The Cayman Islands are a British Overseas Territory and a major global financial centre. Over 40 of the top 50 major banks are licensed in the Cayman Islands and there are over 10,000 registered investment funds. The legal system is based on the English common law with the Privy Council in London being the ultimate court of appeal.
A significant number of M&A deals are governed by the law of the Cayman Islands. The Cayman Islands are also frequently chosen as a neutral forum for the resolution of disputes. The Cayman Islands have recently enacted modern arbitration laws which are loosely based on the UNCITRAL model law. There is also a bespoke division of the Court known as the Financial Services Division or FSD. The FSD's sole remit is to handle commercial disputes.
The FSD's Rules require the Court to determine disputes quickly and proportionately, using modern technology where appropriate. The recent case of Executive Wealth Management v Tharwa Investments S.A. FSD 2/2014 offers a good example. This was a case concerning a share sale agreement between parties based in the United States and Middle East respectively. Judgment was handed down approximately 6 months after proceedings were commenced.
The issue in Executive Wealth was one frequently seen in M&A disputes, namely whether the purchaser was entitled to raise breach of warranty claims against the seller. The relevant agreement contained commonly used notice provisions which required the purchaser to serve notice of warranty claims on the seller at its registered office within a certain time after completion.
In its defence to a claim for the purchase price, the purchaser claimed that a letter it had written to the seller's lawyers constituted a valid claim notice. The seller disputed this and relied on the notice provisions in the agreement, which required notices to be served on its registered office and, it argued, should be strictly enforced.
The Judge agreed with the seller, relying on a vivid illustration from a well known English case in which the Court explained that if an agreement said that notices have to be written on blue paper then a notice sent on pink paper could not be effective, no matter how clear the intent behind the notice. Although every case turns on its own facts, it is clearly important in any commercial agreement for there to be a degree of certainty over what must be done to comply with the applicable term.
Travers Thorp Alberga acted for the successful seller in Executive Wealth.
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