Efficiency/integrity

Bermuda provides a variety of ways for parties to resolve disputes and has a respected, independent and soundly administered judiciary. The principal trial court is the Supreme Court of Bermuda and it is bound by the decisions of the Court of Appeal for Bermuda and Bermuda's highest appellate court, the Judicial Committee of the Privy Council sitting in London, England.

The Rules of the Supreme Court 1985 ("the Rules") are substantially the same as the equivalent rules which were in force in England and Wales in 1999 and they govern the manner in which civil litigation is conducted in the jurisdiction. There is, however, a significant amendment which provides for what is known as the overriding objective (the "Overriding Objective"), and which directs that Bermuda's courts must deal with a case justly, including so far as practicable to:

  1. ensure that the parties are on an equal footing;
  2. save expense; and
  3. deal with the case in ways that are proportionate to the amount of money involved; the importance of the case; the complexity of the issues; and the financial position of each party.

Bermuda also has a commercial division of the Supreme Court and commercial cases are allocated to specialist commercial judges to be dealt with expeditiously and efficiently, in accordance with the Overriding Objective.

There are alternatives to court litigation for dispute resolution and arbitration, in particular, is a popular method of dispute resolution. The Arbitration Act 1986 governs domestic arbitration proceedings and the Bermuda International Conciliation and Arbitration Act 1993 governs international commercial arbitration.

Enforcement of judgments/awards

A foreign judgment for a definite sum of money may become recognised and legally enforceable in Bermuda either by taking steps under the Judgments (Reciprocal Enforcement) Act 1958 ("the Act"), or as a matter of common law, so long as certain conditions are met. Arbitration awards are enforceable through the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Part IV of the Bermuda International Conciliation and Arbitration Act 1993. There are also rules governing the enforcement of maintenance orders, divorces and legal separations.

The Act applies only to judgments of the superior courts of certain countries, states or territories (predominantly the courts of the United Kingdom and certain Commonwealth countries) and which are final and conclusive as between the parties. Judgments for specific performance or for an injunction will not be enforced although they may be relied upon as a defence to a claim or as conclusive of an issue in a claim. Foreign judgments concerning the enforcement of foreign fiscal or penal laws are unenforceable, both under the Act and at common law. Similarly, by virtue of the Protection of Trading Interests Act 1981, judgments which involve an award of damages which has been calculated by taking a multiple of a sum of compensation will not be enforced either under the Act or at common law. Awards of punitive damages may also be unenforceable as being contrary to public policy.

Enforcement at common law is usually achieved through proceedings being issued and the making of an application for summary judgment. A defendant seeking to defend the action will have a considerable burden to discharge and would need to establish that he has a bona fide defence such as by showing that:

  1. the judgment had been obtained by fraud;
  2. the enforcement of the judgment would be contrary to Bermuda public policy;
  3. the proceedings in which the judgment was obtained were contrary to natural justice. The question is whether, looked at in the round, the judgment was obtained in a way which accords with the English idea of substantial justice; for example, it has been held that it is contrary to natural justice to require a defendant to put up security as a condition of defending an action in a sum which it cannot afford. A foreign default judgment would not be treated differently to any other foreign judgment; however, the court may consider the rules of the foreign court for the granting of judgment in default when determining whether there had been any denial of natural justice; or
  4. the foreign court lacked jurisdiction according to the principles conflicts of law applied in Bermuda. The court will not automatically accept that the foreign court had jurisdiction but there are four cases in which a Bermuda court will recognise in personam jurisdiction at common law:
    1. if the judgment debtor was present in the foreign country, at the time the proceedings were instituted. It would not be necessary to show residence, citizenship, property ownership or domicile in the foreign country on the part of the debtor;
    2. if the judgment debtor claimed, or counterclaimed, in the proceedings before the foreign court;
    3. if the judgment debtor submitted to the jurisdiction of the foreign court by voluntarily appearing in the proceedings. The entry of an appearance in the foreign court to contest jurisdiction would probably not amount to a submission to the jurisdiction; or
    4. if the judgment debtor had agreed before the proceedings were commenced to submit to the jurisdiction of the foreign court in respect of the subject matter of the proceedings. The Bermuda court would not review the foreign court's ruling in respect of such an agreement unless it somehow was contrary to Bermuda's conflict of laws principles or involved a denial of natural justice.

