Choice of Jurisdiction Is a Key Contractual Term - International Law Office

Bermuda is a hub of international business activity. Incorporated companies and individuals resident in Bermuda enter into agreements every day with parties located outside Bermuda for the delivery of goods and services. Disagreements may arise between parties to these agreements, which may lead to litigation before the courts. The key questions - for the Bermuda resident on one side of the agreement and the foreign party on the other - are where the dispute will be heard and which law the court will apply.

The ultimate determination of the place where the dispute is to be heard can be of critical importance from a legal perspective, as the relevant law applicable to the dispute may vary considerably between different countries. In addition, it may be extremely expensive in a complex case to make arrangements for witnesses to travel and be accommodated abroad. These expenses may be so high that, considering the amount in dispute, it would not be cost effective to proceed.

When entering into a contractual arrangement with a foreign party, the prudent way to maximize the likelihood that a future dispute will be heard in Bermuda is to provide for it in the agreement. First, the terms of the agreement must state that the agreement itself is governed by Bermuda law. Second, a provision of the agreement must confirm that the parties submit to the exclusive jurisdiction of the Bermuda courts and that any disputes will be heard in Bermuda. These provisions will indicate - not only to the Bermuda courts, but to foreign courts as well - that the parties intended that any dispute would be heard in Bermuda.

However, in many instances agreements do not address the issue of jurisdiction; there is often no written agreement between the parties. In these situations the court will consider a number of factors in determining whether the proceedings should be heard in Bermuda or in another court. Although none of these factors is necessarily determinative, the court will assess them together and make a decision as to the best location for the matter to proceed.

First, the court will consider the law that applies to the dispute between the parties. If the law to be applied is that of Bermuda, this suggests that the matter should be heard in Bermuda. It is generally preferable to have a Bermuda judge consider and rule on issues of Bermuda law. Second, the court will look at the location of the key witnesses who will be called to testify at trial. If most are located in the foreign jurisdiction, the court will consider this to be a factor in favour of the party seeking to have the matter heard in the foreign jurisdiction; it is more convenient for the witnesses involved and more efficient in terms of travel, time and cost. Third, the court will be mindful of the location of the documents that will be required for trial. In complex commercial cases there may be hundreds of documents relevant to the matters at issue. In such circumstances the court will view the location of those documents as an important factor in deciding where the trial should be held.

After reviewing these factors and any other relevant considerations, the court will decide whether a jurisdiction other than Bermuda is the appropriate forum for the trial of the action. If so, the court will order that the action commenced in Bermuda be stayed in favour of an action in the other jurisdiction. The burden of proving that another jurisdiction is more suitable than Bermuda lies with the party seeking to have the matter heard in the foreign jurisdiction.

Issues of jurisdiction are significant. Where a party is considering commencing legal proceedings against a foreign defendant in Bermuda, these issues must be carefully considered to ensure that time and costs are not wasted on proceedings commenced in the wrong forum.

For further information on this topic please contact Kevin Taylor at Appleby by telephone (+1 441 295 2244) or by fax (+1 441 292 8666) or by email (ktaylor@applebyglobal.com).