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International Financial Disputes - Arbitration and Mediation edited by Golden, Jeffrey; Lamm, Carolyn (1st March 2015)

1 The Modern Role of Arbitration in Banking and Finance

Jeffrey Golden, Peter Werner

From: International Financial Disputes: Arbitration and Mediation

Edited By: Jeffrey Golden, Carolyn Lamm

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 01 April 2020

Banks and cross-border issues — International Swaps and Derivatives Association (ISDA)

(p. 1) The Modern Role of Arbitration in Banking and Finance

I.  Introduction

1.01  On 9 September 2013, the International Swaps and Derivatives Association (ISDA) published its first Arbitration Guide.1 The Guide aimed to provide ISDA members with an overview of and guidance on:

  • •  dispute settlement by arbitration;

  • •  key features of arbitral procedure and relevant distinctions with litigation in domestic courts; and

  • •  reasons why ISDA members might consider arbitration for complex product disputes arising under their ISDA Master Agreements.2

(p. 2) The Guide also included model arbitration clauses contemplated for use with future ISDA Master Agreements.

1.02  The 2013 ISDA Arbitration Guide was most certainly evidence of growing interest in the possible relevance of arbitration to financial market disputes. Publication of the Guide followed an extensive consultation with ISDA members. Two memoranda drawing attention to the issue had previously circulated,3 a round-robin of meetings with its members and other stakeholders in financial centres around the world followed, and further comments were invited and received by ISDA staff, all in advance of this reporting out in the form of the Guide. That survey of views had demonstrated strong support for publication of the Guide and the guidance that it offered.

1.03  Subsequent updates and editions of the Guide are contemplated. Still, the 2013 ISDA Arbitration Guide was a first for ISDA, and it will perhaps be seen by some as a revolutionary manifesto. In the spirit of Thomas Paine’s Common Sense and Engels/Marx’s Communist Manifesto, the Guide aims to inspire clear and independent thinking about why the ways of the past should not necessarily be a roadmap for the future—a ‘call to arms’, a ‘loosening of the chains’ that have heretofore bound our conceptualization of financial market dispute settlement or at least a rethink of the subject whose time had come in light of the evolving circumstances of relevant segments of market activity.

1.04  The remainder of this chapter explores many of the themes which inspired derivatives market interest in the 2013 ISDA Arbitration Guide and, in turn, inspire the collaboration which has led to the publication of this book. However, in so doing, we aim to draw attention to a much wider range of financial market disputes than (p. 3) just those relating to complex products, and the relevance of arbitration to this broader category of disputes about banking and finance for not dissimilar reasons.

II.  Changing Landscape

1.05  It is something of a truism to say that the financial markets are all about money—and, thought of in global terms, plenty of it! When parties find themselves in dispute in respect of the investments, instruments, and contracts that constitute financial trading, there is often a lot at stake and the interests of many can be affected.4

1.06  The issues contested in these disputes can be complex. These days financial market disputes that get litigated or arbitrated are rarely ‘one-shot money disputes’ arising from simple transactions and a single, stand-alone debtor–creditor relationship, if, indeed, they ever were such.5 We are instead dealing with sometimes multi-party, often multi-contract disputes, involving complex-structured financial products implicating a number of legal relationships that interact in complicated ways and often across jurisdictional borders.6 Moreover, because of standardization of documentation, the knock-on effects for third-party contracts and relationships of any precedents created can be considerable.

(p. 4) 1.07  As financial transactions and markets have become more complex, so have the disputes. For the uninitiated judge or counsel, coming to grips with such complexity can necessitate a steep learning curve. Indeed, this is borne out by the fact that, in some cases, even experienced courts of first instance have struggled and produced conflicting results, such that key issues, at least in the view of one commentator, have too often only adequately been dealt with on appeal or in some subsequent cases concerning the same issue.7

1.08  The number of complex product disputes has also been growing. A research project conducted by Dr Joanne Braithwaite8 at the London School of Economics and Political Science confirmed that a total of 78 decisions involving ISDA documentation were handed down by the English courts alone during the period 1 January 1993 to 5 August 2011. Of these, 60 per cent occurred between 2009 and 2011. Moreover, the number of such cases decided or pending since then is almost certainly greater than in any prior period of comparable length. In general, the exponential growth of financial markets litigation in recent years owes much, of course, to the financial crisis that kicked off in 2008.9

1.09  Key contracts had historically assumed dispute settlement by courts, frequently courts in the leading financial centres. By way of example, the ISDA Master Agreement discussed in note 2, which governs the vast majority of over-the-counter derivatives transactions, provides in effect for a ‘tick the box’ choice between New York and English courts only.10 It should be pointed out, however, that when this formulation was made it was easier to contemplate a more homogeneous, high-credit universe of relevant wholesale market players that would be using that form of contract and to assume also that most would have considerable exposure to and within those same jurisdictions where the designated courts were situated.

1.10  Part of the particular interest in New York and English courts (and a limited choice between New York and English law as the governing law of the contract) was the further assumption that, by limiting the parties’ choice in this way, there was an increased likelihood that industry standard contracts like the ISDA Master, (p. 5) wherever used and by whichever parties, would represent a kind of ‘platinum end bar’ standard—the Mètre des Archives—giving rise to uniform treatment because of the concomitant expectation of consistent interpretation by these leading commercial courts. And market expectation of such uniformity would, in turn, foster further liquidity in the system, since parties would reasonably believe that they could hedge trading under a contract with one governing law and choice of forum with trading under another contract in which the parties had made the other choice without fear of documentation or ‘basis’ risk.11 However, more recently the results from leading courts have not been in all cases consistent.12 A significant example of this inconsistency is the differing conclusions of the London and New York courts as to the enforceability of a key provision, Section 2(a)(iii), of the ISDA Master Agreement, the former upholding its enforceability in Lomas v Firth Rixson,13 whilst the latter held that, on the facts of the case, it was unenforceable (or at least of limited enforceability) in Metavante.14

1.11  The results from other courts are mixed and vary widely. Across Continental European jurisdictions, especially in Austria, Croatia, France, Germany, Hungary, Italy, Netherlands, Poland, Portugal, and Spain, a wide range of courts of all instances have addressed disputes around derivatives or other complex financial product trading. The approaches taken by these courts range from a contractual law perspective to criminal and even administrative law perspectives. In some cases, we see a combination of several of these elements15 and conflict of law issues have had to be clarified at EU law level16 as a precursor to national proceedings.17 The facts and circumstances discussed in most cases revolve around the capacity (for example, of public law entities) to enter into derivative transactions as well as the (p. 6) degree of disclosure obligations of the seller vis-à-vis professional clients and retail clients. The decisions even among courts within a single jurisdiction tend to vary significantly between lower and higher instance courts.18 So far, only a fraction of cases have made it to the highest appellate courts, whose judgments are published more widely.19

