Alternate Dispute ResolutionOp EdsOP. ED.


Climate change and global warming are the two crucial issues that need the instant attention of people. It is being noticed that global warming is increasing with each passing day. It is necessary to keep up with the protection of the environment along with fulfilling our needs. There have been many neglected ways that can prove to be a significant factor in curbing global warming. When arbitration is discussed, it is well known to many of the people that are being chosen for various reasons. Commercial cases, investment treaties, and many other kinds of matters are being decided through arbitration and other alternate dispute resolution mechanism. Till now, commercial and other sectors of arbitration were being chosen for simplified process, speedy decisions, convenience, etc. so cases get resolved as soon as possible.

While we connect climate changes with international arbitration, it is not shocking to know that, like commercial issues, climate change issues are also in priority. There have been various steps taken by the arbitration institutions which are evident to prove that international arbitration is extending its approach to deal with the issue of global warming. Not only the awards passed by the tribunals but, the implementation of various treaties and campaigns are equally important to curb the major environmental issues. The matters of climate change are of public importance and thus attract the interest of arbitrators too. While we notice that arbitration has been gaining importance from last years, will the steps being taken concerning climate change also come out as fruitful decisions? The steps that have been taken till now are not questionable but, for how long will they be effective?

The questions will be raised for ensuring the effectiveness. However, analysis of the strides made by the arbitration sector will give a proper understanding of the same. The Paris Agreement of 2016[1] is not in direct connection to arbitration but, the arbitration proceedings being held along with it will manage the climatic changes. It is necessary to relate the aspects to get better results out of them.

Correlation of Paris Agreement and International Commercial Arbitration

In 2015 United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement was adopted for the first time that all nations were committed to ambitious efforts to combat climate change and adapt to its effects. The Paris Agreement aim is to lower the global temperature by 2 degrees celsius above pre-industrial levels i.e., mitigation and to enhance the ability of the nations to deal with the impacts of climate change that is to adapt to climate changes. Paris Agreement also aims to support the developing nations and the nations who are in danger to adopt such changes. The task force of ICC had a broader view foreseeing the climate change-related disputes and tried to include any dispute arising out of or concerning the effect of climate change and its policies. [2]

As per the IPCC Special Report on Global Warming of 1.5 degrees Celsius published in 2018, it stated that climate change is one of the biggest challenges of all time. Therefore, to combat this challenge all they require is rapid and far-reaching transitions in energy, urban infrastructure, land, industrial systems to avoid the worst effects of climate change.[3] So as the new rapid changes to land, infrastructure, and industrial systems that are arising out from the global response to climate change will give a new scope of investment and contracts, accordingly, this will give a rise to contractual legal dispute. Such disputes can be categorised as:[4]

  1. Contracts concerning specific transition, adaptation, or mitigation contracts

Here the contract can be executed between the investor, industry body, funder, State, etc. in conformity with the Paris Agreement commitments. These contractual terms are can be reinforced through appropriate and effective dispute mechanisms. The contacts shall be expressly made with a clause relating to UNFCCC such as Green Climate Fund (GFC), agreements reacted to low emission projects.[5]

  1. Contracts not concerning specific transition, adaptation, or mitigation contracts

As every business activity and contractual relationship is capable of being impacted by energy and other systems transition, mitigation, or adaptation measures and/or the environmental impacts of global warming, those contracts that have no direct impact on climate change or have no specific climate-related purpose may predate the Paris Agreement.

The correlation that has been created with the Paris Convention would help the arbitration institutions to reach their goals too. The goal to reach “greener arbitration” is concerning the goal of the Paris Convention. Therefore, working on both of them would bring out better results from both ends. It would not only facilitate but, also encourage other associations to do the same.

The potential steps by ICC in climate change-related disputes

The Task Force’s mandate is first to explore how ICC Arbitration and alternative dispute resolution (ADR) services are currently used to resolve disputes that potentially engage climate change and related environmental issues. As the Paris Agreement and the Intergovernmental Panel on Climate Change (IPCC) Special Report are relatively recent, disputes arising out of “rapid and far-reaching transitions in energy, land, urban and infrastructure, and industrial systems” are not yet reflected in past and existing ICC cases. Nevertheless, three important aspects of existing ICC cases are instructive:[6]

(i) ICC Arbitration and ADR are frequently adopted in commercial contracts concerning energy, land use, urban and infrastructure, and industry with these sectors representing a large portion of ICC cases;

(ii) climate change-related investment is rapidly increasing and system transition of the scale proposed by IPCC will recalibrate regulatory risk and investment strategy in sectors where ICC Arbitration and ADR are already prevalent; and

(iii) climate change mitigation and adaptation, and systems transition as a whole, may cause environmental impact, and ICC Arbitration and ADR are increasingly being used to resolve environmental claims.

