02:21 PM Filbert Lam (LLM International Banking Law and Finance Candidate (Edinburgh); LLB (Hons) First Class (Edinburgh))

    Arbitrability of Insolvency-related Claims – A Comparison between the English and Singapore Positions



    Corporate insolvency is messy business. An efficient winding up of an underperforming company’s affairs allows for better allocation of scarce resources in the economy. Problems arise where agreements entered into prior to insolvency contain arbitration clauses which may conflict with statutory insolvency proceedings. Are such disputes arbitrable? And if so, what are the issues which remain within the exclusive bailiwick of the courts?

    A trinity of cases in England and Singapore have sought to address different claims related to insolvency proceedings. In Nori Holdings Limited and others v Public Joint-Stock Company, Bank Otkritie Financial Corporation (“Nori”) [2018] EWHC 1343 (Comm)​, the central issue concerned the arbitrability of an insolvency claim to set aside a transaction at an undervalue (or its foreign law equivalent). The Singapore decision of Larsen Oil & Gas Pte Ltd v Petroprod Ltd (“Larsen Oil”) [2011] SGCA 21 addresses the arbitrability of statutory insolvency claims. Finally, the landmark Singapore decision of Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals (“Tomolugen”) [2015] SGCA 57 concerns whether a minority oppression claim is arbitrable.

    This author’s view is that the determination of whether insolvency claims should be arbitrable depends on the nature of the claim and whether it affects the rights of third parties. The reasons for this view will be set out in three parts. Part I will consider the decision of the High Court of England and Wales in Nori. Part II will then consider the Singapore decisions of Larsen Oil and Tomolugen. Finally, Part III analyses the decisions and propose an approach that Singapore courts should consider adopting in the future.


    Decision in Nori

    Dramatis personae

    The first two claimants (“Nori” and “Centimila”), together with Lira LLC, Leblanc Investments LLC and Semela LLC, were subsidiaries of an investment company incorporated in Cyprus, O1 Group Limited. The third claimant (“Coniston”) was a minority shareholder in O1 Properties Ltd, a BVI-incorporated company, whose majority shareholders are entities within the O1 Group. The defendant (“the Bank”) is a bank incorporated in Russia.

    O1 Group and Lira had borrowed over US$500 million from the Bank under three Loan Agreements. These were secured by five Pledge Agreements, with all three claimants, over shares in O1 Properties. The Loan Agreements were governed by Russian Law under the jurisdiction of the Moscow Arbitrazh Court. The Pledge Agreements were governed by Cypriot law and provided for London as their seat of arbitration under the LCIA rules.

    The disputes

    In August 2017, the parties entered into a series of arrangements which replaced the Loan Agreements secured by the pledges of shares with O1 Properties, which owned valuable properties in Moscow, with long-term unsecured bonds.

    Three weeks after the conclusion of the August 2017 transactions, the Central Bank of Russia appointed a temporary administrator, with powers to present claims on behalf of the Bank, to better manage the finances of the Bank and prevent bankruptcy. The Bank commenced proceedings in the Moscow Arbitrazh Courts against, inter alia, the claimants to invalidate and reverse the transactions. The claimants alleged that this was a commercial restructuring; whereas the Banks claimed that the transactions were fraudulent as the bonds did not provide for regular coupon payments.

    The Bank’s position was buttressed by two primary submissions: (1) unequal “considerationconsideration” under Article 189.40 of the Russian Bankruptcy Law, similar to a claim under section 238 of the Insolvency Act 1986 (“IA 1986”) to invalidate transactions at an undervalue; and (2) a civil claim for abuse of rights under Articles 10 and 168 of the Russian Federation Civil Code (Nori, at [19]). In November 2017, the Russian court issued an interim order, without extra-territorial effect, to restrain dealings with the impugned shares.

    Between January and February 2018, the claimants instituted LCIA arbitration proceedings against the Bank, where they sought declarations that the Termination Agreements were valid. They further filed proceedings in Cyprus to prevent the Bank from registering the shares in O1 Properties. In response, the Bank filed Cypriot proceedings which duplicated the Russian civil proceedings, but not insolvency, proceedings.

