Parent Company Guarantees Cannot Circumvent Arbitration

English Court Provides Welcome Clarification on Key Arbitral Award Issues

Corrs Chambers Westgarth review the West Australian Supreme Court’s decision in KC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [2019] WASC 177, where the Court refused to declare that a parent company guarantee was ‘as good as cash’ and in doing so, invalidated calls on parent company guarantees while the underlying dispute was subject to arbitration. Of particular note was the finding that the parent company guarantees were not performance bonds and therefore required actual liability to be established, effectively meaning that any call on the guarantee would need to await a determination of liability in the arbitration proceedings.

This is a useful note for construction practitioners who regularly advise in respect of parent company guarantees in the context of both arbitration and litigation proceedings.

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About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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