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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