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Cayman Islands Law Amended to Enable Preliminary Relief in Aid of Foreign Proceedings

Today, litigants are confronted with defendants who have sought to put assets beyond reach by moving them overseas, often into trusts or corporate structures in International Financial Centers. In response to the increasing internationalization of commercial fraud and a concern that their jurisdiction would gain a reputation for being a place where fraudsters could safely hide assets, the Cayman Islands enacted the Grand Court (Amendment) Law.

By the Amendment, new Section 11A gives the Grand Court the power to make an order appointing a receiver or orders for any other interim relief which it would have the power to grant in proceedings within its jurisdiction in respect of proceedings which have or are to be commended in a foreign court which are capable of giving rise to a judgment which may be enforced in the Cayman Islands. Section 11A (4) gives the Grand Court the power to make such orders for interim relief even if the cause of action which is being litigated in the foreign proceeding is not a cause of action which could be litigated in the Cayman Islands. Under Section 11A (5), the Court is entitled to refuse an application for interim relief if it would be unjust or inconvenient to make an order.

Now, the important questions raised by this new legislation are what the claimant needs to satisfy for the court to make an order. Presumably, the claimant will need to show that there are proceedings which are or will be in a foreign court capable of giving rise to an enforceable judgment in the Cayman Islands. The claimant will also have to show that it is not unjust or inconvenient to make the order sought. Presumably, the court will need to be satisfied at a minimum that the claimant would be granted the order if the application had been made in proceedings originating in the Cayman Islands. For a freezing order, it is suggested that the court will need to be satisfied that the claimant has a good arguable case and that there is sound evidence of a real risk that the judgment will not be satisfied without the order sought. Hence, the court will need to be satisfied that considerations of justice and convenience favor the granting of interim relief.

With the Amendment Law now in place, the Cayman Islands joins Jersey, the Isle of Man and other Caribbean jurisdictions who have actively supported interim relief to claimants engaged in foreign litigation where assets are being dissipated or concealed to avoid recovery.

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About this Author

Rick Rein, Creditor's Rights Attorney, Horwood Marcus & Berk Law Firm
Partner

RICK REIN is chair of Horwood Marcus & Berk's Litigation Group and focuses his practice on creditor's rights, loan enforcement and creditor bankruptcy representation. He regularly advises secured creditors in workout and restructuring transactions, including forbearance agreements. He also assists secured creditors in recovering pledged collateral through Uniform Commercial Code sales and commercial mortgage foreclosures, in prosecuting claims based on fraud, non-performing loans, intercreditor disputes and loan commitment litigation and in defending creditors...

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