1.12  Geographical expansion of the industry, product expansion, and an expansion of the universe of market participants on both the buy side and market-making side of the business have all challenged the assumption that dispute settlement was best centred in the courts of just one or two, often remote, jurisdictions. The sheer volume of modern financial transactions has inevitably resulted in a ‘complex world of increasingly connected markets and jurisdictions’,20 calling for more flexible and fine-tuned dispute settlement solutions. The complexity of structured financial products too has grown enormously, with constant and ongoing innovations.21 Thus, the global nature and creativity of the markets calls out for a need to be similarly international and innovative in crafting suitable dispute settlement solutions. Yet any appropriate international response will need to be not only innovative but also coordinated, sophisticated, and thought through. Most importantly, it will need to attract a high calibre of person with suitable experience to the task of dispute resolution.22 Today, most complex financial transactions take place on standardized terms (the ISDA Master Agreements being the most common), with the problematic consequence that a single ‘wrong’ decision in a national court may well have systemic consequences.23

(p. 7) 1.13  As the landscape of international banking and finance has changed, there has also been an evolution in the nature of the issues that we have seen come to court in financial market disputes, particularly those stemming from trading in complex financial products. For example, in the early derivatives market cases, parties tended to battle over matters which, though perhaps more dramatic because of the amounts at stake or the potential repercussions of wrong answers for third-party non-litigants flowing from the use of standardized trading terms, the issues nonetheless were often ones with which judges of generalist courts were familiar from other contexts and in fact had been dealing with for many years. In this category were cases that turned on:

  • •  whether an exchange of correspondence or other communication between two parties does or does not give rise to a binding transaction between them and, if so, what are the terms of that commitment;24

  • •  whether a party has the requisite authority to enter into a particular trading relationship or transaction, or alternatively whether such activity would be ultra vires;25

  • •  whether one party owes the other some fiduciary or other higher duty of care;26 or

  • •  whether disclaimers and non-reliance clauses in contractual documentation, which purport to deny that representations or warranties were made or relied on by the parties, entail that a party is contractually estopped from alleging misrepresentation or negligent misstatement.27

1.14  More recently, however, in addition to such cases, parties have been bringing to court disputes involving highly technical issues that turn on specialist knowledge, or where answers are to be found in multi-jurisdictional practice that may be difficult to discern or prove. As examples, we see cases about:

  • •  the commercial reasonableness of valuations and financial models;

  • •  sophisticated theories developed in or having application to specialist markets, like ‘flawed asset’ or ‘anti-deprivation’, specifically designed to level the otherwise bumpy playing field of international insolvency policy and rarely seen (p. 8) or understood outside specialist courts or by experienced judges in particular jurisdictions;

  • •  challenges thrown up by parallel proceedings and difficult evidentiary issues further complicated by linguistic or logistical barriers;

  • •  Sharia-compliant products and Islamic finance-inspired contracts and terms; and

  • •  multi-jurisdictional conflicts of laws often again compounded by competing policy interests that might potentially be misunderstood or not fully appreciated by domestic courts in a particular jurisdiction.

1.15  In fact, many so-called disputes in less mature financial markets may not be contentious, at least in the traditional sense. Rather, the sought-after settlement may represent the parties’ search, in the absence of known or established precedent, for sophisticated, correct, and consistent answers in light of changed and unanticipated circumstances.

1.16  Consider the hypothetical situation that might arise if, for example, to commemorate a royal birth, death, or marriage, or inspired by a significant personage or event, a parliament or an authorized head of state were to declare an unscheduled bank holiday. Any number of financial transactions or contracts might have a payment falling due on the relevant date, and accordingly the question could arise in the absence of express contractual or statutory guidance which business day convention should apply. Should payments otherwise then due move forward a business day or fall back a business day? Does it make a difference if by adjusting the payment it would for that reason fall into a different calendar month?

1.17  Across all affected local market activity, the impact could be significant. At the same time, the parties’ intent may be to adjust in accordance with the market practice of the relevant global marketplaces for trading in the particular product that is affected. Of course, not knowing the answer, one party might have an interest in receiving a payment sooner, while its counterparty might prefer a grace period that allowed a later payment.

1.18  It would seem undesirable and hardly commercial to expect the parties in such a situation to seek resolution of the issue in a court of general jurisdiction— either a local court where the decision-maker might lack relevant experience of the markets or especially if it would require sending the parties to a court far away, with logistical and linguistic obstacles, prohibitive expense, and lacking in jurisdiction such that it could render a binding answer. These are situations where an expedited arbitration, mediation,28 or even an expert (p. 9) determination29 might be preferable—and where the availability of expert testimony could be invaluable. For experts30 with relevant experience to draw upon, reaching a correct answer might be the work of but a moment, but the same exercise could require considerable education for another. Here again, account must be taken of the interconnectedness of markets and financial trading in them, the impact on other transactions of any determination, the need for certainty and consistent results, and the fact that third parties may have as great or a greater interest in the outcome as the parties who would first spot or litigate the issue.31

1.19  Similarly, pleadings before and resolution by arbitrators experienced in financial market cases and practice may be desirable for disputes over what might be characterized as fairly technical issues such as:

  • •  whether an email is an electronic message for the purpose of satisfying a contractual notice provision;32

  • •  whether a contractually required calculation statement provides the level of detail that the market would expect;33

  • •  whether the market expectation is that quotations for a replacement trade will be provided on a firm or indicative basis;34

  • •  whether and to what extent a party may finally determine default interest consistent with relevant market practice;35 or

  • •  whether the market would view the ISDA Master Agreement as suitable for documenting a loan relationship.36

1.20  The point is that, in the debate about the suitability of arbitration and other forms of alternative dispute resolution (ADR) for financial market disputes, too often each side of the debate has in mind a particular kind of dispute, as between parties of a particular kind and in respect of a specific market arising in a particular jurisdiction or set of relevant jurisdictions, but often, as between both sides of the debate, not the same kind of dispute, parties, product, or jurisdiction. The global financial world is more complicated than that. The simple truth is that the facts will (p. 10) always be important and, when thinking about financial market disputes, one size may not fit all.

1.21  For a variety of reasons, it has increasingly become clear that insofar as achieving correct and enforceable results are concerned, there have been just too many things stemming from the traditional way of handling financial disputes that do not make sense in the current state of affairs.

III.  Legacy Views

1.22  Historically, many financial institutions have behaved as if they were ‘allergic’ to arbitration.37 In the words of one (unnamed) US banker: ‘If we are owed money (p. 11) we sue. Why bother with arbitration?’38 The preference for taking financial market disputes to court, rather than referring them to an alternative dispute settlement mechanism, is discussed in Chapter 9,39 where concerns that have been expressed about whether arbitration can deliver the desired ‘robust decision-making’, predictability, and commitment to correct results are further noted.

