Grounds of Appeal
The defendants challenged Justice Kawaley's ruling on four grounds:
- Service – arguing that the Judge had been wrong to permit service via the defendants' lawyers In Hong Kong (who had acted in the arbitration), rather than through the formal channels of the Hague Convention.
- Full and frank disclosure – arguing that the Judge had been wrong to disregard the fact that the plaintiff had failed to disclose other related legal proceedings in Hong Kong.
- Interest – arguing that the Judge had been wrong to disregard the fact that the plaintiff's application had failed to include a precise calculation of interest, as was required by the relevant court rules.
- Stay application – arguing that the Judge had been wrong to refuse to stay enforcement pending the outcome of the defendants' counterclaim in a separate Hong Kong arbitration.
The Court of Appeal dismissed all four grounds, using this appeal as an opportunity to provide definitive guidance on certain procedural requirements while reaffirming its pro-enforcement stance.
Service Requirements: Welcome Clarification from the Court of Appeal
Justice Kawalay granted leave to appeal on the basis that the proper manner in which service of an ex parte order giving leave to enforce a foreign arbitration award can be ordered was a matter of public interest which would benefit from a decision of the Court of Appeal. Unsurprisingly therefore, the Court of Appeal used this opportunity to provide comprehensive guidance on service of ex parte enforcement orders under GCR O.73, r.31(6).1
The Court of Appeal clarified that while applicants must demonstrate "good reason" to bypass Hague Convention channels, GCR O.73 r.31(6) gave a wide discretion to order service "in such other manner as the court may direct."
Importantly, the Court agreed with the Judge that the requirement that personal service be 'impracticable' (which applies in an application for substituted service) could not be read in here, and generally rejected the appellants' arguments for a restrictive reading of the rule.
Notwithstanding the broad discretion, the Court made clear that the Hague Convention cannot simply be ignored, and went on to outline certain specific requirements for applications seeking to demonstrate a 'good reason' for alternative service:
- Evidence of how long Hague Convention service would take and its reliability;
- Explanation of urgency justifying departure from Convention channels;
- Identification of whether the relevant country has made an objection under Article 10 of the Hague Convention, as then 'exceptional' or 'special' circumstances would be required to justify some other form of service objections requiring "exceptional circumstances".
The Court of Appeal made very plain that a "failure by any applicant or by a judge to follow the approach summarised above on a future occasion is likely to result in any service being treated as ineffective."
Notably however, the Court of Appeal stated that "It would be contrary to the public interest and very much against the Cayman Islands' policy of upholding international standards if enforcement of arbitral awards in this jurisdiction were to become a slow and long drawn-out process because service had to be effected through Hague Convention channels."
The Court of Appeal therefore ultimately endorsed the English Commercial Court's practice of "routinely" authorising service on the lawyers who had acted in the arbitration, extending this approach explicitly to foreign arbitral awards to ensure "speedy finality."
On the facts of this case, despite finding that the plaintiff's initial application lacked the proper evidence to justify bypassing the Hague Convention, the Court of Appeal refused to set aside the Judge's order. They treated the service defects in this case as irregularities, observing that setting aside the service order "would be a triumph of form over substance" given that:
- The defendants had already been made aware of the proceedings and fully participated;
- Service had separately been effected on both defendants;
- No substantive defence to enforcement under section 7 of the Foreign Arbitral Awards Enforcement Act ("Act") had been raised; and
- The parties had chosen expedited arbitration procedures, indicating an intention for swift resolution.
Other grounds dismissed
The defendants' remaining challenges – concerning full and frank disclosure, interest calculations, and stay applications – were dismissed with little ceremony. The Court confirmed that only matters potentially supporting grounds for refusing enforcement under section 7 of the Act would be material for disclosure purposes. Technical compliance failures, such as the missing interest calculation, were readily cured as irregularities under GCR O.2, r.1.2
The defendants' stay application was rejected after the Hong Kong Court had dismissed their parallel stay application on substantive grounds. The Court of Appeal characterised this ground as transforming "from weak to virtually unarguable" in light of the Hong Kong decision.
Comment
The Court of Appeal's approach demonstrates a judicial philosophy firmly oriented towards practical just outcomes rather than procedural perfectionism. The judgment emphasises that delays in enforcement due to technicalities which have not caused any prejudice would be contrary to the New York Convention's objectives and such delay would not be reflective of the Cayman Islands' position as an "international financial centre where substantial sums are placed for investment."
By prioritising substance over form, whilst at the same time establishing clear procedural guidelines for applications for alternative service, the Court of Appeal has strengthened the jurisdiction's position as a reliable forum for swift award enforcement. The approach outlined by the Court of Appeal serves the interests of justice and reflects the fact that "the policy of Cayman law is very much in favour of enforcing arbitration awards."
Key Takeaways
- The Cayman Islands remains a highly favourable jurisdiction for the efficient and effective enforcement of foreign arbitral awards.
- Provided that applications to enforce include specific and detailed evidence about Hague Convention timelines and clear justifications for alternative service, then alternative service (particularly on arbitration counsel) is likely to be routinely granted.
- Technical challenges by award debtors are unlikely to succeed absent genuine substantive prejudice.
Footnotes
1. Grand Court Rule O.73, r.31(6) governs service of ex parte orders granting leave to enforce foreign arbitral awards. It provides three methods of service: (i) personal service, (ii) ordinary service at the respondent's usual or last known place of residence or business, or (iii) "in such other manner as the Court may direct, including electronically." This rule is central to enforcement proceedings as it determines how and when respondents become subject to the court's jurisdiction and the timeframes for challenging enforcement orders.
2. Grand Court Rule O.2, r.1 deals with non-compliance with procedural rules. It provides that failures to comply with court rules "shall be treated as an irregularity and shall not nullify the proceedings," and gives the Court discretion to set aside proceedings or allow amendments "on such terms as to costs or otherwise as it thinks just." This rule is frequently invoked to cure technical defects that do not cause substantive prejudice, allowing courts to focus on the merits rather than procedural technicalities.
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