The New York Convention
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“the Convention”) was acceded to by the UK in 1975 and extended by the UK to the Cayman Islands on 26 November 1980, but only in respect of arbitration awards made in another contracting state. An arbitration/arbitral award made in a contracting state under the Convention is therefore enforceable under the Convention in the Cayman Islands, whereas an arbitral award made within the Cayman Islands is not.
By the Convention, contracting states agree to recognize arbitral awards made in other contracting states (“Convention awards”) as binding on the parties and to enforce them in accordance with their domestic rules of procedure. Consistent with the enforcement of arbitral awards, the Convention requires that the courts of contracting states give effect to and enforce agreements to arbitrate where requested by one of the parties, unless the court finds that the agreement to arbitrate is null and void, inoperative or incapable of being performed.
The Convention requires that the parties seeking to enforce a Convention award, produce on the application for recognition and enforcement, an original or certified copy of the award and a copy of the arbitration agreement, with certified translations of each where appropriate.
The Convention preserves the right of the party, against whom the Convention award is invoked, to contest the validity of the arbitration agreement and the validity of the award on a number of enumerated grounds including common law principles of natural justice and public policy, and provides that recognition and enforcement of the arbitral award may be refused where it is established that these principles have been violated.
The Foreign Arbitral Awards Enforcement Law (“the Law”)
Within the Cayman Islands, the Convention is given effect by the Foreign Arbitral Awards Enforcement Law (1997 Revision) (“the Law”). In giving effect to the Convention, the Law substantively reiterates the provisions of the Convention and the common law limitations on the recognition and enforcement of arbitral awards, recognized by the Convention.
Consistent with the Convention, the Law provides that Convention awards are to be enforced by the Cayman Islands Grand Court (“the Grand Court”) in the same manner as a domestic arbitration award under the Cayman Islands Arbitration Law (2012 Revision), and are binding on the parties to the award and may be relied upon by any of the parties by way of defence, set-off or otherwise in legal proceedings in the Cayman Islands.
Following the Convention, the Law gives effect to arbitration agreements and provides that where legal proceedings are commenced in the Cayman Islands contrary to an arbitration agreement, on the application of a party to the agreement the Grand Court “shall” make an order staying those proceedings, unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties in respect of the matter agreed to be referred to arbitration.
Procedure for enforcement of Convention awards
The procedural rules applicable to the enforcement of Convention awards under the Law, are set out at Part II, Order 73 of the Cayman Islands Grand Court Rules 1995. A party seeking to enforce a Convention award is required to apply to the Grand Court for leave to enforce the award by ex-parte originating summons, supported by an affidavit, exhibiting the Convention award and the arbitration agreement, and providing details of the name and addresses of the creditor and debtor under the award.
Where the requirements of the Law are satisfied on the ex-parte application, the Grand Court will grant leave to enforce the Convention award. The order granting leave to enforce the Convention award must be personally served on the debtor, or delivered to his last known address or place of business in the Cayman Islands or otherwise as the Court directs. The order granting leave will specify a period of 14 days (if served within the Cayman Islands), within which the debtor may apply to set aside the order.
Challenging enforcement of the Convention award
The debtor under a Convention award may, within the designated 14 day period, apply to set aside the order granting leave to enforce the award in accordance with the grounds set out in the Law (substantially identical to those in the Convention), and the Grand Court may refuse to enforce the Convention award if the debtor “proves” any of the following grounds:
- that a party to the arbitration agreement was under some incapacity under the law applicable to them;
- that the arbitration agreement was invalid under the law the parties applied to it, or failing any indication as to the law, under the law of the country where the award was made;
- that he did not receive proper notice of the appointment of the arbitrator, or of the arbitration proceedings, or was otherwise unable to present his case;
- that the arbitral award deals with an issue or matters or contains decisions, outside the scope of the submission to arbitration (provided that where the arbitral award is severable, decisions within the scope of the submission to arbitrate may be recognized and enforced);
- that the composition of the arbitral authority, or the arbitral procedure was not in accordance with the arbitration agreement or, failing such agreement, was not in accordance with the law of the place of the arbitration; or
- that the award has not yet become binding on the parties or has been set aside or suspended by a competent authority in the country in which, or under the law of which, the award was made (in which case the Grand Court may if it considers it appropriate, adjourn the proceedings and may order the debtor to provide suitable security for the benefit of the arbitral award creditor).
The Law further provides that enforcement of a Convention award may also be refused by the Grand Court if the award is in respect of a matter which is not capable of arbitration or where it would be contrary to public policy to enforce the award.
Consistent with the language and intent of the New York Convention, the Law expressly provides that “enforcement of a Convention award shall not be refused” except on the grounds outlined above. These limits imposed upon the ability of a debtor to challenge enforcement of a Convention award have been recognized and emphasized in a number of decisions of the Grand Court.
Subject to the debtor setting aside leave to enforce the award, the Convention award is then enforceable in the Cayman Islands in the same manner as a domestic arbitral award under the Arbitration Law (2012 Revision), i.e. a judgment of the Grand Court may be entered in terms of the Convention award and the judgment on the award enforced in the manner of any other judgment of the Grand Court.
Enforcement of foreign arbitral awards at common law
Since the Convention was originally signed in 1958, most of the world’s major trading nations have acceded to the Convention and in most cases a foreign arbitral award will be a Convention award, recognized and enforceable in the Cayman Islands under the Law. The Convention does not deprive a party of his right to enforce a Convention award at common law and while the Law is silent on the point, it does not purport to derogate from the common law and it would appear that a Convention award may be enforced in the Cayman Islands at common law i.e. by suing on the obligation reflected in the award.
In most cases, given the relatively simple process and limited challenges available to the debtor, it will be preferable to seek to enforce the Convention award under the Law, rather than suing on the foreign arbitral award in the Grand Court under common law principles. Where judgment has been entered on a non-Convention award, the position may require more careful consideration.
Most foreign arbitral awards sought to be enforced in the Cayman Islands will be Convention awards i.e. arbitral awards under the New York Convention. The Law gives effect to the Convention in the Cayman Islands and provides a relatively simple and streamlined mechanism for the recognition and enforcement of Convention awards.
The Law reflects the language and tenor of the Convention and requires that arbitration agreements and arbitral awards be respected and treated as binding, subject only to enumerated grounds on which the debtor may seek to challenge the validity of the arbitration agreement or enforcement of the award. The Grand Court has consistently respected these limitations imposed by the Law upon challenges by debtors to the recognition and enforcement of Convention awards and has demonstrated an unwillingness to permit debtors to raise extraneous matters outside the ambit of the Law.
The foregoing discussion and analysis is for general information purposes only and not intended to be relied upon for legal advice in any specific or individual situation.
If you would like further information on the enforcement of foreign arbitral awards in the Cayman Islands, please contact Paul Keeble of Hampson and Company, Apollo House East, Fourth Floor, 87 Mary Street, George Town, P.O. Box 698 Grand Cayman KY1-1107