1.23  Often cited as well is the need for binding precedents and a settled body of authoritative law40 as well as procedural issues ranging from a lack of consensus and effective procedures regarding discovery and the handling of preliminary disputes,41 confidentiality and the form that referral to arbitration clauses42 should take, and the demonstrated difficulties that have arisen from poorly drafted arbitration agreements.43

1.24  These issues all continue to be important and warrant attention.

IV.  Globalization and Standardization

1.25  However, the expanding and evolving nature of key segments of the financial markets, the widening participation of a range of market players differently situated, and the growing complexity of products and relevant issues giving rise to dispute have all contributed to the significant rethink of this subject.

1.26  In a world where it can easily happen that someone sitting in the Hong Kong branch of a Swiss bank strikes a deal through the airwaves with someone sitting in the Tokyo branch of a German bank to hedge the commodity or weather risk of a Chinese investment in Africa, it cannot be certainly said that the best, most convenient, or cost-effective place to resolve any dispute arising in respect of that (p. 12) trade will necessarily be in the domestic courts of a financial centre on the other side of the globe—or even that the greatest relevant experience in dealing with the particular issues in dispute will necessarily be found among the judges sitting there. In determining a right course of action for resolving financial market disputes here again it is important to consider the facts.

1.27  And the fact is that we live in a highly global and de-centralized financial marketplace. As the current debate about, and conflict in, the financial regulatory scheme of things reflects, there is no world parliament or congress to legislate global financial market law44 and, even where parties have chosen a particular jurisdiction’s law to govern the interpretation of a contractual relationship, there is an absence of relevant international law to be applied to give context to such contracts and to resolve issues of public policy that divide relevant jurisdictions with an interest in the proceedings. Most importantly, there is no over-arching international hierarchy of courts when domestic courts render conflicting decisions, and no ‘Supreme Court’ to rule on such conflicts if and when they arise.

1.28  Particular financial market concerns that contribute to current interest in and thinking about arbitration also include:

  • •  Relevant special entity types. New financial market regulatory regimes place heightened importance on clearinghouses and exchanges and the margin requirements that support them. Dispute settlement mechanisms for such entities vary widely, are often underdeveloped, and insufficiently tested.45 The subject of potential disputes such as mark-to-market and collateral valuations may call for technical expertise,46 and the pool of competent talent to resolve such disputes remains to be identified, recruited to the task, and capable of instilling confidence that agreed procedures will suffice in periods of market stress like (p. 13) the events giving rise to financial crisis in 2008. Other active market participants, like development banks and sovereign treasuries,47 have immunity and other concerns that make resort to foreign national courts problematic.

  • •  Specialization. There are concerns in many relevant jurisdictions about the absence of special subject matter courts for finance. There are often special subject matter domestic courts for a range of subjects, from juvenile crime and family matters to tax, insolvency, and intellectual property. At the international level, the World Trade Organization has its own tribunal, which ensures that world trade has a specialized dispute settlement facility. However, prior to the establishment of P.R.I.M.E. Finance,48 an institution set up in The Hague in January 2012 to resolve, and assist judicial systems in the settlement of, disputes of complex financial transactions, there was no international forum dedicated to the resolution of financial market disputes.49 Arbitration affords an answer that can ensure a dispute settlement forum with the requisite specialized knowledge and experience.50

  • •  Policy and social impact. A later chapter gives an overview of financial products,51 and many of these are increasingly being used to manage risk, often involving emerging market parties, in support of sustainable development. It makes no sense to condition this potential benefit on a requirement that the parties resolve all disputes arising in a forum far away.52

1.29  And then there is the particular challenge generated by the widespread usage in finance of standard terms and contracts. Standardization brings great benefits to (p. 14) the market. It enables parties to speak the same ‘language’ across jurisdictional borders. It fosters efficiencies, including the reduction of costs. However, it breeds a corollary risk (even in the absence of a formal rule of binding precedent), namely of contamination—that a judicial mistake made when interpreting a standard term can ‘infect’ trillions of dollars of trading based on the same term. The search for ‘party intent’ when resolving disputes gives way to the different search for ‘market intent’. Thus, for example, we find a senior English judge admitting that the interpretation of the ISDA Master Agreement had to be sensitive also to the needs of non-litigants who relied on its terms: ‘It is axiomatic that [the ISDA Master Agreement] should, as far as possible, be interpreted in a way that serves the objectives of clarity, certainty and predictability, so that the very large number of parties using it should know where they stand.’53 But for this to happen a requisite familiarity with, and sensitivity to, financial market interest and practice must be presumed. That may be lacking in many domestic courts. Arbitrators who bring with them relevant experience of finance can fill in that experiential gap.

V.  Overarching Concerns: Competence and Enforceability

1.30  Advocates for dispute settlement of financial market disputes by arbitration54 point to a variety of benefits, including a measure of procedural flexibility that allows conformity with particular financial market conventions and can meet a need for expedited procedures or confidentiality.55 The potential for achieving real economies of cost and time and practical conveniences are also part of the debate.56 Inevitably, however, the pro-arbitration camp in the debate will focus in particular on two issues—competency and enforceability:

  • •  avoiding a court the parties don’t like; and

  • •  ensuring that any decision, judgment, or award will be upheld in the relevant jurisdiction.

(p. 15) The importance of these two issues insofar as many parties and relevant market activity are concerned should not be underestimated.

1.31  The unattractiveness of litigating financial disputes in the domestic courts of many jurisdictions, and in particular those in emerging markets where judges are unlikely to have had extensive experience with or training in wholesale market finance, stems from a number of factors, including the delays and lack of familiarity of the parties with local proceedings and the absence of established relationships with local counsel, perceptions of bias57 and corruption,58 concerns where trading is pursuant to standard forms or other contracts governed by foreign law with lack of familiarity with that law in the local courts and the lack of a track record of similar cases or of consistency in the handling of relevant issues or the absence altogether of a rule of binding precedent (stare decisis) as well as practical concerns about the need for translations and interpreters. Of these concerns, the lack of competence or relevant experience of local judges is frequently said to be of greatest concern,59 particularly in light of the reputation of, for example, English and New York judges for probity and experience of complex product cases.

1.32  Still, in the end, the choice may come down to enforceability. It is of course undesirable for a London or New York court to settle a dispute which is then found to be unenforceable in the country of the relevant counterparty. Where that would be the case it would be a nonsense for the contract to send the parties to courts where there can be no practical assurance that any decision rendered would be effective against the losing party. This is not so much a problem for parties litigating with one another within certain countries (or regions) where there exist multilateral treaties and conventions to facilitate the recognition and enforcement of judgments, for example:

(p. 16)

  • •  within the EU and the EFTA region (Switzerland, Norway, Iceland, but excluding Liechtenstein), the Brussels and Lugano regimes mean that enforceability is generally effective between those countries without the need for any special procedure;

  • •  within the Middle East there exist the 1952 Agreement as to the Execution of Judgments (‘Arab League Judgments Convention’), the 1983 Arab Convention on Judicial Co-operation (‘Riyadh Convention’), and the 1995 Protocol on the Enforcement of Judgments Letters Rogatory, and Judicial Notices issued by the Courts of the Member States of the Arab Gulf Co-operation Council (‘GCC Protocol’);60 and

  • •  within Latin America, the 1889 and 1940 Montevideo treaties provide that judgments from one state have the same force both in other countries and domestically, subject to certain requirements. The Bustamante Code of 1928, Articles 423–437, also provides for the enforcement of civil and administrative decisions.61

In addition, the Hague Choice of Court Convention,62 under which contracting parties agree to recognize a choice of court agreement (‘forum selection clause’), is likely, once it has been ratified, to significantly increase the protection for exclusive jurisdiction clauses on a global level and also to bolster cross-border recognition of judgments. Outside these contexts, however, enforcement becomes more difficult.

