Both the British Virgin Islands (BVI) and the Cayman Islands have recently updated and modernised their arbitration regimes. The Cayman Islands passed their legislation first, and in Cayman the process of arbitration is now governed by the Arbitration Law 2012 (theCayman Law). The BVI followed approximately 12 months later passing the Arbitration Act 2013 (theBVI Act) which now regulates the process.
Both the Cayman Law and the BVI Act are largely based on the UNCITRAL Model Law on International Commercial Arbitration, as updated in 2006 (the Model Law), and in the case of the Cayman Law this includes elements from the English Arbitration Act 1996. The BVI Act expressly includes Article 2A of the Model Law requiring the BVI courts to interpret the legislation with regard "to its international origin and to the need to promote uniformity",1 whereas the Cayman Law does not make express provision for this. To facilitate the operation of the Cayman Law, the Cayman Islands also introduced procedural rules regulating the practice and procedures of the Grand Court (the Cayman Rules). The BVI has also drafted subsidiary legislation (the BVI IAC Arbitration Rules 2015), but these have not yet been circulated for public consultation much less brought into force. The Cayman Rules provide a mechanism by which parties to arbitration may refer discrete issues to the Grand Court for determination. The Cayman Rules also govern the procedure that a party to an arbitration must follow when seeking to enforce an award. Awards made by an arbitral tribunal may, with leave of the Grand Court, be enforced in the same manner as a judgment or court order.
In very general terms the Cayman Law tends to be more flexible and more protective of party autonomy, whereas the BVI Act clings more rigidly to the UNCITRAL Model Law template. The Cayman Law largely operates on the principle that most arbitrations will be on an ad hoc basis, whereas the BVI Act is geared towards working with arbitrations under the proposed BVI International Arbitration Centre (BVI IAC). The BVI Act also makes some small provisions for mediations, whereas the Cayman Law focuses solely upon arbitration.
Both the BVI and the Cayman Islands operate arbitral regimes which comply with widely accepted international arbitration practice. In each case the regime governs both domestic and international arbitrations and provides a modern and adaptable alternative to resolving disputes by litigation in the courts.
The Cayman Law is expressly founded on the following three principles:2
- 1.impartiality and the fair resolution of a dispute by a neutral tribunal without any undue delay or expense;
- 2.party autonomy subject only to a public policy restriction;3 and
- 3.limited court intervention.
The BVI Act also includes a statement of principles.4 After stating that the object of the BVI Act is to "facilitate and obtain the fair and speedy resolution of disputes by arbitration without unnecessary delay or expense", the statute similarly lists three guiding principles:
- 1.that subject to the observance of the safeguards that are necessary in the public interest, parties to a dispute should be free to agree on how the dispute should be resolved;
- 2.the courts should not interfere in the arbitration of a dispute, save as expressly provided in the legislation; and
- 3.where the court does interfere in an arbitration pursuant to the expressed provisions of the statute, it shall, as far as possible, give due regard to the wishes of the parties and the provisions of the arbitration agreement.
Section 4(1) of the Cayman Law provides that an arbitration agreement may be in the form of:
- 1.an arbitration clause within an agreement or set of agreements pursuant to which the parties agree to submit to arbitration any dispute that has arisen or may arise in the future; or
- 2.a standalone agreement.
In order to bind the parties, an agreement must be in writing and signed by all the parties or must be an exchange of letters, facsimiles, telegrams, electronic communication or other means of communication that evidence agreement.
In the BVI Act the requirements for an arbitration agreement are set out in section 17 which adopts option 1 from Article 7 of the UNCITRAL Model Law (which includes the use of wholly electronic arbitration agreements), reflecting existing provisions in the BVI's Electronic Transactions Act 2001.
Appointment of an arbitrator
In circumstances where the parties fail to agree on a procedure for the appointment of an arbitrator, or require a neutral, third arbitrator to be appointed, they may enlist the assistance of a chosen third party or the Court to make that appointment in either jurisdiction. Section 16(5) of the Cayman Law sets out a number of practical matters to which the Court or chosen third party must have regard when appointing an arbitrator on behalf of the parties.
