In Cayman Islands litigation, there is no general obligation upon a party to disclose their asset position, and publicly available information is limited.
There are central ownership registers for land, ships, aircraft and motor vehicles, but not for other types of movable or immovable property. Information contained in company share registers, and in the newly introduced beneficial ownership register, is not publicly available.
However, the Cayman Islands courts will, in appropriate cases, make asset disclosure orders in support of freezing injunctions. Likewise, there is a well-established and flexible jurisdiction to grant Norwich Pharmacal and Bankers Trust relief in order to obtain information from an innocent party who has become "mixed up" in wrongdoing. The respondents to such applications in the Cayman Islands are typically banks and corporate services providers.
Once a judgment has been obtained, it is possible to examine the judgment debtor as to their assets, as discussed in 2.4 Post-judgment Procedures for Determining Defendants' Assets.
A wide range of judgments and orders are available in the Cayman Islands, reflecting the diverse range of international and domestic cases before the courts.
Judgments may be obtained by default (if, for example, a defendant fails to respond to a summons), summarily (that is, without a trial) or following a contested trial.
The available juridical remedies broadly correspond to those available in England and Wales, and include the following.
To place this in context, the litigation landscape includes major substantive claims pursued by writ action in the specialist Financial Services Division of the Grand Court and the Cayman Islands Court of Appeal. For example, in recent years the Cayman Islands courts have heard an approximately USD2 billion claim brought by a Madoff feeder fund against its custodian/administrator (the Primeo litigation) and an approximately USD9 billion fraud claim involving a series of Cayman Islands companies connected to Saudi Arabia (the Saad litigation).
The Financial Services Division also hears all insolvency proceedings in respect of Cayman Islands companies and exempted limited partnerships, which are typically investment vehicles for hedge fund and private equity structures. The primary available relief is a winding-up order placing a company into official liquidation and appointing liquidators (although, if the grounds for a just and equitable winding-up are established, the court may, in its discretion, grant alternative remedies). If the company is wound up, the company’s liquidation will be supervised by the court, which will, for example, determine applications brought by the liquidators for sanction to exercise certain powers, such as their power of sale of the company’s assets.
The Cayman Islands also has a well-developed provisional liquidation regime, which provides a means for a distressed company to seek protection from creditor claims while court-appointed provisional liquidators promote (or supervise the directors in promoting) a compromise or arrangement with creditors.
Another notable stream of Cayman Islands litigation concerns the statutory merger regime, pursuant to Section 238 of the Companies Act. In summary, this regime permits a dissenting shareholder to seek "fair value" for its shares rather than receive the price otherwise payable under the merger agreement. Such litigation is heavily contested, involving expert evidence as to the value of the shares in question, and it will result in a judgment according to the court’s findings about the fair value of those shares.
The courts also have a jurisdiction to grant a variety of free-standing interlocutory relief in certain cases, such as freezing orders in aid of foreign proceedings and anti-suit injunctions to restrain foreign proceedings brought vexatiously or in breach of contract.
Finally, the courts will determine the costs of the proceedings, generally on the basis that the loser shall pay the winner’s costs. Costs are taxed (assessed), if not agreed, following the conclusion of the proceedings.
A Cayman Islands judgment may be enforced within the jurisdiction by various means, having regard to the nature of the judgment and relief. Domestic judgments are enforceable in the Cayman Islands within six years of their delivery.
A judgment for the payment of money may be enforced by:
Failure to satisfy a money judgment also provides grounds for the judgment creditor to bring insolvency proceedings against the judgment debtor.
A judgment for the possession of land or the delivery of goods may be enforced by a writ of possession or delivery of goods, an order for committal and/or a writ of sequestration.
A judgment requiring a person to perform or refrain from performing any act may ultimately be enforced by a writ of sequestration, including against the property of any director or other officer of a corporate judgment debtor. Committal for contempt is also possible, including against any such officer. The court also has the power to make a further order requiring the act to be done within another specified period of time or by another person at the expense of the disobedient party.
The required procedure, stipulated in the Grand Court Rules (GCR), will depend upon the chosen method of execution, as summarised below.
General – writ of execution
The procedure for issuing a writ of execution (defined as a writ of fieri facias, a writ of possession, a writ of delivery, a writ of sequestration or a writ in aid of any other such writ) is given in GCR Order 46. Save in certain circumstances, a writ of execution may be issued without the leave of the court. However, where an application for leave to issue a writ of execution is required, it may be made ex parte unless the court directs that it be made by summons (and save for an application for leave to issue a writ of sequestration, which must be made by motion to a judge, and served personally upon the person against whose property is the subject of the writ).
Any such application must be supported by an affidavit that identifies the judgment and provides various other information. The judge hearing the application may grant or refuse leave or, if necessary, may first order that any issue or question be tried. Where the application is for leave to issue a writ of sequestration, the judge may sit in private in any case in which, if the application were for an order for committal, they would be entitled to do so (ie, certain matters involving children, mental health, secrecy or national security, etc), though it shall otherwise be heard in open court.
As a formality, before a writ is issued, a praecipe for its issue (ie, a document signed by the person entitled to execution or, if represented, their attorney) must be filed.
