Bermuda: An Introduction to Dispute Resolution 2025
The stable, competitive regulatory and legal regime in Bermuda continues to ensure its place as a hub for international economic activity. The island also makes effective use of close transport networks, including to London (seven-hour flight), New York and Washington (two-hour flight).
The Dispute Resolution Landscape
The economy
Bermuda retains its prominence as a market leader for insurance and reinsurance. Over 50 new insurance/reinsurance entities were registered with the Bermuda Monetary Authority during 2024. Moreover, the Bermuda Business Development Agency has confirmed that, as of 2024, some USD1.6 trillion in total assets are held by 1,100 (re)insurers, writing gross premiums of approximately USD286 billion.
Bermuda’s tourism industry has continued to expand following the disruption caused by the COVID-19 pandemic. During the third quarter of 2024, some 50,407 leisure visitors arrived by air – a 13.1% year-over-year increase. These leisure air visitors generated a total spend of USD114.1 million, representing a 24.9% year-over-year increase. Bermuda also remains a regular destination for cruise ships, and, on 13 November 2024, a groundbreaking ceremony was held in respect of the USD560 million redevelopment of the Fairmont Southampton Hotel. 500 jobs are expected to be filled during the peak of construction. The projected opening date is 2026.
Corporate tax
On 1 January 2024, the Corporate Income Tax Act 2023 came into force. Businesses continue to prepare for the tax regime that it has introduced, which will become effective for tax years commencing on or after 1 January 2025. The tax provisions are complex but will likely only apply to a relatively small number of entities, given the annual revenue threshold of EUR750 million. Given the significant sums at stake, despite the narrow base of entities, it is expected that there may be an upsurge in legal services for advising on, and potentially challenging, aspects of the tax regime.
Cybersecurity Act 2024
In September 2023, Bermuda was affected by a large cyberattack, which caused a significant adverse impact on government IT services. Debates within Parliament ensued, and, subsequently, on 24 June 2024, the Cybersecurity Act 2024 received Royal Assent. The Act was promulgated to provide regulatory oversight, in the context of IT and cybersecurity, in respect of critical infrastructure and essential services. This legislation stipulates that oversight of sector-specific IT and cybersecurity prescriptions will, in the first instance, be supervised by the Minister of National Security. The Minister is also to act in consultation with a Cybersecurity Advisory Board. Under the Act, the Minister is also permitted, under Section 9, and after consultation with the Board, to designate a Bermudian entity as a Critical National Information Infrastructure enforcement authority, “charged with the duties and functions provided by and under this Act”. In other words, the statutory scheme provides for a secondary and direct level of industry-focused regulatory oversight. It remains to be seen how much of this development will translate into contentious litigation.
Preparing for PIPA
Businesses in Bermuda are also continuing to prepare for 1 January 2025, when Bermuda’s Personal Information Protection Act 2016 (PIPA) will come into effect. PIPA is expected to appreciably increase the burden on management, for affected entities, to ensure legal compliance in the processing of personal information. The consequence of this development is a likely increase in information-related litigation, given the rights provided by the legislation to data subjects, and the burdens imposed on businesses in complying with those rights.
Restructuring and Insolvency
Debt restructuring has continued to rise throughout 2024, including in respect of litigious and non-litigious matters. This upward trend continues to demonstrate Bermuda’s prominence as a centre for restructuring.
Similarly, there has also been an increase in insolvency and formal enforcement actions. Economic conditions have doubtless acted as a trigger for this, not least given economic deterioration in certain areas of the economy, including real estate and commodity volatility.
Bermuda will, most likely, remain a significant and active jurisdiction for insolvency and restructuring proceedings. Management consultancy services continue to operate and expand within Bermuda, and make extensive use of its highly developed legal market for contested insolvency proceedings.
Contentious Trusts
In 2024, there has been a steady stream of court applications seeking to restructure Bermuda trusts, many of which have utilised Section 47 of Bermuda’s Trustee Act. Under Section 47, the court can authorise trustees to enter into transactions where the relevant transactions are expedient for the trust as a whole, notwithstanding the absence of an express power to enter into the transactions.
Importantly, Section 47 can be used to modify administrative provisions and, also, affect beneficial interests – which has made it a valuable tool in restructuring family trusts according to the changing circumstances of individual family members or branches.
We have seen a trend in cases of trustees applying to court to update trustees’ powers and modernise administrative provisions, particularly in respect of trusts established several decades ago.
The Courts
The Bermuda court system itself is currently in the process of implementing a significant USD1 million IT upgrade. It is anticipated that this will be completed by 1 April 2025. The system would enable electronic filing of legal applications and the court’s cause book (formal list of court proceedings) will also become searchable electronically. These developments are most welcome, and would ensure that Bermuda is on an equal footing with other jurisdictions in terms of the ease with which lawyers and lay persons can engage with judicial processes.
Notable Cases
A number of notable judgments were also issued during 2024, including the two summarised below; the first concerns a dispute involving a Bermuda regulator, while the other concerns a Bermuda company shareholder dispute.
BELCO v The Regulatory Authority [2024] SC (Bda) 5 Civ.
In a recent legal case, the Regulatory Authority (RA) of Bermuda successfully defended its decision to reject a 16% rate increase requested by the Bermuda Electric Light Company Limited (Belco). Chief Justice Larry Mussenden, in his 85-page judgment, dismissed all eight of Belco’s arguments against the RA’s decision, which had allowed for only a 7.5% increase.
The case centred on Belco’s objections to the RA’s rate-setting process, including claims of insufficient information, lack of transparency, and unfair treatment during the review process. In rejecting Belco’s arguments, Justice Mussenden noted that the RA’s decision-making process involved highly technical, scientific, and financial analysis, and emphasised that courts should defer to the regulator in such complex evaluative tasks unless there was a clear error.
Jardine Strategic Holdings
On 5 March 2024, the Court of Appeal handed down its judgment in the significant Jardine appraisal litigation, Oasis Investments II Master Fund Ltd and Others v Jardine Strategic Holdings Limited [2024] CA (Bda) 7 Civ. This judgment confirmed that joint interest privilege enables shareholders, including former shareholders, to view the company’s privileged documents. It is being appealed.
A number of active shareholder appraisal matters are ongoing in Bermuda (most of which we are acting in), and this is a closely watched area, given the persuasive influence of Bermudian case law in jurisdictions with similarly active proceedings, including the Cayman Islands and BVI.
First Published in Chambers and Partners.
