Anti-suit Injunctions

Whenever a dispute arises between two or more parties, a threshold issue is where the parties should resolve the dispute. Hong Kong law enables parties to a contract to agree to the forum or jurisdiction where disputes will be resolved. For example, parties can include an arbitration clause in their contract whereby they agree to resolve disputes through arbitration. Equally, for example, parties can include a clause in their contract where they agree to resolve disputes in the court’s of Hong Kong or another jurisdiction. In the absence of any agreement, Hong Kong law may provide for the dispute to be resolved in a specific forum or jurisdiction.

Where a party threatens or takes legal action in a forum or jurisdiction which another party does not think appropriate, the other party may apply to the court for an anti-suit injunction to restrain such legal action.

What is an Anti-Suit Injunction?

Anti-suit injunctions are court orders to prevent a party to a legal dispute from taking legal action against another party in a different forum or jurisdiction. Anti-suit injunctions prevent parallel proceedings in different forums or jurisdictions on the basis that either the parties have agreed to a specific forum or jurisdiction for resolution of disputes or, in the absence of such an agreement, the different forum or jurisdiction is forum non conveniens (i.e. not the most convenient forum).

Anti-suit injunctions are in personam orders, meaning that they are orders of a court directing a specific party not to commence or continue proceedings otherwise than in the agreed or most convenient forum or jurisdiction. Because anti-suit injunctions are made in personam, a party who breaches an anti-suit injunction may be held in contempt of court. The effectiveness of an anti-suit injunction primarily rests on the possibility of legal sanctions against the defendant for breach of an anti-suit injunction. Such legal sanctions may include an order for committal (i.e. imprisonment) or a writ of sequestration (i.e. seizure of property).

How Anti-Suit Injunctions Work

Hong Kong law draws a fundamental distinction between two categories of anti-suit injunctions:.

• Contractual: where foreign proceedings breach an arbitration agreement or an exclusive jurisdiction clause; and

• Non-Contractual: where no contractual breach is involved, the focus shifts to whether the foreign proceedings are vexatious, oppressive, or inconsistent with the principles of forum non conveniens.

Anti-Suit Injunctions and Arbitration Agreements

Where an applicant for an anti-suit injunction relies on an alleged breach of an arbitration agreement and asserts that the appropriate forum should be the contractually agreed arbitration process instead of the proceedings which the applicant seeks to restrain, Hong Kong courts have jurisdiction to grant such anti-suit injunction. The principles which the Court will consider are:

• Foreign proceedings instituted in breach of an arbitration agreement will ordinarily be restrained by the grant of an injunction, unless there are strong reasons shown to the contrary;

• There is no need to prove that the arbitral tribunal is the more convenient forum, since it is not a case of forum non conveniens;

• Nor is there any need for the Court to feel diffidence in granting the injunction, or to exercise the jurisdiction sparingly and with great caution, for fear of giving an appearance of undue interference with proceedings of a foreign court. This is because the restraint is directed against the party which has promised not to bring proceedings otherwise than in accordance with the arbitration agreement;

• The strong reasons must be sufficient to displace the other party's prima facie entitlement to enforce the arbitration agreement and all the facts and circumstances of the particular case are to be considered.

Anti-Suit Injunctions Against Winding-up Proceedings

The recent decision of the Court of Appeal in Hyalroute Communication Group Limited v Industrial and Commercial Bank of China (Asia) Limited [2025] HKCA 936 illustrates the approach of the Hong Kong courts in determining whether to grant an anti-suit injunction to restrain offshore winding-up proceedings taken by a creditor against the debtor where the creditor and debtor had entered into a binding arbitration agreement in relation to disputes as to the underlying debt.

In its decision dated October 21, 2025, the Court of Appeal refused the debtor’s renewed application for an anti-suit injunction to restrain the creditor from presenting any winding-up petition against it in the Cayman Islands (where the debtor was incorporated). The debtor’s initial application was refused by the Court of First Instance.

The Court of Appeal dismissed the debtor’s renewed application on the ground that there was no reasonably arguable appeal on the merits of the debtor’s defence against the subject debt, but left open the possibility of an alternative, wider interpretation of the subject Arbitration Agreement – hence the enigma of the effect of an agreement to arbitrate disputes in Hong Kong in the context of threatened offshore winding up proceedings continues.

Background

Two subsidiaries of the debtor borrowed a term loan from the creditor, with the debtor acting as guarantor. The loan agreement contained an arbitration clause which provided that any dispute, arising out of the loan agreement was be referred to and finally resolved by binding arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) (“Arbitration Agreement”).

The subsidiaries (borrowers) and the debtor (guarantor) defaulted on the loan.

