Singapore Court of Appeal clarifies that there is no mandatory obligation to enforce arbitration agreements in the context of a restructuring moratorium

In Sapura Fabrication Sdn Bhd v GAS [2025] SGCA 13, the Singapore Court of Appeal (SGCA) had to deal with the issue under what circumstances a court should grant a carve-out to the moratorium and allow a creditor to pursue a claim in arbitration against the debtor?

The SGCA clarified that the court is under no mandatory obligation to grant a carve-out. Potential claimants seeking to commence arbitration against a debtor company protected by a moratorium should be aware that they don’t have to establish “exceptional circumstances”; the court’s exercise of its discretion to grant a carve-out from the moratorium remains guided by the factors laid down in Wang Aifeng v Sunmax Global Capital Fund 1 Pte Ltd and another [2023] 3 SLR 1604. These include the nature of the claim, the timing of the application for the carve-out, and any prejudice that may be caused to the creditors or the restructuring proceeding from the grant of the carve-out.

I.e. the decision whether to grant a carve-out to a restructuring moratorium is ultimately a matter for the court's discretion having regard to all relevant circumstances.

Notably, the SGCA decided to issue its judgment on the issue notwithstanding that the appeals had been withdrawn pursuant to a settlement between the appellants and respondent. This underscores the importance of the points in the judgment which the SGCA described as being "of general interest and significance which are in the public interest to ventilate".

The SGCA's decision provides commendable clarity on the subject of when carve-outs to a restructuring moratorium should be granted.