Bermuda: Bermuda Is The Ideal Venue For Companies To Hold Arbitrations

"Where the remote Bermudas ride, in th’oceans bosome unsespy’d … an Isle so long unknown,
And yet far kinder than our own…"
Andrew Marvell (1653)

Bermuda is no longer remote. Situated "in th’oceans bosome", 774 miles south-east (approximately 90 minutes by air from New York, Bermuda is the oldest self-governing dependent territory of the United Kingdom and, since July 1997. Bermuda’s strategic location off the east coast of the United States and political stability, together with a currency on a par with the US dollar and the absence of direct taxation of income have made it an attractive offshore centre for international business. Unlike some offshore jurisdictions, Bermuda enjoys an excellent reputation for financial probity, governmental integrity and the quality and independence of its judiciary.

There are two statutes governing arbitration in Bermuda: the Arbitration Act 1986 (the 1986 Act) and the Bermuda International Conciliation and Arbitration Act 1993 (the 1993 Act). The 1986 Act was modelled on the Hong Kong Arbitration Ordinance then in force, and the majority of its provisions derive from the English Arbitration Acts 1950-1979. The 1993 Act enacts the UNCITRAL Model Law on International Commercial Arbitration (the Model Law). The Model Law governs any international commercial arbitration where the parties have chosen Bermuda as the place of arbitration. Parties may opt out of the Model law and chose the 1986 Act instead (section 29 of the 1993 Act).

Under the Model Law, the powers of the Court to interfere with the arbitral process are reduced to a minimum. The arbitral tribunal is competent to rule on a challenge to its jurisdiction (Model Law, Article 16(3)). In Skandia International Insurance Co v. Al Amana [1993] 4 Re LR 63, the Supreme Court of Bermuda (Mr. Justice Meerabux) followed a decision of the Supreme Court of Hong Kong (Fung Sheng Trading v. Kai Sui Sea Products [1992] 1 HKLR 40) and declined to rule on the question of whether an arbitration clause had been validly incorporated into a reinsurance contract, holding that this was a matter for the arbitrator to decide first. If the tribunal finds that it has jurisdiction, there is a single right of appeal to the Supreme Court of Bermuda (i.e. a single judge), under section 25(a) of the 1993 Act. Apart from a challenge to the tribunal’s jurisdiction, the 1993 Act (section 25(a)) permits an application to be made to the Supreme Court of Bermuda in the following cases: appointment of an arbitrator in default of the appointment procedure in the arbitration clause (Model Law, Article 11(3), (4)); failure or impossibility of an arbitrator to act (Article 14). There is no right of appeal from a decision of the Supreme Court of Bermuda in respect of any of these matters.

The judicial review of arbitration awards is within the exclusive jurisdiction of the Court of Appeal for Bermuda (three judges)(Section 25(b) of the 1993 Act. The grounds upon which an award may be challenged under the Model law are very limited (Article 34) and are derived from the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It is not possible to challenge an award on the ground of error of law, unlike the 1986 Act, which adopts the system of judicial review in the English Arbitration Act 1979. The Model Law offers finality to parties who are willing to trust the arbitral process. The Bermuda Courts, unlike the English Courts, will not interfere with arbitration awards. English practitioners who may seek to disagree with this statement should note the existence of a specialist text published in 1994, no less than 500 pages in length, entitled "The Law and Practice Relating to Appeals from Arbitration Awards".

The latest English legislation (the Arbitration Act 1996) has adopted some elements of the Model Law but preserves a right to appeal, with the leave of the court, on points of law in certain cases (section 69 of the Arbitration Act 1996). The right of appeal may be excluded by agreement of the parties. Nonetheless, it is not possible to exclude section 68, which provides that an award may be set aside on the grounds of "serious irregularity". London undoubtedly has many virtues as an arbitration centre. However, parties who do not want the arbitration to be the first step in an expensive and protracted journey through the English court system will find in Bermuda, "an Isle … far kinder than [their] own."

The Bermuda courts will uphold arbitration agreements. Court proceedings brought in Bermuda in breach of an arbitration clause governed by the Model law will be stayed under Article 8 (Raydon Underwriting Management v. North American Fidelity & Guarantee Ltd, Supreme Court of Bermuda, 4 August 1999, Mr. Justice Meerabux). An injunction will be granted to restrain a party subject to the jurisdiction of the Bermuda Courts from suing abroad in breach of an arbitration clause (Skandia International Insurance Co v. Al Amana, above). The Supreme Court of Bermuda has refused to enforce a foreign judgment obtained in breach of a Bermuda arbitration clause, which the foreign court had held was not binding (Muhl v. Ardra [1997] 6 Re LR 206, Mr. Justice Ground).

The existence of a user-friendly international arbitration law and a judiciary committed to upholding the arbitral process make Bermuda an attractive venue. A glance at the travel agents’ brochures reveals other pluses. Potential users should also be aware of the Bermuda government’s open-door policy. There are no work permit requirements for persons entering Bermuda to participate in an international arbitration, whether as counsel or as arbitrators. There is no requirement to use local counsel. The Bermuda International Arbitration Centre, with first class facilities including video conferencing, opened for business in 1997.

For inquiries regarding the Bermuda International Arbitration Centre, a list of qualified arbitrators resident in Bermuda, or any other information about commercial arbitration in Bermuda, please contact us.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.