Cayman Islands: The New Choice For Arbitration?

As with many jurisdictions, the Cayman Islands has seen arbitration growing in popularity, and arbitration clauses are increasingly being included in commercial contacts as it is recognised as a more flexible, efficient, and effective alternative to litigation for commercial disputes. The Cayman Islands has established itself as a pro-arbitration jurisdiction, with the courts also rendering appropriate and timely judicial assistance where necessary, and robustly enforcing foreign arbitral awards. Cayman’s pro-arbitration legal framework, infrastructure, accessibility, and the official opening of the Cayman International Mediation and Arbitration Centre, have further increased the jurisdiction’s appeal as a seat and venue of arbitration for both the region and around the globe.

What Is CI-MAC?

The Cayman International Mediation and Arbitration Centre (CI-MAC) officially opened at the start of 2023. Located in George Town, Grand Cayman, CI-MAC is a full-service dispute resolution facility, offering parties effective and efficient proceedings with a full range of digital hearing solutions and comfortable, well-appointed rooms, all with a view of the Caribbean Sea. CI-MAC has two large hearing rooms, as well as five additional rooms that can be used for breakout sessions, small hearings, meetings, prayer, nursing mothers, and mediations. It offers a range of assistive technology as well as translation, interpretation and transcription services.

CI-MAC is a ten-minute drive from the international airport with nonstop flights from many major international airports, and offers extensive catering options, on-site parking and facilities, and a roster of experienced resident and non-resident arbitrators and mediators. There are numerous first-class hotels and restaurants within minutes of the centre.

In addition to the facilities for in-person hearings, CI-MAC offers a virtual platform for fully virtual or hybrid hearings, real time court reporting, transcription, translation and interpretation, document management system, and other technology advisory services.

International Experience

CI-MAC’s roster of arbitrators features prominent practitioners from the Cayman Islands and overseas, equipped with a wide range of sectoral experience, professional backgrounds, and language skills. Among the numerous outstanding individuals on the list, are:

• Sir Anthony Smellie KC, former Chief Justice of the Cayman Islands from 1998 to 2022, who offers incomparable expertise in financial services disputes;
• Jean Kalicki, a renowned arbitrator for commercial and investment treaty disputes who was named as one of the “Five Most Influential Female International Arbitrators” in the world by Law360;
• Baiju Vasani, a renowned leader in ISDS, international commercial arbitration, and public international law;
• Professor Homer La Rue, a preeminent labour and employment arbitrator with experience in a variety of industries including airlines, railroads, and telecommunications, and
• Carita Wallgren-Lindholm, who has been involved in more than 120 international arbitrations, predominately as arbitrator and chair, including SCC, ICC, FAI, LCIA, JCAA, DIA, PCA, ICSID, UNCITRAL, and NAFTA and works in four languages.

The parties are also free to appoint arbitrators from outside the Roster. Upon request, CI-MAC is able to act as an appointing authority.

Rules Of Arbitration

CI-MAC released the first edition of its arbitration rules in March 2023, designed to facilitate cost-efficient and expeditious resolution of complex international disputes while also promoting diversity, inclusion, and environmental considerations. As indicated in the Preamble, CI-MAC is a signatory to the Green Pledge, the Equal Representation in Arbitration pledge, and the Ray Corollary Initiative Pledge.

Some key features of the rules are the ways they offer parties flexibility in managing costs, with dedicated provisions for third-party funding (Article 15), facilitated by the Private Funding of Legal Services Act 2020. Parties have the choice between the ad valorem approach and the hourly rate approach for the tribunal and CI-MAC’s fees, and they contain a provision that grandfathers in arbitration agreements that reference its previously proposed name, the Cayman International Arbitration Centre (Article 1.1). For the full text of the rules, please visit www.caymanarbitration.com.

Important Cases

In the matter of Nasser Sulaiman H M Al-Haidar v. Jetty Venkata Uma Maheshwara Rao and Petronash Global Ltd (FSD 328 of 2022, IKJ), the Grand Court of the Cayman Islands confirmed that foreign interim awards can be enforced as judgments in the Cayman Islands. The application was made ex parte and dealt with on the papers without an oral hearing, however, Justice Ian Kawaley agreed to publish written reasons, as no previous Cayman Islands case had addressed the enforceability of interim awards.

