Arbitration Law Monthly

The rules of P&I Clubs, under which liability insurance is granted to shipowners, provide for arbitration in London. It is often the case that a shipowner incurs liability to a third party and the third party has – under legislation operative in its home country – a right to make a direct claim against the Club. The decided cases in England have concluded that the third party is bound by such clauses. As is seen by London Steam Ship Owners Mutual Insurance Association Ltd v The Kingdom of Spain (The Prestige) (No 2) [2015] EWCA Civ 333, a further set of difficulties arise where the third party claimant is a state.

An arbitrator cannot wind up a company. Winding up affects the interests of all creditors and not just the creditor involved in the dispute with the company. Given that only the court can wind up a company, a question then arises as to how the court’s discretion is to be exercised where the winding-up petition alleges the existence of an unadmitted debt arising under a contract containing an arbitration clause.

S Co v B Co [2014] HKEC 1345, a ruling of Mimmie Chan J in the Hong Kong Court of First Instance, discusses the approach of the Hong Kong courts to jurisdictional challenges. The approach adopted is more or less the same as found in England. The case is discussed by Edward Yang Liu, Associate with Reed Smith Richards Butler.