Where commercial relationships are governed by multiple related contracts, each containing its own arbitration clause, disputes may arise as to which clause should govern a given claim. This issue becomes particularly significant in investment structures where different agreements are executed at different stages and involve overlapping parties and obligations. The High Court of Hong Kong in XX and Ors v ZZ [2025] HKCFI 3089 addressed this precise question, offering guidance on how courts approach competing arbitration clauses in a single interconnected transaction.
The dispute concerned ten plaintiff companies and a defendant who was a preferred shareholder. Their relationship was governed by two Share Purchase Agreements (SPAs) executed four years apart. The 2017 SPA was the original investment agreement between the defendant and all ten plaintiffs. It contained warranties, indemnity provisions, and an arbitration clause. The 2021 SPA, by contrast, involved only the first and second plaintiffs and the defendant. It introduced a revised exit arrangement, including a put option for share repurchase, and contained a separate arbitration clause with different terms.
A dispute arose when the defendant alleged that the plaintiffs had failed to repurchase its shares under the 2021 SPA. However, rather than proceeding solely under that agreement, the defendant commenced arbitration under the 2017 SPA, advancing claims including indemnification for alleged breaches of warranties. An arbitral tribunal was therefore constituted under the 2017 arbitration clause.
The plaintiffs challenged jurisdiction, arguing that the substance of the dispute fell under the 2021 SPA and that the tribunal constituted under the 2017 SPA lacked authority. The Court rejected this challenge and upheld the tribunal’s jurisdiction. In doing so, the Court first adopted a broad and purposive approach to contractual interpretation, examining the parties’ intentions, the structure of the transaction, and the nature of the claims. It held that the 2021 SPA did not expressly displace or supersede the dispute resolution mechanism under the 2017 SPA.
The Court then applied a “centre of gravity” analysis, focusing on the agreement most closely connected to the substance of the dispute. It found that the core claims, namely warranty breaches and indemnification, stemmed primarily from the 2017 SPA, making it the governing agreement for arbitration purposes.
The Court further noted that all ten plaintiffs were parties to the 2017 SPA, while only some were parties to the 2021 SPA. Allowing the dispute to proceed solely under the later agreement would risk fragmented proceedings and inconsistent outcomes, which would be commercially impractical. Ultimately, the Court reaffirmed that where multiple contracts form part of a single commercial arrangement, arbitration clauses must be interpreted in context, with priority given to coherence, efficiency, and commercial common sense.