Justice Kawaley reiterated the Court’s pro-enforcement approach to arbitral awards, in keeping with the New York Convention, and he took the view that the enforcement provisions of the Cayman Islands’ Arbitration Act 2012 implicitly expanded the scope of the Foreign Arbitral Awards Enforcement Act (1997 Revision) (FAAEA) to incorporate not just final award enforcement provisions but also the interim measure enforcement provisions. This expands the scope of the FAAEA to cover interim freezing orders and provides a strategic opportunity for parties to ongoing arbitrations.

In the matter of Ren Ci & Ors (FSD 210 of 2022), the Grand Court of the Cayman Islands granted a stay of Cayman Islands Court proceedings in support of an HKIAC arbitration. The Court held that, under section 4 of the FAAEA, an arbitration clause in a shareholders’ agreement remains applicable even if the complaint is based on an alleged breach of the articles of association rather than a breach of the relevant contracts. Additionally, the Court held that filing an application for injunctive relief, provided it contains a proper reservation of right to arbitrate, does not imply a voluntary submission to the court’s jurisdiction.

The case involved a joint venture between two investor groups led by Ren Ci (the “Plaintiff”), and Wang Yanzhi (the “Defendant”) when a dispute arose over the management and ownership of the JV company. The Cayman Islands’ Grand Court examined two key issues: Scope and Waiver

The Plaintiff argued that the dispute fell outside the scope of the arbitration agreement, as it arose in connection to a breach of the Articles of Association. It was the Plaintiff’s contention that in the company law context, it was appropriate to depart from the presumption that, as rational businesspeople, the parties would intend any dispute arising out of their relationship to be decided by the same tribunal. However, the Court rejected this argument and maintained that there was no reason to depart from the presumption, and that the shareholders’ rights under the Articles and the Shareholders’ Agreement was not significantly different, and therefore the arbitration clause in the Shareholders’ Agreement also applied to the dispute arising out of the breaches of the Articles.

The Court also rejected the Plaintiff’s argument that the Defendant had waived his right to arbitrate by applying for an interlocutory injunction, as he had appropriately reserved his right to arbitrate when he filed his acknowledgement of service, on multiple occasions in party correspondence after the action had commenced, and in his affidavit in support of the injunction.

This judgment highlights the Court’s pro-arbitration stance and emphasises the importance of clear contractual agreements. The Court also touched on the potential relief of rectification of the register of members and directors under section 46 of the Companies Act (2023 Revision). However, the Court observed that the issue was not significantly developed during oral submissions to warrant any relief on that basis. This is a developing area of law and the pending Privy Council decision in FamilyMart, discussed below, is eagerly anticipated.

At the time of writing this article, the Privy Council is expected to deliver their judgment in the matter of Ting Chuan (Cayman Islands Holding Corporation v FamilyMart China Holding Co. Ltd., JCP, 2020/0055. The case involves the issue of the arbitrability of shareholder disputes involving Cayman Islands companies and shareholders’ petitions for the compulsory winding up of a solvent company on “just and equitable” grounds. In October 2018, FamilyMart filed a shareholder’s petition seeking to wind up the Company due to complaints about Ting Chuan’s management of the Company. In response, Ting Chuan applied to have the petition struck out, arguing that any disputes should be resolved through arbitration.

The Grand Court of the Cayman Islands, presided over by Mr. Justice Kawaley, rejected the strike-out application in 2019, but granted a stay on the petition until the complaints raised in the petition had been arbitrated. However, in 2020, the Cayman Islands Court of Appeal (Moses JA, Martin JA and Rix JA) held 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 … in order to determine the threshold issue as to whether there are sufficient grounds to justify winding up on just and equitable grounds, the court must evaluate all the circumstances of the case.”

The Privy Council’s decision is eagerly awaited by those involved in both the litigation and the arbitration of corporate disputes in common law jurisdictions. With the establishment of CI-MAC, the release of its modern arbitration Rules, and the recent pro-arbitration decisions by the Grand Court, Cayman has emerged as an increasingly appealing and viable option for international arbitration and is well positioned to become an arbitration hub for the Caribbean and beyond.

Megan Paget-Brown
Megan is an attorney with Paget-Brown Chambers and is the CEO of the Cayman International Arbitration Centre. Her practice areas include Arbitration and Mediation, Trusts, Corporate Governance, Blockchain Technology and Digital Assets. She is admitted to Practice Law in the Cayman Islands, the District of Columbia, Wyoming and Missouri.