Once issued, a writ of execution is valid for 12 months – a period which may be extended by the court from time to time, if an application for extension is made before the writ expires.
Any party at whose instance a writ of execution has been issued may serve a notice on the bailiff to whom the writ was directed requiring them, within the time specified in the notice, to indorse on the writ a statement of the manner in which they have executed it, and to send that party a copy of the statement. If the bailiff fails to do so, the judgment creditor may seek an order requiring them to comply with the notice.
A garnishee is a person who is indebted to the judgment debtor, and who is therefore a person against whom execution may be sought provided the judgment is not for the payment of money into court.
The procedure for garnishee proceedings is given in GCR Order 49. In summary, an application must be made ex parte supported by an affidavit stating the name and last known address of the judgment debtor, identifying the judgment and stating the amount remaining unpaid, and stating that to the best of the deponent’s information or belief (giving sources of that information or grounds for the belief), the garnishee (naming them) is within the jurisdiction and is indebted to the judgment debtor.
An order made pursuant to GCR Order 49 rule 1 shall in the first instance be an order to show cause, specifying the time and place for further consideration of the matter, etc. Unless the court otherwise directs, such an order must be served on the garnishee personally at least 14 days before the hearing date, and on the judgment debtor at least seven days after the order has been served on the garnishee and at least seven days before the hearing date. Such an order shall “bind in the hands of the garnishee as from the service of the order on him [or her] any debt specified in the order so much thereof as may be so specified”.
If the garnishee does not attend the hearing, or does not dispute the debt claimed to be due from them to the judgment debtor, the court may make the garnishee order absolute. Any such order may then be enforced in the same manner as any other order for the payment of money.
If the garnishee disputes liability to pay the debt claimed to be due from them to the judgment debtor, the court may summarily determine that question, or order that it be tried. Likewise, the court may determine or try any question as to whether the garnishee’s debt is payable to a person other than the judgment debtor.
As to costs of the garnishee proceedings, the judgment creditor shall ordinarily be entitled to retain such sums out of the money recovered by them under the order and in priority to the judgment debt.
Charging orders, stop orders, etc
The procedure governing charging and stop orders is given in GCR Order 50. In summary, an application by a judgment creditor for a charging order in respect of a judgment debtor’s beneficial interest in any property shall be made by an ex parte originating motion to show cause, specifying the time and place for further consideration of the matter and imposing the charge in any event until that time. Once again, a supporting affidavit is required to contain certain information.
If the order is granted, it must be served, together with the supporting affidavit, on the judgment debtor. Where the order relates to securities (other than securities held in court), it must also be served upon the corporate entity concerned (and, in the case of securities issued by or on behalf of the Cayman Islands government, it must be served upon the Financial Secretary and the stock transfer agent, if any). Where the order relates to a fund in court, a copy shall be served on the Accountant General at the Court Funds Office. Where the order concerns an interest under a trust (not being a registered mutual fund), the court may direct that it be served upon the trustees. Such service (and any additional service directed by the court) must be effected at least seven days before the hearing date.
Upon further consideration of the matter, the court shall either make the order, with or without modifications, or discharge it. In the recent case of Top Jet Enterprises Limited v Sino Jet Holding Limited & Others (unreported judgment of Segal J dated 3 August 2021), the Grand Court decided to make an order for the sale of charged property being shares in a private company, and gave directions accordingly.
If a charging order is made over an interest in land, it shall be registered in the encumbrances section of the relevant land register. Once any such order is made absolute, the judgment creditor may exercise their power of sale to sell the property by public auction in accordance with Section 75 of the Registered Land Act without applying to the court for an order for sale and without giving any notice in accordance with Section 72 of the Registered Land Act.
There are also specific procedural rules with respect to stop orders, the purpose of which is to prevent transfers in securities.
Attachment of earnings
Applications for an attachment of earnings order are made under GCR Order 50A. Such applications tend to be more straightforward than certain other methods of enforcement. In summary, the application shall be supported by an affidavit identifying the judgment or order in respect of which the attachment of earnings order is sought, verifying the amount due and stating whether a writ of execution has been issued. The application must be served on the debtor, giving them eight days to file a statement of means.
On receipt of the debtor’s reply, the judge may make an attachment of earnings order. The judge may also make a consolidated attachment order where the judgment debtor owes multiple judgment debts.
Equitable execution – the appointment of a receiver
GCR Order 51 rule 1 provides that where an application is made for the appointment of a receiver by way of equitable execution, the court, in determining whether it is just and equitable to do so, shall have regard to the amount claimed by the judgment creditor, to the likely amount to be obtained by the receiver and to the probable costs of their appointment. The court may direct an inquiry into any of these matters or any other matter before making the appointment.
GCR Order 51 rule 3 provides that any such application shall be made in accordance with GCR Order 30 rule 1 and that rules 2 to 6 of that Order shall apply as they would in relation to a receiver appointed for any other purpose. In summary, GCR Order 30 rule 1 provides that an application for the appointment of a receiver may be made by summons or motion, and it may be made in conjunction with an application for an injunction.
