Vol 22 (2025) - Issue 6

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Navigating the Arbitration-Insolvency Interplay: Hyalroute and the Cross-Border Implications for Creditors

Synopsis
It's a familiar dilemma: a debt remains unpaid under a contract and the creditor wishes to pursue payment of the debt. 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 Council in Sian Participation Corp v Halimeda International Ltd ('Sian Participation').