This country-specific Q&A provides an overview of International Arbitration laws and regulations applicable in Cayman Islands.
What legislation applies to arbitration in your country? Are there any mandatory laws?
The principal arbitration related legislation in the Cayman Islands is the Arbitration Law 2012 (the “Arbitration Law“) and the Foreign Arbitral Awards Enforcement Law (1997 Revision) (the “Foreign Awards Law“).
The Arbitration Law is based on the UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended in 2006) and the English Arbitration Act 1996. It applies where the seat of the arbitration is the Cayman Islands (Section 3(1) of the Arbitration Law).
The Foreign Awards Law adopts the provisions of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention“) into Cayman Islands law.
Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
Yes. There are no reservations to the general obligations of the New York Convention.
What other arbitration-related treaties and conventions is your country a party to?
Pursuant to the Arbitration (International Investment Disputes) Act 1966 (Application To Colonies Etc.) Order 1967, the United Kingdom extended certain provisions of the Arbitration (International Investment Disputes) Act 1966 to the Cayman Islands.
For practical purposes however, the effect of this extension has been largely (if not entirely) been superseded by the Arbitration Law and the Foreign Awards Law.
Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?
Yes, see response to question 1 above. There are no significant differences.
Are there any impending plans to reform the arbitration laws in your country?
Not at present.
What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?
There is no arbitral institution in the Cayman Islands at present. However, the Cayman International Arbitration Centre (“CIAC“) is planning to open in the Cayman Islands in 2021. In addition to providing modern hearing facilities, the CIAC intends to introduce an official set of institutional rules and arbitration clauses, which are currently in draft form.
Is there a specialist arbitration court in your country?
No. However, whilst there is no dedicated court, applications pursuant to the Arbitration Law and the Foreign Awards Law are made to the Financial Services Division of the Grand Court of the Cayman Islands (the “Grand Court“), a division of the Grand Court staffed by specialist judges dealing with commercial cases.
What are the validity requirements for an arbitration agreement under the laws of your country?
For an arbitration agreement to be valid it must be in writing and contained in either a document signed by the parties or by means of communication that provide a record of the agreement (Section 4(3) of the Arbitration Law).
An arbitration agreement will also be deemed effective if a party asserts its existence in a pleading, statement of case or any other document which calls for a reply and the assertion is not denied (Section 4(4) of the Arbitration Law).
Are arbitration clauses considered separable from the main contract?
Yes. Section 4(5) of the Arbitration Law states that an arbitration agreement which forms, or was intended to form part of, an agreement shall be treated as a distinct agreement. This is also reflected in Section 27(2) of the Arbitration Law.
Do the courts of your country apply a validation principle under which an arbitration agreement should be considered valid and enforceable if it would be so considered under at least one of the national laws potentially applicable to it?
No, although the Grand Court may set aside an award in circumstances where the arbitration agreement is not valid under the law to which the parties have subjected it.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
In what instances can third parties or non-signatories be bound by an arbitration agreement? Are there any recent court decisions on these issues?
Tribunals are not generally permitted under Cayman Islands law to assume jurisdiction over individuals or entities that are not parties to the arbitration agreement.
In Unilever plc v ABC International [2008 CILR 87], the Grand Court granted an anti-suit injunction restraining the defendant from initiating arbitration proceedings against various companies which had previously owned a party to an arbitration agreement with the defendant, but were no longer the owners.
However, pursuant to Sections 4 and 11 of the Contracts (Rights of Third Parties) Law, 2014 a third party may, in their own right, enforce a term of an arbitration agreement if the agreement is executed after 21 May 2014 and expressly provides that they are entitled to do so.
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
The Arbitration Law does not set out which types of disputes are capable of being resolved by arbitration and which are not. The general position is that any dispute that parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless the arbitration agreement is contrary to public policy or, under any other law of the Cayman Islands, such a dispute is not capable of being determined by arbitration (Section 26(1) of the Arbitration Law).
The fact that any other law confers jurisdiction on the court but does not refer to the determination of that matter by arbitration, does not mean that a dispute about that matter is incapable of determination by arbitration (Section 26(2) of the Arbitration Law).