If any such application for an injunction is made ex parte, the court may grant the relief sought, pending a return date hearing. GCR Order 30 rules 2 to 6 provide, in summary, that a receiver may be required to give security, that they shall be allowed such proper remuneration as may be authorised by the court, that service of the order or judgment appointing the receiver must be made on the receiver and all other parties, that the receiver shall submit accounts to the court, and that the court may fix the amounts and frequency of payments into court to be made by the receiver.
Sequestration and committal for contempt
Since enforcement via sequestration and/or committal for contempt is very rare, the detailed procedures are beyond the scope of this chapter.
The costs and time taken to enforce a domestic judgment will depend upon factors such as the complexity of the case, the nature of the assets that are sought to be enforced against, and the degree of resistance from the judgment debtor (see 2.6 Unenforceable Domestic Judgments).
A simple enforcement action in respect of a money judgment against a natural person might be completed within a matter of weeks at minimal expense, typically via a charging order and/or an attachment of earnings or garnishee order.
However, the enforcement of a high-value judgment in a complex commercial case may be time-consuming and expensive. For instance, any application for the appointment of a receiver may be strongly opposed, resulting in detailed legal arguments and one or more hearings. Assets may need to be frozen to avoid them being dissipated before enforcement is complete. Such enforcement actions may only be worthwhile where the amounts involved are large and there are reasonable prospects of making recoveries. A prudent litigant will have considered enforcement at an early stage and will have an enforcement strategy to ensure any judgment in its favour will be enforceable.
Although the COVID-19 pandemic has had some impact upon the Cayman Islands judicial administration, the courts have generally continued to operate without substantial delays.
Where the judgment creditor has obtained a money judgment, they may apply for an order requiring the judgment debtor (or, if the debtor is a company, an officer of the company) to attend before a judge and be orally examined under oath as to their debts and means of satisfying the judgment debt. The court may also order the judgment debtor or officer to produce relevant books or documents at the examination. Procedurally, an application for examination of a judgment debtor must be supported by an affidavit giving certain particulars, and any such order must be served personally on the judgment debtor or officer of a company ordered to attend for examination.
Following the examination, the judge shall certify a written record of the judgment debtor’s testimony.
A Cayman Islands court will not consider whether the proceedings in which the judgment was given were validly served on the judgment debtor unless that issue is specifically raised.
The ability of a debtor to challenge the enforcement of a domestic judgment depends upon the nature of the enforcement method and the circumstances of the case.
The court has the power to stay a writ of fieri facias where the judgment debtor or any other party liable to execution upon a money order establishes, upon making an application, that there are special circumstances why the judgment should not be enforced or the applicant is unable to pay the money.
In light of the economic hardship caused by the COVID-19 pandemic, the courts may more readily find that there are special circumstances justifying a stay of enforcement actions taken against an individual or local business. However, enforcement actions in complex international cases will largely be unaffected by such factors.
Nonetheless, certain complex methods of enforcement already involve the judgment debtor having a degree of latitude in challenging the enforcement. Equitable execution (via the appointment of a receiver) is rarely straightforward since it involves the exercise of the court’s discretion. For instance, the court has declined to appoint a receiver over a bankrupt’s assets in favour of a single judgment creditor since that would exclude all of the bankrupt’s other creditors. However, Gayhart & Another v Schanck (Grand Court, unreported judgment of Kawaley J dated 14 August 2020) confirms that the court will in appropriate cases "pierce the corporate veil" in order to permit enforcement of a judgment debt via equitable execution.
On the application of a judgment debtor, the court may grant a stay of execution pending an appeal against the judgment. An appeal does not automatically give rise to any stay of execution; however, the court has a discretion to grant a stay, and it will ordinarily do so where the applicant establishes a good reason, such as the risk of a successful appeal being rendered nugatory. The applicant must satisfy the court that it has a real prospect of success on appeal, that the appeal is bona fide and the balance of convenience favours a stay. No stay will be granted if the respondent would be unfairly prejudiced by being deprived of the proceeds of the judgment.
These principles were confirmed in the recent decision in Deputy Registrar v Day [2019 (1) CILR 510], a high-profile case concerning same-sex marriage rights. If the judgment is for payment of a sum of money and the court is satisfied having regard to all relevant factors (including the strength or weakness of the grounds of appeal) that a stay should be granted, the whole judgment sum will usually be ordered to be paid into court unless there is good cause for not imposing that requirement (Shanda Games Limited v Maso Capital Investment Limited & Others, Cayman Islands Court of Appeal, unreported, 18 August 2017). The court may also grant a partial stay, whereby an undisputed part of the judgment debt is satisfied and the disputed balance is paid into court (for example, In the matter of Nord Anglia Education, Inc, Grand Court, unreported judgment of Kawaley J dated 26 May 2020).
If the trial judge refuses to grant a stay of execution, the applicant may renew its application to the Cayman Islands Court of Appeal.
Generally, all judgments made by the Cayman Islands courts are capable of being enforced.
A judgment creditor will be unable to enforce a judgment that the judgment debtor successfully applies to be set aside; for example, on the grounds that a default judgment was irregular on account of the proceedings never having been served on the defendant.
The judicial administration maintains a public register of originating processes, orders and judgments, save to the extent such documents have been determined by the court to be confidential or are otherwise sealed.
This register contains a copy of every final written judgment unless the court directs otherwise. The register does not contain any additional or separate record of any information such as the amounts paid under any judgments, and a judgment will not be removed from the register once it has been satisfied.
