Key takeaways
- The circumstances in which an unsuccessful party in arbitration may resist enforcement of an award in the Cayman Islands are limited in number and narrow in scope.
- The judiciary are alive to the risk that parties may run unmeritorious arguments at the enforcement stage to seek to limit or delay the practical consequences of any award. Any party that seeks to oppose enforcement can expect its case to be the subject of careful judicial scrutiny.
- Parties in arbitral proceedings that may lead to enforcement proceedings in the Cayman Islands should think carefully about the points taken in the arbitration (whether on an interlocutory or final basis) as the Cayman Islands courts are unlikely to reconsider issues that have already been addressed by the tribunal or take into account matters that could have been raised with the tribunal prior to the issue of the award but were not.
Overview
The regime for enforcement of foreign arbitral awards in the Cayman Islands, as embodied in the Foreign Arbitral Awards Enforcement Act (1997 Revision) (the "FAAEA") and the jurisprudence of the Grand Court of the Cayman Islands (the "Court"), reflects the jurisdiction's pro-arbitration culture.
The limited circumstances in which enforcement of a Convention Award may be challenged are set out in s 7(2) and (3) of the of the FAAEA . S 7(1) FAAEA makes it clear that "Enforcement of a Convention Award shall not be refused except in the cases mentioned in section 7(2) and (3)."
Notwithstanding the narrow scope of the exceptions under s 7(2) and (3), unsuccessful parties in foreign-seated arbitrations will often seek to resist enforcement in an attempt to limit or delay the practical consequences of any award.
This article considers three recent cases in which different enforcement issues have arisen. In each case, the defendant to the proceedings was unsuccessful.
Henderson v Henderson
Mr Nasser Sulaiman H M Al-Haidar v Mr Jetty Venkata Uma Maheshwara Rao (unreported, 15 April 2024) concerned an arbitration agreement that provided for arbitration under DIFC-LCIA Rules. In circumstances in which, at the time of the dispute, the DIAC-LCIA had been abolished by the Dubai Decree No. 34 of 2021 (the "Decree"), the plaintiff had issued a Request for Arbitration to the Dubai International Arbitration Centre (“DIAC”) (which was identified by the Decree as the replacement arbitral institution).
The defendant did not initially take issue with the reference by the plaintiff to the DIAC and a tribunal was formed with the defendant's co-operation. Shortly thereafter, the plaintiff applied for interim injunctive relief from the tribunal. Whilst the defendant's Statement of Defence contained a challenge to the jurisdiction of the DIAC tribunal to determine the substantive claim on the basis that the parties had not agreed for the reference to be made to the DIAC, at no point was the jurisdiction point taken in relation to the tribunal's jurisdiction to determine the interlocutory application.
The tribunal issued a provisional award in favour of the plaintiff and the plaintiff then brought enforcement proceedings in relation to that award in the Cayman Islands and elsewhere. It was at this stage that the defendant sought to resist enforcement under s 7(2)(e) FAAEA which provides (in so far as relevant) that enforcement may be refused where:
“the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties…”.
In dismissing the application, Kawaley J found that the defendant was estopped from challenging the jurisdiction of the tribunal in connection with the provisional award where that challenge had not been raised earlier in time in front of the tribunal itself (applying the principle in Henderson v Henderson). The judge also acknowledged in passing that the doctrine of waiver can apply to any breach of an arbitration agreement.
In summarising the position, Kawaley J held that "[t]he legislative policy of swift enforcement on narrowly circumscribed grounds could all too easily be undermined if respondents had the unfettered right to raise new points before foreign enforcement courts which were never in issue before the tribunal but which could and should have been raised."
The question of whether the DIAC constituted tribunal had jurisdiction to determine the substantive dispute between the parties was a matter that was to be left to the tribunal to determine in due course.
Public policy
In White Crystals Ltd v. General Partner of Infrastructure Growth & Capital Fund (unreported, 2 April 2024), the dispute concerned the entitlement of a limited partner ("LP") of a Cayman Islands exempted limited partnership (the "ELP") (i) to have access to the books and records of the ELP and (ii) to receive information from the general partner concerning the business and affairs of the ELP.
The LP had obtained an award in a LCIA administered arbitration which required the general partner of the ELP (the "GP") to provide the access and information sought, but the GP had refused to comply with parts of the award unless the LP gave certain undertakings regarding the manner in which it would use the information provided. The LP applied for leave to enforce the award and to compel performance in the Cayman Islands. At the ex parte hearing, Ramsay-Hale J made the order sought (the "Enforcement Order").
The GP subsequently applied to discharge the Enforcement Order and to obtain an injunction restraining the use by the LP of information or documents provided by the GP pursuant to the award, or alternatively for variation of the Enforcement Order to include either an injunction on similar terms or a requirement that the LP provide certain undertakings to the same effect.
