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Arbitrating financial disputes – Are there tangible benefits?

28 February 2019

In the past decade, several attempts have been undertaken to promote international arbitration in the financial industry. Indeed, various features of international arbitration appear to be particularly well suited for the needs of financial services providers.

For instance, banks and their clients are not necessarily keen to disclose their business relationship and to see their dispute followed by the public. The confidentiality of arbitral proceedings may address these concerns.

The flexibility of arbitral proceedings is perceived as a further advantage for financial institutions. It allows banks and their clients to tailor the dispute resolution process as they deem fit. This includes the ability to appoint arbitrators with sector-specific expertise or to select the language of the arbitration.

Finally, if a bank assumes the role of a plaintiff, for example in a dispute over a loan, such bank is more likely to successfully enforce an arbitral award abroad than a domestic court judgment. The enforceability of arbitral awards under the New York Convention is thus often regarded as another key advantage of arbitration in the context of cross-border banking disputes.

Despite all its appealing features, the use of international arbitration seems to have been of more academic than practical interest in the past. Indeed, according to a survey conducted in 2016 for the ICC Commission Report on Financial Institutions and International Arbitration, only a few of the financial institutions interviewed had made any extensive experience with arbitration proceedings.

However, pursuant to the 2018 International Arbitration Survey recently published by the Queen Mary University, financial institutions now appear to contemplate arbitration with much greater interest than ever before. 56% of the respondents having participated in the survey expressed the view that the use of international arbitration for cross-border financial disputes will increase in the years to come.

This raises the question whether there are any specific reasons behind the newly detected potential of arbitration in the financial sector. It is to be assumed that such reasons necessarily include tangible benefits for the financial sector that go beyond the common features of international arbitration.

These benefits will be discussed on 26 March 2019 at a conference organised by the Swiss Chambers Arbitration Institution, the Zurich Chamber of Commerce and the Zurich Banking Association with the support of CMS as the event's main sponsor.

The topics addressed at the conference – held in German – include:

  • The new Swiss Financial Services Act – New momentum for arbitration?
  • The abusive drawing of bank guarantees – Is emergency arbitration an effective remedy? 
  • Arbitration and the mandatory forum for consumers in cross-border banking disputes – The German perspective 
  • Agreeing upon the Swiss Rules in banking contracts – Is there need for adjustment?

For any further details of the event, its speakers and the program, please click here.