Cayman Islands hedge funds, their directors and service providers, are increasingly appearing as defendants in U.S. litigation, in particular in the aftermath of the Madoff fiasco.  These entities are facing a variety of claims, not always structured appropriately under Cayman Islands law, and not always structured with any particularity.  Broad, sweeping allegations of fraud, gross negligence, the existence of fiduciary and other duties, and clawback claims based on unjust enrichment are thrown in, not always with the application that should be displayed before launching such serious allegations.  Many of these claims face motions to dismiss, often on the basis of applicable Cayman Islands law, in particular, the existence of fiduciary and other duties under Cayman Islands law, derivative claims, reflective loss and exculpation and indemnity clauses.  See “Exculpation and Indemnity Clauses in the Hedge Fund Context: A Cayman Islands Perspective (Part Two of Two),” Hedge Fund Law Report, Vol. 4, No. 1 (Jan. 7, 2011).  It was not uncommon for Cayman Islands lawyers in the past to advise Cayman Islands funds, and other related Cayman entities facing U.S. proceedings, that since they were Cayman Islands entities, it was safe not to participate in the U.S. proceedings, even for the purpose of challenging the jurisdiction of the U.S. court – and to allow a judgment to be entered in the U.S. court, because the U.S. judgment would not be enforceable against them in the Cayman court.  Such advice, even if (rarely) appropriate in individual cases, could not be, and never was, of universal applicability.  There are very clear risks in advising a Cayman entity not to challenge the jurisdiction of a U.S. or other foreign court, where such a challenge can be mounted with a sufficient prospect of success, and, whether or not such an application is made, in allowing a judgment to be entered in default by not participating to defend the proceedings, on the premise that any such judgment would not be enforceable in the Cayman Islands court.  In a guest article, Chris Russell, a partner and head of the litigation and insolvency department of Ogier Cayman, and Michael Makridakis, a senior associate at Ogier, provide an overview of relevant law; identify the relevant common law rules and defenses; and discuss the enforcement of judgments in foreign insolvency proceedings.