These steps taken by ICC promote the goal of the institution widely. The implementation of the task force is evident that apart from resolving the disputes, arbitration has paved a way to safeguard the environment. The process of curbing global warming is not simplified, yet not complicated. It could be time taking but, with collective efforts in different ways by the arbitration sector will come out to be successful.

CGA: A pathway to greener arbitration

Lucy Greenwood in 2019 founded the Campaign for Greener Arbitrations (CGA) 2019 intending to reduce the carbon footprint on international arbitrations. This campaign is led by a Steering Committee from the arbitration community. This campaign runs on the set of protocols so that the goal of developing practical steps which could be implemented to accomplish the Campaigns Guiding Principles. There are several green protocols suggested and some are as under:[7]

  1. The green protocol for arbitral proceedings

This protocol suggests the measures to conduct arbitral proceedings in a more environmental-friendly manner. This protocol can be initiated by the parties or by the tribunal a well.  Here the parties can do remote proceedings, less use of travel, avoiding printings on paper, etc.

  1. The green protocol for law firms and legal service provides.

This protocol has focused on the firm’s day-to-day operations. Here the firms are required to motivate their employees to work eco-friendlier. The firm shall make  “Green Ambassadors” who shall make new policies on working of firms do that the environment depletion can be reduced. Firms shall also use incentive programmes for the employees so that they can be encouraged to use this protocol.

  1. The green protocol for arbitrators

Here the independent arbitrators are required to seek guidance from this protocol. They are expected to reduce travel, energy, etc. so that the wastage of resources can be reduced. The arbitrators expected to integrate the conduct rules with green protocols.

  1. The green protocol for arbitration institutions.

In the protocol, the institutional representatives are required to guide both internal and external operations of the firm. The institutions shall try to motivate the parties and arbitrators to conduct the proceedings remotely and try to provide such infrastructures as well.

  1. The arbitration hearing venues

The facilitators of conducting arbitral proceedings are required to adopt this protocol. They are encouraged to use technological platforms to promote digital representations of cases and file sharing so that the paper works can be reduced. They shall also use clean energy while conducting such proceedings.

So, this campaign can successfully be achieved by only implementing rules i.e. reduce the hard copy bundles and travel least as possible. The Campaign also plans to expand its research to consider the usage of e-mails and energy consumption, as well as other aspects of an international arbitration practice beyond those analysed in the initial impact assessment.


The issue of climate change is crucial, and the steps taken by the arbitral institutions are paramount. It has been known so far, the arbitration resolves the issues related to climate change issues but, the self-contribution in making arbitration greener is a new concept. It would take time for the adaption of this mechanism completely in the field but, would have essential contributions towards nature. This will also increase the importance of arbitration globally. As arbitration will be labelled as a mechanism to resolve one more problem. These steps will gain more importance shortly. Also, this will lead to the opening of doors for news initiatives in the field of international arbitration.

*Advocate, High Court of Chhattisgarh.

**Student, Semester VIII, BA LLB(Hons.), Amity Law School, Amity University, Chhattisgarh.


[2]Melissa Denchak, Paris Climate Agreement: Everything you need to know, NRDC, 10-2-2021

[3]The IPCC Special Report, Global Warming of 1.5˚C (October 2018), p. 15.

[4]In-depth Q&A: The IPCC’s Special Report on Climate Change at 1.5°C, Carbon Brief, 8-10-2018

[5] Green Climate Fund Proposal Toolkit (2017), p. 3.

[6]Kirsten Odynski, The Role of ICC Arbitration in Resolving Climate Change Disputes, White and Case, 29-1-2020

[7]Chetna Alagh and Sejal Makkad, Arbitration and climate: Steps taken by arbitration associations to curb global warming, The Daily Guardian, 30-4-2021

Case BriefsSupreme Court

Supreme Court: The Division Bench of R.F. Nariman* and B.R. Gavai, JJ., addressed an important case regarding nature of arbitration under Arbitration and Conciliation Act, 1996. The Bench ruled,

“If at least one of the parties was either a foreign national, or habitually resident in any country other than India; or by a body corporate which was incorporated in any country other than India; or by the Government of a foreign country, the arbitration would become an international commercial arbitration notwithstanding the fact that the individual, body corporate, or government of a foreign country carry on business in India through a business office in India.”

In the instant case the respondents were appointed as Distributor for the appellant, Amway India Enterprises (P) Ltd. for undertaking sale, distribution and marketing of its products in India with the name, “Sindhia Enterprises”. As a dispute arose between the parties, the respondents, after making repeated attempts to resolve the dispute amicably, invoked arbitration clause on 28-07-2020. Since the parties could not reach to finality regarding appointment of the Arbitrator, the respondents approached Delhi High for appointment of a sole arbitrator under Section 11(6) of the Act, 1996.

