From Financier World Wide

FW: Could you provide an overview of the existing arbitration regime in the Cayman Islands?

Imrie: Before 2 July 2012, arbitration proceedings in the Cayman Islands were governed by the Arbitration Law (2001 Revision). That legislation, which was based on the English Arbitration Act 1950, was repealed and replaced with the Arbitration Law 2012 (the Law) with effect from 2 July 2012, other than in respect of arbitration proceedings that were in progress on that date, which remain governed by the Arbitration Law (2001 Revision). The enforcement in the Cayman Islands of, first, agreements to arbitrate in countries which are parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), and second, arbitral awards made in such countries, is governed by the Foreign Arbitral Awards Enforcement Law. That legislation, which was originally enacted in 1975 and last revised in 1997, incorporates the provisions of the New York Convention relating to the foregoing matters into Cayman Islands law.

FW: What were the perceived weaknesses of the former regime?

Imrie: There were a number of perceived weaknesses in the Arbitration Law (2001 Revision). These included, first, the fact that, where court proceedings had been commenced in breach of an arbitration clause, the court was not required to stay the proceedings in favour of arbitration, but merely had a discretionary power to do so; second, the scope for judicial interference during arbitration proceedings and the wide powers of the court to review and strike down arbitral awards; and, third, the lack of any detailed provisions in the legislation providing a framework for how arbitration proceedings were to be conducted in the absence of agreement between the parties. These perceived weaknesses have been remedied by the introduction of the new law.

FW: Were there any other factors, such as economic conditions, that spurred calls for arbitration reform in the Cayman Islands?

Imrie: To date, arbitration has mainly been used as a mechanism for resolving disputes between parties located in the Cayman Islands. The intention behind the Law was to ensure that arbitration remains available to such parties, whilst at the same time attracting more international arbitration proceedings. Modernising the Islands’ arbitration law and bringing it into line with international standards is seen as a way of making the jurisdiction more attractive for onshore clients who wish to have disputes resolved by confidential arbitration in a neutral offshore venue, where there are experienced legal advisors and other professional service providers readily available to assist with the proceedings.

FW: What are the key features of the Arbitration Law 2012?

Imrie: The Law applies to all arbitrations where the seat of the arbitration is the Cayman Islands, regardless of where the parties are based. The Law governs the conduct the arbitration challenges in the Cayman Islands courts against an award made in the Cayman Islands, and the enforcement of Cayman Islands arbitral awards within the jurisdiction. An arbitral tribunal appointed under the Law has wide powers and is essentially able to award any interim or final remedy that a court could have granted if the dispute in question had been the subject of court proceedings. The Law gives the parties the freedom to tailor the arbitral proceedings according to their needs but also provides a set of default provisions which apply in the absence of agreement. There are certain mandatory provisions of the Law designed to protect the integrity of the arbitration process, for example, by ensuring that the tribunal maintains its impartiality throughout the arbitration and does not have any conflicts of interest. The Law expressly recognises that arbitration proceedings are to be confidential and the limited grounds set out in the Law, upon which an arbitral award may be challenged in the Cayman Islands courts, reflect the grounds in the New York Convention.

FW: On what principles are the new laws founded, and to what extent were they influenced by the arbitration frameworks of other jurisdictions?

Imrie: The principles upon which the Law is founded are set out in section 3 of the Law. They are: the fair resolution of disputes by an impartial tribunal without undue delay or expense; the freedom of the parties to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; and limits on the scope for court intervention in arbitration proceedings. The Law is largely based upon the UNCITRAL Model Law and the English Arbitration Act 1996, although it differs from both in some respects.

FW: Could you provide an insight into the reaction from companies and arbitration experts to the new laws as they were drafted?

Imrie: The Law has received a positive response from both clients and practitioners since it was introduced a short time ago. Before its implementation, the Law was the subject of extensive consultations with relevant stakeholders and it has been drafted to reflect international best practice in relation to arbitration proceedings. Financial services institutions and professional advisors are now increasingly incorporating Cayman Islands arbitration clauses into their agreements.

FW: In what ways do you believe the new laws will re-shape arbitration in the Cayman Islands?

Imrie: It is hoped that the enactment of the Law will lead to more Cayman Islands arbitration clauses being inserted within commercial agreements, which will, in turn, lead to more international arbitrations taking place in the Cayman Islands. This, in turn, will provide momentum for the further development of the infrastructure needed to support arbitrations in the Islands and create a pool of practitioners and others who are able to act as arbitrators and represent parties in arbitration proceedings.

FW: Do you expect to see any challenges arise during the implementation of the new laws, and in the early phase of their use?

Imrie: The transition to the new arbitration regime in the Cayman Islands is proceeding smoothly and we do not foresee any difficulties in adjusting to the Law, given that it is largely based upon the UNCITRAL Model Law and the English Arbitration Act 1996. Accordingly, there is an existing body of case law which will be of assistance to the Cayman Islands courts in interpreting the Law and which will provide guidance as to how the Law is likely to be applied in the Cayman Islands. Decisions of the English and other Commonwealth courts are persuasive rather than binding in the Cayman Islands, but where a legislative provision being considered by a Cayman Islands court is the same, or substantially the same, as a provision which has previously been interpreted by an English or Commonwealth court, the Cayman Islands court is likely to follow that interpretation unless there are good reasons not to do so.

FW: To what extent can we expect the new laws to be refined and improved over time?

Imrie: The enactment of the Law was a comprehensive overhaul of the arbitration regime in the Cayman Islands. We therefore do not expect there to be a need for further legislative changes in the foreseeable future. Nevertheless, the government of the Cayman Islands has shown by implementing the Law that it wishes to have an arbitration law in place which reflects international best practice, and the government will no doubt monitor any major international developments relating to arbitration in future and respond accordingly.

FW: What steps are arbitration experts taking to prepare for the implementation of the new laws?

Imrie: The main steps being undertaken by practitioners are familiarising themselves with the content of the Law, updating arbitration clause precedents and guidance, and informing and educating clients about the Law.

Mac Imrie is a partner at Maples and Calder. He has broad experience in multi-jurisdictional commercial litigation, arbitration and regulatory matters. He regularly works on mutual fund and hedge fund disputes, and in crisis situations. He has been involved in several high-profile fund collapses and resultant litigation and arbitration. Many of his cases involve obtaining interim protection for creditors and shareholders. He has significant advocacy experience having appeared as counsel before numerous courts and tribunals around the world. Mr Imrie can be contacted on +1 345 814 5238 or by email: [email protected].

For more on this story go to:

http://www.financierworldwide.com/article.php?id=9769&page=2

See also our story on Sep 4^th “New Law To Boost Cayman’s Arbitration Industry” link: http://www.ieyenews.com/2012/09/new-law-to-boost-caymans-arbitration-industry/