Lexology GTDT Market Intelligence provides a unique perspective on evolving legal and regulatory landscapes. This interview is taken from the Dispute Resolution volume discussing topics including Brexit’s impact on choice of law and jurisdiction, market competition and the popularity of ADR within key jurisdictions worldwide.

1 What are the most popular dispute resolution methods for clients in your jurisdiction? Is there a clear preference for a particular method in commercial disputes? What is the balance between litigation and arbitration? What are the advantages and disadvantages of the most popular dispute resolution methods?

Litigation continues to be the most popular dispute resolution method for clients involved in a dispute that is to be determined in Guernsey.

Many of those disputes are, in some way, connected to Guernsey’s role as a major offshore financial services centre. Interestingly, in our experience, it is still unusual for providers of financial services who are based in Guernsey to include dispute resolution clauses that provide for an alternative method to litigation, such as arbitration, in their contracts, which would, for example, afford such providers the benefit of having the dispute determined on a confidential basis.

As regards arbitration, historically, parties to commercial contracts in Guernsey have been reluctant to use arbitration as a means of resolving a dispute. The Arbitration (Guernsey) Law 2016 came into force on 12 December 2016 and replaced previous legislation, which dated from 1982. The 2016 law is based largely on the English Arbitration Act 1996.

It was anticipated that the new law would change the common perception of arbitration in Guernsey and encourage parties to use arbitration as a cheaper and more efficient alternative to litigation. However, we have yet to see a significant increase in disputes being resolved by arbitration and so litigation continues to be by far the main method that is used to resolve a dispute in Guernsey. Perhaps unsurprisingly, in our experience, the use of arbitration is most common in construction and IT-related disputes.

The perceived advantages and disadvantages of litigation and arbitration are the same as in most other jurisdictions.

Regarding mediation, there is perhaps less of a focus by Guernsey courts than in England and Wales to require the parties to mediate, but certainly mediation continues to be used as an alternative to litigation and also with a view to avoiding a costly and time consuming trial, should litigation (or indeed arbitration) have been commenced.

2 Are there any recent trends in the formulation of applicable law clauses and dispute resolution clauses in your jurisdiction? What is contributing to those trends? How is the legal profession in your jurisdiction keeping up with these trends and clients’ preferences? What effect has Brexit had on choice of law and jurisdiction clauses?

Guernsey courts will usually respect the express decision of the parties to submit to a particular governing law or jurisdiction or dispute resolution method. There are no mandatory or overriding provisions of law that must be applied by the courts where the parties have agreed a foreign law will apply to their contract. The court will consider whether the matter is properly justiciable in Guernsey and what the interests of justice require. An exclusive jurisdiction clause will usually be upheld unless there are strong reasons to the contrary.

If there is an express agreement that Guernsey law will apply to the contract then the courts will respect that agreement. However, and if and to the extent that Guernsey law is unclear on a particular issue, being a customary law jurisdiction, Guernsey courts can consider legal principles from other jurisdictions where appropriate to find a just solution.

Guernsey is not a party to any international instruments or conventions that affect the courts’ approach to the question of the law applicable to the claim. Guernsey courts will consider matters, including any choice of governing law, where the contract was made, the subject matter of the contract and what the interests of justice require.

We have not noticed any particular trends in the formulation of applicable law clauses and dispute resolution clauses in Guernsey. It is perhaps natural that parties who are based in Guernsey would prefer such clauses that selected both the Guernsey Law and Guernsey courts, although clearly such clauses can be a matter for commercial negotiation. However, often, the significance of such clauses can be overlooked at that stage, such that if and when it comes to litigating a dispute over the same contract many years later, the parties may be stuck with a governing law or jurisdiction that is less favourable to them.

We are not aware of Brexit having any noticeable effect on choice of law and jurisdiction clauses. However, it is to be remembered that, even prior to Brexit, as a separate jurisdiction from the United Kingdom, Guernsey was not a member of the European Union, save that it benefited from limited treaty arrangements for the purposes of trade in certain goods.

3 How competitive is the legal market in commercial contentious matters in your jurisdiction? Have there been recent changes affecting disputes lawyers in your jurisdiction? How is the trend towards ‘niche’ or specialist litigation firms reflected in your jurisdiction?

The legal market in commercially contentious matters in Guernsey continues to be extremely competitive. Broadly speaking, the market is divided into the larger global offshore law firms, who have offices in multiple jurisdictions, and single-office Guernsey firms who focus purely on the Guernsey legal market. There are approximately 11 firms with dispute resolution departments in Guernsey, only four of which are firms in the latter category (including Ferbrache & Farrell LLP).

Such firms are often instructed on the larger multi-party commercial contentious matters that frequently need to be resolved by the Guernsey courts by virtue of the fact that they are relatively conflict-free and are able to offer very competitive charge out rates.

