The interplay between the insolvency and arbitration regimes has been the focus of the highest appellate courts across many jurisdictions of late, and Singapore is no exception. However, the debate has typically centred around whether and when an insolvency court should stay or dismiss a winding-up petition based on a disputed debt, if the debt appears to be subject to an arbitration agreement (see our previous update on the decisions in Founder Group (Hong Kong) Limited (in liquidation) v Singapore JHC Co Pte Ltd and AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co)).
In Sapura Fabrication Sdn Bhd and others v GAS and another appeal [2025] SGCA 13, the Singapore Court of Appeal had the occasion to consider a different question, but one which also explores the interaction between insolvency and arbitration: where a debtor company is already undergoing restructuring proceedings and a moratorium has been granted to restrain all proceedings against it and its assets, under what circumstances should the court grant a carve-out to the moratorium and allow a creditor to pursue a claim in arbitration against the debtor?
In this update, we discuss how the apex court navigated the fine balance between the competing public policy considerations underpinning insolvency and arbitration proceedings. Importantly, its guidance makes clear that the court is under no mandatory obligation to grant a carve-out. Potential claimants seeking to commence arbitration against a debtor company protected by a moratorium should also know that, while they do not have to establish “exceptional circumstances”, the court’s exercise of its discretion to grant a carve-out from the moratorium remains guided by the factors laid down in Wang Aifeng v Sunmax Global Capital Fund 1 Pte Ltd and another [2023] 3 SLR 1604. These include the nature of the claim, the timing of the application for the carve-out, and any prejudice that may be caused to the creditors or the restructuring proceeding from the grant of the carve-out.
If you would like information and/or assistance on the above or any other area of law, you may wish to contact the Partner at WongPartnership whom you normally work with or any of the following Partners:
Adnaan NOOR
Partner – Restructuring & Insolvency and Special Situations Advisory
d +65 6416 2477
e adnaan.noor@wongpartnership.com
Click here to view Adnaan's CV.
Eden Li
Partner – Restructuring & Insolvency and Special Situations Advisory
d +65 6517 3766
e eden.li@wongpartnership.com
Click here to view Eden's CV.