Arbitrability Of Intra-Company Disputes – An Offshore Perspective

Arbitrability is a question of considerable importance - it is the question of whether a particular issue in dispute is capable of being resolved by arbitration as opposed to litigation - and is therefore a question of jurisdiction. If the matter in question is not arbitrable, the tribunal will have no jurisdiction to resolve that dispute.

It is also a question that can arise at various stages throughout the arbitral process. The question is often raised at the beginning of the process before an arbitral tribunal which, depending upon the applicable law of the seat, may have the right under the principle of Kompetenz-Kompetenz to decide upon the existence and scope of its jurisdiction (and therefore the arbitrability of the dispute in question).1 The question can also be raised before the national courts post-award where a party is seeking to set aside an award or before the national court before which the successful party is seeking recognition and enforcement of the award. It is therefore essential that questions of arbitrability are considered as early as possible in the process.

This article will look at how the BVI and Cayman courts have approached the question of statutory remedies available in intra-company disputes where there is a valid arbitration agreement in place.

The English Court of Appeal decision in Fulham Football Club (1987) Ltd v Richards [2012] Ch 333 provided useful guidance on the question. In particular, the issue of whether the statutory relief sought protected class rights and secured relief which would be effective to bind third parties.2 The claimant, Fulham Football Club, contended that its unfair prejudice petition invoked the supervisory jurisdiction of the court and that the subject matter was therefore not arbitrable and/or that arbitration agreements in question should be construed so as to exclude an unfair prejudice dispute. As remarked by Patten LJ, "the inability of an arbitrator to grant such relief is relevant both to the fundamental issue of whether a dispute of this kind is arbitrable at all and to the narrower issue of the construction of arbitration agreements".3 The rights of shareholders to submit disputes inter se to arbitration requires, amongst other things, consideration of whether the matters in dispute engage third party rights or represent an attempt by the parties to delegate to the arbitrators a matter of public interest which cannot be determined within the limitations of a private contractual process.4 Fulham Football Club held that where the dispute in question was between members of a company or between shareholders and the board about alleged breaches of the articles of association or a shareholders' agreement, such disputes are essentially a contractual in nature, and do not necessarily engage the rights of creditors or impinge on any statutory safeguards imposed for the benefits of third parties, and so are generally arbitrable.

British Virgin Islands

Ennio Zanotti v Interlog Finance Corp et al BVIHCV 2009/0394 (Zanotti)

In Zanotti, Bannister J considered the arbitrability of an unfair prejudice claim whereby the Claimant sought (1) a declaration that the affairs of the Company had been conducted in an unfairly prejudicial manner; and (2) that one or other of the Defendants should buy the Claimant out of the Company.5 The Defendants applied for a stay on the proceedings under the old BVI Arbitration Act 1976, relying on the arbitration clause contained within the Company's Memorandum and Articles of Association (the Articles).

Bannister J took the view that there was no doubt that the proceedings raised complaints directly against the Company, to which the...