In Jersey there has been a marked trend towards niche specialist litigation firms, often with employees of much larger firms breaking away and setting up by themselves. Over 40 legal practices are now established on the island, but, as the figures demonstrate, that trend has not repeated itself in a significant way in Guernsey as yet.

4 What have been the most significant recent court cases and litigation topics in your jurisdiction?

The covid-19 pandemic was expected to have a significant impact upon the dispute resolution practices in Guernsey. However, in the areas of civil and commercial litigation, local practices do appear to remain relatively busy and not affected to the extent initially feared. There appears, from hearings that are heard in public, to be a busy Royal Court schedule, which is perhaps a helpful indicator that dispute resolution in Guernsey remains in a healthy state for the immediate future.

Undoubtedly, and despite the very best efforts of local professionals, including court staff and those within private legal practice, there was, during 2020, some delays with certain hearings postponed, in the hope that the parties might be able to attend court at a later date. The use of technology has, otherwise, been widely embraced to the benefit of those who access the Royal Court of Guernsey.

During the pandemic, a trend in regulatory issues has been present, both those comprising appeals to the Royal Court from La Chambre de Discipline dealing with complaints against advocates in addition to a number of claims involving the Guernsey Financial Services Commission and the associated professional obligations of regulated entities and their directors.

As noted, and perhaps somewhat unsurprisingly, developing trends are appearing in relation to the duties of professional fiduciaries and directors. An escalation of claims relating to a breach of such duties and losses related to, among other things, an economic downturn, is expected to follow and, in connection, there is the potential for the escalation of further involvement of the enforcement division of the Guernsey Financial Services Commission.

The long running Tchenguiz litigation continues to develop local jurisprudence. For instance, ITG Ltd and ORS v Glenalla Properties Ltd and ORS [2020] GCA043 facilitated the handing down of a judgment by the Court of Appeal in relation to an insolvent trust and the priority of creditors. As a reflection of the worldwide pandemic, claims relating to insolvency are expected to become more frequent.

It is further anticipated that claims relating to force majeure as a result of the pandemic and, perhaps with any eye to developing jurisprudence in England and Wales, claims pertaining to business interruption insurance products will undoubtedly be revisited.

These claims may, in due course, lead to further consideration of the complex enforcement procedures for judgments, depending on the nature of the assets involved and developing claims in that regard, and those relating to insolvency are expected to increase following changes introduced by The Companies (Guernsey) Law 2008 (Insolvency) (Amendment) Ordinance 2020.

5 What are clients’ attitudes towards litigation in your national courts? How do clients perceive the cost, duration and the certainty of the legal process? How does this compare with attitudes to arbitral proceedings in your jurisdiction?

From the perspective of dispute resolution, the Royal Court of Guernsey is generally regarded as providing a first-rate service in terms of the administration of justice with the deployment of experienced judges and court staff and a highly regarded and respected bailiff.

The costs of proceedings in Guernsey are generally seen as high, with recoverable rates significantly lower than the private fees clients will incur in most cases involving senior advocates.

There are some arguments, particularly in the field of personal injury for instance, that the introduction of conditional fee arrangements might be well received, in order to increase access to justice for individuals as costs can, particularly in less serious cases, often be greater than the value of the claim. An associated, but particular concern, is costs incurred by plaintiffs that will not usually be recovered.

In Guernsey, in relation to personal injury claims, there remains available only the prospect of a ‘lump sum’ award of damages at the end of a matter, as opposed to periodical payments that are commonly available elsewhere. However, in signs of development, in 2019, the states of Guernsey deliberated whether to create a power for the Royal Court to order the payment of damages in respect of personal injury claims on a periodical basis, with further consideration of other potential issues for future development.

In May 2020 the Damages (Assumed Rate of Return and Related Matters) (Enabling Provisions) (Guernsey and Alderney) Law 2020 was registered as primary legislation designed to introduce, among other things, periodical payments. However, it has yet to be implemented. An ordinance is required to formally introduce the legislation, but the 2020 law is nevertheless a clear indication of the potential for future reform insofar personal injury claims are concerned.

The Royal Court of Guernsey operates a sitting each Friday and claims and applications will often have an initial hearing, usually to deal with the timetabling of the same on short notice, often less than a week. Interlocutory applications dealing with strike-out and summary judgment, for instance, are often heard by the Royal Court within weeks and are, therefore, dealt with far more expeditiously than in other jurisdictions.

Plaintiffs, in particular, welcome the speed at which claims can be issued in Guernsey and while letters before action are commonplace, the lack of formal pre-action protocols for most forms of disputes does facilitate initial swift progress through the Royal Court.

As stated, the deployment of arbitration in Guernsey remains relatively rare, despite the introduction of new legislation in 2016 and a more common form of ADR deployed is mediation. Indeed, perhaps reflecting the size of the island, face-to-face meetings and advocate meetings remain common tools utilised to facilitate settlement and the narrowing down of the issues.