The main plea taken by the appellant was that a petition before the High Court was not maintainable as the dispute relates to international commercial arbitration, being covered by Section 2(1)(f)(i) of the Arbitration Act inasmuch as the respondents were husband and wife who were both nationals of and habitually resident in the United States of America. This plea was turned down by the High Court. The High Court, while relying on Larsen & Toubro Ltd. – SCOMI Engineering Bhd v. MMRDA, (2019) 2 SCC 271, wherein the Supreme Court was concerned with a consortium consisting of an Indian company and a foreign company and the Court took note of the fact that the office of an unincorporated entity, i.e. the consortium, being in Mumbai, as one of the factors for arriving at the conclusion that the arbitration proceedings would not be international commercial arbitration, the High Court held that the matter would fall within the purview of domestic arbitration and appointed Justice Brijesh Sethi, a retired Judge of the Delhi High Court as the sole arbitrator.

Whether the distributorship of husband and wife was a separate entity?  

The High Court opined that since the central management and control of the proprietorship was exercised only in India, the dispute was not an international commercial arbitration as the Code of Ethics and Rules of Conduct issued by the appellant under Clause 3.17.1 had contemplated and recognised that a husband and wife shall operate their Distributorship as single entity.

Contrary to that, the Supreme Court observed that under “authorised signature”, the entity’s name was filled in as Sindhia Enterprises and the proprietor was filled in as Ravindranath Rao Sindhia.  Noticing the application form, together with the Code of Ethics, the Bench said that a husband and wife were entitled not to two, but a single distributorship, as it had been made clear under clause 3.17 of the Code of Ethics that they were to operate only as a single entity. The form that was filled in made it clear further that the respondents applied to become a distributor as a sole proprietorship, where the husband, Ravindranath Rao Sindhia, was the sole proprietor / “primary applicant” and the wife, Indumathi Sindhia, was a “co-applicant”. The Bench Said,

“A sole proprietary concern is equated with the proprietor of the business, while a proprietary concern is only the business name in which the proprietor of the business carries on the business. In the event of the death of the proprietor of a proprietary concern, it is the legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary business.”

The provisions of Order XXX, enabled the proprietor of a proprietary business to be sued in the business names of his proprietary concern. The real party who was being sued was the proprietor of the said business. The said provision did not have the effect of converting the proprietary business into a partnership firm. Consequently, the Bench reached to the conclusion that a suit by or against a proprietary concern was by or against the proprietor of the business.


The Bench opined that the argument that there was no international flavour to the transaction between the parties had no legs to stand on. As, an analysis of Section 2(1)(f) would show that whatever be the transaction between the parties, if it happen to be entered into between persons, at least one of whom was either a foreign national, or habitually resident in, any country other than India; or by a body corporate which was incorporated in any country other than India; or by the Government of a foreign country, the arbitration become an international commercial arbitration notwithstanding the fact that the individual, body corporate, or government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India.

In the light of above, the Bench opined that the High Court had no jurisdiction to appoint an arbitrator; therefore, the impugned judgment was set aside.

[Amway India Enterprises (P) Ltd. v. Ravindranath Rao Sindhia, 2021 SCC OnLine SC 171, decided on 04-03-2021]

Kamini Sharma, Editorial Assistant has put this report together 

*Judgment by: Justice R.F. Nariman

Know Thy Judge| Justice Rohinton F. Nariman

Appearance before the Court by:

For Appellant: Sr. Adv. Parag Tripathi,

For Respondent/s: Adv. Manmeet Arora

Op EdsOP. ED.


The utility of international commercial arbitration is to provide redressal and resolution in disputes arising out of international trade and commerce. Entities may not care much about development of arbitral jurisprudence but the outcome which has quantified damages. A conflicting obstacle, rather a dead end, surfaces when a party to an arbitration agreement is hit by the trappings of insolvency. Such circumstances potentially defeat the entire purpose of an arbitration agreement leaving the creditor effectively remediless. This paper examines the need to address potential insolvency and why it is important to take pre-emptive measures at the time of contract negotiation.


International arbitration is a manifestation of party autonomy, free will to engage in transnational trade, and a sought after dispute resolution mechanism that safeguards and promotes international trade and commerce. The New York Convention[1] is the global voice and assent which backs and supports the idea of arbitration, and for an arbitration to be successful; the Convention lays down the law for recognition and enforcement of foreign arbitration awards – the test of a successful arbitration. Since international arbitration still hits a deadlock when insolvency is triggered, it would be ideal to pre-empt such a scenario and address it beforehand, while negotiating contracts, because what emanates after insolvency is triggered, leaves less or no room for the parties to breathe in. The New York Convention may have been the most successful private international law in the world, but even that fails[2] to address such a conflict, and rather adds to it.


While international arbitration and domestic insolvency are conceptually different – the latter focusing on centralisation of all proceedings against the debtor to one location and the former advocating a decentralised approach vested in party autonomy in the world of economic trade – there comes a point of intersection when one of the parties to an international arbitration is subject to insolvency proceedings in its home State. This may happen before or during arbitration, or even at the stage of enforcement of an award.

