The contract contains an arbitration agreement requiring disputes to be resolved in arbitration. The debtor disputes liability to pay the debt. The creditor is left to weigh its options – should it seek to wind up the company on the basis of the unpaid debt, or refer the dispute to arbitration?

Courts of several leading common law jurisdictions have long grappled with the inherent tension between insolvency proceedings and arbitration. In the past decade, this debate intensified following the decision of the English Court of Appeal in Salford Estates (No.2) Ltd vs Altomart Ltd (No.2))  (‘Salford Estates’).

Following Salford Estates, certain leading common law jurisdictions have diverged in their approach to the interaction between insolvency and arbitration proceedings. In particular, there has been a marked divergence in the approaches taken by the courts of Hong Kong when compared with the approach taken in England (and the leading offshore jurisdictions closely associated with it). Since 2023, this divergence has crystallised in the landmark decisions of the Hong Kong Court of Final Appeal in Re Guy Kwok-Hung Lam  (‘Re Guy Lam’) and the decision of the Judicial Committee of the Privy Council4 in Sian Participation Corp v Halimeda International Ltd  (‘Sian Participation’).

Now, Hong Kong law, as established in Re Guy Lam  and subsequently Re Simplicity & Vogue Retailing (HK) Co Ltd  [2024] 2 HKLRD 1064 (‘Simplicity’), generally gives primacy to upholding arbitration agreements. The Hong Kong courts will stay winding up proceedings in favour of arbitration, unless there is a strong reason not to do so, such as the dispute being deemed frivolous or an abuse of process. In contrast, English law, following Sian Participation, requires a debtor to demonstrate a bona fide  dispute on substantial grounds before a creditor’s winding up petition will be dismissed or stayed.

Against this backdrop of divergent approaches, the recent decision by the Court of First Instance of the High Court of Hong Kong (the ‘Hong Kong Court’) in Hyalroute Communication Group Limited v Industrial and Commercial Bank of China (Asia) Limited  [2025] HKCFI 2417 represents a significant and welcome development.

The case marks the first time the Hong Kong Court had to consider whether an anti-suit injunction should be granted to restrain a creditor from presenting a winding up petition in the Cayman Islands (or another similar common law jurisdiction which applies the Sian Participation  approach) despite the existence of an arbitration agreement requiring the dispute to be ‘finally resolved’ through Hong Kong arbitration. It raises an important question as to the relevant law when the Hong Kong courts determine whether to restrain foreign winding up proceedings in jurisdictions that are now bound, or likely, to apply the approach in Sian Participation in favour of a Hong Kong arbitration.

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This article first appeared in Volume 22, Issue 6 of International Corporate Rescue and is reprinted with the permission of Chase Cambria Publishing - www.chasecambria.com