General Outline for Litigators and Legal System

David John Addington · October 12^th, 2006

Bermuda, in the North Atlantic Ocean lies approximately 508 miles due east of Cape Hatteras, North Carolina and is not to be confused with the Bahamas which are some 1,000 miles to the south, or the Caribbean in general. It is the second most isolated inhabited island in the world and in fact comprises a number of islands in a chain 22 miles long and 2 and a half miles wide at its widest part.

Originally volcanic, Bermuda is a delightful coral island with palm trees, pink sand, blue sea and colourful flowers much sought after by tourists and enjoyed by a population of about 68,500 in its 21 square miles.

Despite its relative isolation this self-governing British Colony has one of the highest standards of living anywhere and is attractive to international business with a long standing reputation as an international financial centre.

Banks and Business

Local currency is the Bermuda Dollar (BD$1.00), which is divided into 100 cents and is presently at par with the US Dollar. The Bermuda Monetary Authority,which has had responsibility for administering exchange control under the Exchange Control Act 1972 and related regulations, is an autonomous body responsible for various currency related activities.

Provided the consent of the Bermuda Monetary Authority is obtained, offshore operations can maintain and operate bank accounts in the currency and country of their choice. Foreign currency can be converted to Bermuda Dollars to meet local operating expenses.

There are four banks in Bermuda: Capital G Bank Limited, The Bank of Bermuda Limited, The Bank of N.T. Butterfield & Son Limited and The Bermuda Commercial Bank Limited. The banks offer a full range of commercial, trust and fiduciary services, and correspond with leading financial institutions around the world. Offshore banking is not permitted.

There are two main types of companies operating in Bermuda: Companies incorporated and controlled by Bermudians to conduct business in Bermuda, and companies incorporated by non-Bermudians to conduct business outside Bermuda from a place of business in Bermuda. Companies falling in this latter category are known as “exempted companies” and are so called primarily because they are exempted from those provisions of Bermuda law which restrict the portion of share capital which may be held by non-Bermudians. They may be incorporated by registration or by private act. The Companies Act 1981 (as Amended) amends and consolidates Bermuda company law (of which further mention will be made later in this article).

An exempted company is restricted by the 1981 Act from taking mortgages of land in Bermuda to secure any principal sum exceeding BD$50,000 without consent, from acquiring securities created or issued by, or any interest in, any local company or business, other than certain types of Bermuda Government Securities, and from trading in Bermuda with local persons except in furtherance of its business carried on outside Bermuda. An exempted company may, however, transact business (other than retail business) with and deal in securities created or issued by another exempted company, an exempted partnership or a corporation resident in Bermuda but incorporated abroad. It may also effect and complete contracts and exercise all of its powers in Bermuda to the extent necessary for the carrying on of its business outside Bermuda. No exempted company may acquire or hold land in Bermuda, other than land required for its business held by way of lease or tenancy agreement for not more than 21 years, without the express authorization of the Bermuda Legislature.

The minimum share capital of an exempted company is US$12,000 and must be subscribed and allotted although there is no legal requirement that it be fully paid. If the company writes insurance as its principal business, at least US$120,000 must be authorized and issued and must be fully paid in the case of (1) general business, (2) US$250,000 for long-term business, and (3) US$370,000 where both types of business is being written. A fourth class requires a minimum capital and surplus of US$100,000,000 where insurers are carrying on significant amounts of direct excess liability and/or property catastrophe risks. Our Insurance and Regulatory practice advises on all matters relating to offshore insurance, including the establishment, regulatory compliance and business operations of Bermuda-based insurance and reinsurance companies, insurance managers and brokers. We also assist non-Bermudian insurers who wish to carry on business in Bermuda or deal with Bermuda-based entities. Matters on which we advise our insurance clients include:

• formation of captives and ‘rent-a-captives’
• utilisation of segregated account structures to isolate risk
• risk swaps
• fixed and variable annuity policies
• policy and contract reviews
• insurance linked methods of alternate risk transfer

Quorum International Limited and Quorum Limited provide administrative services for incorporations and corporate administration.

Quorum group provides a full range of corporate management and secretarial services to local and exempted companies and partners;hips. Quorum’s service is dependable, efficient and focused on the needs and expectations of our clients. Quorum is headed by qualified professinals who ae committed to providing excellent service through a responsive and professional approach to corporate management. We also have a team of experienced and dedicated Corporate Administrators who work alongside the Corporate Department to provide a seamless service to the firm’s clients. Quorum’s services include:

• book-keeping services
• company administration
• nominee and shareholder services
• provision of registered offices for companies and partnerships
• provision of resident representatives for companiesd and partnerships
• statutory compliance for companies and partnerships

Taxation

It is convenient to mention here that Bermuda is a low-taxed jurisdiction with modest rates compared with most developed countries. Bermuda has never had income tax.

There are no taxes on profits, income or dividends, nor is there any capital gains tax, or death duty (capital transfer tax). Estate duty is limited to Bermuda property as defined by the Stamp Duties Act 1976. Consequently Bermuda is also a popular centre for the establishment of trusts for avoiding death duties and costly administration procedures resulting from estates settlement. The Bermuda Trustee Act 1975 is drawn from the English Acts of 1925 and 1961. The firm provides trustee and trust administration services to Bermuda trusts through Fiduciary Partners Trust Company Ltd., a Bermuda licensed and regulated trust company. Fiduciary Partners is staffed by an energetic and highly competent team of professionals that works alongside the Trust and Estates team to provide a full range of trust services to our clients.

