Contributed By Carey Olsen
The Cayman Islands arbitration industry continues to develop following the introduction of the modern Arbitration Law, 2012 ("Law"). To date, arbitration in the Cayman Islands has remained mainly domestic in nature, but the introduction of the Law, combined with support from the Cayman Islands' strong and highly regarded court system, the legal profession's expertise in complex financial disputes and the anticipated establishment of the Cayman International Arbitration Centre ("CIAC") (www.caymanarbitration.com), should facilitate the development of the Cayman Islands as a centre for international arbitration.
The Cayman Islands continues to demonstrate that it is a pro-arbitration jurisdiction.
The recent decision of the Grand Court of the Cayman Islands in BDO Cayman Ltd concerning Argyle Funds SPC Inc [2018 (1) CILR 114], in which the court restrained a party from continuing proceedings commenced in breach of an arbitration agreement, emphasises the willingness of Cayman Islands courts to accord primacy to arbitration agreements, and confirms the status of the Cayman Islands as a pro-arbitration jurisdiction. While the BDO decision has been successfully appealed in part (Argyle Funds SPC Inc (in Official Liquidation) v BDO Cayman Ltd, CICA (Civil) 8 of 2018, unreported, 8 October 2018), the appeal did not displace the Grand Court's core decision to enforce the arbitration agreement by way of an anti-suit injunction. The Grand Court's very recent decision in In re China CVS (Cayman Islands) Holding Corp (FSD 195 of 2018, Kawaley J, 25 February 2019, unreported) further reaffirms its readiness to give effect to arbitration clauses, even in the context of applications for winding up (see 3.2 Arbitrability, below).
On the enforcement side, the recent cases of In re China Healthcare Inc (FSD 120 of 2018, Kawaley J, 3 October 2018, unreported) and VRG Linhas Aereas S.A. v Matlin Patterson Global Opportunities Partners (Cayman) II L.P. & others (FSD 137 of 2016, Mangatal J, 19 February 2019, unreported) (see 12.3 Approach of the Courts, below) illustrate the Grand Court's considerable and continually growing expertise in matters regarding the recognition and enforcement of foreign arbitral awards. Most recently, on 29 May 2019, the Grand Court granted an application for the enforcement in the Cayman Islands of a USD1.5 billion arbitral award made by an ICC Arbitration Tribunal sitting in Minnesota, USA (Arcelormittal USA LLC v Essar Steel Limited and Others (Cause No. FSD 74 of 2019, Kawaley J, 2 July 2019, unreported)).
Further, as noted above, it is anticipated that 2019 will see the establishment of CIAC, which it is hoped will offer an attractive option for parties wishing to arbitrate in the Cayman Islands.
Cayman Islands arbitration clauses tend to be more common in service agreements involving financial institutions, professional service providers and funds, and in shareholder agreements.
For the time being, domestic arbitrations tend to be ad hoc. A variety of major arbitral institutions tend to be named in arbitration agreements with an overseas seat. However, the anticipated establishment of CIAC suggests that the Cayman Islands may have their own arbitral institution in the near future.
Arbitration proceedings commenced after 2 July 2012 that have their seat in the Cayman Islands (and the enforcement of awards made therein) are governed by the Law, which is based on the UNCITRAL Model Law and the English Arbitration Act 1996.
The enforcement of arbitral awards made by arbitral tribunals seated in other jurisdictions is governed by the Foreign Arbitral Awards Enforcement Law (1997 Revision) ("FAAEL"), in which the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") is given domestic effect.
There have been no changes to the Law or the FAAEL in the past year, and there is no relevant pending legislation.
Subject to certain limited exceptions, an arbitration agreement must be in writing and must be contained in a document signed by the parties or in an exchange of communications (s. 4 of the Law). The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Incorporation by reference to another document containing an arbitration clause is also possible.
It should also be borne in mind that if a party asserts the existence of an arbitration agreement in a pleading in any arbitral or legal proceedings in circumstances where such assertion calls for a reply, and the assertion is not denied, then there is deemed to be an arbitration agreement between the parties.
A model arbitration clause is offered in the Schedule to the Law, but its use is not mandatory.
The Law itself does not impose any express restrictions on the type of dispute that may be referred to arbitration, except to provide that a dispute may not be so referred if the agreement to arbitrate is contrary to public policy or if, under any other law of the Cayman Islands, the dispute is not capable of being resolved by arbitration (s. 26(1) of the Law). At the same time, s. 26(2) of the Law states that the mere fact that another law confers jurisdiction in respect of a matter on the court but does not refer to determination by arbitration does not mean that the dispute about the matter is incapable of determination by arbitration.
