Cayman to open dedicated financial court

The Cayman Islands will open a dedicated financial services division of its Grand Court on November 1 to adjudicate complex litigation involving financial companies, including those linked to hedge funds domiciled in Cayman.

The court will hear cases involving investment funds, insurers and other financial services providers based in the Cayman Islands. This will include regulatory proceedings, insolvency cases and disputes on breach of contract, breach of trust and breach of fiduciary duty, including claims brought against service providers to investment funds.

While jurisdictions like the British Virgin Islands and Bermuda have dedicated courts to hear commercial cases, the Cayman Grand Court's financial services division is believed to be the first specialist court of its kind in the offshore world.

The financial services division was created to handle the ever increasing volume of financial services cases in the Cayman Islands, said Jeremy Walton, a partner at the law firm Appleby in the Cayman Islands.

"It is well timed, given the general increase in litigation we have seen this year, and expect to see over the next several years," said Walton.

The financial services division will have its own dedicated infrastructure within the Cayman courts system. This will include state-of-the-art court rooms and dedicated staff such as registrars. Financial services proceedings will be heard by specialist judges who will sit solely in the division.

"Specialist and dedicated expertise is being brought to bear on cases involving financial companies," said Walton. "This will include active case management of complex disputes, resulting in speedier decisions, lower legal costs and greater legal certainty. The infrastructure is intended to be comparable to anything in the onshore world."

The Cayman authorities are yet to name the judges who will sit in the financial services division.

The launch of a dedicated financial services division has been broadly welcomed by law firms in the Cayman Islands. However, there are some concerns over the cost of initiating proceedings in the division.

In order to bring a case in the financial services division, claimants will have to pay a fixed, up-front fee of up to CI$15,000 ($18,293). The cost is pegged to the maximum fee currently payable for initiating a claim or obtaining an award for more $1 million.

However, this fee will have to be paid up-front for cases initiated in the financial services division, whereas under the previous system it may never be collected if the case settles before trial.

The hefty fee payable for initiating proceedings in the financial services division will serve to discourage parties from initiating proceedings in the division that do not belong there, Walton said. It also reflects the considerable cost of providing a dedicated and bespoke service for financial services cases.

"In most financial services cases the court fee would be only a fraction of the total legal costs. The concern is that smaller disputes involving financial services no longer have a ready home in the court system. It is expected that most of these claims will be settled before trial. However, if they are contested, these claims may be priced out of the court system," concluded Walton.