Judgments which fall within the Act become recognised and enforceable through registration so long as the applicant complies strictly with the documentary requirements set out in the Judgments (Reciprocal Enforcement) Rules 1976, verified in affidavit. Such recognition is granted as of right rather than as a matter of discretion, but there is a six-year time limit in which to make registration. The Act excludes the enforcement of a judgment covered by the Act at common law. The rules laid down under the Act relating to the circumstances in which a foreign court will be found to have had jurisdiction are, in broad terms, similar to those available to a judgment debtor at common law, however section 4(1)(2)(a) of the Act goes into more detail by expressly providing that the foreign court will have jurisdiction in the case of a debtor who had a residence, office or place of business in the foreign country. Importantly, the Act differs from the common law in that it does not provide for the setting aside of a judgment on the grounds that natural justice has been denied or that the judgment is contrary to the public policy of Bermuda. Unlike the common law, therefore, a foreign judgment covered by the Act may be enforceable in Bermuda, even though the cause of action upon which it is based could not have been entertained by the Bermuda court had it been litigated before it.

Under section 5 of the Act, the court is given discretion to set aside the registration of a foreign judgment where an appeal against the judgment is pending or where the debtor intends on appealing. "Appeal" is defined in the Act as "any proceeding by way of discharging or setting aside a judgment or an application for a new trial or a stay of execution". The principle underlying the definition is that the foreign judgment ought to only be recognised in accordance with the Act where it is enforceable by execution in the foreign jurisdiction.

The decisions of the Bermuda courts are marked by their respect for the judgments of foreign courts and their reluctance to entertain unmeritorious attempts by debtors to frustrate the enforcement of those judgments. Consistent with this theme is the recent decision in this area in Masri v Consolidated Contractors International SAL [2009] Bda LR 12 in which the definition of "appeal" in the context of section 5 of the Act was considered by Mr Justice Kawaley1. In Masri, the debtor sought to rely on there being an appeal to the European Court of Human Rights against the English judgments as a "pending appeal" justifying the setting aside of the registration of the judgments under the Act. However, the court held that this was not an "appeal" because the European Court was not the competent tribunal to "dispose" of the appeal; it could only lead to the English courts being directed to reopen an appeal that had been dismissed before those courts. Similarly, the court read down a reference in the rules made under the Act to the setting aside of registration where it was "just and convenient"2. The court held that this rule did not amplify the grounds upon which registration may be set aside beyond those specified in the Act itself.

Privilege and disclosure

The rules of legal professional privilege in Bermuda are governed by substantially the same common law principles as those followed by other Commonwealth jurisdictions; for instance, written communications between a party and its lawyer (in that professional capacity) are generally privileged if made for the purpose of advising or assisting the party. In addition, documents, whether they are communications between a party and its lawyers, or between a party/its lawyers and third parties, are subject to legal professional privilege if they come into existence for the dominant purpose of giving or obtaining legal advice relating to, or aiding in the conduct of, existing or contemplated litigation. However, such documents must have also been kept confidential. Similarly, the laws of privilege applicable to settlement negotiations are well-recognised in Bermuda.

The process of discovery in ordinary litigation before the Bermuda courts is governed by the same rules as those set out in the Rules of Supreme Court in force in England and Wales in 1999 prior to the making of the Civil Procedure Rules in that jurisdiction. In accordance with the provisions of the Overriding Objective and the court's duty to engage in active case management, the court may make flexible orders limiting or targeting discovery or adapting its processes to take account of the challenges posed by the identification and storage of information generated by modern electronic processes.

Costs and funding

Order 62 of the Rules establishes the basis upon which a party's legal costs in litigation can be recovered. The normal rule is that a successful party in litigation can expect to have awarded to it some portion of its legal costs expended in bringing or defending the action.

The statement of principle in the English decision of Research in Motion UK Limited v. Visto Corporation [2008] EWHC 819, was recently approved by the Bermuda Court in Golar LNG Limited v. World Nordic SE [2012] SC (Bda) 2 Com, namely that:

"the Courts function is not to stop the parties spending money on litigation: it has no power to prevent expenditure, although it will use its powers to ensure that the litigation is run in a way that does not cause the parties to expend unnecessary sums... The Court does however have a function in preventing unnecessary and unreasonable costs being recovered by a party from its opponent ... parties can be discouraged from enforcing or defending their rights if they face claims for unreasonable and unnecessary costs being allowed against them."

In Golar, the parties cross appealed to the Supreme Court Judge in respect of the Court Registrar's taxation of the costs awarded to the respondents. The costs taxation was hotly contested, and concerned complex high value commercial litigation primarily concerning the valuation of shares. The Judge made a number of points; first, so far as the manner in which attorneys recorded time increments, he endorsed the English practice to bill routine work in six-minute units. The respondent's attorneys billed in 15-minute increments and he criticised the practice. The Court has, in the future, directed the Registrar to tax down each item to the nearest 6-minute unit automatically in the absence of a positive demonstration that the entire 15-minute increment had been fully utilised.

