Forum, Firewall, and Fights in Foreign Courts
Rachael Reynolds – Partner
Deborah Barker Roye - Counsel
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F
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who has jurisdiction to determine
disputes over a Cayman Islands
trust?
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which law will apply?
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will a foreign judgment be enforced?
Distinction between jurisdiction and
governing law
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Position under common law - a foreign judgment may be enforced if:
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Final and binding
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Non penal or tax judgment
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From a court of competent jurisdiction
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Enforced without reference to merits or whether same conclusion would be
reached by Cayman court
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Fight over
assets
Foreign Court
Order affecting
trust assets
Enforcement in
Offshore Court
Offshore Trust
Forum, Firewalls and Fights
All questions
arising in regard to a Cayman trust or in regard to any disposition of
property upon such trust are to be determined according to
Cayman law
without
reference to the laws of any other jurisdiction
Such as:
o
Capacity of settlor
o
Validity of trust or disposition
o
Administration of trust
o
Existence and extent of powers (eg. revocation)
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(i) does not validate any disposition of property which is [not] owned by the settlor ...
(ii) …subject to any express contrary term of the trust or disposition
(iii) does not …affect the recognition of the laws of place of incorporation
(iv) does not affect the recognition of foreign laws prescribing generally…the formalities for the
disposition of property
(v) does not validate any trust or disposition of immovable property …which is invalid
according to the laws of such jurisdiction
(vi) does not validate any testamentary trust or disposition which is invalid according to the
laws of the testator’s domicile.
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:
Subject to the same provisos…
…
no trust
governed by the laws of the Islands
and no disposition of property
to be held upon the
trusts thereof
is void
… liable to be set aside …nor is the trustee, any beneficiary or any other person
to be subjected to any liability or deprived of any right,
by reason that-
(a) the laws of any foreign jurisdiction prohibit or do not recognise the concept of a trust; or
(b)
the trust or disposition avoids or defeats rights, claims or interests conferred by foreign law
upon any person by reason of a personal relationship to the settlor or any beneficiary (whether
discretionary or otherwise) or by way of heirship rights
, or contravenes any rule of foreign law or
any foreign judicial or administrative order or action intended to recognise, protect, enforce or
give effect to any such rights, claims or interests.
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A foreign judgment shall not be recognised, enforced or give rise to any
estoppel insofar as it is inconsistent with section 91 or 92.
Changes the effect of the common law
Makes no reference section 90
No definition of “inconsistent” foreign judgments.
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Grupo Torras SA v Bank of Butterfield International
(Cayman) Limited
(2000 CILR 452):
“
only the [Cayman] court has jurisdiction to
determine the nature of the [Cayman] trust
”
•
Merrill Lynch Bank v Demirel
(2010 (2) CILR 75):
“[The firewall provisions]
are intended to abrogate the English… rules of forum non conveniens
”
•
Re B Trust
(2010 (2) CILR 348):
“A trust in the Cayman Islands can only be
varied in accordance with the law of the Cayman Islands and only by a court of the
Cayman Islands. These overarching rules are provided for expressly in the Trusts Law
(2009 Revision) in ss. 90, 91 and 93.“
•
Re A Trust
(2016 (2) CILR 416)
•
HSBC v Tan Po Lee
(2019)
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Forum, Firewalls and Fights
Cayman trust
Non-divorce case (s.90)
Clarified scope and meaning of section 90
Ruling on meaning and effect of forum for administration clauses
Surrender of discretion
Precedent of Cayman court offering to act as auxiliary court
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challenge jurisdiction of Singapore Court;
2.
not available for breach of trust
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proper law of trust - Cayman
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proper construction of the forum for administration clause – exclusive jurisdiction
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enforceability of foreign orders – only if Cayman law applied; matter of public policy
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whether it should make the distribution sought in the Singapore Proceedings;
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whether it should terminate any part of the Trust; and
3.
whether it should resign as trustee of the Trust
4.
Cayman Court willing to act as auxiliary court
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Forum, Firewalls and Fights
“
The
courts
of the Cayman Islands
shall
be
the
forum for the administration
of the Trust
.”