As such, the question of which matters may and may not be referred to arbitration is largely a matter of case law. In the area of insolvency law, the courts appear to be increasingly willing to give force to arbitration agreements, where appropriate. For example, in In Re Sphinx Group (CICA No. 6 of 2015, 2 February 2016), an issue arose in the context of liquidation as to whether a reserve created during the liquidation to meet claims for contingency fees by a US law firm should be released. The firm's engagement letter contained a New York arbitration clause. The court held that, because the need for a liquidation reserve depended on the strength of the claim, which was within the scope of the arbitration clause, the application to release the reserve itself had to be stayed in favour of arbitration, pursuant to s. 4 of the FAAEL.
In reaching this conclusion, the court cast doubt on the reasoning in the earlier case of Cybernaut Growth Fund, LP [2014 (2) CILR 413], in which the court refused to strike out or stay a winding-up petition brought on just and equitable grounds, despite the fund arguing that the dispute giving rise to the petition was subject to arbitration in New York. While Sphinx did not overrule Cybernaut, it may be seen as indicative of a greater willingness by the courts to give effect to arbitration clauses even against the background of insolvency proceedings. In a similar vein, in Re Times Property Holdings Ltd [2011 (1) CILR 223], the court stayed a creditor's winding-up petition pending arbitration of the alleged indebtedness in Hong Kong, which further demonstrates the Cayman Islands' pro-arbitration stance. This trend of the courts holding the parties to their arbitration agreements even in the context of winding-up proceedings has recently been continued by the decision in In re China CVS (Cayman Islands) Holding Corp (FSD 195 of 2018, Kawaley J, 25 February 2019, unreported), in which the Grand Court stayed a petition for the just and equitable winding up under s. 4 of the FAAEL in favour of arbitration of the underlying issues, pursuant to the arbitration clause in the relevant shareholders' agreement. While the decision acknowledges that the actual remedy of just and equitable winding up could only be granted by the court, it also demonstrates that the court is prepared to leave distinct arbitrable issues underpinning the application for such relief (particularly when alternative non-winding up relief is also sought) to the arbitral tribunal, in accordance with the relevant arbitration clause.
Separately, while there is no prohibition against referring disputes that involve allegations of fraud to arbitration, s. 74(2) of the Law gives the courts the discretion to revoke the authority of the arbitrator and to order that the agreement shall cease to have effect, so far as may be necessary to enable that question of fraud to be determined by the court.
The enforcement of arbitral awards is dealt with in more detail below, as is the enforcement of arbitration agreements by way of ancillary relief. As for the support given by the courts to the arbitral process in general, the Law is founded on the following key principles:
The invalidity of the contract containing the arbitration clause does not entail the invalidity of the arbitration clause (s. 4(6) of the Law). Indeed, a dispute about the validity of the substantive agreement may be arbitrated in accordance with the arbitration agreement (s. 4(7) of the Law), and an arbitration clause that forms part of a contract is treated as an agreement independent of the other terms of the contract (s. 27(2) of the Law). A decision by the arbitral tribunal that the contract is null and void does not entail the invalidity of the arbitration clause (s. 27(3) of the Law).
Pursuant to ss. 15(1) and 16(1) of the Law, the parties are free to choose any number of arbitrators, and to agree such procedure for the appointment of the panel, in accordance with any rules they may have chosen.
If the parties fail to agree the number of arbitrators, there shall be a single arbitrator (s. 15(2) of the Law). If the parties fail to agree the rules for appointing the tribunal, there is a default procedure that ultimately relies on the so-called 'appointing authority', being either the person or the authority chosen by the parties to appoint an arbitrator or, in default of such, a person or authority designated for this purpose by the court (ss. 16(2)-(5) of the Law). Currently, the Cayman Islands Association of Mediators and Arbitrators ("CIAMA") (http://ciama.ky/) will act as the appointing authority if the parties request it to do so.
The court does not have jurisdiction to intervene directly in the selection of arbitrators. However, if the parties have failed to agree on the 'appointing authority' and recourse to such becomes necessary due to the failure of the parties to select the arbitration panel, the court will have the jurisdiction to choose the identity of the 'appointing authority' (see the definition in s. 2(1) of the Law).
Unless there is a provision to the contrary in the arbitration agreement, the authority of the arbitrator is irrevocable, except by leave of the court (s. 17 of the Law). However, there are procedures for challenging or removing arbitrators.
