Arbitration Clauses Not a Shield Against a Winding-Up Petition

Executive Summary

In San Leon Energy plc v Brightwaters Energy Ltd [2026] IEHC 1, the Irish High Court (Mr. Justice Kennedy) confirmed that a broadly worded arbitration clause does not provide a shield against the presentation of a winding-up petition. Because a winding-up petition is not a legitimate means of enforcing a debt which is bona fide disputed, the presentation of a petition would normally be restrained (by the court granting an injunction) if the alleged debt is disputed in good faith and on substantial grounds.

The decision in San Leon confirms that Ireland’s arbitration framework, which is based on the UNCITRAL Model Law on International Commercial Arbitration, does not extend to winding-up petitions, which are a statutory remedy rather than a claim to determine the underlying debt.

Key Facts and Background

San Leon Energy plc (“San Leon”) held interests in oil mining in Nigeria, including an interest in Energy Link Infrastructure (Malta) Ltd (“ELI”), a Maltese company that owned a major pipeline project. ELI had engaged Brightwaters Energy Ltd (“Brightwaters”), a Nigerian company, under a construction contract. ELI failed to make payments that were due to Brightwaters, resulting in a consent judgment of USD $25 million (approx.) against ELI in Nigeria in 2022.

Given San Leon’s commercial interest in ELI, it agreed to invest in ELI and simultaneously engaged with Tri Ri Asset Management Corp (“TRAM”) on a corporate refinancing of up to USD $187 million. In October 2023, San Leon and Brightwaters entered into an agreement, under which San Leon undertook to settle the debt owed by ELI to Brightwaters (the “Debt”) in the amount of USD $16 million (approx). In return, Brightwaters agreed to withdraw legal proceedings and re-commence construction. The agreement was governed by Nigerian law and contained an ICC arbitration clause with London as the seat.

The Debt was not paid. Brightwaters presented a winding-up petition in the Irish High Court. San Leon sought an interlocutory injunction restraining the winding-up petition, arguing: (i) its payment obligation was conditional on it (San Leon) receiving funding from TRAM, and therefore the Debt was disputed on bona fide and substantial grounds; and (ii) the dispute fell within the ICC arbitration clause.

Legal Principles Applied by the Court

Under Irish law, the Court has discretion to restrain a winding-up petition where a debt is bona fide disputed. Kennedy J cited case law which confirms that this jurisdiction should be exercised “with great circumspection” and only where the company disputes liability “in good faith and on substantial grounds”.

The Court followed the decision of the UK Privy Council in Sian Participation Corp (In Liquidation) v Halimeda International Ltd [2024] UKPC 16, in which it was held that a winding-up petition does not determine the petitioner’s debt claim and therefore does not fall within the scope of a typical arbitration clause or the mandatory stay provisions of Article 8 of the UNCITRAL Model Law.

Kennedy J endorsed the reasoning in Sian, observing that “[a]rbitration law is about resolving genuine disputes outside courts, not providing a procedural obstacle to legitimate statutory procedures.”

The Court held that the mere existence of an arbitration clause — and indeed the invocation of that clause by the debtor — was not sufficient to restrain a winding-up petition. To obtain an injunction restraining the petition, the debtor had to demonstrate a bona fide dispute on substantial grounds. If no such dispute existed, the arbitration clause provided no basis for a stay, as there was simply nothing to refer to arbitration.

Kennedy J analysed whether San Leon’s payment obligation was conditional on TRAM funding. The Court held there was no basis to imply a term making the agreement conditional on receipt of TRAM funds: San Leon had “made an unconditional commitment” and was bound accordingly.

The Court further noted that a winding-up order could be made where a company is insolvent, even if the company bona fide disputes the debt allegedly owed to the party that presents the winding-up petition. In this case, Kennedy J said that Brightwaters had presented “unrefuted prima facie evidence” that San Leon was insolvent. On that basis, the Court was disinclined to stay the winding-up petition, quite apart from the dispute as to whether a debt was due and owing to the petitioner.

Conclusion

The Court refused to grant an interlocutory injunction to restrain the winding-up petition. The key takeaways from the decision are:

1. The question as to whether a debt is disputed on bona fide and substantial grounds is a matter for the court to decide, rather than an arbitrator.
2. In this case, there was no bona fide dispute because the payment obligation was not conditional.
3. Even if there had been a bona fide dispute about the Debt, the court would not have restrained the winding-up petition, because there was undisputed evidence that San Leon was insolvent.

The judgment is the first Irish High Court decision to expressly endorse the Privy Council’s reasoning in Sian, confirming that Irish law is in line with the position in England and Wales. The core principle is clear: An arbitration clause is not a shield against a winding-up petition.

A winding-up petition does not determine the underlying debt and therefore does not fall within the scope of a typical arbitration clause. As Kennedy J observed, a winding-up petition is a statutory right, not a claim to determine a debt.

This decision provides welcome certainty for creditors seeking to pursue a winding-up remedy while maintaining Ireland’s commitment to upholding arbitration agreements where a genuine dispute exists to be resolved.

Further Information

If you have any questions about this decision, please liaise with any of the persons listed on this page or your usual Maples Group contact.