1.33  Arbitration, on the other hand, offers the advantage that foreign arbitral awards are generally enforceable across borders, by virtue of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (‘the New York Convention’), to which approximately 153 states are party.63 Contracting parties under the New York Convention have an obligation to recognize and enforce arbitral awards, with some exceptions.

(p. 17) VI.  Conclusions

1.34  What we are witnessing is a sea-change in thinking towards dispute resolution within the finance and banking sectors. For an industry that has in the past been notorious for its rejection of arbitration and other methods of alternative dispute resolution, it is significant that 69 per cent of Financial Services sector respondents in a recent survey held by the Queen Mary College, University of London and PriceWaterhouseCoopers, expressed their support for arbitration as an effective dispute resolution process.64 This change in attitude is reflected in the publication of the 2013 ISDA Arbitration Guide containing model arbitration clauses,65 as well as the establishment of P.R.I.M.E. Finance, an institution which is dedicated to the settlement of disputes concerning complex financial transactions. One immediate benefit of this venture is that experts in finance and experts in dispute resolution are engaged with each other in an ongoing dialogue, which is already showing signs of innovative procedural reform and a broader sharing of relevant knowledge.

1.35  As discussed above, the evolution in both the number and the nature of banking and finance disputes strongly warrants a review of the adequacy of the dispute resolution process as it currently stands, and an analysis of what benefits arbitration might offer. The increasing demand for arbitration from banks and financial institutions themselves (especially in relation to transactions involving parties from emerging market jurisdictions)66 also affirms the timeliness of this review.

(p. 18) 1.36  Many financial market disputes are of a highly technical nature and beg a background in market practice, custom, and usage, yet the absence of a specialized subject matter court for finance, both at the domestic level in many jurisdictions and at the international level, creates a void that a carefully selected arbitration panel, comprised of one or more arbitrators with the requisite experience, can fill. By tailoring arbitral rules and procedures to specific concerns of these markets, it can only be expected that the attractiveness of this alternative will be further enhanced.67

1.37  Asking parties to fly to remote places for unenforceable decisions? That makes no sense.68 It makes no sense that the only resort under standard form contracts like the ISDA Master Agreement for derivatives trading should be to US or English courts. Why shouldn’t these matters be litigated where the parties would agree it makes sense, in a language they understand, and before those whose background can give context to the text of the parties’ contract?

1.38  Leaving the markets, especially more emerging markets, at the mercy of inexperienced courts makes no sense either. No doubt the markets would prefer unenforceable right answers to enforceable wrong ones. This should be a particular worry of parties with significant exposure to the emerging markets. Indeed for such parties, this issue may be a time-bomb waiting to explode.

1.39  Even in experienced courts, it makes no sense to leave the selection of judges to a dice roll when the parties can pick from a specialist pool of more than 100 experts and arbitrators69 with relevant experience who stand ready, willing, and able to (p. 19) assist, and whose expertise parties are able to exploit, selecting those most appropriate for the particular case.70

1.40  For all the reasons discussed above, a rethink on the subject of financial market dispute settlement at this juncture should both not come as a surprise and be viewed as timely. And in this regard, it would be a shame, as part of that rethink, not to study in a modern way, with a view to repositioning, the role that arbitration, mediation, and other forms of alternative dispute resolution could and should play in banking and finance. When that happens, it is hoped that this book, including as it does the contributions from a most distinguished group of authors on the topics they believe to be particularly relevant to this subject, will prove helpful.


*  The authors gratefully acknowledge the assistance of Chloe Shuffrey MA Cantab, MSt Oxon in preparing this chapter for publication.

1  ISDA, 2013 ISDA Arbitration Guide (9 September 2013), <http://www2.isda.org/functional- areas/public-policy/financial-law-reform/>, p 1, visited on 1 September 2014.

2  The ISDA Master Agreement is a master agreement form which can govern multiple derivatives transactions. It is a single agreement consisting of three different components: first, a printed form of standard provisions; second, a schedule to the agreement, in which certain variables and elections made by the parties, together with any additional, bilaterally agreed provisions, are set out; and third, confirmations relating to individual transactions, where the economic terms of the transactions are set out. First published in 1987, these forms have been revised and re-published twice since then: in 1992 and in 2002. The ISDA Master Agreement is widely used as an industry standard and receives considerable attention in all leading treatises on law and practice in the derivatives markets. SK Henderson, Henderson on Derivatives (Butterworths LexisNexis, 2010), p 803 concludes that ‘[t]he ISDA master is perhaps the most successful financial form document ever, anywhere’. The author goes on to write: ‘There cannot be any other standard document which governs as many transactions, with as much credit exposure among as many different parties with such beneficial results. This did not happen by chance.’ The ISDA Master Agreement’s status as the industry standard has also been widely recognized by both domestic and foreign courts. See Finance One Public Co Ltd v Lehman Bros Special Financing, Inc, 414 F.3d 325, 328 (2d Cir 2005) (referring to the ISDA Master Agreement as ‘the industry standard in general use worldwide for formalizing derivatives trading arrangements’); Thrifty Oil Co v Bank of America Nat Trust and Savings Ass’n, 310 F.3d 1188, 1202 (9th Cir 2002) (same); JP Morgan Chase Bank, NA v Controladora Comercial Mexicana SAB De CV, 2010 WL 4868142, *2 (NY Sup Ct Mar 16, 2010) (noting that the ISDA Master Agreement ‘and ancillary documents [are] widely employed in the derivatives market’); Lomas v JFB Firth Rixson Inc [2010] EWHC 3372 (English High Court) (‘The ISDA Master Agreement is one of the most widely used forms of agreement in the world. It is probably the most important standard market agreement used in the financial world’); Greenclose Ltd v National Westminster Bank Plc [2014] EWHC 1156 (English High Court) (‘Given that this [1992 ISDA Master] is a version of a standard form which is still in regular use as a template throughout the world, the way in which I determine the issues of construction is bound to have ramifications beyond this case’).

3  ISDA, ‘Memorandum for members of the International Swaps and Derivatives Association, Inc.: Memorandum on arbitration in derivatives’ (19 January 2011), <http://www2.isda.org/functional-areas/public-policy/financial-law-reform/>, p 2, visited on 1 September 2014; ISDA, ‘The use of arbitration under an ISDA Master Agreement: feedback and policy options’ (10 November 2011), <http://www2.isda.org/functional-areas/public-policy/financial-law-reform/>, p 1, visited on 1 September 2014.

