Successful litigants in foreign proceedings will often be required to take steps to enforce any judgment or order obtained outside of the jurisdiction in which it was made. The Grand Court of the Cayman Islands routinely recognises and enforces foreign judgments and arbitral awards from countries such as the United States, the United Kingdom, Singapore, Hong Kong and the PRC (amongst others) against individuals, entities and assets domiciled or situated in the Cayman Islands.
This advisory provides an overview of the process for recognition and enforcement of foreign judgments, foreign arbitral awards and worldwide freezing orders made by foreign courts or by the Grand Court in support of foreign proceedings or arbitral proceedings.
Common law recognition of foreign judgments
The Cayman Islands has not entered into any bilateral or multilateral treaties for the reciprocal recognition and enforcement of foreign judgments other than The Foreign Judgments Reciprocal Enforcement Act (1996 Revision) which extends only to judgments from the Superior Courts of Australia and its external territories.
Australian judgments aside, the typical route for recognition and enforcement of foreign judgments is under the common law which requires the enforcing party to issue fresh proceedings in the Cayman Islands by filing a writ of summons in the Financial Services Division of the Grand Court seeking an order in the same terms as the foreign judgment, i.e. the foreign judgment is the cause of action and enforcement involves seeking summary (or, where possible, default) judgment in the writ action. Monetary and certain non-monetary judgments are enforceable at common law and the limitation period for issuing the writ action is six years from the date of the foreign judgment. Once judgment has been entered, it can be enforced in the same way as a domestic judgment.
Monetary judgments
Foreign monetary judgments, i.e. judgments for a debt of a definitive sum of money, are relatively straightforward to enforce. Provided that the judgment is final and conclusive, for the payment of a sum of money, is not fiscal, penal or contrary to Cayman public policy and is made by a foreign court of competent jurisdiction then the judgment creditor may issue a writ action in the Grand Court seeking payment of the judgment debt. Default judgments made by a foreign court can be enforced provided that the foreign court had jurisdiction to make the order.
Non-monetary judgments
For non-monetary judgments, foreign in personam judgments made by a competent court with jurisdiction to give that judgment may be recognised and enforced by the Grand Court through equitable remedies or under the principle of comity provided that the Grand Court does not have to extend domestic law to do so and the foreign order is final and conclusive.
A distinction therefore needs to be made between a foreign judgment arising from an in personam proceeding which decides the personal rights and interests of the parties to those proceedings and in rem proceedings which decide the rights or title to property situated outside the jurisdiction of the foreign court which is binding on both the parties and non-parties alike.[1] The Grand Court will exercise its discretion to recognise and enforce foreign monetary and non-monetary in personam judgments having regard to general considerations of fairness.
Freezing orders or injunctions (formerly known as Mareva orders or injunctions)
The requirement for a non-monetary judgment to be final and conclusive in order for it to be recognised and enforced means that a foreign interim order such as a worldwide freezing order, which is typically made to prevent the dissipation of assets pending the determination of an action, is incapable of being recognised and enforced under the common law.
Instead the Grand Court has a statutory power under section 11A of the Grand Court Act (2015 Revision) to grant a worldwide freezing order (or other form of injunctive relief) in relation to proceedings which have been or are to be commenced in a foreign court, where such proceedings are capable of giving rise to a judgment that may be enforced in the Cayman Islands. The power to order a worldwide freezing order in support of foreign proceedings is broadly similar to the power of the English Courts under section 25 of the Civil Jurisdiction and Judgments Act. An application may be made ex parte on short notice to the respondent or in certain circumstances on no notice to the respondent.
Test for an injunction
The test for obtaining an injunction under section 11A of the Grand Court Act in connection with foreign proceedings is the same test for obtaining an injunction in relation to domestic proceedings, namely a good arguable case (i.e. on the merits of the substantive claims brought/to be brought in the foreign jurisdiction) and whether there is a risk of dissipation of assets such that, if the relief is not granted, there is a real risk that any foreign judgment would go unsatisfied.
It is also necessary for the Grand Court to decide whether granting the worldwide freezing order would be just and convenient, which is akin to a test of expediency (the equivalent term used in the English statute). The jurisdiction is not one that should be exercised only in exceptional circumstances, and the Court should not be timid to grant relief where appropriate.
