The Effects of Bankruptcy on Arbitration

The dissertation is devoted to the analysis of the effects of a party's bankruptcy on international arbitration proceedings. In particular, the author elaborates on the determination of the law applicable to such effects by arbitrators and state judges. There are several possible strategies for determining the applicable law and author derives the most common principles and mechanisms for all jurisdictions in this regard. In addition, the author analyzes the restrictions imposed on the possibility of referring a dispute to the arbitration. Such restrictions include limitation of party's capacity to participate in the arbitration (subjective non-arbitrability), considering dispute to be objectively non-arbitrable, and, finally, recognition of an arbitration agreement as invalid. The author concludes that disputes are most often recognized as objectively non-arbitrable. Recognizing disputes with insolvent parties as subjectively non-arbitrable or arbitration agreements invalid is rather an exception and is typical for outdated versions of legal acts and judicial and arbitral awards. Finally, the author explores the possibility of continuing arbitration after the initiation of insolvency proceedings. Based on accumulated case law and theoretical material, the author reaches the conclusion that even if the continuation of the arbitration proceedings is possible and the insolvency procedure does not automatically make the dispute non-arbitrable or the arbitration clause invalid, the arbitration proceedings are affected in any case. The effect of bankruptcy can be manifested in the temporary suspension of the arbitral proceedings, as well as in the narrowing of the arbitrators' competence solely to the declarative, but not condemnatory powers.