4  The amount of money at risk is staggering. The Bank for International Settlements estimates the current size of the over-the-counter derivatives market alone in terms of notional amounts outstanding to be approximately $691 trillion <http://www.bis.org/publ/otc_hy1411.htm> visited on 1 December 2014. More than 90 per cent of this amount is said to be governed by ISDA terms. (See n 2 and accompanying text.) This standardization can magnify the consequence of a court’s mistake in deciding a term’s proper meaning, since a wrong decision may have an even greater practical effect on parties outside a dispute than on the parties who are litigating the issue. At the same time there are now more than 3,000 Bilateral and Multilateral Investment Agreements between and among states, most of which define investments to include ‘financial instruments, securities, bonds, debt instruments and any instrument having economic value’. Each of these agreements usually includes an offer of consent to arbitrate disputes relating to financial (and other) investments. This creates a host state investor dispute mechanism that is available with most capital importing countries in the event of a lack of fair and equitable treatment, expropriation, or other violation of a lack of minimal standard of international treatment. Such proceedings to date have included inter alios: Fedex N.V. v The Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction, 11 July 1997, Ceskoslovenska Obchodni Banka A.S. v The Slovak Republic, ICSID Case No. ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction, 24 May 1999, Abaclat and Others v Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility, 4 August 2011, Ambiente Ufficio S.p.A.and others v Arggentine Republic, ICSID Case No. ARB/08/9, Decision on Jurisdiction and Admissibility, 8 February 2013, Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award, 31 October 2012, as described in Chapter 5.

5  See KP Berger, ‘The Aftermath of the Financial Crisis: Why Arbitration Makes Sense for Banks and Financial Institutions’, Law and Financial Markets Review, 3(1) (2009), 54–63, who doubts that financial disputes were ever as simple as they have been characterized. He argues that, on deeper analysis, many seemingly simple ‘one-shot money disputes’ often involved complex legal and conflict-of-laws issues. See also HAG Naon, ‘ICC Dispute Resolution’ in N Horn and JJ Norton (eds), Non-judicial Dispute Settlement in International Financial Transactions (The Hague, Kluwer Law International, 2000), p 75, which discusses the complicated issues that can arise out of seemingly simple loan or credit transactions, and concludes that ‘it is a simplistic vision of reality to assume that loan agreements only give rise to unilateral and unconditional obligations to repay moneys only on the borrower’s side’.

6  See J Golden, ‘Judges and Systemic Risk in the Financial Markets’, Fordham Journal of Corporate & Financial Law, XVIII (2013), 327–37, at 330–1.

7  See J Ross, ‘The Case for P.R.I.M.E. Finance: P.R.I.M.E. Finance Cases’, Capital Markets Law Journal, 7(3) (2012), 221–70, at 224. Ross contends that Marine Trade SA v Pioneer Freight Futures Co Ltd [2009] EWHC 2656 (Comm) (English High Court) is an example of such a case.

8  See JP Braithwaite, ‘OTC Derivatives, the Courts and Regulatory Reform’, Capital Markets Law Journal, 7(4) (2012), 1–22, available at: <http://cmlj.oxfordjournals.org/content/early/2012/09/21/cmlj.kms033.full?keytype=ref&ijkey=uwjPs64CzTOXiza> visited on 1 September 2014.

9  Golden, ‘Judges and Systemic Risk in the Financial Markets’, 330: ‘a “tsunami” of financial markets litigation from the financial crisis has been predicted, and the cases are pouring in.’ The 2012 Eurozone crisis is also regarded in the Financial Services sector as likely to have an impact on litigation activity. In the Survey ‘Corporate Choices in International Arbitration’ (2013), the plurality of Financial Services industry respondents (46%) indicated that they foresaw a rise in disputes as a result of the 2012 crisis (p 11).

10  The standard terms of the Loan Market Association have similar jurisdiction clauses favouring the New York and London courts.

11  J Golden, ‘Interpreting ISDA Terms: When Market Practice Is Relevant, as of When Is It Relevant?’, Capital Markets Law Journal, 9 (2014), 299–307, at 304.

12  See eg Belmont Park Invs Pty Ltd v BNY Corporate Tr Servs Ltd & Lehman Bros Special Fin Inc [2011] UKSC 38, SC. Cf In Re Lehman Bros Holdings Inc. 422 B R 407 (Bankr, SDNY 2010).

13  [2010] EWHC 3372 (Ch), CA.

14  In Re Lehman Brothers Holdings Inc, No 08-013555 (JMP) (Bankr, SDNY 15 September 2009). See Ross, ‘The Case for P.R.I.M.E. Finance’, 246ff, who discusses the significance of these, and other, inconsistent cases.

15  Eg, in Italy: Italian Supreme Court Decision No 773 of 20 January 2014 and Consiglio di Stato/Council for Administrative Law Matters, Decision No 5962 of 27 November 2012: Dexia-Depfa v Province of Pisa; and in Austria: City of Linz v BAWAG PSK, Handelsgericht Wien/Vienna Commercial Court, Case No 48 Cg 218/11k.

16  Case C-114/10 BVG v JPMorgan Chase Bank [2011] (former European Court of Justice (now Court of Justice of the European Union)). For a summary of the judgment, see http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/;ELX_SESSIONID=hwydJYJcD1vFfXb9hLBwZ1hs3NyZ2w2sptdXVhLn5hQ22Q42LKDV!883808027?isOldUri=true&uri=CELEX:62010CJ0144> visited on 1 September 2014.

17  See eg the following English court proceedings: Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 (HL); Berliner Verkehrsbetriebe Anstalt Des Oeffentlichen Rechts v JP Morgan Chase Bank NA and JP Securities Ltd [2010] EWCA Civ 390 (CA); and Depfa Bank PLC v Province di Pisa; Dexia Crediop SpA v Province di Pisa [2010] EWHC 1148 (Comm) (English High Court).

18  Germany is a good example; cf cases listed in P Clouth, ‘Anlegerschutz—Grundlagen aus Sicht der Praxis’, Zeitschrift fuer das gesamte Handels- und Wirtschaftsrecht 177 (2013), 212–63.

19  Eg the Austrian case, Oberster Gerichtshof, Judgment 8Ob11/11t (‘Quanto Snowball Swap’) of 24 October 2011, available at: <https://www.ris.bka.gv.at/Dokument.wxe?Abfrage=Justiz&Dokumentnummer=JJT_20111024_OGH0002_0080OB00011_11T0000_000> visited on 1 September 2014; and the German case, Bundesgerichtshof/Supreme Civil Court, Judgment of 22 March 2011 (‘Spread Ladder Swap’), BGHZ 189, 13, available at: <http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&nr=55748&pos=0&anz=1> visited on 1 September 2014.

