Financial Insolvency as a Basis for the Unenforceability of an Arbitration Agreement and Standards of Proof

Abstract

The fiancial insolvency of one of the parties is often grounds for the unenforceability of an arbitration agreement. The problem is that if there is a valid arbitration agreement, it cannot be enforced. Insolvency itself does not render the arbitration agreement unenforceable, but the implementation of the arbitration proceedings becomes doubtful if the insolvent party does not have the necessary funds to pay the costs of the arbitration proceedings.

Russian judicial practice on resolving the problem of unenforceability of an arbitration agreement due to the insolvency of a party is quite extensive and contradictory, it increases uncertainty in the arbitration sphere and does not contribute to the attractiveness of arbitration. An analysis of judicial practice in Russia shows that it is impossible to accurately predict the outcome of events, since courts can assess the circumstances differently. To fid a solution to the identifid problem, the author proposes to introduce a standard of proof when considering disputes about fiancial insolvency as a basis for the unenforceability of an arbitration agreement. Despite the fact that this is a new institution for Russian law, it is becoming increasingly popular in doctrine and is actively used in Russian judicial practice.