The COVID-19 pandemic is upending economies globally, causing a wave of unexpected insolvencies. The businesses that remain standing may face the question: will my insolvency or that of my counterparty prevent me from resolving disputes by arbitration?

The short answer is no. However, depending on the jurisdiction, there will be some limitations on what can be decided by arbitration. We have therefore briefly summarized some of the issues and challenges that a party may face under US law in the context of an arbitration arising from its own or an opposing party’s insolvency.

On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the Act) came into force. The Act marks the most significant insolvency reforms in a generation. It doesn’t just deal with measures required to tide companies through the COVID-19 pandemic but includes far-reaching wholesale reforms to the UK’s restructuring toolbox, including the introduction of the restructuring plan, which has the potential to be a gamechanger for restructurings.

There are two temporary measures dealing with COVID-19 impacts on companies specifically:

We reported in our previous blog published on 15 June 2020 (“The Corporate Insolvency and Governance Bill – a pensions perspective”) that a number of pensions concerns had been raised about the Corporate Insolvency and Governance Bill (the Bill). As a result, the Bill was subject to significant amendment and debate from a pensions perspective in the House of Lords.

In the recent decision of Bresco Electrical Services Limited (in liquidation) v Michael J Lonsdale (Electrical) Limited, the Supreme Court has overturned the Court of Appeal in upholding the practicality of adjudication by insolvent companies.

Landlords are receiving a deluge of requests to provide rent relief to commercial tenants whose operations have either been closed or substantially restricted as a result of state and local governments’ COVID-19 stay-at-home orders and related restrictions. Some tenants are using the threat of a bankruptcy filing as leverage to obtain these concessions. Meanwhile, landlords are facing their own challenges with mortgage lenders and servicers as they try to service real estate loans with limited available cash.

Introduction

The past decade has witnessed a significant increase in cross-border commerce involving Chinese companies. If these ventures fail, a common dilemma for our clients has been which jurisdiction they should focus their efforts on when enforcing their rights. As we explain below, the success of a cross-jurisdictional recovery claim can often depend on the important tactical decision of focusing on the correct jurisdiction(s) at the outset.

Identify all relevant jurisdictions

The new Corporate Insolvency and Governance Bill (the Bill) has been introduced into the UK Parliament and proposes significant changes to insolvency law, including:

As COVID-19 spread across the globe like wild fire, many of its effects—including an economic downturn and emerging disputes risks—are being felt across markets.

In March 2020, the UK government announced that changes will be made to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency.

The legislation implementing this has now been laid before Parliament in the Corporate Insolvency and Governance Bill. This includes measures intended to tide companies through the COVID-19 pandemic, as well as far-reaching wholesale reforms to the UK’s restructuring toolbox.

Goulston & Storrs bankruptcy attorney Doug Rosner recently collaborated with Thomson Reuters to create a three-part video series regarding alternative solutions to the financial problems of distressed companies. This summary highlights the key elements to a successful out-of-court restructuring (part two of the series).