1 Legal framework
1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
The Arbitration Law 2012 governs every arbitration which has its seat in the Cayman Islands. For the law to apply, arbitration agreements must be evidenced in writing. Oral agreements may be recognised at common law only.
The provisions of the law are founded on the following principles:
- The object of arbitration is to obtain the fair resolution of disputes by an impartial arbitral tribunal without undue delay or undue expense;
- The parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; and
- The court should not intervene except as provided in this law.
The Foreign Arbitral Awards Enforcement Law 1997 applies to the enforcement in the Cayman Islands of arbitration awards with their seat outside the Cayman Islands in territories which are party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?
See question 1.1.
1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?
The Cayman Islands has not adopted the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration 1985 (as amended). However, the Arbitration Law does incorporate many of its principles. The law is also influenced by the English Arbitration Act 1996.
1.4 Are all provisions of the legislation in your jurisdiction mandatory?
The parties may opt out of certain provisions in the Arbitration Law. However, the following are mandatory:
- Section 4: The requirements for a valid arbitration agreement;
- Section 9: Stays of proceedings brought in breach of an arbitration agreement;
- Section 20: Removal of an arbitrator by the court;
- Section 22: Other circumstances in which an arbitrator shall cease to hold office;
- Section 27: The tribunal's competence to rule on its own jurisdiction;
- Section 28: Duty of the tribunal to:
- act fairly and impartially;
- allow each party a reasonable opportunity to present its case;
- conduct the arbitration without unnecessary delay or expense; and
- Sections 73–77: Challenges to, and appeals of, arbitral awards.
1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?
Not at present. The law was updated in 2012.
1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?
The United Kingdom (which is a signatory to the New York Convention) extended the territorial application of the New York Convention to the Cayman Islands. The convention was enacted into domestic legislation by the Foreign Arbitral Awards Enforcement Law 1997.
The applicability of the convention in the Cayman Islands is subject to a reciprocity reservation, meaning that the Cayman Islands is obliged to recognise and enforce only arbitral awards made in a territory that is also signatory to the convention.
1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?
The United Kingdom has extended to the Cayman Islands the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States 1965. However, it is rarely utilised in practice.
2 Arbitrability and restrictions on arbitration
2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?
Any dispute that the parties have agreed in writing to submit to arbitration in the Cayman Islands is arbitrable in the Cayman Islands, unless the arbitration agreement is contrary to public policy or any other law of the islands (Section 26 of the Arbitration Law). This means that while criminal law and matrimonial matters are not arbitrable, most commercial disputes are capable of being resolved by arbitration.
An arbitration agreement will also be deemed to exist where a party asserts the existence of an arbitration agreement in a pleading, statement of case or other document in circumstances in which the assertion calls for a reply and the assertion is not denied (Section 4(4)).
The arbitrability of a dispute can be challenged before an arbitral tribunal. Under Section 27, the arbitral tribunal may rule on its own jurisdiction, including any objections to the existence or validity of the arbitration agreement. A party may also resist enforcement in the Cayman Islands of an award on the grounds that the tribunal lacked jurisdiction (Section 72(3)).
The interplay between the Grand Court's winding-up jurisdiction and the law of arbitration has been the subject of several decisions in recent years. The judiciary has sought to strike a careful balance between the freedom of the parties to choose arbitration for the resolution of their disputes and the class nature of remedies afforded by the insolvency regime. Specialist advice, which is beyond the scope of this Q&A, is essential in order to navigate this complex and developing area of law.
2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?
The Arbitration Law applies only to arbitrations seated in the Cayman Islands (Section 3(1)). However, parties domiciled or operating in the Cayman Islands are free to choose a different seat of arbitration for the resolution of any dispute.
3 Arbitration agreement
3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?
The Arbitration Law applies only where the arbitration agreement is evidenced in writing. This may include an agreement made in writing (signed or unsigned), such as an arbitration agreement or an arbitration clause in a contract. Alternatively, it might include an agreement made by the exchange of communications in writing (eg, by way of letters, emails) (Section 5).
The arbitration agreement also must not be contrary to public policy or any other law of the islands (Section 26 of the Arbitration Law).
Oral arbitration agreements fall outside the scope of the Arbitration Law; however, they may be recognised as valid at common law.
3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?