In terms of the principles, a good arguable case means “… one which is more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50 per cent chance of success” (Ninemia Maritime Corp v Trave GmbH [1984] 1 All ER 398).
As to the risk of dissipation, there must be “solid evidence” (which is to be judged on a case by case basis) of a real risk of any judgment remaining unsatisfied as a result of the respondent engaging in activities outside of the usual and ordinary course of its business to dissipate its assets. It is possible in principle to infer a risk of dissipation and a risk will be more readily inferred where the respondent is a holding company without any substantial presence or operations within the jurisdiction.
Where there is a good arguable case of fraudulent or dishonest behavior by the respondent, this will support the inference of a risk of dissipation being present. However, the Court will take into account the timing of any application for a worldwide freezing order and a delay in bringing the application may suggest to the court that the applicant does not consider there to be a real risk of dissipation.
Court’s wide jurisdiction to grant an injunction in support of foreign proceedings
The Grand Court has jurisdiction to grant a worldwide freezing order (or other form of injunctive relief) under section 11A of the Grand Court Act against a respondent outside of the jurisdiction.[2] In certain cases, such as where a cross-border fraud is alleged, the Grand Court may be persuaded to grant a worldwide freezing order even if the respondent does not have any assets in the Cayman Islands.
In circumstances where the respondent is either non-resident or non-domiciled in the Cayman Islands, the Court will consider the availability of injunctive relief from another jurisdiction and the enforceability of the worldwide freezing order if granted by the Grand Court. Questions of comity require the Grand Court to consider whether granting the relief sought would interfere with, be inconsistent with, or otherwise overlap with an order made by another court.
If relief is available in the primary court or in the jurisdiction of the respondent’s residence or in some other jurisdiction, questions of comity require the Grand Court to have regard to certain considerations when exercising its discretion including the following:
- If relief is within the power of the foreign court and may be or has been obtained, then any injunctive relief in the Cayman Islands is likely to be limited in scope to assets within the Islands;
- If the relief is within the power of the foreign court but has been refused by the foreign court, that will be a factor to be taken into account, but it does not necessarilymean that the Grand Court will decline to grant the worldwide freezing order; and
- If relief is not available in other jurisdictions, then that is a factor that weighs in favour of granting the relief in the Cayman Islands.
In terms of enforceability, it will be inexpedient to grant a worldwide freezing order if there is no prospect of it being enforced or successfully policed as the Court will not make an order in vain. If there are significant assets within the Cayman Islands that tends to suggest that any worldwide freezing order granted by the Grand Court would be capable of enforcement.
The Grand Court also has a power to grant a worldwide freezing order against a respondent against whom no cause of action is pleaded or contemplated, i.e. where no domestic or foreign proceedings are on foot or contemplated against the respondent. The scope of this Chabra jurisdiction in the Cayman Islands, however, appears to be narrower than that in England following the Cayman Islands Court of Appeal’s decision in Algosaibi v Saad [2011 (1) CILR 178].
The Grand Court’s power under section 11A of the Grand Court Act extends to an order for discovery against both a respondent to actual or contemplated foreign proceedings and an innocent third party caught up in the alleged wrongdoing, thereby providing a statutory footing to complement the Court’s Norwich Pharmacal jurisdiction.
Arbitration awards and interim awards
In the Cayman Islands, the enforcement of foreign arbitral awards is governed by the Arbitration Act, 2012 (the “Arbitration Act”) and the Foreign Arbitral Awards Enforcement Act (1997 Revision) (the “Enforcement Act”), which together give domestic effect to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) which was extended by the UK Government to the Cayman Islands in 1980. The Arbitration Act is based on the UNCITRAL Model Law on International Commercial Arbitration.
Section 72 of the Arbitration Act provides that an arbitral award made pursuant to an arbitration agreement may, with the leave of the court, be enforced in the same manner as a domestic judgment or order of the court to the same effect. Upon leave being granted, judgment may be entered in the terms of the award. This applies to all arbitral awards irrespective of the country in which the award was made, subject to the leave of the court and compliance with the procedural requirements set out in sections 6 and 7 of the Enforcement Act.
An application for leave to enforce an arbitral award is made by filing an ex parte originating summons in the Financial Services Division of the Grand Court together with a supporting affidavit which exhibits the original or a certified copy of the award and the arbitration agreement, together with a certified translation if either document is in a foreign language. Leave of the court is also required to serve the originating summons out of the jurisdiction on the other party.
