Remedial Non-Arbitrability: A New Concept?
By Leyla Bahmany, PhD
The UK Privy Council’s landmark decision in 2023 added a new term to our arbitration dictionary: “remedial non-arbitrability”. The question is whether this new term represents a new concept to be kept on practitioners’ radar for developments, or whether it is just a new term for an already existing concept.
In September 2023, the Judicial Committee of the Privy Council (“JCPC”)[1] gave judgment in a case originating from the Cayman Islands, involving the following issue: whether an application to wind up a company on just and equitable grounds would render inarbitrable the parties’ disputes arising out of their shareholders’ agreement that contains a broad arbitration clause.[2] In its judgment, the JCPC used a new term: “remedial non-arbitrability”.
The question that arbitration practitioners may ask is whether this new term represents a new concept, or whether it is just a new term for a concept that one can already identify in the case law of some arbitration jurisdictions. Let us first take a brief look at the case.
Case Summary
The company subject to the winding up petition was China CVS (a Cayman Islands holding company operating in China through its subsidiaries), which had two shareholders: Ting Chuan (another Cayman Islands holding company – the majority shareholder) and FamilyMart China (a Japanese holding company – the minority shareholder).[3] The minority shareholder presented the winding up petition to the Cayman Islands court, and the majority shareholder applied to strike out or stay the petition based on the arbitration clause in the shareholders’ agreement which was governed by the laws of the Islands.[4] The Cayman Islands Grand Court (equivalent to the English High Court of Justice) granted the application to stay the petition in favour of arbitration, but its ruling was overturned by the Cayman Islands Court of Appeal and so the case landed before the JCPC.[5]
Throughout its analysis, the JCPC discussed the laws of different common law jurisdictions and emphasized the need to adopt a uniform approach when interpreting the domestic legislative provisions originating from the New York Convention.[6] The JCPC identified two types of non-arbitrability: subject matter non-arbitrability and remedial non-arbitrability.[7] The former refers to the types of disputes that may not be submitted to arbitration due to a statutory prohibition or public policy concerns, whereas the latter refers to a situation “where the award of certain remedies is beyond the jurisdiction which the parties can confer through their agreement on an arbitral tribunal”.[8] The case at bar concerned the latter.
There were, among other things, two main sets of issues before the JCPC: (i) whether trust was lost between the shareholders and their relationship had irretrievably broken down; and (ii) whether it was just and equitable for the company to be wound up and, if so, for such an order (or an alternative relief) to be granted.[9] Regarding the first set of issues, the JCPC characterized it as constitutive of a “substantive” dispute which would provide the “factual basis” for the winding up petition and, as such, should be subject to a mandatory stay in favour of arbitration.[10] However, according to the JCPC, the second set of issues was an example of “remedial non-arbitrability” and thus fell within the exclusive jurisdiction of courts.[11] The JCPC then stayed the judicial proceeding relating to the second set of issues, pending the outcome of the arbitration.[12]
New or Not So New?
The term subject matter non-arbitrability is as old as the history of modern arbitration, but what about “remedial non-arbitrability”? It is indeed a new term, yet not a new concept. As the JCPC set out in its judgment, there are several cases in common law jurisdictions (e.g., England and Wales, Hong Kong, and Singapore) where courts have made similar rulings based on the same notion.[13]
Professor Fabien Gélinas and I have recently published a book that exclusively discusses arbitrability through a comparative study of nine major jurisdictions, including Canada.[14] One of the topics covered in the book is the interaction between arbitrability and limitations on remedies. Although the term remedial non-arbitrability had not yet been coined at the time, we identified the concept as a feature of arbitrability in the context of corporate disputes (more specifically, oppression claims) viewed from the perspective of at least some common law jurisdictions. The book discusses a similar case in Canada as well.[15]
In ABOP LLC v Qtrade Canada Inc (2007), the British Columbia Court of Appeal took a position which is similar to – yet not as clear as – the position taken by the JCPC. On the one hand, the BCCA upheld the BCSC’s decision holding that “the only aspect of the [oppression] petition which requires a resolution by the court, rather than by an arbitrator, is the request in the petition for a finding of oppression and a request for the appointment of a receiver or receiver manager of the assets of [the Respondent]”.[16] This is similar to the JCPC’s ruling regarding the second set of issues discussed above. On the other hand, another part of the BCCA’s judgment indicates that arbitrators may make findings of facts and oppression, which means that the first part in the second set of issues discussed above can be submitted to arbitration.[17]
In any event, the question of whether the JCPC’s position on remedial non-arbitrability is better viewed as a pro-arbitration position (for not considering such disputes as entirely inarbitrable) or instead, as a problematic relegation of arbitrators to the status of mere “fact finders”, is not within the scope of this piece. However, arbitration practitioners can rest assured that the JCPC’s decision has not unveiled a new concept that would demand a rethink of the law of arbitrability generally.
[1] The JCPC is “the court of final appeal for the UK overseas territories and Crown dependencies. It also serves those Commonwealth countries that have retained the appeal to His Majesty in Council or, in the case of republics, to the Judicial Committee.” The website of the Privy Council: <https://www.jcpc.uk/about/role-of-the-jcpc.html> (last visited 7 January 2024).
[2] FamilyMart China Holding Co Ltd v Ting Chuan Holding Corp, [2023] UKPC 33, online: <https://www.jcpc.uk/cases/docs/jcpc-2020-0055-judgment.pdf> (last visited 7 January 2024).
[10] Ibid at paras 96, 97, 105.
[11] Ibid at paras 75, 79, 80, 82, 89, 92, 105.
[13] See Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855; Quiksilver Greater China Ltd v Quiksilver Glorious Sun JV Ltd [2014] HKCFI 1304; Tomolugen Holdings Ltd v Silica Investors Ltd [2016] 1 SLR 373 (CA).
[14] Fabien Gélinas & Leyla Bahmany, Arbitrability: Fundamentals and Major Approaches (Kluwer Law International, 2023).
[15] See ABOP LLC v Qtrade Canada Inc, 2007 BCCA 290, 72 BCLR (4th) 34.
[16] Ibid at paras 1, 11, 12, 29 (emphasis added).
Leyla Bahmany, PhD, is a postdoctoral associate at the McGill University Faculty of Law, researching and writing in the field of international arbitration (investment and commercial). She also assists Professor Fabien Gélinas Ad. E. in his arbitral work. Dr. Bahmany is a member of the New York State Bar and has previously worked with two international law firms in Paris and Dubai.