Hong Kong Court of Final Appeal Rules on Exclusive Jurisdiction Clauses in Insolvency

A bankruptcy petition should not proceed if the debt is disputed and subject to an exclusive jurisdiction clause in favour of a foreign court.

The Hong Kong Court of Final Appeal (CFA) has ruled that if a bankruptcy petition is disputed and the disputed debt arises from an agreement containing an exclusive jurisdiction clause (EJC) in favour of a foreign court, the dispute should be resolved in accordance with that EJC. In particular, the Hong Kong courts should decline jurisdiction in a bankruptcy (and by extension, a winding-up) petition pending resolution of the dispute in a foreign court, absent countervailing factors such as the risk of the debtor’s insolvency affecting other parties, the debtor’s reliance on a frivolous defence, or an abuse of process.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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