The Cayman Islands has a well-established regime for the enforcement of foreign judgments.
The Cayman Islands has enacted the Foreign Judgments Reciprocal Enforcement Act (1996 Revision) in respect of foreign money judgments; however, this legislation has to date only been extended to Australia and its external territories. All other foreign judgments must be enforced under common law rules, which, in summary, provide for enforcement where:
Therefore, the legal issues concerning the enforcement of foreign judgments typically involve challenges to enforcement on the grounds that one or more of these requirements has not been fulfilled.
As noted in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments, Australian money judgments are enforceable in the Cayman Islands under the Foreign Judgments Reciprocal Enforcement Act, whereas all other judgments are subject to common law enforcement.
The Cayman Islands courts routinely enforce foreign money judgments made in personam. Historically, enforcement was not available in respect of non-monetary foreign judgments; however, the courts will now enforce such judgments in certain circumstances, such as where the principles of comity require it.
For instance, in Bandone v Sol Properties Inc [2008 CILR 301], the court ordered rectification of a share register in favour of the plaintiff as a means of enforcing Brunei orders for specific performance against one of the defendants, Prince Jefri Bolkiah of Brunei. According to the judgment, judicial discretion is required to maintain the integrity of the Cayman Islands judicial system. The court should have regard to comity, fairness and mutuality, and ensure that domestic law is not extended to suit foreign litigation. On the facts, Prince Jefri had failed to show that the court should not recognise and enforce the Brunei orders in the exercise of that discretion.
The judgment in Bandone confirmed that the Cayman Islands courts will not enforce a foreign in rem judgment with respect to Cayman property. The Bandone judgment was recently cited without demur by Doyle J in his judgment in Kisha Dean Trezevant v Stanley H Trezevant III (unreported judgment dated 10 November 2021), albeit the judgment concerned an ex parte application for an asset freezing injunction and therefore the point was not argued before the court. Likewise, the courts will not enforce judgments that relate to the penal or public laws of another country or unpaid foreign taxes. However, these limitations do not apply to a judgment arising from foreign statutory breaches that gives rise to a private law remedy.
Pursuant to the Trusts Act, a foreign judgment that a Cayman trust or trust disposition is void or liable to be set aside because such trusts are not recognised under the relevant foreign law, or because of matrimonial or certain other rights existing in the foreign jurisdiction, will not be enforced.
The requirements stated in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments must also be satisfied (see further 3.6 Challenging Enforcement of Foreign Judgments).
The procedure for enforcing a foreign judgment involves issuing a writ of summons suing for the foreign judgment debt, serving the writ upon the defendant and then ordinarily seeking summary judgment (or default judgment in the absence of an acknowledgment of service). The court will usually not re-hear the merits of the underlying action, although the court will hear any challenge to the recognition and enforcement of the judgment (see 3.6 Challenging Enforcement of Foreign Judgments). Upon judgment being granted in the writ action, it will be enforceable in the same manner as a domestic judgment.
As with any other aspect of the enforcement process, the time and costs involved will depend substantially upon the degree of resistance from the judgment debtor, and the complexity of any resulting dispute.
At its simplest, a Cayman Islands judgment for the enforcement of a foreign money judgment, which faces little or no resistance, may be obtained within a matter of weeks and at modest expense.
On the other hand, any robust and persistent challenge to the recognition and enforcement of a foreign judgment, particularly one involving complex non-monetary remedies, such as in Bandone, can be expensive and time-consuming. The judgment creditor is typically unable to control such matters since they depend largely upon the nature and degree of the resistance made by the judgment debtor. However, the court will be cognisant of a judgment debtor simply seeking to delay enforcement of a foreign judgment against it.
The recognition and enforcement of a foreign judgment may be challenged on the grounds that one or more of the requirements outlined in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments are not satisfied.
As to the requirement for the foreign court to have had personal jurisdiction over the judgment debtor, the Cayman Islands court must be satisfied that the debtor was either present in the foreign jurisdiction at the time the proceedings were instituted, participated as a plaintiff or counter-claimant in those proceedings, voluntarily appeared as a defendant, or submitted to the foreign court’s jurisdiction as a defendant by prior agreement. By definition, this means that the foreign proceedings must have been served upon the debtor. Such matters may constitute a triable issue that precludes the grant of a summary judgment in a writ enforcement action.
As to finality, a foreign judgment will be treated as final and conclusive if it is regarded as res judicata by the foreign court. A judgment entered in default of appearance by a defendant who has had notice of the foreign court’s intention to proceed may be final and conclusive even though the court has the power to set aside its own judgment.
However, the principle of res judicata is to be applied with caution to earlier proceedings resolved by a judgment in default, and the Cayman Islands court may give leave to defend if the case was decided upon documentary evidence alone and the issue upon which the defendant seeks to rely was not a necessary element in the foreign court’s judgment. Judgment will not be considered final for the purposes of Cayman Islands enforcement unless/until any foreign appeals procedure has been exhausted. Where enforcement is sought via recognition of foreign receivership proceedings, a foreign receivership order does not create any conclusive and final obligation capable of being enforced in the Cayman Islands.