An arbitrator may only be challenged if there are justifiable doubts as to his or her impartiality or independence, or if he or she does not possess the qualifications agreed by the parties (s. 18(3) of the Law). The parties are free to agree on the procedure for challenging an arbitrator (s. 19(1) of the Law). If no procedure is agreed, the deadline for making the challenge shall be 15 days from the constitution of the tribunal or upon becoming aware of any of the grounds for challenge, whichever is later. In either case, the challenge is decided by the tribunal itself in the first instance. If the challenge fails, the aggrieved party can apply to the court within 30 days (s. 19(4) of the Law). A challenge does not suspend the arbitration proceedings, nor prevent the tribunal from making an award while the challenge is being decided (s. 19(6) of the Law).
An arbitrator may be removed if he or she is physically or mentally incapable of conducting the proceedings (or if there are justifiable doubts as to his or her capacity), or if he or she has refused or failed to properly conduct the proceedings or to use all reasonable dispatch in doing so. In all cases, removal can only take place where substantial injustice has been or will be done to the party applying (s. 20(1) of the Law).
The power of removal is vested in the court, except where the parties have vested some other person with this power (s. 20 of the Law). The fact that an application for the removal of an arbitrator is pending does not prevent the arbitrator concerned from continuing the proceedings and making an award.
In addition, the parties can terminate an arbitrator's office by agreement (s. 22(1)(d) of the Law).
An arbitrator has a duty to disclose to the parties (or the appointing authority) any circumstances that might reasonably compromise his or her impartiality or independence (s. 18(1) of the Law). This is a continuing duty (s. 18(2) of the Law).
An arbitrator is not liable for any consequences resulting from their negligence or mistake of law, fact or procedure, but will be so liable if they acted in bad faith (s. 25 of the Law).
See 3.2 Arbitrability, above.
The arbitral tribunal is competent to rule on a challenge to its jurisdiction (s. 27 of the Law). Objection to jurisdiction should be made no later than the submission of the statement of defence.
The arbitral tribunal is free to rule on a jurisdictional objection, either as a preliminary question or in the award on the merits. If it rules on jurisdiction as a preliminary question, a party – if it accepts jurisdiction – has 30 days after receiving notice of that ruling to apply to the court to decide the matter (s. 27(9) of the Law).
If the arbitral tribunal affirms jurisdiction in its final award on the merits, then the procedures for appeal or setting aside the award detailed below are open to the parties.
As set out above, the tribunal is the arbiter of its own jurisdiction in the first instance. Reference to court may only be made once the tribunal has ruled on its own jurisdiction, whether by way of a preliminary ruling or as part of the final award on the merits.
The Law does not specify whether the court conducts a review or a rehearing as part of a jurisdictional challenge. However, the Supreme Court in the UK has determined that an appeal against the tribunal decision on jurisdiction takes the form of a rehearing (Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan  1 AC 763), and this decision will be highly persuasive in the Cayman Islands.
The courts shall grant a stay of any court proceedings commenced in breach of a domestic arbitration agreement, unless they are satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed (s. 9 of the Law). However, a party's right to obtain this relief is lost if it takes steps to answer the substantive claim in the court proceedings.
A similar entitlement to a stay of court proceedings is also contained in s. 4 of the FAAEL, and operates in aid of foreign arbitral proceedings. In the past, the Grand Court has stayed Cayman Islands court proceedings in aid of foreign arbitrations under s. 4 of the FAAEL (see I.N.E.C. Engineering Company Limited v Ramoil Holding Company Limited [1997 CILR 230] and Bankamerica Trust And Banking Corporation (Cayman) Limited v Trans-World Telecom Holdings Limited [1999 CILR 110]).
In general, Cayman Islands law recognises privity of contract and the concept of separate corporate identity. In particular, the 'group enterprise' doctrine is not the law of the Cayman Islands, and in the past the Grand Court has curtailed an attempt by a party to an arbitration agreement to force the other party to the arbitration into arbitration proceedings (Unilever Plc v ABC International [2008 CILR 87]). Furthermore, in the recent decision in VRG Linhas Aereas S.A. v Matlin Patterson Global Opportunities Partners (Cayman) II L.P. & others (FSD 137 of 2016, Mangatal J, 19 February 2019, unreported), the Grand Court set aside an order enforcing a foreign arbitral award due, in part, to the fact that the fund was not party to the arbitration agreement in question.
There are some circumstances in which the position of the non-parties and non-signatories may be more complex, such as the existence of relationships of agency, succession, novation, assignment, piercing the corporate veil, or the existence of third party direct rights of enforcement under the Contracts (Rights of Third Parties) Law, 2014, but the analysis of such issues is beyond the scope of this article. Of note, however, is s. 7 of the Law, which provides that an arbitration agreement entered into by a body corporate remains enforceable against the liquidator, receiver or administrator of that body.