6 Discuss any notable recent or upcoming reforms or initiatives affecting court proceedings in your jurisdiction.

Regarding the covid-19 pandemic, as an island with a population of approximately 63,000 people, Guernsey has been fortunate to have experienced two relatively short periods of lockdown. During those periods, the Guernsey courts continued to sit, albeit remotely, to deal with urgent and prearranged interlocutory matters.

As regards upcoming reforms or initiatives in a dispute resolution context, the Royal Court Civil Rules 2007 (the Rules) govern civil litigation procedure in Guernsey. Last year, the Civil Rules Review Committee, consisting of members of the judiciary and local practitioners, was resurrected to review the Rules, in particular with a view to increasing the use of IT where appropriate to ensure, as far as possible, that justice is available to all. At the time of writing, its work is ongoing.

7 What have been the most significant recent trends in arbitral proceedings in your jurisdiction?

There is no public data available to provide an answer to such a question at this time.

8 What are the most significant recent developments in arbitration in your jurisdiction?

As stated above, the Arbitration (Guernsey) Law 2016 was heralded as a new dawn at its introduction, based in no small part on the English Arbitration Act 1996 and the proliferation of arbitration and its deployment in Guernsey may well have been expected as a consequence. The initial fanfare notwithstanding, arbitration does not appear as popular in Guernsey as other jurisdictions and is certainly less popular than mediation, for example.

Experience suggests that arbitration remains at the forefront of considerations in terms of ADR, although, as matters stand, it does not appear to be frequently utilised. It may well be that arbitration is suitable for a number of trust disputes, a common theme of disputes in this jurisdiction, but there exist concerns that amendment of the local trust legislation may be required if it is to be actively engaged in that environment to the fullest extent.

It is entirely possible that arbitration will become more popular and local practitioners appear to support its deployment. Its slow development thus far serves as a useful indicator of the successes of other forms of ADR.

9 How popular is ADR as an alternative to litigation and arbitration in your jurisdiction? What are the current ADR trends? Do particular commercial sectors prefer or avoid ADR? Why?

ADR is actively encouraged in Guernsey and it is not uncommon for proceedings to be adjourned to facilitate ADR in a variety of claims. This suggests that it does not lend itself better to any particular dispute resolution discipline, but rather that ADR is encouraged, utilised and embraced actively by advocates locally. As noted, advocate meetings and mediation are perhaps the most common forms of ADR relied on in Guernsey, with arbitration deployment significantly less common.

Clients often see ADR as a sensible alternative to trial in the potential for cost savings and, indeed, to truncate the timetable to a potential resolution. In Guernsey, ADR can be especially effective when seen not only as a resolution to court proceedings, but as part of the resolution of relationships on a small community island.

10 What is the position in relation to litigation funding in your jurisdiction? Is funding available? Have there been any significant developments in this area in your jurisdiction?

Third-party litigation funding in Guernsey remains in its infancy. It is technically available, but further developing jurisprudence in this area would be desirable for those wishing to access it.

The case of Providence Investment Funds PCC Limited, Judgment 44/2017 provides a helpful precedent for litigation funding being permissible, in the context of an insolvency and provided the funder does not have control and an appropriate approach to other forms of dispute resolution.

It is expected that litigation funding will develop with the passage of time especially by those seeking access to the Royal Court but without the means to do so in a potential economic downturn and, certainly, clients of late do seem more prepared to explore this funding stream as a viable option.

The Inside Track

What is the most interesting dispute you have worked on recently and why?

In 2020, Ferbrache & Farrell LLP acted for Manita Khuller, who had sued her Guernsey-based trustee, FNB International, for losses to her pension fund as a result of the trustee’s gross negligence. Findings of gross negligence against professional trustees, are (thankfully) rare in Guernsey and the legal threshold that needs to be met to enable the court to make such a finding is a high one. There was also definitely an element of ‘David and Goliath’ to the proceedings, particularly as Ms Khuller had (very ably) represented herself during the trial at first instance.

What do you consider to have been the most significant legal development or change in your jurisdiction of the past 10 years?

Undoubtedly, the most significant legal development in Guernsey over the past 10 years was the long-running case of Carlyle Capital Corporation (in Liquidation) and others v Conway and others. There were over eight years of court proceedings and the judgment at first instance ran to some 529 pages.

The case was noteworthy in two main respects. First, it clarified fundamental principles of company law relating to directors of Guernsey companies. Secondly, it demonstrated the ability of the Guernsey courts and law firms to deal with a significant piece of litigation efficiently and justly.

What key changes do you foresee in relation to dispute resolution in the near future arising out of technological changes?

We anticipate that some of the procedures by which cases are dealt with by Guernsey courts will change as a result of increased use of IT. The aim will be to streamline the process with a view to making it more efficient, while seeking to ensure that justice is available to all. In conjunction with that initiative, the local rules themselves are also subject to review. At the time of writing, it is too early to provide further details but it is fair to say the commitment and drive of all involved is likely to result in significant and positive changes.