Insurance/Reinsurance: Bermuda Form Arbitration Clause

A recent Commercial Court decision, C v D, demonstrates that the English courts will make parties adhere to the Bermuda form arbitration clause in an insurance policy and will not sanction the challenge to an English arbitration award by the New York courts under New York law.

The attitude of the English Court in upholding arbitration clauses generally - as exemplified by this decision - will be of interest to any party engaged in cross-border disputes, as considered in our recent law-now.

Of particular interest to the insurance market is that the decision was based on an arbitration clause particularly prevalent in certain sectors of the market - the Bermuda form. The decision is a reminder of why the combination of English arbitration and New York law - which might at first blush seem an unusual combination - is regarded by many parties to insurance contracts as embodying the best of both worlds. The advantages of the Bermuda form include:

English procedural rules are commonly thought to be less burdensome than the equivalent procedures in the US.

Arbitrators appointed under the Arbitration Act 1996 will be neutral - whereas in the US party-appointed arbitrators will be expected to lean in favour of the party who appointed them.

English arbitration awards will (unless specifically agreed otherwise) include written reasons for the arbitrators' decision.

The Bermuda form commonly provides that the arbitrators' decision will be full and final so limiting the parties' rights of appeal and allowing the arbitrators more freedom to reach equitable commercial decisions.

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