Arbitration chance in Singapore court: go to arbitration, do not wind up (yet), do not collect a stay

Earlier this year, the Singapore Court of Appeal [1] reaffirmed the position as to how the Singapore courts ought to deal with disputed debts arising from an agreement between parties containing an arbitration clause. The Singapore International Arbitration Centre has also released its Restructuring and Insolvency Arbitration Protocol (the "SIAC Insolvency Protocol") to deal with the resolution of restructuring and insolvency-related disputes.

This article explores the impact of these developments, when arbitration and insolvency intersect, on your dispute under Singapore law.

The Significance of Singapore Commodities Group Co Pte Ltd v Founder Group (Hong Kong) Ltd [2026] SGCA 24

A. Background Facts

In Singapore Commodities, the dispute arose from a purchase contract between Singapore Commodities Group Co Pte Ltd (the appellant) and Founder Group (Hong Kong) Ltd (the respondent, in liquidation) for the sale of copper cathodes. The contract was governed by PRC law and contained an arbitration clause.

When Founder Group’s liquidators discovered an alleged debt owed by the appellant, they issued a statutory demand under the Insolvency, Restructuring and Dissolution Act 2018 ("IRDA"). The appellant resisted payment and instead commenced arbitration, arguing that:

• The contract was null and void under PRC law, having been entered into only for bookkeeping purposes.
• No copper cathodes were ever delivered.

The arbitration ended inconclusively with the tribunal rejecting the appellant’s first argument but noted the respondent had not proven delivery. In other words, the tribunal declined to decide definitively whether the alleged debt existed or not. Meanwhile, the respondent pursued a winding-up application, claiming the appellant had admitted the debt in audit confirmation letters and financial statements.

The Singapore High Court initially agreed with the respondent, finding an abuse of process in the appellant’s denial of the debt, and ordered the winding up of the appellant. On appeal, however, the Court of Appeal reversed the High Court's decision, holding that the appellant had not acted in abuse of process and that the respondent failed to establish its standing as a creditor.

B. Key Legal Principles

The Court of Appeal clarified several important points for claimant-creditors:

• Standing of creditors: To bring a winding-up application, a claimant must first establish standing as a creditor under s 124(1)(c) IRDA. If the debt is disputed, standing is not automatically established.

• Disputed debts:
o If no arbitration agreement exists, courts apply the triable issue test (whether the debtor raises a bona fide and substantial dispute).
o If an arbitration agreement exists, courts apply a prima facie standard and generally defer to arbitration.

• Abuse of process:
o A debtor may be found to abuse process if it resiles from a clear and unequivocal admission of liability and quantum without a convincing reason.
o In this case, the audit confirmation letters and financial statements did not amount to unequivocal admissions under PRC law.

• Contingent creditors: The respondent could not rely on contingent creditor status, as whether the debt existed was a matter of past fact, not a future contingency.

C. Importance of the Decision

This ruling is pivotal for creditors in Singapore and beyond:

• Reinforces arbitration agreements: Creditors cannot bypass arbitration by resorting to winding-up proceedings when debts are disputed.

• Protects debtors from pressure tactics: The court warned against using winding-up applications as leverage to compel payment of disputed debts.

• Clarifies abuse of process safeguards: Only unequivocal admissions can ground abuse of process; equivocal documents like audit confirmations are insufficient.• Sets precedent for contingent creditor claims: Creditors must show a genuine future contingency, not rely on unresolved past facts.

D. Why Creditors Should Take Note

The Court of Appeal’s decision underscores that winding-up proceedings are not a shortcut to debt recovery. Creditors must establish debts conclusively, often through arbitration or litigation, and avoid speculative or oppressive use of insolvency proceedings.

The Court of Appeal also reiterated that courts will likely award indemnity costs against unreasonable conduct, as happened here.

Unless a claimant-creditor has standing, the court will have no basis to exercise its winding-up jurisdiction to make such an order against the defendant, and the winding-up application will be ordinarily dismissed.

II. The SIAC Insolvency Protocol

The SIAC Insolvency Protocol introduces a specially designed mechanism for the resolution of restructuring and insolvency-related disputes that parties may choose to adopt. The Protocol adapts SIAC Arbitration Rules with modifications to increase efficiency and reduce the time taken for the arbitration.

The SIAC Insolvency Protocol applies to a wide range of disputes; it allows the parties to consent to arbitrating almost every dispute relating to or potentially concerning restructuring and insolvency and is also available in situations of restructuring of debt of solvent entities and persons, or where the dispute being referred to arbitration does not relate to arise out of or in anticipation of any insolvency proceedings. However, the SIAC Insolvency Protocol is only applicable when the subject matter of the dispute is arbitrable, i.e., when the claimant is seeking damages or an order other than a direct winding-up or judicial management order, or when the claim is carved out from the statutory moratorium.

With the new SIAC Insolvency Protocol, the Singapore courts may be more willing to grant a carve-out from the statutory moratorium and the statutory proof of debt regime. In the recent case of Sapura Fabrication Sdn Bhd v GAS and another appeal ("Sapura"), [2] the Court of Appeal observed that the SIAC Insolvency Protocol “may facilitate the court's task in deciding whether to grant a carve-out” and “attenuate the court's concern that the arbitration would cause undue delay, expense and distraction to the insolvency proceeding”.

For example, before the SIAC Insolvency Protocol, the courts need to consider whether the grant of carve-out and the pursuit of relevant claims in arbitration would adversely impact or delay the existing proceeding, including the additional time and costs that may incur. [3] Therefore, the relative lengthy process and high cost of standard arbitration proceedings may defer the courts from granting a carve-out and referring the matter to arbitration.

The SIAC Insolvency Protocol mitigates those concerns by providing truncated timeline and simplified procedure. For instance, the case management conference is expected to be conducted within 7 days after constitution of the tribunal, and the final award of the arbitration shall be issued within 6 months after constitution of the tribunal. Moreover, the default is that a sole arbitrator will be appointed within 14 days from commencement in any arbitration under the SIAC Insolvency Protocol, which ensures procedural efficiency and reduces costs. As the SIAC Insolvency Protocol addresses the courts' concern for orderly administration of the restructuring, [4] it becomes more conducive for the courts to grant a carve-out and refer the matter to arbitration.

Both developments strengthen the integrity of Singapore’s insolvency and arbitration framework by balancing creditor rights with debtor protections, ensuring that winding-up remains a remedy of last resort rather than a tool of commercial pressure and holding parties to their contractual bargain of resolving their dispute through arbitration.

If you are unsure of the correct step to take, please do not hesitate to reach out to our specialist teams in RPC. 

1. Singapore Commodities Group Co., Pts. Ltd. v Founder Group (Hong Kong) Limited (in liquidation) [2026] SGCA 24 ("Singapore Commodities")
2. [2025] 1 SLR 492 at [107]
3. Sapura at [85]-[87]
4. Sapura at [59]