In the light of the current economic downturn it was timely that on the agenda of the 16th Annual Global Insolvency and Restructuring Conference held in Hamburg in May 2010 was a session entitled “Mediation ADR and Insolvency”.
The conference was organised by the International Bar Association’s (IBA) section on Insolvency, Restructuring and Creditors’ Rights and supported by the IBA European Regional Forum. The conference was entitled, “Cleaning up the mess: restructuring and insolvency approaches worldwide”. CEDR Solve panel mediators, Birgit Sambeth Glasner (based in Geneva) and Nick Pearson (London) [Nick is also a CEDR Solve Direct Mediator were on the panel leading this topic.
Both of them have acted in a number of insolvency related mediations. Typically these will be disputes between the insolvent entity (in liquidation, bankruptcy or administration) and a third party or parties, not that dissimilar from a dispute outside the context of insolvency. Differences may arise though if insolvency related remedies are sought—eg, misfeasance claims against directors, preference claims, claims to set aside transfers at undervalue, etc, and steps may have to be taken to ensure appropriate authority to settle is provided by the court or creditors’ committee.
In addition it is often the case that insolvency will bring the parties to mediation earlier in the dispute than might otherwise be the case, given what may be limited costs available in the insolvent party and the need to bring matters to a speedy resolution when there is no prospect of ongoing business relationships.
The Hamburg seminar looked at mediation in insolvency matters from various different perspectives and jurisdictions. Current details were provided about the recent Mediation Orders made in the context of the US Lehman bankruptcy. Recent additions to the UNCITRAL’s Cross Border Insolvency Rules concerning use of mediation were discussed, as well as the possible use of mediation in voluntary restructuring proceedings or schemes of arrangement.
Scope of mediation in the insolvency field
In many cases, as indicated above, mediation is ideally suited to insolvency cases where, for example claims made need to be settled quickly and where creditors, having already lost money, want to find ways of reaching resolutions cost effectively.
The arrival of a third party professional administrator into the insolvent entity does bring to the problem a new set of eyes and an independence…