As noted above, an arbitral tribunal may render a preliminary ruling on jurisdiction, thereby potentially terminating an arbitration before consideration of the merits. In addition, Part VIII of the Law contains powers for the arbitral tribunal to order interim measures and make preliminary orders on an ex parte basis.
In particular, under s. 44 of the Law and unless agreed otherwise by the parties, the arbitral tribunal may, at any time prior to the issue of a final award and at the request of a party, grant an interim measure ordering the party to:
A party seeking one of these orders must satisfy the tribunal that damages would not be an adequate remedy for the harm it would suffer if the measure is not ordered, that the harm it would suffer if the measure is not ordered substantially outweighs the harm that the other party would suffer if the measure is granted, and that there is a reasonable possibility that it will succeed on the merits.
The tribunal may require the party applying for an interim measure to provide appropriate security in connection with the measure (s. 49(1) of the Law).
Unless otherwise agreed, an application for an interim measure under s. 44 of the Law may be made ex parte and be accompanied by a request for a preliminary order directing a party not to frustrate the purpose of the interim measure (s. 46 of the Law). The tribunal may grant such an application if it considers that putting the other party on notice of the request for the interim measure may frustrate the purpose of the measure.
A party applying for a preliminary order comes under a continuing duty of full and frank disclosure until such time as the opposing party has an opportunity to present its case (s. 50 of the Law), and shall be required to provide security, unless the tribunal considers it unnecessary or inappropriate to do so (s. 49(2) of the Law).
A party requesting an interim measure or applying for a preliminary order shall be liable for any costs and damages caused by it to any party if the arbitral tribunal later determines that the measure or order should not have been granted (s. 51 of the Law).
Unless otherwise provided by the arbitral tribunal, an interim measure is enforceable upon application to the court (s. 52(1) of the Law).
In addition, the court has its own, free-standing jurisdiction to order the same interim measures in relation to arbitration proceedings, irrespective of the location of the seat of arbitration, as it has in relation to the proceedings in court (s. 54 of the Law). However, in general, the court will only be willing to exercise these powers if the tribunal is unable to do so itself.
Unless otherwise agreed by the parties, an arbitral tribunal has the power to order the payment of security for costs (s. 38(2)(a) of the Law). However, this power is not to be exercised by reason only that the claimant is an individual ordinarily resident outside the Cayman Islands or a corporation formed outside the Cayman Islands but whose central management and control is located there.
The parties have wide discretion to agree on the rules to be followed by the arbitral tribunal in conducting proceedings; failing such agreement, the arbitral tribunal has wide discretion to conduct proceedings in such manner as it considers appropriate (s. 29 of the Law). However, Part VII of the Law contains certain basic provisions governing the procedural aspects of an arbitration in default of agreement or determination.
In general, the procedural steps are to be agreed by the parties or determined by the tribunal. However, Part VII of the Law provides for some basic elements of procedure that apply in default of agreement.
Unless there is agreement to the contrary, and in each case within the time periods agreed or ordered by the tribunal, a claimant is required to state the facts supporting his claim, the points in issue, and the relief or remedy sought, and the defendant is required to state his defence (s. 32 of the Law). Unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold hearings at appropriate stages of proceedings, upon the request of a party (s. 33 of the Law). Unless otherwise agreed in writing by the parties, an arbitral tribunal shall not be bound by rules of evidence but may inform itself in relation to any matter it deems appropriate (s. 33 of the Law). The arbitral tribunal may appoint one or more experts to report to it on specific issues (s. 37 of the Law).
The Law requires the arbitral tribunal to act fairly and impartially, to allow each party a reasonable opportunity to present his case, and to conduct the arbitration without unnecessary delay, and without incurring unnecessary expense (s. 28 of the Law). The Law also imposes the duties of disclosure on the arbitrators, as discussed above.
The powers of the arbitrators are largely up to the parties to define, whether by specific agreement or by adoption of the procedural rules of a particular arbitral institution. However, in default of such agreement or adoption, the arbitrators do have a number of powers, including to order security for costs, to order discovery of documents and interrogatories, to direct the giving of evidence by affidavit, to order a party or witness to be examined on oath or affirmation, to direct the preservation and interim custody of any evidence, to order samples to be taken or observations to be made or experiments to be conducted upon any property that is the subject matter of the dispute, and to direct the preservation, interim custody, or sale of any property that forms part of the subject matter of the dispute (s. 38 of the Law). All orders and directions given by the arbitral tribunal shall, with leave of the court, be enforceable in the same way as a court order, and judgment may be entered in the terms of such order or direction.