In the recent Cayman Islands Court of Appeal case of Familymart China Holding Co. Ltd. v Ting Chuan (Cayman Islands) Holding Corporation (Unreported, 25 February 2019, Kawaley J), it was held that a shareholder petition seeking the winding up of a Cayman Islands company on the just and equitable ground was, in that instance, non-arbitrable. Specifically, the Court of Appeal held [at para. 109] that “where the underlying issues are central and inextricably connected to determination of the statutory question whether the company should be wound up on just and equitable grounds, the possibility of hiving off those issues becomes more difficult.”
That principle has recently been followed by the Grand Court in In the matter of Asean Infrastructure Fund II LP (Unreported, 13 August 2020, Smellie CJ), which held that a petition seeking a statutory remedy was subject to the exclusive jurisdiction of the court and thus was not amenable to arbitration, even if the underlying dispute itself relates to issues which may be arbitrable.
How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?
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.
Where the parties have not chosen the law applicable to the substance of their dispute or the law chosen cannot apply to thesubstance of the dispute, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable (Section 55(2) of the Arbitration Law).
When making a decision in relation to a dispute, the tribunal shall have regard to:
(a) the provisions of any contract relating to the substance of the dispute;
(b) the normal commercial or trade usage of any undefined terms in the provisions of any contract;
(c) any established commercial or trade customs or practices relevant to the substance of the dispute; and
(d) any other matter which the parties agree is relevant in the circumstances.
(Section 55(4) of the Arbitration Law).
Have the courts in your country applied the UNIDROIT or any other transnational principles as the substantive law? If so, in what circumstances have such principles been applied?
In your country, are there any restrictions in the appointment of arbitrators?
No. The parties to an arbitration agreement may choose any number of arbitrators (Section 15(1) of the Arbitration Law), and they may agree to a procedure for appointment of an arbitrator in accordance with the rules they have chosen (Section 16(1) of the Arbitration Law).
There are no statutory requirements in terms of an arbitrator’s qualifications or past experience. Arbitrators are however required to confirm their independence (Sections 18(1) and 18(2) of the Arbitration Law).
Are there any default requirements as to the selection of a tribunal?
Where the parties fail to determine the number of arbitrators, the matter will be heard by a single arbitrator (Section 15(2) of the Arbitration Law).
Sections 16(2) and (3) of the Arbitration Law also provide for a default procedure where the parties fail to agree on rules for appointing the tribunal. This is achieved with the assistance of the “appointing authority” which means (a) any person or authority chosen by the parties to appoint an arbitrator; or (b) any person or authority designated by the Grand Court.
Can the local courts intervene in the selection of arbitrators? If so, how?
See response to question 17.
Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?
An arbitrator may be challenged only if (a) circumstances exist that give rise to justifiable doubts as to their impartiality or independence; or (b) they do not possess the qualifications agreed to by the parties (Section 18(3) of the Arbitration Law).
However, a party who appointed an arbitrator or participated in the appointment of the arbitrator cannot bring a challenge against that arbitrator, unless the grounds for the challenge became known to the party after the appointment was made (Section 18(4) of the Arbitration Law).
The parties may agree on a procedure for challenging an arbitrator. Absent such agreement, a challenge must be made within 15 days of either the constitution of the tribunal or a party becoming aware of any of the circumstances referred to in Section 18(3) of the Arbitration Law (Section 19(1) and (2) of the Arbitration Law).
Have there been any recent developments concerning the duty of independence and impartiality of the arbitrators
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
The Arbitration Law is silent on this issue, however Section 23 of the Arbitration Law sets out the procedures for the appointment of a substitute arbitrator whereby an arbitrator ceases to hold office. This includes a consideration of whether, and if so to what extent, the previous proceedings should stand.
Are arbitrators immune from liability?
An arbitrator is not liable for any consequences or costs resulting from (a) negligence in respect of anything done or omitted to be done by them in their capacity as arbitrator; or (b) any mistake of law, fact or procedure made by them in the course of arbitration proceedings or in the making of an arbitral award (Section 25(1) of the Arbitration Law).
However, an arbitrator is liable for any act or omission done where such an act or omission is shown to be done in bad faith (Section 25(4) of the Arbitration Law).
Is the principle of competence-competence recognized in your country?
