The Cayman Islands' position as a top international financial centre is facilitated not only by its income tax-free status, but also by the Islands' history of political and economic stability, responsible and practical levels of regulation, and a highly competent workforce of professionals, judiciary and legislators. As an English-speaking British Overseas Territory, the Cayman Islands maintains a strong connection with the United Kingdom (UK) from which it inherits much of its legislative system and judicial framework.
Legislation
The Cayman Islands Legislative Assembly is a unicameral legislature comprising 18 elected members and two ex officio members pursuant to the Cayman Islands Constitution of 2009. The ex officio members are the Deputy Governor (the Member Responsible for the Civil Service) and the Attorney General (the Member Responsible for Legal Affairs). The passing of legislation, similarly to the UK, requires three readings of the draft bill in the Legislative Assembly followed by a majority vote of the legislature. Draft bills can be presented by government motion or private member's motion. Bills, once passed by the Legislative Assembly, require royal assent before becoming effective. In practice, royal assent is given by the Governor, who also has power under the Constitution to withhold royal assent in certain circumstances.
In order to ensure the most appropriate and effective legislation, the relevant Cayman Islands private sectors are regularly consulted regarding draft bills before they are laid before the Legislative Assembly. The Cayman Islands financial industry, including the local law and accounting firms, plays an active role in contributing to the terms of draft laws that govern the sector. The Mutual Funds Law, the Exempted Limited Partnership Law and the Trusts Law are all industry-specific legislation that have had significant input from the relevant sectors, including by way of industry consultations and private sector advisory committees.
The Cayman Islands government has illustrated its responsiveness to the industry through the passing of legislation intended to provide mechanisms for the creation of alternative corporate structures such as Segregated Portfolio Companies, STAR Trusts (through the alternative regime for the creation of special trusts), Exempted Limited Partnerships (similar to Delaware LLPs) and Exempted Companies (companies registered in the Cayman Islands for operation in other jurisdictions).
An historically important piece of Cayman Islands legislation, the Confidential Relationships (Preservation) Law (CRPL), has been in force since 1976 and was most recently revised in 2009. The CRPL imposes criminal penalties on any individual improperly disclosing confidential information which professionals are obliged to keep confidential, while also providing for the appropriate exceptions, including criminal investigations and disclosure in legal proceedings, where approved by the Grand Court.
Legal Proceedings
The Cayman Islands legal system is based on the English common- law legal system, which is a well-developed and internationally recognised system of law. Generally, English common-law principles are recognised and applied by the Courts in the Cayman Islands and, as a result, the Cayman Islands jurisdiction has a well-deserved reputation of producing balanced and predictable results, with wide applicability throughout the Commonwealth and in other offshore jurisdictions.
Litigants who are unhappy with a decision of the Grand Court can appeal first to the Cayman Islands Court of Appeal (although leave to appeal is required in certain circumstances) and in some cases there is also a final appeal from the Court of Appeal to the UK Judicial Committee of the Privy Council in London.
The Cayman Islands Court of Appeal was established in 1984 (prior to this, appeals were heard by the Jamaican Court of Appeal) and is comprised of judges who have held high judicial office for many years in the Cayman Islands and elsewhere. The current president of the Court of Appeal, the Rt. Hon. Sir John Chadwick, is very highly qualified; he was a member of the Judicial Committee of the Privy Council and a judge of the Courts of Appeal of Jersey and Guernsey, and is currently a judge of the Court of Appeal of the Dubai International Financial Centre. The Court of Appeal generally holds three sittings per year in the Cayman Islands, with three judges hearing each appeal. The Court of Appeal will also hold special sittings where the urgency of the matter requires.
The Judicial Committee of the Privy Council is comprised of members of the Supreme Court of England and Wales. It is the court of final appeal for the UK Overseas Territories and Crown Dependencies, and for those Commonwealth countries that have retained the appeal to Her Majesty in Council.
The judicial process in the Cayman Islands has been streamlined considerably by the establishment of the Financial Services Division of the Grand Court (FSD) in 2009. The FSD was created to fulfil an identified need for special procedures and skills in dealing with the more complex civil cases that arise out of the financial sector in the Cayman Islands.
The procedures of the FSD, which are set out in part in the Grand Court Rules and in part in a separate FSD Users' Guide, reflect the need for urgent action to be taken in some cases; for there to be special processes for confidentiality and security of sensitive information; and for proper allocation of judicial resources in this highly specialised area of work. Each matter that is assigned to the FSD is assigned a specialist judge at the outset who will actively manage the case through to resolution. The FSD is served by six judges, including the Hon. Chief Justice, who all have a high level of practical experience and judicial expertise generally, and especially in relation to financial services matters. The FSD also caters for the global practicalities of financial services litigation, which frequently involves multi-jurisdictional issues and requires the involvement of experts and resources outside of the Cayman Islands. One example of the FSD's approach to the international nature of this type of work is the use of state-of-the-art video conferencing facilities at its specialist courthouse.
Bolstering the high quality of the judicial administration in Cayman is the first-rate legal talent that is abundant in the Islands as a result of both the first-class legal education and training opportunities available to Caymanians (the Cayman Islands has its own law school), and also by the presence of highly trained and experienced practitioners who have relocated to the Cayman Islands from throughout the Commonwealth, having been attracted by the high standard of living and the excellent quality of legal work on offer. Leading counsel from England with specialist knowledge and experience in financial services also appear regularly in the Grand Court and Court of Appeal, particularly in the more high-value and complex disputes. Legal proceedings and liquidations in respect of 100 million-dollar to multibillion-dollar disputes or estates are common in the Cayman Islands and, as a result, the legal practitioners here frequently deal with novel and cutting-edge legal issues.
Conclusion
A multitude of factors buttress the Cayman Islands' dominance in the offshore financial industry. The reactive and proactive nature of the legislature, coupled with the proficient judiciary produces an effective and efficient regime which ensures prognostic results welcomed by investors, investment managers and industry practitioners alike. Capitalising on these strengths as it does, Cayman will continue to evolve through the legislature's consultative efforts, highly capable judiciary and, especially, the use of the specialised FSD.
About the Author
Shelley White is Senior Counsel with Walkers, specialising in insolvency litigation, trust disputes and general commercial litigation.
About the Author
Joanne Verbiesen is an Associate with Walkers, specialising in commercial litigation, complex cross-border litigation and trusts disputes.
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