Upon leave to enforce an arbitral award being granted by the court, the other party to the award has 14 days (or if the order is to be served out of the jurisdiction, such period as the court may think fit) from the date of service to apply to set aside the order for leave. The award cannot be enforced until the period for setting aside the order has expired or, if an application to set aside is made within the prescribed period for doing so, until that application has been dismissed.
There are very narrow grounds available to resist enforcement of a foreign arbitral award which are set out in section 7 of the Enforcement Act (which are in equivalent terms to Article 5 of the New York Convention). Enforcement may also be refused if the award is in respect of a matter which is not capable of determination by arbitration or where enforcement of the award is contrary to public policy (which is rare in practice). Absent one of these grounds being established (and the burden is on the opposing party to establish that one or more grounds exist), the court is bound to enforce the award.
Section 43 of the Arbitration Act gives the court certain powers to be exercised in support of domestic and foreign arbitral proceedings including in relation to security for costs, disclosure, compelling a witness to attend court and give evidence or produce documents, the power to secure the amount in dispute and to prevent the dissipation of assets against which an award may be enforced and the power to grant interim injunctions in support of the foreign arbitral proceedings.
All directions given by the arbitral tribunal may, with the leave of the court, be enforceable in the same manner as if they were orders made by the court and judgment may also be entered in the terms of the directions given by the tribunal.
Enforcement of judgments and awards
Once a foreign judgment or arbitral award has been recognised, the judgment or award can be enforced in the same way as a domestic judgment. The procedure for enforcement of domestic judgments is governed by orders 45 to 52 of the Grand Court Rules (1995 Revision) and the Judicature Act (as revised).
In respect of monetary judgments, these can be enforced by the following means:
- A writ of fieri facias: a writ of execution for an order that the court bailiff seize assets belonging to the judgment debtor to satisfy all or part of the judgment debt and the costs of enforcement;
- Garnishee proceedings: an order requiring a third party who owes the judgment debtor money to pay the judgment creditor instead. In practice such orders tend to be made against banks with whom the judgment debtor holds an account balance;
- Charging order and/or order for sale: the judgment creditor seeks a charging order over assets belonging to the judgment debtor which can include interests in land, securities, funds in court and certain interests in trusts, the effect of which is to make the judgment creditor a secured creditor. The judgment creditor will then seek an order for sale of those charged assets with the sale proceeds being applied in full or partial discharge of the outstanding judgment debt;
- Attachment of earnings order: an order compelling the employer of a judgment debtor to pay a certain amount into court by way of deductions to salary or other form of remuneration. This remedy is only available where the judgment debtor is an individual employed in the Cayman Islands;
- Commencement of bankruptcy or insolvency proceedings: the judgment creditor applies for the appointment of a trustee in bankruptcy in the case of an individual judgment debtor or a liquidator in the case of a corporate judgment debtor. This is a collective remedy for the benefit of all creditors and the trustee in bankruptcy or the liquidator (as applicable) has a statutory duty to collect in the assets of the judgment debtor and distribute those assets in accordance with the statutory scheme.
- Appointment of a receiver by way of equitable execution: The Court has the power to appoint receivers over the legal or beneficial interests or assets of a judgment debtor where it is just and convenient to do so pursuant to section 11(1) of the Grand Court Act. By virtue of section 11A of the Grand Court Act that power extends to proceedings which have been or are to be commenced in a foreign court, provided that such proceedings are capable of giving rise to a judgment that may be enforced in the Cayman Islands. Receivers may be appointed pre-judgment/award where the risk of asset dissipation is such that a worldwide freezing order would not provide adequate protection. This remedy is distinct to any contractual right that a creditor may have to appoint receivers over certain assets of the debtor.
ABOUT THE AUTHOR: Liam Faulkner is a partner in our Cayman Islands’ Litigation, Insolvency and Restructuring Group where he specialises in cross-border insolvency, restructuring and litigation, with extensive experience in shareholder and investment fund disputes. He joined Campbells in 2015 having previously worked in the British Virgin Islands and London. As part of his practice, Liam advises on both Cayman Islands and BVI law and has considerable experience of disputes arising out of Hong Kong and the PRC having spent two years practicing in Campbells’ Hong Kong office.
