Arbitration and insolvency – a battle of priorities


Insolvency-related claims relating to contracts subject to arbitration agreements continue to pose interesting challenges for the English court. In a recent decision, the court had to decide whether a request for summary judgment amounted to a stage in the proceedings where the claimant had waived his right to seek a stay in favor of arbitration.


The liquidator of a Ukrainian bank had obtained recognition in England of the liquidation as foreign main proceedings, and the liquidator was recognized as the “foreign representative” under the Cross-Border Insolvency Regulation 2006.

The Ukrainian bank, through its liquidator, has filed claims under Sections 423 to 425 of the UK Insolvency Act 1986 (these provisions relate primarily to fraudulent transactions by creditors) in connection with various pledge agreements that the bank Ukrainian had concluded with a bank of Liechtenstein in support of loans made by the bank of Liechtenstein to three entities incorporated in the United Kingdom. The Liechtenstein bank had executed the pledge agreements and obtained US $ 25.8 million held by the Ukrainian bank in its account with the Liechtenstein bank. The pledge agreements contained arbitration agreements.

The Liechtenstein bank has filed petitions seeking the following orders:

  1. in the light of the arbitration agreements contained in the pledge agreement, a suspension of the request of the Ukrainian bank in favor of arbitration in accordance with art. 9 of the English Arbitration Act 1996 (“AA 96“) or the inherent jurisdiction of the court to stay claims (the”Stay request“);

  2. alternatively, and “only in case of failure of the stay request“, Write off the claim of the Ukrainian bank, alternatively summary judgment (the”SJ request“). However, the Bank of Liechtenstein clarified in its request that it was advancing the SJ request:

in the alternative and only in the event of failure of the Residence Request, [and] the [Liechtenstein bank] does not (and does not intend to) take any substantive action in the proceedings that would affect the request for suspension”.

Questions to be determined

The questions to be decided by the tribunal were as follows:

  1. whether SJ’s request amounted to a step in the proceedings such that the request for suspension was not sustainable because Article 9 of AA 96 provides that a request for suspension in favor of arbitration cannot be made after the claimant has taken action in the proceedings to respond to the claim on the merits.

  2. from a case management perspective, the order in which the stay request and SJ’s request are to be heard.

Step in the procedure

The court concluded that the following did not constitute a procedural step for the purposes of section 9 of AA 96:

  1. an application for striking off or for summary judgment which is made expressly on the condition that a request for suspension has failed; and

  2. request a hearing and make submissions at the hearing of such request.

Key to the court’s conclusion was the fact that the Liechtenstein bank was pursuing SJ’s claim on the conditional basis of the failure of the stay request. The fact that if SJ’s request were granted, the stay request would become moot in relation to the request did not change the court’s conclusion.

Case management

The court then had to determine the order in which the stay application and SJ’s application were to be heard. The court recognized that regardless of the order in which the claims were heard, there was a risk of incurring unnecessary costs.

Despite the Liechtenstein Bank’s argument that the SJ request would be easier to determine than the stay request, the court was not convinced that the stay request would be more complex and take longer than the SJ request. The court also took into account that:

  1. there was no common problem that favored the two motions being heard together; and

  2. SJ’s request was expressly based on the outcome of the stay request. Therefore, unless there are clear conflicting case management considerations to the contrary, the stay request should be heard first. In the present case, the tribunal was not convinced of the existence of such considerations.

As such, the court decided to process the stay request first and only agreed to register SJ’s request after the stay request was determined.


This decision is another example of the English court’s general pro-arbitration approach as well as a demonstration of the active management of cases undertaken in the event of potentially competing claims, in order to ensure a practical but legally sound outcome. It also shows that the provisions of the AA Act 96 should not automatically be considered inapplicable in the context of insolvency-related claims.

Case reference: Deposit Guarantee Fund for individuals against Bank Frick & Co AG and others [2021] EWHC 3226 (chapter).


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