As to fraud or breach of natural justice, the judgment debtor will be estopped from pleading any such challenge if they consented to the judgment. A foreign judgment will be impeachable for fraud only on the basis of newly discovered material facts that were not before the foreign court. Likewise, it will be assumed that foreign proceedings have been conducted according to the proper procedure unless the contrary is shown.
The Cayman Islands is a pro-arbitration jurisdiction in which arbitral awards are readily enforceable in accordance with international norms. The Arbitration Act, 2012 (the “Arbitration Act”) is based on the widely adopted UNCITRAL Model Law on International Commercial Arbitration. Together with the Foreign Arbitral Awards Enforcement Act (1997 Revision) (the “Enforcement Act”), the Arbitration Act gives effect to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).
The Arbitration Act provides that an arbitral award made pursuant to an arbitration agreement may, with the leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect. Upon the grant of leave, judgment may be entered in the terms of the award.
The Arbitration Act further provides that an arbitral award made in any country shall be recognised as binding and, upon application to the court, shall be enforced subject to the provisions of Sections 6 and 7 of the Enforcement Act (whether or not the award was made in a New York Convention contracting state; ie, a “convention award”).
Section 6 of the Enforcement Act concerns the application procedure for seeking enforcement of a foreign award (see 4.4 Process of Enforcing Arbitral Awards) and Section 7 concerns the (narrow) grounds upon which enforcement of such an award may be resisted (see 4.3 Categories of Arbitral Awards Not Enforced).
The Enforcement Act does not apply to an arbitral award made in investor-state arbitrations. There is an alternative statutory enforcement mechanism for such awards pursuant to the Arbitration (International Investment Disputes) Act 1966 (Application to Colonies Etc.) Order 1967, by which the UK extended certain provisions of the Arbitration (International Investment Disputes) Act 1966 to the Cayman Islands. By these means, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (known as the Washington Convention) has been given effect in the Cayman Islands.
In accordance with the Arbitration Act, no arbitral award shall be enforced where, or to the extent that, the arbitral tribunal lacked jurisdiction to make the award. The additional grounds upon which a foreign arbitral award may be refused are discussed in 4.6 Challenging Enforcement of Arbitral Awards.
An application for leave to enforce an arbitral award is made by ex parte originating summons, supported by affidavit evidence.
In the case of a foreign award, Section 6 of the Enforcement Act provides that a party seeking to enforce a convention award shall adduce an original or certified copy of the award and the arbitration agreement, and a certified translation where the award is in a foreign language, and give certain other information.
Upon leave being granted, the order giving leave must be served on the respondent. If required, service outside of the jurisdiction is permitted without leave.
The respondent then ordinarily has 14 days from service of the order in which to apply to set it aside. The award shall not be enforced until either that time period has expired or the court has disposed of any application made within that period.
A domestic arbitral award may readily be recognised as a court judgment, in which case the time and costs of enforcement will depend upon the factors outlined in 2.3 Costs and Time Taken to Enforce Domestic Judgments.
The same applies to a foreign arbitral award unless the respondent applies to set aside the recognition order. The time and costs involved will depend upon the number and complexity of the grounds of resistance.
As noted in 4.3 Categories of Arbitral Awards Not Enforced, a domestic arbitral award will ordinarily be enforced unless the arbitral tribunal lacked jurisdiction.
As to the enforcement of a foreign award, the grounds for potential refusal are set out in Section 7 of the Enforcement Act, which mirror those in Article 5 of the New York Convention. In summary, enforcement shall only be refused if it is established that:
Generally, the Cayman Islands courts take a robust approach to the recognition and enforcement of foreign arbitral awards, while ensuring that the defendant is given an opportunity to apply for enforcement to be set aside. For instance, in Re China Hospitals Inc [2018 (2) CILR 335] a petitioner was entitled to rely upon a Hong Kong arbitral award as the basis for seeking to wind up a company even though the award was subject to a set-aside application in Hong Kong. An indemnity costs order has been made against a defendant who pursued a collateral action with the purpose of frustrating the enforcement of a convention award.
A refusal by the Cayman courts to enforce an award is exceedingly rare, and one of the few instances of enforcement being refused was subsequently overturned by the Court of Appeal in Gol Linhas Aereas SA (formerly VRG Linhas Aereas SA) v Matlin Patterson Global Opportunities Partners (Cayman) II LP & Others (Cayman Islands Court of Appeal, unreported judgment dated 11 August 2020), a decision recently upheld by the Judicial Committee of the Privy Council ( UKPC 21). In its judgment, the Privy Council referred not only to the great weight to be attached to the policy of sustaining the finality of international awards, but also to the policy of sustaining the finality of the determination of properly referred procedural issues by the courts of the supervisory jurisdiction (in that case, Brazil).
As well as the pure question of enforcement of an arbitral award, issues may arise in the context of applications for ancillary relief, such as a Norwich Pharmacal order. For example, the recent Court of Appeal decision in Essar Global Fund Limited v ArcelorMittal USA LLC (unreported judgment of the Cayman Islands Court of Appeal dated 29 December 2020) concerned non-satisfaction of a USD1.38 billion arbitral award in favour of the respondent, to whom the Grand Court had granted Norwich Pharmacal relief requiring the appellants to provide information and documents. In dismissing the appellants’ appeal, the Court of Appeal readily overcame a technical procedural objection to the enforceability of the foreign award in the Cayman Islands, and provided guidance as to when non-satisfaction of an arbitral award may amount to sufficient wrongdoing justifying the grant of Norwich Pharmacal relief.
