International Chamber of Commerce
1 A Task Force on Financial Institutions and International Arbitration of the ICC Commission on Arbitration & ADR has examined a wide range of banking and financial activities, whether undertaken by licensed banks or by funds (equity, investment or sovereign wealth). The Task Force examined the actual or potential use of arbitration in derivatives, sovereign lending, regulatory matters, international financing, trade finance, Islamic finance disputes, advisory matters, asset management, and interbank disputes.
2 The Report which the ICC Task Force published in November 2016 (see here for the Supplementary Materials) covers many types of financial institutions, including multilateral and bilateral development financial institutions and export credit agencies providing credit-enhancement or risk-mitigation tools, insofar as those institutions use arbitration from time to time and often have a persuasive role in proposing arbitration as an option to lending syndicates in which they participate or those that they guarantee. The Report is based on interviews conducted by members of the Task Force on the basis of a questionnaire reproduced in the Annex to the Report with lawyers and other practitioners from the finance industry.
3 A core conclusion of the Task Force is that there is an overall lack of awareness of the potential benefits of international commercial arbitration and investment arbitration in banking and financial matters and that there are some common misperceptions about the process (ICC Report, p. 2, para 3). The feedback of those who participated in the interviews does in fact provide a mixed picture as to the frequency with which arbitration is being used in the banking and finance industry:
"The interviews conducted by the Task Force reveal that most financial institutions do not have substantial experience of international arbitration: 70% of interviewees were not aware of whether their financial institutions had participated in any international arbitration proceedings in the last five years; 24% of the financial institutions interviewed had participated in a small number of international arbitration proceedings in the previous five years representing 5% or less of all the financial institution’s disputes; and 6% of the financial institutions interviewed had participated in a larger number of arbitration proceedings.
Financial institutions tend to favour arbitration when: (i) the transaction is significant or particularly complex; (ii) confidentiality is a concern; (iii) the counterparty is a state-owned entity; and (iv) the counterparty is in a jurisdiction where the recognition of foreign judgments is problematic or where it is expected that enforcement of an arbitral award under the New York Convention will be easier than enforcement of a court judgment." (ICC Report, p. 8, paras. 41, 42)
4 The ICC Task Force analysed both international commercial and investment arbitration. The latter is a relatively novel feature in the banking and financial landscape with a number of investment awards holding that financial instruments ranging from straightforward loans to negotiable instruments, securities and oil hedges are qualifying investments under the relevant treaties. These awards open up broad horizons with respect to treaty claims that could have a catalysing effect on the receptiveness of the banking and financial sector to arbitration in general.