In Syska v Vivendi [2008] EWHC 2155, the Commercial Court had to consider the effect of a Polish company's insolvency on pending LCIA arbitration in London, in which it was a party.
The arbitration proceedings had been brought against the Polish company in August 2003. In August 2007 it was declared bankrupt in Poland and in October 2007 the tribunal held that it still had jurisdiction and made an award against the company.
Under Polish insolvency law, an arbitration clause concluded by a bankrupt loses its legal effect as of the date of bankruptcy and any pending arbitration proceedings shall be discontinued.
However, the European Insolvency Regulation provides at article 4(2)(e) that the law of the state of the opening insolvency proceedings shall determine the effects of insolvency proceedings on current contracts to which the debtor is a party. However, article 4(2)(f) provides an exception for "lawsuits pending", and article 15 provides that the effect of insolvency proceedings on a lawsuit pending shall be governed solely by the law of the member state in which that lawsuit is pending.
The English court held that "lawsuit" would include arbitration and, therefore, the Regulation overrides the Polish insolvency law, and so the challenge to the award failed.
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