Background
The decision concerns an application under s. 34 of the Hong Kong Arbitration Ordinance to set aside an arbitral tribunal’s positive ruling regarding its jurisdiction. The challenge to the tribunal’s ruling was brought by two plaintiffs:
- a Cayman Islands company (the Company) which was the subject of the underlying dispute and a respondent to the arbitration proceedings; and
- a British Virgin Islands company which was also a respondent in the arbitration and the owner of 60% of the shares in the Company (the Majority Shareholder).
The defendant to the application and the claimant in the arbitration proceedings, also a company registered in the Cayman Islands, held the remaining 40% of the shares in the Company (the Minority Shareholder).
The Company operated as a joint venture, with the relationship between the two shareholders governed by two share subscription agreements and a shareholders’ agreement (the Agreements). Each of the Agreements were governed by Hong Kong law and contained arbitration clauses in identical terms providing for the referral of “[a]ny dispute, controversy, difference or claim arising out of or relation to the Agreement, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relation to it” to arbitration in Hong Kong (the Arbitration Clause).
The Minority Shareholder commenced arbitration in October 2023, alleging:
- unfairly oppressive and/or discriminatory conduct by the Majority Shareholder (the Oppression Claims); and
- loss of trust and confidence in the Majority Shareholder’s management of the Company’s affairs (the Loss of Confidence Claims).
The Minority Shareholder sought declarations in relation to both sets of claims, relying on a number of alleged breaches of the Agreements.[1]
In June 2024, the Company and the Majority Shareholder sought to challenge the tribunal’s jurisdiction within the arbitration on the basis that:
- the Oppression Claims fell within the exclusive jurisdiction of the Grand Court of the Cayman Islands to wind up Cayman Islands incorporated companies on just and equitable grounds and were therefore non-arbitrable; and
- the Loss of Confidence Claims fell outside the scope of the Arbitration Clause.
In August 2024, the tribunal rejected the challenge to its jurisdiction. The applicants sought to set aside the decision before the High Court of Hong Kong. The application was heard by Mimmie Chan J in March 2025, with her Ladyship giving judgment later that month.
The Oppression Claims
In deciding whether the Oppression Claims were arbitrable, the High Court of Hong Kong relied heavily upon the reasoning of the JCPC in FamilyMart. In that case, which was an appeal from the Cayman Islands Court of Appeal, the Board determined that, under Cayman Islands law, while an arbitral tribunal is unable to make a winding up order (with such matters being within the Cayman Islands Court’s exclusive jurisdiction), “[m]atters, such as whether one party has breached its obligations under a shareholders’ agreement or whether equitable rights arising out of the relationship between the parties have been flouted, are arbitrable.”[2]
Following FamilyMart, the High Court of Hong Kong found that the Oppression Claims were arbitrable.[3] The Court rejected an argument made on behalf of the Company and the Majority Shareholder that an arbitral tribunal would be precluded from determining factual and legal issues where those determinations would serve as “precursors” to whether the relevant court should exercise its jurisdiction to wind up a company.[4]
Importantly, the Court held that, as was observed in FamilyMart,[5] an arbitral tribunal’s jurisdiction to make such findings does not preclude a court from conducting its own determination as to whether a winding up order should ultimately be made on just and equitable grounds.[6]
The Loss of Confidence Claims
Although not disputed as arbitrable, the Company and the Majority Shareholder argued that the Loss of Confidence Claims were outside the scope of the Arbitration Clause. In attempting to do so, they sought to rely upon the High Court of Hong Kong’s decision in Dickson Holdings Enterprise Co Ltd v Moravia CV [2019] HKCFI 1424; [2019] HKCLC 397 (Dickson Holdings).
