Hong Kong court of appeal lays down the test for insolvency petitions where there is an arbitration agreement confirming applicability of Re Guy Lam (April 2024)
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The Court of Appeal ("CA") handed down two landmark decisions on the same day, confirming that the court will give effect to arbitration agreements covering debts and cross-claims in the context of winding up and bankruptcy petitions (collectively, "insolvency petitions").
The CA's ruling echoes the strong public policy requiring parties to abide by their contracts, in particular, the parties' agreement on the dispute resolution mechanism. In situations where the underlying dispute surrounding the petition debt or a cross-claim is subject to an arbitration agreement, the court will not hesitate to dismiss an insolvency petition and have the dispute determined by way of arbitration save in wholly exceptional circumstances.