The interaction of insolvency and arbitration not only creates conflict of laws issues, but issues of primacy in adjudication[3]. Insolvency law may result in the preliminary suspension of all litigation including arbitration, yet arbitration law may not take insolvency into account and not recognise such a stay. When the insolvency is of a multinational business, the problems increase. Such cases are increasing with globalisation and the increased use of arbitration[4].

Therefore the interaction is an important matter to consider.  Failing to recognise insolvency could jeopardise the enforceability of the arbitral award, whether in domestic or international arbitration. Insolvency is often considered State public policy[5]. Hence, on an international plane ignoring the insolvency recognised in the seat risks setting aside under adoptions of Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration[6] or similar provisions in national laws[7]. A tribunal dealing with an insolvent party or a party facing insolvency proceedings, must decide the relevant law to apply to determine the impact of the possible/insolvency on the disputed matter. A common approach is for the tribunal to apply the lex fori or the law of the seat of arbitration. Therefore the essential issue is the international public policy of the seat in the sense of Article V(2)(b) of the New York Convention[8].

Deciding upon the conflict of laws rules to apply becomes difficult[9] without a clear lex fori. The tribunal has a conflict of laws problem[10]. Three main approaches to the issue are:

  1. the seat’s insolvency specific conflict of laws system;[11]
  2. the seat’s international private law conflict of laws system; and
  3. any mandatory rules from the lex fori concursus.[12]

The tribunal is not even bound by the conflict of laws systems of the seat jurisdiction, but that system has an important impact in the interaction between the award and the wider world. Choosing the insolvency specific conflict of laws rules is a logical route, but in the significant case of Vivendi v. Deutsche Telekom, the Swiss Supreme Court preferred the second option and translated all issues to a private law conflict of laws system, applying the Swiss Private International Law.[13]

Applying the mandatory rules approach ties in the arbitration way of thinking. Mandatory rules need to be adhered to so awards may be enforced. Mandatory rules include the lex fori concursus[14] and the mandatory rules of the seat. However, the tribunal can be left with an incomplete conflict of laws framework as not all rules are mandatory. Some mandatory rules in lex fori concursus and from seat may conflict. The tribunal would have to choose the mandatory rules with the associated risk of unenforceability of the award. As a precaution it is probable that a tribunal would choose to apply the mandatory rules of the seat to prevent setting aside action.  In this difficult area, the tribunals often directly apply particular insolvency laws without in depth discussion[15].

It is crucial to classify the particular insolvency issue that the tribunal is dealing with[16]. A different qualification can lead to a different applicable law depending on the conflict of laws system. Many courts see the impact of insolvency on arbitration as a question of party capacity so they apply the conflict of laws rules dealing with capacity. Other tribunals see the issue as the validity of the arbitration agreement[17], leading to applying different conflict of laws rules[18].

The question can also be addressed from the lex causae. This leads to a presumption of validity; one needs to apply the chosen law and its characterisation to determine if that law was chosen validly. If there is no chosen law, this is problematic as there is no starting point. Furthermore, the law chosen to govern the merits of a case often is not the law governing the insolvency. The characterisation can be decided via the lex fori concursus, the law of the insolvency forum, but this would also start with a presumption of applicability.[19]

Finally, there are a range of comparative and functional approaches to the issue. Comparative approaches take into account several legal systems. Functional approaches do the same but keep the focus on the lex fori. These methods balance the lex fori approach and the lex causae approach[20]. Together they can be viewed as opposing options based in the territorial and contractual approaches. Therefore, one could consider this the hybrid option.

The applicable law is critical in international arbitration and cross-border insolvency. Different laws may govern different parts of the arbitration: the law applicable to the merits, the law applicable to the procedure and the law applicable to the arbitration agreement. To determine the effects that any insolvency has on the arbitration, the tribunal will have to make another conflict of laws determination.

Approaches in literature range from the pragmatic to the highly theoretical regarding managing the applicable law. Tribunals like pragmatic, direct approaches, avoiding complex choice of law discussions. The complex arbitration to seat relationship means, with the associated legal theory, that there is not a right or wrong way to determine the law applicable to the impact of the insolvency on an arbitration; it is more a case specific determination. This creates uncertainty and unpredictability but gives freedom of manoeuvring to the tribunal[21]. The parameters of this freedom are the mandatory rules and the international public policy of the seat. The tribunal acts within these parameters to reduce the risk of setting aside later.  One key consideration for the tribunal is to ensure its award is reasoned to avoid it being set aside for lack of reasoning.

A hybrid theory or applying the conflict of laws rules of the lex fori for the applicable law to insolvency provides more legal certainty. It takes into account any relevant mandatory rule or rule of public policy of the lex fori.  However, it does not provide certainty regarding which the rules will be applied.


