Scope of Arbitration Agreements in Corporate Winding-Up Proceedings and Costs of Moot Applications

Introduction

SK Fishing Limited v Companies Act (Approved) [2025] IEHC 235 is a High Court decision delivered by Mr Justice Liam Kennedy on 15 May 2025. The case arose out of interconnected disputes among the principals of a joint fishing enterprise (including a company, a partnership and another corporate entity) governed by a co-ownership agreement containing a broad arbitration clause. When one party petitioned to wind up the company under the Companies Act 2014, the other sought to stay those winding-up proceedings and compel arbitration under Article 8(1) of the UNCITRAL Model Law (as incorporated in Ireland by the Arbitration Act 2010). Both sides claimed costs, and the court was called upon not only to decide whether a stay should issue but also how the costs should be allocated once the parties ultimately agreed a revised, comprehensive submission to arbitration.

Summary of the Judgment

1. The court held that a stay of the winding-up petition could properly be granted, not as of right under Article 8(1) (since the applicant had already filed a substantive statement) but on the basis of the court’s inherent jurisdiction and the parties’ agreement.

2. The original arbitration referral and motion were rendered moot by the parties’ negotiation of a new, expanded submission to arbitration encompassing (a) both companies, the principals (including the deceased partner’s widow/executrix) and the partnership; and (b) all disputes among them concerning vessel operation, partnership assets, winding-up mechanics and derivative claims on behalf of the company.

3. On costs, applying the structured framework for “moot” applications as set out by the Court of Appeal in Hughes v Revenue Commissioners [2023] 3 IR 393, the court exercised its overriding discretion. It concluded that neither party could claim a unilateral victory: the stay application did not achieve exactly what was originally argued, and the agreed procedure went well beyond the terms of the initial notice of arbitration. Accordingly, it ordered that the costs of the stay motion be “costs in the cause” in the winding-up proceedings, to be resolved later in light of the outcome of the arbitration (or further litigation).

Analysis

1. Precedents Cited

Arbitration Act 2010, s.6: Incorporates the UNCITRAL Model Law into Irish domestic law, giving Model Law Article 8 force in both international and domestic arbitrations.
Model Law Article 8(1): Provides for an automatic right to a stay of court proceedings when an arbitration agreement governs the dispute, provided the request is made “not later than when submitting the first statement on the substance of the dispute.”
Hughes v Revenue Commissioners [2023] 3 IR 393:
- Established a three-part analysis for costs in moot applications: (a) Mootness from an external event → parties bear their own costs. (b) Mootness by unilateral act of one party in response to proceedings → that party bears costs. (c) Acts that could have occurred before incurring costs → responsible party bears costs.
- Then refined by Murray J to ask: (i) What specific event rendered the action moot? (ii) Was it external to both parties? (iii) Was it a unilateral act by one party in response to proceedings? (iv) If so, was it taken independently of the proceedings?
Cunningham v President of the Circuit Court [2012] IESC 39: Established that cost awards in moot judicial review proceedings turn on the cause of mootness, not merits.
M v Croydon LBC [2012] EWCA Civ 595: Held that courts have jurisdiction to determine costs when parties compromise “all issues save costs,” but are not compelled to do so.

2. Legal Reasoning

• Stay of Winding-Up: Although Model Law Article 8(1) affords an automatic stay when properly invoked, the court recognized that the applicant had already filed his first statement on substance in the winding-up petition, forfeiting the right to an Article 8 stay. The court nonetheless exercised its inherent jurisdiction to stay the winding-up proceedings on terms agreed by the parties, in light of the co-ownership agreement and to avoid multiplicity of proceedings.

• Scope of Arbitration Clause: By negotiating a formal “submission to arbitration,” the parties expanded the original clause to cover:

Both companies and the partnership.
All disputes over the vessel, license, catches, partnership assets, winding-up mechanics, distribution of proceeds and derivative claims.

The court stressed that an arbitrator’s jurisdiction stems from the underlying arbitration agreement (or any agreed variation), not from later pleadings.

• Costs of Moot Applications: Applying the Hughes framework, the court asked:

What event rendered the motion moot?
The parties’ negotiated, broader submission to arbitration.
Was it external to both parties?
No—the agreement was bilateral.
Was it unilateral by one side?
No—it was a mutual compromise.
Could it have been offered earlier?
Yes—either party could have proposed it before the motion issued.

Because neither side unilaterally produced mootness, and both shared responsibility for the timing of the compromise, the court held it would not award costs in favour of either party but would treat the stay motion costs as “costs in the cause” of the winding-up proceedings.

3. Impact

This decision clarifies several points of broad significance:

Arbitration Stays in Insolvency Contexts: A winding-up petition may be stayed even when the company itself is not a signatory to the arbitration clause, provided its principals and the subject-matter fall within a broad arbitration agreement.
Scope of Arbitration Clauses: Parties to multi-entity joint enterprises can expand an original clause by formal submission to arbitration, capturing derivative claims and non-signatory entities through bilateral agreement.
Costs in Moot Applications: Reaffirms the structured approach of Hughes and Cunningham in deciding costs when proceedings are rendered moot by bilateral compromise.
Encouragement of Early Compromise: Highlights the risk that delayed settlement may leave parties bearing their own costs, encouraging earlier, collaborative dispute-resolution efforts.

Complex Concepts Simplified

Stay of Proceedings: A court order halting litigation, often used to defer court claims while an arbitration proceeds.
UNCITRAL Model Law Article 8(1): A provision requiring courts to refer disputes to arbitration if a valid arbitration agreement exists and the party requests a stay before filing its substantive court pleadings.
Derivative Claim: A lawsuit brought by a shareholder on behalf of the company to enforce the company’s rights.
Costs in the Cause: Costs that are reserved to be determined later, often at the final resolution of the primary matter.
Mootness: A situation in which the court’s decision would no longer impact the parties because the dispute has been resolved or substantially changed.

Conclusion

SK Fishing Ltd v Companies Act underscores the flexibility of arbitration stays in winding-up proceedings and affirms the High Court’s power to accommodate broad, party-negotiated arbitration agreements even where signatory status is complex. On costs, the judgment endorses the Hughes framework for “moot” applications: when parties jointly render a motion moot by compromising on broader terms than originally sought, neither side can claim unilateral success. Ordering the stay motion costs as “costs in the cause” strikes a practical balance, enabling a final costs determination once the arbitration (or any subsequent litigation) concludes.