There was recently a significant push to encourage the arbitration of trust disputes. Indeed, the Trustee Act specifically provides for the arbitration of trust disputes. However, Matteo Volpi v Delanson Services Limited (dated 7 August 2019) provides an important clarification on the jurisdictional limits of the Supreme Court to assist in trust-related arbitrations.
The trust deeds in question provided that the seat of any arbitration would be The Bahamas; however:
- the parties to the arbitration were all resident outside The Bahamas;
- there were no trust assets in The Bahamas;
- the arbitrators were all resident outside The Bahamas; and
- the arbitration was not taking place in The Bahamas.
Notwithstanding this, the plaintiff applied to the Bahamian court for injunctive relief and sought leave to serve the action and injunction on the defendants outside the jurisdiction. The plaintiff initially obtained the injunction and leave; however, the defendants applied to discharge both on jurisdictional grounds.
Justice Winder, after a detailed analysis of the law, ruled that the Bahamian Supreme Court had no such jurisdiction to allow service outside the jurisdiction of the action and consequently discharged the injunction he had initially granted to the plaintiff. Winder firmly rejected the plaintiff's invitation to engage in judicial activism to fill the "lacuna in the rules" and noted that the lack of jurisdiction to provide relief to the plaintiff in this case was "a matter for the Rules Committee, if not parliament, but not the Supreme Court judge".
Winder carried out a two-pronged analysis in his judgment. First, he held that Section 55 of the Arbitration Act was not intended to have an extraterritorial effect as the plaintiff had argued. Winder noted that Section 55 itself was limited by its language, which states that the court in arbitration proceedings has the same powers as it has in ordinary legal proceedings. Consequently, since the Supreme Court has no power to grant freestanding injunctive relief in support of legal proceedings taking place outside The Bahamas, as held in MeesPierson (Bahamas) Limited v Grupo Torras SA 2 (ITELR 29), a court in arbitration proceedings could not grant a freestanding injunction in the arbitral proceeding. Second, Winder held that Order 66 Rule 4 of the Bahamian Rules of the Supreme Court was the only provision that allowed for service outside the jurisdiction concerning arbitrations. This section allows only for service outside in limited circumstances (eg, to appoint or remove an arbitrator or to enforce or set aside an award). In this case, Winder dismissed the argument that Order 11 Rule 8 could provide a vehicle for service outside the jurisdiction of the action and injunction.
Given this ruling, parties to trust arbitration agreements must be cognisant that, notwithstanding whether their trust deeds provide for the seat of any arbitration to be The Bahamas, the court can provide only limited assistance where the arbitration is not held and the parties or assets are not in The Bahamas. The Rules Committee or Parliament will hopefully remedy this situation soon.
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