The English High Court in Telnic Ltd v Knipp Medien Und Kommunikation GmbH [2020] EWHC 2075 (Ch) has confirmed that the court has discretion to restrain a winding-up petition against debtor's when the debt is governed by an arbitration agreement.

Knipp Medien Und Kommunikation GmbH (Knipp) appealed against an order to stay its winding-up petition against Telnic Limited (Telnic). Telnic also brought a cross-appeal seeking orders that Knipp's petition be dismissed rather than stayed.

On Knipp's appeal, the court confirmed that once it is alleged that a petition debt is governed by an arbitration agreement and is disputed, then a judge may make an order to dismiss or stay that petition.  In order to uphold the policy of the Arbitration Act 1961 and to encourage parties to adhere to their agreement to arbitrate, judges should only take into account whether the debt is disputed in good faith on substantial grounds in wholly exceptional circumstances.  Even past admissions of the debt (at least ones that are seemingly retracted by the time of the application) would not constitute such circumstances.  The court had regard to the Singaporean decision Anan Group (Singapore) PTE Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33 reported in our last newsletter.

The court also dismissed Telnic's cross appeal, finding that judges may use their discretion to stay rather than dismiss a petition to allow arbitration to proceed. 

A copy of the judgment can be found here.