Under the BVI Act if the parties do not provide a process for appointing a tribunal and cannot agree upon one, then the appointment may be dealt with either by the Court or by the BVI IAC.5 If the agreement does not specify the number of arbitrators and the appointment if made by the BVI IAC, it is presumed to be three subject to a discretion to appoint a sole arbitrator; there are no stated guidelines in such situations for appointments by the Court. In contrast to Cayman there is no list of factors set out to consider when determining an appointment, although the more general language from the Model Law is replicated: the appointing authority "shall have due regard to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties".
In Cayman the appointment of an arbitrator may only be challenged if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence or if he or she does not possess any qualifications required of the arbitrator by the arbitration agreement or otherwise by the parties.6 The position is largely identical under the BVI Act.7
The Cayman Law gives the parties the right to choose whichever set of arbitration rules they prefer to govern the conduct of the arbitration. The parties are also free to select the language and seat of the arbitration, whether the proceedings will be written or conducted as an oral hearing and whether they wish to be represented by a legal practitioner or by any other person, provided that the conduct of the arbitration is consistent with the following general duties of the arbitral tribunal:8
- 1.to act fairly and impartially;
- 2.to allow each party a reasonable opportunity to present their case;
- 3.to conduct the arbitration without unnecessary delay; and
- 4.to conduct the arbitration without incurring any unnecessary expense.
Where the parties fail to agree on a particular set of rules, the arbitral tribunal may adopt such rules as it considers appropriate as long as they are not inconsistent with the Cayman Law.9
The BVI Act adopts Article 19 of the Model Law wholesale, to substantially the same effect.10
Stay of court proceedings
In both Cayman and the BVI, the new regimes expressly provide that court proceedings shall be stayed in favour of arbitration where there is an effective arbitration clause, providing that the application is made prior to delivery of pleadings by the party seeking the stay.11 Historically under previous legislation the BVI courts have shown themselves to be fairly zealous in staying proceedings in favour of arbitration, and it is expected that this culture of deference would continue.12
Powers of the tribunal
In both BVI and Cayman, the tribunal has power to rule on its own jurisdiction.13 The BVI provision is expressed in broader terms, and states that this includes power to rule on matters of constitution and submission as well, although this is probably implicit in the more succinct Caymanian provisions.
In Cayman the parties may agree on the powers that may be exercised by the arbitral tribunal. In the absence of agreement, the Cayman Law confers extensive default powers on the arbitral tribunal, reinforcing the notion that the arbitral process should be controlled by the arbitral tribunal without involving the Court unless necessary. The Cayman Law now grants the arbitral tribunal the power to make orders in respect of:
- 1.security for costs;
- 2.discovery of documents and interrogatories;
- 3.giving of evidence by affidavit;
- 4.a party or witness to be examined on oath or affirmation;
- 5.the preservation and interim custody of any evidence;
- 6.samples from, observation made or experiment conducted upon any subject property; and
- 7.the preservation, interim custody or sale of any subject property.
The Court, on the other hand, retains the power to, amongst other things, compel a witness to attend an arbitration proceeding, give oral evidence or produce documents. Taken as a whole, in Cayman the powers of the Court are intended to be a support mechanism to the tribunal and should not be exercised to overreach the tribunal itself.
The arbitral tribunal has discretion to order an interim measure as a means of protection to prevent or minimise any prejudice which may arise after the tribunal has rendered its final award. Examples of interim measures include: orders for not removing goods or assets from a place or jurisdiction; orders for preserving evidence or for selling goods; and orders for monetary guarantees. An interim measure may last for the duration of the arbitration or may be temporary and modified as the arbitration advances.
In contrast, the BVI legislation appears slightly more conservative on the whole in relation to conferring powers on the tribunal, although section 54(1) does confer express powers in relation to:
- requiring security for costs;
- discovery of documents and delivery of interrogatories;
- directing evidence to be given by affidavit; or
- in relation to any relevant property, (i) directing the inspection, photographing, preservation, custody,detention or sale of the relevant property by the tribunal, a party or an expert; or (ii) directing samples to be taken from, observations to be made of, or experiments to be conducted on, the relevant property.
