Bermuda: Litigation & Dispute Resolution 2020
This article first appeared in Global Legal Insights: Litigation & Dispute Resolution 2020, which covers key topics including efficiency and integrity, injuctions, cross-border issues, disclosure and privilege, costs and funding, settlement and mediation, and arbitration and expert determination - in 24 jurisdictions.
Efficiency of process
The Bermuda court system, with a dedicated Commercial Court, is efficient and the court endeavours to facilitate the requirements of its commercial users. In common with courts elsewhere, the Bermuda courts experienced severe disruption as a result of the COVID-19 pandemic which was exacerbated by the court’s paper-based record system and manual filing processes. The anticipated introduction of an electronic document management system and electronic filing will improve the efficiency of the court in future.
The Supreme Court (Bermuda’s court of first instance in respect of commercial matters valued over US$25,000) has two full-time judges, including Bermuda’s Chief Justice, and a number of assistant judges, who are highly experienced in civil and commercial matters.
Bermuda statutes, rules, practice directions and judgments are all available online. Court files (subject to certain confidentiality restrictions) may be inspected on the same day as a request is filed.
Urgent applications can be heard at almost no notice, if necessary.
The rules of the Supreme Court 1985 closely follow the contemporaneous rules of the England and Wales Supreme Court (i.e. pre-Civil Procedure Rules but the English “overriding objective” has been incorporated more recently) and provide a clear and efficient structure for litigation (with template forms for users). There are, however, a number of material differences between Bermuda civil procedures and those currently applied in English High Court proceedings.
At a very high level, Bermuda’s civil procedures are not dissimilar to those in the United States, with parties adopting an “adversarial” approach. For example, a typical damages claim will encompass pleadings, discovery, fact (and possibly expert) witness testimony, opportunities for early disposition, use of written submissions/briefs and a trial with live witness testimony and oral submissions from counsel. At a lower level, however, there are a number of very significant differences between Bermuda and US civil procedures.
In insolvency matters, the Companies Act 1981 and Companies (Winding-up) Rules 1982 also provide a reasonably clear set of rules for those proceedings.
Under normal circumstances, non-urgent applications and preliminary hearings in proceedings are listed within two to eight weeks and the court can be relied upon to give commercial directions for the efficient and expeditious hearing of trials.
The court’s summary judgment procedure also follows the England and Wales model and the court generally takes a robust approach to the early determination of issues where one party has no real prospect of success at trial.
Integrity of process
The integrity of the Bermuda court process is beyond reproach.
As above, the Supreme Court’s judiciary are highly experienced in civil and commercial matters. Appeals are to the Court of Appeal of Bermuda, which sits three times a year and whose bench is drawn from highly experienced members of the UK and Caribbean judiciaries, including from the English High Court and Court of Appeal. Final appeal, with permission, lies to the Privy Council, whose members also constitute the English Supreme Court (England’s apex court), sitting in London.
Principles of natural justice are therefore well respected and the right to a fair hearing is enshrined in Bermuda’s constitution. Bermuda’s judiciary operate in a manner that is free from political interference and the courts have a long history of reviewing government actions and legislation.
Privilege and disclosure
Subject to certain protections, and/or agreement between the parties, in standard factual disputes (particularly where commenced by a writ of summons), disclosure between litigants of documents relating to the matters in question is compulsory in Bermuda.
The obligation, which continues to the point of judgment, extends to preserving and disclosing all documents that are or have been in the litigants’ possession, control or power relating to the issues in question, whether helpful to their case or not.
Third parties may be compelled to produce documents in certain circumstances, particularly where necessary to dispose fairly of the claim or save costs.
The use of electronic disclosure is a matter for the parties and the Court has not yet sought to regulate this area, although the modern practice of the English Commercial Court is often adopted.
Bermuda’s procedural rules do not permit US-style deposition discovery of witnesses.
Protections from disclosure extend to privileged documents, “without prejudice” communications made with a view to settling the litigation, documents that it would not be in the public interest to disclose, and the right to avoid self-incrimination.
