The question of what happens to an international arbitration when a party files for bankruptcy in the United States is arising with increasing frequency. In the United States, the public policy interests that underlie both bankruptcy and arbitration legislation sometimes clash on critical points. The federal courts have developed competing approaches to addressing these issues. This fractured caselaw introduces uncertainty at the intersection of arbitration and bankruptcy.

US Bankruptcy Code

German Insolvency Law

In a decision that will be of great interest to the creditor community, the US Court of Appeals for the Second Circuit held, on November 5, 2009, that the Bankruptcy Code does not bar an unsecured claim for post-petition attorneys’ fees that was authorized under a valid prepetition contract. The case, Ogle v. Fidelity & Deposit Company of Maryland,1 extends and clarifies the US Supreme Court’s March 2007 decision in the Travelers case,2 which opened the door for such a ruling.

Following an informal consultation in late 2008, the DWP is now consulting formally about changes to the Employer Debt Regulations made under s75 Pensions Act 1995. The consultation document can be found at www.dwp.gov.uk/consultations/2009.

The main proposed changes are intended to facilitate corporate restructurings, but other changes are designed to address some technical problems with the Regulations.

Corporate restructurings

The importance of notifications to potential defendants and directors of the insolvent company

The decision in Re Octaviar Administration Pty Ltd (in liq) [2013] NSWSC 786 highlights two key issues for insolvency practitioners:

Taking decisions to liquidate companies has become a matter of routine when optimising corporate structures to improve cost efficiency. Increasingly, we see that such decisions have been taken either prematurely or without taking all of the relevant factors into account.

In October 2009 the Greek airline, Olympic Airlines SA ("OA"), entered "special liquidation" in Greece after the European Commission ordered it to repay illegal state aid from the Greek Government. OA employed about 27 employees in the UK, who participated in an occupational pension scheme. In June 2010 OA's liquidator informed the scheme's trustees that the UK employees' employment would be terminated and that pension contributions would cease from July 2010.

Starting from 22 September 2012, the beneficial owners (aka controllers), substantial shareholders, and senior executive officers of Ukrainian commercial banks could face personal financial liability for the insolvency of banks during liquidation. 

The Financial Services Authority (OJK) has issued the first regulation on the dissolution, liquidation and bankruptcy of insurance companies. On 11 December 2015, enacted Regulation No. 28/POJK.05/2015 on Dissolution, Liquidation and Bankruptcy of Insurance Companies, Syariah Insurance Companies, Reinsurance Companies and Syariah Reinsurance Companies (POJK 28). Before the enactment of  POJK 28 there was no regulation within the vicinity of the insurance law on matter.

The Productivity Commission published its final report on Business Set-up, Transfer and Closure on 7 December 2015. A copy of the final report is available here.

The final report recommends a number of changes to Australia's corporate insolvency laws and follows public consultation on the Productivity Commission's draft report released in May 2015.