jurisdiction.

An arbitral tribunal appointed under the Law has wide powers and is essentially able to award any interim or final remedy that a court could have granted if the dispute in question had been the subject of court proceedings. The Law gives the parties the freedom to tailor the arbitral proceedings according to their needs, but also provides default provisions that apply in the absence of agreement. There are certain mandatory provisions of the Law designed to protect the integrity of the arbitration process; for example, by ensuring that the tribunal maintains its impartiality throughout the arbitration and does not have any conflicts of interest. The Law expressly recognises that arbitration proceedings are to be confidential and the limited grounds set out in the Law, upon which an arbitral award may be challenged in the Cayman Islands courts reflect the grounds in the New York Convention.

An arbitration agreement may be in the form of an arbitration clause in a contract or a separate agreement (section 4(1)). An arbitration agreement must be in writing and contained in a document signed by the parties or an exchange of letters, facsimile, telegrams, electronic communications or other communications that provide a record of the agreement (section 4(3)). An arbitration agreement will also be deemed to exist where a party asserts the existence of an arbitration agreement in a pleading, statement of case or any other document in circumstances calling for a reply and the assertion is not denied (section 4(4)).

Jurisdiction

The Law does not impose any restrictions on the types of dispute that may be referred to arbitration. Section 26(1) provides that any dispute that the parties have agreed to submit to arbitration may be determined by arbitration unless the arbitration agreement is contrary to public policy or the dispute is not capable of determination by arbitration under any other law of the Cayman Islands.

One example relevant to the Cayman Islands financial services industry, particularly in relation to investment funds, is the winding-up of companies and partnerships. In Cybernaut Growth Fund, LP (Grand Court, Jones J, 23 July 2013) a petition to wind up and liquidate an investment fund (on just and equitable grounds) had been filed. The fund attempted to strike out or stay the petition on the basis that arbitration proceedings had been commenced in New York pursuant to an arbitration clause in the fund's partnership agreement. The Grand Court concluded that a petition to wind up a company and appoint a qualified insolvency practitioner as liquidator was a dispute that was non-arbitrable. The actual winding up order, being an order by which third parties would be bound, was beyond the scope of an arbitrator's contractual powers. Furthermore, the identity of the appointed liquidators was a matter of public interest, particularly if the business in question was regulated (as is often the case for investment funds registered in the Cayman Islands). Winding-up orders, supervision orders and orders for the appointment or removal of liquidators all fall within the exclusive jurisdiction of the Court. The Grand Court took the opportunity to consider the English Court of Appeal decision in Fulham Football Club (1987) Ltd v Richards [2012] Ch 333, in which Patten LJ suggested that an arbitrator could exercise considerable jurisdiction in relation to winding up disputes. The Grand Court expressed the view that this principle should be confined to cases in which the winding up petition includes a discreet claim between the parties to the arbitration agreement, and where the petition includes matters which could be disposed of as preliminary issues. Several recent English decisions have considered the interplay between the courts' exclusive jurisdiction and arbitration and so this issue remains topical. Practitioners in the Cayman Islands will continue to monitor development in this area with interest.

Where the respondent wishes to raise objections regarding the tribunal's jurisdiction, he must first do so with the tribunal. Under section 27(1), the arbitral tribunal may rule on its own jurisdiction, including any objections to the existence or validity of the arbitration agreement. A party may also resist enforcement in the Cayman Islands of an award made here on the ground that the tribunal lacked jurisdiction (section 72(3)).

Under section 9, where a party to an arbitration agreement institutes court proceedings in respect of any matter falling within the arbitration agreement, the other party to the arbitration agreement may apply to the court for an order staying the proceedings. The court must then grant a stay unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. A party that takes a step in the court proceedings to answer the substantive claim loses its right to apply for a stay of the proceedings (section 9(1)).

The court is also required to grant a stay in favour of foreign arbitral proceedings pursuant to section 4 of the Foreign Awards Law. This provision has been applied by the Cayman Islands courts (for...