The GP argued that the application to the tribunal was not bona fide and had been made by a minority stakeholder for improper purposes solely to obtain confidential information for third parties whose interests were adverse to those of the ELP. The GP argued that it would be unjust and therefore contrary to public policy to require the GP to comply with the Enforcement Order without affording it the protections sought. Accordingly, it argued, it was open to the Court to refuse to enforce under s 7(3)) of the FAAEA.
Ramsay-Hale J roundly rejected the GP's application on the basis that enforcement of the award was not contrary to any public policy or mandatory rule of law (i.e. s 7(3) had not been satisfied). The judge noted in this context that: "[G]iven the strong public policy in the enforcement of tribunal awards in the FAAEA, which provides very limited bases on which the enforcement of an award may be refused, the scope of the public policy basis for refusing to enforce an award should be construed very narrowly."
The judge also accepted the submission of counsel for the LP that the Court has no jurisdiction to add "a rider or addendum" to and award on an enforcement application; instead, the choice for the Court is a binary one either to enforce the award in accordance with s 5 FAAEA or to refuse to do so.
The case also raised an issue estoppel point similar to that raised in Al-Haidar v Rao as the GP had already run similar arguments in front of the tribunal. Ramsay-Hale J was clear that it was not open to the GP to re-litigate this issue when the tribunal had rejected the GP's evidence.
The judge also appeared to accept the submission on behalf of the LP that, given the scope of the parties' arbitration agreement, any application for an injunction ought to have been made to the tribunal and not the Court.
Stays and service
In Carrefour Nederland B.V. v. Suning International Group Co., Limited and Suning.Com Co., Ltd (unreported, 15 April 2024), Kawaley J considered an application to stay enforcement of an award issued by a HKIAC administered tribunal on the basis that the defendant in the enforcement proceedings had commenced a 'counterclaim' in a separate set of proceedings[1] such that there was the possibility of set-off against the defendant's liability under the existing award. A similar stay application had been made by the defendant before the Hong Kong court and was sub judice at the time of Kawaley J's judgment.
Kawaley J gave careful consideration to the pragmatic arguments raised by the defendant's counsel regarding the advantages of a case management stay. Ultimately, however, the judge concluded that whatever the practical advantages, and notwithstanding the Court's inherent case management powers, it was not possible to circumvent the clear statutory wording of section 7(1) to the effect that enforcement could only be refused on one of the grounds specified in section 7(2) and (3).
Interestingly, Kawaley J acknowledged that "once local judgment had been entered in terms of the Final Award, the Court’s common law and/or statutory jurisdiction to stay execution could not be doubted". In other words, the defendant had simply applied for the stay prematurely and in relation to the wrong stage of the process.
The judgment also contains interesting commentary regarding service. Firstly, Kawaley J confirmed that although it will not typically be necessary for a plaintiff on an ex parte application for enforcement of a foreign arbitral award to formally serve the originating process on the defendant(s) itself,[1] the Court has a discretion to require service in the appropriate case. In such a case, the judge noted that the plaintiff would need to seek leave to serve out of the jurisdiction "under the more traditional service abroad regime" in a manner that will often engage the Hague Convention[2]. In the typical ex parte case, however, Kawaley J confirmed that the plaintiff will instead only be required to serve the order for enforcement once made. In this instance, the normal rules for service of originating process do not apply due to the provisions of O.73, r.31. In particular, personal service will not be required and the Court has an unfettered discretion under O.73, r.31(6) to authorise service in such manner as it thinks fit, provided that the method of service chosen is not contrary to the local law of the place where service is to occur. In confirming the position, Kawaley J noted: "Order 73 rule 31(6) is specifically designed to sidestep attempt to delay enforcement by evading service and empowers the Court to direct service in whatever way is likely to bring the order to the respondent's notice".
On 24 July 2024 Kawaley J heard an application for leave to appeal and for stay pending appeal from the defendants. He allowed the leave to appeal but refused to stay the Judgement pending appeal.
Although Kawaley J did not find the reasons to appeal had "realistic prospect of success", he allowed the leave to appeal as the reasons raised a question of public interest
Conclusion
It is clear from the judicial commentary in all three of the cases summarised above that the Cayman Islands continues to be an arbitration friendly jurisdiction in which the Court is vigilant against attempts by unsuccessful parties to circumvent the findings of the arbitral tribunal in the primary proceedings. Nonetheless, practitioners can expect the steady flow of enforcement disputes to continue given the possible upside for defendants if a s 7(2) or (3) exception is established.
[1] Defined in the act as an award made in pursuance of an arbitration agreement in the territory of a State, other than the Islands, which is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, (the "New York Convention").
[2] These grounds derive from and are aligned with Article V of the New York Convention.
[3] (1843) 3 Hare 100
[4] The HKIAC tribunal had found it had no jurisdiction to determine the counterclaim when raised in the first arbitration.
[5] Including after an order has been obtained.
[6]The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965).
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