In the insolvency sphere there is a tension between, on the one hand, the bi-lateral resolution of private disputes for which arbitration clauses have been crafted and, on the other hand, the statutory insolvency regime, according to which proceedings to wind up a company are a class action brought in the public interest for the purpose of realising and distributing the assets of a company for the benefit of its creditors.

What is to be done when insolvency litigation throws up a dispute that is also the subject of an arbitration clause? The arbitration clause is a binding contractual term under which the dispute is to be resolved under the bi-lateral private regime. Must it yield its power to require arbitration when the dispute also engages the public interest and arises in the context of the class action? The Court of Appeal of England and Wales (Salford Estates (No.2) Limited v. Altomart Limited [2015] Ch. 589) held in late 2014 that the answer to this question is a qualified “no” – unless there are exceptional circumstances the dispute must be resolved by arbitration.

In December 2015 the Eastern Caribbean Court of Appeal (sitting in the BVI) refused to follow the Salford Estates approach (Jinpeng Group Ltd v Peak Hotels and Resorts Limited (BVIHCMAP 2014_0025 and 2015_0003)). Now the Court of Appeal of the Cayman Islands has pronounced on the subject (in the matter of the SPhinX Group of Companies CICA 6/2015). In SPhinX the Salford Estates reasoning was indorsed and applied.

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Insight

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Cayman Islands

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