Setting aside enforcement: Take 1, challenging jurisdiction and material non-disclosure

In Al-Haidar v Rao FSD 328 OF 2022 (IKJ), the Plaintiff obtained an ex parte Order in January 2023 granting leave to enforce a provisional DIAC arbitral award which contained a freezing order. The Defendant applied to set aside that Order on the grounds that: (1) the arbitration was not conducted in accordance with the arbitral rules specified in the parties’ agreement; and (2) the failure to disclose this matter to the Court at the ex parte stage was a material non-disclosure. The Defendant also challenged the DIAC Tribunal’s jurisdiction to make the provisional award, despite not making such a challenge before the Tribunal itself.

On ground (1), the Defendant relied on section 7(2) of the Foreign Arbitral Awards Enforcement Act (1997 Revision) (the Act)[1], subsection (e) of which provides that the enforcement of an award may be refused if the arbitral procedure was not in accordance with the agreement of the parties. The Defendant argued that the arbitration was not conducted in accordance with the parties’ agreement as it did not proceed under the rules agreed by the parties in their agreement.

The Court found that, whilst this argument had been raised in the arbitration proceedings in respects of the merits of the arbitration, the Defendant failed to challenge the Tribunal’s jurisdiction to make the provisional award – indeed the Defendant had confirmed to the Tribunal that it would comply with the provisional award. The Court held that the Defendant was estopped from challenging the Tribunal’s jurisdiction to make the provisional award on the basis of Henderson v Henderson (1843) 3 Hare 100 and the common law doctrine of issue estoppel. Kawaley J observed that the “legislative policy of swift enforcement on narrowly circumscribed grounds could all too easily be undermined if respondents had the unfettered right to raise new points before foreign enforcement courts which were never in issue before the tribunal but which could and should have been raised” during the arbitration. Kawaley J noted that, should the provisional award ultimately be set aside by the Tribunal, the Defendant would be protected by the cross-undertaking in damages given by the Plaintiff when it obtained the freezing order.

On ground (2), in dismissing the material non-disclosure complaint, the Court found that, as the Defendant had not challenged the Tribunal’s jurisdiction to make the provisional award during the course of the arbitration, these issues were “irrelevant, not simply immaterial” to the Plaintiff’s ex parte application for enforcement of the provisional award.

Setting aside enforcement: Take 2, challenging service and unfair presentation

In Carrefour Nederland BV v Suning International Group and Suning FSD 304 OF 2023 (IKJ), the Plaintiff had obtained a final HKIAC arbitral award and subsequently obtained in the Cayman Court an ex parte Order granting leave to enforce that award in the Cayman Islands. The Defendants applied for: (1) a declaration that the Order was not validly served on the Defendants; (2) an Order setting aside service on the grounds that the Plaintiff had failed to make full and frank disclosure and/or the Order did not comply with parts of the Grand Court Rules (GCR); and/or (3) an order staying the Order.

The Court characterised the Defendants as having taken a “kitchen sink” approach to their complaints, considering and dismissing each in turn.

Service complaint

The Order granted leave to serve enforcement proceedings outside the jurisdiction and by substituted service (email to the Defendants’ attorneys). The Defendants complained substituted service was unusual and that the GCR required service on bodies corporate at their “principal or registered address”, and submitted that the Court should refrain from a “broad, casual, and/or generous approach to the issue of service.”

The Court disagreed and rejected the Defendants’ arguments that they had not been validly served, and held that the Court has an unfettered discretion to authorise service in the manner that it considers fit.

Material non-disclosure / unfair presentation

The alleged breach of its duty to make fair presentation on the ex parte application was that the Plaintiff failed to disclose (among other things) a second pending arbitration which could give rise to a complete defence or counterclaim.

Kawaley J rejected the complaint, finding that the that the matters complained of were not material for the Plaintiff to disclose, and holding that only matters that could support a ground for refusing enforcement under section 7 of the Act would be material. Kawaley J also noted that the burden was on the Defendants to establish qualifying refusal grounds, and that the ex parte leave context is markedly different from the ex parte injunction application context.

Stay application

In light of the pending second arbitration, the Defendants sought a stay on enforcement. In refusing a stay the Court found that none of the bases for refusing or adjourning enforcement contained within section 7 of the Act had been met. The Court noted that whilst granting a pragmatic short stay might be attractive, this approach would potentially undermine the streamlined enforcement process contained in the Act. Although the Court did not entirely shut down the prospect of a more tailored stay in the future, its rejection of the general stay was expressly made without prejudice to any application the Defendants might make to stay specific execution steps taken by the Plaintiff.

Observations

For those looking to enforce arbitral awards in the Cayman Islands, the jurisdiction has shown itself to be supportive and robust in its approach. These two recent decisions of Kawaley J reaffirm that approach and demonstrate that:

  1. The Cayman Islands continues to adopt a pro-arbitration approach with regard to the enforcement of foreign arbitral awards, whether provisional or final, in line with giving effect to the provisions of the New York Convention.
  2. The Court is likely to refuse to entertain jurisdictional arguments during the enforcement stage which could (and should) have been raised during the course of the underlying arbitration.
  3. Grounds for refusing or staying enforcement will be construed narrowly, and those seeking to set aside enforcement will need to satisfy one of the grounds under section 7 of the Act.
  4. The only matters which are likely to be relevant to an ex parte application for enforcement of an award from a fair presentation / disclosure perspective are those which go to grounds under section 7 of the Act.

[1] Which gives effect to Article V of the New York Convention on the recognition and enforcement of foreign arbitral awards.

Key Contacts

David Lee

Partner: Cayman Islands

T +1 345 814 2083
E Email David

Zuhair Farouki

Associate: Cayman Islands

T +1345 814 2728
E Email Zuhair

Crystal Au-Yeung

Counsel: Hong Kong

T +852 2905 5767
E Email Crystal

David Lewis-Hall

Consultant: Cayman Islands

T +1 (345) 814 2047
E Email David

George Mallis

Associate: Hong Kong

T +852 2905 5724
E Email George

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