    The decision of the High Court

    The claimants filed an application to restrain the Bank from pursuing further claims and to terminate the extant proceedings in Russia and Cyprus. They alleged that the proceedings violated the arbitration agreements embodied in both the Pledge and Termination Agreements. The Bank, resisting the application, relied upon the respective Singapore and English authorities of Larsen Oil and Fulham Football Club (1987) Ltd v Richards (“Fulham”) [2011] EWCA Civ 855, [2012] Ch 333.

    This present analysis is restricted to whether the Russian insolvency claims are arbitrable. Males J rejected the Bank’s arguments that the dispute was non-arbitrable under both Russian and Cypriot law. The English High Court rejected the approach in Larsen Oil which “viewed arbitration as a procedure depriving a party of its inalienable rights” arising from the insolvency regime (Nori, at [65]). Arbitration is merely an alternative way to resolve such disputes between parties without prejudice to the fundamental rights of parties (Nori, at [66]).

    To determine the arbitrability of an insolvency claim, the court must look at the substance, not form, of the claim (Nori, at [61-2]). Applying this principle, Males J held that the dispute in Nori concerned whether the transactions were a fraud on the Bank to replace the secured loans with essentially valueless bonds. The Bank could avoid such transactions and claim restitution only if the claim of fraud was made out (Nori, at [63]). The High Court determined that this was a dispute which could be settled by the arbitrators and the remedy sought could be granted by the tribunal since no third parties were affected (Nori, at [64]).


    Singapore decisions – Larsen Oil and Tomolugen

    Larsen Oil on statutory insolvency claims

    In Larsen Oil, the liquidator of a company applied to set aside a payment agreement, which contained an arbitration clause. It was alleged that the payments constituted unfair preferences or transactions at an undervalue. The Singapore Court of Appeal dismissed the application for a stay in favour of arbitration on two grounds. Writing for the majority, V K Rajah JA held, first, that as a matter of statutory construction, the claim could not fall within the scope of the arbitration clause; and, second, even if it did, the claim was not arbitrable.

    The Court of Appeal held there was a distinction between (a) common law or statutory private remedial claims and; (b) claims which can only be brought by a liquidator or judicial manager of an insolvency company (Larsen Oil, at [45]). Arbitration clauses should not be construed to include avoidance claims in the absence of express language to the contrary. If parties agreed on the scope of an arbitration clause, they are likely to prefer a dispute resolution mechanism which could handle all disputes within a single forum. However, this assumption does not apply to avoidance claims pursued during insolvency proceedings, which can only be pursued by liquidators or judicial managers. Accordingly, there was no reason to assume that a company’s management would include such claims to fall within the scope of an arbitration agreement (Larsen Oil, at [21]).

    On the public policy issue, Rajah JA held that the objective of the insolvency regime – to assist creditors to recoup losses caused by misfeasance and/or malfeasance of the company management – would be defeated if the pre-insolvency management could restrict the ability of creditors from enforcing such statutory remedies in court (Larsen Oil, at [45-6]). Public policy concerns would disallow the enforcement of arbitration clauses between the insolvent company and contractual counterparts (Larsen Oil, at [48]). Where the substantive rights of creditors are affected, such clauses should not be enforced (Larsen Oil, at [50]). However, they could be enforced as between parties where they related to pre-insolvency rights and obligation sensu stricto (Larsen Oil, at [51]).

    Tomolugen on minority oppression

    In Tomolugen, a minority shareholder applied for a temporary stay of court proceedings in favour of arbitration under the Singapore International Arbitration Centre rules in force at the time, pursuant to an arbitration clause in the share sale agreement (Tomolugen, at [19o(e)(i)]). The Court of Appeal held at [75],

    “the essential criterion of non-arbitrability is whether the subject matter of the dispute is of such a nature as to make it contrary to public policy for that dispute to be resolved by arbitration”

    This sweeping criterion is also enshrined in section 11(1) of the International Arbitration Act (Cap. 143A) (“IAA”).

    Even though Tomolugen reiterated Singapore’s pro-arbitration stance, the Court of Appeal maintained that claims arising from insolvency cannot be resolved by arbitration. This is because the arbitration of such claims run counter to the objectives of the insolvency legal regime and thus, contrary to public policy (Tomolugen, at [77]). This affirms the position taken by the Singapore Court of Appeal in Larsen Oil (at [45]).

