The approach towards winding-up and bankruptcy petitions based on debts which are the subject of arbitration clauses has been the subject of much litigation in Hong Kong and other common law jurisdictions in recent years.

 (2023) 26 HKCFAR 119, the Court of Final Appeal decided that where the debt in question is the subject of an exclusive jurisdiction clause, it is not sufficient for the petitioner to show that there was no 

 dispute on substantial grounds regarding the debt (the test applied by the courts for ordinary petitions). Rather, absent countervailing factors such as a “creditor community at risk” or “a dispute bordering on the frivolous or an abuse of process”, the parties should be required to litigate their dispute in their contractually agreed forum. The 

approach was subsequently endorsed (and confirmed to extend to arbitration clauses) by the Court of Appeal in 

More recently, however, doubts have been raised regarding the correctness of the 

approach in light of the UK Privy Council decision in 

Sian Partnership Corp v Halimeda International Ltd

 [2024] UKPC 16, which declined to follow 

 and held instead that the court’s approach to insolvency petitions remained the same whether or not an arbitration clause or exclusive jurisdiction clause was involved.

 [2024] HKCFI 2286, Recorder Richard Khaw SC confirmed that as a matter of 

 approach should continue to be followed in Hong Kong. Applying that test, the Recorder held that the Company and the Debtor’s defences involved “

factual disputes which necessitated a careful examination of all relevant oral and documentary evidence

”, and that the Company and Debtor had a genuine intention to resolve the dispute by arbitration as evidenced by them having commenced arbitration proceedings shortly after the petitions were presented against them. In the circumstances, their defences could not be said to be frivolous or an abuse of process, and there were no other countervailing factors which justified not holding the parties to their agreed dispute resolution mechanism. The Recorder accordingly stayed both petitions pending the resolution of the arbitration.

, instructed by Woo Kwan Lee & Lo, acted for the Company and the Debtor.

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