The recent global recession has seen a marked rise in the number of corporate insolvencies. In the United Kingdom, first quarter 2009 insolvencies saw an increase of 56 per cent on the same period a year earlier, while mid-year expectations were that KPMG's prediction of 5,000 corporate insolvencies in 2009 would be met. This experience has been echoed in the United States where, for example, 52 banks failed in the first six months of the year followed by a further seven in one day in early July 2009.

For the third year in a row Fulbright and Jaworski's  Annual Litigation Trends Survey (2009) saw an increase in the number of respondent companies expecting more disputes over the following 12 months. Chief among the reasons given were the repercussions of the economic downturn.

Accordingly, with insolvencies on the rise and commercial disputes also expected to increase, many parties will find themselves contemplating claims against insolvent entities or in dispute with a party who becomes insolvent. In cross-border disputes, claimants will have the added hurdle of dealing with unfamiliar foreign insolvency legislation. Moreover, as arbitration arguably remains the favoured means of dispute resolution in international contracts, many such disputes will fall to be resolved in arbitration rather than litigation.

Read the full article in the attached PDF