Yes. This is reflected in Section 27(1) of the Arbitration Law.
What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
The Grand Court would likely grant a stay of the court proceedings pursuant to Section 9 of the Arbitration Law, unless it is satisfied that the arbitration agreement is void, inoperative, or incapable of being performed.
The party requesting the stay must make the application after acknowledging service of the claim but before filing any pleading or taking any substantive step in the proceedings.
Similar provision is made at Section 4 of the Foreign Awards Law, however this section also provides that a stay shall be granted if the Grand Court is satisfied that there is no dispute between the parties with regard to the subject matter of the arbitration.
How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
Unless otherwise agreed by the parties, an arbitration is commenced when either:
(a) a party to an arbitration agreement gives the other party notice of an intention to submit a dispute to arbitration in accordance with the agreement;
(b) a party to the arbitration agreement serves on the other party a notice requiring him to appoint or concur in appointing an arbitrator; or
(c) the arbitrator is named in the arbitration agreement and one party serves on the other party a notice requiring him to submit the matter to the arbitrator named. (Section 12(1) of the Arbitration Law).
Limitation periods in the Cayman Islands are governed by the Limitation Law (1996 Revision), which applies to both litigation and arbitration proceedings (Section 14(1) of the Arbitration Law).
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
The UK State Immunities Act 1978 (the “SIA“) was extended to apply to the Cayman Islands by the State Immunity (Overseas Territories) Order 1979 (SI 1979/458).
Where a state or state entity is a party, an arbitration can only proceed validly on the basis that the state concerned has agreed to arbitrate, and such an agreement is generally held to be a waiver of immunity. Under Section 9 of the SIA, where a state has agreed in writing to submit existing or future disputes to arbitration, the state is then not immune in respect of court proceedings which relate to the arbitration.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel participation?
Unless there is an agreement to the contrary, if a respondent fails to provide a statement of defence, the tribunal may continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations; and if any party fails to appear at a hearing or produce documentary evidence, the tribunal may continue the proceedings and make an award on the evidence before it (Section 39(2) of the Arbitration Law).
The Grand Court has powers of compulsion under Sections 40 and 41 of the Arbitration Law, which include the requirement of witnesses to attend before the tribunal to give evidence and/or to produce documents.
Can third parties voluntarily join arbitration proceedings? If all parties agree to the intervention, is the tribunal bound by this agreement? If all parties do not agree to the intervention, can the tribunal allow for it?
The tribunal’s jurisdiction derives from the agreement of the parties to the arbitration, and as such joinder or intervention is generally only possible with the consent of all parties concerned.
Can local courts order third parties to participate in arbitration proceedings in your country?
See responses to questions 12 and 27.
The Cayman Islands recognises the common law principle of privity of contract, which applies to arbitration agreements in the same way as to other types of contracts. The principle is however subject to a number of limited exceptions, such as where a contract is validly assigned to a third party, or where the right to enforce the contract in the name of one of the contracting parties has passed by operation of law to another person such as a liquidator or an insurer exercising a right of subrogation.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
Unless otherwise agreed by the parties, the tribunal may at any time prior to the issue of a final award grant an interim measure ordering a party to:
(a) maintain or restore the original position of the other party pending determination of the dispute;
(b) take action that would prevent, or refrain from taking action that is likely to cause, current or immediate harm to the arbitral process;
(c) provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) preserve evidence that may be relevant and material to the dispute.
(Section 44 of the Arbitration Law).
The Grand Court also has the same power to issue interim measures, irrespective of whether the seat of the arbitration is in the Cayman Islands, as it has in relation to court proceedings (Section 54(1) of the Arbitration Law).
Are anti-suit and/or anti-arbitration injunctions available and enforceable in your country?
Yes. By way of example, in In In the Matter of an Application of BDO Cayman Ltd concerning Argyle Funds SPC Inc. (Unreported, 13 February 2018, Parker J) the Grand Court granted an anti-suit injunction to restrain the joint official liquidators of Argyle Funds SPC (in Official Liquidation) from continuing litigation commenced in the Supreme Court of the State of New York against Argyle’s former statutory auditor and three related parties in breach of an arbitration agreement.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence? Can local courts compel witnesses to participate in arbitration proceedings?