Cf
Crociani v Crociani
[2014] UKPC 40
The clause distinguished between
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"general administration" (which could be carried out anywhere) and
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"forum for administration" which was specifically stated to be the
courts of the Cayman Islands, and required a deed to change it;
Cayman would have jurisdiction anyway – so must mean exclusive
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Cayman Trust
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validity challenge in Milan
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consent / understanding dipsute
Beddoe
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Retrospective Beddoe relief
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Beddoe relief to challenge jurisdiction - and lost challenge
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Beddoe relief to defend on Merits
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Stay application by Guardian in Cayman
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Milan Proceedings on foot for 3 years
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Forum factors
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majority of witnesses, documents, evidence in Milan/Switzerland
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evidence largely in Italian
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Cayman Trust governed by Cayman law
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Swiss Trustee and trust administered in Switzerland
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:
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Forum of Administration Clause bestowed exclusive jurisdiction on
Cayman court to determine question of validity
2.
Section 90:
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conferred exclusive jurisdiction on Cayman court to determine
question of validity and
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abrogates common law forum non conveniens principles which would
otherwise apply
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(1)
Forum clause had no application where the trust’s validity is in issue, as
the person challenging the validity was not bringing the claim pursuant to
or under the trust
(2)
Section 90 merely deals with applicable law to be applied to any question
arising concerning Cayman trust. It did not confer exclusive jurisdiction on
Cayman court
(3)
forum non conveniens
principles pointed to Milan as the more appropriate
forum
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Forum clause: “
The courts of the Cayman Islands shall be the forum for
the administration of this trust
”
"
The question of whether a forum for administration clause, irrespective
of whether it is expressed to be exclusive or not, confers exclusive
jurisdiction on the relevant court is an arid debate if the context in which
the question arises is not taken into account.“
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An exclusive jurisdiction clause would not apply where the very validity
of the agreement in question was in dispute.
Even if it were an operative jurisdiction clause it was open to court to
deny trustee’s reliance on it on discretionary ground – would have done so
here given litigation history
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The effect of the firewall legislation is that all questions arising in relation to
a Cayman trust must be determined in accordance with
Cayman law
, but it
does not bestow exclusive jurisdiction on the Cayman court.
•
The Court confirmed, contrary to suggestions in previous cases, that the
Cayman firewall did
not
abrogate common law forum
non conveniens
principles
(
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Usual forum factors evenly balanced in this case
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Cayman law issue not complex,
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all parties agreed that that Cayman Islands law would be applied
Litigation history was found to be dispositive of the application to stay
proceedings:
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Beddoe directions given to defend in Milan
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jurisdiction has been challenged and lost by the trustee in the foreign
proceedings; and
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the more advanced status of those foreign proceedings (3 years +).
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Apply to the Cayman court at the earliest stage,
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before time and costs have been spent by the parties litigating in the
foreign jurisdiction
In HSBC, the trustee:
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sought declarations from Cayman court before the jurisdiction
challenge in Singapore
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Sought leave to defend only if Singapore court refused to adhere to
Cayman court declarations
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Sought the auxiliary court relief
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Common law forum principles apply – relevant factors:
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Complexity of legal issues – Cayman may be better placed to hear it
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Location of witnesses and evidence
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Language
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Litigation history
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Whether jurisdiction has been challenged in foreign court
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Forum of administration clauses will be construed according to the facts
of each case
HSBC factors remain relevant to construction.
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Firewall – robust protection for Cayman trusts
•
provides protection for Cayman trusts against orders of foreign courts;
•
ensures the application of Cayman law; and
•
provides protection against forced heirship right or rights arising out of
a personal relationship.
But also sensibly and pragmatically applied
•
preserves discretion (common law principles)
•
potential weakness in other jurisdictions’ firewall to override FNC
principles
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Subject to exceptions – it won’t apply if
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property is outside jurisdiction
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Cayman law competently applied by foreign court
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it comes under one of the provisos to s.90
•
being used for fraudulent purposes
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Forum, Firewalls and Fights
T
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Q
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Rachael Reynolds
Partner
T +1 345 815 1865
E rachael.reynolds@ogier.com
Deborah Barker-Roye
Counsel
T +1 345 815 1779
E deborah.barkerroye@ogier.com
This legal overview delves into the jurisdiction and governing laws of Cayman Islands trusts, the enforcement of foreign judgments, and the application of firewall provisions to determine trust matters. It discusses the common law position, the implications of Section 90 of the Trusts Act, and elaborates on the provisions regarding property ownership and trust validity.
