Bermuda: International Arbitration 2020

This article first appeared in The ICLG to: International Arbitration Laws and Regulations, which covers common issues in international arbitration laws and regulations - including arbitration agreements, governing legislation, choice of law rules, selection of arbitral tribunal, preliminary relief and interim measures - in 34 jurisdictions.

1 Arbitration agreements

1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?

Other than requiring that arbitration agreements be in writing, Bermuda’s arbitration statutes do not require any specific form or format. Agreements may take the form of a clause contained in a contract or a separate agreement signed by the parties or they can be evidenced by an exchange of letters or other means of communication. Additionally, an arbitration clause contained in a separate document can be incorporated by express reference.

1.2 What other elements ought to be incorporated in an arbitration agreement?

There are no other elements that must be incorporated in an arbitration agreement; however, given the existence of two arbitration regimes in Bermuda (see the response to question 2.1 below), it is advisable that the arbitration agreement specify which statute is to apply. For example, an arbitration clause in a reinsurance agreement between Bermuda companies (including a captive insurer) may be deemed to be subject to Bermuda’s domestic statute – despite the contract having an “international flavour” – unless the parties stipulate that the international statute is to apply.

The arbitration agreement will dictate the scope of the arbitral panel’s jurisdiction. Accordingly, although here are no rules regarding the contents of the agreement, care should be taken to ensure it is broad enough to encompass all matters of dispute that may potentially arise between the parties.

In addition, the parties may wish to consider including provisions in the agreement relating to the number of arbitrators, their qualifications, and the procedure for appointing them. The parties may also wish to consider whether to adopt a particular set of procedural rules to govern any arbitrated dispute. It is also open to the parties to include provisions relating to interim measures that may be sought, including jurisdiction for the tribunal to order security for costs.

It is common for Bermuda arbitration clauses to include a provision regulating awards of costs (e.g. “the costs of the arbitration shall be at the sole discretion of the arbitral tribunal, who may direct to whom and by whom and in what manner they shall be paid”). Arbitration clauses in Bermuda insurance policies sometimes contain provisions designed to bind to arbitration third parties asserting rights in relation to the policy (e.g. subrogating insurers, liquidators or direct claimants) or to require the insured to cooperate in obtaining the dismissal of court proceedings brought against the insurer by other insurers seeking a contribution or indemnity.

1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?

There is a well-established body of Bermudian authority affirming the strong policy grounds upon which arbitration agreements will be upheld in Bermuda. The Bermuda court will act “robustly” where necessary, including by issuing an anti-suit injunction, to restrain a party from acting in violation of an arbitration agreement.

2 Governing Legislation

2.1 What legislation governs the enforcement of arbitration proceedings in your jurisdiction?

There are two different arbitration regimes in Bermuda. The Arbitration Act 1986 (“the 1986 Act”) governs the arbitration of domestic disputes, while the Bermuda International Conciliation and Arbitration Act 1993 (“the 1993 Act”), which incorporates into Bermuda law the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”), applies to “international commercial arbitrations”. This chapter focuses on arbitration under the 1993 Act.

2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

The 1986 Act governs domestic arbitrations, while the 1993 Act governs international arbitrations. The 1986 Act is similar to the English Arbitration Acts 1950–1979, whereas the 1993 Act adopts the Model Law. A notable difference between the two statutes relates to the scope for appeal, which is very narrow under the 1993 Act but broader under the 1986 Act. Other differences include a prohibition in the 1986 Act against provisions that purport to fetter the arbitral tribunal’s jurisdiction to award costs (no such restriction applies to the 1993 Act) and the retention in the 1986 Act of the traditional role of the “umpire” as a passive observer who participates only where the two “arbitrators” cannot agree.

2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

Yes. Section 23 of the 1993 Act adopts the Model Law (save for certain differences as regards the enforcement of arbitration awards).

2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?

There are no mandatory rules governing international arbitration proceedings, save that Article 18 of the Model Law requires that the parties must be treated equally and given a full opportunity to present their respective cases. Article 19 of the Model Law provides that the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceeding and that, failing such agreement, the tribunal may conduct the arbitration in such manner as it considers appropriate. The power conferred upon the tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

3. Jurisdiction

3.1 Are there any subject matters that may not be referred to arbitration under the governing law of your jurisdiction? What is the general approach used in determining whether or not a dispute is “arbitrable”?

There are generally no restrictions on the subject matter that may be referred to arbitration in Bermuda, save that there is some scope for argument as to the arbitrability of insolvency, minority shareholder, and partnership disputes. Whether a dispute is “arbitrable” is a question of the scope and terms of the arbitration agreement (Lenihan v LSF Consolidated Golf Holdings Ltd [2007] Bda LR 49).

3.2 Is an arbitral tribunal permitted to rule on the question of its own jurisdiction?

Yes. The tribunal may rule on its own jurisdiction, and on objections with respect to the existence or validity of an arbitration agreement. For these purposes, an arbitration clause contained in a contract is treated as an agreement independent of all other terms.