Similarly, the Court in the BVI has power to compel assistance in relation to evidence.14
When granting an award in Cayman, the arbitral tribunal must abide by the choice of law in the agreement and, if there is no specific choice of law, will determine the applicable law in accordance with conflicts of law rules.
Similarly in the BVI, article 28 of the Model Law is adopted,15 and provides that:
- (1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conflict of laws rules.
- (2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.
The Cayman Law and the BVI Act both permit the tribunal to grant awards in relation to different issues at different times. This allows the tribunal, when hearing a complex case, to make separate awards in respect of the different issues on a priority basis. This effectively empowers the tribunal to manage each case as it sees fit, factoring in time and costs.
Challenging an award
In both jurisdictions the regimes for applying to a court set aside an award are restrictive, but the available grounds vary slightly. In the BVI under section 79(1) the power of the Court to intervene is limited to:
- 1.where the party making the application furnishes proof that:
- 2.the Court finds that:
In Cayman the Court has power to intervene on all of the same basic grounds, and two additional ones:17 where (1) the making of the award was induced or affected by fraud, corruption or misconduct on the part of an arbitrator; or (2) there has been any other breach of the rules of natural justice in connection with the making of the award.
In both BVI and Cayman it is also possible to appeal an award to the Court on a question of law: in Cayman this right of appeal exists unless the parties "opt out",18 whereas in BVI the parties need to "opt in" to have such rights.19 In both BVI and Cayman, an appeal on a point of law requires the leave of the Court.
Enforcement of foreign arbitral awards
Foreign arbitration awards may be enforced in the Cayman Islands, provided that the awards are:
- Arbitration awards made in states that are party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Awards made pursuant to the New York Convention are given effect by virtue of the Foreign Arbitral Awards Enforcement Law (1997 Revision). Accordingly, a foreign arbitral award made in a state that is party to the New York Convention will be recognised and enforced in the Cayman Islands courts. The party wishing to enforce an award granted pursuant to the New York Convention must make an ex parte application for leave in the Grand Court of the Cayman Islands.
- Arbitration awards made under the Convention on the Settlement of Investment Disputes done in Washington on 18 March 1965 (the Washington Convention). The Cayman Islands are an indirect signatory to the Washington Convention by virtue of it being a British Overseas Territory of the United Kingdom and pursuant to the Arbitration (International Investment Disputes) Act 1966 (Application to Colonies, etc) Order 1967.
- Arbitration awards made under the Convention establishing the Multilateral Investment Guarantee Agency done in Seoul on 11 October 1985 (the MIGA Convention). The Cayman Islands is also an indirect signatory to the MIGA Convention by virtue of being a British Overseas Territory and pursuant to the Multilateral Investment Guarantee Agency (Overseas Territories) Order 1998.
In the BVI arbitration awards can also be enforced under the New York Convention or the Washington Convention (although like Cayman, there is a paucity of bilateral or multilateral investment treaties extended to the BVI which provide for resolution by ICSID pursuant to the Convention). In the BVI there is also an additional enforcement mechanism under the Reciprocal Enforcement of Judgments Act 1922 for selected countries which applies where the award has the force of a judgment under domestic law. For practical purposes this is only relevant to awards made where the seat of the arbitration was in the United Kingdom where the claimant has obtained an order under Part 62(18) of the English Civil Procedure Rules.
In both jurisdictions it also remains possible to enforce foreign arbitration awards by suing upon the award as a debt at common law outside of the statutory framework,20 although for technical reasons this is not recommended in either jurisdiction.
