With more than 700 international insurers registered to write third party business, Bermuda is a natural forum for resolving insurance and reinsurance disputes. Over the last 10 years, the Bermuda government has made a concerted effort to promote Bermuda as a venue for international arbitrations and for that purpose has carefully considered the needs of the international user.

There is broad agreement that users require:

1. A modern and flexible legal framework in which the parties have confidence.

2. Free access to the jurisdiction.

3. Adequate infrastructure to handle international arbitrations.

With the full support of the Bermuda government, the island's business and professionals have taken measures which in practical terms meet the requirements of the international user.

Legal framework

In its search for a neutral arbitral legal framework, Bermuda entirely overhauled its arbitration law in relation to international arbitrations. The UNCITRAL Model Law on international commercial arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 came into effect in Bermuda on 29 June 1993 by the passage of the Bermuda International Conciliation and Arbitration Act 1993.

Previously, Bermuda had in place the Arbitration Act 1986, which was a copy of the English Arbitration Acts 1950 and 1975. The essential choice for Bermuda was whether to keep the existing legislation or to adopt the Model Law. In favour of retaining the 1986 Act was that it was essentially a modern arbitration statute. It copied the legal regime then prevailing in England and Wales. It could also be argued that, since the 1986 Act was based upon English law, there was a body of case law built upon existing legislation which provided a certain guide to the courts and lawyers. Furthermore, this case law had been developed based upon practical experience over many years.

However, the real disadvantage of retaining English law was that it was English. Likewise, the real disadvantage of retaining the Bermudian Arbitration Act, 1986 was that it was Bermudian legislation. To the international user of arbitration, these laws were difficult to comprehend. A simple point of arbitration law could require examination of a section of the Bermudian Arbitration Act 1986, comparison with the corresponding provision under the English Arbitration Act 1950 and then study of relevant decisions of the English courts. This inaccessibility of English and Bermudian law to the international users made this legal regime unlikely to attract users from jurisdictions unfamiliar with the English or Bermudian law or the common law doctrine of precedent.

The primary advantage of adopting the Model Law was that it provided a system which is easily understood by the potential users of international arbitration, and it is neutral. It is international in character and enjoys international currency. Users are more likely to know what the Model Law provides than any particular arbitral legal system.

One of the strengths of the Model Law is that it expressly sets out the level of local court intervention permitted in the arbitral process. As a matter of general principle, it provides that, in matters governed by the Model Law, no court shall intervene except where the law so provides.

Finality of arbitral awards is obviously a matter of fundamental importance. One of the crucial differences between the position under the 1986 Act and the Model Law is that under the Model Law, there is no right of appeal from an award of the arbitrators. Setting aside is the exclusive recourse against an arbitral award, and the grounds for setting aside are very limited indeed, for example, if the arbitration agreement is not valid under its proper law or the party was unable to present its case. In setting aside the award, the court does not enter into the merits of the award unless there is a violation of public policy.

The fact that there is no right of appeal on the ground that there has been an error of law or by reference to the underlying merits is a matter of great practical importance since it promotes the finality of the arbitral award.

Speed and expense

The attractiveness of arbitration is that it should be quicker and less expensive than litigation as means of dispute resolution. A number of provisions in the Model Law are designed to promote a speedy resolution of the dispute or at least to minimise the opportunity for delay. Article 19 contains a fundamental provision in relation to determination of rules of procedure. It allows the parties to agree the procedure to be followed by the arbitral tribunal conducting the proceedings, and only where they cannot agree should the arbitral tribunal settle the procedure.

This allows the parties and their advisers to tailor the arbitration procedure to the requirements of a particular case. Not all disputes require the exchange of formal pleadings favoured by most common law countries, followed by extensive discovery and a lengthy hearing involving viva voce evidence by all the witnesses. Creative and dispute specific procedure in international arbitration is a big advantage over litigation in common law countries.