3.3 What is the approach of the national courts in your jurisdiction towards a party who commences court proceedings in apparent breach of an arbitration agreement?

The Bermuda court will act robustly to enforce an arbitration agreement, including by granting an anti-suit injunction against a party who commences proceedings in breach of an arbitration agreement. The Bermuda court has the power to grant injunctive relief regardless of whether the litigation has been commenced in Bermuda or outside Bermuda, and any party who takes steps in connection with the court proceedings in violation of the anti-suit order may be held in contempt of court.

An action commenced before a court in Bermuda in breach of an arbitration agreement will be stayed by the court at the request of a party to the action who has not submitted to the court’s jurisdiction (for example, by entering a defence). Proceedings were stayed pursuant to Article 8 of the Model Law in Raydon Underwriting Management Co Ltd v North American Fidelity & Guarantee [1994] Bda LR 65. Under Article 8, the Bermuda court will not refer the matter to arbitration if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

3.4 Under what circumstances can a national court address the issue of the jurisdiction and competence of an arbitral tribunal? What is the standard of review in respect of a tribunal’s decision as to its own jurisdiction?

Article 16 of the Model Law provides that the arbitral tribunal may rule on issues going to its jurisdiction. This includes its competence to hear objections with respect to the existence or validity of the arbitration agreement that purportedly gives it power to act. It may also determine questions about the principal agreement in which the arbitration clause is embedded. To this extent, Bermuda law recognises the doctrine of KompetenzKompetenz. The tribunal can address the issue as a preliminary question or in its final award on the merits. If the tribunal rules as a preliminary matter that it has jurisdiction, any party may request, within 30 days of receiving notice of the award, that the Bermuda Supreme Court decide the matter. The court’s decision is binding and cannot be appealed. Where the tribunal rules on questions of jurisdiction and competence in any award, it is open to a party to seek to have the award set aside on the grounds that it deals with a dispute not contemplated by the arbitration agreement, or contains decisions on matters beyond the scope of the submission to arbitration, or that either the composition of the tribunal or its procedure was not in accordance with the parties’ agreement.

3.5 Under what, if any, circumstances does the national law of your jurisdiction allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?

Parties can only be compelled into arbitration by consent, and subject to the terms of the applicable arbitration agreement. Non-parties to that agreement cannot be compelled to arbitrate, no matter how relevant they may be to the dispute.

This question often arises in the context of insurance coverage disputes, where the policyholder enters into separate insurance policies (each containing a separate arbitration agreement) with multiple insurers within a “tower” of insurance. Where multiple coverage disputes arise between the policyholder and its insurers, the policyholder is unable to compel the insurers into a single consolidated proceeding even if the disputes involve common questions of fact and law.

It is not uncommon for a third party to assert rights under an insurance policy that contains an arbitration clause even though such party is not a party to the policy or to the arbitration clause. Examples include a claimant asserting a “cut through” right directly against the insurer (e.g. pursuant to a “direct action” statute), assignees of the policyholder (including liquidating trusts in bankruptcy proceedings), an insurer exercising rights of subrogation or a co-insurer seeking a contribution from another insurer. In all of these cases, the target insurer will, generally, be able to insist that its rights under the policy be determined through arbitration notwithstanding that the third party was not an original party to the arbitration clause (see, for example, ACE Bermuda Insurance Ltd. v Continental Casualty Co [2007] Bda LR 8, [2007] Bda LR 38).

The Contracts (Rights of Third Parties) Act 2016 enables parties to confer contractual rights on third parties, subject to the terms and conditions of the contract (including, for example, any arbitration clause).

3.6 What laws or rules prescribe limitation periods for the commencement of arbitrations in your jurisdiction and what is the typical length of such periods? Do the national courts of your jurisdiction consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods?

Section 35 of the Limitation Act 1984 applies the limitation provisions for commencing court proceedings in Bermuda to arbitrations. In Bermuda, the limitation period for cases founded on a contract or in tort is six years from the date upon which the relevant cause of action accrued. Time stops running for limitation purposes once arbitration proceedings are commenced.

The courts of Bermuda have not addressed whether questions as to limitation are questions of substance or procedure, although this issue often arises in arbitration proceedings involving “Bermuda Form” insurance policies, where the substantive law is that of New York and the procedural law is that of Bermuda. Section 51 of the 1993 Act expressly refers to and sets out the part of the Limitation Act dealing with foreign limitation periods, such that (subject to certain exceptions) the law in relation to limitation is treated as a matter of substance rather than procedure, and is thus ordinarily governed by the lex causae.

3.7 What is the effect in your jurisdiction of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?

Where a winding-up order is made against a company under the Bermuda Companies Act 1981, no arbitration can be commenced or proceeded with against it without the court’s express permission.

In the insurance context, it is possible that the insolvency of the policyholder will give rise to a statutory assignment of the policyholder’s rights under the Third Parties (Rights Against Insurers) Act 1963 with the result that the assignee becomes subject to any arbitration clause.