General

Bermuda emerged as a potential centre for international business in the early 50s. The categories of such international business now to be found among Bermuda companies reflect every aspect of lawful commercial endeavours. However, it is in the fields of insurance and reinsurance that Bermuda has evolved as a very real force in international commercial markets - to the point where it has been described, at least potentially, as the third largest reinsurance market in the world. The passage of the Insurance Act 1978 and its related regulations together with more recent measures reflected a recognition by Government and by the insurance industry itself that some measure of regulation was necessary if the public interest was to be served and protected and if Bermuda’s credibility as an internationally accepted insurance centre was to be maintained. Bermuda’s favourable location between New York and London has had much to do with this country’s popularity as a centre for insurance operations. Recently we have seen the emergence of association captives as risk taking and financing vehicles for insurance purposes.

In another area of commerce, the Bermuda shipping register is currently the fourth largest in the world and the register is steadily growing. Hamilton, Bermuda is a British Registry Port. The ownership, registration and operation of vessels is governed primarily by the Merchant Shipping Acts 1930 to 1983 (“the Bermuda Acts”) and those parts of the United Kingdom Merchant Shipping Acts 1894 to 1979 (“the UK Acts”) in force in Bermuda. The UK Acts provide that certain officers of Bermuda registered vessels shall be British certificated. Stringent manning and safety regulations are modelled after British legislation. SOLAS (Safety of Life at Sea) Regulations are identical to those in the United Kingdom.

Legal System

The systems of law administered are the common law of England, doctrines of equity and statutes of general application up to 1612 except insofar as such laws have been altered:

1. By United Kingdom acts expressly made applicable to Bermuda;
2. By local legislation; and
3. By expansion or restriction of common law since the year 1612, not resulting from any legislation which is not applicable to Bermuda.

Law and equity are administered concurrently, and in any conflict the rules of equity prevail. Procedure is modelled on rules of The Supreme Court of England and Wales and “the Rules of the Supreme Court 1985” are taken very largely from the 1979 “White Book”. Therefore, English lawyers will be familiar with both Bermuda statute law and procedural rules, much of it being borrowed from United Kingdom legislation (albeit of an earlier vintage in some areas).

The Supreme Court is a superior court of record and consists of a Chief Justice and several Puisne Judges. Appeal in all civil and criminal matters lies to the Supreme Court from the lower courts. Appeals from The Supreme Court lie to the Court of Appeal and a further and ultimate appeal lies from the Court of Appeal to the Judicial Committee of the Privy Council in England. There is a Magistrates’ Court exercising jurisdiction in matrimonial, lesser civil claims and criminal matters and in very broad terms the jurisdiction of the Magistrates’ Court can be said to be akin to the jurisdiction of both the County Court and the Magistrates’ Court in England.

Limitation of Actions

Under the Limitation Act 1984, broadly speaking a period of six years pertains in respect of actions in contract and tort including negligence actions. Actions under the Fatal Injuries (Action for Damages) Act 1949, and certain actions under the Survival of Actions Act 1949, must be commenced within twelve months after death respectively.

Enforcement of Judgments

The Supreme Court has power under the Judgments (Reciprocal Enforcements) Act 1958, to permit enforcement in Bermuda of a money judgment or order of the High Court of Justice in England (and in Scotland and Northern Ireland) within six years of that judgment or order being given. The 1958 Act has been extended to a number of territories specified in a statutory instrument made under the Act, including the states and territories of Australia, Anguilla, Antigua and Barbuda, Barbados, British Virgin Islands, Dominica, Jamaica, Montserrat, St. Kitts/Nevis, St. Lucia, St.Vincent, Guernsey, Jersey and Isle of Man. The Act does not, however, extend to the United States of America.

Mareva Jurisdiction

Pre-trial a “Mareva Injunction” and Preservation Orders may be obtained preventing the removal of assets out of this country, pending determination of a claim justifiable before The Supreme Court of Bermuda. As the decisions of the English Courts are good persuasive authority in The Supreme Court of Bermuda the “Mareva” and “Anton Piller” jurisdiction will be familiar to the English practitioner together with Tracing Orders.

Taking Evidence on Commission

There is on the web site a separate article concerning taking evidence on Commission Rogatory which is something of a specialization in this Firm and of the writer David Addington who will be pleased to provide further information and practice precedents.

The Companies Act 1981

Mention has been made earlier in this article of the fact that the Companies Act 1981 governs Bermuda company law. It should also be said that Bermuda law and procedure for the compulsory winding-up of companies is governed by the 1981 Act and related Rules and Regulations which include the Companies Winding-Up Rules 1982. Both the Act and the Rules are modelled on United Kingdom legislation; many of the Sections/Rules being taken directly from the 1948 United Kingdom Legislation. Therefore, once more, the overall practice and procedure will be familiar to the English practitioner although there are original and other sources included to meet local requirements.

Finally, it is of interest to note that whilst Bermuda is administered under the Crown it has by its 1968 Constitution obtained a great measure of internal self-government. The year 2009 will see the 400th anniversary of the wreck of the Sea Venture and the first inhabitation of the Island by those on their way to James Town Virginia and this year (2006) sees the 386th anniversary of the Bermuda Parliament, the first Parliament in the western world, and the oldest in the world next to Britain and Iceland.