Under Section 27 of the Arbitration Law, unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether in writing or not) shall not be regarded as invalid, non-existent or ineffective just because that other agreement is invalid, did not come into existence or has become ineffective. As such, the arbitration agreement shall be treated as a distinct agreement. This is consistent with Section 7 of the Arbitration Act in England and the leading English case of Fiona Trust & Holding Corporation v Privalov  UKHL 40.
3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?
The parties are free to choose the seat and/or language of the arbitration. Where there is no agreement between the parties, the arbitral tribunal has the discretion to decide (Sections 30(2) and 31(2)), having regard to the circumstances of the case, including the convenience of the parties.
4 Objections to jurisdiction
4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?
A party shall not be precluded from raising the plea that the arbitral tribunal does not have jurisdiction by virtue of the fact it has appointed or participated in the appointment of an arbitrator.
A plea that the arbitral tribunal does not have jurisdiction must be raised not later than the submission of the statement of defence.
A plea that the arbitral tribunal is exceeding the scope of its authority must be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the proceedings.
Notwithstanding any delay in raising such pleas, the arbitral tribunal does have the discretion to admit such a plea if it considers the delay to be justified in the circumstances.
4.2 Can a tribunal rule on its own jurisdiction?
The arbitral tribunal may rule on its own jurisdiction. In contrast with Section 30 of the English 1996 Arbitration Act, the parties may not contract out of this rule.
Upon a plea being raised that the tribunal does not have jurisdiction (see question 4.1), the arbitral tribunal may rule on that plea either as a preliminary question or as part of its award on the merits. It may also determine which matters are subject to arbitration in accordance with the arbitration agreement (Sections 26 and 27 of the Arbitration Law).
4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?
If the arbitral tribunal has ruled that it has jurisdiction, any party may, within 30 days of receiving notice of that ruling, apply to the Grand Court to decide the matter. The court will revisit the question of jurisdiction. This applies to a preliminary finding by the arbitral tribunal (Section 27(9)) and a finding on jurisdiction within the final award (Section 75).
The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the Grand Court is pending.
5 The parties
5.1 Are there any restrictions on who can be a party to an arbitration agreement?
Any party with the legal capacity to enter into a contract or agreement can be a party to an arbitration agreement, including individuals, corporate bodies, partnerships, states, state entities and public authorities. There may, of course, be formalities that must be observed when certain types of parties sign an arbitration agreement (eg, to ensure that the signatory has authority to sign and thereby bind the party in question).
5.2 Are the parties under any duties in relation to the arbitration?
The parties are under a general duty to "take any necessary action for the proper and expeditious conduct of the proceedings". However, the parties may agree on the powers that may be exercised by the arbitral tribunal in case of one party's failure to do so.
In the absence of agreement, the Arbitration Law 2012 gives the arbitral tribunal certain default powers. For example:
- if, without showing sufficient cause, the claimant fails to provide its statement of claim in accordance with Section 32, the arbitral tribunal may terminate the proceedings;
- if, without showing sufficient cause, the respondent fails to provide its statement of defence in accordance with Section 32, the arbitral tribunal may continue the proceedings without treating such failure in itself as an admission of the claimant's allegations; and
- if, without showing sufficient cause, any party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it.
In addition, if the arbitral tribunal is satisfied that there has been inordinate and inexcusable delay on the part of the claimant in pursuing its claim, the tribunal may make an award dismissing the claim if the delay:
- gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair resolution of the issues in that claim; or
- has caused, or is likely to cause, serious prejudice to the respondent.
As discussed at question 15, the parties also have a duty to maintain confidentiality (in respect of the hearing, the award and any documents generated and disclosed during the proceedings).
5.3 Are there any provisions of law which deal with multi-party disputes?
The Arbitration Law imposes no limit on the number of parties that may agree to be bound by an arbitration agreement. As such, multi-party arbitration agreements are permissible.
6 Applicable law issues
6.1 How is the law of the arbitration agreement determined in your jurisdiction?
The arbitral tribunal shall decide a dispute in accordance with the law chosen by the parties as applicable to the substance of the dispute (Section 55(1) of the Arbitration Law).
The doctrine of separability means that it is possible for an arbitration agreement to be governed by a different law from the law of the substantive contract.
If the parties have not chosen the law applicable to the substance of their dispute (or where the law chosen cannot apply to the substance of the dispute), the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.