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Judgment Debtors Beware: Enforcing Foreign Judgments and Arbitration Awards in the Cayman Islands Using Novel Funding Arrangements
The Cayman Islands has long been considered a jurisdiction friendly to foreign investors, not least because of the well-established laws which govern the enforcement of foreign judgments and arbitration awards. Two recent developments are now bolstering the jurisdiction’s reputation as an investor-friendly business location, namely the ground-breaking introduction of the Private Funding of Legal Services Act 2020 and the recent decision of the Privy Council in Gol Linhas Aereas SA v MatlinPatterson Global Opportunities Partners  UKPC 21.
Enforcing foreign judgments
The Cayman Islands has not entered into bilateral treaties for the reciprocal enforcement of foreign judgments. Instead, the Foreign Judgments Reciprocal Enforcement Act (1996 Revision) (the “Reciprocal Enforcement Act”) governs the recognition and enforcement of judgments granted by the courts of certain foreign jurisdictions as ordered by the Governor. Currently, only judgments of the Superior Courts of Australia and its external territories are recognised in the Cayman Islands pursuant to the Reciprocal Enforcement Act; and any other foreign judgment, irrespective of jurisdiction, is recognised by following the well-trodden path of the common law.
The process for seeking the enforcement of a foreign court judgment or award at common law is fairly uncomplicated and simply involves the issuing of a writ of summons before the Financial Services Division in the Grand Court of the Cayman Islands (the “Grand Court”) seeking an order in terms identical to the judgment granted by the foreign court. The Grand Court may enter a domestic judgment on the same terms as the foreign judgment if it:
Foreign money judgments are regularly enforced in the Cayman Islands by issuing new proceedings for the payment of the foreign judgment debt. The writ of summons that commences proceedings in the Cayman Islands will then be served on the defendant (or served outside of the jurisdiction, where necessary). Often, summary judgment is sought against the defendant. A straightforward enforcement of a foreign money judgment can be obtained fairly quickly and inexpensively.
Non-monetary judgments can also be enforced at common law where the principle of comity requires it and where all of the necessary conditions are met. However, given that the enforcement of non-monetary judgments is slightly more complicated than the simple enforcement of foreign money judgments, the proceedings can be lengthier and therefore more expensive.
To the extent that any enforcement proceedings were to be challenged, the time and cost of pursuing such proceedings would naturally increase. Grounds on which a defendant may seek to challenge the enforcement of a foreign judgment include that:
For completeness, it bears mention that certain types of judgments cannot be enforced in the Cayman Islands either under the Reciprocal Enforcement Act or at common law. These are judgments relating to the penal laws of another country, foreign tax judgments or circumstances where enforcing the judgment would be contrary to the public policy or the laws of the Cayman Islands.
Enforcing foreign arbitration awards
Similarly to foreign judgments, foreign arbitral awards are not automatically enforceable in the Cayman Islands. Any party seeking to rely on or execute against a foreign arbitral award must seek leave of the Grand Court to do so, by making an application to have the award recognised or enforced, as the case may be. Where a party simply wishes to have an award recognised, for example, in order to rely on it in separate proceedings relating to the same issue, it must make an application for recognition. On the other hand, a party wishing to execute against an award, often because it wishes to gain access to assets within the jurisdiction, will need to apply for the enforcement of the award. An arbitral award does not need to be enforceable to be recognised, but does need to be recognised in order to be enforceable.
As a British Overseas Territory, the Cayman Islands is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Any award made in an arbitration conducted in a New York Convention jurisdiction is enforceable in terms of the Foreign Arbitral Awards Enforcement Act (1997 Revision) (the “Enforcement Act”).
The Arbitration Act 2012 (“Arbitration Act”) extends the options for enforcement and recognition of foreign arbitration awards to all arbitrations, regardless of where such award is made. These two pieces of legislation form the legislative framework that governs the recognition and enforcement of foreign arbitral awards in the Cayman Islands, which is normally a relatively straightforward process.
Under Section 5 of the Enforcement Act, a New York Convention award is treated as binding for all purposes on the persons between whom it was made. Similarly, under Section 72(5) of the Arbitration Act, an award (whether a New York Convention award or not) is recognised as binding.
However, to the extent that a party seeks to rely on that award in any manner, such as by relying on it in pleadings for issue estoppel, application must be made to have the award formally recognised for that purpose. Such an application takes the same form, and follows the same procedure, as an application for the enforcement of an award, the only difference being the nature of the relief sought.
With the introduction of the Arbitration Act, the process for commencing enforcement proceedings in the Courts of the Cayman Islands has also become fairly straightforward. Under Section 72 of the Arbitration Act, “an award made by the arbitral tribunal pursuant to an arbitration agreement may, with leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect”. Section 72(5) stipulates that application for an award to be enforced (or relied upon, as the case may be) is to be made in accordance with the Enforcement Act. Practically speaking, therefore, all foreign arbitral awards are subject to the same procedure, regardless of which jurisdiction they were granted in.
