Recovering Debts Through Arbitration After Company Insolvency

In today's economy, cross-border transactions are standard. However, they come with increased risks, including the potential insolvency of a business partner. When a company enters formal insolvency proceedings, it can become incredibly difficult to recover outstanding debts. International arbitration offers a possible solution but brings its own unique challenges.

This article will delve into tactics, emerging trends, and real-world insights to help creditors maximize their chances of debt recovery in complex situations.?

International Considerations

International business dealings often mean your contracts are governed by the laws of a different jurisdiction than your own. Understanding these laws is critical before a dispute arises. Key considerations include:

• Governing Law and Jurisdiction: Your contract should explicitly state the governing law and which courts or arbitral forums have jurisdiction in case of a dispute.
• Arbitration Agreements: Ensure robust arbitration clauses are included. Choose the arbitral institution (ICC, LCIA, etc.) and its rules carefully to optimize your position.
• Mutual Recognition Conventions: India is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This streamlines enforcement of awards compared to court judgments but still requires navigating local laws.

Monetizing Debt Recovery:

• Consider early assignment of debt to a specialist debt recovery agency. They may have more resources and success against insolvent companies.
• Explore factoring or invoice discounting, especially if significant cash flow issues could arise from the debtor's insolvency.

Proactive Steps to Mitigate Disputes

Taking measures beforehand can significantly lower the risk of disputes escalating and requiring expensive arbitration or litigation. Here are key proactive strategies businesses should adopt:

• Robust Contract Drafting
• Relationship Management:
• Record Keeping and Documentation

Project Management Tools: Utilize software that tracks tasks, changes, and approvals to create a transparent audit trail.