Current Economic Conditions

Bermuda is an international business hub and a popular offshore domicile and is impacted by global economic factors. A prime example is the current impact of the Covid-19 pandemic on both Bermuda’s economy and Bermuda’s legal sphere. The Government of Bermuda, like many other governments, is tasked with balancing the unexpected negative financial impact of Covid-19 with the desire to keep Bermuda “open for business”. What this has meant for companies and attorneys representing those companies is the careful navigation of newly implemented virtual protocols for delivering documents and appearing in Court hearings via video link. Largely, the Government of Bermuda and the Courts have struck the right balance and we are confident in the ongoing operations of Bermuda’s legal system.

Activity, Trends & Developments

Notable Commercial Cases

Over the last year there have been several Court cases, some of which we have been involved in, that may have lasting resonance in the Bermuda legal environment.

In Bidzina Ivanishvilli v Credit Suisse Life (Bermuda) Ltd., the Supreme Court considered the issue of whether a Swiss agent was required pursuant to Article 400 of the Swiss Code of Obligations to provide its Bermuda based principal documents relevant to assist the principal in determining whether that agent has fully complied with its mandate. Chief Justice Narinder Hargun ruled in the affirmative, at least in part relying on a nuanced interpretation of the overriding objective codified in the Rules of the Supreme Court. While this decision is the subject of appeal, as it stands currently there is potential for the ruling to have lasting impact on offshore litigation involving onshore domiciled agents and the ability of the Bermuda Court to compel Bermuda based principals to pursue documents held by the agent.

Trusts actions feature prominently in Bermuda as well with several large and high net-worth trust cases adjudicated each year. Despite the impact of Covid-19, 2020-2021 was no exception and we note the following two decisions:

In In the matters of FA Trust and FB Trust the Bermuda Supreme Court considered whether it the scope of its jurisdiction to remove a protector of a Bermuda trust, confirming that it does.  The test for removal is the same as that for trustees, as set out in the Privy Council case Letterstedt v Broers and another, namely that removal is appropriate where the protector’s continuation in office would be detrimental to the execution of the trust. The Court further confirmed that the trustee’s view of the protector’s conduct will be of central importance in assessing whether the test is met. If the trustee considers it is unable to work with the protector, removal is likely to follow because of the resulting detrimental impact on the administration of the trust. The Court also underlined the importance of the trustees’ regulatory obligations and the fact that a trustee is entitled to conclude it cannot work with a protector who might cause it to infringe those obligations.

Wong and ors v Grand View Private Trust Company Ltd (Wong v Grand View Private Trust) concerns a claim for the recovery of trust property transferred to a trustee of a purpose trust. The Court at first instance granted judgement in favor of the Plaintiffs on the basis that powers of addition and exclusion cannot be exercised in a way that alters or destroys the foundation of the trust. The Court of Appeal overturned this decision and the issue is headed for final determination in the Privy Council later in 2021. While there is a pending appeal to the Privy Council, a point of particular interest is how the Court of Appeal considered and whether or not there was a ‘substratum rule’ that precluded powers of amendments to the trust being exercised in a manner which alters the substratum of the trust. The Court of Appeal rejected the suggestion, commenting that such a rule would constitute a fundamental departure from the ordinary principles of construction and implication of terms. The Privy Council’s eventual determination of this issue will be welcome guiding precedent.

These cases and the principles engaged in them will certainly impact the landscape for trust disputes and commercial disputes generally.

Covid-19 and Open Justice in Remote Hearings

As a result of the global pandemic, the Bermuda Courts have adapted to accommodate remote hearings via Zoom and facilitate attendance of hearings either via disseminating access credentials or by broadcasting the hearing on platforms such as YouTube.

The issue of open justice and rights of attendance at remote hearings was considered in Wong v Grand View Private Trust, which is a case involving litigants and interested parties based in other jurisdictions. The Court considered the extent to which the constitutionally protected principles of open justice apply to remote hearings, especially with regard to non-Bermuda based non-parties who wish to attend a hearing (e.g. a foreign news outlet).

Acting Justice Dr. Ian Kawaley (Bermuda’s former Chief Justice) confirmed that Bermuda residents have a right, one protected by the Bermuda Constitution, to attend hearings in Bermuda unless the Court determines to restrict access. In the case of Wong v Grand View Private Trust, the Court determined that non-party Bermuda based individuals who wish to attend the hearing virtually, may request access from the Supreme Court Registrar and would be provided the necessary credentials to access the remote hearing. Examples of attendees this would apply to are Bermuda based news outlets, Bermuda lawyers who practice in the particular area of law who might be interested in attending the proceedings, and members of the public who wish to attend.

On the issue of non-Bermuda based attendees, Acting Justice Kawaley confirmed that parties outside Bermuda do not have the same rights of access to remote hearings as Bermuda based attendees but that the Court has the discretion to grant access.

Insolvency

Throughout 2020 and into 2021, many companies have had to consider whether their financial standing and existing business models are strong enough to withstand the negative economic effects resulting from covid-19. Important decisions concerning the most appropriate and effective ‘business rescue’ methods are being made on an  expeditious basis. Bermuda has always been viewed as a – business friendly jurisdiction that promotes restructuring – through light-touch provisional liquidation – the hallmark of Bermuda’s insolvency regime which will provide a number of those companies with a much-needed lifeline to restructure their debts in a practical, structured and sustainable manner.

While there remains a need to clarify and formalize the parameters of provisional liquidation by the enactment of legislative updates, comfort can still be taken that Bermuda’s current restructuring framework (largely dictated by evolving case law) has been tried, tested and has successfully promoted cross-border business even in these most challenging of economic environments.

Regulatory

This has been an area of our practice where we have seen increased activity year on year. Bermuda is home to robust regulators and a legislature that, while pro-business, is very much astute to the concerns of global agencies on issues such as anti-money laundering and anti-terrorist financing.

Legislative – Potential impact

The Bermuda legislature was, understandably, impacted by covid-19 and for the first two quarters of 2020 focused primarily on its response to that crisis. One act in particular managed to work its way through the legislative process despite covid-19 and that is the Trusts (Special Provisions) Act 1989 (Trusts Act). The Trusts Act was enacted in 2020 implementing improved protection for trust assets in Bermuda against orders issued from foreign courts (these protections are often referred to as “Firewall Provisions”). The amended legislation now notes the specific circumstances by which any foreign law is to be excluded from applying to a Bermuda trust and prevents enforcement or recognition of any foreign court order in certain circumstances.

Another example of a legislative development that may impact those doing business in Bermuda is the Personal information Protection Act 2016 (PIPA). Despite receiving Royal Assent in July 2016, the substantive provisions of PIPA, which impose obligations on organisations, are not yet in force. It is expected that they will come into force, at least in part, during the course of 2021; however, no implementation dates have been confirmed.

Looking Forward

To date, 2021 has been a busy year for the Courts in Bermuda. The prevailing economic conditions and the lingering uncertainty around covid-19 will certainly lead to companies considering options on insolvency and restructuring and, as the dust begins to settle (we hope) we expect there will be an uptick in general commercial litigation.

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