Legal Symphony: Courts And Arbitration In Perfect Harmony (Podcast)

The recent decision of the Cayman Islands Court of Appeal (CICA) in Minsheng Vocational Education Company Limited (Minsheng) v Leed Education Holding Limited...
Cayman Islands Litigation, Mediation & Arbitration
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Episode Description

The recent decision of the Cayman Islands Court of Appeal (CICA) in Minsheng Vocational Education Company Limited (Minsheng) v Leed Education Holding Limited (the Education Group) serves as a pertinent reminder of the Cayman Islands' commitment to upholding arbitration agreements and facilitating the arbitral process.

The judgments of both the Grand Court and CICA highlight the jurisdiction's supportive stance towards arbitration and reinforces the enforceability of interim arbitration measures in Cayman Islands law, consistent with the principles of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the Model Law).


Minsheng is a Cayman Islands company, listed on the Hong Kong Stock Exchange. The Education Group consists of three investment holding companies incorporated in the British Virgin Islands, which hold various investments in education-related projects in the Peoples Republic of China (PRC).

Minsheng, as purchaser, and the Education Group as seller, entered into a sale and purchase agreement for shares (the SPA) in Leed International Education Group Inc, (LIEG) a Cayman company. The SPA was governed by Hong Kong law and contained a Hong Kong International Arbitration Centre (HKIAC) arbitration clause.

In order to facilitate the sale of shares, Minsheng and the Education Group, along with other affiliates, entered into various loan agreements which were governed by PRC law and subject to a China International Economic and Trade Arbitration Commission (CIETAC) arbitration clause.

After the transfer of the first tranche of shares (51 per cent of the LIEG shares), a dispute arose between the parties in respect of the remaining shares, triggering the initiation of arbitrations in both the HKIAC (in respect of the SPA) and CIETAC (in respect of the loan agreements).

Minsheng had enforcement rights under a series of share charges granted by the Education Group over the remaining 49 per cent of the shares in LIEG (the Share Charges), which if the Education Group was successful in the arbitrations would be discharged.

The Education Group was concerned that before the outcome of the arbitration would be determined, Minsheng would seek to enforce the Share Charges and sell the LIEG shares to a third party, putting the shares beyond the Education Groupâs reach should it be successful in the arbitration. To prevent this, the Education Group sought an interim injunction from the Grand Court.

The Grand Court decision

The Grand Court granted the interim injunction restraining Minsheng from exercising the Share Charges until the CIETAC arbitration had concluded (the Injunction). The Injunction was granted subject to two conditions: first, that it was confirmed that CIETAC was unable to grant the injunction sought; and second, that permission was obtained from CIETAC to continue to rely on the Injunction in accordance with the applicable arbitration rules.

The Injunction in this case was regarded as ânot an ordinary injunctionâ but one needed as a matter of urgency to preserve assets and protect the integrity of the pending arbitration. Justice Segal in the Grand Court considered, on the balance, âthe risk of grave and irreparable harmâ would result if the injunction was not granted (and the shares were sold), which outweighed the risk of any prejudice to the restrained party.

The appeal

Minsheng appealed and sought to have the Injunction discharged on the following four grounds:

the Education Group was obliged to first seek relief in either of the foreign arbitrations from the supervisory courts at the seat of the arbitrations;

the Injunction was unavailable because of the competing jurisdiction cause in the share charge calling for judicial resolution;

no preservation of property order could (properly) be made in the case; and

there can be no injunction to restrain enforcement of security.

All four grounds of appeal were dismissed. Taking a closer look ...

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