As to privilege, the position in Bermuda is based on the English common law which rigorously protects against disclosure of documents attracting advice, litigation, joint and common interest privilege. In summary:
- “Advice privilege” protects against disclosure of confidential communications between lawyer and client made for the purposes of seeking or giving legal advice
- “Litigation privilege” protects against disclosure of all confidential documents created primarily for the purpose of ongoing or anticipated litigation
- “Joint interest privilege” is the protection against disclosure of material passing between clients and their jointly instructed lawyer in relation to litigation, and
- “Common interest privilege” protects against disclosure material passing between parties with a common interest in litigation with a view to informing one another about matters in the litigation.
Documents disclosed in Bermuda proceedings are generally subject to an implied undertaking of confidentiality/against collateral use. They cannot therefore be used outside of the proceedings without the court’s permission, which is rarely given.
Subject to balancing the importance of open justice, the Bermuda Court will, where appropriate, seal the court file and hear matters in camera to protect confidentiality. This approach is most often taken in arbitration, trust, intellectual property or other sensitive and/or confidential commercial matters.
Bermuda’s common law and statutory rules of evidence in civil proceedings generally follow English law, and the presentation of the evidence is “adversarial” in nature. In large part reflecting the lack of jury trials for civil matters in Bermuda, issues as to the quality of evidence (e.g. hearsay) rarely arise (in contrast to the US courts) and most factual disputes are determined by reference to the relative “weight” of the parties’ evidence.
In respect of proceedings requiring the final determination of factual disputes, written evidence-in-chief (or “direct testimony” in US parlance) is exchanged prior to, and affirmed by live witnesses at, the hearing, where witnesses may be subject to cross-examination. Expert evidence, including evidence of foreign law, is permitted with the court’s consent and is treated in the same way with experts producing written reports. There is no practice of deposing experts in advance of trial, and communications between counsel and experts (including draft reports) are generally protected from disclosure.
Interlocutory applications are almost always dealt with on written evidence alone.
Consistent with the Hague Convention on the Taking Abroad of Evidence in Civil and Commercial Matters (although that Convention is not technically applicable in Bermuda), Bermuda provides assistance to foreign courts through a formal “Letter of Request” (or “Letters Rogatory”) process for the examination of witnesses in Bermuda and for their production of particular specified documents, or other prescribed real evidence, for use in foreign proceedings.
Witnesses in both domestic proceedings and those providing evidence for use in foreign courts are compellable by subpoena.
Awards of costs (or “attorneys’ fees” as they are labelled in US litigation) are made at the discretion of the court, but reasonably incurred legal costs in respect of Bermudian proceedings are normally recoverable by the winning party (i.e. what Americans call the “English rule” on costs).
Pre-emptive costs capping in Bermuda is rare and limited to cases where there is a public interest component.
While awards of costs of interlocutory hearings may be deferred until the end of proceedings or awarded at each contested application/hearing, the quantum assessment of costs in Bermuda is usually postponed until the end of the proceedings and the court does not, except in exceptional circumstances, make an order for payment on account of costs pending assessment.
There is conflicting authority on the extent to which the court can take an “issues-based” approach to the award of costs, as opposed to the determination of costs more generally by assessing who the substantial winner is. However, the trend appears to favour issues-based orders.
Costs can be awarded on an indemnity or standard basis, which changes the presumption between the parties as to whether the costs were reasonably incurred (and therefore recoverable).
In cases where costs are assessed on the standard basis (which is the usual basis absent agreement or unreasonable conduct of the losing party), as a “rule of thumb” the winning party might expect to recover 65–75% of their costs.
Applications for security for costs are permissible, but only by the defendant to a claim or counterclaim, where the plaintiff is ordinarily resident outside of the jurisdiction, a nominal plaintiff suing for some other person, or there are questions over the address of the plaintiff and there are legitimate concerns about the enforceability of any costs order against that person. In the case of a foreign plaintiff, the amount of security is assessed by reference to the estimated cost of enforcing a costs order in the jurisdiction of the foreign party.
