BERMUDA: An Introduction to Dispute Resolution

BERMUDA: An Introduction to Dispute Resolution 

Current Economic Conditions 

Bermuda is an international business hub and a popular offshore domicile which is impacted by global economic factors. A prime example is the current impact of the COVID-19 pandemic on both Bermuda’s economy and Bermuda’s legal sphere. The Government of Bermuda, like many other governments, is tasked with balancing the unexpected negative financial impact of COVID-19 with the desire to keep Bermuda “open for business”. In 2022, we look forward to the Bermuda courts transitioning back to in-person hearings while retaining the lessons learned from remote practice during the pandemic.

Activity, Trends & Developments 

Notable Commercial Cases 

Over the last year there have been several court cases, some of which we have been involved in, that may have lasting resonance in the Bermuda legal environment.

The law relating to amalgamations under Bermuda law has been the subject of a number of recent court proceedings, two such proceedings resulting in judgments during 2021 that are of particular importance as they clarify areas of law that have either not been adjudicated previously in Bermuda or where the Bermuda Court has not fully considered the principles in recent years.

In Nkwe Platinum Limited v Glendina Pty Limited et al, the Supreme Court considered (1) the legal effect of an amalgamation under Bermuda law; (2) whether an amalgamated company was a “new company”; and (3) whether the amalgamation resulted in a “transfer” of property from the two amalgamating companies to the remaining amalgamated company. Confirming the longstanding position held by the Supreme Court in the earlier case of Clark and Others v Energia Global International, Ltd., the Honourable Chief Justice, Narinder Hargun, ruled that the legal effect of an amalgamation under Bermuda’s legislative framework is that the two companies continue as one with their assets and liabilities intact.

The legal effect of an amalgamation is an important issue, especially given the economic impact of the COVID-19 pandemic and the need for companies to consider their options to address ever-changing market conditions.

In the Matter of Jardine Strategic Limited ('Jardine'), the Chief Justice handed down another significant judgment in the context of company amalgamations. This litigation concerns the rights of dissenting shareholders under section 106 of the Companies Act 1981 to seek a fair-value appraisal of their shares following an amalgamation. In Jardine, the Supreme Court was asked to give judgment on the appropriate level of company disclosure in the initial stages of appraisal proceedings. The dissenting shareholders invited the Court to adopt the settled approach of the Cayman courts in relation to the provision of general discovery, which in the context of the subject proceedings, would impose extensive and onerous obligations on the amalgamating group of companies. The company argued that an expert-led approach to discovery would be preferable, given the technical nature of the material and given the size and complexity of its overall group structure.

The Chief Justice declined to order general discovery during the initial stages of the proceedings, and instead adopted the expert-led approach to discovery suggested by the company.

To date, there have been very few reported judgments concerning the appraisal rights granted by section 106 and Jardine provides useful guidance on the appropriate approach to discovery in the context of appraisal litigation in Bermuda.

COVID-19 and Open Justice in Remote Hearings 

As a result of the global pandemic, the Bermuda Courts adapted to accommodate remote hearings via Zoom and facilitate attendance of hearings either via disseminating access credentials or by broadcasting the hearing on platforms such as YouTube.

The issue of open justice and rights of attendance at remote hearings was considered in Wong v Grand View Private Trust Company Ltd. ('Wong'), which is a case involving litigants and interested parties based in other jurisdictions. The Court considered the extent to which the constitutionally protected principles of open justice apply to remote hearings, especially with regard to non-Bermuda based non-parties who wish to attend a hearing (e.g. a foreign news outlet).

Acting Justice Dr. Ian Kawaley (Bermuda’s former Chief Justice) confirmed that Bermuda residents have a right, one protected by the Bermuda Constitution, to attend hearings in Bermuda unless the Court determines to restrict access. In Wong, the Court determined that non-party Bermuda-based individuals who wish to attend the hearing virtually may request access from the Supreme Court registrar and would be provided the necessary credentials to access the remote hearing. Examples of attendees this would apply to are Bermuda-based news outlets, Bermuda lawyers who practice in the particular area of law and might be interested in attending the proceedings, and members of the public who wish to attend.

On the issue of non-Bermuda based attendees, Acting Justice Kawaley confirmed that parties outside Bermuda do not have the same rights of access to remote hearings as Bermuda-based attendees but that the Court has the discretion to grant access.

In Bidzina Ivanishvilli v Credit Suisse Life (Bermuda) Ltd., the Bermuda Court demonstrated its ability to handle lengthy, complex commercial trials remotely. The five-week trial in this matter was conducted remotely, with witnesses appearing from all over the world.

Insolvency 

Throughout the pandemic, many companies have had to consider whether their financial standing and existing business models can withstand the pandemic's lasting economic effects. Important decisions concerning the most appropriate and effective ‘business rescue’ methods are being made on an expeditious basis. Bermuda has always been viewed as a business-friendly jurisdiction that promotes restructuring – through light-touch provisional liquidation – the hallmark of Bermuda’s insolvency regime which will provide a number of those companies with a much-needed lifeline to restructure their debts in a practical, structured and sustainable manner.

While there remains a need to clarify and formalise the parameters of provisional liquidation by the enactment of legislative updates, comfort can still be taken that Bermuda’s current restructuring framework (largely dictated by evolving case law) has been tried and tested and has successfully promoted cross-border business even in these most challenging of economic environments.

Regulatory 

This has been an area of our practice where we continue to see increased activity. Bermuda is home to robust regulators and a legislature that, while pro-business, is very much astute to the concerns of global agencies on issues such as anti-money laundering and anti-terrorist financing.

Many businesses require regulator input before effecting a restructuring and we have advised many of these organisations on the best way to successfully implement their arrangements.

Legislative – Potential impact 

The Bermuda legislature was impacted by COVID-19 but one act in particular managed to work its way through the legislative process despite COVID-19 and that is the Trusts (Special Provisions) Act 1989 (Trusts Act). The Trusts Act was enacted in 2020 implementing improved protection for trust assets in Bermuda against orders issued from foreign courts (these protections are often referred to as “Firewall Provisions”). The amended legislation now notes the specific circumstances by which any foreign law is to be excluded from applying to a Bermuda trust and prevents enforcement or recognition of any foreign court order in certain circumstances.

Bermuda has continued to embrace cutting-edge developments in finance and seeks to become a leader in cryptocurrency markets. The Bermuda Monetary Authority continues to welcome digital assets businesses, regulated under the Digital Asset Business Act 2018, and an increasing number of financial entities have been embracing the scheme.

Looking Forward 

2022 will be another busy year for the courts in Bermuda. The prevailing economic conditions and the lingering uncertainty around COVID-19 will lead to companies considering options on insolvency and restructuring and, as the dust begins to settle, we are seeing an uptick in general commercial litigation.