Squaring The Circle? The Arbitrability Of Shareholder Claims For Just And Equitable Winding Up

The BVI Commercial Court, consistent with its reputation as a world-class centre of dispute resolution, has long shown itself to be arbitration-friendly. That reputation stands only to be enhanced following the appointment of Barry Leon, well known as an international arbitrator, as the Commercial Court Judge earlier this year, the introduction of the BVI Arbitration Act, 2013 (the "Arbitration Act") modelled on the UNCITRAL model law (the "Model Law") and the launch of the BVI International Arbitration Centre.

Section 18 of the Arbitration Act introduces Article 8 of the Model Law into BVI law. Article 8 provides that -

"A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed."

It is to be noted that the provisions of Article 8 are in mandatory terms, (the "court...shall"), so that if a party requests that a dispute be referred to arbitration and the Court is satisfied that the dispute before it falls within the scope of an arbitration agreement, the Court has no discretion. In those circumstances, the Court must give effect to the arbitration agreement and refer the parties to arbitration unless it also finds that the arbitration clause is "null and void, inoperative or incapable of being performed"1.

The words "null and void" and "inoperative" have been held2 to allow for considerations of public policy by which certain claims are deemed to be non-arbitrable. Because issues of public policy are involved, the question of arbitrability is to be determined by reference to the policy of the relevant state at the relevant time and that policy may be subject to change. However, many of the categories of claim considered non-arbitrable involve a public element, for example, disputes as to the grant or validity of a patent or trademark, or claims based on criminal acts, or claims which may affect the rights or interests of a class of persons beyond those who may be party to the arbitration.

A creditor's claim to wind up a company on the grounds of insolvency has classically been considered non-arbitrable on the grounds of public policy. This is on the basis that the statutory regime which governs the winding up of companiestarget=_blank3 engages a collective...