The arbitral tribunal may decide the dispute, if the parties agree, in accordance with such other considerations as are agreed by them or determined by the tribunal.
When making a decision in relation to a dispute, the arbitral tribunal shall have regard to:
- the provisions of any contract relating to the substance of the dispute;
- the normal commercial or trade usage of any undefined terms in the provisions of any contract;
- any established commercial or trade customs or practices relevant to the substance of the dispute; and
- any other matter which the parties agree is relevant in the circumstances.
6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?
Section 55(1) of the Arbitration Law provides that the tribunal shall decide a dispute in accordance with the law chosen by the parties as applicable to the substance of the dispute.
If there is no such choice, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable (Section 55(2)).
7 Consolidation and third parties
7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?
The tribunal has no residual power to order the consolidation of proceedings, but such power may be conferred on it by the agreement of the parties (Section 36 of the Arbitration Law).
A tribunal may also extend arbitration proceedings to cover additional disputes between the same parties which fall within the same arbitration agreement as the original dispute (Section 35).
7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?
The Cayman Islands recognises the common law principle of privity of contract. This means that the tribunal has no residual power to order the joinder of additional parties to an arbitration, since the law of the Cayman Islands does not allow an arbitral tribunal to assume jurisdiction over individuals or entities that are not party to the arbitration agreement.
7.3 Does an arbitration agreement bind assignees or other third parties?
As stated above, the Cayman Islands recognises the common law principle of privity of contract. The law of the Cayman Islands does not allow an arbitral tribunal to assume jurisdiction over individuals or entities that are not parties to an arbitration agreement. In Unilever plc v ABC International (2008 CILR 87), the court confirmed that the group enterprise theory is not a doctrine recognised by Cayman Islands law.
The principle of privity of contract is subject to limited exceptions, however, such as where a contract is validly assigned to a third party. Where contractual rights are assigned, the assignee will usually be bound by any applicable arbitration agreement under the original contract. In such circumstances, the assignee takes the transferred rights with the benefit and the burden of any applicable arbitration agreement. This is consistent with Section 70 of the Arbitration Law, which states that references to a party to an arbitration agreement include any person claiming "through or under" a party to the agreement.
In addition, a third party with rights under the Contracts (Rights of Third Parties) Law 2014 may be treated as a party to an arbitration agreement in the underlying contract in respect of any disputes relating to the enforcement of such third-party rights.
8 The tribunal
8.1 How is the tribunal appointed?
The parties may agree to a procedure for the appointment of an arbitrator in accordance with the rules they have chosen (Section 16(1) of the Arbitration Law). This may include agreement as to what will happen in the event the procedure fails.
Where the parties do not agree such rules:
- in an arbitration with a sole arbitrator, the arbitrator shall be appointed by the appointing authority; and
- in an arbitration with more than two arbitrators, the parties shall appoint an odd number of arbitrators either by:
- each party appointing an arbitrator and agreeing to the appointment of a subsequent arbitrator; or
- two or more parties agreeing to the appointment of the required number of arbitrators.
- In this case, if a party fails to appoint an arbitrator within 30 days of receipt of a first request to do so from the other party, or if the parties fail to agree on the appointment of the additional arbitrator within 30 days of receipt of the first request by any party to do so, the appointment shall be made, upon the request of a party, by the appointing authority.
Unless the parties have agreed otherwise, the appointing authority shall, in appointing an arbitrator, have regard to the following:
- the nature of the subject matter of the arbitration;
- the availability of any arbitrator;
- the identities of the parties to the arbitration;
- any suggestion made by any of the parties regarding the appointment of any arbitrator;
- any qualifications required of the arbitrator by the arbitration agreement or otherwise by the parties; and
- such considerations as are likely to secure the appointment of an independent and impartial arbitrator.
The ‘appointing authority' is any person or authority chosen by the parties to appoint an arbitrator or, where the parties have not so agreed, any person or authority designated by the Grand Court.
8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
The parties may agree on the number of arbitrators to form a tribunal and on the qualifications of the arbitrators. If there is no such agreement, the tribunal shall consist of one arbitrator (Section 15 of the Arbitration Law). There are no default requirements regarding the characteristics of arbitrators.