A moratorium imposed by foreign insolvency proceedings involving a party to a Bermuda arbitration has no automatic effect on the Bermuda arbitration (although it may be contended in the foreign jurisdiction that pursuing the Bermuda arbitration is a breach of the moratorium, as a matter of foreign law). In certain circumstances, the Bermuda court may have jurisdiction to recognise and assist the foreign proceedings by imposing a moratorium in Bermuda on actions brought by or against the party subject to the foreign proceedings, including the arbitration. Where foreign court proceedings engage the insolvency jurisdiction of the foreign court, the Bermuda court will limit its interference to matters arising under the contract and it is unlikely to seek to restrain resolution of insolvency questions (e.g. priority, proof of claim, subordination, etc.) by the foreign court. The Supreme Court of Bermuda considered some of these issues in Ironshore Insurance Ltd et al v MF Global Assigned Assets LLP [2016] Bda LR 127.

4. Choice of law rules

4.1 How is the law applicable to the substance of a dispute determined?

Article 28 of the Model Law prescribes that the arbitral tribunal will determine the dispute between the parties in accordance with the rules of law chosen by them. Any designation of the law or legal system of a given state shall be construed, unless otherwise expressed, as directly referring to the substantive law of that state, and not its conflict of law rules. Where the parties do not expressly identify the substantive law applicable to the dispute, the tribunal will do so, having regard to the conflict of laws rules it considers applicable. This will generally involve the application of the conflict of law rules of Bermuda, inferring the parties’ intentions as regards governing law from the circumstances, or applying an objective test of which system of law has the closest and most real connection with the subject-matter of the contract.

4.2 In what circumstances will mandatory laws (of the seat or of another jurisdiction) prevail over the law chosen by the parties?

The parties to an arbitration agreement have broad scope to agree on the law that will govern their dispute. There are no Bermuda laws that specifically prohibit the arbitration of disputes, such as statutes in certain US states that purport to void arbitration clauses in certain insurance policies.

4.3 What choice of law rules govern the formation, validity, and legality of arbitration agreements?

There is no presumption under the 1993 Act or the Model Law (in contrast to the 1986 Act) that a contract providing for arbitration in Bermuda will be governed by Bermuda law. In the case of most commercial agreements that include an agreement to refer future disputes to arbitration, it will be presumed that the law governing the reference agreement is the same as the proper law of the agreement. Nevertheless, the “severability” of the arbitration agreement from the agreement in which it is embedded creates a potential for the law of the arbitration agreement to differ from the proper law of the agreement. The context in which this is most likely to arise in Bermuda arbitration is in disputes over “Bermuda Form” insurance policies, which are governed by (modified) New York law but subject to arbitration in Bermuda under Bermuda law (or in London under English law).

5. Selection of arbitral tribunal

5.1 Are there any limits to the parties’ autonomy to select arbitrators?

There are no limits to the parties’ autonomy to select the tribunal save as stipulated in the arbitration agreement. The parties are free to specify the number of arbitrators, the qualifications they should possess, as well as the procedure for their selection. Prospective candidates are required under Article 12 of the Model Law to disclose any circumstances likely to give rise to justifiable doubts about their impartiality and independence. The Model Law prevents one party objecting to the appointment of an arbitrator by reason of his nationality unless the parties have agreed otherwise.

5.2 If the parties’ chosen method for selecting arbitrators fails, is there a default procedure?

The Model Law provides the parties with autonomy to agree a procedure for appointing the arbitral panel, which may include express provision in the arbitration agreement for a default procedure. Articles 11(3) and (4) provide for the appointment of an arbitral tribunal where the parties have failed to agree on a procedure, or where one party fails to perform its obligations. Where a party fails to act as required, or a third party fails to perform any function entrusted to it under the agreed procedure, any party can ask the Supreme Court of Bermuda to take the necessary steps (unless the agreed procedure provides another means of securing the appointment). The court’s decision on such an application cannot be appealed. There are a number of reported and unreported decisions in which the Supreme Court has shown itself ready to make appointments in default pursuant to the 1993 Act.

5.3 Can a court intervene in the selection of arbitrators? If so, how?

Yes. Where the parties fail to agree to the appointment of a sole arbitrator, or two party-appointed arbitrators fail to agree on a third, or an appointing institution fails to make an appointment, Articles 11(3) and (4) of the Model Law will apply (see question 5.2 above). The Supreme Court may also appoint an arbitrator, in default of agreement, under Section 15 of the 1986 Act as in the recent “Bermuda Form” decision S v T [2018] SC Bda 9 Civ.

In addition, Article 12 of the Model Law provides that an arbitrator may be challenged if circumstances exist which give rise to justifiable doubts as to his impartiality and independence. A party may only challenge an arbitrator appointed by him, or in whose appointment he participated, on the basis of reasons he becomes aware of after the appointment. The procedure for challenging an arbitrator is set out at Article 13, which requires the objecting party to act expeditiously once it becomes aware of the constitution of the tribunal or a relevant circumstance.

