Can Arbitration Be Used To Circumvent Statutory Insolvency Regimes?
Courts in Hong Kong support party autonomy and almost always give effect to arbitration clauses. Article 8 of the UNCITRAL Model Law (applicable to international arbitrations pursuant to section 6(1) of the Hong Kong Arbitration Ordinance) states that a court must stay a court action1 if there is a valid arbitration agreement and the party applies for the stay prior to that party’s first court filing on the substance of the dispute. The court may refuse to stay the court proceedings only if the arbitration agreement is null and void, inoperative or incapable of being performed. The court’s power of stay to uphold arbitration agreements is automatic and does not require an examination of the merits of the case. One exception however appears to be when a party opts to file a winding up petition. In such circumstances, recent decisions show that the courts will not stay valid winding up petitions in circumstances where there is also an underlying arbitration agreement. In a recent Hong Ko