The Model Law also does away with one of the main procedural devices leading to delay in the arbitration proceedings, the ability of a party to object to the tribunal's jurisdiction which would hold up the arbitration proceedings while the issue was argued in the local courts. Under the Model Law, if a party wishes to object to the jurisdiction of the arbitral tribunal, then it must do so before the tribunal no later than the submission of the statement of defence. An appeal to the Supreme Court of Bermuda is possible within 30 days, but the decision of the Supreme Court is final. Further, while the appeal is taking place, the arbitral tribunal may continue its proceedings and make the award.

The effectiveness of Model Law and in particular Article 16 is demonstrated by the decision of Mr Justice Meerabux of the Supreme Court of Bermuda in Skandia International Insurance Corporation and Others -v- Al Amana Insurance and Reinsurance Company Limited in 1993. In that case, one of the parties disputed the existence of the arbitration agreement and sought to have that issue decided by the Supreme Court. Mr Justice Meerabux relied that under Article 16 of the Model Law, the arbitration tribunal, and not the court, is the first to decide matters of jurisdiction, including any dispute about the existence, validity and scope of the arbitration agreement invoked by the claimant.

Honesty, impartiality and independence

Honesty on the part of the arbitral tribunal is clearly one of the essential requirements. Article 18 makes a statement of principle that the parties shall be treated with equality and each party shall be given a full opportunity of presenting his case. Section 27 of the 1993 Act expressly provides that if fraud or corruption induced or effected the making of the award, then the award is in conflict with the public policy of Bermuda and, therefore, unenforcable. In addition, the Model Law requires that an arbitrator must be impartial and independent. Article 12 provides that where a person is approached as a possible arbitrator or appointed, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. This is a continuing obligation. A justifiable doubt as to impartiality or independence is a ground for challenge to the appointment of an arbitrator.

Confidentiality

The 1993 Act seeks to promote confidentiality of arbitration proceedings. Section 45 provides that (subject to the constitution) arbitration proceedings conducted according to the 1993 Act can be heard in camera on the application of any of the parties.

Interest

In commercial disputes, interest on the amount claimed becomes a significant item in the dispute and it is essential that there is a reasonable provision for interest. The 1993 Act expressly deals with the jurisdiction of the arbitral tribunal to award interest. Section 31 gives the tribunal express power to include interest in the award sum and to determine a reasonable rate and the period for which it should apply.

Enforcement

International commercial arbitration awards are readily enforceable in Bermuda. Under Section 28 of the 1993 Act, enforcement of awards under the New York Convention is in accordance with the terms of the convention to which Bermuda is a party. The Supreme Court may only refuse entitlement in the limited circumstances set out in the convention. These features demonstrate that Bermuda clearly provides a suitable legal framework for the conduct of international arbitrations.

Access to the jurisdiction

Bermuda, as a small island in the mid-Atlantic, has historically followed a very stringent immigration and work control policy. A non-Bermudian is required to obtain a work permit in order to engage in any gainful activity in Bermuda. However, in relation to international arbitration, the government has accepted the general principle that there must be free access to the jurisdiction by the parties, their advisers and support personnel. As a consequence, there is no requirement that any arbitrator must come from Bermuda or that any legal or other representation must be by persons resident in Bermuda. This demonstrates the commitment of the government and business and professional community in Bermuda to promote this jurisdiction as a venue for international arbitration.

Adequate infrastructure

Bermuda has many hotels that can offer conference facilities, although holding an arbitration in a hotel may give an image that belies the seriousness of the work being done. In addition, the Bermuda International Arbitration Centre, a shared facility with the Bermuda College, provides adequate facilities for the conduct of arbitration hearings.

The geographical location of Bermuda, the frequency of flights from the United States, Canada and London, make the island a convenient centre for any dispute involving parties from both sides of the Atlantic. In the last few years, Bermuda has made a concerted effort to meet the requirements for arbitration in the international use and I believe it has, to a large extent, been successful in doing so.

  • Narinder K Hargun is a fellow of the Chartered Institute of Arbitrators and a partner in Conyers Dill & Pearman.

    Tel: +441 295 1422; e-mail: nkhargun@cdp.bm