Partnership Law and Corporate Commercial Practice in Bermuda: A Professional Development Perspective

• Author: Ian R. C. Kawaley/Karen Skiffington
• Pages: 61-77

CHAPTER 4

PARTNERSHIP LAW AND CORPORATE COMMERCIAL PRACTICE IN BERMUDA: A PROFESSIONAL DEVELOPMENT PERSPECTIVE

Kenneth ET Robinson

Introduction – learning the trade 61 Offshore investment funds – key features of the offshore environment 64 Bermuda partnership law – introduction 66 Key principles of partnership law 68 Bermuda partnership law 71 Partnership Act 1902 71 Exempted Partnership Act 1992 72 Limited Partnership Act 1883 72 Overseas Partnership Act 1995 73 Recent changes to partnership legislation 73 Offshore funds and the offshore fund business 74 Conclusion – challenges and opportunities 75

INTRODUCTION – LEARNING THE TRADE

4.1 Leading Bermuda law and accounting firms have increased significantly in the numbers of their professional staff over the last three decades, and in the case of the law firms there are considerably more firms that engage mainly in a corporate-commercial practice, including ‘boutique’ firms whose practices are highly specialised. It is now perhaps the norm, in the case of the larger Bermuda law firms, to find a commercial department that supports several different practice areas, in each of which the individual attorneys will look to develop a specialty. This is markedly different from the situation I encountered at the start of my

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career. Then, the expectation was that a young lawyer would be exposed to a cross-section of practice areas, with a view to gaining the competence to pursue, in effect, a fairly generalised practice. It is now relatively less common for a trainee commercial practitioner to be ‘seated’ for a period in the litigation, or the property department, of the firm at which he or she starts. Rather, that trainee is more likely to begin immediately with commercial work, trying out perhaps in one, two or possibly more closely related areas, then remaining permanently in the practice area he or she is offered after an initial few months. Thanks to the growth of international business the pressures of work in the modern Bermuda law firms are now simply too great for trainee lawyers to spend the time to gain experience in practice areas they will not ultimately follow.

4.2 It is my impression that the majority of young Bermudian lawyers now returning have spent somewhat longer periods abroad in pupillage or articles, and appear generally better oriented than in former years. I believe this better orientation is due, at least in part, to the greater maturity of the jurisdiction’s international business, so career paths and options are more obvious than in earlier years. These young lawyers have more of an idea of what they wish to aim for in their careers. However, my personal view is that the lack of a more generalised legal background is not entirely desirable. I continue to find value from my early litigation experience, limited though it was. I retain instincts for application of rules of evidence and procedure that remain important in my current practice. My effectiveness as a commercial lawyer is enhanced, I think, for having a generalised practice as my foundation.

4.3 In Bermuda the legal profession is fused, so a lawyer trained as a barrister may ultimately have a practice more traditionally associated with that of a solicitor (and vice-versa). So it was, in my case. I was admitted to the Bar of England and Wales (in November 1976, as a member of the Middle Temple) and then, following the minimum required, and very short, period of 6 months pupillage in London and Bermuda, to the Bermuda Bar (August 1977). During my pupillage and earliest years in practice I was involved in almost no significant work that might properly be described as ‘commercial’. Instead, I was engaged almost exclusively in litigation, mainly at magistrates’ court level, and with matters of almost every description ranging from small claims, defence of criminal and traffic-court prosecutions to matrimonial work. This had little direct bearing on my later career and was not what I was seeking. However, it was simply a fact of life for a young lawyer at a small-to-very-small firm that one did what one had to, meaning inevitably a court-room practice of some kind. Commercial work, particularly the significant matters, was reserved to the larger firms, of which there were only a few. This also meant that training, experience and direction for any young attorney with aspirations towards a corporate-commercial practice would be obliged to seek a place with one of the larger firms.

4.4 As it was my strong belief (correct, as it transpired) that the corporate-commercial side of legal practice in Bermuda would increase very significantly, I was determined to make that my career path. All my practical training had been litigation-oriented. The fact that I joined a small firm upon my return from England made it necessary for me to make career adjustments quite early on. These adjustments required dedication and, it is fair to say, a degree of luck. I was fortunate to obtain a place with one of the largest Bermuda firms of the day, Appleby (Appleby, Spurling & Kempe as the firm was then known), on the basis that I would have a place in its corporate department. In many respects this represented the luck. However, once I joined Appleby, it was necessary for me to gain the training I lacked. Apart from a few university and law-school courses, I had scant background: this is where dedication came into play.

4.5 Much the same dilemma would still exist in Bermuda, for a lawyer returning without commercial experience. Obtaining training, direction and experience continues to present challenges for young Bermuda lawyers, but along with the success of the domicile and the growth in sophistication of its business overall have come considerably wider options. I was fortunate to obtain training while at Appleby. In the main, this came from working with experienced, nonBermudian commercial attorneys hired to meet the needs of the firm’s expanding international business. These experienced lawyers would spend a number of years with the firm, typically 5 to 10 years although sometimes less, before moving on. Bermuda immigration law and policy effectively excluded the path to partner status in the case of non-Bermudians; these restrictive laws and policies still apply.

4.6 An experienced attorney asked to undertake training of a junior lawyer who may ultimately by-pass him or her, and become a partner where he or she cannot, is unlikely to relish the training role. This is a quandary for all concerned, as not in every case will the experienced attorney be prepared to undertake a mentorship role or, where this is agreed, to discharge it effectively. Much will depend upon the good nature of the mentor (or lack thereof) and, again, much will depend upon the luck of the relationship so far as the trainee’s interests are involved. Accordingly, a trainee in such circumstances must be prepared to assume responsibility for self-training to a very large extent. Self-training means library work and much of it, reading and more reading of legal texts, legal and business articles and journals, and books containing forms and precedents. Texts dealing with legislative drafting can be valuable as sources for instruction in relation to drafting commercial contracts and understanding principles of legal construction – accordingly, these texts should not be overlooked as training tools. Also, the internet can now serve in many ways where once only a well-equipped law library would suffice.

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4.7 I have described how my early training came in large degree from working with experienced foreign lawyers at Appleby. Other aspects of my training occurred independently. My involvement in deals and transactions for Appleby’s international clients did not always involve working under supervision of senior lawyers at the firm. With the partnership matters in particular I was on many occasions left largely to my own devices. The shift to working independently on partnership client affairs produced perhaps the most significant impact on the development of my skills.

OFFSHORE INVESTMENT FUNDS – KEY FEATURES OF THE OFFSHORE ENVIRONMENT

4.8 My legal practice today involves corporate-commercial work, with particular emphasis on partnership matters. In Bermuda, a practice of this description means that my clients are primarily the so-called offshore investment funds. I will act for the funds themselves, or for counter-parties that have dealings with them, including, significantly, banks and brokerage firms that extend credit or provide these funds with investment trading facilities.

4.9 The term, ‘offshore investment fund’ is perhaps best understood as a reference to arrangements structured to permit collective investment by, and on behalf of, investors from jurisdictions other than Bermuda that conduct their businesses externally to Bermuda, but from offices that are locally based. Such arrangements may be structured as companies (i.e. corporations), partnerships or trusts. Partnership vehicles are well-suited to the purposes of such arrangements, and over the time the ‘partnership option’ for investment funds has become very popular.

4.10 Jurisdictions such as Bermuda are selected by offshore fund participants because the local commercial laws have been developed, to a greater or lesser degree, to cater directly to fund investors’ requirements. Convenience and requirements of offshore fund participants are a considerable driving force behind...