On 12 May 2017, the Court of Appeal for Bermuda handed down its judgment in the case of Bermuda Bar Council v Walkers (Bermuda) Ltd  CA Bda 12 Civ, reversing the decision of the Chief Justice at first instance, and upholding the decision of the Bermuda Bar Council.
I have previously written a blogpost about the Chief Justice’s decision at first instance, and I do not propose to repeat what I said on that occasion.
It seems to me that the most interesting points to note at this stage are these:
- the Court of Appeal has endorsed the Bar Council’s view that the Bar Council is entitled to have regard not only to the question of whether or not the shareholders and directors of the company are barristers, admitted to the Bermuda Bar with valid practicing certificates, but also the question of whether or not the company is “controlled by Bermudians“, within the meaning of the Companies Act 1981.
- in assessing “control” in this context, the relevant consideration is “commercial control”, “practical control”, “effective control”, or “substantive control”, and not simply “corporate control” (in the sense of majority voting rights as shareholders or directors of the company).
- in assessing “control”, the Bermuda Bar Council is engaged in a fact-finding exercise, with the burden of proof resting on the applicant (and with an appellate Court’s role being limited to that of appellate review, rather than re-hearing de novo).
- it is open to a potential applicant, such as Walkers (Bermuda) Limited, to make fresh applications, supported by additional, or new, evidence addressing the issue of “control”, until such time as the Bermuda Bar Council is satisfied that its arrangements are such as to leave it in a position “controlled by Bermudians“.
I would respectfully suggest that the Court of Appeal’s reasoning makes sense on the basis of the legal arguments, and the evidence, that were apparently put before it, in the circumstances of this particular application.
More generally, however, the Court of Appeal’s judgment must surely justify an argument in favour of urgent law reform and/or regulatory reform, for at least three reasons:
- firstly, it seems practically impossible for the Bermuda Bar Council to perform the task of ‘fact finding’ on the issue of “effective control”, in circumstances where (a) the Bermuda Bar Council and its elected members are clearly not independent nor free of conflicts of interest; and (b) the regulatory scheme does not seem to contemplate any method by which the Bermuda Bar Council can receive, test, investigate or challenge the evidence which is presented in support of an application (whether at the time the application is made or subsequently);
- secondly, there must be scope for argument in the case of every single law firm doing business in Bermuda, with even the smallest of international connections, as to whom has “effective control” of the business (whether Bermudians or non-Bermudians). For example:
- what of the sole practitioner who ‘fronts’ or ‘postboxes’ for foreign law firms or foreign clients?
- what of the Bermuda law firm whose reliance on its non-Bermudian employees (whether for legal services, business development, or management) is so great that the firm would be significantly impacted if any or all of those non-Bermudian employees decided to leave?
- what of the Bermuda law firm whose reliance on back-office services overseas (whether in the form of IT support, marketing support, or accounting support) is so great that the firm would be significantly impacted if any of these services were suspended or terminated?
- what of the Bermuda law firm that funds its business operations through a (secured) loan from a bank such as HSBC?
- what of the Bermuda law firm that has expanded its business into foreign jurisdictions in such as a way that, on an international level, there are just as many non-Bermudian stakeholders as there are Bermudian stakeholders?
- what of the Bermuda law firm that relies on referrals or instructions from foreign clients, lawyers, or law firms for a significant amount of its annual revenue, to such an extent that the firm would be significantly impacted if those instructions or referrals were withdrawn or terminated?
- thirdly, at a time when the Bermudian economy would almost certainly benefit from (a) a competitive and qualified legal profession, (b) additional investment in the legal profession, and (c) the aggressive marketing and promotion of Bermuda in foreign jurisdictions, it seems counter-intuitive to be deterring Bermudians from opening law firms that are affiliated with international law firms – provided that both the Bermudian firm (and the international law firm, to the extent necessary) can be properly regulated in and from Bermuda.
Not an easy topic, and certainly not one free from controversy.