In Josef Syska (Administrator of Elektrim SA (in bankruptcy) and Elektrim SA (in bankruptcy) v Vivendi Universal SA & Others [2009] EWCA Civ 677 the main question to be decided by the Court of Appeal was whether, when an arbitration is proceeding in one Member State of the European Union, in this case the UK, and one of the parties to the arbitration becomes insolvent in another Member State, in this case Poland, the consequences of that insolvency, in so far as they affect the arbitration, are to be determined by the law of the Member State where the insolvency proceedings have been instituted or the law of the Member State in which arbitration is taking place.

In deciding the above question the Court of Appeal had to follow Council Regulation (EU) No. 1346/2000 of 29 May 2000 on Insolvency Proceedings (the Regulation), in particular article 4 and 15 of the Regulation. Article 4.1 of the Regulation provides that:

"Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened"

Article 4.2 of the Regulation gives a non-exclusive list of examples of matters to be determined by the law of the state in which insolvency proceedings are commenced. Of particular relevance is the example in Article 4.2(f):

"the effects of insolvency proceedings on proceedings brought by individual creditors, with the exception of lawsuits pending."

Article 15 of the Regulation falls within the exception in Article 4.2 of the Regulation and provides that:

"The effects of insolvency proceedings on a lawsuit pending concerning an asset or right of which the debtor has been divested shall be governed solely by the law of the Member State in which that lawsuit is pending."

In the Court of Appeal Longmore LJ found that if a legal action had been commenced or a reference in arbitration had been constituted in a Member State, other than that in which the insolvency proceedings had been opened, it was natural that the law of that Member State should determine whether that action or that reference should be continued or discontinued. It was also held that Article 15 and Article 4 of the Regulation were not in conflict but that each article had its own sphere of operation. Once it was accepted that "lawsuit pending", as per Article 4.2(f) of the Regulation, included pending references to arbitration then Article 15 of the Regulation, dealing with lawsuits pending, determined what effect Elektrim's insolvency would have on the arbitration proceedings. Applying Article 15, the question whether the English arbitration should continue or be discontinued by reason of the insolvency is to be determined by English law.

Josef Syska & Others v Vivendi Universal & Others illustrates how a court will interpret the Regulation. It is also clear that arbitration, as regards Articles 4 and 15 of the Regulation, is deemed to be a "lawsuit pending". As such the courts have decided that the question of whether an English arbitration should continue or be discontinued by reason of an insolvency is to be determined by English law.