Arbitration Clauses And Winding Up Petitions: The Future Of Arbitration Stay Applications In The BVI

Two recent decisions of the BVI Court of Appeal in the case of C-Mobile Services Limited v Huawei Technologies Co. Limited BVIHCMAP 2014/0006 and BVIHCMAP 2014/0017, concerning the interplay between s.6(2) of the 1976 Arbitration Ordinance and the Insolvency Act 2003, serves to highlight why the old Arbitration Ordinance has benefitted from revision, whilst leaving open the door for the courts to resolve the apparent conflict between the circumstances in which the mandatory stay provisions in s.18 of the new BVI Arbitration Act 2013 are engaged.

C-Mobile concerned an unsuccessful application to set aside a statutory demand under s. 156(1) of the Insolvency Act 2003, followed (one month later) by an unsuccessful application under s.6(2) of the Arbitration Ordinance to stay proceedings to appoint liquidators over the company on the grounds of an arbitration stay. On appeal the two applications were heard back-to-back, however, the Court of Appeal was careful to ensure that its judgments were handed down in the order in which the applications were determined at first instance. This is of some significance, as the dismissal of the appeal to set aside the statutory demand played a part in the Court's determination of the appeal on the arbitration stay.

Turning first to the application to set aside the statutory demand, one of the grounds for the application, at first instance, was that the alleged debt giving rise to the statutory demand arose under a contract which contained an arbitration clause. The applicant sought to rely upon Bannister J's decision in Applied Enterprises Ltd v Interisle Holdings Ltd et al BVIHVC (COM) 2012/0135 in which the Court had stayed a claim brought to enforce various provisions of an agreement on the basis of an arbitration clause contained in that agreement. Crucially, although as the court in Applied Enterprises had recognized, there was a substantial dispute between the parties in that case, Bannister J had stated that it was not necessary for there to be a substantial dispute in light of the narrow interpretation of the extent of the Court's merits review jurisdiction suggestion by Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. Bannister J held that even if the dispute was not a substantial one, a stay should be granted.

However, in C-Mobile the BVI Commercial Court made short shrift of the company's argument relying on the arbitration clause. It said that Applied Enterprises did not apply to applications to set aside statutory demands. If it did, the Court said, the BVI case of Sparkasse Bregenz Bank AG v Associated Capital Corporation BVI Civ App...