In 2008, the catastrophic effect of the credit crunch spread to most world economies. As in previous recessions, insolvency has affected increasing numbers of individuals and companies, and parties to agreements to arbitrate are increasingly likely to find themselves dealing with insolvent companies. What are the issues to bear in mind?

1/ Prior insolvency

Through the years, arbitration as a mode of dispute resolution has gained prominence because it promotes party autonomy with minimal court intervention, amongst others.

An examination of the impact of an insolvent respondent in an arbitration.

In 2008, the catastrophic effect of the credit crunch spread to most world economies, touching governments, companies and individuals alike. As in previous recessions, insolvency is affecting increasing numbers of individuals and companies. UK government figures show that individual insolvencies went up by 8.8% in the third quarter of 2008, with corporate liquidations up by 10.5% in the same period. Commentators predict that this trend will only accelerate through 2009.

Summary

On 1 July 2009, UNCITRAL adopted the Practice Guide on Cross-Border Insolvency Cooperation. The Practice Guide provides a useful reference source on some practical aspects of cooperation and communication to deal with many of the conflicts and tensions between stakeholders and jurisdictions inevitable in cross-border cases. To ease these tensions, it is often essential for creditors and, importantly, the courts concerned to reach agreement about how the process will be handled.

International context

The Hong Kong Court of First Instance has declined to prioritise an arbitration agreement where a debtor intended to dispute the existence of a debt without proving there was a bona fide dispute on substantial grounds.

Dayang (HK) Marine Shipping Co., Ltd v. Asia Master Logistics Ltd [2020] HKCFI 311; HCCW 14/2019

Background

Reconsidering the Lasmos approach to winding-up petitions involving arbitration clauses.

近年市场竞争及经营环境不确定性持续增加的情况下，不少企业有可能面临营运及财务困难，导致债务违约的情况有上升的趋势。如果债务人资不抵债，债权人有权利用破产清盘的程序接管债务人的资产并尽量实现回收最大化。根据香港破产管理署公布的统计数字，在2019年1月至10月期间，强制公司清盘案及破产案呈请的数字达到7,062宗。我们藉此介绍近期香港法院就破产清盘颁发的两个重要判决。

1. 仲裁协议的存在是否会影响破产清盘程序的开展？

香港上诉法院近期在But Ka Chon v Interactive Brokers LLC [2019] HKCA 873一案中，考虑了债权相关的合同中约定有仲裁条款管辖的情况下，债权人利用法院破产清盘程序的权利会否受限。由于很多的商业协议均载有仲裁条款，法院的判决对债权人的权利及可采取的救济手段有重要意义。

在该案中，上诉人（证券公司客户，即债务人）与被上诉人（证券公司，即债权人）签订的客户协议约定双方之间的争议以仲裁解决。由于上诉人没有偿还保证金账户的欠款，债权人在香港法院申请上诉人破产。上诉人以双方已经约定仲裁为其中一个理由，请求上诉法院撤销债权人发出的法定偿债书。

The Court of Appeal (CA) recently dismissed an appeal to set aside a statutory demand arising out of the failure to pay margin calls in But Ka Chon v. Interactive Brokers LLC (02/08/2019, CACV 611/2018) [2019] HKCA 873, despite the presence of a mandatory arbitration clause. Obiter comments of the CA put into question the recent case law in Re Southwest Pacific Bauxite (HK) Ltd [2018] 2 HKLRD 449 (the “Lasmos case“) that a petition should “generally be dismissed” in the face of a mandatory arbitration clause.  

Some key points 

Hong Kong Court Addresses Interplay Between Arbitration and Insolvency

The Hong Kong Court of Appeal has suggested that a previous Court decision may have overstepped the mark by suggesting that an arbitration clause in a client agreement should generally take precedence over a creditor's right to present a winding-up petition.