The procedure for seeking leave to enforce a foreign arbitration award is set out in the Grand Court Rules (GCR). Application must be made by use of an ex parte originating summons (Order 73, rule 31(1), GCR). The application must be accompanied by an affidavit setting out the following information:
Under Section 6 of the Enforcement Act, the application for enforcement must be accompanied by the following documents:
The fact that the application for enforcement will be made on an ex parte basis means that the applicant must give full and frank disclosure to the Court. The application should therefore address the following information:
The Court has very limited grounds for refusing to enforce a foreign arbitral award. These are set out in Section 7 of the Enforcement Act and include the following:
In addition, where the award is in respect of a matter that cannot be settled by arbitration or where it would be contrary to public policy to enforce the award, the court may refuse enforcement under the Enforcement Act. The latter ground was recently the subject of the decision in Gol Linhas, in which the Court’s ability to refuse enforcement on the grounds of due process and public policy were considered in detail by the Privy Council.
Following an arbitration seated in Brazil, MatlinPatterson (the “Appellants”) applied to the Brazilian courts to have the arbitral award set aside. The Appellants’ application before the Brazilian courts was unsuccessful and all rights of appeal in Brazil had been exhausted. Thereafter, Gol Linhas (the “Respondent”) sought to enforce the award in the Cayman Islands and applied to the Grand Court seeking an order in those terms.
The grounds on which the Appellants resisted enforcement of the award in the Cayman Islands were similar to their original grounds challenging the arbitral award, which were rejected by the Brazilian courts. Those grounds included that:
Although leave to enforce the award was first granted on an ex parte basis, on 19 February 2019, in the first instance inter partes decision of the Grand Court, the judge upheld all the grounds of challenge brought by the Appellants and refused to enforce the award in the Cayman Islands. The Court of first instance also refused leave to appeal that decision. However, in November 2019, an application by the Respondent for leave to appeal was heard and granted by the Court of Appeal of the Cayman Islands (the “Court of Appeal”).
On 11 August 2020, the Court of Appeal delivered its judgment allowing the Respondent leave to enforce the arbitral award in the same manner as if it had been a judgment of the Grand Court. In summary, the Court of Appeal held that:
The Appellant appealed the decision of the Court of Appeal to the Privy Council (the highest appellate Court of the Cayman Islands), which was asked to consider three issues, namely, (i) the validity of the arbitration agreement (as relevant to the question of issue estoppel), (ii) the due process/public policy arguments against the arbitral award, and (iii) whether the arbitral tribunal’s award had strayed outside of the agreed scope of the submission to arbitration. In its decision on 19 May 2022, the Privy Council confirmed the Court of Appeal’s rulings on all three of the issues and concluded that none of the grounds relied on by the Appellants justified a refusal to enforce the award in the Cayman Islands.
Regarding the validity of the arbitration agreement, the Privy Council held that the Brazilian domestic courts had undertaken an independent investigation of the validity of the agreement and had reached a final and binding conclusion regarding that issue, during the Appellants’ (unsuccessful) application for the award to be set aside by the Brazilian domestic courts. On that basis, the Privy Council held that issue estoppel would operate against the Appellants to prevent the validity argument from being re-litigated in the context of the enforcement proceedings before the Cayman Islands courts.
Considering the question of due process and the public policy of the Cayman Islands, the Privy Council noted that the point was finely balanced. It remarked in its conclusion that in the present case, the “prudent” course would have been for the arbitral tribunal to adopt a more conservative approach by requesting the parties’ comments on the legal point upon which it ultimately relied. Had that occurred, the concern that the parties had not had an opportunity to address the tribunal on that legal point would not have arisen. That notwithstanding, the Privy Council ultimately concluded that the tribunal’s reliance on the point did not amount to “so serious a denial of procedural fairness as to justify refusal to enforce the award”. In coming to its conclusion, the Privy Council held that the requirement which must be met in order to show a breach of due process is “proof, not merely that a procedure was adopted which was irregular or undesirable, but of fundamental unfairness which goes to the essence of the right to be heard”. In the present case, that had not been established.
Finally, on the issue of the agreed scope of submission to arbitration, the Privy Council held that on the facts of the case, any difference between the terms of reference of the arbitration and the remedy ultimately granted “(came) nowhere close to the kind of excess of authority which would justify refusal to enforce the award.” The Privy Council stated that the established practice of narrowly construing any defences to the enforcement of arbitral awards included a correlative, established practice to widely construe the scope of submission to arbitration.
For all of those reasons, the Privy Council declined to alter the Court of Appeal’s order to enforce the award. As such, the Brazilian arbitral award became enforceable in the Cayman Islands.
For completeness, it should be noted that, once an order of the Grand Court is made enforcing an arbitral award, such order must be served on the parties against whom the award is to be enforced, including by way of service out of the jurisdiction, under a separate application, if necessary.
Funding enforcement proceedings
Whilst the procedure for making an application to have a foreign judgment or arbitral award declared enforceable in the Cayman Islands is usually straightforward, Gol Linhas took over three years to be fully resolved in the Cayman Islands. Cases like Gol Linhas have demonstrated that where challenges to enforcement are being made, rather than being straightforward and reasonably cost-effective, enforcement proceedings can be lengthy and, consequently, expensive to litigate. That relative uncertainty may have previously caused some reluctance amongst litigants to commence enforcement proceedings in the Cayman Islands.
