Syska v Vivendi Universal SA & Ors

Under the Insolvency Regulation, the law of the Member State where insolvency proceedings are opened generally governs their effects. That rule is subject to the specific exception for lawsuits pending. The exception extends to pending arbitrations concerning assets or rights forming part of the insolvent estate. The law of the Member State where the arbitration is pending governs the effect of the insolvency on the pending reference, including whether the arbitration agreement or reference contract remains effective for that reference. Article 4.2(e) continues to govern the arbitration agreement so far as it concerns future, non-pending proceedings, and governs substantive contracts affected by the insolvency.

Elektrim, a Polish company in bankruptcy, was party to an arbitration agreement governed by English law and providing for London arbitration under LCIA rules. Vivendi had commenced arbitration alleging breaches of an investment agreement. After Elektrim was declared bankrupt in Poland, its administrator contended that article 142 of the Polish Bankruptcy and Reorganisation Law annulled the arbitration agreement. The arbitral tribunal rejected that challenge by majority and issued an interim partial award on liability.

Elektrim applied under section 67 of the Arbitration Act 1996 to set aside the award. The central issue was which law governed the effect of the Polish bankruptcy order on the pending arbitration.

1. Application dismissed. The award was not set aside.
2. The Insolvency Regulation requires autonomous interpretation by reference to its language versions, scheme and purpose. Its objectives include efficient administration of insolvencies, equal treatment of creditors, protection of legitimate expectations and transactional certainty.
3. Article 4.2(f) is not confined to execution proceedings. “Proceedings brought by individual creditors” includes proceedings brought to establish the validity, content or amount of a claim, as well as execution proceedings. The exception for “lawsuits pending” applies to the former category, but not to execution.
4. “Lawsuit” in article 15 includes arbitration. A pending arbitration concerning an asset or right forming part of the insolvent estate is governed by the law of the Member State in which the arbitration is pending. That law governs the effects of the insolvency on the pending reference, including whether the arbitration agreement or reference contract remains effective for that reference.
5. The expression concerning an asset or right of which the debtor has been divested extends to claims by or against the debtor and claims which, if successful, would be satisfied from the insolvency estate. Partial divestment is sufficient.
6. Articles 4.2(e) and 4.2(f)/15 address different but potentially overlapping effects. Article 4.2(f), together with article 15, is the specific exception for pending arbitrations and must be given effective operation. Article 4.2(e) governs the arbitration agreement insofar as it concerns future proceedings and governs substantive contracts affected by the insolvency.
7. The court disagreed with In re Flightlease, considering its interpretation of article 15 erroneous. Mazur Media provided no basis for limiting article 15 to proprietary claims.