International Arbitration 2021

• Published date: 24 August 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Kennedys Law LLP
• Author: Mr Mark Chudleigh and Lewis Preston

This article first appeared in The ICLG to: International Arbitration Laws and Regulations, which covers common issues in international arbitration laws and regulations - including arbitration agreements, governing legislation, choice of law rules, selection of arbitral tribunal, preliminary relief and interim measures - in 36 jurisdictions.

1 Arbitration Agreements

1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?

Other than requiring that arbitration agreements be in writing, Bermuda's arbitration statutes do not require any specific form or format. Agreements may take the form of a clause contained in a contract or a separate agreement signed by the parties, or they can be evidenced by an exchange of letters or other means of communication. Additionally, an arbitration clause contained in a separate document can be incorporated by express reference.

1.2 What other elements ought to be incorporated in an arbitration agreement?

There are no other elements that must be incorporated in an arbitration agreement; however, given the existence of two arbitration regimes in Bermuda (see the response to question 2.1 below), it is advisable that the arbitration agreement specify which statute applies For example, an arbitration clause in a reinsurance agreement between Bermuda companies (including a captive insurer) may be deemed subject to Bermuda's domestic statute - despite the contract having an "international flavour" - unless the parties stipulate that the international statute is to apply.

The arbitration agreement will dictate the scope of the arbitral panel's jurisdiction. Accordingly, although there are no rules regarding the contents of the agreement, care should be taken to ensure it is broad enough to encompass all matters of dispute that may potentially arise between the parties.

In addition, the parties may wish to consider including provisions in the agreement relating to the number of arbitrators, their qualifications, and the procedure for appointing them. The parties may also wish to consider whether to adopt a particular set of procedural rules to govern any arbitrated dispute. It is also open to the parties to include provisions relating to interim measures that may be sought, including jurisdiction for the tribunal to order security for costs.

It is common for Bermuda arbitration clauses to include a provision regulating awards of costs (e.g. "the costs of the arbitration shall be at the sole discretion of the arbitral tribunal, who may direct to whom and by whom and in what manner they shall be paid"). Arbitration clauses in Bermuda insurance policies sometimes contain provisions designed to bind to arbitration third parties asserting rights in relation to the policy (e.g. subrogating insurers, liquidators or direct claimants) or to require the insured to cooperate in obtaining the dismissal of court proceedings brought against the insurer by other insurers seeking a contribution or indemnity.

Finally, following the decision of the UK Supreme Court in Enka v Chubb [2020] UKSC 38, arbitration clauses in contracts subject to the substantive law of a foreign jurisdiction (e.g. New York law under "Bermuda Form" insurance policies) should make clear the system of the law that is to be applied when interpreting the arbitration clause itself, which it is suggested should be Bermuda law in the case of arbitration clauses that stipulate Bermuda as the seat.

1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?

There is a well-established body of Bermudian authority affirming the strong policy grounds upon which arbitration agreements will be upheld in Bermuda. The Bermuda court will act robustly where necessary, including by issuing an anti-suit injunction, to restrain a party from acting in violation of an arbitration agreement. The Bermuda court recently reviewed the applicable Bermuda and English authorities in this regard in Allied World Assurance Company Ltd v Bloomin' Brands, Inc. [2021] SC (Bda) 16 Civ.

2 Governing Legislation

2.1 What legislation governs the enforcement of arbitration proceedings in your jurisdiction?

There are two different arbitration regimes in Bermuda. The Arbitration Act 1986 ("the 1986 Act") governs the arbitration of domestic disputes, while the Bermuda International Conciliation and Arbitration Act 1993 ("the 1993 Act"), which incorporates into Bermuda law the UNCITRAL Model Law on International Commercial Arbitration ("the Model Law"), applies to "international commercial arbitrations". This chapter focuses on international arbitration under the 1993 Act.

2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

The 1986 Act governs domestic arbitrations, while the 1993 Act governs international arbitrations. The 1986 Act is similar to the English Arbitration Acts 1950-1979, whereas the 1993 Act adopts the Model Law. A notable difference between the two statutes relates to the scope for appeal, which is very narrow under the 1993 Act but broader under the 1986 Act. Other differences include a prohibition in the 1986 Act against provisions that purport to fetter the arbitral tribunal's jurisdiction to award costs (no such restriction applies to the 1993 Act), and the retention in the 1986 Act of the traditional role of the "umpire" as a passive observer who participates only where the two "arbitrators" cannot agree.

2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

Yes. Section 23 of the 1993 Act adopts the Model Law (save for certain differences as regards the enforcement of arbitration awards).

2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?

There are no mandatory rules governing international arbitration proceedings, save that Article 18 of the Model Law requires that the parties must be treated equally and given a full opportunity to present their respective cases. Article 19 of the Model Law provides that the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceeding and that, failing such agreement, the tribunal may conduct the arbitration in such manner as it considers appropriate. The power conferred upon the tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred to arbitration under the governing law of your jurisdiction? What is the general approach used in determining whether or not a dispute is "arbitrable"?

There are generally no restrictions on the subject matter that may be referred to arbitration in Bermuda, save that there is some scope for argument as to the arbitrability of insolvency, minority shareholder, trusts and partnership disputes. Whether a dispute is "arbitrable" is a question of the scope and terms of the arbitration agreement (Lenihan v LSF Consolidated Golf Holdings Ltd [2007] Bda LR 49).

3.2 Is an arbitral tribunal permitted to rule on the question of its own jurisdiction?

Yes. The tribunal may rule on its own jurisdiction, and on objections with respect to the existence or validity of an arbitration agreement. For these purposes, an arbitration clause contained in a contract is treated as an agreement independent of all other terms. If jurisdiction is confirmed by the tribunal, the party contesting jurisdiction has a "one shot" non-appealable right to have the jurisdiction question reviewed by the Supreme Court of Bermuda.

3.3 What is the approach of the national courts in your jurisdiction towards a party who commences court proceedings in apparent breach of an arbitration agreement?

The Bermuda court will act robustly to enforce an arbitration agreement, including by granting an anti-suit injunction against a party who commences proceedings in breach of an arbitration agreement. The Bermuda court has the power to grant injunctive relief regardless of whether the litigation has been commenced in Bermuda or outside Bermuda, and any party who takes steps in connection with the court proceedings in violation of the anti-suit order may be held in contempt of court and any foreign judgment may be unenforceable in Bermuda.

An action commenced before a court in Bermuda in breach of an arbitration agreement will be stayed by the court at the request of a party to the action who has not submitted to the court's jurisdiction (for example, by entering a defence). Proceedings were stayed pursuant to Article 8 of the Model Law in Raydon Underwriting Management Co Ltd v North American Fidelity & Guarantee [1994] Bda LR 65. Under Article 8, the Bermuda court will not refer the matter to arbitration if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

3.4 Under what circumstances can a national court address the issue of the jurisdiction and competence of an arbitral tribunal? What is the standard of review in respect of a tribunal's decision as to its own jurisdiction?

Article 16 of the Model Law provides that the arbitral tribunal may rule on issues going to its jurisdiction. This includes its competence to hear objections with respect to the existence or validity of the arbitration agreement that purportedly gives it power to act. It may also determine questions about the principal agreement in which the arbitration clause is embedded. To this extent, Bermuda law recognises the doctrine of Kompetenz-Kompetenz. The tribunal can address the issue as a preliminary question or in its final award on the merits. If the tribunal rules as a preliminary matter that it has jurisdiction, any party may request, within 30 days of receiving notice of the award, that the Bermuda Supreme Court decide...