Arbitration as a means of resolving international commercial disputes has grown in popularity in recent years as reflected by the reported rise in arbitration filings of more than 3% a year from 2010 to 2019 and a spike of 9.9% in 2020, based on data from international arbitration institutions (source: FTI Consulting: International Arbitration after the Pandemic, March 2022).
It is almost certain that the Pandemic has increased the use of arbitration clauses with arbitration having demonstrated its practical advantages and flexibility as compared to court-based dispute resolution, particularly in the second quarter of 2020 when many courts were operating at greatly reduced capacity whilst most arbitration proceedings progressed without pause.
The international insurance and reinsurance industry frequently uses arbitration as a means of resolving its disputes. In the Bermuda (re)insurance market, arbitration clauses are incorporated into most, if not all, (re)insurance contracts, enabling the parties to access experienced arbitrators from across the globe to resolve their coverage disputes.
Flexibility in terms of the procedure and the substantive law to be applied is a hallmark of arbitration with contracting parties from different jurisdictions having the ability to negotiate where and under which procedural regime they wish to have their disputes resolved. So, for example, parties to an infrastructure project domiciled respectively in, say, the United States and Peru, may agree that any disputes should be resolved in a neutral jurisdiction (say Bermuda) possibly applying a system of law of a different neutral jurisdiction (say English and Welsh law).
Traditionally, commercial insurance policies issued in the Bermuda market have been governed by a modified form of New York law (i.e. modified to strip out rules of interpretation applicable to consumer insurance, such as the contra proferentem doctrine) with English and Welsh or Bermudian arbitration procedures applying and with hearings taking place in London or Bermuda (or, as regards remote hearings, deemed to be taking place at these locations). More recently, Canada has been added to some Bermuda market arbitration clauses, sometimes merely as a physical venue for hearings (with an English and Welsh or Bermudian procedural regime applying), but occasionally a Canadian province is nominated as the deemed “seat” with a Canadian (usually Ontario) arbitration statute governing the procedure.
It is extremely rare for Bermuda insurers to agree to arbitrate in the United States, but there are known instances of Bermuda reinsurers participating in U.S. arbitrations, for example under the rules of the U.S. reinsurance arbitration organisation, ARIAS.
With Bermuda, England and Wales, Canada and the United States amongst the most common arbitration seats encountered by Kennedys’ clients, Kennedys has produced a Quick Reference Guide to Arbitration Procedures in the USA, England and Wales, Bermuda and Canada, a copy of which can be accessed here.
Read other items in London Market Brief – November 2022
Read other items in Commercial Brief – November 2022
