PRIME Finance announces revision of its arbitration rules

Kasper Krzeminski
P.R.I.M.E. Finance, The Hague
NautaDutilh, Rotterdam

Camilla Macpherson
P.R.I.M.E. Finance, The Hague​​​​​​​

The need for specialised fora for the resolution of finance disputes

Rapid growth and ever-increasing complexity in the financial markets call for innovative solutions for dispute resolution. National courts and existing non-specialised arbitration frameworks have not always been able to produce a settled and authoritative body of financial markets law.

In recent times, a number of initiatives have sought to grapple with the challenges of financial disputes. A number of specialist chambers within court systems have been established to handle finance disputes only. The English High Court’s Financial List, set up to address the particular business needs of cases involving financial matters, is just one such example. Some arbitral institutions have also created specialist rules to encourage a sector which has traditionally preferred the courts as a forum for resolving its disputes. P.R.I.M.E. Finance was established to lead the way in this regard, with a mission to reduce legal uncertainty and foster stability and confidence in the global financial markets.

The P.R.I.M.E. Finance offering

Based in The Hague, P.R.I.M.E. Finance stands for the Panel of Recognised International Market Experts in Finance. P.R.I.M.E. Finance is dedicated to promoting a more sophisticated approach to financial markets dispute resolution. From the outset, this mission included the provision of the P.R.I.M.E. Finance Arbitration Rules (the Rules), designed to provide parties with a specialised mechanism for resolving financial disputes.

Financial institutions consistently rank technical expertise in banking and finance of arbitrators as one of the key factors in choosing arbitration as a means of dispute resolution. A core feature of P.R.I.M.E. Finance is its offering of a panel of experts, comprising more than 200 arbitrators, judges, central bankers, regulators, academics, representatives from private legal practice and market participants, all with the requisite expertise for the resolution of complex financial disputes. P.R.I.M.E. Finance’s Panel may be consulted, when appropriate, for the purpose of arbitrator nominations or appointments.

In 2015, P.R.I.M.E. Finance joined forces with the Permanent Court of Arbitration (the PCA), the world’s oldest arbitral institution with over a century of experience in administering complex international proceedings. Arbitrations under the Rules are administered by the PCA. The combination of the PCA’s efficiency in administering arbitral proceedings and the Panel’s subject matter expertise brings significant advantages for users in the banking and finance sectors.

P.R.I.M.E. Finance is also one of the international arbitration centres acknowledged by the International Swaps and Derivatives Association (ISDA) in its Arbitration Guide. The ISDA Guide provides a range of model arbitration clauses tailored for use with ISDA’s industry standard 1992 and 2002 Master Agreements.

The P.R.I.M.E. Finance arbitration rules review

In June 2020, P.R.I.M.E. Finance set out to review the Rules, to ensure that they were fit for purpose, reflected current best practice in arbitration, and preserved – and expanded – features of particular interest to financial market participants. The guiding aim has been to offer arbitrators and users a comprehensive, clear, and straightforward set of procedural rules in complex financial disputes.

In January 2021, P.R.I.M.E. Finance launched the draft Rules for public comment. The draft is available to download from the P.R.I.M.E. Finance website at https://primefinancedisputes.org/page/review-of-p-r-i-m-e-finance-arbitration-rules-1.

The Rules are suitable for a wide range of financial disputes, including those arising in relation to derivatives, sovereign lending, investment and advisory banking, financing, private equity, asset management and smart contracts. Non-bank parties and financial institutions conducting ordinary business transactions can also choose to use the Rules, which are also suitable for resolving disputes in emerging areas such as fintech and sustainable finance.

The Rules review is being undertaken by a drafting group and a consulting group, with the latter providing guidance and strategic advice. The drafting group is chaired by Georges Affaki, Professor of International Banking Law and Dispute Resolution, independent arbitrator and Chairman of the ICC Banking Commission Legal Committee. The consulting group is chaired by Carolyn Lamm, Co-Chair International Disputes Americas, White & Case LLP, and Heikki Cantell, General Counsel, Head of Legal Department and Secretary General of the Nordic Investment Bank. Both groups bring together pre-eminent experts with a range of banking and arbitration experience.