20  Ross, ‘The Case for P.R.I.M.E. Finance’, 222.

21  M Kantor, ‘OTC Derivatives and Arbitration: Should Counterparties Embrace the Alternative?’, Banking Law Journal, 117 (2000), 408ff.

22  The relevance of this objective is supported by the findings in a recent survey, ‘Corporate Choices in International Arbitration: Industry Perspectives 2013’, Survey by School of Arbitration (Queen Mary College, London) and PriceWaterhouseCoopers (2013), available at: <http://www.pwc.com/gx/en/arbitration-dispute-resolution/assets/pwc-international-arbitration-study.pdf> visited on 1 September 2014. Financial services industry respondents cited ‘the expertise of the decision-maker’ as the number one benefit of arbitration. The report goes on to note that ‘this appears to be in line with the perception that many disputes in the Financial Services sector are highly technical and parties select industry specialists for their cases’, p 8.

See also G Affaki, ‘A Banker’s Approach to Arbitration’, in G Kaufmann-Kohler and V Frossard (eds), Arbitration in Banking and Financial Matters (Basel, Kluwer Law International, 2003), pp 68 and 75. Affaki sees bankers’ primary concern with arbitral institutions as their ability (or inability) to show an understanding of the ‘specificity of the banking business’.

23  See JB Golden, ‘The Courts, the Financial Crisis and Systemic Risk’, Capital Markets Law Journal, 4 (2009), ss 141–9 at s 143.

24  See, eg, Intershoe Inc v Bankers Trust Co 77 NY2d 517, 569 NYS 2d 333 (1991); Powercor Australia Ltd v Pacific Power [1999] VSC 110, BC9907547.

25  Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 (HL); see also, eg, Berliner Verkehrsbetriebe Anstalt Des Öffentlichen Rechts v JP Morgan Chase Bank NA and JP Securities Ltd [2010] EWCA Civ 390 (CA) and Depfa Bank PLC v Province di Pisa; Dexia Crediop SpA v Province di Pisa [2010] EWHC 1148 (Comm) (English High Court), which involve jurisdictional issues in this context.

26  PT Dharmala Sakti Sejahtara (Dharmala) v Bankers Trust [1996] CLC 518; Springwell Navigation Corporation v JP Morgan Europe Limited [2010] EWCA 1221 (CA).

27  Peekay Intermark v Australia and New Zealand Banking Corporation [2006] EWCA Civ 386 (CA); Springwell Navigation Corporation v JP Morgan Europe Limited; Bank Leumi v Wachner [2011] EWHC 656 (Comm) (English High Court); Standard Chartered Bank v Ceylon Petroleum Corporation [2012] EWCA Civ 1049 (CA).

28  Mediation differs from arbitration insofar as it generally does not lead to a final and binding decision on the parties. It is instead focused on enabling parties to reach a settlement through the help of a third party, which will enable them to continue to fulfil their duties under their original contract and thereby maintain ongoing commercial relations. See the 2013 ISDA Arbitration Guide, p 1.

29  Expert determination is a process that involves the clarification of a specific legal or factual question by a third-party ‘expert’, in order that the parties may continue with an existing contract. Parties may stipulate in their contract that any determination by the expert is binding.

30  See generally Chapter 10.

31  See further discussion on the issue of standardization at para 1.29ff.

32  Greenclose Ltd v National Westminster Bank Plc [2014] EWHC 1156 (English High Court).

33  Goldman Sachs International v Videocon Global Ltd [2013] EWHC 2843 (Comm) (English High Court); Goldman Sachs International v Videocon Global Ltd and another [2014] EWHC 4267 (Comm).

34  Lehman Brothers Finance SA v Sal Oppenheim jr & Cie KGAA [2014] EWHC 2627 (Comm) (English High Court).

35  Finance One Public Company Limited v Lehman Bro. Special Financing Inc No 03-9049(L) (US Court of Appeals).

36  HSBC Life (UK) Ltd v Stubbs (Inspector of Taxes) [2002] STC (SCD) 9, 2001 WL 1422963.

37  See Berger, ‘The Aftermath of the Financial Crisis’, who lists, and refutes, the following ten reasons frequently advanced when challenging the relevance of arbitration to disputes arising in the banking and financial industry: (1) arbitration is not apt for ‘one-shot money disputes’, (2) arbitration does not provide for the possibility of summary judgment, (3) disputes about the tribunal’s jurisdiction may lead to unnecessary delays, (4) arbitrators tend to be more equitable than judges, (5) the flexibility of the legal process creates legal uncertainty, (6) banks want control by higher courts instead of finality of awards, (7) international arbitrators allow discovery, (8) arbitration creates problems in multi-party disputes, (9) confidentiality in arbitration prevents pressure through negative publicity, and (10) an arbitration agreement closes the door for proceedings before the court. He concludes that for a variety of reasons, including the fact that financial market disputes require expert judges (competence), in a post-financial crisis world, there can be advantages of arbitration for banks and bank disputes which are overwhelming. For earlier statements on bankers’ traditional averseness to arbitration, see PR Wood in International Loans, Bonds and Securities Regulation (London, Sweet & Maxwell, 1995), 85–7. Wood cites the following as reasons why banks have not favoured arbitration as a method of dispute resolution: (1) lack of finality in arbitration awards, (2) privacy and confidentiality being inimical to the interests of lenders, (3) lack of condition precedent, (4) less well-developed procedure, (5) enforcement issues (although he acknowledges the positive difference made by the New York Convention), and (6) disputes over the validity of arbitration clauses. Also see L Shore, ‘The Advantages of Arbitration for Banking Institutions’, Journal of International Banking Law, 14(11) (1999), 347–51, at 348, who sets out some reasons why banks in particular have traditionally been opposed to arbitration: the limited opportunity to appeal arbitral awards and the lack of pre-trial procedural mechanisms which have enabled banks to put significant pressure on their opponents; Affaki, ‘A Banker’s Approach to Arbitration’, pp 63ff; A Sheppard, ‘Arbitration of International Financial Disputes’, Kluwer Arbitration Blog, 19 March 2009, available at: <http://kluwerarbitrationblog.com/blog/2009/03/19/arbitration-of-international-financial-disputes/> visited 1 September 2014, who notes that traditionally banks ‘have had sufficient bargaining power in international transactions to insist upon the governing law of their choice (very often New York law or English law) and upon the jurisdiction of their choice (very often New York courts or English courts)’; and I Hanefeld, ‘Arbitration in Banking and Finance’, NYU Journal of Law & Business, 9 (2013), 917–39, 919–20, available at: <http://www.nyujlb.org/wp-content/uploads/nyb_9-3_917-940_Hanefeld.pdf> visited 1 September 2014. Dr Hanefeld cites, in addition to the ‘one-shot money disputes’ argument, (1) the original international framework agreements (in particular, the 1992 and 2002 ISDA Master Agreements), which referred to the exclusive jurisdiction of state courts, and (2) general uncertainty amongst bankers as to whether or not certain financial disputes could be arbitrated, as other reasons for the limited use of arbitration in this arena. See LA Mistelis, ‘Are Banks Changing? The New Big Industry for International Arbitration?’, Kluwer Arbitration Blog, 2 October 2013, available at: <http://kluwerarbitrationblog.com/blog/2013/10/02/are-banks-changing-the-new-big-industry-for-international-arbitration/> visited 1 September 2014.