5.4 What are the requirements (if any) imposed by law or issued by arbitration institutions within your jurisdiction as to arbitrator independence, neutrality and/or impartiality and for disclosure of potential conflicts of interest for arbitrators?

Article 18 of the Model Law provides that each party is to be treated with equality and given a full opportunity to present its case. It follows, therefore, that the arbitrators must remain impartial and independent throughout the proceedings. The high-profile case of Halliburton Company v Chubb Bermuda Insurance Ltd [2018] EWCA Civ 817 recently considered the removal of an arbitrator in a “Bermuda Form” insurance arbitration (conducted under the UK’s Arbitration Act 1996). The English Court of Appeal agreed with the High Court that there were no justifiable doubts about the arbitrator’s impartiality and independence. The case was subsequently appealed to the English Supreme Court, whose decision is awaited. Whilst the decision will not be binding in Bermuda, it is likely to be persuasive.

6. Procedural rules

6.1 Are there laws or rules governing the procedure of arbitration in your jurisdiction? If so, do those laws or rules apply to all arbitral proceedings sited in your jurisdiction?

Save for the requirements that the parties be treated equally and that each be given the opportunity to present its case, there are no mandatory rules governing the arbitration procedure under the 1993 Act or the Model Law in Bermuda.

6.2 In arbitration proceedings conducted in your jurisdiction, are there any particular procedural steps that are required by law?

The parties are free to agree the procedure to be followed by the arbitral tribunal. Failing such agreement, the tribunal may conduct the arbitration in such manner as it considers appropriate. Article 23 of the Model Law provides for the filing of statements of claim and defence. Generally, Bermuda arbitrations tend to adopt procedures influenced by English and Bermudian civil procedure rules, where the parties first exchange statements of case followed by documentary disclosure and then the exchange of fact and expert witness statements.

6.3 Are there any particular rules that govern the conduct of counsel from your jurisdiction in arbitral proceedings sited in your jurisdiction? If so: (i) do those same rules also govern the conduct of counsel from your jurisdiction in arbitral proceedings sited elsewhere; and (ii) do those same rules also govern the conduct of counsel from countries other than your jurisdiction in arbitral proceedings sited in your jurisdiction?

The conduct of counsel admitted to the Bermuda Bar is governed by the Barristers’ Code of Professional Conduct 1981. These rules also govern the conduct of counsel from Bermuda in arbitral proceedings sited elsewhere.

The Code of Conduct does not govern the conduct of counsel from countries other than Bermuda in arbitration proceedings sited in Bermuda.

6.4 What powers and duties does the national law of your jurisdiction impose upon arbitrators?

Arbitrators must treat each party with equality and give them a full opportunity to present their case (Article 18 of the Model Law). Arbitrators are also required to give the parties proper notice in advance of any hearing or meeting (Article 24(2)) and are under a continuing duty to disclose circumstances likely to give rise to justifiable doubts as to their impartiality or independence.

6.5 Are there rules restricting the appearance of lawyers from other jurisdictions in legal matters in your jurisdiction and, if so, is it clear that such restrictions do not apply to arbitration proceedings sited in your jurisdiction?

Professional and immigration restrictions apply to the appearance of lawyers from other jurisdictions in Bermuda. These are relaxed, however, in relation to international commercial arbitrations. Section 37(3) of the 1993 Act permits a foreign legal practitioner to act on behalf of a party in arbitral proceedings to which that Act applies without restriction. This includes appearing as counsel before the tribunal. The Bermuda Government’s 2015 Work Permit Policy makes clear that lawyers visiting Bermuda in connection with international arbitrations are exempt from the normal requirements to obtain a work permit, provided they remain in Bermuda for no longer than 21 days.

6.6 To what extent are there laws or rules in your jurisdiction providing for arbitrator immunity?

Section 33 of the 1993 Act provides that no arbitrator shall be subject to service of process in any civil matter relating to a dispute in respect of an arbitration under the 1993 Act. Section 34 goes onto provide that an arbitrator cannot be liable for any act or omission in his capacity as an arbitrator in connection with an arbitration conducted under the Act, although he may be held liable for the consequences of any conscious or deliberate wrongdoing.

6.7 Do the national courts have jurisdiction to deal with procedural issues arising during an arbitration?

The jurisdiction of the court to deal with procedural issues is limited to:

Granting an interim measure of protection (Article 9)
Appointing an arbitrator where either the agreed mechanism or the default mechanism under the Model Law has failed (Articles 11(3) and 11(4))
Responding to a challenge to the appointment of an arbitrator (Article 13(3))
Deciding whether the appointment of an arbitrator should be terminated (Article 14)
Deciding on the jurisdiction of a tribunal following a preliminary ruling on the question by the tribunal (Article 16(3))
Assisting in the taking of evidence (Article 27), or
Setting aside an award (Article 34(2)).

7. Preliminary relief and interim measures

7.1 Is an arbitral tribunal in your jurisdiction permitted to award preliminary or interim relief? If so, what types of relief? Must an arbitral tribunal seek the assistance of a court to do so?

