The Cayman Islands courts have recently delivered four judgments concerning the law and practice of international arbitration, which is a growing feature of the offshore legal landscape.
First, in Minsheng Vocational Education Company v Leed Education Holding Limited & Others[1], the Cayman Islands Court of Appeal (“CICA”) upheld the first instance decision by Segal J to grant an injunction pursuant to section 54 of the Arbitration Act 2012 (the “Act”) in support of foreign arbitral proceedings.
The factual background involved disputes over complex corporate lending and security interests, including a contested put option for the sale and purchase of shares in Leed International Education Group Inc. (a Cayman Islands company) and related share charges in favour of the Appellant.
These disputes gave rise to separate arbitral proceedings in Hong Kong and, later, in Beijing. Whereas the Hong Kong arbitration concerned matters including the put option, the Beijing arbitration concerned rights and obligations under the loan agreements. The Beijing arbitration was conducted under the rules of the China International Economic and Trade Commission (“CIETAC”), as stipulated by the relevant loan agreements, whereas the share charges contained a non-exclusive jurisdiction clause in favour of the courts of the Cayman Islands.
At first instance, Segal J granted an injunction to restrain the Appellant from enforcing the share charges pending the outcome of the Beijing arbitration. The jurisdictional basis for the injunction was Section 54 of the Act, which provides that:
“(1) A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their seat of arbitration is in the Islands, as it has in relation to the proceedings in court.
(2) The court shall exercise those powers in accordance with its own procedures and in consideration of the specific principles of international arbitration.”
In the exercise of his discretion, Segal J had applied the well-established American Cyanamid principles. The order was made by Segal J before the tribunal in the Beijing arbitration was fully constituted, and evidence had been adduced by the Respondents to the effect that no such protective measures could, in any case, be granted by the tribunal in the Beijing arbitration. Segal J took account of those factors in his order, by requiring the Respondents to apply to the tribunal in the Beijing arbitration within five business days of its constitution for permission to continue to rely upon the interim injunctive remedies. The Respondents duly applied to the Beijing tribunal for such permission, however a decision upon that application remained pending.
On appeal to the CICA, the Appellant advanced four grounds of appeal against the first instance decision. For the reasons given in the leading judgment delivered by the Hon. Sir Anthony Smellie KC, the CICA unanimously dismissed the appeal and upheld the judgment of Segal J.
The first ground of appeal was that the Respondents were required to seek relief in either the Hong Kong or Beijing arbitrations, or from the supervisory courts at the seat of the arbitrations. In rejecting this argument, Smellie J.A. summarised the legal position as follows:[2]
- The jurisdiction of the Court to grant interim relief in aid of foreign arbitral proceedings is open textured and uncategorised in nature. The jurisdiction allows the issuance of interim measures in support of arbitrations taking place in other jurisdictions, as necessary to meet the needs of modern international arbitration practice.
- The Court has ancillary powers which must be exercised with caution – parties ought not be allowed to bypass the arbitral tribunal to seek interim measures from the Court merely because curial assistance is conceivably available. Accordingly, the powers are to be used only as needed for the purpose of assisting the foreign arbitral proceedings, without usurping the powers of the tribunal.
- There is no hard and fast requirement that a party must first apply to the arbitral tribunal itself or to a court in the seat of the arbitration for an interim measure, before applying under Section 54.
- If the option of applying to the arbitral tribunal or a court in the seat of the arbitration is available, the burden will be on the party applying to explain why it was not pursued, however the Section 54 powers may nonetheless be exercised in appropriate circumstances, such as in cases of urgency or where it is shown that the arbitral tribunal or foreign court (as the case might be) would not have the power to grant the interim measure or measures particularly needed;
- There must be a sufficient connection between the interim measures sought and the foreign arbitration they purport to assist.
- While an order under Section 54 could also be obtained as against a third party to arbitral proceedings, such an order is likely to be refused where the arbitral tribunal is already duly constituted and the application has either not been brought before it or has been refused by it or by a court in the seat of arbitration. Otherwise, an order against a third party is also a matter for the exercise of discretion by the Cayman Court as a foreign court pursuant to Section 54.
- As regards any presumptive obligation to first seek relief from an emergency arbitrator, it will be open to the claimant to decide whether to apply to the court (either in the seat or abroad as the circumstances might require) instead of “passing the baton” to an emergency arbitrator, if interim measures are required prior to the constitution of the arbitral tribunal, unless applicable binding rules provide to the contrary.
