Insolvency -v- Arbitration : the uncommon approaches of common law courts

How should the court approach a winding-up petition where the underlying debt is disputed, and the dispute is subject to an arbitration clause? This simple question has received radically different answers across the common law world. 

If a party ignores an arbitration clause and refers its dispute to court proceedings, arbitration is meant to prevail .  In most common law jurisdictions, the Court must stay those proceedings unless it finds that the arbitration clause is “null and void, inoperative, or incapable of being performed” (referred to below as the “stay”).  That language has its origins in the New York Convention and was carried through to the UNCITRAL Model Law on International Commercial Arbitration. However, where insolvency is involved, a tension exists in that insolvency procedures centralise the dispute whereas arbitration is entirely decentralised. 

England & Wales via BVI

The Privy Council in Sian Participation Corp v Halimeda International Ltd [2024] UKPC 161 settled the law of England and Wales (and BVI) on the subject. The Board concluded that where the debt underpinning a liquidation application or winding up petition is subject to an arbitration agreement or an exclusive jurisdiction clause and is said to be disputed, the correct test for the Court to apply is whether the debt is disputed on genuine and substantial grounds. In short, the same test applies to liquidation applications where or not there is an arbitration clause (or exclusive jurisdiction clause) involving the debt. 

In coming to this conclusion the Board overruled the decision of the English Court of Appeal in Salford Estates v Altomart [2015] Ch 589 (CA), the hitherto leading decision in English law, because, among other reasons, a winding up petition “does not seek to, and does not, resolve or determine anything about the petitioner’s claim to be owed money by the company” (at [88]). 

In Salford Estates, it was held that where a debt was not admitted and is subject to an arbitration agreement, the court should use its discretion to stay or dismiss a creditor’s winding-up petition save in wholly exceptional circumstances. The Board in Sian went as far as concluding that Salford Estates had been wrongly decided, and directed the English Courts not to follow Salford Estates. In doing so, the Board directed the Companies Court to abandon its current practice of staying or dismissing a winding-up petition where the debt was subject to an arbitration clause provided there was a dispute. 

Sian limits the use of spurious disputes as a defence to a winding-up petition as a court will no longer defer to an arbitrator to decide the genuineness of a dispute. Sian may also give creditors more confidence to include an arbitration agreement in their contracts as this inclusion will now be a less significant impediment to pursuing remedies against a company by way of a winding-up petition or administration application.

Singapore via Salford

The Singapore Court of Appeal (“SGCA”) adopted an approach similar to Salford Estates, in its decision in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33. In Singapore, the court will stay or dismiss a winding-up petition in the face of a valid arbitration agreement between the parties unless the dispute does not fall within the scope of the arbitration agreement or the dispute is raised in abuse of process (at [56]). Examples of such abuse included: (a) past admission of the liability and quantum of a debt; (b) existence of waiver or estoppel from enforcing right to insist on arbitration; or (c) “where the debtor-company is seeking to stave off substantiated concerns which justify the invocation of the insolvency regime”.  

The SGCA has since clarified that its decision in AnAn does not mean that “the policy of enforcing arbitration agreements should trump the insolvency regime under all circumstances,” particularly where the policy concerns of the insolvency regime had been strictly engaged and the company in question has been determined to be a debtor. In Sapura Fabrication Sdn Bhd and others v GAS and another appeal [2025] SGCA 13, SGCA upheld the lower court’s decision to carve-out an arbitration during insolvency proceedings and determined that, while there is no mandatory obligation for courts to grant a carve-out for arbitration in insolvency proceedings, they retain discretion to do so, referencing the factors outlined in Wang Aifeng v Sunmax Global Capital Fund 1 Pte Ltd and another [2023] 3 SLR 1604, including timing of the carve-out application, the nature of the claim, and existing remedies.  

The SGCA rejected the claim that "exceptional circumstances" were required for a carve-out, holding that this would unjustifiably skew the assessment towards a negative outcome. Instead, the court should exercise its jurisdiction according to the Wang Aifeng factors. The SGCA's decision provides clarity about when carve-outs to a restructuring moratorium should be granted. It rejects the normal position of the primacy of arbitration over insolvency and introduces a balanced approach which permits the court to give weight to the specific issues in debate.

