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Introduction
The Court of First Instance decision in Hyalroute Communication Group Limited v Industrial and Commercial Bank of China (Asia) Limited [2025] HKCFI 2417 marks a precedent-setting moment for Hong Kong law. This is the first case where the Hong Kong courts have to consider the circumstances in which it should restrain winding-up proceedings in a similar common law jurisdiction which adopts a different approach. This case highlights the divergence between the Hong Kong approach in Re Guy Lam (2023) 26 HKCFAR 119 ("Re Guy Lam") and the UK/Privy Council approach in Sian Participation Corp v Halimeda International [2024] UKPC 16 ("Sian Participation") on how to deal with winding-up proceedings in favour of arbitration.
Facts and parties
The Plaintiff, a company incorporated in the Cayman Islands, sought an anti-suit injunction against the Defendant, a creditor, from presenting any winding-up petition against it in the Cayman Islands. The dispute arose out of a Term Facility Agreement dated 27 July 2018 (the "TFA"). In late 2024, the Defendant served a statutory demand on the Plaintiff in the Cayman Islands claiming for a sum of US$95 million.
The Plaintiff relied on the grounds that the TFA has an arbitration clause which mandates the parties to resolve disputes by way of arbitration in the Hong Kong International Arbitration Centre (the "HKIAC"), and that the Hong Kong courts should restrain the winding-up petition in the Cayman Islands.
The Defendant submits that it will not be acting in breach of the arbitration agreement due to three reasons: (1) the terms of the TFA did not cover winding-up proceedings and there can be no breach; (2) the presentation of a winding-up petition by itself is not a breach of the arbitration agreement and an injunction would prejudice matters such as unfair preference and fraudulent conveyance; and (3) as a matter of Cayman law, any eventual winding-up order by the Cayman Court will not breach the parties' arbitration agreement.
Issue
The issue is whether the Defendant's intended presentation of a Cayman winding-up petition will be in breach of its obligation under Clause 43.1 on arbitration of the TFA ("Clause 43.1") and the Courts had to ascertain whether the Cayman winding-up proceedings would have the effect of finally resolving the dispute on the Plaintiff's indebtedness under the TFA within the meaning of Clause 43.1.
Clause 43.1 provides that:
"43.1 Arbitration (a) Any dispute, controversy or claim arising in any way out of or in connection with this Agreement (including (i) any issue regarding contractual, pre-contractual or non-contractual rights, obligations or liabilities and (ii) any issue as to the existence, validity, breach or termination of this Agreement) (a "Dispute") shall be referred to and finally resolved by binding arbitration administered by the Hong Kong International Arbitration Centre ("HKIAC")"
Analysis of Re Guy Lam and Sian Participation
Difference in approach
| Case | Jurisdiction & position | Legal test | Core principle |
|---|---|---|---|
| Re Guy Lam | Hong Kong (Court of Final Appeal) | Stay or dismiss winding-up proceedings in favour of arbitration unless abuse of process | If a bona fide dispute on substantial grounds exists, insolvency proceedings should typically yield to arbitration. The emphasis is on upholding arbitration even in insolvency despite the creditor's petition. |
| Sian Participation | Privy Council (BVI/UK law) | Apply the traditional test: creditor may proceed unless debtor shows a bona fide dispute on substantial grounds | The Court should first determine if the debt is genuinely disputed on substantial grounds before granting any stay. Insolvency proceedings themselves do not "determine" the substantive dispute, so no breach of arbitration clause occurs. |
In short, Re Guy Lam treated winding-up proceedings as potentially determining a dispute (thereby breaching an arbitration clause), while Sian Participation held they do not finally resolve the underlying dispute and thus can proceed without contravening the arbitration agreement.
Judgment
Mr Recorder William Wong SC found that: (1) Hong Kong Courts cannot give more conclusive force than what Cayman law would give in the Cayman winding-up proceedings to the treatment of the dispute about Plaintiff's indebtedness under the TFA; (2) the Cayman wind-up proceedings would not have the effect of finally resolving the dispute within the meaning of Clause 43.1; and (3) the Defendant in bringing the Cayman proceedings would not be in breach of its obligation under Clause 43.1 of not having the dispute finally resolved in a non-contractual forum.
Why Re Guy Lam was rejected
The plaintiff relied on Re Guy Lam to argue that the Cayman winding-up petition would "determine" the repayment dispute contrary to the arbitration clause – hence, it sought an anti-suit injunction from the Hong Kong Court. Mr Recorder William Wong SC disagreed for several structured reasons:
- Construction of Clause 43.1: The arbitration clause required that disputes be "finally resolved" by arbitration. The judge held that "final resolution" carries the meaning of decisions capable of creating res judicata or issue estoppel. Therefore, one must look to Cayman law to decide whether its winding-up process produces such finality.
- Application of Cayman Law: Cayman law (consistent with Sian Participation and Re BPGIC Holdings Ltd FSD 248 of 2023) views winding-up proceedings as dealing only with the threshold question – whether the debt is bona fide disputed on substantial grounds – not as a final resolution of the debt itself. Thus, they do not determine the parties' rights and obligations under the contract.
- No breach of arbitration clause: Because Cayman proceedings would not "finally resolve" the debt dispute, they fell outside the scope of the arbitration clause. Hence, there was no breach by the Defendant and no basis for an anti-suit injunction.
- Policy and merits: Mr Recorder William Wong SC emphasized comity and that the Cayman court was the Plaintiff's "home court." Moreover, the Plaintiff's substantive defence (based on alleged suspension under a "Covered Risk Application") was found hopeless and frivolous. Even if Re Guy Lam applied, the Court would exercise discretion against granting relief due to the weakness of that defence.
Takeaway
This judgment confirms that Hong Kong Courts will not enjoin foreign winding‑up proceedings unless those proceedings themselves determine the substantive disputes, thereby in breach of an arbitration agreement. Under Cayman law (and aligning with English and BVI position), such petitions do not finally resolve debt issues. This case also illustrates principled recognition of cross‑border comity and warns that anti‑suit injunctions are exceptional, particularly where a debtor's defenses lack genuine substance.
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