38  As cited in A Connerty, ‘Documentary Credits: A Dispute Resolution System from the ICC’, Journal of International Banking Law, 14(3) (1999), 65.

39  See 9.04ff.

40  See D Baragwanath, ‘How Should We Resolve Disputes in Complex International Financing Transactions?’, Capital Markets Law Journal, 7(3) (2012), 1–17, at 4ff. Baragwanath argues that a body of consistent jurisprudence is needed to bring clarity and certainty to the law, so as to minimize risk in the markets. This, he contends, is required by the rule of law. See also Hanefeld, ‘Arbitration in Banking and Finance’, who cites the need to establish legal certainty through arbitral precedents as one of the main challenges for the future success of arbitration in the banking and finance sector. Creative attempts to share relevant experiences without undermining confidentiality concerns include efforts by P.R.I.M.E. Finance to host an annual reporting out conference at which its experts discuss in a conceptual way the lessons from the past year’s decisions and awards that they have made or of which they have been made aware.

41  Berger, ‘The Aftermath of the Financial Crisis’ addresses these issues head on, and in fact argues that the absence of ‘US-style discovery’ is, indeed, one of the key benefits of arbitration.

42  Berger, ‘The Aftermath of the Financial Crisis’, p. 56: ‘the drafting of the arbitration agreement is perceived to make substantial demands on the know-how of the drafter in respect of determining the desired arbitration institution and the scope of the arbitration agreement’.

43  See ISDA Mem (19 January 2011), p 5.

44  See J Golden, ‘Do We Need a World Court for the Financial Markets?’, in D Vriesendrop, F A Nelissen and M Wladimiroff (eds), Liber in Honorem W.I. Deetman (The Hague, Academic Press, 2008). See also J Golden, ‘Do We Need a World Court with Specialist Judges?’, Financial Times (9 September 2009) and Golden, ‘Judges and Systemic Risk in the Financial Markets’.

45  Braithwaite, ‘OTC Derivatives, the Courts and Regulatory Reform’, in a significant paper investigating how regulatory reforms might affect the role currently played by national courts in the financial markets, concludes that the outcome of one of the key features of the reform programme set out in the United States and proposed EU rules, namely, the requirement of clearing of certain classes of over-the-counter derivatives transactions through a central counterparty, will be increased use of private dispute resolution procedures. Braithwaite suggests that disputes arising from transactions between two members of a clearinghouse that take place on the clearinghouse’s standard terms are highly likely to be submitted to a private internal dispute resolution (most likely, arbitration). She comes to this conclusion by suggesting that clearinghouse transactions are closely analogous with transactions conducted on exchanges, where it is well known that internally administered, private dispute resolution procedures are mandated (pp 9ff).

46  The Financial Services sector is particularly reliant on the assistance of technical (ie non-legal) experts in dispute resolution: 45 per cent of Financial Services respondents in the 2013 survey ‘Corporate Choices in International Arbitration: Industry Perspectives’ indicated that technical experts were ‘always’ or ‘frequently’ involved in cases. In the Energy sector, this statistic was 35 per cent, and in the Construction sector, 30 per cent (p 180).

47  See N Horn, ‘Non-Judicial Dispute Settlement in International Financial Transactions’, in Horn and Norton, Non-judicial Dispute Settlement in International Financial Transactions, at p 9: ‘Most sovereign borrowers today prefer arbitration clauses in order to avoid that their obligation be made subject to foreign jurisdiction. Lenders, who dislike being subject to the borrower’s jurisdiction, agree to it as a suitable compromise.’

48  See P.R.I.M.E. Finance home page, <http://primefinancedisputes.org> visited 1 September 2014, for an overview of the organization’s constitution and purpose. Its primary activities are identified as being (1) the provision of dispute resolution services (including arbitration and mediation), (2) the provision of judicial support and education, and (3) the compilation of a central database of precedents. See also Golden, ‘Judges and Systemic Risk in the Financial Markets’; ISDA Mem (10 November 2011) for a more detailed insight into the reasons behind the P.R.I.M.E. Finance initiative.

49  See P Nobel, ‘Arbitration in Banking and Financial Matters—Some General Reflections on Arbitration in Banking and Finance’, in Kaufmann-Kohler and Frossard, Arbitration in Banking and Financial Matters, p 17. In Professor Nobel’s opinion, at the time he drafted his paper in 2003, there did not exist ‘a strong Finance Arbitration Court’.

50  One of us first wrote about this theme just prior to the 2008 financial crisis in a chapter entitled ‘Do We Need a World Court for the Financial Markets?’, in Vriesendrop, Nelissen and Wladimiroff, Liber in Honorem W.I. Deetman. See also Golden, ‘The Courts, the Financial Crisis and Systemic Risk’; G Tett, ‘More Prison Sentences May Renew Financial Credibility’, Financial Times (4 September 2009); and Golden, ‘Do We Need a World Court with Specialist Judges?’, Financial Times (9 September 2009).

51  See generally Chapter 4.

52  Indeed, Hanefeld, ‘Arbitration in Banking and Finance’, at 924 argues that, given the international dimension of banking and finance transactions today, arbitration can be the only efficient means of dispute resolution.

53  Lomas v JFB Firth Rixson Inc [2010] EWHC 3372 (Ch) (English High Court), at [53].

54  This camp includes Berger, ‘The Aftermath of the Financial Crisis’, who has for many years now consistently advanced a robust argument in favour of arbitration in financial markets disputes, critically reviewing and rejecting the opposing arguments; also Hanefeld, ‘Arbitration in Banking and Finance’, who somewhat more reservedly comes to the conclusion that the success of arbitration in this industry will depend on the expertise and commitment of the arbitrators and the competitiveness of state courts; and Shore, ‘The Advantages of Arbitration for Banking Institutions’, who enumerated the arguments in favour of arbitration for banking institutions 15 years ago.

55  See the 2013 ISDA Arbitration Guide at pp 7–10 for a detailed discussion of the benefits of arbitration in relation to procedural flexibility, expedited procedures, and confidentiality.

56  Berger, ‘The Aftermath of the Financial Crisis’, discusses in detail how various arbitral institution rules have developed solutions to address the issues of time and cost. See Final Report of ICC Task Force on Reducing Time and Costs in Arbitration ‘Techniques for Controlling Time and Costs in Arbitration’, ICC International Court of Arbitration Bulletin (2007), no 1, pp 23ff (as cited in Berger).

57  See N Horn, ‘Non-Judicial Dispute Settlement in International Financial Transactions’, in Horn and Norton, Non-judicial Dispute Settlement in International Financial Transactions, p 3: ‘parties to international transactions often have the suspicion that municipal courts may have a tendency to administer what is sometimes described as “home-town justice”’.