Appeals to the Court of Appeal require, as a condition of the appeal, the securing by the appellant of the respondent(s)’s costs.
Neither contingency nor conditional fee arrangements are currently permitted in Bermuda, although the Bermuda Bar Association has been campaigning for legislation to enable the use of conditional (but not contingency) fee arrangements.
Bermuda has yet to enact legislation in relation to third-party funding. However, in recent years, the Bermuda courts have taken a modern approach to third-party funding arrangements (based on notions of “access to justice”), and, in the context of commercial cases, are generally unsympathetic to assertions that such arrangements are unlawful (although third-party funders can be made liable for costs). Third-party funding is most common in claims being pursued by companies in liquidation.
Litigation insurance, including after the event (“ATE”) insurance, is also permitted.
Where numerous persons have the same interest in any proceedings, those proceedings may be brought and/or continued by or against any one or more of them in a representative capacity.
In such proceedings, a judgment or order is binding upon the member-represented group, but is enforceable against those persons who were not parties, with leave of the court.
In practice, these types of proceedings are very rare and have little in common with US-style class actions.
Interim relief in support of underlying proceedings (whether local or, under certain circumstances further set out below, foreign proceedings) is available in Bermuda, including orders:
- Prohibiting a person from doing, or mandating a person to do, something
- Requiring disclosure of assets and information in relation to those assets
- Providing for the searching of property
- Securing particular property, the ownership of which is disputed
- Freezing a respondent’s general assets in Bermuda or, if the court has in personam jurisdiction over the respondent to such an application, the freezing of their worldwide assets
- Prohibiting a party from engaging in proceedings, including foreign proceedings, and
- Requiring a stay of Bermudian proceedings.
Penal notices (warning of possible contempt of court for non-compliance) can attach to such orders as appropriate.
Where necessary, applications can be made on an urgent and ex parte basis and undertakings can be required from the applicant to compensate the respondent in damages for losses flowing from any injunction that is ultimately set aside.
Additional complexities in relation to interim relief in support of foreign proceedings are considered below.
Enforcement of judgments/awards
There are various mechanisms for enforcing a Bermuda judgment within the jurisdiction:
- A bailiff action to seize such assets of the judgment debtor as may be sold to satisfy the judgment debt, interest and costs of execution
- Third-party debt (garnishee) orders, in which third parties, including banks, may be ordered to pay to the judgment creditor any sums they owe to, or sums they hold in respect of, the judgment debtor
- The appointment of a receiver by way of equitable execution over a judgment debtor’s real and/or personal property, and/or
- In circumstances where the failure to comply with an order constitutes a contempt of court, sequestration to seize the judgment debtor’s assets until the order is complied with and the costs of the judgment creditor are secured.
Domestic arbitration awards are, with the leave of the court, enforceable as a judgment or order to the same effect and judgment may be entered in the terms of the award. They can also provide a basis for set-off, res judicata and issue estoppel defences in Bermuda.
Enforcement of foreign judgments and arbitration awards are considered below.
Most of the matters pending before Bermuda’s Commercial Court have a “cross-border” component.
The circumstances in which the Bermuda Court will permit claims to be served on a non- resident person or entity outside of the jurisdiction (and accept jurisdiction over such claims and defendants) are restricted to certain categories (which are common to Commonwealth jurisdictions) and include:
- Injunctions in relation to acts within Bermuda
- Claims concerning necessary or proper parties (outside Bermuda) to proceedings in which other parties have been duly served (inside or outside Bermuda)
- Claims in respect of:
- Contracts made within the jurisdiction
- Contracts made by or through an agent within the jurisdiction
- Contracts governed by Bermuda law, or with a Bermuda jurisdiction clause, or
- Breaches of contract within the jurisdiction.
- Torts in which the tortious act or damage occurred within the jurisdiction
- Claims relating to land in Bermuda or Bermuda trusts
- Claims concerning probate in Bermuda, and
- Claims for the enforcement of judgments or arbitration awards in Bermuda.
