Brazilian companies have increasingly chosen arbitration as their preferred method for resolving domestic and international disputes. Now the impact of COVID-19 in Brazil has caused a sharp increase in insolvencies, and there is no expectation of a quick turnaround in the next months and, possibly, years to come. What, then, are the potential effects of Brazilian insolvency proceedings on arbitrations in Brazil and abroad? We provide our insights in the document below.
Empresas brasileiras têm optado por resolver disputas nacionais e internacionais via arbitragem. Mais recentemente, os impactos econômicos do COVID-19 no Brasil têm causado um aumento considerável do número de recuperações judiciais e falências. Sem expectativa de que essa tendência seja revertida dentro dos próximos meses e, possivelmente, anos, é oportuno indagar: quais seriam os efeitos causados pela nova onda de insolvências em arbitragens brasileiras e internacionais? Veja nossos comentários no documento abaixo.
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.
The German Federal Government is currently working on a Law for the Mitigation of the consequences of the COVID-19 pandemic in the areas of Insolvency, Corporate, Civil and Criminal Procedure Law. Ministry officials are working through the weekend with the goal to get the legislation finalized by both chambers of parliament as early as possible next week.
On January 7, 2013, the Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that a dispute concerning the debtors’ use of cash collateral was not subject to arbitration, notwithstanding a broad arbitration clause in the parties’ underlying agreement, because the decision to allow a debtor to use cash collateral constituted a “core” issue and was a fundamental aspect of the bankruptcy process. In re Hostess Brands, Inc., No. 12-22052 (RDD), 2013 WL 82914 (Bankr. S.D.N.Y. Jan. 7, 2013).
Background
In Bethlehem Steel Corp. v. Moran Towing Corp. (In re Bethlehem Steel Corp.),1 the United States Bankruptcy Court for the Southern District of New York held that preferential transfer claims were not arbitrable. The Court reasoned that because the avoidance powers did not belong to the debtor, but rather were creditor claims that could only be brought by a trustee or debtor-in-possession, they were not subject to the arbitration clauses in contracts to which the creditors were not parties.
The Dispute and the Arbitration Clauses
2020 was a transformative year for the consumer financial services world. As we navigated an unprecedented volume of industry regulation, Troutman Pepper leveraged our decades of experience and legal know how to help clients find successful resolutions and stay ahead of the compliance curve.
APPLICATIONS FOR LEAVE TO APPEAL DISMISSED
37997 St. James No.1 Inc. v. Ed Vanderwindt, Chief Building Official and City of Hamilton (Ont.)
Municipal law – Heritage properties – Demolition or removal of structure
36778 Ad Hoc Group of Bondholders v. Ernst & Young Inc. in its capacity as Monitor et al.
(ON)
Commercial law – Bankruptcy and insolvency – Interest
You must have been in isolation if you haven’t heard or read about the Supreme Court’s decision in Bresco v Lonsdale. It has been hailed by some as opening the floodgates to adjudications by insolvent companies. But as a series of recent judgments show, there remain a number of obstacles that will need to be overcome by insolvent entities seeking to enforce an adjudication award.
The background