    The position in Singapore

    The decisions in Larsen Oil and Tomolugen are broadly consistent with each other. Two key propositions may be distilled from the cases. First, a legal issue is non-arbitrable if it is contrary to public policy or is a matter which concerns public interest. Second, the question of arbitrability does not turn on whether certain remedies may be granted by the tribunal. Thus, in both cases the Court of Appeal adopted the view that insolvency claims are non-arbitrable generally.

    However, Tomolugen noted that jurisdictional limits on the tribunal’s ability to grant certain remedies are distinct from and irrelevant to the issue of arbitrability (at [97-8]). The Court of Appeal adopted the English approach outlined in Fulham (at [74] and [83-4]; Tomolugen, at [99]). The tribunal could resolve the underlying dispute and leave parties with the liberty to apply to court for specific remedies, if they go beyond the power of the tribunal to award (Tomolugen, at [100]). This approach was also adopted by the Hong Kong SAR High Court in their decision of Re Quiksilver Glorious Sun JV Ltd [2014] 4 HKLRD 759 (at [21]).

    In sum, while Tomolugen recognised that arbitrability and the extent of a tribunal’s power to grant remedies are separate and distinct, the Court of Appeal affirmed the Larsen Oil decision even where it seemed to go against this very holding. It falls on future Singapore courts to resolve this apparent inconsistency in the Tomologen and Larsen Oil decisions.



    Comparison of the positions in Singapore and English law

    Both the Singapore and English jurisprudence started with the same fundamental premises – (i) the protection of third parties and; (ii) nonarbitrability on grounds that it involves a matter of public policy. However, under Singapore law, the courts draw a fundamental distinction between pre- and post-insolvency claims. In contrast, the English approach is that the courts will consider both whether the nature of the claim fall within the tribunal’s jurisdiction and if the remedies sought were ones which the tribunal could grant.

    Scope of the arbitration clause

    The upshot of the Larsen Oil decision was that, in the absence of express terms, it was generally assumed that arbitration clauses do not apply to avoidance claims by a liquidator or judicial manager. Rather than holding that one could not construe the arbitration clause to include insolvency proceedings, the Court of Appeal in Larsen Oil held that they should be construed to not include such proceedings.

    Echoing the decision in Fulham, Males J held that the English Arbitration Act 1996 (“the AA 1996”) did not expressly exclude the arbitrability of disputes of any kind (Nori, at [53]). Further, applying the test set out in Marks & Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Limited [2015] UKSC 72; [2016] AC 742, such implication was unnecessary for two main reasons. First, if insolvency proceedings were non-arbitrable ipso jure, then it would plainly be unnecessary to imply such a term into the clear statutory provisions. Next, where there is not a policy against the arbitrability of insolvency proceedings, then there is no reasonable basis for holding that such a term should be implied in the statute (Nori, at [60]). Thus, to arrive at a definitive answer, we must first consider whether public policy excludes the arbitrability of such claims ipso jure.


    In Nori, the High Court held that the approach in Larsen Oil is not and should not be part of English law (Nori, at [61] and [65]). The Court instead preferred the approach taken in Fulham. In Fulham, the Court considered an appeal against a decision of Vos J which held that an unfair prejudice petition under section 994 of the English Companies Act 2006 was arbitrable. On this basis, the Court stayed the proceedings in favour of arbitration under section 9 of the AA 1996.

    Patten LJ reasoned that the provision in the AA 1996 did not expressly exclude the arbitrability of unfair prejudice petitions (Fulham, at [28]). Similarly, Longmore LJ held that the terms “all disputes” and “all differences” were sufficiently broad enough to include unfair prejudice petitions (Fulham, at [95]). There was neither (a) an express or implied prohibition in the Companies Act 2006; nor (b) any public policy concern which prevented the enforcement of such arbitration clauses. Further, his Lordship held there was a relevant distinction to be made between (a) the determination of the legal dispute; and (b) whether the arbitrators could grant the remedies sought (Fulham, at [33]). A tribunal could determine that there was a dispute and then the applicant could then bring winding up proceedings to before a court (Nori, at [57]).

    The Nori approach is preferable

    The decision in Nori represents a marked divergence in the common law world on the interaction between arbitration and insolvency-related proceedings. This is because the position that insolvency-related claims are non-arbitrable is not unique to Singapore. In fact, it is the English High Court in Nori which had adopted a novel position. In Tomolugen (at [79-81]), the Court pointed out that the Australian case of A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd (“Skyer”) [1999] VSC 170 and the Caymanian decision of In re Cybernaut Growth Fund LP (“Cybernaut”) Cause No FSD 73 of 2013 (23 July 2013) had adopted the same position.