The decision in Dickson Holdings concerned an unfair prejudice petition based on alleged breaches of a company’s articles of association and the fiduciary duties of the company’s directors, but not on any alleged breaches of the relevant shareholder agreement entered into between the parties to that case which contained the arbitration clause upon which respondents to the petition sought to rely. In rejecting an application seeking a stay of the petition in favour of arbitration, Godfrey Lam J (as his Lordship then was) observed “[i]t has to be borne in mind that the arbitration clause in this case applies to disputes arising out of or relating to the Shareholders Agreement … not arising out of or relating to the affairs of the Company” and that the allegations regarding the breaches of the company’s articles and of the directors’ fiduciary duties did not fall within the arbitration clause.[7]
In PI 1 & PI 2, Mimmie Chan J distinguished the reasoning in Dickson Holdings, on two grounds: that the Arbitration Clause was more broadly worded than the clause considered in Dickson Holdings given that it covered “tortious claims, as well as disputes in respect of any other obligations which are not purely contractual” and (ii) that the allegations relied on in support of the Loss of Confidence Claims included alleged breaches of the contractual obligations under the Agreements, which were plainly within the ambit of the Arbitration Clause.[8]
The High Court of Hong Kong was not convinced that the absence of language expressly referring to disputes relating to the “affairs of the company” to arbitration (a stipulation which is often included in arbitration clauses within shareholders’ agreements), excluded the Loss of Confidence Claims.[9] Rather, it was clear that the alleged breaches of the Agreements relied on in support of the Loss of Confidence Claims fell within the scope of the Arbitration Clause.[10]
Conclusion
The High Court of Hong Kong dismissed the jurisdictional challenge and awarded indemnity costs to the Minority Shareholder.[11]
Although Mimmie Chan J’s decision is consistent with previous Hong Kong judgments concerning the arbitrability of underlying factual and legal issues in this context,[12] the decision appears to be the first Hong Kong judgment to expressly adopt and apply the JCPC’s decision in FamilyMart. As FamilyMart is a decision of the JCPC concerning Cayman Islands law, there is little doubt that, had the Grand Court of the Cayman Islands been called upon to determine the challenge to the tribunal’s jurisdiction (in the context of an application for an anti-suit injunction), it would have reached the same conclusion. Given that it is commonplace for Hong Kong based businesses and joint ventures to utilise Cayman Islands corporate structures, the decision provides a reinforced level of certainty that the courts of the Cayman Islands and Hong Kong will adopt a consistent pro-arbitration approach.
It is noteworthy that the Minority Shareholder’s legal counsel in the arbitration proceedings amended their pleadings during the course of the arbitration to remove a claim that the minority shareholder was entitled to relief under section 95(3) of the Cayman Islands Companies Act.[13] With that amendment made, the relief sought in the arbitration was limited to declaratory relief only, with the likely intention that any declarations obtained might then be relied upon in support of substantive relief to be pursued against the Company in proceedings to be commenced following the arbitration. The interesting question remains as to what weight will be given to such declarations in a case such as this by whichever court subsequently tasked with determining whether to grant the substantive relief sought.
[1] These complaints included allegations relating to unauthorised remuneration of the Majority Shareholder’s ultimate beneficial owner, unauthorised third-party transactions, failure to provide financial and business information, failure to allow the Minority Shareholder’s appointed directors to attend board meetings and failure to comply with contractual “Exit Notices”.
[2] FamilyMart China Holdings Co Ltd v Ting Chuan (Cayman Islands) Holding Corp [2023] UKPC 33; [2024] Bus LR 190 at [78].
[3] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [42].
[4] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [25]-[29]. The Court observed that this argument adopted the reasoning of Moses JA in FamilyMart China Holdings Company Limited v Ting Chuan (Cayman Islands) Holding Corporation 2020 2 CILR 201 and that this reasoning was not adopted by the Board on appeal.
[5] See FamilyMart China Holdings Co Ltd v Ting Chuan (Cayman Islands) Holding Corp [2023] UKPC 33; [2024] Bus LR 190 at [99].
[6] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [39]-[42].
[7] Dickson Holdings Enterprise Co Ltd v Moravia CV [2019] HKCFI 1424; [2019] HKCLC 397 at [40]-[41].
[8] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [49]-[51].
[9] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [52].
[10] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [52].
[11] PI 1 & PI 2 v MR [2025] HKCFI 1110 at [42], [56]-[57].
[12] See for example, the decisions in Quiksilver Greater China Limited v Quiksilver Glorious Sun JV Limited [2014] 4 HKLRD 759 and China Europe International Business School v Chengwei Evergreen Capital LP [2021] HKCFI 3513, both of which were cited in FamilyMart.
[13] Section 95(3) of the Cayman Islands Companies Act contains a range of remedies that the Grand Court may grant as an alternative to winding up of a company on the just and equitable ground.