8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
Under Section 20 of the Arbitration Law, a party to an arbitration may apply to the court for the removal of an arbitrator where:
- the arbitrator:
- is physically or mentally incapable of conducting the proceedings or where there are justifiable doubts as to his capacity to do so; or
- has refused or failed to properly conduct the proceedings to use all reasonable despatch in conducting the proceedings or making an award; and
- a substantial injustice has been or will be caused to that party.
Where an application to remove an arbitrator has been made, the tribunal may continue the arbitral proceedings and make an award while such an application is pending.
The arbitrator concerned is entitled to appear and be heard by the court before the court makes any order under this section.
A party may not bring a challenge based on a conflict of interest of an arbitrator whom it appointed, unless the grounds for the challenge became known to the party only after the appointment was made (Section 18(4)).
8.4 If a challenge is successful, how is the arbitrator replaced?
Where an arbitrator, not being a sole arbitrator, is removed by the court, the appointing authority may, on the application of any party to the arbitration agreement, appoint a person to act as arbitrator in place of any arbitrator removed.
Where the sole arbitrator is removed, the appointment process set out in question 8.1 will apply.
8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?
Before and during his or her appointment, an arbitrator is under an obligation to disclose any circumstances which might reasonably compromise his or her impartiality or independence (Section 19).
In conducting the arbitral proceedings, the Arbitration Law requires the arbitral tribunal to:
- act fairly and impartially;
- allow each party a reasonable opportunity to present its case;
- conduct the arbitration without unnecessary delay; and
- conduct the arbitration without incurring unnecessary expense.
Subject to certain exceptions, including the agreement of the parties, the arbitral tribunal is also under a duty to conduct the proceedings in private and confidentially (see question 15).
8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
(a) Procedure, including evidence?
The parties may agree on the rules to be followed during the arbitral proceedings (Section 29 of the Arbitration Law) and the powers that may be exercised by the tribunal (Section 38).
In the absence of agreement, the arbitral tribunal shall decide procedural and evidential matters in such manner as it considers appropriate (Section 29).
These matters include (Part VII of the Arbitration Law):
- when and where any part of the proceedings is to be held;
- the language or languages to be used;
- whether written documents materials are required and if so, in what form;
- whether there should be oral evidence;
- which documents or classes of documents should be disclosed between the parties (if any);
- the extent to which telecommunications technology will be used;
- the extent to which the tribunal will be bound by rules of evidence; and
- the determination of the admissibility, relevance, materiality and weight of any evidence.
(b) Interim relief?
Part VIII of the Arbitration Law sets out the tribunal's power to grant interim relief (based on Article 17 of the United Nations Commission on International Trade Law Model Law). Unless otherwise agreed by the parties, the tribunal has the power to grant the following measures (Section 44 of the Arbitration Law):
- to maintain or restore the original position of the other party pending determination of the dispute;
- to take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process;
- to provide a means of preserving assets out of which a subsequent award may be satisfied; and
- to preserve evidence that may be relevant and material to the resolution of the dispute.
A party that requests an interim measure shall satisfy the tribunal that (Section 45):
- harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and that the harm substantially outweighs the harm likely to result to the party against which the measure is directed if the measure is granted; and
- there is a reasonable possibility that the requesting party will succeed on the merits of the claim.
An interim measure issued by an arbitral tribunal shall be recognised as binding and, unless otherwise provided by the tribunal, enforceable upon application to the court, irrespective of the jurisdiction in which it was issued (Section 52), subject to a limited number of defences (Section 53).
The party requesting an interim measure shall be liable for any costs and damages caused by the measure to any party if the tribunal later determines that, in the circumstances, the measure should not have been granted (Section 51).
Unless otherwise agreed by the parties, the tribunal can grant interim relief on an ex parte basis. The tribunal may grant such an order provided that it considers that prior disclosure to the party against which the measure is directed may frustrate the purpose of the measure (Section 46(2)). Full and frank disclosure is required (Section 50); and the tribunal may require the party requesting the measure to provide security (Section 49). The party against which an order is made will be given an opportunity to present its case at the earliest practicable time thereafter (Section 47).
Moreover, unless the parties agree otherwise, the tribunal may order a claimant to provide security for the costs of the arbitration (Section 38(2)(a)). However, this power shall not be exercised by reason only that the claimant is an individual ordinarily resident outside the Cayman Islands or a corporation or an association incorporated or formed under the law of a country outside the islands, or whose central management and control is exercised outside the islands.
