A Study Of The Legal Issues At The Intersection Of Cross-Border Insolvency And Pending International Commercial Arbitration

The global economy is in the doldrums due to the outbreak of COVID-19 and many businesses are facing bankruptcy due to the overwhelming burden.At the same time,international arbitration remains the preferred method of dispute resolution for parties to cross-border commercial disputes.Against this backdrop,the number of cases where parties declare bankruptcy while international commercial arbitration proceedings are in progress has begun to increase.International commercial arbitration proceedings differ from cross-border insolvency proceedings in terms of their value,with the former focusing on meaningful autonomy and the primacy of the individual and the arbitration agreement,while the latter have centralized jurisdiction as the institutional content,highlighting the public interest of society,attaching importance to the principle of equality of creditors and,to a certain extent,demonstrating the extraterritoriality of their application.It is because the two procedural values are different that they exhibit a conflict of procedures.In order to provide a certain degree of predictability to an international arbitration proceeding faced with the insolvency of a party in the course of that proceeding,a neutral and coherent approach should be summarised to help determine the impact of facts involving the insolvency of a party on the international commercial arbitration proceedings.This article focuses on the important legal issues facing arbitrators when ongoing international commercial arbitration proceedings meet insolvency,namely whether the insolvent debtor has the capacity to continue to participate in the arbitration,whether the arbitral tribunal can decide on its own whether to proceed with the arbitration and whether the award ultimately rendered is enforceable.And the article is divided into the following parts.The first part analyses whether cross-border insolvency has an impact on the parties involved in the arbitration proceedings.The paper starts with the legal application of the law for determining the capacity of the parties,with some countries directing to the provisions of personal law on the capacity of legal persons through conflict of norms guidance,while some countries interpret the provisions of insolvency law where the insolvency invalidates the arbitration agreement as the parties’ incapacity to participate in the arbitration.A comparison of the national provisions on capacity reveals that,although they differ,they all affirm that the insolvency representative continues to participate in legal proceedings in place of the insolvent debtor,thereby compensating for the debtor’s capacity.The second part starts with the impact of cross-border insolvency on ongoing arbitration proceedings.The most difficult issue for arbitral tribunals to deal with when faced with the intersection of the two is how to determine the extraterritorial effects of insolvency.The paper looks at the recognition of insolvency,the impact of insolvency on arbitral proceedings,and the factors that courts and arbitral tribunals consider when deciding whether to proceed with arbitration,and analyses the law that arbitral tribunals should adopt to guide the conduct of arbitral proceedings.Where insolvency intersects with pending international commercial arbitration proceedings,the main position should be in favor of the continuation of the arbitration proceedings,unless the place of arbitration overlaps with the seat of the insolvency proceedings,based on the application of the law of the place of arbitration for the purposes of judicial review.The third part addresses the enforceability of an arbitral award in the event of the insolvency of a party.This issue covers both the obstacles faced when recognizing and enforcing an arbitral award and the functional change of an arbitral award in relation to the integration of insolvency proceedings.It analyses the existence of grounds for setting aside or not recognizing and enforcing different types of awards and the procedures to be followed for their specific enforcement.In the case of domestic arbitral awards,the laws and procedures for enforcing arbitral awards in a country are usually set out in national arbitration laws,while in the case of insolvency regimes,the relevant provisions of the insolvency law are taken into account;in the case of foreign arbitral awards,in most jurisdictions,the arbitral tribunal does not take into account the automatic stay in insolvency when faced with the intersection of insolvency and arbitral proceedings,and the act of proceeding with the arbitration does not affect the recognition and enforcement of the award.The continuation of the arbitration does not affect the recognition and enforcement of the award.In the fourth part,on the basis of an analysis of the existing system in China,and taking into account the special issues of the capacity of the parties,the continuation or otherwise of the arbitration proceedings and the possibility of enforcement of the award,the existing practice of dealing with issues involving the intersection of arbitration proceedings and insolvency proceedings is discussed in different contexts,and the concerns of the arbitral tribunal and the court in different situations are raised.The primary concern of arbitral tribunals in administering arbitration proceedings is to ensure that the arbitration process meets the requirements of legitimacy and legality by guaranteeing the insolvency representative’s smooth access to the arbitration process and his or her right to be heard.The courts,in dealing with the intersection of insolvency and arbitration proceedings,mainly play a role at the stage of recognition and enforcement of the award,and should interpret the grounds for setting aside or nonrecognition and enforcement provided for in our laws and the New York Convention in a restrictive manner,only when the arbitral tribunal disregards the automatic stay clause in insolvency,resulting in substantial impairment of the insolvency representative’s right to be heard or violating the basic principles of our laws,sovereign security and The adverse consequences of setting aside or not recognizing and enforcing an award will only arise if the arbitral tribunal’s disregard of the automatic stay in bankruptcy results in substantial prejudice to the insolvency representative’s right to be heard or violates fundamental principles of our law,sovereign security and public order and morality.