Many national insolvency laws or court procedural laws have clauses that suspend any ongoing legal proceedings of the insolvent entity once insolvency commences[22]. These clauses usually prevent further proceedings from being initiated[23]. Several jurisdictions have concluded that the suspension and prevention extends to arbitration proceedings.[24]

According to the rule of suspension, which reflects the principle of jurisdictional attraction, the commencement of bankruptcy proceedings as a form of court proceeding should abate or interrupt all other actions in order to preserve the bankruptcy estate, and all creditors of the debtor, except for the privileged creditors, are put in the same position.

This rule exists as protection to the creditors since in most developed systems of insolvency, law presumes that the creditors of an insolvent debtor must be treated equally and transparently; regardless of any individual agreements they may have concluded with the debtor, and therefore contemplate collective proceedings to bind all. Insolvency proceedings have emerged to be the only way to protect the interests of all the creditors equally. If the arbitration agreement supersedes such a proceeding then most creditors, would be suffering huge losses if they were not part of an arbitration agreement and their cause of action will go in vain. However, to tackle such issues, EC and EU Insolvency Regulation have an underlying principle known as the principle of universality wherein there is a system in which all aspects of the debtor’s insolvency are encompassed by a single central proceeding under one insolvency law.

In contrast, the United States Supreme Court while discussing the refusal to enforce international arbitration agreements held that “would surely damage the fabric of international commerce and trade, and imperil the willingness and ability of businessmen to enter into international agreements…To refuse to enforce an arbitration clause in the context of an international transaction ‘would reflect a parochial concept that all disputes must be resolved under our laws and in our courts…We cannot have trade and commerce in world markets … exclusively on our terms, governed by our laws, and resolved in our courts.[25] In another case, a US Court held that Congress did not intend for the Bankruptcy Code to modify the Federal Arbitration Act and that no irreconcilable conflict existed between the purposes of the Bankruptcy Code and the arbitration of non-core matters, where the bankruptcy courts do not have exclusive jurisdiction over such matters[26]. Another US Court[27] held that the key in determining whether arbitration may continue or whether arbitral judgement can be affirmed or enforced, is whether arbitration “would contravene a strong public policy of the forum”.


In summary, some countries used to, or still, have rules that interfere with the arbitration agreement and arbitration proceedings in case of insolvency, making them null and void or inoperable. Party capacity cannot be forgotten in an insolvency setting. The party’s original representative may need to be replaced by the insolvency administrator causing delays in the proceedings to ensure procedural fairness. An award against an insolvent entity is vulnerable to unenforceability on several grounds and is highly dependent on the approach to insolvency and arbitration in the jurisdiction of enforcement, however, a tribunal can minimalise such risks by careful consideration of due process.

Therefore, arguments for not providing a stay of proceedings may find little force in the current scenario. It may seem prudent to a tribunal to stay proceedings so that the parties and the tribunal may carefully consider the appropriate steps and consequences of the insolvency. The loss of time in the arbitration proceedings is to be measured against the integrity of the arbitration and the award.  Tribunals may look favourably upon a request from the insolvent entity to provide at least an informal stay or delay. In any event the tribunals should consider a stay or delay ex officio, as it may take some time for the insolvency administrator to be duly appointed and get up to speed with the arbitration.

On becoming aware of insolvency, the tribunals may take the necessary common sense steps, such as accepting the administrator into the proceedings and staying proceedings to consider the insolvency implications. In most jurisdictions their awards may be set aside or become non-enforceable if they deal with core insolvency issues. The tribunals would likely look at the insolvency law of the fori concursus, specifically its public policy and mandatory rules, particularly if that is the expected enforcement jurisdiction. 

While the arbitrators should not consider insolvency as automatically ending an arbitration because insolvency procedures can be misused as an inappropriate substitute for debt enforcement procedures by parties[28], arbitrators should note the measures in the insolvency laws that try to prevent such misuse[29].  In English common law, a debt must be “bona fide” to attract the winding up jurisdiction of the English courts.  A disputed debt, which still might have appeals processes to exhaust, would entitle the winding up of a company to be delayed[30]. Likewise in Singapore, if a debtor has a valid counterclaim equivalent to or exceeding the claimed debt, then the insolvency process cannot be applied to the party.[31]


It is sometimes argued that when a party in arbitration goes insolvent or is insolvent, that constitutes a ground for security for costs. Security for costs requests are interim measure applications governed mainly by the lex arbitri which is commonly the law of the seat of arbitration.  This is not as straightforward as it might seem.  The UNCITRAL Model Law Article 17-A mentions three basic and common requirements for interim measures, which is widely understood to include security for costs[32]:

  1. the danger of substantial harm;
  2. this harm outweighing the potential harm caused by the interim measure; and
  3. a chance to win the on the merits of the case.