Similarly, while it is up to the parties to agree on the powers that the tribunal may exercise in the case of a party's default in the conduct of the proceedings, the Law confers certain powers on the tribunal in the absence of any agreement to the contrary by the parties. Specifically, s. 39 of the Law gives the arbitrators the power to terminate the proceedings for the claimant's failure to provide a statement of claim or for other inordinate delay in prosecuting the claim, in certain circumstances, and to continue proceedings and make an award despite the failure of a party to appear or produce documentary evidence.
Unless otherwise agreed by the parties, there are no particular qualifications or other requirements for the parties' representatives in the arbitral proceedings. A party may be represented by an attorney-at-law qualified to practise in the Cayman Islands, by a legal practitioner qualified to practise in another jurisdiction, or, indeed, by any other person (s. 34 of the Law). However, a work permit is required to work in the Cayman Islands.
As set out above, the parties are generally free to agree the procedure for the conduct of the arbitration; in default of such agreement, the tribunal has wide discretion to make directions as it deems appropriate. As such, there is no prescribed approach to evidence, and the tribunal is free to determine matters such as the admissibility, relevance, materiality and weight of any evidence, as well as the times at which it should be submitted and the manner in which this should be done.
The Grand Court upholds this principle. For example, in Appalachian Reinsurance (Bermuda) Ltd v Mangino [2014 (1) CILR 152] the Grand Court found that an arbitral tribunal's decision to render summary judgment without an oral hearing was lawful in light of, among other things, the parties' agreement that the tribunal was not required to follow judicial formalities or rules of evidence.
No specific rules of evidence apply to arbitral proceedings in the Cayman Islands. Indeed, pursuant to s. 33(6) of the Law, unless otherwise agreed by the parties in writing, an arbitral tribunal is not bound by rules of evidence but may inform itself in relation to any matter as it deems appropriate.
However, in general, one might reasonably expect an arbitral tribunal in the Cayman Islands to have regard to the International Bar Association Rules on the Taking of Evidence in International Arbitration.
A person who willfully or corruptly gives false evidence before an arbitral tribunal is guilty of perjury, as if the evidence had been given in court, and may be prosecuted and punished accordingly (s. 42 of the Law).
Unless otherwise agreed by the parties, the arbitral tribunal has the power to order discovery of documents and to direct a party or witness to be examined on oath or affirmation (s. 38 of the Law).
These powers of the tribunal are augmented by the ability of the parties to have recourse to the courts, in certain circumstances. Pursuant to s. 40 of the Law, a party may apply to the court to compel a witness to attend before an arbitral tribunal and give evidence and/or produce specific documents, but this power cannot be used to compel a person to produce a document that they could not be compelled to produce in court proceedings. Unless there is a contrary intention in the arbitration agreement, if a person fails to comply with a subpoena to attend before the arbitral tribunal (or with an order of the tribunal to do so) or if, having attended, the witness fails to answer questions or produce documents, any party to the arbitration agreement (or the arbitrator) may apply to the court for an order for the person in default to attend for examination before or produce the relevant document to the court (s. 41 of the Law). The powers of compulsion available to the court under ss. 40 and 41 are available against both parties and non-parties.
Pursuant to s. 81 of the Law, arbitral proceedings are private and confidential. The disclosure of confidential information relating to the arbitration is actionable as a breach of an obligation of confidence, except where it is authorised by the parties and in certain other limited circumstances. As such, the default position is that all aspects of the arbitration are confidential.
However, to the extent that proceedings have to be taken under the Law in court, either to procure the attendance of witnesses and the production of documents, to secure interim relief, or to enforce the ultimate award, the default position is that such proceedings shall take place in open court, unless a party applies for them to be heard in private (s. 83 of the Law). As such, a party seeking recourse to the courts should take care, and take steps to preserve the confidentiality of proceedings if desired.
In principle, the courts are prepared to grant sealing orders in appropriate cases, as demonstrated by the decision of the Cayman Islands Court of Appeal in Sasken Communication Technologies Limited v Spreadtrum Communications Incorporated [2016 (1) CILR 1], by which the court ordered that certain documents on the court file of the earlier application to enforce an arbitration award should be sealed so that no third party could inspect them without leave of the court and notice being given to the parties.
The legal requirements for an arbitral award are stipulated in s. 63 of the Law. The arbitral award must be in writing and must be signed by all the arbitrators or by the majority, if the reason for any omitted signatures is stated. Unless the parties have agreed otherwise, or the award is on agreed terms, the award must state the reasons upon which it is based. The award must state its date and the seat of the arbitration, and will be deemed to have been made there. A copy of the award signed by the arbitrators must be delivered to each party.
