Scope of Arbitration Clauses

In HR-2026-855-U, the question was whether a parent company that had provided a guarantee for the subsidiary's contractual obligations was bound by the arbitration clause in the underlying contract. Two days later, the Danish Supreme Court ruled in case BS-49652/2025-HJR on whether a bankruptcy estate that steps into the company's legal position is bound by arbitration clauses in board member agreements when the estate claims compensation from the board members.

HR-2026-855-U: Guarantor not bound by the main contract's arbitration clause

In 2019, Westcon Yards AS and Rimfrost Antarctic AS had entered into a shipbuilding contract subject to arbitration. The yard's contractual position was later transferred to Westcon 39 AS, and the parent company Rimfrost Holding AS provided a guarantee for Rimfrost Antarctic's obligations. When Westcon 39 cancelled the contract and took legal action in the ordinary courts against Rimfrost Holding for liability under the guarantee, Rimfrost Holding requested that the lawsuit be dismissed on the grounds that the lawsuit was subject to arbitration, cf. Section 7 of the Arbitration Act. The District Court and the Court of Appeal ruled in favour of Rimfrost Holding.

The Supreme Court took as its starting point that the question of dismissal depends on whether the case falls within the scope of arbitration pursuant to Section 7 of the Arbitration Act, which presupposes that the parties are bound by an agreement on arbitration, cf. Section 10 of the Arbitration Act. Whether an arbitration agreement has been entered into must be assessed on the basis of general principles of contract law; cf. Rt-2010-748, paragraph 36.

There was no written arbitration agreement between Westcon 39 and Rimfrost Holding. The Court of Appeal had nevertheless found that several circumstances – the guarantee agreement's connection to the shipbuilding contract, the fact that the guarantor was the parent company of the same group, that the agreements were entered into by persons with an overall overview of the contract structure, and the consideration of comprehensive and efficient dispute resolution – indicated that the parties had a common understanding that the guarantee relationship was subject to arbitration. The Supreme Court disagreed. The guarantee declaration did not imply that Rimfrost Holding had become a party to the shipbuilding contract in which arbitration had been agreed, and the circumstances referred to by the Court of Appeal were not sufficient to establish that there was an arbitration agreement between the parties. The Court of Appeal's ruling was therefore set aside.

The question of whether a guarantor is bound by an arbitration agreement in the main contract has been somewhat debated in Norwegian legal theory. Some have assumed that the guarantor will be bound if the arbitration agreement was entered into before the provision of the guarantee and the guarantor was aware of it, while others have believed that the solution must depend on a specific assessment according to the ordinary rules of contract law on entering into a contract. The Supreme Court's ruling does not support the claim that there are more lenient requirements in guarantee relationships than would otherwise apply.

Danish Supreme Court: The bankruptcy estate was bound by arbitration clauses in board member agreements

A and B joined the Board of Directors of X A/S in March 2017 and signed Non-Executive Director Agreements with arbitration clauses covering "any dispute arising out of or in connection with this Agreement". The company was placed under bankruptcy proceedings in December 2018. In November 2021, the bankruptcy estate filed a lawsuit with the City Court of Copenhagen claiming compensation pursuant to Section 361 of the Danish Companies Act – corresponding to Section 17-1 of the Norwegian Limited Liability Companies Act – because the estate believed that A and B had acted in a manner that gave rise to liability towards the company. The background was an agreement in which the company's outstanding amount of NOK 60 million was settled with bonds at par value. The estate claimed that X A/S was insolvent or inadequate at the time of the agreement, and that the market price of the bonds was significantly lower, and claimed approximately NOK 25 million in compensation. A and B applied for the case to be dismissed with reference to the arbitration clauses, cf. Section 8 of the Danish Arbitration Act (Norwegian Arbitration Act Section 7). The bankruptcy estate was successful in the District Court, while A and B won in the High Court and the Supreme Court.

The Supreme Court first found that the arbitration agreement between the board members and the company had been validly concluded. The court then discussed the bankruptcy estate's argument that the claim for damages was of an insolvency nature – because it concerned transactions made during insolvency and the creditors' losses – and was therefore not subject to arbitration. The Supreme Court pointed out that the claim was based on the fact that the estate had entered into the company's legal position vis-à-vis A and B, not on rights or remedies available to bankruptcy estates only. The question of liability could be assessed independently of the bankruptcy, as a general claim for damages. The Supreme Court therefore concluded that the arbitration clause applied, and that the case should be dismissed by the courts.

Norwegian law is based on similar starting points. An arbitration agreement is in principle binding on the bankruptcy estate of the contracting parties, cf. Section 10 of the Arbitration Act. Exceptions apply to cases that, pursuant to Section 145 of the Bankruptcy Act, fall within the jurisdiction of the district court – typically disputes concerning reported claims and priority – unless the administrator or the board of directors agrees to arbitrate with the consent of the district court. Claims pursuant to Section 17-1 of the Limited Liability Companies Act fall in any case outside Section 145 of the Bankruptcy Act. The special rule in Section 17-3, first paragraph, first sentence of the Limited Liability Companies Act, that the question of bringing proceedings against board members falls within the scope of the general meeting, must apply even if arbitration has been agreed. On the other hand, it follows from the second sentence of the provision in conjunction with Section 100 of the Bankruptcy Act that a bankruptcy estate may on its own take a position on the company's claims for damages, including claims against the members of the board.

Under Norwegian law, the bankruptcy estate also enters into the company's claim against the board members pursuant to Section 17-1 of the Limited Liability Companies Act – a claim that is classified as a contractual claim; see e.g. Rt. 2008 p. 833 (Finance Credit I) paragraph 68. If the board members have agreed with the company that all claims between them shall be settled by arbitration, the arbitration clause will also apply to the bankruptcy estate. For directors' liability claims raised by parties other than the company, typically special claims from shareholders or creditors, the position will be different. Another issue is that in Norway it is hardly common for agreements to be entered into between board members and the company to the effect that disputes between the parties are subject to arbitration.