The Effect of Insolvency on Pending International Arbitration: What is and What Should Not Be

Journal of International Arbitration, Volume 32, Issue 5, pp. 511–542, 2015

Posted: 13 Oct 2015

See all articles by Deyan Draguiev

Deyan Draguiev

Honourable Society of the Inner Temple; Vienna International Arbitral Centre; World Intellectual Property Organization - Arbitration & Mediation Center; University of Manchester - School of Law; Saint Clement of Ohrid University of Sofia - Faculty of Law

Date Written: October 2015

Abstract

Situations in which the respondent in international arbitral proceedings is declared insolvent in its jurisdiction of incorporation while the arbitration is still pending are not uncommon. They raise a number of choice of law issues both in terms of substantive and procedural law. While the roots of arbitration lie in party autonomy, insolvency laws are often comprised of mandatory rules protecting the interests of different classes of stakeholders. This article attempts to devise an abstract model of the various choice of law and characterization problems regarding the cross-border effect of the insolvency and provide reasoned options and solutions for the arbitral tribunal faced with the interaction between insolvency and pending arbitration proceedings. It is suggested that it is part of the arbitrators’ duty to render an enforceable award to consider cautiously the effects of insolvency, especially if there is a risk of a clash with the mandatory framework of insolvency either at the seat of the arbitration or the likely place of enforcement of the award. The arguments are tested against recent case law of various national courts having reviewed the conflicts between arbitration and insolvency.

Keywords: international arbitration, international commercial arbitration, insolvency, bankruptcy, EU Regulation 1346/2000, corporate law, enforcement of arbitral awards, international commercial litigation

JEL Classification: K41, K33, K22

Suggested Citation

Draguiev, Deyan, The Effect of Insolvency on Pending International Arbitration: What is and What Should Not Be (October 2015). Journal of International Arbitration, Volume 32, Issue 5, pp. 511–542, 2015. Available at SSRN: https://ssrn.com/abstract=2673404

Deyan Draguiev (Contact Author)

Honourable Society of the Inner Temple ( email )

The Inner Temple
EC4Y
London
United Kingdom

Vienna International Arbitral Centre ( email )

Wiedner Hauptstraße 63
Vienna
Austria

World Intellectual Property Organization - Arbitration & Mediation Center ( email )

34, chemin des Colombettes
1211 Geneva 20
Switzerland

University of Manchester - School of Law

Manchester M13 9PL
United Kingdom

Saint Clement of Ohrid University of Sofia - Faculty of Law

15 Tsar Osvoboditel Blvd
15 Tsar Osvoboditel Blvd
Sofia, 1000
Bulgaria

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