(c) Parties which do not comply with its orders?
The parties may agree on the powers that may be exercised by the arbitral tribunal should one party fail to take any necessary action for the proper and expeditious conduct of the proceedings (Section 39 of the Arbitration Law).
Unless otherwise agreed by the parties, if, without showing sufficient cause:
- the claimant fails to provide its statement of claim in accordance with Section 32, the arbitral tribunal may terminate the proceedings;
- the respondent fails to provide its statement of defence in accordance with Section 32, the arbitral tribunal may continue the proceedings without treating such failure in itself as an admission of the claimant's allegations; and
- any party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it.
If the arbitral tribunal is satisfied that there has been inordinate and inexcusable delay on the part of the claimant in pursuing its claim, the tribunal may make an award dismissing the claim if the delay:
- gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair resolution of the issues in that claim; or
- has caused, or is likely to cause, serious prejudice to the respondent.
Unless a contrary intention is expressed in the arbitration agreement, where any person (whether or not a party to the agreement) refuses or fails to do any other thing which the arbitrator may require, a party to the arbitration agreement or the arbitrator may apply to the Grand Court for an order requesting the person in default to attend before the court for examination or to produce the relevant document or to do the relevant thing (Section 41). Any person that fails to comply with a court order will be in contempt of court.
(d) Issuing partial final awards?
Unless otherwise agreed by the parties, the tribunal may issue interim (Sections 2(1) and 61), interlocutory or partial awards.
(e) The remedies it can grant in a final award?
The parties are generally free to agree on the tribunal's power to grant remedies (Section 57).
Unless otherwise agreed by the parties, the arbitral tribunal may award any remedy or relief that could have been ordered by the Grand Court if the dispute had been the subject of civil proceedings in that court. Such remedies include damages, permanent injunctions, orders for specific performance, declaratory relief and awards of costs and interest.
Subject to the parties' agreement, the tribunal may award interest for such periods and at such rates as it considers meets the justice of the case, both up to the date of the award and between the date of the award and payment (Section 58).
8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
Where a respondent fails to participate in arbitration without showing sufficient cause, the tribunal may continue the proceedings without that party and may make an award on the basis of the evidence before it (see question 8.7(c)).
A tribunal will typically give non-participating respondents every opportunity to participate as the case progresses and, mindful of its duties under Section 28 of the Arbitration Law, may in practice raise points for the claimant to address which would have been available for the respondent had it chosen to participate.
8.8 Are arbitrators immune from liability?
Arbitrators and their employees and agents are immune for acts and omissions in the discharge or purported discharge of their duties (as are appointing authorities), unless they have been shown to have acted in bad faith (Section 25 of the Arbitration Law).
9 The role of the court during an arbitration
9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?
If legal proceedings are initiated against a party to an arbitration agreement, that party can apply to the Grand Court for a stay of proceedings.
The court not only has the power to grant a stay, but must grant a stay unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed (Section 9 of the Arbitration Law).
A party that takes a step in the court proceedings to answer the substantive claim loses its right to apply for a stay of the proceedings (Section 9(1)).
The court is also required to grant a stay in favour of foreign arbitral proceedings (Section 4 of the Foreign Arbitral Awards Enforcement Law (1997 Revision)).
9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?
The Cayman Islands legal framework affords the court a range of powers designed to assist and support the arbitral tribunal.