Even if jurisdiction can be established, the Bermuda Court can stay actions on the basis of forum non conveniens where some other forum is more appropriate.
Bermuda has adopted various other measures to facilitate cross-border litigation and enforcement.
As set out above in the section on Evidence, Bermuda provides assistance to foreign courts through a formal “Letter of Request” process for the examination of witnesses in Bermuda and for their production of particular specified documents, or other prescribed real evidence, for use in foreign proceedings.
There is a simplified system for the registration and enforcement of foreign money judgments (excluding taxes, fines and penalties) from certain countries and territories.
Those countries and territories are: Anguilla; Antigua; the Bahamas; Barbados; Barbuda; the British Virgin Islands; Dominica; Gibraltar; Grenada; Guyana; Hong Kong; Jamaica; Montserrat; Nevis; Nigeria; Redonda; St Kitts; St Lucia; St Vincent; the UK; the Federal Courts of the Commonwealth of Australia; and various State and Territory Courts within Australia.
Registration under this procedure can be withheld or set aside on the grounds that:
- The foreign court lacked jurisdiction in a private international law sense (i.e. the defendant was not present in the foreign country when the foreign proceedings were issued, did not make a claim or counterclaim in those proceedings, or did not voluntarily submit to those proceedings)
- Insufficient notice was given to the defendant in the foreign proceedings, or
- The foreign judgment was obtained by fraud.
Judgment creditors of foreign judgments not issued in the above countries and territories are required to use the common law method of enforcement, by issuing a claim in Bermuda mirroring the original proceedings against the same parties and seeking summary judgment on the basis of res judicata. In order to employ this mechanism, the foreign judgment must be the final in personam judgment for a definite sum of money given by a competent court with jurisdiction (in a private international law sense (as above)), which was not obtained by fraud or in breach of natural justice and the enforcement of which must not be contrary to public policy.
Provided a foreign court’s proceedings have produced or might produce a judgment that is enforceable in Bermuda as above:
- A Bermuda Court may grant a freezing injunction in aid of those proceedings to prevent the dissipation of assets within Bermuda, or
- If the Bermuda Court has in personam jurisdiction over the judgment debtor (or potential judgment debtor), it may also grant a freezing injunction in aid of those proceedings to prevent the dissipation of worldwide assets.
In relation to anti-suit injunctions, where there is an agreement to arbitrate or litigate in Bermuda, or where the Bermuda Court has jurisdiction over a party seeking to avoid the consequences of a jurisdictional or arbitration clause, an anti-suit injunction can be sought in Bermuda to prohibit engagement in litigation contrary to that agreement. A foreign judgment obtained against a Bermudian defendant in violation of an arbitration clause may not be enforceable in Bermuda.
In relation to insolvency, it is not possible to wind up foreign companies in Bermuda unless they have been granted a permit by the Minister of Finance to carry on business in Bermuda. However, the Bermuda Court frequently does recognise liquidators appointed by foreign courts both in relation to the liquidation of foreign companies and Bermuda companies where there is a sufficient connection to the foreign court’s jurisdiction making it the most convenient jurisdiction to have made the winding up or appointment order, where there are documents, assets or liabilities in Bermuda or other connecting factors with Bermuda, and recognition or assistance would be consistent with Bermuda’s substantive law and public policy. The exact scope of the Bermuda Court’s jurisdiction to assist in the absence of a Bermuda liquidation is the subject of a number of recent decisions and is an area in which we are likely to see further clarification.
While Bermuda has not implemented the UNCITRAL Model Law on Cross-Border Insolvency, the Bermuda Court has taken a pragmatic approach in developing its practice and procedure relating to provisional liquidations to facilitate the implementation of crossborder restructuring of Bermuda companies.
Bermuda’s (re)insurance industry utilises arbitration clauses in all contracts, typically applying New Law and often Bermuda-seated arbitration. As such, there is widespread understanding of international arbitration and a significant body of case law.