Absent any agreement between the parties on the rules to be followed by the tribunal, the tribunal has the power to determine the admissibility, relevance, materiality and weight of any evidence (Sections 29(3) of the Arbitration Law). Unless otherwise agreed, the tribunal may also make orders or give directions to any party for discovery of documents and interrogatories (Section 38(2)(b) of the Arbitration Law).
See also response to question 27.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?
Section 28 of the Arbitration Law states that the tribunal must:
(a) act fairly and impartially;
(b) allow each party a reasonable opportunity to present their case;
(c) conduct the arbitration without unnecessary delay; and
(d) conduct the arbitration without incurring unnecessary expense.
There are also a number of non-binding ethical codes for arbitrators, including the IBA Rules of Ethics for International Arbitrators and its Guidelines on Conflicts of Interest in International Arbitration.
In your country, are there any rules with respect to the confidentiality of arbitration proceedings?
Yes. Section 81(1) of the Arbitration Law provides that a tribunal must conduct the arbitral proceedings in private and confidentially.
The parties and the tribunal are also obliged to take reasonable steps to prevent unauthorised disclosure of confidential information by any third party involved in the conduct of the arbitration (Section 81(3) of the Arbitration Law).
Any proceedings before the Grand Court in support of the arbitration will be heard in open court unless a party applies for them to be heard in private (Section 83 of the Arbitration Law). Parties to such court proceedings may also apply for certain documents to be sealed on the court file.
How are the costs of arbitration proceedings estimated and allocated?
Unless otherwise agreed, every arbitration agreement is deemed to include a provision that the costs of the arbitration shall be at the discretion of the tribunal (Section 64(1) of the Arbitration Law).
If no provision is made by an award with respect to the costs of the arbitration, any party can apply to the tribunal within 14 days of the date of the award for a direction as to whom such costs shall be paid (Section 64(2) of the Arbitration Law).
In proceedings before the Grand Court the usual rule is that costs follow the event (i.e. “loser pays”), and as a result, in practice this rule also tends to apply to arbitration proceedings in the Cayman Islands.
Can pre- and post-award interest be included on the principal claim and costs incurred?
Yes, the tribunal has broad discretion to make orders for interest pursuant to Section 58 of the Arbitration Law.
What legal requirements are there in your country for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?
The requirements concerning the form and content of an award are set out at Section 63 of the Arbitration Law, which (unless the parties agree otherwise) includes a requirement that it must state the reasons upon which it is based.
An award may, with leave of the Grand Court, be enforced in the same manner as a judgment or order of the court to the same effect, and where leave is given, judgment may be entered in the same terms as the award (Sections 72(1) and (2) of the Arbitration Law).
What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?
The length of time that enforcement proceedings take depends on the circumstances, however it is intended to be a relatively quick process.
An application for leave to enforce an award is made by ex parte originating summons, supported by affidavit evidence. The requirements are set out at Order 73, Rule 31 of the Grand Court Rules.
Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?
No, the standard for review is substantially the same. The grounds for setting aside a domestic award are set out at Section 75 of the Arbitration law, and the grounds for refusal of enforcement of a foreign award are set out at Section 7 of the Foreign Awards Law. These broadly mirror the grounds set out in Article V of the New York Convention.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts
Absent any agreement between the parties on the powers exercisable by the tribunal in relation to remedies, the tribunal may award any remedy or relief that could have been ordered by the Grand Court if the dispute had been the subject of litigation proceedings (Section 57(2) of the Arbitration Law).
As punitive damages are not awarded by the Grand Court, absent any agreement between the parties otherwise, a tribunal would not be able to award that remedy.
Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?
Yes, a party may, with the leave of the Grand Court, and upon notice to the other party and to the tribunal, appeal to the Grand Court on a question of law arising out of an award made in the proceedings (Section 76(1) of the Arbitration Law). Leave will only be granted if the Grand Court is satisfied that:
(a) the determination of the question will substantially affect the rights of one or more of the parties;
(b) the question is one that the tribunal was asked to determine;
(c) on the basis of the tribunal’s findings of fact, its decision on the question is obviously wrong, or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and
(d) 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.
The procedure for applying for permission to appeal on a question of law is similar to that for an application to set aside under Section 75 of the Arbitration Law, and the applicant must identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted (Section 76(5) of the Arbitration Law).
