Published 23 July 2020
This article posits that there will be an increase in arbitrations involving bankruptcy in the wake of the COVID-19 pandemic, and that many litigants will be compelled — or should be compelled — pursuant to written agreements, to arbitrate their disputes before specialized tribunals, such as FINRA, in lieu of litigating these same claims before the bankruptcy courts.
In the context of bankruptcy, arbitral institutions and bankruptcy courts frequently have concurrent jurisdiction over disputes, particularly where arbitration is a contractual right. Oftentimes a claim that belongs in arbitration or in state court gets pulled into a bankruptcy court because it is related or ancillary to the bankruptcy proceeding. But if a claim is not within the bankruptcy court’s “core” jurisdiction, such claim should be separated from the core bankruptcy issues and resolved outside of the bankruptcy proceeding - particularly where the underlying contract negotiated by the parties expressly provides for arbitration. Where this is the case, this article suggests that the parties are oft better suited adhering to their agreement to arbitrate, even where their claims could be brought ancillary to a Chapter 11 proceeding. To do otherwise would be a waste of resources, disruptive and/or overwhelm the judicial system, or worse, countenance forum shopping by litigants filing bankruptcy as a means of seeking more favorable treatment.
This paper is part of a series of papers on the "Overlap between Bankruptcy / Insolvency Proceedings and Arbitrations ...". More information here www.transnational-dispute-management.com/news.asp?key=1812