An insolvency event may meet the first requirement as it increases the chance that the other party would not be able to enforce a costs award in practice[33]. It does not influence the third requirement, but it may have an indirect influence on the second requirement. The weight of case law points to insolvency not being a valid or sufficient reason to order security for costs.  The cases indicate that insolvency alone does not necessarily mean a lack of funds – an insolvent company may have enough money to pay for a potential costs award[34]. It follows that insolvency itself is not enough to justify a security for costs award[35]. The Chartered Institute of Arbitrators’ guidelines for requesting security for costs confirm this.  It states that if the insolvent party had a questionable financial situation at the inception of the contract, security for costs are further barred because the risk of insolvency was accepted[36].

Further, if non-compliance occurs after ordering security for costs some legislation allows for the claims may be dismissed, for example under Section 41(6) of the English Arbitration Act[37]. This would complicate the consideration for providing for security for costs in case of insolvency; the insolvency now interacts with an access to justice issue.

Therefore insolvency does not automatically justify a security for costs award, even though a quick analysis might have suggested otherwise. Instead it complicates the decision on security for costs and related issues which the tribunal makes.


In bankruptcy or insolvency law, irrespective of the jurisdiction, there may be the potential for abuse of the codified provision by actors seeking advantages in litigation. One of the most common forms of abuse is forum shopping. When a debtor or creditor has the ability to choose among forums that may have jurisdiction, naturally the party will want to go to the forum that will offer the best options as a matter of both procedural and substantive law. Of course, in an efficient legal system this would not necessarily be possible because there should be only one jurisdiction to open proceedings and deal with the matter at hand. In the European Union, however, with a common internal market, freedom of establishment, and the free movement of capital and goods, debtors and creditors deal with each other across national lines, national law is the substantive law regarding insolvency proceedings under the EU Insolvency Regulation, with judgments being given effect in the other member States. Insolvency, doubtlessly, is a great arm-twisting tool used to cough out money. It is often criticised as such, as it is not used with the degree of responsibility that is legislatively desired. Insolvency may also be abused by a party, by either voluntarily opting for insolvency, or fraudulently inducing a creditor to initiate insolvency. Under the new Insolvency & Bankruptcy Code of 2016 in India, promoters of Medium and Small Enterprise are eligible to re-acquire the insolvency estate of their corporate entity. It is not to be forgotten that the result of insolvency is either liquidation or re-organisation, all litigations being extinguished in both cases. Insolvency, therefore, is a tool that can be strategically abused to evade liability.


We dive into a deeper, darker and uncertain abyss when it comes to enforcement of awards[38] against an insolvent debtor. Most international arbitration award holders would not even proceed to enforce awards once the debtor is subject to insolvency. Not only do the domestic courts refuse such enforcement proceedings, but the award-holders are discouraged from even making the effort to enforce these awards knowing that the estate of the debtor is in the hands of the creditors and the insolvency mechanism. But why should this be the case? It takes years of efforts and resources to conclude an arbitration – a result of parties’ consent – there is application of mind.

The two most probable hurdles to enforcement of an award would, in light of the  New York Convention, be

  1. Capacity, and
  2. Public Policy.

While delving into the two aspects should, in the authors’ view, remain a separate topic to be discussed while testing the legalities involved in the conflict between an international award its conflict with a domestic insolvency, it is safe to assume and conclude that no international arbitral awards are enforced against an insolvent entity as that would be conflicting with the public policy of the State where such enforcement is sought. But what is the fault of the creditor concerned, who believed in the now insolvent business entity to be able to engage in business. Such confidence has much to do with the comity of nations and the contracting party’s host State’s commitment of treaties and conventions.

How do we look at enforcement. Domestic laws may provide for a mechanism to punish bad faith cases, but those are not the concern of businesses. More than the evolution of jurisprudence, businesses are concerned about the colour of money. That’s the reason behind business. Either party may, in an unfortunate or unforeseen scenario, fall into the trappings of insolvency/bankruptcy. The other party may, either during or after or before such circumstances arise, have an arbitration award in their hands or may initiate arbitral proceedings.


It may take time for laws in this regard to get harmonised, but what parties can do to circumvent such juxtapose or mitigate chances of hitting this apparent dead-end is to ensure that the aforementioned issues are well thought of and dealt with at the time of entering into contracts.

Take for example, the United Nations Convention on Contracts for the International Sale of Goods, 1980 (“CISG”), Preamble of which considers the development of international trade on the basis of equality and mutual benefit, and the adopting States being of the opinion that “adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade”. Article 8 of the CISG speaks of interpreting statements of the parties in terms of their intent and while considering the circumstances of the negotiations. A holistic reading of the CISG, including Article 19, would provide a great platform for recording negotiations pertaining to prospective /potential insolvency of the parties in the travaux préparatoires so as to be in a position to address these in accordance with State laws in case any party is hit by insolvency.