The creditor served a statutory demand on the creditor pursuant to Cayman Island law, the place where the creditor was incorporated. The debtor applied to the Hong Kong court for an anti-suit injunction to restrain the creditor from presenting any winding-up petition against it in the Cayman Islands. Under Cayman Islands law, a debtor may resist a winding-up petition on the basis of a genuine dispute as to the debt giving rise to the winding-up petition.

Court of First Instance

The Hong Kong Court of First Instance held that Cayman Islands law followed English law, meaning that the Cayman court would only determine whether the debtor had a genuine dispute as to the subject debt as a threshold question. In other words, in deciding whether to grant the winding up petition, it would not be resolving the dispute. It would only be determining whether such a genuine dispute existed. As the Arbitration Agreement was invoked only for “final resolution” of disputes, it held that the creditor would not be in breach of the Arbitration Agreement by commencing the winding-up proceedings in the Cayman Islands. It thus dismissed the debtor’s application for the anti-suit injunction.

Hong Kong vs English approach

The Cayman approach (echoing the English approach) contrasts with the Hong Kong approach. Hong Kong courts have taken the view that winding up orders do have the effect of finally determining a dispute as to the subject debt. A grant of a winding-up order by a Hong Kong court is regarded as a conclusive determination of any dispute as to the debt. As a result, a Hong Kong court would normally grant an anti-suit injunction to restrain a winding-up proceeding in cases where a creditor and debtor have agreed to arbitrate any disputes as to the underlying debt.

However, even given the premises that a winding-up order finally resolves any dispute as to any underlying debt, Hong Kong courts do retain residual discretion to make a winding up order in the face of an arbitration agreement (or exclusive jurisdiction clause) relating to the underlying debt if there are countervailing factors such as, if (with reference to public policy considerations) rights of third parties (especially other creditors) will be affected by the insolvency of the debtor or the dispute borders on the “frivolous” or an “abuse of process”.

In any event, the Hong Kong Court of First Instance found that the debtor’s defence to the dispute was “hopeless and frivolous”, foreclosing any argument based on Hong Kong law.

Court of Appeal

The debtor appealed on the basis that the Court of First Instance’s narrow focus on the Arbitration Agreement requiring a “final resolution” was unjustified. In other words, the debtor argued that an interpretation that only disputes which would be finally resolved in a non-contractual forum would fall foul of the Arbitration Agreement unjustifiably limited the scope of the Arbitration Agreement. The Court of Appeal remarked that this ground was “reasonably arguable”, thus leaving the possibility for a wider interpretation of the Arbitration Agreement.

However, ultimately, the Court of Appeal held that the debtor had no reasonably arguable defence to the debt. In short, the Court of Appeal echoed the finding that the debtor’s defence was frivolous. In doing so, the Court of Appeal held that the merits of the debtor’s defence should be considered and are relevant to the exercise of the Court’s discretion as to whether to grant the anti-suit injunction.

As the Court of Appeal stated, the court does not consider its exercise of discretion to grant an anti-suit injunction in a vacuum. It is reasonable that the court will invariably have to look at the merits of the debtor’s defence before making any decision to exercise its discretion of whether or not to make a winding up order or to grant an anti-suit injunction.

Given the principle that arbitral proceedings should determine the merits of any dispute where the parties have agreed to arbitration, it remains to be seen as to the extent to which the court will look into the merits – arguably, there is a balance to be struck between looking into the merits at a high level to determine whether the defence is frivolous, versus meticulously assessing the merits to determine whether there is a bona fide dispute on substantial grounds.

Key Takeaways

While there are benefits to incorporating offshore companies (such as in the Cayman Islands or in the BVI), Hyalroute is an interesting case which sheds light onto a potential drawback – the possibility of Hong Kong courts being reluctant to grant anti-suit injunctions to restrain winding up proceedings taken by creditors against such offshore companies despite arbitration agreements to arbitrate disputes in Hong Kong.

Each arbitration agreement may be construed differently depending on the wording used. As suggested in Hyalroute, the construction of an arbitration agreement may have a decisive effect on the outcome in court litigation where a party seeks to restrain winding up proceedings against it by another party to such arbitration agreement by applying for an anti-suit injunction. Hence, it is imperative to seek legal advice at the drafting stage to ensure that the arbitration agreement best protects the parties’ interests and reflects the parties’ intentions.

Given the opinion of the Court of Appeal in Hyalroute that a wider interpretation of the subject Arbitration Agreement than the Court of First Instance adopted was reasonably arguable, it remains to be seen whether an arbitration agreement which provides for disputes to be arbitrated in Hong Kong can effectively assist a party to such agreement to obtain a Hong Kong court ordered anti-suit injunction to restrain offshore winding up proceedings before any dispute is arbitrated.