Abstrakt
This chapter explores the consequences of an insolvency administration for the standing of claimants in investment arbitration. In practice, the imposition of the insolvency administration on the claimant investor is a frequently invoked ground for a challenge of its standing in the arbitral proceedings.
During insolvency, an indebted legal entity is generally represented by an administrator who primarily supervises its activities and takes steps with a view to business rescue or, where this is not possible, sale of the estate. The scope of the administrator's powers largely depends on the type of the insolvency proceedings and differs also across individual jurisdictions.
As the common goal is maximising the value of the debtor's assets, the administrators are usually empowered to grant or refuse authorisation for the debtors' legal acts and to varying degrees also dispose of the estate. For investors involved in arbitration against the host state, insolvency may bring several practical difficulties as administrators can assume the power to represent the claimant in the proceedings instead of legal counsels and their control over the investor's activities can raise doubts as to the claimant's nationality pursuant to the applicable investment agreement.
Furthermore, although insolvency administrators are required to act impartially and independently in discharging their duties, one can also point to the risk of the host state abusing insolvency to subvert the arbitral proceedings and compel the claimant to withdraw its claims. In this regard, tribunals are required to adopt adequate safeguards to prevent any abuse of process.