It would not be out of context to propose it as a model practice for the vendors to ensure that the purchasers conditionally pledge shares at the time of entering into cross-border transactions, or to create some form of security that would make the trade more responsible. More importantly, this would ensure that in the event of an insolvency, the vendor shall have a seat at the table in the reorganisation of the purchaser and shall also have a claim at par with other secured creditors. This would also be in respect and honour of the NY Convention which seemingly did not address insolvency and perhaps cannot unless it is amended or revamped.


The New York Convention, respect be paid to it in sync with the number of signatories it has, is pro-arbitration and it may not be out of place to assert that international commercial arbitration should trump domestic insolvency hurdles. But until such provisions are harmonised at an international level with domestic support, the parties must resort to pre-emptive and mitigating measures to safeguard their interests. The issues discussed hereinabove are what may hinder or even defeat an entire transaction and therefore, it becomes incumbent upon the parties to carefully consider issues of jurisdiction, insolvency and security to avoid getting into transactions that may lead to cascading losses should insolvency loom over a party.

*Candidate, White & Case International Arbitration LLM, 2019, University of Miami School of Law

**Assistant Professor, Jindal Global Law School

[1] The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958

[2] Dependence on factors mentioned under Article V(ii)

[3] ‘Insolvency in International Arbitration: where two fields meet’,  Fabian A van der Ven, LLM Thesis, University of St Gallen

[4] Sara Nadeau-Séguin, ‘When Bankruptcy and Arbitration Meet: A Look at Recent ICC Practice’ (2011) 5 Disp Resol Int’l 79 79 just 17 ICC awards on the subject in 1968-2002 and 16 between the years of 2002-2006.

[5] Domitille Baizeau, ‘Arbitration and insolvency: issues of applicable law’ in Christoph Müller and Antonio Rigozzi (eds), New Developments in International Commercial Arbitration (Schulthess 2009) 100

[6] UNCITRAL Model Law on International Commercial Arbitration

[7] Domitille Baizeau, ‘Arbitration and insolvency: issues of applicable law’ in Christoph Müller and Antonio Rigozzi (eds), New Developments in International Commercial Arbitration (Schulthess 2009) 100. France, for example considers at least parts of its insolvency law as public policy see (2009) No. 08-10.281 (French Supreme Court)

[8] Sara Nadeau-Séguin, ‘When Bankruptcy and Arbitration Meet: A Look at Recent ICC Practice’ (2011) 5 Disp Resol Int’l 79 at 86

[9] Also in the absence of specific agreement between the parties to this effect.

[10] Filip de Ly, ‘Arbitation and Insolvency – Selected Conflict of Law Problems’ in F. Ferrari and S. Kröll (eds), Conflict of Laws in International Arbitration (Sellier European Law Publishers 2011) 3

[11] Elektrim v. Vivendi Universal [2009] EWCA Civ. 677, [2010] IILR 39 (Court of Appeal London)

[12] Simon Vorburger, International Arbitration and Cross-border Insolvency: Comparative Perspectives (International Arbitration Law Library vol 31, Kluwer Law International 2014) 6 at 86-89

[13] Vivendi S.A et al. v. Deutsche Telekom AG et al. [2009] 4A_428/2008, [2010] 28 ASA Bull 104 et seq. (Swiss Federal Supreme Court) 2-3

[14] Simon Vorburger, International Arbitration and Cross-border Insolvency: Comparative Perspectives (International Arbitration Law Library Vol. 31, Kluwer Law International 2014) 88-89

[15] Swiss entity v.  Dutch entity [2001] HKZ Case No. 415, [2002] 20 ASA Bull 467 III; (2011) CAM Case No. 2412 A contribution by the ITA Board of Reporters, Kluwer Law International

[16] Marta Tsvengrosh, Arbitration and insolvency – conflict of laws issues: Conflict of laws in international arbitration: cross-border insolvency cases (LAP LAMBERT Academic Pub 2011) 7

[17] However, such conflicts in the opinion of the authors do not qualify the arbitration agreement as a nullity.

[18] Samantha J Lord, ‘When Two Polar Extremes Collide: An Exploration into the Effects of Insolvency on International Arbitration’ (2012) 15 Int’l Trade & Bus L Rev 316 at 323

[19] Simon Vorburger, International Arbitration and Cross-border Insolvency: Comparative Perspectives (International Arbitration Law Library, Vol. 31, Kluwer Law International 2014) 92-93

[20] Simon Vorburger, International Arbitration and Cross-border Insolvency: Comparative Perspectives (International Arbitration Law Library, Vol. 31, Kluwer Law International 2014) 93-94

[21] Simon Vorburger, International arbitration and cross-border insolvency: Comparative Perspectives (International Arbitration Law Library Vol. 31, Kluwer Law International 2014) 84

