Shareholders Agreement Dispute Resolution Clause

Mediation, which involves an independent lawyer or other professional to facilitate consensus in a confidential and unprejudiced environment, can help to avoid an escalation of litigation and eliminate the attitude and position that may stand in the way of a solution that would otherwise protect the business and end the damaging litigation. The court recognized the English House of Lords` approach (as it was then) in Fiona Trust and Holding Corporation v. Privalov [2007] UKHL 40, provided that the words « in reference » are interpreted broadly. Nevertheless, the court found it difficult to see how these disputes could fit within the scope of the arbitration agreement. He found that the dispute was not within the scope of the arbitration agreement, so the stay application was dismissed. The Tribunal convincingly recognized that, in addition to the shareholders` pact, the parties were also « governed by Hong Kong corporate law and by the company`s statutes, which arise solely from the fact that they were shareholders of the company. » This means that the parties have rights and obligations that do not flow directly from the shareholders` pact, which may later lead to disputes that need to be resolved. Indeed, « the shareholders` pact is not invoked for the debt or for the defence, » and « the ownership rights of a member over his shares in the company are not the subject of the shareholder contract, but of the law of ordinary companies. » The Tribunal recognized (at [40]) that it was possible to develop an arbitration agreement with a broader scope. Thus, in a shareholders` pact, the Tribunal has decisively distinguished two types of arbitration clauses, namely (1) a broader clause providing for the right of conciliation in all corporate cases and (2) a narrower clause which provides only the right to arbitrate in matters under the shareholders` pact. The proposal for a resolution on a general meeting to remedy the situation Mediation is not always the answer to some cases, but with the relatively high cost of litigation and the pressure that the courts exert on the parties for first attempting to regulate through mediation (before pursuing a court decision), it would be unwise not to at least seriously consider the possibility mediation provides as an alternative method of resolving disputes. The Hong Kong courts are known to have chosen a pro-arbitrating approach.

However, a natural concern may be whether this case, which states that the scope of the arbitration agreement was not broad enough, indicates that the court has departed from such an approach. It is alleged that this is not the case because the court appears to have been attentive and, in particular, supported its decision in cases in other pro-arbitration courts.