The decision is an important and noteworthy one as various key restructuring jurisdictions continue to grapple with the inherent tension between the arbitration and insolvency regimes. In Sapura, the SGCA remarked that because it did not agree with the court below that there was a mandatory obligation to enforce the arbitration agreement in that case, it did not think it necessary to revisit AnAn in the light of the Privy Council’s decision in Sian Participation. It therefore remains to be seen whether the seemingly strict position in AnAn (which relied upon the decision below) may be revisited in the future.  

In the meantime, alternative initiatives have arisen aimed at bridging the fundamental policy differences between arbitration and insolvency. For instance, the SGCA acknowledged the potential role of the SIAC Insolvency Arbitration Protocol (at the time in draft), which adapts the SIAC process for disputes involving insolvency issues. Recognizing its potential, the SGCA noted that this protocol could assist courts in determining whether to grant a carve-out, thereby facilitating a more balanced approach to managing conflicts between arbitration and insolvency proceedings.

The Singapore International Arbitration Centre (SIAC) launched its Restructuring and Insolvency Arbitration Protocol in January 2025, offering a tailored framework for resolving disputes arising in insolvency contexts. This Protocol enables parties to opt into a fast-track arbitration process — typically completed within six months — designed to accommodate the urgency and complexity of insolvency-related claims. It is particularly relevant for cross-border restructurings, foreign debtors, and multi-jurisdictional proceedings. Parties may adopt the Protocol through model clauses either pre- or post-dispute.

Hong Kong via Cayman

The position in Hong Kong was complex and uncertain, however, two recent decisions of the Hong Kong Court of Appeal had brought some clarity to the law. 

In Re Simplicity & Vogue Retailing (HK) Co Ltd [2024] HKCA 299 and Re Shandong Chenming Paper Holdings Ltd [2024] HKCA 352, the Court held that a winding-up petition should generally be stayed or dismissed if there was evidence of an intention to commence arbitration proceedings, unless there was a risk of prejudice to other creditors, or where the supposed dispute about the debt bordered on the frivolous or abusive. In doing so it followed the decision of the Hong Kong Court of Final Appeal in Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP [2023] HKCFA 9, that winding-up proceedings will be stayed in favour of arbitration unless there is abuse, whereas English law following Sian Participation requires a debtor to show the usual bona fide dispute on substantial grounds to justify the creditor going through arbitration. 

More recently, in Hyalroute Communication Group Limited v Industrial and Commercial Bank of China (Asia) (“ICBC”) [2025] HKCFI 2417 the HK courts refused to grant an anti-suit injunction to stop a Cayman-incorporated Plaintiff from pursuing a winding-up petition in the Cayman Islands. Following events in Myanmar that affected Hyalroute, ICBC commenced winding-up proceedings against Hyalroute in the Cayman Islands to recover a debt. Hyalroute sought an anti-suit injunction in Hong Kong to halt the Cayman Islands proceedings, arguing a breach of the arbitration agreement.

In denying Hyalroute’s application the court found that the Cayman Islands winding-up proceedings did not violate the arbitration agreement because they would not "finally resolve the dispute" as defined by the clause. Under Cayman law, the court noted, winding-up petitions assess only the genuineness of a dispute, not the substantive debt, and thus lack res judicata or estoppel effects. The court also considered Hyalroute's defense against the debt to be without merit and an abuse of process.  

Courts will pay close attention to the exact and explicit terms of the arbitration agreement. The key starting point remains: what's the scope of the arbitration clause, and does it expressly or implicitly cover the proceedings the parties seek to restrain? Overall, the trend is towards harmonising arbitration with insolvency; honouring party agreements to arbitrate only to the extent that doing so does not prejudice the fundamental principles of insolvency (like equitable distribution and timely resolution). Each jurisdiction balances these considerations slightly differently, but the common theme is: a genuine dispute belongs in arbitration and a non-genuine dispute should not frustrate insolvency proceedings.
 

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