The Cayman Islands is a British Overseas Territory located in the Caribbean some 430 miles due south of Florida. Home to over 150 banks and 11,000 regulated mutual funds, the Cayman Islands is a sophisticated, modern and tax-neutral jurisdiction which regularly sees some of the heaviest and most complicated litigation in the offshore world.
Since 2009 the Grand Court has had a dedicated financial services division, staffed with specialist commercial judges dealing in particular with proceedings related to Cayman Islands trusts, registered investment funds, exempt insurers, Companies Act proceedings and the enforcement of foreign judgments and arbitral awards. The Cayman Islands also has the benefit of regular sittings of a highly experienced Court of Appeal, made up of some of the most experienced judges from the UK and the Caribbean.
In recent months Cayman Islands law has continued to develop dynamically, with a number of important decisions and statutory reforms (some of which are highlighted below) supplementing established mechanisms to facilitate international cooperation. Furthermore, various practical changes have been made to court procedures in response to the challenges posed by the pandemic, most notably the introduction of electronic filing and the frequent use of video hearings. That usage has extended to substantial trials, with judges, counsel and witnesses participating from across the world.
The liberalisation of the rules in relation to litigation funding that will occur once the Private Funding of Legal Services Act comes into force in the near future is likely to substantially alter the Cayman Islands legal landscape, where non-traditional fee arrangements have hitherto been difficult to implement and as such extremely rare. Attorneys will now be permitted to accept instructions on both a conditional fee and full contingency basis in most civil claims without the need for pre-approval.
Whilst the maximum success fee or attorney's share of the fruits of the litigation, as the case may be, will be capped in ordinary circumstances (at 100% and a percentage to be prescribed by regulations, respectively), engagements on terms which exceed these normal limits will also be permitted where sanctioned by the court.
Whilst a number of local judicial statements in recent years have recognised the utility and importance of third-party litigation funding, the formal statutory endorsement of such arrangements is a further welcome development, alongside the repeal of champerty and maintenance as both crimes and torts. In a liquidation context the sanction of the court is still likely to be sought prior to accepting such funding, but that will not now be a formal requirement, and both prospective and existing litigants will have substantially more latitude in how they may choose to meet their legal expenses, whether on grounds of commerciality or necessity.
The Cayman Islands continues to be an attractive, efficient and important restructuring jurisdiction. The Grand Court has significant experience of high-value restructuring (including in the context of large and complex cross-border cases), applying common law principles and responding quickly when urgent assistance is required.
As might be expected in light of recent market turmoil, recent major restructuring work has included a number of businesses exposed to oil and gas and travel. In the case of Ocean Rig, the oil services group switched the centre of main interests (COMI) to the Cayman Islands to restructure in excess of USD3.5 billion of debt and obtained Chapter 15 recognition in the United States, whilst the restructuring of the LATAM Airlines Group saw the Grand Court approve a court-to-court protocol with the courts in New York.
The necessary breathing space to effect a restructuring is obtained at present through the appointment of provisional liquidators following the filing of a winding-up petition. That then triggers the statutory moratorium on actions, and the petition will be dismissed once the restructuring has been effected, whether by scheme of arrangement or otherwise. While that approach has worked well it is in the process of being streamlined; proposed amendments to Part V of the Companies Act likely to be passed in the near future provide for the appointment of restructuring officers and the imposition of a statutory moratorium without the need to file a winding-up petition as a precursor.
Enforcement of Foreign Judgments and Arbitral Awards
The Cayman Islands has a robust system for the enforcement of foreign judgments, with a statutory system for enforcement by registration that has been extended to judgments from Australia and its External Territories alongside common law enforcement of final and conclusive in personam judgments where the foreign court had jurisdiction over the party subject to the judgment. Such judgment must be unimpeachable on grounds of fraud or being contrary to natural justice or Cayman Islands public policy (for example if it relates to foreign taxes or penalties). Further, under the Arbitration Act 2012, a foreign arbitral award will be recognised as binding and, upon application to the Grand Court, enforceable in the Cayman Islands, subject to limited exceptions.
Investigations and Information Gathering
For those conducting investigations into alleged wrongdoing and seeking information about potential claims, the Cayman Islands has a substantial tool kit that plaintiffs can use and which is frequently deployed in the Grand Court. In a departure from the approach taken by the English High Court in Ramilos Trading v Buyanovsky, the Grand Court recently held that notwithstanding the statutory route under the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 to obtaining evidence for use overseas, the equitable jurisdiction to grant Norwich Pharmacal relief in support of foreign proceedings was still available where the facts of the case justified it (ArcelorMittal v Essar 2019 (1) CILR 297).
Other available routes to obtaining information include the availability of registers of company directors and wide liquidator powers to obtain statements of affairs, as well as to apply to conduct private examinations of, inter alia, directors, officers or professional service providers of failed companies.