THE BAHAMAS: An Introduction to General Business Law: Dispute Resolution

I. The return to “normalcy” since the COVID-19 pandemic

Like every other sector, the COVID-19 pandemic prompted the judiciary to pivot in its operations. The pandemic gave rise to the judiciary issuing Coronavirus Mitigation Protocols and Practice Directions with the objective to:

i) protect the safety and health of judicial officers, staff, law enforcement officials, members of the Bar and all public users of the courts; and

ii) keep the judiciary operating to provide continued access to justice as it discharges its mission, which is a critical function in a democratic society.

Since March 2020, there has been a significant reduction in the need for persons to physically attend the courts, and most hearings and trials were conducted virtually. Now, as we move into a “post-COVID era”, many interlocutory matters are still conducted virtually while substantive hearings and trials have mostly resumed in person. The presiding judge has the authority to adjust the procedure of any hearing before him or her and decide whether such hearing will be held in person or virtually.

Certain technological elements developed and enhanced since March 2020 remain in place today, such as the ability to apply for a hearing date and submit court documents on the judiciary’s website. Further, all legal submissions must be delivered to the judge in both hard and electronic copies. The judges have become increasingly adept at navigating voluminous bundles on the computer, which eliminates the time spent locating references in hard copies.

II. Bahamian Rules of the Supreme Court 

For many years, civil litigation in The Bahamas was generally governed by the Rules of the Supreme Court of 1978, which were promulgated more than 40 years ago and are based on the former UK Rules of the Supreme Court.

However, on the 29 July 2022 the Rules Committee passed the Supreme Court Civil Procedure Rules 2022 (the “Rules”). The Rules will come into operation on a date to be appointed by the Rules Committee by notice published in the Gazette. The Rules have been drafted on the basis of the Civil Procedure Rules from England, New Zealand, the Cayman Islands and Barbados and taking the Rules of the Eastern Caribbean Supreme Court as a guide. The introduction of the Rules will result in a new litigation culture focused on the overriding objective, which will enable the court to:

• deal with cases justly by ensuring that the parties are on equal footing;

• save expense;

• deal with cases in ways which are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of each party; and

• ensure that cases are dealt with expeditiously and fairly and allot to each of them an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases.

Specific areas of the litigation procedure which will be significantly reformed include case management, discovery, the court’s control of the preparation and presentation of evidence (in particular the role and duty of expert witnesses) and the cost regime.

III. The liquidation of FTX Digital Markets Ltd 

FTX Digital Markets Ltd (“FDM”) was registered in The Bahamas as a digital assets business pursuant to section 6 of the Digital Assets and Registered Exchanges Act 2020. This registration provided for: (i) an exchange between digital assets and fiat currency; and (ii) an exchange between one or more forms of digital assets. FTX Trading Ltd (“FTX”) and its related entities were long heralded for bringing digital currency into the mainstream. The founder and former CEO, Mr Samuel Bankman-Fried, was widely seen as a wonderkid who revolutionised the cryptocurrency industry and was committed to philanthropy.

However, on 10 November 2022 the Securities Commission of The Bahamas (the “Commission”) took action to freeze assets of FDM and related parties. The Commission also suspended FDM’s registration and applied to the Supreme Court of The Bahamas (the “Supreme Court”) for the appointment of a provisional liquidator of FDM.

On 11 November 2022 FTX started voluntary Chapter 11 proceedings in the United States, along with Alameda Research and nearly 130 other affiliates of FTX. Mr Bankman-Fried also resigned as CEO of FTX.

The Commission launched an investigation into the collapse of FDM given that FDM was registered by it. The Commission advised that it is the “…lead authority in The Bahamas conducting the investigations into the events and parties, including, but not limited to, FDM (a regulated entity), FTX Trading Ltd., Alameda Research Ltd. and other related entities whose centre of main interest, direction and management were purportedly located in The Bahamas. The investigations into these events are ongoing, and the Commission will extend its full assistance to the police if and when required.”

Since the appointment of a provisional liquidator of FDM in The Bahamas and the commencement of Chapter 11 bankruptcy proceedings in the United States, there has been widespread global interest in this matter and the Bahamian liquidation proceedings. American law officials formally requested that Mr Bankman-Fried be extradited to the United States to face criminal charges. Mr Bankman-Fried agreed to the extradition and was flown to the United States on 21 December 2022. The heightened interest in this matter has brought international media coverage and crews to our shores, along with potential creditors seeking payment of their alleged claims against FDM and related entities.

IV. Sealing applications and the principle of open justice

Recently there have been two important decisions in The Bahamas regarding sealing applications and the fundamental principle of open justice, specifically as it relates to section 77(3) of the Banks and Trust Companies Regulation Act 2020, which provides: “In any civil proceedings where information is likely to be disclosed in relation to a customer’s bank account, those proceedings may, if the court of its own motion or on the application of a party to the proceedings so orders, be held in camera and the information shall be confidential as between the court and the parties thereto.”

In Hot Pancakes Limited et al v Amber Louise Murphy et al SCCiv App 95 of 2020, the Court of Appeal held that section 77(3) does not give a right to the applicant that the proceedings be kept confidential, rather it gives the court a discretion to determine whether privacy is warranted. The Court of Appeal stressed the need for compelling evidence beyond the mere fact that the action would disclose financial information.

Subsequently, in Cheryl Hammersmith-Stewart v Cromwell Trust Company Limited et al 2021/CLE/gen/01043, the Supreme Court upheld the principle of open justice enunciated by the Court of Appeal. Leave to appeal the Supreme Court’s decision was denied. The applicants have made an application for leave to appeal in the Court of Appeal, which will be heard in January 2023.