Once the award is rendered, the parties may sometimes have an opportunity to invite the tribunal to make corrections to it. In respect of typographical, clerical and arithmetical errors, a party has 30 days from receipt of the award to invite the tribunal (on notice to the other parties) to make appropriate corrections. Within the same time period, a party may ask the arbitral tribunal to give an interpretation of a specific point or part of the award, with the agreement of the other parties. More substantively, within 30 days of the receipt of the award and on notice to the other party, a party may request the arbitral tribunal to make an additional award as to claims presented during the arbitration proceedings but omitted from the award (s. 69 of the Law).
Generally, unless the contrary is provided in the arbitration agreement, there is no time limit within which the tribunal must render its award (s. 59 of the Law). If such a time limit is imposed, the court may extend it, unless otherwise agreed by the parties.
It is worth bearing in mind that, because the arbitral tribunal is a creature of contract, it unsurprisingly has certain powers to help it ensure that its fees are paid. In particular, unless agreed otherwise by the parties, the arbitral tribunal may refuse to deliver an award to the parties if the parties have not paid the fees and expenses of the arbitrators in full (s. 67 of the Law).
There is a rebuttable presumption that the tribunal is entitled to make interim awards, if it deems it appropriate (s. 62 of the Law).
Pursuant to s. 57(2) of the Law, unless agreed otherwise by the parties, the arbitral tribunal may award any remedy or relief that could have been ordered by the court if the dispute had been the subject of civil proceedings in that court. This means that the tribunal is generally competent to award pecuniary damages, declarations, injunctions, orders for specific performance, and other remedies that a Cayman Islands court can award.
Punitive damages are not available in the Cayman Islands courts and so, without the parties' agreement on the issue, an arbitral tribunal would not be able to order punitive damages.
Unless otherwise agreed, the costs of the arbitration are at the discretion of the arbitral tribunal (s. 64 of the Law). Unless costs are determined in the award itself, any party may make an application to the tribunal for a direction as to costs within 14 days of the delivery of the award.
The tribunal has power to award interest on any amount the award orders to be paid, with the rate of interest and the period for which it runs being at the discretion of the tribunal. If no rate of interest is specified in the award, it will carry the same rate of interest as a judgment debt awarded by the court (s. 58 of the Law).
While arbitration awards tend to be private (see above), anecdotal evidence suggests that the usual approach is for costs to follow the event, meaning that the losing party pays the winning party's costs.
With the leave of court, and upon notice to the other party and the arbitral tribunal, a party to the arbitration may appeal to the court on a question of law arising out of an award made in the arbitration (s. 76(1) of the Law). An application for leave to appeal must identify the question of law to be determined and state the grounds on which leave to appeal should be granted. Leave to appeal shall be given only on the following grounds:
At the end of the appeal process, the court may: (i) confirm the award; (ii) vary the award; (iii) remit the award to the arbitral tribunal for reconsideration in whole or in part; or (iv) set aside the award in whole or in part. If the award is remitted back to the tribunal, it shall make its award within three months of the date of the order, unless the court directs otherwise.
Separate from the right of appeal under s. 76 of the Law, the court also has the power to set aside an award under s. 75 of the Law, in the following circumstances:
Furthermore, the award may be set aside if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the Law, or if the award is contrary to public policy.
Where appropriate and where a party so requests, proceedings to set aside an award may be suspended to allow the arbitral tribunal to resume the arbitration or take such other action as may eliminate the grounds for setting aside an award (s. 75(3) of the Law).
Whether the award is challenged by way of an application to set it aside under s. 75 or by way of appeal under s. 76, the procedural requirements in s. 77 of the Law apply. First, neither application may be brought until every available recourse within the arbitral process itself has been exhausted. Second, whichever route is pursued, the application or appeal must be brought within one month of the date of the award. Security for costs may be ordered.
The parties may agree to exclude the right to appeal (s. 76(2) of the Law). However, there is no scope for excluding the right to set aside the award.
The Law is silent on the question of expanding the scope of appeal or challenge, but since any appeal or challenge invokes the statutory jurisdiction of the court as opposed to the consensual and contractual jurisdiction of the arbitral tribunal, it must be the case that the scope of appeal cannot be expanded by agreement.
Appeals under s. 76 of the Law are concerned with examining decisions on questions of law only; the section gives no scope to appeal findings of fact.
Broadly speaking, the grounds for setting aside under s. 75 of the Law go to the jurisdictional competence and procedural integrity of an award, and would not necessarily have to involve a de novo examination of all the circumstances of the case.
The enforcement of domestic arbitration awards is governed by the Law.