Article 17 of the Model Law provides that (unless the parties agree otherwise) the tribunal may request a party to take such interim measure of protection as it considers necessary in respect of the subject-matter of the dispute. The tribunal may require any party to provide appropriate security in connection with such measure.

7.2 Is a court entitled to grant preliminary or interim relief in proceedings subject to arbitration? In what circumstances? Can a party’s request to a court for relief have any effect on the jurisdiction of the arbitration tribunal?

Article 9 of the Model Law provides that a party may request that the Bermuda court make an order for an interim measure of protection. Section 35(5) of the 1993 Act provides that the court may make orders:

For the preservation, interim custody or sale of goods that are the subject-matter of the arbitration
To secure an amount in dispute in the arbitration
For the detention, preservation or inspection of any property or thing which is the subject of the arbitration or as to which any question may arise therein, and authorising for any such purpose any person to enter upon or into any land or building in the possession of any party to the arbitration, or authorising any samples to be taken or any observations to be made or experiment to be tried which may be necessary or expedient for the purpose of obtaining full information or evidence
For interim injunctions, or
For the appointment of a receiver.

Section 35(5) does not prejudice any power an arbitrator may have to make orders with respect to any of the listed matters.

7.3 In practice, what is the approach of the national courts to requests for interim relief by parties to arbitration agreements?

The Bermuda court will take the steps necessary to give effect to an arbitration agreement and assist the arbitral tribunal as required.

7.4 Under what circumstances will a national court of your jurisdiction issue an anti-suit injunction in aid of an arbitration?

There is a well-established body of authority affirming the strong policy grounds upon which arbitration agreements will be upheld by the Bermuda court through an anti-suit injunction. Where proceedings are commenced in breach of a valid and binding arbitration clause, the presumption is that an injunction will normally be granted unless the other party can show “strong reasons” why it should not (see ACE Bermuda Insurance Ltd v Continental Casualty Co [2007] Bda LR 8 and [2007] Bda LR 38).

The Bermuda court may enforce arbitration agreements regardless of whether the seat of the arbitration is Bermuda or elsewhere, as in IPOC International Growth Fund Ltd v OAO CT Mobile [2007] Bda LR 43, where the Court of Appeal for Bermuda upheld a first instance decision preventing a Bermudian entity from pursuing foreign proceedings in breach of Swedish and Swiss arbitration agreements.

It is worth noting that the Bermuda court will also use its anti-suit jurisdiction to prevent arbitration proceedings (even in a foreign jurisdiction) in exceptional circumstances, e.g. where the arbitration is oppressive – see: Al Bakri & Sons Ltd v Al Bakri [2017] Bda LR 56.

7.5 Does the law of your jurisdiction allow for the national court and/or arbitral tribunal to order security for costs?

There is no express provision under either the 1993 Act or the Model Law allowing an arbitral tribunal to order security for costs or the Bermuda court to make such an order in support of an arbitration, nor are there any reported authorities addressing this issue.

7.6 What is the approach of national courts to the enforcement of preliminary relief and interim measures ordered by arbitral tribunals in your jurisdiction and in other jurisdictions?

See questions 7.2 and 7.3 above.

8 Evidentiary matters

8.1 What rules of evidence (if any) apply to arbitral proceedings in your jurisdiction?

The parties are free to agree the rules of evidence that apply to arbitral proceedings in Bermuda (Article 19). Section 35(2) of the 1993 Act provides that the tribunal may receive any evidence that it considers relevant and, unless the parties have otherwise agreed, shall not be bound by rules of evidence applicable in Bermuda. Article 18 empowers the tribunal to determine the admissibility, relevance, materiality and weight of evidence.

8.2 What powers does an arbitral tribunal have to order disclosure/discovery and to require the attendance of witnesses?

Apart from Article 18 – which mandates equality of treatment – there are no limitations on the arbitrator’s authority to order the disclosure of documents by the parties. An arbitrator cannot compel disclosure from a third party without the assistance of the court.

8.3 Under what circumstances, if any, can a national court assist arbitral proceedings by ordering disclosure/discovery or requiring the attendance of witnesses?

Article 27 of the Model Law permits the arbitral tribunal to request assistance from the Bermuda court in relation to the taking of evidence. In practice, this applies only to taking evidence from non-parties. Section 35 of the 1993 Act also enables a party to issue a subpoena to compel the production of documents or the attendance of a witness. The court may also make orders in respect of the examination on oath of any witnesses, and can issue a request for the examination of a witness outside the jurisdiction.

8.4 What, if any, laws, regulations or professional rules apply to the production of written and/or oral witness testimony? For example, must witnesses be sworn in before the tribunal and is cross-examination allowed?

Section 35 of the 1993 Act provides that, unless the parties agree otherwise, every agreement to arbitrate in Bermuda contains an implied term that the arbitral tribunal has the power to examine witnesses on oath or affirmation, although it is not customary for witnesses to be examined on oath and direct testimony is typically elicited through a written witness statement.