In relation to arbitrations seated in the Cayman Islands, these powers enable the court to do the following:
- Stay court proceedings in the face of a valid arbitration clause (Section 9(1) of the Arbitration Law);
- Extend the time for commencing an arbitration (Section 13);
- Appoint a person (the ‘appointing authority') to appoint an arbitrator where the parties are not agreed (Section 16);
- Terminate an arbitrator's appointment (and appoint a replacement) in limited circumstances (Sections 20–21), such as where the arbitrator has failed to, or is unable to, comply with his or her duties;
- Rule on the arbitral tribunal's jurisdiction as a preliminary issue upon application by one party (Section 27(9));
- Enforce tribunal orders on matters such as orders for witness attendance (Sections 40–41);
- Order interim injunctive relief (either in cases of urgency or with permission) on the following matters (Section 43):
- the taking of evidence of witnesses;
- the preservation of evidence;
- the preservation of property which is subject to the arbitral proceedings;
- the sale of goods that are the subject of the arbitral proceedings; and
- the granting of an interim injunction or the appointment of a receiver;
- Extend the time for making an arbitral award (Section 60);
- Determine the recoverable costs of the arbitration in certain circumstances – for example, where the tribunal has failed to do so (Sections 64–66);
- Enforce the tribunal award in the same manner as a judgment or order of the court (Section 72);
- Determine whether an arbitration agreement should cease to have effect where one party is guilty of fraud (Section 74);
- Give relief where an arbitrator is not impartial (Section 74);
- Determine challenges to awards in relation to an exhaustive list of grounds, including lack of notice, invalidity of the arbitration agreement, fraud and breach of the rules of natural justice (Section 75);
- Determine appeals from awards on questions of law (Section 76) (provided that this is not excluded by agreement);
- Order the tribunal to state the reasons for its award if it has failed to do so (Section 77); and
- Extend or abridge the timeframes for making applications or lodging appeals with the court Section 79).
Sections 9 to 11 (stay of legal proceedings) and Section 72 (enforcement of arbitral awards) apply even if the seat of the arbitration is outside the Cayman Islands, or where no seat has been designated or determined.
The powers conferred on the court by Part VII in relation to interim measures and preliminary orders apply even if the seat of the arbitration is outside the Cayman Islands (Section 54).
9.3 Can the parties exclude the court's powers by agreement?
The parties may exclude the court's power to:
- enforce tribunal orders in relation to witness attendance (Section 41);
- extend the timeframe for making an arbitral award (Section 60);
- assess the arbitration fees and costs (Sections 65–66);
- charge property for payment of legal practitioners' costs (Section 68);
- determine preliminary points of law (Section 71);
- determine appeals from awards on questions of law (Section 76);
- order the tribunal to state the reasons for its award if it has failed to do so (Section 77); and
- extend or abridge the timeframes for making applications or lodging appeals with the court (Section 79).
10.1 How will the tribunal approach the issue of costs?
The costs of the arbitration include:
- the legal and other costs of the parties; and
- the fees and expenses of the arbitrator or arbitrators.
In the absence of agreement between the parties, the costs of the arbitration shall be at the discretion of the arbitral tribunal (Section 64(1) of the Arbitration Law).
Unless the fees of the arbitral tribunal have been fixed by written agreement or such agreement has provided for a determination of the fees by a person or institution agreed to by the parties, any party to the arbitration may require that such fees be assessed by the court.
The two main factors that typically influence how a court or arbitral tribunal exercises its discretion to award costs for or against the parties are:
- the extent to which one party has prevailed in the arbitration (since the general principle is that the successful party will be awarded its costs); and
- the manner in which each of the parties has chosen to conduct its claim or defence.
10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?
The Arbitration Law contains no restrictions on what the parties can agree in terms of costs. The law simply states that unless a contrary intention is expressed, every arbitration agreement shall be deemed to include a provision that the costs of the arbitration shall be at the discretion of the arbitral tribunal.
(There is no equivalent to Section 60 of the English Arbitration Act 1996, which provides that any agreement whereby one party is to pay the whole or part of the costs of the arbitration in any event shall not be valid unless agreed after the dispute in question has arisen).
The parties are jointly and severally liable to pay to the arbitral tribunal such reasonable fees and expenses as are appropriate in the circumstances. Unless the fees of the arbitral tribunal have been fixed by written agreement or such agreement has provided for a determination of the fees by a person or institution agreed to by the parties, any party to the arbitration may require that such fees be assessed by the court.
11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?
The common law rules in respect of champerty and maintenance have not been abolished by statute, as they have been in England. Accordingly, any third-party funding of arbitration proceedings in the Cayman Islands must be very carefully considered, to ensure that it does not infringe these rules.
In relation to court proceedings, the Grand Court has, in recent years, shown a willingness to consider and approve third-party funding in certain cases (see decisions in Company v A Funder [2017 (2) CILR 710] and in Trustee v The Funder (unreported)), provided that safeguards are in place and that tests similar to those applicable in England and Wales are satisfied.