    In Skyer, the Court held that the arbitration clause was null and void because “it has the effect of obviating the statutory regime for the winding up of a company” and “frustrate the contributory, in its efforts to seek relief from the court” (Tomolugen, at [18]). Similarly, in Cybernaut, the Court held that that insolvency claims were non-arbitrable because “a winding up order … is an order in rem which is capable of affecting third parties” and it is “a matter involving the public interest, especially if it is carrying on a regulated business” (Tomolugen, at [7]).

    Under English law today, it is inconceivable that arbitration deprives parties of their rights per se. What matters is for the tribunal or, subsequently, a curial court to determine if the claims fell within the jurisdiction of the tribunal and the remedies granted were ones that the tribunal was entitled to grant. In contrast, the Singapore Court of Appeal held that some species of legal disputes were ipso jure non-arbitrable because they would deprive parties of inalienable or fundamental rights. The issue which needs to be addressed is which framework should be adopted to determine whether certain or all insolvency proceedings are arbitrable. Quid juris?

    Fundamentally, the question is whether insolvency-related claims should be arbitrable or not as a matter of general law and/or public policy. If such disputes were not non-arbitrable per se, then the question of implication falls away. Leaving aside the decision in Tomolugen, which was not referred to by both counsel in Nori, this author argues that the decision in Nori is correct.

    The notion that all insolvency disputes are non-arbitrable because it would immediately frustrate or defeat the fundamental rights of all creditors is unsustainable in law. As Nori points out, avoidance claims which seek nothing more than to declare void certain transactions plainly do not affect any third creditors if such claims are limited, as they most often are, to restitution claims. The Larsen Oil decision also represented a view of insolvency which is unsupported by the current jurisprudence. It is evident that some insolvency claims, like avoidance proceedings, do not affect all other creditors.

    Males J noted that the decision in Larsen Oil was arrived at based on the decision of Judge Weeks QC in Exeter City Association Football Club Ltd v Football Conference Ltd (“Exeter City”) [2004] 1 WLR 2910. However, this is slightly inaccurate since the decision was found to be unhelpful because it did not set out the approach which should be taken to reach this decision (Larsen Oil, at [39]). In any event, this was a decision which was not adopted by the English Court of Appeal in Fulham. Further, Males J held that “the view that arbitration represents a deprivation of inalienable rights is with respect a very outmoded view”. Arbitration merely allows parties the choice of alternative means of settling legal disputes in relation to such rights (Nori, at [66]).

    Nori stands for the proposition that not all insolvency proceedings affect the rights and obligations of all third parties. In contrast, the Singapore Court of Appeal in Larsen Oil held that this approach would bind third parties against their will. On this basis, the position under Singapore law is that claims arising out of the statutory insolvency regime are non-arbitrable (Larsen Oil, at [45-6]). However, this latter view is unsupported by contemporary arbitration and insolvency laws. As Nori pointed out, what matters when considering arbitrability is whether the rights of third parties are affected. This requires considering the nature of the claim and the remedy sought, rather than an analysis which stops merely at the parties which potentially might be involved. Avoidance claims, where parties merely seek the restitution of property, are plainly claims which do not purport to affect any rights of third parties. Thus, in this author’s view, on a proper analysis of corporate insolvency law, the Nori approach better addresses the variegated claims creditors may make.

    Next, on the issue of construction of the terms, this author agrees with the overall approach of the High Court in Nori, with a few reservations. The use of the term “construction” does not accurately reflect the approach of the court. The court sought to determine if a term should be read impliedly into the relevant statutory provisions. In Marks & Spencer plc, the UK Supreme Court held that a distinction must be made between “construction” - which identifies the correct boundaries of the terms - and “implication” - which seeks to identify, where there is a lack of express words, a legal right or obligation nevertheless forms part of the terms. This distinction was also referred to in the Singapore Court of Appeal’s decision in SembCorp Marine. Applying this approach, the decision of the High Court in Nori is not vulnerable to critique.