8.5 What is the scope of the privilege rules under the law of your jurisdiction? For example, do all communications with outside counsel and/or in-house counsel attract privilege? In what circumstances is privilege deemed to have been waived?

This is a complex subject, particularly in an international context. It is generally accepted that the rules of privilege that apply in litigation also apply to arbitrations. Bermuda law recognises two types of privilege: legal professional privilege; and litigation privilege. Whether a communication with counsel attracts privilege will depend on the nature of the communication (i.e. whether it falls within either category of privilege). The privilege belongs to the client, who can waive it either intentionally or unintentionally. Difficult issues can arise in “Bermuda Form” arbitrations concerning the existence and scope of privilege: for example, the extent to which the arbitral tribunal should uphold a claim for privilege under a foreign law that would not be recognised under Bermuda law.

9 Making an award

9.1 What, if any, are the legal requirements of an arbitral award? For example, is there any requirement under the law of your jurisdiction that the award contains reasons or that the arbitrators sign every page?

Article 31 sets out the requirements as to the form and contents of an arbitral award, namely: (i) the award shall be in writing and signed by the arbitrator(s); (ii) in arbitral proceedings with more than one arbitrator, the signatures of the majority shall suffice, provided that the reason for any omitted signature is stated; (iii) the award shall state the reasons upon which it is based, unless the parties have agreed otherwise; and (iv) the award shall state its date and the place of arbitration and the award shall be deemed to have been made at that place. There is no requirement that the arbitrators sign every page of the award.

9.2 What powers (if any) do arbitral tribunals have to clarify, correct or amend an arbitral award?

Article 33 empowers the arbitral tribunal to correct any errors in computation, any clerical or typographical errors, or errors of a similar nature. If agreed by the parties, a party may request the tribunal to give an interpretation of a specific point or part of the award. In addition, if requested by a party, the tribunal may make an additional award as to claims made in the arbitral proceedings but omitted from the award.

10 Challenge of an award

10.1 On what bases, if any, are parties entitled to challenge an arbitral award made in your jurisdiction?

There is no right of appeal of arbitration awards under the 1993 Act on the merits. The only recourse against an arbitral award is to have it set aside (Article 34). An application can be made to the Court of Appeal for Bermuda on the basis that: (i) a party to the arbitration agreement was under an incapacity; (ii) the arbitration agreement was invalid; (iii) a party was not given proper notice of the appointment of an arbitrator, or of the proceedings, or was otherwise unable to present its case; (iv) the award deals with a dispute outside the scope of the arbitration agreement; (v) the arbitral tribunal, or the procedure it adopted, did not accord with the parties’ agreement; (vi) the subject-matter of the dispute is not capable of settlement by arbitration under Bermuda law; or (vii) the award offends public policy. Section 27 of the 1993 Act provides that an award will offend Bermudian public policy if it was induced or affected by fraud or corruption.

10.2 Can parties agree to exclude any basis of challenge against an arbitral award that would otherwise apply as a matter of law?

The grounds for challenging an award under the 1993 Act are very narrow and it is unlikely that the parties could further narrow the bases for challenge by agreement. Nevertheless, arbitration provisions in “Bermuda Form” policies typically provide that the parties waive any right to appeal to the fullest extent permitted.

10.3 Can parties agree to expand the scope of appeal of an arbitral award beyond the grounds available in relevant national laws?

No, not under the 1993 Act. If parties to a Bermuda arbitration wish to have broader grounds for challenge, they could expressly incorporate the 1986 Act into their arbitration agreement as it affords wider bases for appeal.

10.4 What is the procedure for appealing an arbitral award in your jurisdiction?

Under Article 34, any application to set aside an award must be made within three months of the date upon which the applicant receives the award. The court may give the arbitral tribunal an opportunity to correct the error that has given rise to the application to set aside, before considering the application.

11 Enforcement of an award

11.1 Has your jurisdiction signed and/or ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Has it entered any reservations? What is the relevant national legislation?

The New York Convention was extended to Bermuda by the United Kingdom on 14 November 1979. A reservation has been entered limiting its application to the recognition and enforcement of awards made by another Contracting State, i.e. with regard to reciprocity. Convention Awards are enforceable under Part IV of the 1993 Act, and a full text of the Convention is annexed to the 1993 Act as Schedule 3.

11.2 Has your jurisdiction signed and/or ratified any regional Conventions concerning the recognition and enforcement of arbitral awards?

No, it has not.

11.3 What is the approach of the national courts in your jurisdiction towards the recognition and enforcement of arbitration awards in practice? What steps are parties required to take?

A party seeking to enforce a Convention Award may do so either by action or by leave of the court. Entering judgment by leave is likely to be the preferred route for enforcement, but the alternative procedure may be adopted where the award is incapable of being converted into a judgment; for example, because of incompleteness or uncertainty or because it is oral.