12.1 What procedural and substantive requirements must be met by an award?
The arbitrators should decide the dispute in accordance with:
- the law applicable to the substance of the dispute; and
- other considerations agreed between the parties or determined by the tribunal (Section 55 of the Arbitration Law).
The parties may agree on the form of the award. If there is no agreement, the award shall:
- be in writing;
- be signed by all arbitrators or all those assenting to the award;
- contain the reasons for the award (unless it is an agreed award or the parties have agreed to dispense with reasons); and
- state the seat of the arbitration and the date on which the award was made.
After the award is made, a copy of the award signed by the arbitrators in accordance with subsection 63 (1) shall be delivered to each party.
At the request of any party to an arbitration agreement, the appointing authority may:
- certify an original award registered with it;
- certify a copy of any relevant original arbitration agreement; or
- arrange for the translation and sworn certification of any award or agreement not stated in the English language.
12.2 Must the award be produced within a certain timeframe?
An arbitration agreement may specify the timeframe within which the award should be made.
Unless otherwise agreed by the parties, the court may, by order, extend that time upon application by the tribunal or by any party to the arbitral proceedings (Section 60 of the Arbitration Law).
13 Enforcement of awards
13.1 Are awards enforced in your jurisdiction? Under what procedure?
Both domestic and foreign arbitral awards can be enforced in the Cayman Islands.
The enforcement of arbitration proceedings where the seat of the arbitration is the Cayman Islands is governed by the Arbitration Law; whereas the enforcement of agreements to arbitrate where the seat of the arbitration is in any country that is a party to the New York Convention is governed by the Foreign Arbitral Awards Enforcement Law 1997.
In either case, the party seeking to enforce the award will apply to the Grand Court to enter a judgment or order of the court on the same terms as the award. The application is made ex parte (Grand Court Rules, Order 73, Rule 31) and must be supported by an affidavit exhibiting, among other things, the arbitration agreement and the original award.
The court will consider the application for leave to enforce the arbitral award at the very first hearing, unless it wishes to hear from any other party. If the court wishes to hear from any other party, it will require the applicant to serve the other party or parties to the arbitration.
Section 72(5) of the Arbitration Law states that an award, irrespective of the country in which it was made, shall be recognised as binding and shall be enforced subject to certain defences (see below) that might be raised by the respondent.
Any order that the court makes granting leave to enforce an arbitral award will take effect 14 days after service on the party against which enforcement is sought (or such other period stated by the court where service is to be effected outside the jurisdiction).
An opposing party can, in the 14 days following service, apply to set aside the order. To succeed, the respondent must prove that one of the statutory criteria for refusal applies. Such grounds include the following:
- A party to the agreement was under some incapacity;
- The agreement was not valid under the law to which the parties subjected it;
- The respondent was not given proper notice of the proceedings;
- The award deals with a dispute not falling within the terms of the agreement; or
- Enforcement of the award would be contrary to public policy.
Once leave to enforce has been granted, enforcement of the award can take place using all means available to a court under Cayman Islands law. Such remedies include:
- orders requiring the provision of financial information;
- orders for the seizure and sale of property;
- charging orders;
- garnishee orders; and
- the appointment of receivers and winding up proceedings.
14 Grounds for challenging an award
14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?
The Arbitration Law provides for two ways in which a party can challenge an arbitral award.
First, an application under Section 75 of the Arbitration Law to set aside an arbitral award can be made on similar grounds to those set out in Article V of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
Pursuant to Section 75, an award may be set aside by the Grand Court:
- if a party which applies to the court to set aside the award proves to the satisfaction of the court that:
- a party to the arbitration agreement was under an incapacity or placed under duress to enter into an arbitration agreement;
- the arbitration agreement is not valid under the law to which the parties have subjected it, or failing any indication thereof, under the laws of the Cayman Islands;
- the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings, or was otherwise unable to present its case;
- the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration;
- the composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties, unless such agreement is contrary to any provisions of this Law from which the parties cannot derogate, or, in the absence of such agreement, is contrary to the provisions of this Law;
- the making of the award was induced or affected by fraud, corruption or misconduct on the part of an arbitrator; or
- a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced; or
- if the court finds that:
- the subject matter of the dispute is not capable of settlement by arbitration under the Arbitration Law; or
- the award is contrary to public policy.