The Court further endorsed the general principle that the costs for legal research not be recovered, at least not on routine matters, particularly for senior fee earners who are entitled to charge a high fee because of their experience. This position was further endorsed in the case of Moulder v. Cox Hallett Wilkinson (A Firm) et al [2012] SC (Bda) 1 Civ.

Finally, in Golar, the Court applied the principle that the applicant must establish both that the costs incurred were reasonable and necessary. On the facts of the case, the Court ultimately disallowed 100 out of 160 hours of pre-trial preparation.

By virtue of Order 23 of the Rules of the Supreme Court, the Court has the discretion to order a foreign plaintiff to give security for costs. In the recent case of Artha Master Fund LLC v. Dufry South America [2011] Bda LR 16, the Court had to consider an application for security costs in regard to a foreign shareholder exercising its statutory right to have the Court value its shares as a result of a merger proposal. By virtue of the Bermuda Constitution, the Court said that upon such an application it must consider whether the disability imposed on the foreign litigant by the requirement of giving security is reasonably justifiable in a democratic society having regard to the nature or special circumstances pertaining to such a litigant. The Court said that the prospect of incurring additional costs in enforcing a costs award overseas would constitute such a special circumstance where it was necessary to pursue a foreign litigant in a jurisdiction which did not have a reciprocal enforcement regime with Bermuda. The Court followed English law in assuming that ordering a foreign litigant to post security to cover such additional costs would be the appropriate course. Similarly, the Court recognised that where enforcement abroad would effectively be impossible, then such security could be well in excess of merely the additional costs of enforcement and could amount to the full amount of costs awarded.

Interim remedies

The law of Bermuda follows the English common law in respect of the availability of interim relief such as Mareva injunctions (i.e. "freezing injunctions" which preserve a defendant's assets), Anton Pillar orders and the appointment of interim receivers, although there is unlikely to be any jurisdiction for the Bermuda court to grant an injunction in a case where there is no actual or potential claim for substantive relief which can be put before the Bermuda court. This would preclude an injunction made solely in aid of foreign proceedings, however there would be jurisdiction where proceedings are commenced to enforce or seek recognition of a foreign judgment.

There have been recent developments in respect of the court's approach to the appointment of an interim receiver. The Bermuda court's jurisdiction in this respect is derived from section 19(c) of the Supreme Court Act 1905, which is in similar terms to the provision in the equivalent English legislation. Until the recent case of Masri v Consolidated Contractors International SAL [2010] Bda LR 213 there had been little detailed judicial consideration of the provision in Bermuda. Upon registration of English judgments totaling around $50m in Bermuda, the court appointed a receiver over the judgment debtor to receive revenues from Qatar Shell relating to a joint venture between it and the debtor. The issue which arose was the extent to which Teyseer Contracting Company ("Teyseer"), a Qatari company, was jointly entitled to the revenues with the debtor. Teyseer applied for leave to intervene and argued that the receiver could not collect such revenues in satisfaction of the debtors' sole debt. The court confirmed that the jurisdiction is unconstrained and it is primarily concerned with whether it is "just and equitable" and that it is a remedy of inherent flexibility. The court adopted the guidance given by Lord Donaldson in Derby & Co v Wheldon (No 3 and 4) [1990] 1 Ch 65 at 77 that the jurisdiction ought to be exercised to adapt to a "time of rapidly growing commercial and financial sophistication" and the "current wiles of those defendants who are prepared to devote as much energy to making themselves immune to the court's orders as to resisting the making of such orders on the merits of their case".

With that in mind, the court refused to recognise that Teyseer had sufficient interest to challenge the jurisdiction of the court to determine that it was just and equitable to appoint a receiver; the court took the view that if Teyseer complains of impermissible prejudice from the order as an innocent third party then it could instead seek appropriate directions from the court. The court also confirmed that whilst collection of a joint debt could be problematic as a matter of practicality, this was not, in principle, a reason why a judgment debtor's joint debts cannot be the subject of a receivership. It was held that all that the judgment creditor needed to show was that there was a good arguable case that the judgment debtor owned a portion of the contract revenues payable by Qatar Shell. Teyseer could show that it had a contractual right to use the contract revenues when these were received, but this did not necessarily mean that the judgment debtor had no legal or beneficial interest in them such that the receivership would be fruitless.