The party seeking to enforce the award must demonstrate that the award is prima facie one that the court is bound to recognise by virtue of Section 40(2) of the 1993 Act. In this regard, that party must produce: (i) an authenticated original of the award or a certified copy of it; (ii) the original arbitration agreement or a certified copy; and (iii) where either the award or arbitration agreement is in a language other than English, a translation certified by an official or sworn translator or by a diplomatic or consular agent.

In Sampoerna Strategic Holdings Ltd v Huwaei Tech Investments Co Ltd [2014] CA Civ (Bda) 2, the Court of Appeal for Bermuda acknowledged there may be rare cases where enforcement of a Convention Award will be refused on public policy grounds if enforcement would “shock the conscience” or be “clearly injurious to the public good” or otherwise “violate the forum’s most basic notion of morality and justice”. In Leap Investments Ltd. v Emerging Markets Special Solutions 3 Ltd. [2015] Bda LR 38, the Court of Appeal for Bermuda stayed enforcement proceedings on the basis that the award was subject to annulment proceedings in the foreign jurisdiction. In CAT S.A. v Priosma [2019] SC BDA 56 Com, the Supreme Court refused to allow a challenge to enforcement of an arbitration award on the grounds that the tribunal lacked jurisdiction, finding that an issue estoppel had been created by a challenge to the French court.

11.4 What is the effect of an arbitration award in terms of res judicata in your jurisdiction? Does the fact that certain issues have been finally determined by an arbitral tribunal preclude those issues from being re-heard in a national court and, if so, in what circumstances?

The principle of res judicata applies to arbitration; issues that have been finally determined by an arbitral tribunal cannot be re-heard in the Bermuda court. The application of this principle was affirmed by the Privy Council (on an appeal from Bermuda under the 1993 Act) in Associated Electric & Gas Insurance Services Ltd. v European Reinsurance Co. of Zurich [2003] 1 WLR 1041. The Bermuda courts also recognise the applicability of the principle of res judicata where foreign courts have been asked to determine issues connected with the arbitral process, such as a challenge to the enforceability of the award – see: CAT SA v Priosma Limited [2019] SC (Bda) 56 Com.

11.5 What is the standard for refusing enforcement of an arbitral award on the grounds of public policy?

The court has discretion not to enforce an award where it is shown that: (i) one or more of the parties to the arbitration agreement was under some incapacity; (ii) the arbitration agreement pursuant to which the award was purportedly made was invalid; (iii) the party against whom the award was made was not given proper notice of the appointment of the arbitrator or the commencement of proceedings or was otherwise unable to present his case; (iv) the award deals with issues outside the scope of the arbitration agreement; (v) there were procedural irregularities; (vi) the award is not yet final; (vii) the subject matter of the dispute is incapable of determination by arbitration in the country where the arbitration took place; or (viii) recognition or enforcement would be contrary to the public interest of that country (Section 42 of the 1993 Act, Article 36 of the Model Law, and Article V of the New York Convention).

12 Confidentiality

12.1 Are arbitral proceedings sited in your jurisdiction confidential? In what circumstances, if any, are proceedings not protected by confidentiality? What, if any, law governs confidentiality?

Generally, arbitrations under the 1993 Act are private and confidential as a matter of Bermuda law. This has been affirmed by both the Privy Council in the Associated Gas case (see question 11.4) and by the Supreme Court of Bermuda in Ace Bermuda Insurance Ltd. v Ford Motor Company [2016] Bda LR 1. Confidentiality is not absolute, however, and there are narrow exceptions, e.g. disclosure of the award to found an issue estoppel.

12.2 Can information disclosed in arbitral proceedings be referred to and/or relied on in subsequent proceedings?

Yes, but only with the agreement of the parties or with leave of court. Arguably, a witness may be impeached by reference to testimony given in arbitration proceedings if the court grants leave to adduce the transcript of the prior testimony.

13 Remedies/interests/costs

13.1 Are there limits on the types of remedies (including damages) that are available in arbitration (e.g., punitive damages)?

The arbitral tribunal must determine an appropriate remedy in accordance with the law that the parties have chosen to apply to the dispute. In the absence of the parties’ agreement to the contrary, it is unlikely that the tribunal has the power to award punitive damages under Bermuda law.

13.2 What, if any, interest is available, and how is the rate of interest determined?

Section 31 of the 1993 Act provides that, subject to any agreement by the parties to the contrary, where a tribunal makes an award for money, the tribunal may include an award of interest at such reasonable rate as it determines. Where the sum payable is in Bermuda Dollars, the Interest and Credit (Charges) Regulations 1975 will apply.

13.3 Are parties entitled to recover fees and/or costs and, if so, on what basis? What is the general practice with regard to shifting fees and costs between the parties?

Under Section 32 of the 1993 Act, and subject to any agreement by the parties to the contrary, the arbitral tribunal has wide discretion when it comes to costs. Costs are broadly defined to mean: (i) the fees and expenses of the arbitrators; (ii) legal fees and expenses of the parties, their representatives and expert witnesses; (iii) administration fees of an arbitral institution; and (iv) any other expense incurred in connection with the proceedings.