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Presentation Transcript
Forum, Firewall and Fights in Foreign Courts Rachael Reynolds Partner Deborah Barker Roye - Counsel
Forum and Firewall issues Forum who has jurisdiction to determine disputes over a Cayman Islands trust? Firewall which law will apply? will a foreign judgment be enforced? Distinction between jurisdiction and governing law Forum, Firewalls and Fights
Why does this matter? Common law position Position under common law - a foreign judgment may be enforced if: Final and binding Non penal or tax judgment From a court of competent jurisdiction Enforced without reference to merits or whether same conclusion would be reached by Cayman court Foreign Court Order affecting trust assets Enforcement in Offshore Court Fight over assets Offshore Trust Forum, Firewalls and Fights
Firewall Section 90 Trusts Act All questions arising in regard to a Cayman trust or in regard to any disposition of property upon such trust are to be determined according to Cayman law without reference to the laws of any other jurisdiction Such as: o Capacity of settlor o Validity of trust or disposition o Administration of trust o Existence and extent of powers (eg. revocation) Forum, Firewalls and Fights
Firewall Provisos (i) does not validate any disposition of property which is [not] owned by the settlor ... (ii) subject to any express contrary term of the trust or disposition (iii) does not affect the recognition of the laws of place of incorporation (iv) does not affect the recognition of foreign laws prescribing generally the formalities for the disposition of property (v) does not validate any trust or disposition of immovable property which is invalid according to the laws of such jurisdiction (vi) does not validate any testamentary trust or disposition which is invalid according to the laws of the testator s domicile. Forum, Firewalls and Fights
Firewall Section 91 Section 91: Subject to the same provisos no trust governed by the laws of the Islands and no disposition of property to be held upon the trusts thereof is void liable to be set aside nor is the trustee, any beneficiary or any other person to be subjected to any liability or deprived of any right, by reason that- (a) the laws of any foreign jurisdiction prohibit or do not recognise the concept of a trust; or (b) the trust or disposition avoids or defeats rights, claims or interests conferred by foreign law upon any person by reason of a personal relationship to the settlor or any beneficiary (whether discretionary or otherwise) or by way of heirship rights, or contravenes any rule of foreign law or any foreign judicial or administrative order or action intended to recognise, protect, enforce or give effect to any such rights, claims or interests. Forum, Firewalls and Fights
Firewall Section 93 Trusts Act A foreign judgment shall not be recognised, enforced or give rise to any estoppel insofar as it is inconsistent with section 91 or 92. Changes the effect of the common law Makes no reference section 90 No definition of inconsistent foreign judgments. Forum, Firewalls and Fights
Firewall Case law recap Grupo Torras SA v Bank of Butterfield International (Cayman) Limited (2000 CILR 452): only the [Cayman] court has jurisdiction to determine the nature of the [Cayman] trust Merrill Lynch Bank v Demirel (2010 (2) CILR 75): [The firewall provisions] are intended to abrogate the English rules of forum non conveniens Re B Trust (2010 (2) CILR 348): A trust in the Cayman Islands can only be varied in accordance with the law of the Cayman Islands and only by a court of the Cayman Islands. These overarching rules are provided for expressly in the Trusts Law (2009 Revision) in ss. 90, 91 and 93. Re A Trust (2016 (2) CILR 416) HSBC v Tan Po Lee (2019) Forum, Firewalls and Fights
HSBC v Tan Po Lee & Ors [2019] Recap Cayman trust Non-divorce case (s.90) Clarified scope and meaning of section 90 Ruling on meaning and effect of forum for administration clauses Surrender of discretion Precedent of Cayman court offering to act as auxiliary court Forum, Firewalls and Fights
HSBC v Tan Po Lee & Ors [2019] Trustee applied to Cayman Court for: Beddoe relief challenge jurisdiction of Singapore Court; not available for breach of trust Declaratory relief: 1. proper law of trust - Cayman 2. proper construction of the forum for administration clause exclusive jurisdiction 3. enforceability of foreign orders only if Cayman law applied; matter of public policy Directions - surrender of discretion: 1. whether it should make the distribution sought in the Singapore Proceedings; 2. whether it should terminate any part of the Trust; and 3. whether it should resign as trustee of the Trust 4. Cayman Court willing to act as auxiliary court 1. 2. Forum, Firewalls and Fights
HSBC v Tan Po Lee & Ors [2019] Forum for administration clause: The courts of the Cayman Islands shall be the forum for the administration of the Trust. Cf Crociani v Crociani [2014] UKPC 40 The clause distinguished between "general administration" (which could be carried out anywhere) and "forum for administration" which was specifically stated to be the courts of the Cayman Islands, and required a deed to change it; Cayman would have jurisdiction anyway so must mean exclusive Forum, Firewalls and Fights
Geneva Trust Company v IDF (21 December 2020) Re Stingray Trust Cayman Trust validity challenge in Milan consent / understanding dipsute Beddoe Retrospective Beddoe relief Beddoe relief to challenge jurisdiction - and lost challenge Beddoe relief to defend on Merits Forum, Firewalls and Fights
Re Stingray Trust Issues o Stay application by Guardian in Cayman o Milan Proceedings on foot for 3 years o Forum factors majority of witnesses, documents, evidence in Milan/Switzerland evidence largely in Italian Cayman Trust governed by Cayman law Swiss Trustee and trust administered in Switzerland Forum, Firewalls and Fights
Re Stingray Trust Forum Issues Trustee s arguments: 1. Forum of Administration Clause bestowed exclusive jurisdiction on Cayman court to determine question of validity 2. Section 90: conferred exclusive jurisdiction on Cayman court to determine question of validity and abrogates common law forum non conveniens principles which would otherwise apply Forum, Firewalls and Fights
Re Stingray Trust Forum Issues Guardian s arguments: (1) Forum clause had no application where the trust s validity is in issue, as the person challenging the validity was not bringing the claim pursuant to or under the trust (2) Section 90 merely deals with applicable law to be applied to any question arising concerning Cayman trust. It did not confer exclusive jurisdiction on Cayman court (3) forum non conveniens principles pointed to Milan as the more appropriate forum Forum, Firewalls and Fights
Stingray Forum of Administration Clause Argument 1 - Decision Forum clause: The courts of the Cayman Islands shall be the forum for the administration of this trust "The question of whether a forum for administration clause, irrespective of whether it is expressed to be exclusive or not, confers exclusive jurisdiction on the relevant court is an arid debate if the context in which the question arises is not taken into account. Forum, Firewalls and Fights
Stingray Forum of Administration Clause Decision An exclusive jurisdiction clause would not apply where the very validity of the agreement in question was in dispute. Even if it were an operative jurisdiction clause it was open to court to deny trustee s reliance on it on discretionary ground would have done so here given litigation history Forum, Firewalls and Fights
(2) Effect of Section 90 Trusts Law Decision: Section 90 The effect of the firewall legislation is that all questions arising in relation to a Cayman trust must be determined in accordance with Cayman law, but it does not bestow exclusive jurisdiction on the Cayman court. The Court confirmed, contrary to suggestions in previous cases, that the Cayman firewall did not abrogate common law forum non conveniens principles Forum, Firewalls and Fights
Re Stingray Forum Non Conveniens Decision: Forum non conveniens Usual forum factors evenly balanced in this case Cayman law issue not complex, all parties agreed that that Cayman Islands law would be applied Litigation history was found to be dispositive of the application to stay proceedings: Beddoe directions given to defend in Milan jurisdiction has been challenged and lost by the trustee in the foreign proceedings and the more advanced status of those foreign proceedings (3 years +). Forum, Firewalls and Fights
5 Key Take Aways 1. Act quickly Apply to the Cayman court at the earliest stage, before time and costs have been spent by the parties litigating in the foreign jurisdiction In HSBC, the trustee: sought declarations from Cayman court before the jurisdiction challenge in Singapore Sought leave to defend only if Singapore court refused to adhere to Cayman court declarations Sought the auxiliary court relief Forum, Firewalls and Fights
5 Key Take Aways 2. Forum non conveniens principles still apply Common law forum principles apply relevant factors: Complexity of legal issues Cayman may be better placed to hear it Location of witnesses and evidence Language Litigation history Whether jurisdiction has been challenged in foreign court Forum, Firewalls and Fights
5 Key Take Aways 3. Forum clauses Forum of administration clauses will be construed according to the facts of each case HSBC factors remain relevant to construction. However, forum clauses will not apply to bind parties where the issue is the Trust s very validity and the claim is not being brought under the Trust. Forum, Firewalls and Fights
5 Key Take Aways 4. Firewall robustly but pragmatically applied Firewall robust protection for Cayman trusts provides protection for Cayman trusts against orders of foreign courts ensures the application of Cayman law and provides protection against forced heirship right or rights arising out of a personal relationship. But also sensibly and pragmatically applied preserves discretion (common law principles) potential weakness in other jurisdictions firewall to override FNC principles Forum, Firewalls and Fights
5 Key Take Aways 5. The Firewall is not impenetrable! Subject to exceptions it won t apply if property is outside jurisdiction Cayman law competently applied by foreign court it comes under one of the provisos to s.90 being used for fraudulent purposes Forum, Firewalls and Fights
Questions? Thank you!
Deborah Barker-Roye Counsel T +1 345 815 1779 E deborah.barkerroye@ogier.com Rachael Reynolds Partner T +1 345 815 1865 E rachael.reynolds@ogier.com