Second, pursuant to Section 76, a party may seek to appeal an award on the grounds that the tribunal made an error on a question of law.
Such an appeal is available provided that the parties have not agreed to exclude the right to appeal and the court grants leave to appeal.
Leave to appeal shall be given only if the court is satisfied that:
- the determination of the question will substantially affect the rights of one or more of the parties;
- the question is one that the arbitral tribunal was asked to determine;
- on the basis of the findings of fact in the award:
- the decision of the arbitral tribunal on the question is obviously wrong; or
- the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt; and
- despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
On an appeal under Section 76, the court may:
- confirm the award;
- vary the award;
- remit the award to the arbitral tribunal, in whole or in part, for reconsideration in light of the court's determination; or
- set aside the award in whole or in part.
A further appeal (against the decision of the Grand Court) may be made to the Court of Appeal. The Court of Appeal may give leave to appeal only if the question of law before it is one of general importance or one that, for some other special reason, should be considered by the Court of Appeal.
14.2 Are there are any time limits and/or other requirements to bring a challenge?
Section 75 or 76 challenges must be brought within one month of the date of the award or, if there has been any arbitral process of appeal or review, of the date on which the applicant or appellant was notified of the result of that process (Section 77(3) of the Arbitration Law).
The applicant or appellant must first have exhausted any available arbitration process of appeal or review and any available recourse for correction of the award (Section 77(2)).
14.3 Are parties permitted to exclude any rights of challenge or appeal?
The parties are permitted to exclude the right to challenge an award on a question of law (Section 76(2)), but may not exclude the court's power under Section 75.
15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?
The Arbitration Law states that an arbitral tribunal shall conduct the arbitral proceedings in private and confidentially (Section 81(1)).
The arbitral tribunal shall, at the outset of the arbitration, inform the parties of the obligations which this rule imposes on them (Section 81(4)).
Pursuant to Section 81 (2) of the Law, disclosure by the arbitral tribunal or a party of confidential information relating to the arbitration shall be actionable as a breach of an obligation of confidence (subject to certain exceptions set out below at 15.2)
The Law also provides that the arbitral tribunal and the parties shall take reasonable steps to prevent unauthorised disclosure of confidential information by any third party involved in the conduct of the arbitration (Section 81 (3)).
15.2 Are there any exceptions to confidentiality?
Disclosure of confidential information relating to the arbitration may not amount to a breach of an obligation of confidence if it:
- is authorised, expressly or impliedly, by the parties or can reasonably be considered as having been so authorised;
- is required by the tribunal or is otherwise made to assist or enable the tribunal to conduct the arbitration;
- is required:
- in order to comply with any enactment or rule of law;
- for the proper performance of the discloser's public functions; or
- in order to enable any public body or office-holder to perform public functions properly;
- can reasonably be considered as being needed to protect a party's lawful interests;
- is in the public interest;
- is necessary in the interests of justice; or
- is made in circumstances in which the discloser would have absolute privilege had the disclosed information been defamatory.
An obvious circumstance in which a party might need to disclose the arbitral award is to enforce or appeal it.
The Arbitration Law states that proceedings under the law in any court shall be heard in open court unless a party makes an application for those proceedings to be heard otherwise. In practice, parties will often apply, and the court will often accede, to applications to keep the proceedings private (Sasken Communication Technologies Limited v Spreadtrum Communications Incorporated [2016 (1) CILR 1]).
If a court does hear proceedings otherwise than in open court, it shall, on the application of any party to the proceedings, give directions as to whether any and, if so, what information relating to the proceedings may be published.
A court shall not give a direction permitting information to be published, unless:
- all parties to the proceedings agree that such information may be published; or
- the court is satisfied that the information, if published in accordance with such directions as it may give, would not reveal any matter, including the identity of any party to the proceedings, that any party to the proceedings reasonably wishes to remain confidential.
Notwithstanding the above, where a court considers its judgment to be of major legal interest, the court shall direct that reports of the judgment may be published in law reports and professional publications; but if any party to the proceedings reasonably wishes to conceal any matter, including the fact that he was such a party, the court shall:
- give directions as to the action that shall be taken to conceal that matter in those reports; and
- if it considers that a report published in accordance with such directions would be likely to reveal that matter, direct that no report shall be published until after the end of such period, not exceeding ten years, as it considers appropriate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.