The Grand Court’s financial services division is keeping an increasing number of court records from the public, according to a report published this week by OffshoreAlert, a financial services website that publishes Cayman- and other offshore-related court records.

OffshoreAlert’s research states that the number of financial cases sealed from the public has been steadily rising over the last decade – a trend that the site’s owner, David Marchant, criticizes as a “repugnant” effort to conceal fraud and other cases by a jurisdiction that prides itself on being transparent. The Grand Court, however, has disputed OffshoreAlert’s report, stating that most of the cases not currently public are winding-up petitions, which are subject to a “special procedure” that delays their publication until a judge can ensure that the petition has merit.

When the Grand Court’s financial services division was created in 2009, the records for all of its 67 cases were publicly available. Only around 1 percent of the cases were sealed from 2010 to 2012, but then the number started creeping upward steadily from 3.8 percent in 2013 to 8.7 percent in 2014, and then to 15.7 percent last year, according to OffshoreAlert.

So far this year, roughly one-third of the court’s 133 financial services cases are not publicly available, OffshoreAlert’s research states. Mr. Marchant explained that he gleaned these numbers by having his researcher compare the total number of cases listed in the court book with the number of publicly available writs, liquidation petitions and other originating motions in the Grand Court Registry’s book of writs.

Along with financial services cases, about 13 percent of civil cases this year are not publicly available, according to OffshoreAlert. “I’m wondering whether these are cases involving politicians or attorneys?” Mr. Marchant asked.

However, these numbers are disputed by the Grand Court, which told the Compass via email on Wednesday that only 3 percent of the financial cases in 2017 and 4 percent so far this year have been sealed.

“Such order[s] are of course made only for good reason, such as for the protection of sensitive trade, industrial or financial information pending the outcome of the case or (more typically) until further order is made by the Court,” according to the court’s statement, sent by Court Administrator and Chief Officer of Judicial Administration Suzanne Bothwell.

Moreover, these sealing orders are “temporary,” the statement noted.

The rest of the unavailable records are winding-up petitions that are temporarily withheld while a judge reviews them for merit, according to the Grand Court.

The number of these cases has seen an even more dramatic spike since the Grand Court published practice directions last August that gives the court wider powers to keep petitions to wind up a company from the public, according to OffshoreAlert.

Mr. Marchant said he thinks many of the sealed cases have to do with these petitions, including involuntary winding-up petitions, which are often filed when there are allegations of wrongdoing within a company. There are only two involuntary winding-up petitions that have been made public so far, compared to 12 or more in each of the last three years, according to OffshoreAlert.

Again, the Grand Court disputed OffshoreAlert’s contention, stating that winding-up petitions are usually made public within 72 hours of their filing, after a judge determines that they have merit.

“The purpose of the rule is to ensure that the interests of companies (and those who have an interest in them such as shareholders and creditors) are not damaged by the undue publication of an unjustified petition by it being placed upon the Public Register of Writs and Actions for want of vetting by a judge as required by the rules. It is to be emphasized that this is a short temporary process which does not involve the sealing of the file,” the court noted in its statement.

The Grand Court’s practice directions from last August state that winding-up petitions should only be made accessible for public inspection after there is a hearing date scheduled for the matter. In cases where the Cayman Islands Monetary Authority presents the petition, it would not be made public until after a judge directs it to be advertised or entered on the register.

Also, if the assigned judge makes an order restricting the filing or publication of a creditor’s petition, it may not be entered on the register until further order of the court, according to a briefing on the matter by the law firm Conyers Dill & Pearman.

Chief Justice Anthony Smellie explained when issuing the directions that the “filing of a petition to wind up a company can cause irreparable harm to its reputation, even if the petition is ultimately dismissed for lack of merit.”

Law firms also were in favor of the new directions.

“In the age of the internet, it has become increasingly difficult to control widespread and immediate publication of petitions once they are placed on the publicly available court files,” stated a Harneys legal brief that explained the directions. “A new practice direction issued by the Grand Court seeks to address this problem by updating the procedure for the presentation and filing of winding up petitions.”

Harneys further explained that the practice direction offers “some relief” to companies faced with the threat of a winding-up petition from creditors seeking to pressure the company into settling disputed debts.

However, OffshoreAlert criticized the practice, noting that “keeping the petitions from the public means that foreign investors, creditors, and clients of Cayman-domiciled hedge funds and other companies will not be alerted to insolvencies and other problems.”

“Cayman’s rampant court secrecy, concealing liquidations, fraud and other cases from foreign investors and clients … [is] truly repugnant,” the financial services website stated.

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  1. The information provided to the Compass is simply not accurate. In reality, 16% or so of all FSD cases were sealed last year (i.e. are not publicly available in any way, shape or form), 33% this year, and over 50% in the last few months. Similarly, the Court’s claim that “winding-up petitions are usually made public within 72 hours of their filing, after a judge determines that they have merit” is also inaccurate. OffshoreAlert has the number of every case that’s been sealed since the FSD opened on November 1st, 2009. Copies of these cases had been denied us in the past but, as part of our recent investigation, we wanted to see if they had since become publicly-available. So, a few weeks ago, we asked the Court again to provide copies of these cases. A handful were made available, and were taken into account in our investigation, but the overwhelming majority, many of which are undoubtedly winding up petitions, remain sealed months and years after they were first filed. The Court’s claim that the sealing of winding up petitions is “a short temporary process” is simply not supported by the evidence. No credible investment manager, investor, or lender would put one cent into a Cayman company if they are denied the opportunity to conduct effective due diligence, as is currently the case. To place money in such circumstances is, by definition, negligent.