A year ago,
on a surge of international arbitration caseloads in the major
international arbitration administrating institutes due to increasing
banking, finance and energy disputes. The caseload stream continues to flow
and, according to statistics recently released by major international
administrators, some of that is due to a continued increase in banking and
As international dealings become more commonplace in the banking and
finance sector, the advantages international arbitration holds over court
proceedings for dispute resolution are becoming more apparent to potential users.
International Arbitration Administrators Report Record Caseloads
The continued growth of international arbitration as the primary means to
resolve international disputes is reflected in recently released statistics
on caseloads from last year:
number of arbitrations
were referred to the London Court of International Arbitration (LCIA)
under the LCIA rules.
A record number of
new cases ─ 842 ─ were registered
with the International Chamber of Commerce International Court of
Arbitration (with the exception of 2016, which included 135 related
small-claim cases arising from a single collective dispute).
- The Arbitration Institute of the Stockholm Chamber of Commerce reported an
unprecedented increase in the average dispute value, with the total value in dispute for all new cases in 2018 amounting to
13.3 billion EUR (despite a decrease in the total number of new cases
registered, namely, 152 new cases registered compared to 200 new cases in
- The International Centre for Settlement of Investment Disputes reported
continued growth, with a record 56 new registered cases in 2018.
Banking and Finance Shifting From Courts to International Arbitration
Until recently, the banking and finance sectors traditionally turned to the
courts to resolve disputes. Recent surveys of banking and finance users,
however, show those users are leaning toward international arbitration in
their international dealings. (See p. 29 of the
Queen Mary University of London 2018 International Arbitration Survey
on the Evolution of International Arbitration
conducted in partnership with White & Case LLP.)
The proof is in the latest caseload statistics, which reveal a significant
rise in the number of international arbitrations in the banking and finance
sector. For example, the LCIA reported that 29 percent of all new cases
involved the banking and finance sector (up from 24 percent in 2017). The
International Centre for Dispute Resolution, which is the international arm
of the American Arbitration Association, reported a 78 percent increase in
financial services cases in
in 2018. (For details, see the American Arbitration Association’s
and key statistics.)
Benefits of International Arbitration and Further Developments
The benefits of international arbitration to the banking and finance sector
are driving the sector’s reliance on it as a primary form of dispute
resolution. