Procedure
Arbitral tribunal powers
Grand Court supervision and assistance
Consolidation of proceedings
Interim measures
This article is the second in a three-part series on arbitration in the Cayman Islands and covers the main aspects of the conduct of proceedings. For part one of the series please see "Guide to Cayman Islands arbitration".
There is no default mechanism to determine the place, language or seat of the arbitration proceedings. The parties to an arbitration may, therefore, decide these themselves. In default of agreement, the arbitral tribunal determines these issues having regard to the circumstances of the case.
The parties usually select a set of procedural rules in the arbitration agreement, either by reference to and incorporation of a recognised body of institutional rules (such as those of the International Chamber of Commerce or the American Arbitration Association) or by including tailor-made rules to govern the particular subject matter of any reference to arbitration. Once the Cayman International Arbitration Centre (CIAC) is established, the parties may also choose to incorporate the CIAC rules into their arbitration.
The parties can, for example, agree whether to have a hearing, and in the absence of any agreement between the parties, the arbitrator can decide whether a hearing is necessary. If the chosen rules do not address a particular procedural issue that arises during the arbitration, the arbitrator can "conduct the arbitration in such manner as it considers appropriate".(1) In Appalachian, the Grand Court upheld the relevant arbitration clause by which the parties expressly agreed that the arbitrators were "not obliged to follow judicial formalities or rules of evidence". In that case, the tribunal's decision to hear a summary judgment application without an oral hearing was not found in any way to represent a breach of the rules of natural justice as alleged, and it was not contrary to the public interest for the tribunal to do so.
The Arbitration Act provides that arbitral tribunals have the following powers, unless a contrary intention is expressed in the arbitration agreement:(2)
- set their own rules of evidence;
- provide that a party gives security for the other party's costs of the arbitral proceedings;
- administer oaths, or take affirmations of the parties and witnesses;
- order, but not compel, the disclosure of documents or attendance of a witness (an arbitrator cannot penalise a third party for non-compliance with an order; however, where an arbitrator deems it necessary to compel the disclosure of documents or attendance of a witness, the assistance of the Grand Court can be sought);
- provide for the appointment of appropriate experts (the arbitral tribunal can also require that the expert be provided with access to relevant information and documentation and to conduct inspections of property);
- provide for the custody and preservation of any evidence for the purpose of the proceedings;
- order that questions may be put to the other party; and
- call for the production of all documents within the possession or power of the parties (the parties can agree different rules on disclosure, including electronic discovery, that are far more flexible in comparison to the strict rules of disclosure in litigation).
Grand Court supervision and assistance
The Grand Court can assist in the arbitration process where appropriate and will supervise arbitral proceedings and intervene only where it is necessary, so as to protect the integrity of the arbitral process or to further the fundamental principles. The rules require that all applications made to the Grand Court arising out of arbitrations must be made in the financial services division, which is the division most experienced in handling the Cayman Islands' complex commercial disputes and which assigns specialist judges to hear such matters.
There are a number of ways the Grand Court can assist an arbitration. The Grand Court can assist in gathering evidence and may issue orders to compel the attendance and examination of witnesses, and the production of documents, to the same extent as if it were trying the action in the Grand Court. However, before it does so, the rules provide that the Court must be satisfied that the arbitral tribunal permits the application to be made, or that it is made with the agreement of the other parties.
In relation to procedural issues, the Grand Court:
- is compelled to stay legal proceedings commenced in breach of an arbitration agreement;(3)
- may extend any time limits for starting arbitration proceedings and for making an award;
- may determine any question of law arising during an arbitration referred to it by the arbitral parties;(4)
- may assess and enforce the payment of an arbitrator's fees and the payment of costs awarded by an arbitrator against a party; and
- may enforce an arbitral award in the same way as a judgment (this can include a foreign arbitral award).
In respect of available interim remedies, the Grand Court has the same broad powers in its arsenal as are ancillary to an action in the Grand Court, but these powers are exercisable only if or to the extent that the arbitral tribunal has no power to deal with the issue at hand or is unable for the time being to act effectively.(5) In particular, it may:
- make asset preservation orders where the application is urgent and with the permission of the parties or arbitral tribunal where the application is not urgent;
- grant interim injunctions;
- make search and seizure orders; and
- appoint a receiver.
These powers are not exclusive to the Grand Court, as equivalent powers may be vested in the arbitrator. However, they may be preferred, since equivalent orders from the arbitral tribunal will not bind third parties (eg, custodians of assets) who are not party to the arbitration agreement.