Selected features of the draft revised Rules

Interested parties are advised to review the draft Rules for a complete picture of the revision. However, some particular highlights follow.

The role of the PCA

The PCA, as administering arbitration, is given a key role throughout the arbitral process. By way of example, as regards the composition of the arbitral tribunal, it will:

• act as appointing authority where the parties are unable to agree on a nomination;
• confirm arbitrator nominations; and
• decide challenges.

The PCA also decides matters of joinder and/or consolidation where the tribunal is not yet appointed, and re-constitutes the arbitral tribunal as needed. The PCA also has a role in establishing the costs of the arbitration, determining an arbitrator’s rate where this cannot be agreed and adjusting the fees of an arbitrator if they are not reasonable in amount. Finally, the PCA determines whether the new expedited arbitration provisions apply, but at the same time holds discretion to extend certain time periods where so warranted.

Transparency

Transparency has been a key driver of the revision project, and takes various forms in the draft revised Rules. For example:

• parties are required to disclose any third-party funding arrangement of any claim or defence, and the identity of that third party;
• arbitral tribunals have the power to invite or grant leave to an industry body to appear before it as amicus curiae and make submissions on relevant issues; and
• final awards are to be published in anonymised form, to permit the emergence of a body of jurisprudence similar to the case law of courts in major financial centres.

Complex arbitrations

Complex financial transactions may involve multiple parties, sometimes with adverse interests and multiple contracts. One of the pitfalls in the arbitral process is that expediency often requires that all claimants, on the one hand, and all respondents, on the other, be treated alike, regardless of their interests. The draft revised Rules include detailed revised joinder and consolidation provisions, and even a provision enabling separate arbitrations that are not eligible for consolidation to be coordinated where appropriate.

Emergency and expedited rules

The draft revised Rules comprehensively address the need for procedural efficiency and effective means to deal with matters of urgency, both before and after the tribunal is constituted. Indeed, the provisions on emergency arbitration, interim measures and expedited rules have been thoroughly revised.

Emergency arbitration allows users in need of urgent interim measures that cannot await the constitution of the tribunal to request the PCA to appoint an emergency arbitrator. The emergency arbitrator shall render a decision within 15 days as from their appointment.

In addition, the draft revised Rules provide for expedited proceedings aimed at achieving a speedy final resolution of the dispute. The expedited rules, which apply automatically to arbitrations with an amount in dispute of €4m or less, will lead to a final award within six months of the constitution of the tribunal. The ambitious timelines in both emergency and expedited proceedings reflect the focus on efficiency that pervades the entire draft revised Rules.

Efficiency

The draft Rules are built on efficiency. For example:​​​​​​​

• Tribunals are expected to convene a case management conference with the parties within 30 days of their constitution.
• Tribunals with three or more members are required to render the final award within 90 days of the closing of the hearing (or the receipt of the last submissions authorised by the tribunal); for sole arbitrators, the time limit is 60 days.
• Tribunals are explicitly empowered to assist the parties in discussing a settlement when appropriate.
• Tribunals may decide, after consulting the parties, that hearings will be conducted by remote means of communication.
• A dedicated section deals with the tribunals’ empowerment to proceed with the expeditious resolution of manifestly unmeritorious claims or defences.
• Parties can choose whether fees are calculated on a time-based system or in proportion to the value of the dispute. Absent agreement, the rules default to a time-based fee system.

The public consultation: your chance to contribute

It is vital that the final version of the Rules meets the expectations of users. Please send your comments on the draft to secretary@primefinancedisputes.com.

P.R.I.M.E. Finance has already held a series of virtual consultations focussed on EMEA, the Americas and Asia, with a view to engaging a global audience in the process and soliciting views from a wide range of jurisdictions.  Recordings of these consultations are available on our website.

Once the consultation period closes, all input will be reviewed by the drafting and consulting groups, with the goal of launching the revised rules later in 2021. 

More information about the Rules Review project, including recordings of the public consultations, can be found at https://primefinancedisputes.org/page/review-of-p-r-i-m-e-finance-arbitration-rules-1.