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In a recent decision of the Supreme Court of Cyprus, it has been
held, that a derivative action filed by a minority shareholder of a
Cyprus company, did not fall within the ambit of an arbitration
clause contained in a Shareholder Agreement executed only by the
shareholders of a Cypriot company and not by the company, which
provided as follows:
"In the event of any dispute between the shareholders,
it shall be put before a vote of all shareholders. If there is no
majority decision following votes being cast by the shareholders
within 30 days then the shareholders will appoint Intersolve
Holdings Limited, Tower 42, 25 Old Broad Street, London EC2N 1HN OR
another arbitrator if unanimously agreed".
The Supreme Court decided that:
The above arbitral clause was not binding on the Cyprus
company, because the latter, was not a contracting party to the
Shareholders Agreement.
The derivative action filed by the minority shareholder, did
not fall, within the ambit of the above arbitral clause, because it
was not a dispute between the shareholders of the company.
The derivative action is an action raised by the minority, to
redress wrongs committed against the Company.
COMMENT: In view of the above position of the
Supreme Court of Cyprus, it is prudent and wise, the arbitration
clauses inserted in Shareholders Agreements, to be wide in order to
cover all contractual and tortuous claims, as well as to have the
Cypriot Companies as contracting parties to the Shareholders
Agreements.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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