In the first three parts of this series I wrote about innovative uses of international arbitration in other forms of disputes.
After outlining a proposal by former United States Bankruptcy Judge Allan Gropper (The Arbitration of Cross-Border Business Insolvencies), I considered why it may be that parties to insolvency proceedings are not taking up arbitration, what may be some drawbacks to the concept as articulated to date and possible methods for obtaining pre-insolvency consent to arbitrate international insolvency disputes.
In this final article I conclude that while there are a host of challenges to overcome in developing a workable and acceptable arbitration scheme for cross-border insolvency matters, the challenges appear to be surmountable with creativity and perseverance, such as the Judicial Insolvency Network (JIN) arbitration clause and JIN Basic Rules for Insolvency Arbitration.
Terminology for process
Considering the public nature of insolvency proceedings and the public interest in them, it may be preferable to structure an arbitration regime using terminology specific to these proceedings, so long as it is clear legally that the decision is an award to which the New York Convention applies (in other words, that the process is arbitration).
As previously mentioned, in the investor-state arbitration world there is significant discontent in some quarters with the use of arbitration to determine disputes which have a public interest.
Subject to the above concern about the New York Convention being applicable, the term “arbitration” might not be used generally but rather a term such as “adjudication.” This would need to be considered more carefully to ensure that recognition and enforcement under the New York Convention is not jeopardized. It may be that calling it insolvency arbitration would suffice, as it would become known as a form of non-private, non-confidential arbitration with other special features.
International insolvency courts/tribunals
Each adjudication would be by a tribunal known in each instance as an International Insolvency Court (IIC) or an International Insolvency Tribunal (IIT) (that is, a special arbitral tribunal established for the disputes or disputes submitted to it in connection with an insolvency.
JIN Basic Rules
There could be basic rules that set out the rules for the arbitration in a manner similar to what is done by the UNCITRAL Arbitration Rules or the rules of international arbitral institutions, covering the same kinds of topics but in ways suited to the situations that arise in the types of international insolvency disputes to be arbitrated.
The main areas requiring special innovation in the JIN Basic Rules would include the following:
The prize worth the candle
The question now is whether the benefits of having one arbitration proceeding to determine international insolvency disputes are worth pursuing.
While there are a host of challenges to overcome in developing a workable and acceptable arbitration scheme for cross-border insolvency matters, the challenges appear to be surmountable with creativity and perseverance.
As Judge Gropper pointed out, it is well worth pursuing, through the mechanism of international arbitration, the goal of having a single proceeding to co-ordinate the insolvency of a multinational enterprise and provide centralized control over its worldwide assets, the possibility of a reorganization and a single, uniform distribution to creditors of the same priority.
The prize is worth the candle. Let us begin.
This is part four of a four-part series. Read part one: International arbitration gets innovative: Cross-border insolvencies; part two: International arbitration gets innovative: Privacy, confidentiality and appeals; part three: International arbitration gets innovative: Overcoming problems.
The Honourable Barry Leon is an independent arbitrator and mediator with Arbitration Place, Arbitrators@33BedfordRow (London) and Caribbean Arbitrators. He was presiding judge of BVI's Commercial Court (2015-2018) and chair of ICC Canada's Arbitration Committee.
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