the effectiveness of arbitration clauses in insurance and reinsurance contracts as a way of settling commercial disputes.

Mr. Kempe, who outlined his opposition to arbitration last month when discussing his experiences as joint liquidator of Mentor Insurance, considers arbitration the worst way of resolving insurance disagreements.

Expanding on his views yesterday, Mr. Kempe said: "I believe an arbitration clause has no place in a reinsurance or insurance contract.'' Arbitration was often more costly than going to court, frequently produced bizarre decisions, allowed one or both parties to delay and frustrate and created no binding precedent for future disputes.

Delays often began from the very beginning with disputes over who should be appointed to arbitrate or umpire disputes, said Mr. Kempe.

"Even when an umpire is agreed upon, it can later transpire that he has a conflict of interest which was not known to anyone from the start,'' he said.

"You have none of the efficiencies you have when you go to court, where nobody can argue about who the judge will be.

"The judge decides when you will appear and argue your case and runs the whole thing under procedural rules set by the court.

"There is nowhere near the latitude for abuse of process that you find in arbitration.'' Mr. Kempe said there were many cases of illogical decisions being made by arbitrators, for which there was no satisfactory appeals procedure.

"It's becoming near standard practice for an arbitrator to endeavour to please both parties and cutting the baby in half,'' he said. "There are no appeal procedures against the rationale of an arbitrator.

"You can appeal the result of an arbitration to a court but can only do so successfully if you can prove it was fraudulently arrived at. If you can't prove that, you haven't got a leg to stand on.'' Mr. Kempe said he had never come across an arbitration decision where he suspected foul play.

"Ineptitude and bad logic, yes, but never evidence of fraud,'' he said. The fact that an arbitrated decision created no precedent was another factor against the process, said Mr. Kempe.

"If, for example, you are in dispute with three reinsurers and you go to arbitration with one of them and win, this decision is not binding.

"You may still have to go to separate arbitrations with the other two and are by no means guaranteed the same result.'' He also criticised the cost of arbitrations.

"I've been involved with cases where three or four lawyers from each side stayed at the Hamilton Princess for a couple of week, court stenographers were brought from New York and witnesses were flown in and out,'' he said. "It's not a cheap process.'' In place of arbitration, Mr. Kempe said you couldn't beat "good old fashioned commercial negotiation with no lawyers in the room''.

"This way you can come up with a result that both parties can wear,'' he said. "Both parties may not like the decision, but they will both be able to live with it.'' Mr. Kempe stressed that his criticisms of the arbitration process related purely to insurance and reinsurance contracts.

He supported current moves to turn Bermuda into a leading international arbitration centre for commercial disputes of all natures saying that, if arbitrations are going to be carried out, they might as well be held in Bermuda as anywhere else.