In doing so, the Court of Appeal emphasised the policy of Cayman Islands law in favour of swift enforcement of arbitral awards. It also cautioned that failure to follow the guidance in this judgment will likely result in a service order being set aside.

The respondent obtained an arbitral award in Hong Kong requiring the appellants to pay RMB1 billion (plus interest and costs) arising out of the failure by appellants to make payment pursuant to a put option for shares exercised by the respondent.

Pursuant to section 5 of the Foreign Arbitral Awards Enforcement Act (1997 Revision) and with leave of the Court a Convention award may be enforced in the same manner as a judgment or order of the Grand Court. GCR Order 73, rule 31 deals with the procedure to be followed. Rule 31(6) provides that an order giving leave may be served personally, by sending to the respondent’s usual or last known place of residence or business, or in such other manner as the Court may direct, including electronically.

The Grand Court made an order ex parte granting leave to enforce the arbitral award in the Cayman Islands and directed that the order and associated documents be served on the appellants by delivery to their Hong Kong counsel in the arbitration proceedings. The respondent arranged service pursuant to the terms of the order, and also effected service by hand and registered post on each appellant respectively.

The appellants then applied to set aside the order on various grounds including that the method of service ordered by the Judge was allegedly not in accordance with the relevant law.

The appellants submitted that service of an ex parte  order pursuant to rule 31(6) should be by way of service on a body corporate at its principal office or registered address and that the option of serving in some other manner should only be utilised on exceptional grounds. They submitted there was no evidence before the Court to show that service in according with the Hague Convention would cause any particular difficulty or delay, and there was no justification for in effect ordering substituted service.

Justice Kawaley rejected these submissions and held that the wording of rule 31(6) gave the Court a suite of equal options rather than a suite of options sequentially ranked. He drew a distinction with the wording of GCR Order 65, rule 4 permitting substituted service where personal service is “impractical”. He also noted there was no suggestion that serving the documents on the appellants’ arbitration attorneys was contrary to Hong Kong law.

The Grand Court dismissed the application to set aside the order but granted leave to appeal on the basis that the manner in which service of an ex parte  order giving leave to enforce a foreign arbitral award is a matter of public interest which would benefit from a decision from the Court of Appeal.

The Court of Appeal dismissed the appeal.

The Court of Appeal endorsed Mr Justice Foxton’s comments in the English decision of M v N. In particular, the policy of speedy finality reflected in the approach to arbitration cases is even more compelling in connection with applications for enforcement of awards.

Mr Justice Foxton set out factors that he held justified an order for alternative service notwithstanding that the Hague Service Convention applied. These included that the application was brought to assist with the enforcement of an arbitral award which engages the policy of speedy finality, the respondent had fully engaged (through counsel) with the proceedings that culminated in the award, the award had been outstanding for a considerable period of time (two years), the effect of a lengthy delay in service would be to increase the period during which any challenge to the enforcement order might be made, the method of service was likely to be effective to bring the documents to the respondent’s attention, and the applicant had a contractual right to serve at least some of the documents in the relevant jurisdiction.

As with English law, the Court of Appeal held that the policy of the Cayman Islands is in a favour of enforcement of awards. This is illustrated by section 7(1) of the Act which provides that enforcement of a Convention award shall not be refused except in certain specific circumstances. Further, alternative service is not, in this context, being effected to commence a dispute but after it has already been determined. The need for legal certainty dictates that such awards can be enforced speedily, without long delay caused by the need for service under the Hague Convention.

The Court also held that swift enforcement of an award is essential to the effectiveness of arbitration as a means of resolving disputes. It would be contrary to the public interest and the Cayman Islands’ policy of upholding international standards if enforcement of arbitral awards were to become a slow and long drawn-out process because service had to be effected through the Hague Convention channels.

The Court of Appeal agreed with Justice Kawaley that the wording of rule 31(6) is to be distinguished from Order 65, rule 4. Rule 31(6) permits service in any case “in any such other manner as the court may direct” and confers a wide discretion on the court.

When considering how to exercise the wide discretion, the provisions of the Hague Convention must be considered. There must be good reason to order service by some method other than through the Central Authority of the relevant country.

• In order for the Court to be able to consider whether there is such good reason, an applicant must adduce evidence of the practicalities of serving the order in question in the relevant country in accordance with the Hague Convention. In particular, how long would such service be expected to take and how reliable is it.
• If service other than personal or ordinary service is requested, the applicant must explain the need for urgency and why the third alternative (in any other manner as the court may direct) is appropriate in that case.
• The applicant must also set out whether the relevant country has made an objection under Article 10. If it does, the court would then need to consider whether exceptional or special circumstances exist so as to justify some other form of service.
• The application must explain any need for urgency and which of the factors described by Mr Justice Foxton in M v N are in play so as to justify the court departing from the Hague Convention method of service.

If an application contains all the necessary information and is considered by the Court in light of the specific facts, the Court of Appeal held that there would be no reason why the court should not routinely decide that good reason, or exceptional circumstances where a state has made an Article 10 objection, are made out so as to justify an order for service other than through the central authority. This could result in the Court ordering personal or ordinary service but directly rather than through the official channel, or ordering some other method of service such as service on the relevant party electronically or on lawyers instructed in the arbitration.

The Court of Appeal held that there was no evidence before the Judge as to how long service via the Central Authority would take in either Hong Kong or China, nor as to urgency. The Judge was therefore not in a position to consider whether the requirements of speedy finality justified a departure from the Hague Convention service method or to apply the appropriate test.

The Court however declined to set aside the order. Doing so would, it held, be a “triumph of form over substance” and in the unusual circumstances where the procedure in relation to rule 31(6) had not previously been clarified (and the appellants had also been served by delivery to their registered offices), the Court of Appeal treated the service point as an irregularity which it waived.

The Court of Appeal cautioned that, given the clarification on rule 31(6) has now been provided, failure by any applicant or by a Judge to follow the approach on a future occasion is likely to result in any service being treated as ineffective.

This is the leading decision in the Cayman Islands on the procedure for service of an order enforcing an arbitral award, where the respondent is resident in a state that is party to the Hague Convention, otherwise than pursuant to the Hague Service Convention procedures. The Court of Appeal’s emphasis on swift enforcement will be useful for award creditors seeking to take enforcement action in the Cayman Islands and is consistent with the jurisdiction’s pro-enforcement approach.

The Court provides practical guidance on the evidence that will be required to establish “good reasons” exist so as to justify service under rule 31(6) other than through a central authority. Despite the need for “good reasons” (or “exceptional” circumstances in the case of a state with an Article 10 objection), there is no reason that alternative service should not be routinely directed.

Failure to follow the guidance in the judgement will likely result in service being treated as ineffective, even if the documents have come to the attention of the respondent. Award creditors seeking service orders under rule 31(6) should therefore pay close attention to the procedure in the decision.