Arbitration v winding up — which prevails?

By Jeremy Walton

A creditor petitions to wind up a company for non-payment of a contractual debt. The company disputes the debt. Not only that, but the company denies the court’s jurisdiction to determine whether there is a genuine and substantial dispute over the existence of the debt — that being the usual test for dismissing the petition. Rather, the company says that the presence of an arbitration clause in the contract means that the court must simply refer the matter to arbitration, without enquiring any further, and meanwhile must dismiss or stay the petition.

The court is faced with a tension between upholding the primacy of the arbitration agreement and the court’s exclusive statutory jurisdiction to determine winding-up petitions. How does the court respond?

There have been conflicting decisions over the years, but the trend is towards the court retaining its power to decide whether there is actually a genuine and substantial dispute, even though the court would not go on to resolve any such dispute. This runs counter to the trend towards giving absolute primacy to arbitration agreements via the UNCITRAL Model Law that has been adopted (subject to certain variations) in many jurisdictions, including the Cayman Islands…

If you are registered and logged in to the site, click on the link below to read the rest of the Appleby briefing. If not, please register or sign in with your details below.

Briefings from Appleby

  • Incorporating your business has many advantages

    Incorporation describes the process of forming a new legal entity (a company) that is recognised at law as a separate legal person.

  • Wealth Structuring 20:20 2014

    This feature publication aims to tap into the issues facing high-net-worth individuals around the globe, and investigate the themes and challenges affecting this elite group.

View more briefings from Appleby

Analysis from The Lawyer

  • /v/a/c/offshore.jpg

    Distant shores

    The past quarter has been busy for the offshore sector as firms have looked to capitalise on globalisation, while workflow has remained high

  • /b/s/t/Isle_of_Man_.jpg

    Offshore: Isle of Man - Go Man, go

    Business is booming in the Isle of Man, a small jurisdiction that thinks big

View more analysis from The Lawyer

Overview

1st Floor
3 Copthall Avenue
London
EC2R 7BH
UK
http://www.applebyglobal.com

Total staff: 528
Partners: 64