13.4 Is an award subject to tax? If so, in what circumstances and on what basis?

Arbitral awards are not subject to tax in Bermuda (save in the case of domestic arbitration awards, which require payment of stamp duty in the sum of 0.25% of the amount or value awarded up to a maximum of BD$25).

13.5 Are there any restrictions on third parties, including lawyers, funding claims under the law of your jurisdiction? Are contingency fees legal under the law of your jurisdiction? Are there any “professional” funders active in the market, either for litigation or arbitration?

Section 96 of the Barristers’ Code of Professional Conduct provides that, except in respect of undefended debt collections or to the extent permitted by the Bar Council, Bermuda counsel shall not enter into contingent fee arrangements where the fees charged depend upon the results of the case, or consist of a pre-arranged share of money recovered on behalf of the client. It is unlikely that this restriction would apply to overseas counsel conducting arbitrations in Bermuda. A recommendation for the introduction of conditional and/or contingency fee arrangements is being actively considered by the Bermuda Bar Association.

The involvement of professional third party funders is becoming more prevalent in Bermuda. In Stiftung Salle Modulable and another v Butterfield Trust (Bermuda) Limited [2014] SC (Bda) 14, the plaintiff procured funding in return for approximately 40% of any damages recovered. The court observed that fair trial rights guaranteed by the Bermuda Constitution suggested that funding arrangements should be encouraged, rather than condemned.

14 Investor state arbitrations

14.1 Has your jurisdiction signed and ratified the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (1965) (otherwise known as “ICSID”)?

Yes, ICSID has been extended to Bermuda.

14.2 How many Bilateral Investment Treaties (“BITs”) or other multi-party investment treaties (such as the Energy Charter Treaty) is your jurisdiction party to?

According to the United Nations Conference of Trade and Development, Bermuda is not party to any in-force BITs (https://investmentpolicyhub.unctad.org/IIA/IiasByCountry#iiaInnerMenu).

14.3 Does your jurisdiction have any noteworthy language that it uses in its investment treaties (for example, in relation to “most favoured nation” or exhaustion of local remedies provisions)? If so, what is the intended significance of that language?

As an overseas territory of the United Kingdom, treaty language is largely negotiated by the UK.

14.4 What is the approach of the national courts in your jurisdiction towards the defence of state immunity regarding jurisdiction and execution?

Bermuda has not introduced legislation equivalent to the United Kingdom Sovereign Immunity Act 1978. Accordingly, the common law rules governing the defence apply: see Miller v The Department of the Navy of the United States of America [1986] Bda LR 78. It is likely that the Bermuda court will give effect to state immunity where circumstances require.

15 General

15.1 Are there noteworthy trends or current issues affecting the use of arbitration in your jurisdiction (such as pending or proposed legislation)? Are there any trends regarding the type of disputes commonly being referred to arbitration?

Bermudian insurers and reinsurers routinely include arbitration agreements in the many thousands of (re)insurance policies issued in the Bermuda market annually. Typically, these provide for arbitration in Bermuda (under the 1993 Act) or for arbitration in London (under the UK’s Arbitration Act 1996). It is common for insurance policies issued in Bermuda to adopt (modified) New York law as the substantive law of the contract, but to adopt Bermuda or English law to govern procedural matters and the resulting arbitrations are often referred to as “Bermuda Form” arbitrations.

There has been an ongoing discussion in Bermuda regarding the establishment of an international arbitration centre with a view to positioning Bermuda as an international arbitration hub for the Americas along similar lines to that which Singapore occupies for the Asian region. The government has recently commenced work on the Ottiwell A. Simmons International Arbitration Centre, although there is no indication yet of when it might be open for business.

The 2020 COVID-19 pandemic highlighted inadequacies in court-based litigation (including in Bermuda) from reliance of paper-based records and adherence to inflexible procedures, matters that do not affect arbitration proceedings to the same extent. Increased use of arbitration as a means of dispute resolution is a likely consequence.

15.2 What, if any, recent steps have institutions in your jurisdiction taken to address current issues in arbitration (such as time and costs)?

A continuing trend in the Bermuda insurance market has been to allow the insured to determine the venue for any arbitration hearing, subject to a defined choice of venues (e.g. Bermuda, England or Canada). However, in most cases, the Bermuda or English arbitration statute continues to apply. Despite some pressure from insurance brokers and certain policyholders, the Bermuda insurance market has been resistant to abandoning arbitration clauses or to agreeing to arbitration in the United States.

At least one insurer in Bermuda has modified its arbitration clause so as to mitigate the effect of the “loser pays” costs “rule” in Bermuda arbitrations by providing that the insurer will not seek recovery of its costs in a coverage dispute unless the insurer succeeds on all matters in dispute. This modification would not be permitted under the English Arbitration Act 1996 but parties are free to agree such provisions in Bermuda.

Bermuda’s leading arbitration organisation, the Chartered Institute of Arbitrators, has undergone something of a relaunch in an effort to promote arbitration as a means of dispute resolution, primarily for domestic disputes and to expand its membership.