The Grand Court will take steps to uphold the primacy of the parties' agreement to arbitrate. Pursuant to section 9 of the Arbitration Act, where there is a valid and binding arbitration agreement, the Grand Court must recognise and enforce it by staying any legal proceedings started in breach of such an agreement, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. Likewise, section 4 of the Foreign Arbitral Awards Enforcement Law (1997 Revision) (the Enforcement Law) provides that a stay will be granted in favour of an overseas arbitration, subject to the same exceptions.
In recent years, there have been a number of cases which have considered the applicability of the mandatory stay provision in the context of insolvency proceedings, where a creditor petitions to wind up a company for non-payment of a contractual debt, which is disputed and arises out of a contract containing an arbitration clause. The approach taken by the Cayman courts in decisions such as Re Sphinx Group of Companies and Re Times Property Holdings Ltd(6) confirms that the Court will ordinarily grant a stay of a winding up petition based on a disputed debt where the underlying dispute falls within the scope of an agreement to arbitrate, thereby demonstrating the Cayman Islands' pro-arbitration stance. However, in the recent decision of Re Grand State Investments Limited(7) the Court did confirm that the mere presence of a dispute will not be enough; the Court needs to be satisfied as to the existence of a bona fide dispute on substantial grounds prior to being able to exercise its discretion to stay a petition in favour of arbitration.
The issue is more complicated in the context of winding up proceedings that are brought on the just and equitable ground. In the recent decision of FamilyMart China Holdings Holding CO LTD v Ting Chuan (Cayman Islands) Holding Corporation,(8) the Cayman Islands Court of Appeal (overturning the earlier lower Court decision) held that, while it is possible to "hive off" issues to be determined by the arbitrator in the context of winding up proceedings on the grounds of insolvency, the same cannot be said for just and equitable winding up petitions, as the Cayman court has exclusive jurisdiction to make a winding up order where "the court is of the opinion" that it just and equitable to do so.(9) It is, therefore, necessary for the court to form its own opinion as to whether it is just and equitable to wind up a company; it will not hive off that issue to an arbitrator.
In recognition of the fact that the Cayman Islands is home to the majority of offshore investment funds and the multitude of parties often involved in investment fund disputes, specific provisions allow for multi-party arbitrations and related issues concerning the consolidation of arbitral proceedings. The ambit of arbitral proceedings may also be extended, and the parties may refer additional disputes to which the relevant arbitration agreement applies.
After the arbitral tribunal has been constituted and unless otherwise agreed by the parties, the tribunal may grant interim measures ordering a party to:(10)
- maintain or restore the original position of the other party pending determination of the dispute;
- 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;
- provide a means of preserving assets out of which a subsequent award may be satisfied; or
- preserve evidence that may be relevant and material to the resolution of the dispute.
The party seeking the interim measure is under an ongoing duty to disclose all circumstances that are likely to be relevant to the arbitral tribunal's determination whether to grant or maintain the order sought. Should the arbitral tribunal grant an interim measure, the requesting party will be liable for any costs or damages caused by the measure should the tribunal later find that the measure ought not to have been granted, and the arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure.
For further information on this topic please contact Jennifer Fox, William Jones or Anna Snead at Ogier's Grand Cayman office by telephone (+1 345 949 9876) or email ([email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.
Endnotes
(1) Section 29(2) of the Arbitration Act.
(2) Sections 37 and 38(2) of the Arbitration Act.
(3) Section 9 of the Arbitration Act.
(4) Section 71 of the Arbitration Act provides that parties to an arbitration can seek a preliminary determination of the Grand Court on any question of law arising during the course of the arbitration or an award, provided that the arbitration agreement does not provide otherwise and the Grand Court is satisfied that the issue substantially affects the rights of one or more of the parties. In addition, the Grand Court will only entertain such an application provided that:
- all of the parties to the arbitration agree that the application ought to be made;
- the arbitral tribunal permits the making of the application;
- the Grand Court is satisfied that the determination of the question is likely to produce substantial savings in costs; and
- the application is made without delay.
(5) Section 43(5) of the Arbitration Act.
(6) In Re Sphinx Group, Court of Appeal, unreported, 2 February 2016 and Re Times Property Holdings Ltd [2011 (1) CILR 223].
(7) Re Grand State Investments Limited 28 April 2021, FSD 11/2021.
(8) FamilyMart China Holdings Holding CO LTD v Ting Chuan (Cayman Islands) Holding Corporation, CICA, unreported, 24 April 2020.