The Privy Council Winds Up Salford Estates

This decision relates to an appeal to the Privy Council out of the British Virgin Islands dealing with the question of staying winding up proceedings where there is an agreement to arbitrate. The case has been widely reported but I thought I would post it for those who have not seen it.

In Sian Participation Corp v Halimeda International Ltd [2024] UKPC 16, the Privy Council ruled that the earlier decision in Salford Estates (No 2) Ltd v Altomart Ltd (No 2) [2014] was incorrectly decided. The case involved a debtor company seeking a stay of winding-up proceedings in the British Virgin Islands (BVI), arguing that the dispute over the debt should be referred to arbitration under the parties’ agreement. The creditor opposed this, arguing that since the debt was not genuinely disputed, a stay should not be granted.

The Privy Council refused the stay, holding that the assumption in *Salford Estates*—that courts should generally stay winding-up proceedings in favour of arbitration unless in exceptional circumstances—was flawed. They clarified that a winding-up petition does not constitute a claim under section 9 of the Arbitration Act 1996 because it doesn’t seek to resolve the debt itself but rather to address the insolvency of the debtor.

The ruling emphasizes that requiring arbitration when there is no genuine dispute over the debt only adds unnecessary delay and expense. The decision is significant as it limits the ability of insolvent companies to delay insolvency proceedings through arbitration and aligns the treatment of disputed debts under arbitration agreements with those under exclusive jurisdiction agreements, as seen in cases like BST Properties Ltd v Reorg-Apport Penzugyi RT [2001].