[White & Case] Using Arbitration to Resolve International Financing Disputes
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작성일17-01-09 23:16관련링크
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Parties to international financial transactions have, subject to limited exceptions, historically been
reticent to choose international arbitration as a means of dispute resolution in their agreements. In
recent years, however, recourse to arbitration in such transactions has been on the rise. The ICC's
"Task Force on Financial Institutions and International Arbitration" recently published a report
exploring and challenging the historical preference for litigation before national courts and
analyzing the nascent trend in favor of arbitration.1 The findings of the Task Force’s Work
Stream focusing on "International Financing", co-led by the author of this alert,2 are briefly
presented herein. They are a must-read for anyone involved or interested in international
financing transactions.3
Scope of the "International Financing" Work Stream
International Financing encompasses a broad scope of transactions where the parties and/or assets are located in
several countries, including bilateral and syndicated lending transactions (secured and unsecured), asset
finance, project finance and trade finance. The aim of our stream of the Task Force was to identify current trends
in dispute resolution in international financing and to assess the effectiveness of arbitration to resolve disputes
arising out of international financing.
Historical Reticence
The Task Force's survey of financial institutions revealed, as was already well known to all members of the
stream, that there has been a historical reticence to relying on arbitration as a means for resolving international
financing disputes. Within the different types of transactions, we noted a stronger resistance to using arbitration
in the syndicated lending and asset finance sectors than in project finance transactions. This resistance stems
largely from cultural factors and has been fueled by inertia and standardized documentation.
Apart from this reticence, some financial institutions also cited the unsuitability of arbitration to cater to the
requirements of financial disputes (particularly the restricted range of available interim measures) and its
inability to generate binding legal precedents.
This historical resistance has been exacerbated in the arena of secured transactions, due to the uncertainty of
enforceability of security rights over assets through arbitration. Court intervention was viewed as somewhat
preordained and recourse to arbitration was perceived to be an exercise in futility. Although often unfounded,
the belief in such practical inarbitrability of security agreements continues. It is correct that, for those security
rights whose enforcement requires the intervention of a court (if not enforced voluntarily), it will not make sense
to choose arbitration as a means of dispute resolution. But whenever the security at issue is self-enforcing,
there is no inherent reason for disputes arising out of such security to be referred to a national court as opposed
to an arbitral tribunal.
Concerns have occasionally been voiced that arbitration may result in short-circuiting third party rights,
especially in the context of insolvency proceedings. That concern is baseless. The decisions rendered by
arbitral tribunals will always be subject to compliance with the decisions of the insolvency court on matters over which it has mandatory and exclusive jurisdiction, such as the validity of security posted during the lookback
period and the approval of the statement of secured claims, and with the timetable of the insolvency
proceedings.
Mapping the change in trends
The trend has however begun to shift away from the historical resistance to arbitration. Indeed the Task Force
stream found that arbitration is increasingly used, as opposed to court litigation, where parties and assets are
subject to courts that are perceived as inadequate for the protection and enforcement of the financier’s rights,
and no agreement can be reached on the choice of a court deemed acceptable by the parties. This was
especially true for project finance transactions, as well as for financing transactions in general, centered in
Latin America, CIS or Africa, and for transactions involving State or State sector entities as counter-parties. It
was also noted that self-enforcement is an increasingly available option in security laws and when the
intervention of a court remains necessary, it is restricted to secured asset enforcement issues as opposed to
adjudication on the secured claim.
Although no marked preference for either arbitration or litigation was found in trade finance, there is a growing
recognition that court litigation is not the most suitable forum for resolving disputes in such transactions and
that arbitration is capable of being tailored to specific contexts.
What does arbitration have to offer?
The ease of enforceability of an arbitral award across jurisdictions due to the popularity of the New York
Convention, 1958 is a key advantage offered by arbitration.
In addition, arbitration offers the benefits of expert decision-making in complex disputes, flexibility, neutrality,
and a confidentiality regime which the parties can design according to their needs and preferences (ranging
from the fullest confidentiality extending even to the mere existence of the proceedings, to a regime of full
publicity). Arbitration can also offer the advantage of avoiding fragmentation of remedies across multiple court
fora, by providing the option for financiers to enter into multiparty dispute resolution mechanisms and/or
consolidation of arbitral proceedings. Arbitration also provides the parties the flexibility to be able to isolate
and segregate issues into separate proceedings, for example separating reimbursement actions from disputes
relating to commercial contracts entered into by the project company.
Whither Litigation?
What does the (admittedly timid but nevertheless real) change in trend indicate for the future of dispute
resolution in international financing? As pointed out above, arbitration is likely to continue to attract users
where there are qualitative concerns about the national courts available as alternatives to arbitration. Whether
the parties choose arbitration or litigation will depend on which mode of dispute resolution is more suitable
for the specific transaction at issue, especially in light of the parties involved and an assessment of the
available alternatives. In many cases, arbitration will prove to be a very attractive option.
Click here to download PDF.
1 The "Task Force on Financial Institutions and International Arbitration" was constituted in 2014 under the aegis
of the International Chamber of Commerce and has performed a detailed survey and analysis of current
practices in international financial transactions. Its report can be found here.
2 The Work Stream was led by White & Case partner, Charles Nairac, with Jean-François Adelle of Paris law firm
Jeantet & Associés.
3 This summary was first published on Kluwer's Arbitration Blog, where further posts can be found presenting the
work of the Task Force.
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