TGIF 31 July 2026 – NSW Court of Appeal confirms non-arbitrability of disputes involving Deeds of Company Arrangement

This week’s TGIF considers Clough Projects Australia Pty Ltd v Elecnor Australia Pty Ltd [2026] NSWCA 111 (Clough v Elecnor), in which the NSW Court of Appeal dismissed an appeal concerning whether disputes involving the construction and effect of a Deed of Company Arrangement (DOCA) are capable of settlement by arbitration.

The decision provides important guidance on the limits of arbitration in the insolvency context and the interaction between contractual dispute resolution mechanisms and statutory regimes under the Corporations Act 2001 (Cth) (Corporations Act).

Key takeaways

• Disputes involving questions as to the efficacy of a DOCA and associated provisions of the Corporations Act which may affect the rights of third-party creditors are not “capable of settlement by arbitration” within the meaning of section 7(2) of the International Arbitration Act 1974 (Cth) (Arbitration Act).
   
• The distinctive nature of a DOCA - including its capacity to bind all creditors of a company and its status as a form of statutory instrument, and a court’s supervisory jurisdiction under the Corporations Act - distinguishes DOCA-related disputes from ordinary commercial disputes capable of resolution by arbitration.
   
• Insolvency practitioners and stakeholders can proceed on the basis that disputes of this nature will remain within the sole ambit of the courts.

What happened?

Elecnor Australia Pty Ltd (Elecnor) and Clough Projects Australia Pty Ltd (Clough) were parties to a Joint Venture Deed (JV Deed) establishing a joint venture to deliver a large-scale energy infrastructure project (EPC Contract) for NSW Electricity Operation Pty Ltd (Transgrid). The JV Deed was structured as a 50/50 joint venture, with each party sharing equally in liabilities under the project. 

The terms of the JV Deed included:

• a broad arbitration clause involving (amongst other things) the resolution of disputes by ICC arbitration seated in Singapore;
   
• a compulsory acquisition process entitling a non-defaulting party to offer to purchase a defaulting party’s interest following an unremedied material default;
   
• step-in rights, whereby an aggrieved party was entitled to carry on the business of the joint venture with “sole full and absolute operational and financial control” following an insolvency event.

In December 2022, Clough’s directors determined that Clough was insolvent or likely to become insolvent and resolved to appoint voluntary administrators. In February 2023, Clough and its related entities entered a DOCA, pursuant to which assets were transferred to a creditors’ trust in exchange for shares in the Clough entities being transferred to the purchaser, with creditor claims being converted into claims against the creditors’ trust. 

Elecnor subsequently exercised its step-in rights under the JV Deed to carry on the joint venture and completed the balance of the works under the EPC Contract. 

In July 2024, Elecnor offered to purchase Clough’s participating interest for $1, on the basis that Clough had not remedied its material defaults. The Trustees of the creditors’ trust (Trustees) and Clough responded that the JV Deed was inapplicable in circumstances where the Trustees were not party to the JV Deed (which they had disavowed in any event) and where Clough and the Trustees were now bound by the terms of the DOCA.

In December 2024, Elecnor commenced proceedings in the NSW Supreme Court seeking declarations that the DOCA did not transfer Clough’s JV Deed interests and an order for specific performance  enabling compulsory acquisition. 

In March 2025, Clough and the Trustees cross-claimed alleging Elecnor breached various obligations it owed pursuant to the JV Deed in respect of the acquisition offer whilst seeking $55 million in contribution from Elecnor in respect of Transgrid’s call on securities (relying on provisions in the JV Deed which required parties to share in the burdens of security calls proportionally).

Elecnor sought to stay the crossclaim and have the matter referred to arbitration pursuant to section 7(2) of the Arbitration Act.

Trial judgment 

Pursuant to section 7(2) of the Arbitration Act, a party to an arbitration agreement can apply to stay a proceeding commenced by another party to that agreement which involves “the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration”.

At first instance, the Court identified and distinguished two distinct ‘matters’ for the purposes of section 7(2). The trial judge found Elecnor’s claim in relation to the compulsory acquisition of Clough’s JV interests and the effect of the DOCA were not matters capable of private arbitration. 

Conversely, Clough’s crossclaim against Elecnor seeking contribution towards losses incurred in relation to Transgrid’s call on securities was a matter squarely within the scope of the arbitration agreement and subject to referral under section 7(2) of the Arbitration Act. 

Appeal judgment 

The Court of Appeal upheld the decision at first instance. The Court affirmed Elecnor’s claims concerning the effect of the DOCA on the interests held by Clough under the JV Deed were not capable of settlement by arbitration because the remedy sought by Elecnor involved the determination of questions concerning the efficacy of the DOCA and other provisions of the Corporations Act which may affect the rights of creditors.

The Court emphasised that a DOCA is "more than a set of promises between those who are parties to it”. Rather, a DOCA effects a change in status of the company and binds all creditors, officers and members of the company by operation of both deed and statute under the supervisory jurisdiction of a court, not from any contractual bargain. 

By contrast, Clough’s crossclaim was a private dispute that did not involve questions as to provisions under the Corporations Act and was properly referrable to arbitration. Although creditors may be interested in the outcome of such a claim (as it may increase available assets), it would not affect the substantive rights of creditors to the same extent as interference with a court adjudicated DOCA. 

Conclusion

Clough v Elecnor provides authoritative guidance on the intersection between insolvency law and (international) arbitration. 

For insolvency practitioners, deed administrators and restructuring advisers, the decision reinforces that disputes requiring a court to construe or determine the effect of a DOCA will not be referred to arbitration, regardless of how broadly the parties’ arbitration agreement is drafted. The public interest in judicial oversight over statutory instruments under the Corporations Act prevails over the parties’ private agreement to arbitrate.

For parties to joint ventures and other complex commercial arrangements that include arbitration clauses, the decision highlights the risks that insolvency events may fracture dispute resolution across multiple forums, with some arbitrable matters proceeding to arbitration and others necessarily remaining before the courts. 

Careful drafting of dispute resolution clauses, with potential carve-outs for insolvency-related disputes, may mitigate the procedural complexity and expense that can result from such fracturing.