Prime Time For Updated Arbitration Rules For Financial Disputes? A Review Of The P.R.I.M.E. Finance Arbitration Rules 2022

• Published date: 07 January 2022
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Arbitration & Dispute Resolution
• Law Firm: Mayer Brown
• Author: Mr Ian McDonald, Stephen Moi, Chris Arnold, Lisa Dubot and Line Chataud

On 15 November 2021, P.R.I.M.E. Finance – the Panel of Recognised International Market Experts in Finance - launched its revised Arbitration Rules (the "2022 Rules") which came into effect on 1 January 2022 and which, like their predecessors, are designed for the arbitration of complex financial disputes. The 2022 Rules is the third iteration of P.R.I.M.E. Finance's Arbitration Rules, and are said to have undergone "the most ambitious revision of its rules since its inception", following an "extensive global public consultation". It is apparent that the changes made to the rules seek to address the feedback and reservations of financial market participants ("FMPs") regarding previous versions of these rules, and possibly arbitration as a dispute resolution forum for financial disputes more generally.

This Update takes a close look at the key features of the 2022 Rules by reference to some of the reservations that have been expressed in the past, and includes a brief comparison with other major institutional rules.

Arbitrating financial disputes

Traditionally, arbitration has not been as popular in the finance sector for the resolution of disputes as it is in other industries, such as energy, construction, or shipping. Concerns expressed regarding arbitration in general include the following perceptions:

• Lack of transparency in arbitration compared to court litigation;
• Lack of precedent and legal certainty for future cases;
• Inability to obtain interim and urgent relief;
• Inability of an arbitral tribunal to issue a summary judgment;

• Fewer mechanisms to minimise the risk of parallel related proceedings and inconsistent decisions arising from multi-party and multi-contract scenarios.

Whilst FMPs have historically turned more to the courts in key financial jurisdictions such as New York, England & Wales, and Hong Kong to resolve disputes, arbitration is not uncommon for certain types of finance transaction or involving certain kinds of counterparty, particularly in deals involving emerging markets, or those involving state-owned enterprises. In these cases, there may be reasons from the outset as to why litigating a potential dispute in national courts might not be appropriate or desirable. For example, it might be felt that not all national courts have the same level of technical expertise and working knowledge of complex financial products; nor are they all equally able to resolve disputes speedily; and in some circumstances confidentiality may be of primary concern.

There are some data available from which to observe trends. For example, the finance sector is one of the top three sectors comprising the caseload of the London Court of International Arbitration ("LCIA") in recent years. In 2019, the sector comprised 32% of the LCIA's total cases and in 2020 it comprised 20%¹. Similarly, in 2019 the ICDR-AAA reported a 58% year-on-year increase in disputes in financial services, having already reported a 78% increase in 2018. Although the 2020 figures show a slight decrease, it does not belie the apparent direction of travel.

Background to P.R.I.M.E. Finance and the 2022 Rules

Against the backdrop of the global financial crisis, P.R.I.M.E. Finance was established by legal and finance practitioners and experts in 2012 as an organisation dedicated to the resolution of disputes concerning complex financial products. On its launch, P.R.I.M.E. Finance also released the first version of its Arbitration Rules, which were based on the 2010 UNCITRAL Rules. Following a revised version in 2016 (the "2016 Rules"), the 2022 Rules will apply to P.R.I.M.E. Finance arbitrations commencing on or after 1 January 2022 (unless the parties specify that an earlier version should apply).

As is evident from the statistics cited above, a considerable volume of finance-related disputes are already arbitrated under the rules of established arbitral institutions. P.R.I.M.E. Finance's offering appears to be underpinned by the following characteristics:

• Arbitration rules aimed at finance disputes – the rules are specifically designed with complex financial disputes in mind, including those concerning derivatives², sovereign lending, investment and advisory banking, financing...