Arbitration Trumps: Bermuda Court Confirms Pro-arbitration Approach

• Law Firm: Kennedys Law LLP
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Author: Erik Penz
• Published date: 01 March 2023

If litigation proceedings are commenced in breach of a valid and enforceable agreement to arbitrate, how soon in the proceedings does a defendant need to seek a stay of the litigation?

The Supreme Court of Bermuda recently considered this question in Shelly Hall Properties v Warren [2022] SC (Bda) 101.

Statutory provisions for staying litigation in favour of arbitration

The Bermuda International Conciliation and Arbitration Act 1993, which governs international commercial arbitration, provides that if litigation is brought on a matter which is subject to an arbitration agreement, the court shall refer the parties to arbitration if a party makes this request not later than when the party submits its first statement on the substance of the dispute.

Bermuda's Arbitration Act 1986, which applies to domestic arbitration, sets out that if litigation is commenced in respect of a matter which the parties have agreed to refer to arbitration then any party may, before delivering any pleadings or taking any other step in the litigation, apply to the court to stay the litigation.

The premise of these statutory provisions is a strong policy in favour of arbitration, however the agreement to arbitrate must be raised by one of the parties and if a defendant fails to do so ' and instead proceeds to respond substantively to litigation brought in contravention ' then it may have waived its right to rely on the agreement.

Shelly Hall Properties v Warren

In Shelley Hall, a landlord commenced proceedings in Magistrates' Court against tenants of a residential property for unpaid maintenance fees required under the lease. The lease contained an arbitration clause but the tenants, who were self-represented, did not raise the clause in defending against the claim and also counterclaimed alleging that the landlord had failed to maintain the property and provide adequate water service. The tenants failed to appear at the trial, at which the landlord did not bring the arbitration clause to the attention of the presiding magistrate. The magistrate rendered monetary judgment in favour of the landlord and dismissed the tenants' counterclaim.

The landlord applied to the Supreme Court for possession of the property on the basis of the judgment. The tenants, in turn, applied to...