Until very recently, contingency fee arrangements and litigation funding were not as readily available to litigants in the Cayman Islands as they are in other established jurisdictions. Issues of champerty and maintenance (and their prohibition) under the common law often created insurmountable barriers to litigants finding alternative avenues for the funding of litigation. The sanction of third-party funding was considered by the courts on a case-by-case basis but, previously, the position was not codified by legislation. The recent introduction in the Cayman Islands of the Private Funding of Legal Services Act, 2020 (the “Private Funding Act”) has caused a substantial sea change in the ability of litigants to fund proceedings commenced in the jurisdiction. That legislation will have a direct bearing on parties’ willingness and ability to institute proceedings in the Cayman Islands seeking to enforce foreign judgments or arbitral awards in the jurisdiction.
Contingency fee arrangements
The Private Funding Act, which entered into force on 1 May 2021, now allows for contingency fee arrangements to be entered into between litigants and attorneys in the Cayman Islands. Although contingency fee arrangements were occasionally accepted by the Court, they were only allowed in respect of a foreign lawyer’s fees in matters involving cross-border litigation and, only in instances where that foreign lawyer’s jurisdiction allowed contingency fees. A contingency fee arrangement between a Cayman Islands attorney-at-law and a litigant was a concept previously unheard of in the jurisdiction.
Now, under Section 3 of the Private Funding Act, an attorney “may enter into a contingency fee agreement with a client in which it is agreed that the remuneration paid to the attorney-at-law for the legal services provided to or on behalf of the client is contingent, in whole or in part, on the successful disposition or completion of the matter in respect of which the legal services are provided.”
Section 4 of the Private Funding Act outlines certain conditions in relation to an attorneys’ renumeration which must be met in order for them to be able to enter into a contingency fee arrangement with a client. These include a restriction that whilst an attorney may now charge a “success fee” (or uplift) over and above its normal fee, that success fee is capped at 100% of the attorney’s usual fees. However, for claims sounding in money, that success fee cannot exceed an “allowed percentage” of the total sum recovered by the client. Similarly, instead of a success fee, an attorney may charge a percentage of the value of the recoveries made by a client in claims involving either money or property up to an “allowed percentage” in accordance with the Private Funding of Legal Services Regulations 2021. In both cases, that percentage is currently capped at a maximum of 33.3% of the sum of money or value of the property recovered (excluding the attorney’s costs).
Importantly, under Section 4(4) of the Private Funding Act attorneys and their clients may contract out of the above-mentioned caps by making a joint application to the Grand Court within 90 days of entering into such a contingency fee agreement. In determining whether to sanction such a contingency fee agreement, the Grand Court will consider the nature and complexity of the claim as well as the expense and risk associated with the proceedings and any other factor that the Court may deem relevant in the circumstances.
It bears mention that the required form and content of the contingency fee agreement is set out in Section 5 of the Private Funding Act, which specifies that the agreement must be (i) in writing and (ii) signed by both the client (or an authorised representative if the client is not a natural person) and the attorney. Furthermore, in accordance with Section 12 of the Private Funding Act, where the client is acting in a fiduciary capacity (for example as a trustee under a deed or will, or as a guardian of property or to a minor child), the contingency fee agreement must be presented to the Clerk of the Court before payment is made to the attorney. The Clerk of the Court will examine the contingency fee arrangement and may disallow any part of it or it may require the Grand Court to make a direction thereon.
The Private Funding Act has also codified the ability of litigators to make use of third-party litigation funding. Section 16 defines a litigation funding agreement as an agreement:
A litigation funding agreement must be made in writing and shall comply with certain prescribed requirements (as regulated by the Cabinet), including that the funder has provided certain prescribed information (if any) to the client before the litigation funding agreement is entered into. In accordance with Section 16(2), the sum to be paid by a client to the funder shall consist of (i) any awarded costs payable to the client in respect of the relevant proceedings and an amount calculated by reference to the funder’s anticipated expenditures in funding the provision of the services, or (ii) a percentage of the sum or value of the property recovered in the relevant proceedings.
As adverted to above, Section 19 of the Private Funding Act states that the Cabinet may make regulations in respect of contingency fee agreements and litigation funding agreements. Whilst the Regulations made currently provide further details and clarifications in relation to contingency fee arrangements (as noted above), there are no further requirements relating to litigation funding agreements specified in the Regulations at this time.
Whilst the Private Funding Act is fairly short and “light touch”, it is a very welcome piece of legislation in the Cayman Islands, particularly in respect of complicated enforcement proceedings. Due to the past inability of litigants to seek alternative means of funding the provision of legal services in the Cayman Islands, it is likely that many assets of foreign judgment debtors situated in the jurisdiction went unrecovered. However, the introduction of contingency fee arrangements and litigation funding options now make those assets more readily recoverable, by allowing parties who have successfully litigated arbitration proceedings or foreign judgment proceedings more creative options for funding the enforcement of those awards in the Cayman Islands. Judgment debtors beware!