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
Yes, the parties may agree to exclude the provisions of Section 76 of the Arbitration Law. This agreement may be reflected in the arbitration clause. They cannot however waive the right to set aside an award.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
We anticipate that the Grand Court would follow the English Court of Appeal decision in Svenska Petroleum Exploration v Lithuania  EWCA Civ 1529, which held that arbitration is a consensual procedure and the principle underlying Section 9 of the SIA is that, if a state has agreed to submit to arbitration it has rendered itself amenable to such process as may be necessary to render the arbitration effective. This extends to proceedings for the enforcement of the arbitral award.
In what instances can third parties or non-signatories be bound by an award? To what extent might a third party challenge the recognition of an award?
See responses to questions 12 and 28.
As a general rule, those who are not a party to the arbitration agreement pursuant to which a tribunal is granted jurisdiction will not be bound by that tribunal’s award.
Have courts in your jurisdiction considered third party funding in connection with arbitration proceedings recently?
Yes. In A Company v A Funder (Unreported, 23 November 2017), the Grand Court held that a proposed funding agreement intended to fund the enforcement of a New York arbitral award in the Cayman Islands was not unenforceable as a matter of public policy. Applications of this nature are considered on a case by case basis.
Is emergency arbitrator relief available in your country? Is this frequently used?
The Arbitration Law does not include provisions relating to emergency arbitrator relief. In practice, such relief can usually be found in the institutional rules adopted by the parties, if any.
Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?
Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?
No. However, as mentioned in the responses to questions 16 and 19, the parties are afforded significant flexibility in their choice of arbitrators, with challenges only permitted if circumstances exist that give rise to justifiable doubts as to their impartiality or independence, or they do not possess the qualification agreed to by the parties.
Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
Have there been any recent court decisions in your country considering the issue of corruption? What standard do local courts apply for proving of corruption? Which party bears the burden of proving corruption?
Have there been any recent court decisions in your country considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award?
No specific guidance has been provided by the Grand Court with respect to corruption in arbitration proceedings. However, the Anti-Corruption Law (2019 Revision) creates a range of criminal offences relating to the actual, attempted or solicited bribery of public officers. “Public Officers” are defined as including any arbitrator in any proceeding or matter with the sanction of any court or in pursuance of any law, and as such any corruption in relation to an arbitration would be likely to constitute a crime.
The responsibility for prosecuting any such allegation would rest with the Director of Public Prosecutions and the standard of proof would be that applicable in criminal cases, namely beyond reasonable doubt.
Have there been any recent court decisions in your country considering the judgment of the Court of Justice of the European Union in Slovak Republic v Achmea BV (Case C-284/16) with respect to intra-European Union bilateral investment treaties or the Energy Charter Treaty? Are there any pending decisions?
In VRG Linhas Aereas S.A. v Matlin Patterson Global Opportunities Partners (Cayman) II L.P. & Ors, (Unreported, 19 February 2019, Mangatal J) the Grand Court exercised its discretion to refuse enforcement of a foreign award in circumstances where, among other things, the defendants were not parties to the arbitration agreement and did not consent to arbitration on the basis that the award violated the principles established by the New York Convention and was contrary to the public policy of the Cayman Islands on grounds of breach of procedural fairness and natural justice.
Have there are been any recent decisions in your country considering the General Court of the European Union’s decision Micula & Ors (Joined Cases T-624/15, T-694/15 and T-694.15), ECLI:EU:T:2019:423, dated 18 June 2019? Are there any pending decisions?
What measures, if any, have arbitral institutions in your country taken in response to the COVID-19 pandemic?
In your country, does the insolvency of a party affect the enforceability of an arbitration agreement?
No. Section 7 of the Arbitration Law states that a contract in which the director of an insolvent body corporate has agreed to refer to arbitration any dispute arising from that contract shall be enforceable against the liquidator, receiver or administrator if either of them adopts the contract.
Is your country a Contracting Party to the Energy Charter Treaty? If so, has it expressed any specific views as to the current negotiations on the modernization of the Treaty?
Have there been any recent developments in your jurisdiction with regard to disputes on climate change and/or human rights?
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