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Arbitration, as a mechanism of binding dispute resolution, is
the equivalent of litigation in the courts, but entails resolving
disputes outside the courts in accordance with procedures,
structures and substantive legal or non-legal standards chosen by
the parties involved. As such arbitration is distinct from
nonbinding forms of dispute resolution such as mediation or
negotiation.
Arbitration is becoming more recognised globally as a viable
alternative to court proceedings to resolve commercial disputes.
Given that parties to commercial agreements often prefer the
ability to deal with legal disputes without the publicity and
formality of court proceedings, the arbitration procedure can offer
more flexibility and cost savings compared to litigation in the
courts.
The ability to use arbitrators who have not only expertise with
the arbitration process but also with a specific subject matter,
can make it attractive in complex cases, for example involving
hedge funds. It is also typically a less adversarial form of
dispute resolution that litigation and can thus help maintain the
relationships between the parties.
The new law will bring Cayman's arbitration regime in line
with international standards. It is based on the UNCITRAL Model Law
on International Commercial Arbitration with some additional
provisions to suit local conditions and other refinements taken
from legislation that has been successful in comparable
jurisdictions which have adopted the Model Law, including the
Bahamas, Singapore and Hong Kong.
"The introduction of the Cayman Islands Arbitration Law
will see the Cayman Islands well placed as a modern and
sophisticated jurisdiction in which to conduct international
arbitrations," said Jeremy Walton, head of Appleby's
Litigation and Insolvency practice group in Cayman.
He said the law is found on three fundamental principles,
including the fair resolution of disputes by an impartial tribunal
without undue delay or expense, maximum party autonomy, subject
only to safeguards in the public interest and limited judicial
intervention.
"For international commercial enterprises which are already
attracted to using the Cayman Islands because of the quality of its
dispute resolution services, these features are very likely to
increase the choice of Cayman as the seat to conduct arbitral
proceedings," he said.
In the offshore market, purchasers of financial services and
products increasing take into account the quality of dispute
resolution mechanisms when choosing between competing
jurisdictions.
"It must be recognised that further steps will be required
in order to fully develop the Cayman Islands as an effective seat
of arbitration," Walton said. "These include public
education and training for practitioners, the establishment of an
arbitration centre, and the alignment of administrative policies
and procedures to support implementation of the Law. It will be
very interesting to see how this develops over the coming
months."
Overall however the new arbitration legislation constitutes a
significant change and also includes more provisions governing the
confidentiality of proceedings than the old law.
The new Cayman Islands Arbitration Law, 2012 will come into
force on a date determined by Cabinet.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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