The receivership order was also challenged on the basis that it amounted to the exercise of an exorbitant jurisdiction by the Bermuda court. This was because there was an exclusive jurisdiction clause in the relevant contracts in favour of the English courts and that, as the receiver simply stood in the shoes of the debtor in collecting the revenues, it would have to take action before the English courts. It was also argued that, in addition, the assets (i.e. the debts) were located outside the jurisdiction (i.e. Qatar, since the basis rule is that a debt is situate at the place where the debtor resides). However, the court held that whilst this meant that an English court would need to have regard to Qatari law, this did not make the receiver's appointment an impermissibly broad exercise of jurisdiction because the receiver intended to seek appropriate relief from the English court before actually collecting any revenues from Qatar Shell. The English court could, therefore, decide whether a payment to the receiver would discharge Qatar Shell from its joint debt.

International arbitration

Bermuda is frequently designated as the seat for international arbitration. The Bermuda International Conciliation and Arbitration Act 1993 ("the 1993 Act") governs international commercial arbitration and the enforcement of foreign arbitral awards. The 1993 Act enacts the UNCITRAL Model Law on International Commercial Arbitration, although the parties are free to agree any other arbitral rules for the arbitration proceedings. The Bermuda Court recognises and enforces arbitration agreements and can stay or restrain procedural proceedings.

There is clear judicial support for the arbitration process and the Bermuda court is careful not to intervene unless there is a clear basis for doing so. For example, from time to time, the Court is asked to appoint arbitrators in the absence of the parties agreeing to do so. The court will, as far as possible, seek to give effect to what it considers to have been the parties' agreement, rather than find that there was insufficient evidence of their agreement in this respect. In Powers et al v. Sustainable Forest Holdings Limited et al [2010] Bda LR 60, the applicants appointed a Bermudian arbitrator and the Respondent appointed a Canadian arbitrator. It fell to the two appointed arbitrators to appoint the third. The latter proposed Hong Kong based candidates for the third arbitrator, while the applicant proposed Bermudians and, therefore, the applicant applied to court for an appointment. The Court was required to consider, in accordance with the 1993 Act, whether the version of the UNCITRAL Rules which was incorporated in the arbitration agreement provided for an appointment mechanism and, therefore, ousted the court's jurisdiction. Ultimately, the Judge favoured a reading of the documents that indicated that the parties had agreed their own procedure. The court, therefore, declined to make an appointment and left the parties to make a request of the Secretary General of the Permanent Court of Arbitration at The Hague. It is likely that the court was concerned about the prospect that the enforceability of the arbitration award could, as a matter of principle, be challenged if it was found that the appointment of the arbitral tribunal had not been in accordance with the parties' agreement.

However, the Court will exercise its jurisdiction to appoint an arbitrator where the agreed appointment procedure has broken down, as occurred in Montpelier Reinsurance Ltd v Manufacturers Property & Casualty Limited [2008] Bda LR 24. There are no restrictions under Bermuda law as to who may be appointed to act as an arbitrator. Under the 1993 Act, a party may challenge the suitability of an arbitrator on the grounds of justifiable doubts as to their impartiality or independence, or on the grounds that the arbitrator does not have the requisite qualifications. The Bermuda court has recently shown itself to be very careful to avoid any perceptions of bias in the appointment of a third arbitrator to a tribunal; for example, in Princess Cruise Lines v Matthews [2011] SC (Bda) 51, whilst the court rejected any concerns that there could be some perception of bias in favour of a Bermuda defendant as a result of the appointment of an arbitrator of Bermudan nationality, it wanted to avoid the perception that could be created from having two arbitrators who were both practicing members of the Bermuda bar. The Court, therefore, appointed a retired judge.

Mediation and ADR

Bermuda is very familiar with arbitration as a means of alternative dispute resolution, both in the local and international context. As mentioned earlier, the Arbitration Act 1986 governs domestic arbitration proceedings and the Bermuda International Conciliation and Arbitration Act 1993 governs international commercial arbitration and the enforcement of foreign arbitral awards. Part II of the 1993 Act provides for parties to an international arbitration agreement to resolve disputes through conciliation and for any resulting settlement agreement to be enforceable as an arbitration award.

Whilst there is no compulsion on parties to litigation to mediate their disputes, the Bermuda court has regarded itself as able, by virtue of the Overriding Objective, to make orders compelling parties to devote their best endeavours to mediate their disputes as part of orders granting wider relief and may grant a stay to that end; for example, see the recent decision in Nesbitt v Beek [2011] Bda LR 29.

Footnotes

1. The appeal against his decision was dismissed by the Court of Appeal in its decision reported at [2009] Bda LR 61.

2. See Rule 12 of the Judgments (Reciprocal Enforcement) Rules 1976.

3. The appeal against the decision at first instance was dismissed on narrower grounds by the Court of Appeal in its decision reported at [2011] Bda LR 15.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.