Recent Developments In Arbitration & Alternative Dispute Resolution In The Cayman Islands
By Ross McDonough & Kirsten Houghton
Posted: 9th November 2012 10:19
On 2nd July 2012, the Cayman Islands brought into force its newly enacted Arbitration Law 2012 (“the Law”). The Law repeals in its entirety the former Arbitration Law (2001 Revision) which had long outlived its usefulness, based, as it was, on the outdated provisions of the United Kingdom’s Arbitration Act 1950, and brings into a force a regime for arbitration in the Cayman Islands based on the UNCITRAL Model Law. The Law is the result of over three years’ work by the Cayman Islands’ Law Reform Commission (“the Commission”), which published three draft bills over that period, and undertook a lengthy consultation amongst Cayman Islands’ legal profession and other stakeholders. The Commission described its task as follows:
“The critical element of the modernisation relations to ensuring that [the Law] provides for party autonomy in the arbitration process while limiting judicial intervention… it was felt that a law formulated along the lines of the [UNCITRAL] Model Law would allow [the Cayman Islands] to become a jurisdictions in which arbitration practitioners can operate in a regime which accords with widely accepted international arbitration practices and development… with the reform of the legislative regime, the Cayman Islands would be seen as a jurisdiction which business parties would choose as the seat to conduct arbitral proceedings, thereby generally promoting Cayman as a regional centre for legal services and dispute resolution.”(1)
These are noble aims, particularly as the Commission frankly acknowledged that the financial services industry, which comprises a large sector of our economy, does not, so far as is known, currently generate any international arbitration business which is actually conducted in the Cayman Islands. In fact, the vast majority of disputes concerning our financial services industry are determined in the Grand Court. This is not surprising in one sense, because the majority of cases arise in the course of insolvency proceedings, but increasingly our courts are being presented with breach of contract, negligence and breach of fiduciary duty claims concerning funds and trusts and other businesses carried out abroad by companies which are registered here as “exempt” companies. These disputes can, and sometime do, take a great deal of time to resolve, because of procedural posturing and lack of court availability (although this last has been improved by the institution of the Financial Services Division of the Grand Court), and can also generate damaging publicity for the protagonists. In addition, the Cayman Islands is actively seeking to attract a larger proportion of the insurance and reinsurance industry to establish businesses here. That is a sector of the economy in which arbitration has always been an important, if not the primary, method of dispute resolution. If the Law plays a part in attracting even a modest percentage of the parties to these non-insolvency related commercial disputes to utilise a Cayman Islands’ based arbitral procedure, it will have achieved its aim.
There may be teething problems – for example, one of the recommendations made by the Commission was that the Cayman Islands’ authorities should aim to foster international arbitration business, in part by a liberalisation of immigration and other laws which might tend to restrict the movement of parties, arbitrators, witnesses and “advocates” into the Cayman Islands for the purpose of conducting arbitrations. The Commission also recommended that the Cayman Islands should gradually work towards the establishment of a formal arbitration centre, funded partly by Government and partly by private investment. It is unlikely that this second recommendation will be adopted in the short to medium term by the Cayman Islands’ Government, but it is possible that immigration procedures and legal practice requirements might be adapted to enable overseas participants in arbitration proceedings in the Cayman Islands to enter the Islands and conduct the proceedings more easily than is currently the case. It is notable in this regard that one of the provisions of the Government versions of the bill (now enshrined in the new Law) which was significantly different from the version drafted by the Commission is section 34, which provides that a party to an arbitration may be represented by a “legal practitioner” (a term defined by Cayman Islands’ law limited to local attorneys) or “any other person chosen by him”, perhaps paving the way for the necessary changes to immigration and legal practice requirements. The current requirements are definitely not insurmountable, but careful amendment of these requirements to encourage arbitration proceedings to take place more flexibly and cost effectively should be encouraged.
The Law is generally supported by the legal community in the Cayman Islands. Clearly there exists here wide expertise in dispute resolution before the courts. More recently, as a result of the efforts of a small number of lawyers and others, particularly Alistair Walters of Campbells, and the teaching faculty of the London School of Mediation, the legal profession and others have formed the Cayman Islands Association of Mediators and Arbitrators (“CIAMA”), a body which exists to promote mediation and arbitration as alternative methods of dispute resolution across a wide range of areas, including financial services, construction, insurance, family law, consumer and private disputes and, with the imminent introduction of the Bill of Rights, human rights. The Cayman Islands also has a small but growing community of members, associates and Fellows of the Chartered Institute of Arbitrators, and several affiliates of AAA. Whilst it is not yet a large portion of our legal world in Cayman, interest is growing, and it is to be hoped that both arbitration and mediation will grow in prominence, particularly if added benefits of speedy resolution and lower cost can be achieved.
It remains to be seen whether the Law will bring about any of the effects desired by the Commission. However, there are certainly new options for dispute resolution available for clients in many areas of business which can now be looked at and advised upon with more confidence than formerly.
Ross McDonough has practised at the Cayman bar for 18 years and is currently ranked band 1 in Chambers and Partners Guide 2012. Ross specialises in commercial litigation (asset tracing claims, confidentiality matters, liquidations and receiverships, mutual fund and trust litigation, enforcement of foreign judgments). Appeared as lead Counsel in numerous reported cases before the Grand Court, Court of Appeal and Privy Council. Ross has also been instructed as an expert witness in Cayman law in a number of proceedings before courts in other jurisdictions.
Ross McDonough can be contacted by phone on +1 345 949 2648or alternatively via email at firstname.lastname@example.org
Kirsten Houghton has practised at the Cayman Bar for over 6 years, and previously at the English Bar for over 15 years. She has a broad commercial dispute resolution practice including international and domestic commercial disputes, Funds’ litigation, insurance and reinsurance, company and shareholder disputes, construction and property related matters, information technology, pre-emptive remedies and all aspects of commercial professional negligence. She is an experienced advocate before the Cayman Islands’ courts and is also a Chartered arbitrator and a founder member of the Cayman Islands Association of Mediators and Arbitrators.
Kirsten Houghton can be contacted by phone on +1 345 949 2648or alternatively via email at email@example.com
(1) Review of the Arbitration Law of the Cayman Islands, Final report, 4th January 2012, Cayman Islands Law Commission