In contrast to court proceedings, arbitral proceedings are conducted entirely as a private matter between the parties and confidentiality is protected by the Cayman Law. Section 81 of the Cayman Law imposes a duty of confidentiality on the parties and dictates that the proceedings are conducted in private. There is no public record of the proceedings, no public statements of the parties' respective positions, nor any public hearings or reported judgements. Subject to limited exceptions, any disclosure by a tribunal member or another party of confidential information is an actionable breach. The definition of what constitutes "confidential information" is broad and includes all documents and evidence, notes or transcripts of the proceedings and any rulings and awards made by the arbitral tribunal. Disclosure of confidential information is only permitted if authorised by the parties, is in the public interest or falls within limited other exceptions as outlined in section 81(2) of the Cayman Law.
Conversely the BVI Act contains no express provision for the protection of the confidentiality of the parties, and accordingly this matter remains wholly regulated by the common rules in the BVI.21
Unless a contrary intention is expressed, every arbitration agreement shall be deemed to include a provision that the costs of the arbitration will be in the discretion of the arbitral tribunal. The flexibility of the arbitral process allows the parties to limit their costs by limiting their discovery of documents, the venue and timing of the arbitration, their expert evidence, or they may even decide to forgo the oral hearing altogether and reach a resolution on the basis of written submissions. The Cayman Law stipulates that the arbitral tribunal is to conduct the arbitration without unnecessary delay and without incurring any unnecessary expense. Unless an arbitral award relates to the transfer of property or the importation of goods, it will not give rise to any tax implications under Cayman Islands law. Moreover, the legal costs which parties to a Cayman arbitration proceeding can claim from the tribunal are more generous than those parties could expect to recover at the end of litigation brought in the Cayman Islands courts.
In the BVI the position is slightly unusual in that the BVI Act expressly prohibits provisions in an arbitration agreement which provide that each party shall be responsible for its own costs, and mandates that (unless such a provision was entered into prior to the dispute arising) all such provisions shall be treated as void.22
The BVI Act makes express provision for a new statutory body, the BVI IAC, to facilitate arbitrations within the jurisdiction and to assist with appointments and other mechanical aspects of arbitrations. However, as yet no appointments have been made to the board of the BVI IAC and the body is not yet functional. The BVI does not have a dedicated a dedicated physical arbitration centre, and there are no plans at present to construct one.
In contrast, the Cayman Law does not create a statutory body to oversee and/or facilitate arbitrations, but in the Cayman Islands plans for a dedicated and permanent Arbitration Centre are currently being considered by the Dart Enterprise Group. It is envisaged that a state-of-the-art facility could be in place and housed within the Camana Bay development by as early as 2016. It is hoped that an exclusive Arbitration Centre would persuade parties to designate the Cayman Islands as the seat of arbitration for any commercial disputes, and reinforce the reputation of the Cayman Islands as the jurisdiction of choice for international dispute resolution.
- 1 Section 7.
- 2 Section 3(3). See also Appalachian Reinsurance (Bermuda) Ltd v Greenlight Reinsurance Ltd  1 CILR 152
- 3 Re Cybernaut Growth Fund LP, (Unreported, FSD 73/2013, dated 23 July 2013) provides an example of the court finding that a case is not capable of arbitrating due to public policy grounds. Jones J. held that any dispute regarding who should be appointed as liquidator of a regulated company ought to be litigated before the Grand Court as a matter of public interest.
- 4 Sections 3(1) and (2).
- 5 Section 22(1).
- 6 Section 18(3).
- 7 Section 23.
- 8 Section 28.
- 9Section 18(3) – 18(4).
- 10 Section 45.
- 11 Cayman Law, section 9; BVI Act, section 18(1) and (4).
- 12 See for example Applied Enterprises Limited v Interisle Holdings Ltd (BVIHCV (COM) 2012/0135).
- 13 Cayman Law, section 27(1); BVI Act, section 32(1).
- 14 Section 53.
- 15 Section 62.
- 16 Subject to the proviso that if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside.
- 17 Section 75(1).
- 18 Section 76(2).
- 19 Section 89 and schedule 2, paragraph 5.
- 20 Birtley & District Cooperative Society v Windy Nook & District Cooperative Society  2 QB 1.
- 21 See generally Dolling-Baker v Merrett  1 WLR 1205.
- 22 Section 72(8).