Bermuda has enacted into law, with supporting provisions, the UNCITRAL Model Law on International Commercial Arbitration (albeit without its 2006 amendments). It therefore has an excellent mechanism for international arbitration with detailed provisions for:
- Assistance and supervision by the Bermuda Court
- The appointment of arbitrators
- Addressing questions as to the jurisdiction of the tribunal
- The conduct of the arbitration proceedings
- Interim, interlocutory or partial awards (which are permissible)
- The enforcement of awards
- The reporting of proceedings, and
- Costs (which are recoverable).
As a general matter, the Bermuda courts are very supportive of the arbitration process.
Although the courts are frequently called upon to support the arbitration process, in the case of international arbitrations the courts rarely review arbitration awards, given the very limited grounds for appeal under Bermuda’s international arbitration statute.
Bermuda is subject to the New York Convention on the enforcement of arbitration awards.
Convention awards are enforceable in Bermuda with the leave of the court, in the same manner as a judgment or order to the same effect, and judgment may be entered in the terms of the award. Such awards are also recognised for the purposes of set-off, issue estoppel and res judicata.
As above, the court has jurisdiction to grant an injunction to stay any court proceedings issued contrary to an agreement to arbitrate.
The Bermuda Court can only refuse to enforce an arbitration award if:
- One of the parties to the arbitration agreement was under some incapacity
- The arbitration agreement was not valid under the law of either the agreement or, in the absence of an agreement, under the law of Bermuda
- The award debtor was not given proper notice of the appointment of an arbitration tribunal or of the arbitral proceedings or was otherwise unable to present its case
- The tribunal did not have jurisdiction because the award deals with a dispute not contemplated by or within the terms of the arbitration agreement, or the decision itself goes beyond the scope of the agreement to arbitrate (in which case those decisions that do go beyond the submission to arbitrate can be set aside but do not necessarily extinguish the whole award)
- The composition of the arbitration tribunal or the arbitration procedure itself was not in accordance with the agreement between the parties
- The award has been suspended or set aside by a competent authority in the country in which it was made
- The subject matter of the dispute is not capable of settlement by arbitration under the law of Bermuda, or
- Enforcement of the award would be contrary to public policy.
In the case of arbitrations taking place between persons and entities all resident in Bermuda (which are governed by a separate domestic arbitration statute), appeals of arbitration awards may be made on a point of law to the Court of Appeal with leave of the Supreme Court.
Mediation and ADR
Mediation is not compulsory in Bermuda but there are statutory model provisions for mediation that can be agreed between parties to international arbitration agreements to apply to their dispute (and such provisions could largely be agreed between parties to standard litigation dispute). Those standard provisions allow for without prejudice discussions, stays of proceedings, representation, equal bearing of costs and standard terms with the mediator.
Bermuda has a branch of the Chartered Institute of Arbitrators which facilitates such mediations.
Regulatory investigations have become increasingly common over the past decade. The Bermuda Monetary Authority (the “BMA”) has regulatory and supervisory authority over a wide range of financial services and related businesses conducted in Bermuda and/or by Bermuda entities, including in the insurance, banking, trust, investment, funds, and corporate service provider sectors.
The BMA has a wide range of inspection- and information gathering-powers, including (in addition to routine annual regulatory filings by registrants) conducting on-site examinations, commissioning inspections and audit reports, requiring the provision of written answers to interrogatories, the production of documents, and attendance at the BMA for live questioning. Regulated institutions are also required to self-report regulatory noncompliance. Although most requests are dealt with voluntarily, the BMA does have powers to enter regulated business premises for the purpose of its investigations.
Where investigations result in the discovery of a breach of regulatory requirements or there is non-cooperation, the BMA has a number of enforcement options, including the imposition of conditions on a registrant’s licence, imposition of directions, seeking statutory civil penalties and injunctions from the Court, prohibition orders in respect of officers and shareholder controllers, revocation of licences, winding-up by the Court and referral to the police.
Decisions to take such actions are subject to judicial review.
In addition to the BMA, professional bodies, including those regulating lawyers and accountants, have certain investigatory powers.