Holding steady - Financial services and international arbitration
Parties in the financial services sector continue to turn to arbitration to resolve their disputes. Since our last blog post (here), financing parties have used arbitration in steady numbers.
The London Court of International Arbitration (“LCIA”) reports that in 2023 finance and banking cases represented 16% of all new cases, up slightly from 15% in 2022.[1] Interestingly, banking and finance was the most common industry sector to turn to the LCIA after transport and commodities, which accounted for 36% of new cases.[2] Energy and resources matters, which are traditionally associated with arbitration lagged behind banking and finance at 14% of new cases in 2023.[3]
In contrast to the LCIA, financing and banking cases make up fewer of the International Chamber of Commerce’s (“ICC”) International Court of Arbitration’s caseload. The ICC reports that finance and insurance matters represented between 3% - 6% of new cases.[4] London UK’s reputation as a global hub for banking and finance likely partially explains why finance and banking related disputes make up a larger percentage of the LCIA’s caseload compared to the ICC.
Despite there not being a significant increase in the number of banking and finance parties relying on major arbitral institutions to resolve their disputes, there are other arbitral bodies that financing parties can turn to if they want their matter to proceed by way of arbitration. One such example, is P.R.I.M.E. Finance, which stands for “Panel of Recognised International Market Experts in Finance” and was launched in 2012 with a view to providing assistance to judicial systems in the resolution of disputes concerning complex financial products.[5]
P.R.I.M.E. Finance has bespoke Arbitration Rules which are designed to be used by parties to a wide range of financing disputes (the “Rules”). Parties who turn to P.R.I.M.E. Finance have their arbitrations administered by the Permanent Court of Arbitration in The Hague. Moreover, the Rules, which were most recently updated in 2022, incorporate many of the key advantages of arbitration, including:
- The ability to appoint arbitrators who have relevant expertise;
- The efficiencies that come with arbitration, such as the requirement that Tribunals are required to render their final award within 90 days of the hearing;
- Provisions relating to emergency, expedited and default procedures. This includes rules relating to interim measures; and
- The enforcement of the Award rendered by the Tribunal in accordance with the New York Convention on the Recognition and Enforcement of Arbitral Awards 1958.[6]
How frequently parties are using the Rules to govern their disputes is unclear, as P.R.I.M.E. Finance does not report how many new cases it takes on annually. In any event, P.R.I.M.E. Finance provides an attractive alternative to the major arbitral institutions by incorporating into its Rules provisions reflecting the latest developments in arbitration more generally, such as the ability to appoint an emergency arbitrator and the jurisdiction of the Tribunal to award interim measures.
There is no reason to expect that there will be a major shift to the current trend of the use of arbitration by parties with disputes in the financial services sector. If anything, having rules that are designed with such disputes in mind may cause more parties to consider arbitration as a serious alternative to litigating banking and financing disputes in the courts.
[1] LCIA 2023 Annual Casework Report, pages 7-8.
[2] LCIA 2023 Annual Casework Report, pages 7-8.
[3] LCIA 2023 Annual Casework Report, pages 7-8.
[4] ICC Dispute Resolution, 2023 Statistics, page 13.
[5] https://www.primefinancedisputes.org/page/general-information-and-history
[6] https://www.primefinancedisputes.org/page/p-r-i-m-e-finance-arbitration-rules