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Grand Court clarifies procedure for enforcement of foreign arbitral awards

In the recent decision of ArcelorMittal v Essar the Cayman Islands Grand Court clarified important procedural points in relation to enforcement of foreign arbitral awards. Foreign arbitral awards have no direct operation in the Cayman Islands, so they cannot be directly enforced by execution. An order for leave to enforce is the precursor to substantive enforcement action. The Cayman Islands is a party to the New York Convention and the Foreign Arbitral Awards Enforcement Law (FAAEL) gives effect to it, meaning that there are limited bases on which enforcement can be refused. 

The following procedural clarifications have now been provided in relation to the initial application for leave to enforce:

  • There had previously been some uncertainty as to the interplay between the service provisions in Order 73, rule 31 and in Order 11, rule 1(m).  The former provides that on hearing the application for leave to enforce an arbitral award, the Court may direct that the application be served out of the jurisdiction with leave of the Court, but that service of an order (granting leave to enforce an arbitral award) out of the jurisdiction is permissible without leave of the Court.  The latter provides that leave is required to serve a claim to enforce any arbitral award within the meaning of the Arbitration Law (2012 Revision).
  • Justice Kawaley confirmed that Order 73, rule 31 of the Grand Court Rules is a self-contained code for the enforcement of foreign arbitral awards.  Order 11(1)(m) is not relevant to the enforcement of foreign arbitral awards and it is not clear why it was seemingly submitted by Counsel in the earlier decision of Globeop Financial Services v Titan that it was; it is only relevant in the context of enforcing domestic awards, i.e. where the seat of arbitration is the Cayman Islands. 
  • There is no requirement for prior service of the application for leave to enforce an arbitral award.  The structure of Order 73 is such as to permit an applicant to obtain leave to enforce an award without prior notice.  What is mandatory is service of the order.  The correct procedure ordinarily is that an application under Order 73, rule 21(1) should in fact not be served without prior permission of the Court.
  • The criteria to be applied as between leave to enforce a foreign arbitral award and a foreign judgment are different. There is no “tangible benefit” test for enforcing foreign arbitral awards, that being relevant only in relation to enforcement of foreign judgments.  The only grounds for challenging the enforcement of a foreign arbitral award are those in section 7(2) of the FAAEL, which relate to defects in the procedure of obtaining the award.

The Cayman Islands Grand Court judges are highly experienced in high value cross-border disputes and in dealing with large-scale enforcement action.  Applications for leave to enforce foreign arbitral awards are becoming ever more frequent in the Cayman Islands, so the above guidance will be welcomed. 

 

Grand Court clarifies procedure for enforcement of foreign arbitral awards

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