[22] Fernando Mantilla-Serrano, ‘International Arbitration and Insolvency Proceedings’ (1995) 11(1) Arbitration International 51, 57; Alexander J Be?lohlávek, ‘The impact of insolvency of a party on pending arbitration proceedings in Czech Republic, England and Switzerland and other countries’ in Marianne Roth and Michael Geistlinger (eds), Yearbook on international arbitration. Vol. 1 (DJØF Publishing 2010) 146 151; Ge Yang, ‘Insolvency Proceedings and Their Effect on International Commercial Arbitration’ (LLM Thesis, University of Ghent 2012) 30

[23] Simon Vorburger, International arbitration and cross-border insolvency: Comparative perspectives (International Arbitration Law Library, Vol. 31, Kluwer Law International 2014) 179

[24] Franco Ferrari and Stefan Kröll, Conflict of laws in international arbitration (Sellier 2011) 362; Ge Yang, ‘Insolvency Proceedings and Their Effect on International Commercial Arbitration’ (LLM Thesis, University of Ghent 2012) 32

[25] Scherk v. Alberto-Culver Company, 1974 SCC OnLine US SC 128 : 417 US 506, at 519 (1974)

[26] Hays and Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149 (3d Cir. 1989)

[27] Fotochrome, Inc. v. Copal Co., Ltd., 517 F.2d 512 (2d Cir. 1975)

[28] Mobilox Innovations Private Limited v. Kirusa Software Private Limited, (2018) 1 SCC 353 at para 13 referring to the Legislative Guide on Insolvency Law of the United Nations Commission on International Trade Law

[29] The draft of Section 8 of the Indian Insolvency and Bankruptcy Code, 2016 included “bona fide dispute”.  “Bona fide” is absent in the enacted Code

[30] See Re A Company – Victory House General Partner Ltd. v. RGB P&C Ltd., 2018 EWHC 1143 (Ch)

[31] Lim PohYeoh (alias Lim Aster) and TS Ong Construction Pte Lt., 2016 SGHC 179 at paras 43 and 45

[32] Weixia Gu, ‘Security for Costs in International Commercial Arbitration’ (2005) 22(3) Journal of International Arbitration 167 167

[33] James Hargrove and Vanessa Liborio, ‘Arbitration and Insolvency: English and Swiss Perspectives’ (2009) 75 Arbitration 47 50–51

[34] Smith v. UIC Insurance Co Ltd (2001) BCC 11 (Comm (QBD)); James Hargrove and Vanessa Liborio, ‘Arbitration and Insolvency: English and Swiss Perspectives’ (2009) 75 Arbitration 47, 51 referring to

[35] [2007] ICC Case No. 14993, [2014] 24 ICC Bulletin 24; Hargrove and Vanessa Liborio, ‘Arbitration and Insolvency: English and Swiss Perspectives’ (2009) 75 Arbitration 47, 51

[36] [1994] ICC Case No. 7047, [1995] ASA Bull 301 et seq. n. 18 as referred to by; Chartered Institute of Arbitrators, ‘International Arbitration Practice Guideline: Applications for Security for Costs’ (London 2015) Commentary to Article 3 (b) <>

[37] Hargrove and Vanessa Liborio, ‘Arbitration and Insolvency: English and Swiss Perspectives’ (2009) 75 Arbitration 47, 51

[38] Given the arbitration proceedings see the light of the day in terms of an award being rendered

Case BriefsSupreme Court

Supreme Court: The Bench of RK Agrawal and AM Sapre, JJ has referred the question as to determination of the “seat” and “venue” for holding arbitration proceedings to a larger bench after the counsel brought to the Court’s notice that there are several decisions on the issue by the Benches of variable strength.

The Court, hence, said that though, the question regarding the “seat” and “venue” for holding arbitration proceedings by the arbitrators arising under the Arbitration Agreement/International Commercial Arbitration Agreement is primarily required to be decided keeping in view the terms of the arbitration agreement itself, but keeping in view the decisions by the Benches of variable strength and issues involved, which frequently arise in International Commercial Arbitration matters, the matter should be referred to a larger bench.

The Court was hearing the appeal arising from a Delhi High Court order wherein it was held that Indian Courts have no jurisdiction to entertain the application filed by the Union of India (appellant) under Section 34 of the Arbitration and Conciliation Act, 1996 to question the legality and correctness of the award in question and accordingly dismissed the appellant’s application as being not maintainable in Indian Courts.

The Counsel had brought to the Court’s notice that some decisions which have bearing over the questions arising in this appeal have been rendered by the Constitution Bench, some by Three- Judge Bench and remaining by the Two-Judge Bench and hence, the matter should be decided by an appropriate bench in order to clear the confusion.

The question placed before the larger bench is:

“when the arbitration agreement specifies the “venue” for holding the arbitration sittings by the arbitrators but does not specify the “seat”, then on what basis and by which principle, the parties have to decide the place of “seat” which has a material bearing for determining the applicability of laws of a particular country for deciding the post award arbitration proceedings.”

[Union of India v. Hardy Exploration and Production (India) INC, 2018 SCC OnLine SC 474, decided on 01.05.2018]