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Effect of Exclusive Jurisdiction Clauses in Insolvency Proceedings: Re Guy Kwok-hung Lam [2023] HKCFA 9

4 May 2023

In the latest ground breaking decision in Re Guy Kwok-hung Lam [2023] HKCFA 9, the Court of Final Appeal dismissed the appeal and laid to rest a long-standing debate on the vexing question concerning the impact, if any, exclusive jurisdiction clauses (EJCs) have on the presentation of bankruptcy petitions.

In short, the CFA endorsed the approach adopted by the majority of the Court of Appeal, holding that in an ordinary case where the underlying dispute of the petition debt was subject to an EJC, the Court should dismiss the petition unless there are countervailing factors, such as the risk of the debtor’s insolvency impacting third parties, the debtor’s reliance on disputes that border on the frivolous, or an occurrence of an abuse of process.

In so holding, the CFA noted that public policy considerations behind the bankruptcy regime carry less weight when the petition is brought only by one creditor with no evidence of the creditor community at risk.

This decision reflects the importance attached by the Courts to party autonomy and bargains freely struck between them. It will certainly have far-reaching implications on the bankruptcy landscape and ripple effects on the treatment of arbitration clauses in the context of winding-up and bankruptcy petitions.

Mr José-Antonio Maurellet SC, Mr Nick Luxton and Mr Brian Fan acted for the Appellant

Ms Rachel Lam SC, Mr Terrence Tai and Ms Clara Wong acted for the Respondent

This article was authored by Ms Clara Wong.