58  Statistics from Transparency International Transparency International (Global Corruption Report 2007—Executive Summary, available at http://archive.transparency.org/publications/gcr/gcr_2007#summary> visited 1 September 2014) suggest that corruption remains widespread in judicial systems in large parts of the world, thereby seriously jeopardizing the fair administration of justice in the countries concerned.

59  This is a major part of the raison d’être behind the P.R.I.M.E. Finance initiative: to gather together a panel of competent experts and arbitrators, who are educated and experienced in complex financial transactions, and whose collective expertise can help to fill what has been described as an ‘immense black hole of legal uncertainty’—see Baragwanath, ‘How Should We Resolve Disputes in Complex International Financing Transactions?’, (2012), at 2. Baragwanath suggests that ‘what is needed are judges with an internationalist understanding’ (at 13). Other major motivators and raisons d’être for the P.R.I.M.E. initiative identified by Baragwanath include: (1) the absence of an acceptable international forum, (2) the globalization of complex financial market transactions, (3) the need for consistent interpretation of standard contractual documentation in complex financial transactions. Cf Ross, ‘The Case for P.R.I.M.E. Finance’, who cites broadly similar justifications for the establishment of P.R.I.M.E. Finance.

60  See R Michaels, ‘Recognition and Enforcement of Foreign Judgments’, Max Planck Encyclopedia of Public International Law (Heidelberg and Oxford University Press 2009), available at: <http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2699&context=faculty_scholarship> visited on 1 September 2014, para 19.

61  Michaels, ‘Recognition and Enforcement of Foreign Judgments’, para 16.

62  Convention of 30 June 2005 on Choice of Court Agreements (<http://www.hcch.net/index_en.php?act=text.display&tid=134> visited on 1 September 2014). This instrument was drawn up in 2005 and is due to come into force in the near future. In the meantime the EU Council has approved to ratify (ie next step after signing) the Hague Choice of Court Convention (October 2014).

63  United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards, done at New York on June 10, 1958. The text and list of contracting states is available at <http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html> visited on 22 January 2015. An equivalent convention exists for the Latin American region: the Inter-American Convention of International Commercial Arbitration of 30 January 1975 (‘the Panama Convention’). The text and list of contracting states is available at: <http://www.oas.org/juridico/english/sigs/b-35.html> visited on 1 September 2014.

64  Survey ‘Corporate Choices in International Arbitration: Industry Perspectives’ (2013).

65  Hanefeld, ‘Arbitration in Banking and Finance’, at 923, eg, states: ‘The trend towards arbitration is reflected in initiatives such as the recent consultation of ISDA on the use of model arbitration clauses instead of jurisdiction clauses under ISDA Master Agreements. This consultation resulted in the release of model arbitration clauses for use in the ISDA 2002 Master Agreement and the 1992 Master Agreement (Multicurrency—Cross Border).’ Hanefeld also cites the Tahawut Master Agreement, developed by ISDA and the International Islamic Financial Market for application in the field of Islamic derivatives, as another example of the increasing demand for arbitration.

See also M Karampelia, ‘Cross-border Disputes in the Financial Sector: A Trend towards Arbitration and the Release of the ISDA Arbitration Guide’, on the Kluwer Arbitration Blog, 24 October 2013 (available at: <http://kluwerarbitrationblog.com/blog/2013/10/24/cross-border-disputes-in-the-financial-sector-a-trend-towards-arbitration-and-the-release-of-the-isda-arbitration-guide/> visited on 1 September 2014).

66  See ISDA Mem (19 January 2011). Recent evidence suggests that banks are increasingly showing interest in arbitration as an alternate dispute mechanism: in the 2013 Survey ‘Corporate Choices in International Arbitration: Industry Perspectives’, 69 per cent of the financial services industry respondents supported arbitration (although this is markedly less than the support found in the construction and energy sectors, where the statistics were 84 per cent and 78 per cent respectively).

The number of arbitrations in the fields of finance and insurance has increased from 7.2 per cent to 15 per cent between 2008 and 2010. See ICC International Court of Arbitration Bulletin, 20(1) (2009), 5 and ICC International Court of Arbitration Bulletin, 22(1) (2011), 5 (as cited in Hanefeld, ‘Arbitration in Banking and Finance’). Statistics from the Financial Industry Regulatory Authority (FINRA) also suggest that there has been an increasing number of arbitrations regarding securities related disputes: see Dispute Resolution Statistics—FINRA (as cited in Hanefeld, ‘Arbitration in Banking and Finance’), available at <http://finra.org/ArbitrationandMediation/FINRADisputeResolution/AdditionalResources/Statistics/> visited on 1 September 2014.

67  Besides specialized institutions such as P.R.I.M.E. Finance, other arbitral institutions have developed special rules for banking and financial disputes, such as (i) the AAA Arbitration Rules for Commercial Financial disputes (Commercial Finance Rules, AAA, available at: <http://www/arbitrationonline.org/research/ArbitrationInstitStat/index.html> visited on 1 September 2014); (ii) the CIETAC Arbitration Rules for Commercial Financial Disputes (CIETAC, Financial Disputes Arbitration Rules, available at: <http://www.cietac.org/index/rules/47607aa1ab746c7f001.cms> visited on 1 September 2014); and (iii) the European Centre for Financial Dispute Resolution (EuroArbitration), founded in 2000, which has specialized arbitration rules for financial disputes (<http://www.euroarb.org> visited on 1 September 2014). In addition, the London City Disputes Panel (CDP), founded in 1994, deals exclusively with disputes in the banking and finance sector, and holds itself out as a specialist in large and complicated disputes (see the CDP homepage, available at: <http://www.citydisputespanel.org> visited on 1 September 2014). Affaki, ‘A Banker’s Approach to Arbitration’, 66–7, also cites Spain’s Diriban (Servicio para dirimir cuestiones entre Bancos) as an example of a successful arbitral tribunal created by the banking industry and designed to meet a local market’s needs. Under the Diriban system, all banks that adhere to the Spanish Banking Association (AEB) agree to submit disputes that may arise between themselves to the exclusive jurisdiction of Diriban.

68  By virtue of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, P.R.I.M.E. Finance arbitral awards can be enforced in more than 150 jurisdictions, see < http://www.newyorkconvention.org/contracting-states>, visited on 1 September 2014. This Convention is considered to be one of the key advantages of international arbitration, since court decisions would not necessarily be as widely enforceable.

69  Such as the pool, now numbering just over 100 and collectively representing more than 3,000 years of relevant experience, of Finance Experts and Dispute Resolution Experts offered by P.R.I.M.E. Finance, launched in 2012, the recruitment of which has been one of the main attractions and driving forces behind the initiative.

70  Even should parties choose an arbitral institution that does not offer a specialized list of experts and arbitrators, they remain free to select their own well-qualified arbitrators: see, eg, ICC Arbitration Rules, Article 12.