    Nevertheless, this author suggests that the approach in Nori should be preferred. The Singapore Court of Appeal in Larsen Oil seemed to have relied disproportionately on public policy rather than legal arguments. The express reference to “public policy” under statute is not a carte blanche for relying primarily on policy arguments as opposed to the clear, broad terms of the statute. The key difference is that while Nori hinged on the issue of protection of third parties, Larsen Oil turned on the “public interest” principle. However, applied in its context, the “public interest” element in insolvency claims is primarily concerned with the protection of third parties. There is little or no divergence between the English and Singapore statutes applied in this context.

    Finally, a few words must be said of the differences between the Singapore and English statutory regimes. In Singapore, section 11(1) of the IAA states,

    “Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless it is contrary to public policy to do so.”

    In contrast, the English AA 1996 is silent on the issue of arbitrability. The statute preserves the common law position on arbitrability (AA 1996, section 81(1)(a)). However, while the sources of the obligation differ, the content of the obligation under both laws are broadly the same. Under the English common law, the issue of arbitrability is a matter for the public policy of the applicable law (Fulham, at [78]). Further, English law allows a trustee in bankruptcy to adopt or reject an arbitration agreement. If rejected, arbitration proceedings may still be brought with the consent of the company’s creditors and the approval of the court (AA 1996, s 107; IA 1986, s 349A). In fact, the rules in the UK and Singapore are so similar, that Born characterises both jurisdictions to take “a case-by-case approach” (G Born, International Commercial Arbitration (Kluwer Law International, 2014), pp 998-9). Thus, in this author’s view, the differences in the statutory regime is largely immaterial to the present analysis.



    The decisions in Larsen Oil and Tomolugen are broadly consistent with each other. Two key propositions can be distilled from these cases. First, a legal issue is non-arbitrable if it violates a principle of public policy or is a matter which is of the public interest. Second, the question of arbitrability does not turn on whether certain remedies may be granted by the tribunal. However, even taking these propositions together, it is unclear why some insolvency issues should not be arbitrable. The key difference between Singapore and English law on this point is that the former considers a fundamental distinction between pre- and post-insolvency claims; whereas the latter does not.

    This author agrees with the critique by Males J in Nori of the decision in Larsen Oil. It is unsurprising that the arbitrability of certain insolvency claims were not ventilated in Tomolugen, which was involved a shareholder dispute sensu stricto. However, insofar as Larsen Oil states that all insolvency claims are ipso jure non-arbitrable, this is no longer the law as applied in England and Wales.

    When considering the arbitrability of insolvency-related claim, the courts should not consider if the remedies sought are ones which could be granted by the arbitral tribunal. Instead, if the remedies cannot be granted by the tribunal, then the award-creditor may file a claim in court for the appropriate remedies (Fulham, at [83]; DSJ Sutton et al., Russell on Arbitration (24th edn, Sweet & Maxwell, 2015), paras 2-080 ff, especially 2-087; see also paras 6-096, 6-180, and 7-024). Justice Quentin Loh argued extra-judicially that this may lead to inconsistencies in the decisions and multiplicities in proceedings (Q Loh, “The Limits of Arbitration”, (2014) 1 McGill Journal of Dispute Resolution 66, at 74). This author respectfully disagrees. One could equally argue that a bifurcation of such proceedings may relieve the courts from the burden of deciding on complex factual disputes and save considerable public monies in this regard. Courts may still exercise their curial decision to determine, inter alia, issues of arbitrability and further grant the appropriate remedies in relation to insolvency-related disputes. Singapore courts should seriously consider adopting the Nori approach, which represents the modern pro-arbitration stance on arbitrability.

    Finally, this author welcomes the recommendation by the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (see here, Recommendations 7 to 9) that alternative dispute resolution mechanisms be used to resolve some insolvency disputes. Clause 420 of the recent Insolvency, Restructuring and Dissolution Bill (“the Bill”, see here), submitted to Parliament by the Singapore Ministry of Law, seemed to have adopted this position. This is broadly similar to the powers of the trustee in bankruptcy under English law (AA 1996, s 107; IA 1986, s 349A). This author suggests that, if the Bill receives the President’s ssent, then it will be timely for the Singapore courts to review the Larsen Oil and Tomolugen decisions.


    * This blog entry may be cited as Filbert Lam, “Arbitrability of Insolvency-related Claims – A Comparison between the English and Singapore Positions”  (15 October 2018) (

    ** A PDF version of this entry may be downloaded here


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