As regards the enforcement of foreign arbitration awards, the operation of the New York Convention has been extended to the Cayman Islands by the United Kingdom by way of a notification made on 26 November 1980. The notification contained the reservation that, in the Cayman Islands, the New York Convention would apply "only to the recognition and enforcement of awards made in the territory of another Contracting State." The New York Convention is given domestic effect by the FAAEL.
With regard to awards made in investor-state arbitrations, pursuant to the Arbitration (International Investment Disputes) Act 1966 (Application To Colonies Etc.) Order 1967, the United Kingdom extended certain provisions of the Arbitration (International Investment Disputes) Act 1966 ("Act") to the Cayman Islands and, thereby, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which was opened for signature in Washington on 18 March 1965 ("Washington Convention").
A domestic arbitration award is enforced under the Law, pursuant to s. 72 of which an award may, with leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect, and judgment may be entered in terms of the award.
A foreign arbitration award is enforced under s. 5 of the FAAEL. Enforcement may be refused on the grounds set out in s. 7 of the FAAEL, which match the grounds for refusal of enforcement set out in the New York Convention itself.
Whether in the case of a domestic arbitration award enforceable under the Law or a foreign arbitration award enforceable under the FAAEL, the application for leave to enforce is made by ex parte originating summons under GCR Order 73 Rule 31. Once the resulting enforcement order is served on the respondent, it will have 14 days (or such longer period as the court may fix if the respondent is outside the Cayman Islands) to apply to set aside the enforcement order. The award shall not be enforced until the expiration of that period or, if an application to set aside is made, until after the application is finally disposed of.
In the case of an award under the Washington Convention, the effect of s. 2 of the Act is that an award that has been registered in accordance with s. 1 of the Act is of the same force as a judgment of the Grand Court. The procedure for registering a Washington Convention award is set out in GCR Order 73 Rule 34. The application is made by an originating summons, and notice of registration must be served (an affidavit of service of such notice will be required before execution can be issued on the award) (GCR Order 73 Rule 34(2) and GCR Order 71 Rules 7 and 10(3)). Unlike with awards enforceable under the Law or under the FAAEL, there is no provision for setting aside an award under the Washington Convention. However, in certain limited circumstances, the court may stay the execution of an award under the Washington Convention (GCR Order 73 Rule 34(6)).
The enforcement mechanism for domestic and foreign arbitration awards under the Law, the FAAEL and the procedural provisions of GCR Order 73 Rule 31 is well trodden, and the courts generally deal with such applications in an expeditious and efficient manner. The courts also have experience in dealing with set-aside applications. An award being contrary to public policy is one of the grounds for setting aside a domestic award (s. 75(1)(b)(ii) of the Law) and also for refusing leave to enforce a foreign award (s. 7(3) of the FAAEL).
The Grand Court is robust in enforcing (or permitting recognition of) foreign arbitral awards, where appropriate. A recent example of successful enforcement is the case of In re China Healthcare Inc (FSD 120 of 2018, Kawaley J, 3 October 2018, unreported), where the Grand Court allowed a petitioner to rely on a Hong Kong arbitral award to wind up a company despite the fact that the award was subject to a set-aside application in Hong Kong. In reaching its decision, the Grand Court was assisted by and made observations on the similarities between the relevant provisions of the FAAEL and the Hong Kong statutes governing the setting aside of arbitral awards, deriving as they both did from the New York Convention and the UNCITRAL Model Law. This fact allowed the Grand Court to view the relevant decisions of the Hong Kong courts as persuasive, and is an intriguing example of the sort of cross-jurisdictional consistency that is made possible by the fact that the relevant national laws have a common root in international instruments. The judgment also reiterated the two key pro-arbitration principles adopted by the Cayman Courts: ensuring that arbitration agreements are honoured by enforcing agreements to arbitrate, and enforcing arbitration awards after arbitral disputes have been adjudicated by the contractually agreed tribunal.
At the same time, the Grand Court is astute in exercising its limited discretion to refuse enforcement where the award offends the fundamental principles established by the New York Convention. The case of VRG Linhas Aereas S.A. v Matlin Patterson Global Opportunities Partners (Cayman) II L.P. & others (FSD 137 of 2016, Mangatal J, 19 February 2019, unreported) is a recent example of the Grand Court enforcing those principles. In VRG, the Grand Court refused to enforce an award obtained in an ICC arbitration in Brazil in circumstances where the defendants were not parties to the arbitration agreement, and findings of liability were made on grounds that had not been pleaded or argued in the arbitration. As such, not only did the award violate the principles established by the New York Convention, but it was also contrary to the public policy of the Cayman Islands, which provides a right for each party to be heard. It is understood that this decision is subject to an appeal.