The Appellant’s second ground of appeal was that an injunction was unavailable because of the competing jurisdiction clause in the share charge documents. This ground of appeal failed because the jurisdiction clause in the share charges was non-exclusive and thus did not preclude another forum, including an arbitral forum, from having jurisdiction in respect of disputes arising in relation to the share charges. Furthermore, the parties had contractually agreed to resolve all disputes “relating to” the loan agreements by arbitration, thereby giving the tribunal jurisdiction to resolve them.
The Appellant’s third and fourth grounds of appeal concerned arguments that no preservation order could properly be made in the case, and that there could be no injunction to restrain enforcement of security. These grounds of appeal were also dismissed.
Consequently, the decision of the CICA in Minsheng represents a robust confirmation of the jurisdiction of the Cayman Islands courts to grant interim protective measures in support of foreign arbitral proceedings in appropriate cases.
The Grand Court of the Cayman Islands has also delivered three recent judgments concerning the enforcement of foreign arbitral awards pursuant to section 5 of the Foreign Arbitral Awards Enforcement Act (1997 Revision) (the “FAAEA”), as briefly summarised below.
In White Crystals Ltd v IGCF General Partner Limited[3] the Court dismissed an application by the general partner of a Cayman Islands exempted limited partnership to set aside an ex parte order that granted leave to enforce a foreign arbitral award pursuant to section 5 of the FAAEA.
The award concerned the rights of a limited partner to information and documentation from the general partner pursuant to statutory rights conferred on the limited partner by sections 22, 29, 30 and 31 of the Exempted Limited Partnership Act. The general partner had sought to impose conditions upon the provision of such information and documentation, ostensibly with the aim of preventing an anticipated breach of confidentiality obligations by the limited partner. However, the Court found that this line of argument was not supported by sufficient evidence and amounted to an attempt to re-litigate points raised before, and dismissed by, the arbitral tribunal. It thus provided no proper basis for the Court to overturn its ex parte decision to permit enforcement of the award.
Ramsay-Hale CJ concluded that “… public policy favoured the enforcement of an award which was made in defence of a statutory entitlement which had been dishonoured and to enforce a clear contractual obligation”[4] and that in any case “… this Court does not have jurisdiction to add a rider or addendum to an award … the Court’s jurisdiction is limited to enforcing an award or refusing to enforce it where any of the grounds in section 7 of FAAEA is established.”[5]
In Mr Nasser Sulaiman H M Al-Haidar v Mr Jetty Venkata Uma Maheshwara Rao[6] the Court dismissed an application to set aside an ex parte order that granted leave to enforce a provisional foreign arbitral award pursuant to section 5 of the FAAEA, on the grounds that the arbitral tribunal lacked jurisdiction to make the provisional award. On the facts, the defendant had failed to raise a jurisdictional challenge before the arbitral tribunal before it issued the provisional award. Therefore, applying the doctrine of Henderson v Henderson (viz. a party to litigation cannot later raise an argument that was available to it at an earlier stage of proceedings), it was not open to the defendant to challenge enforcement of the provisional award.
Finally, in Carrefour Nederland B.V. v Uning International Group Co. Limited & another[7] the Court likewise dismissed an application to set aside an ex parte order that granted leave to enforce a foreign arbitral award pursuant to section 5 of the FAAEA on various technical grounds, including procedural points concerning service. The Court also refused a stay of enforcement, noting that any subsequent attempts to execute the order would come before the Court in the usual way. Kawaley J concluded that “…[w]hatever residual inherent jurisdiction the Court may have to adjourn enforcement proceedings on case management grounds, such jurisdiction does not extend so far as granting relief which is a thinly-veiled form of refusing to enforce an unimpeached foreign award on grounds which contravene the express terms of an Act of Parliament.”[8]
These decisions confirm that the Cayman Islands courts take a firm pro-arbitration stance in ensuring that foreign arbitral awards are enforceable in the Cayman Islands subject only to narrow statutory exceptions.
[1] Unreported decision of the Cayman Islands Court of Appeal dated 28 March 2024 in CICA (Civil) Appeal No. 0019 of 2023.
[2] Judgment, [79].
[3] Unreported decision of Ramsay-Hale CJ dated 2 April 2024 in Cause No: FSD 394 of 2023 (MRHCJ).
[4] Judgment, [44].
[5] Judgment, [47].
[6] Unreported judgment of Kawaley J dated 15 April 2024 in Cause No: FSD 328 of 2022 (IKJ).
[7] Unreported judgment of Kawaley J dated 15 April 2024 in Cause No: FSD 304 of 2023 (IKJ).
[8] Judgment, [37].