In relation to awards under the Washington Convention, it is important to bear in mind that, while the award itself – once recognised – is enforceable as if it were a final judgment of the Grand Court, enforcement of the award remains subject to Cayman Islands law on sovereign immunity, by virtue of Article 55 of the Washington Convention.
In general, even in the context of litigation, the Cayman Islands do not have the concept of 'class action' as it is commonly understood in jurisdictions such as the United States. That being said, in principle, it is possible in the litigation setting for a single plaintiff to bring so-called 'representative proceedings' on behalf of a group of plaintiffs with the same interests. However, historically, this has been rare in non-insolvency litigation.
As for arbitration, the Law does not make any express provision for class action or group arbitration. The Law also prevents an arbitral tribunal from consolidating arbitral proceedings or hearing them concurrently without the parties' consent (see 13.4 Consolidation, below). In the circumstances, and given that there are no class action or group arbitrations seated in the Cayman Islands, as far as is known, such proceedings might only be possible if they are specifically provided for in the relevant arbitration agreement between all the relevant parties.
The Cayman Islands Legal Practitioners Association ("CILPA") has promulgated a voluntary code of conduct for Cayman Islands attorneys-at-law ("Code of Conduct"). The Code of Conduct makes no differentiation between litigation and arbitration. Rule 1.10 of the Code of Conduct requires Cayman Islands attorneys-at-law to have regard to the provisions of the International Principles on Conduct for the Legal Profession promoted by the International Bar Association ("IBA Code"). However, where the IBA Code and the Code of Conduct conflict, the Code of Conduct prevails.
Ultimately, all counsel who are attorneys-at-law admitted to practice in the Cayman Islands are subject to the disciplinary jurisdiction of the Grand Court. Pursuant to s. 7(1) of the Legal Practitioners Law (2015 Revision) ("LPL"), a judge of the Grand Court has the power, for reasonable cause shown, to suspend any attorney-at-law from practising for a specified period, or to strike his name off the Court Roll. While it is not necessary to be a Cayman Islands-admitted attorney-at-law in order to represent a party in an arbitration seated in the Cayman Islands (s. 34 of the Law), the potential sanction under s. 7 of the LPL is clearly formidable from the point of view of a local attorney.
No domestic code of conduct applies to foreign attorneys (or non-lawyers) conducting arbitration proceedings in the Cayman Islands. However, foreign attorneys might be expected to be subject to their own domestic ethical codes.
The climate for third-party funding in the Cayman Islands has improved in recent years.
Until recently, the settled understanding was that third-party litigation funding could only be utilised, with the sanction of the Court, by liquidators in insolvency situations. This was due to the fact that, in solvent situations, such funding was typically understood to offend against the common law doctrines of maintenance and champerty (essentially, funding litigation for commercial gain).
However, in Company v A Funder [2017 (2) CILR 710], the Grand Court issued a declaration in relation to a proposed funding agreement intended to fund the enforcement of an overseas arbitral award in the Cayman Islands that the funding agreement in question was not unlawful, despite the fact that the statement that the object of the proposed funding was solvent was uncontested. The decision also set out a useful list of factors (which are essentially the same as under English common law) that the court would consider when evaluating such funding agreements.
The industry can derive further comfort from the subsequent judgment of the Grand Court in Trustee v The Funder (Cause No. 98 of 2018, 26 July 2018, Segal J, unreported), in which, having evaluated a proposed third-party funding agreement against the factors set out in Company v A Funder, the court declared lawful a third-party funding agreement intended to fund the defence by the Trustee of Cayman proceedings relating to the assets of the Trust.
While neither of these decisions concerned third-party funding of Cayman arbitration per se, it is likely that the Grand Court would follow the English decision of Bevan Ashford v Geoffrey Yeandle  2 Ch 239, which ruled that the doctrines of maintenance and champerty also apply to arbitration proceedings. As such, the principles applied in Company v A Funder and in Trustee v The Funder permitting a third-party funding arrangement in the context of litigation should be equally applicable in an arbitration.
It should be noted that both decisions were uncontested, so this development awaits its first test in a fully adversarial setting. Nevertheless, these recent decisions of the Grand Court strongly suggest that, subject to the same considerations as apply under English law, third-party funding arrangements would be allowed to stand in the context of an arbitration.
The arbitral tribunal may only consolidate arbitral proceedings or hold concurrent hearings in two or more arbitral proceedings if and to the extent the parties to the relevant arbitration agreements have agreed to this (s. 36 of the Law). Without such agreement, the arbitral tribunal has no power to consolidate or to hold concurrent hearings.
See 5.7 Third Parties, above.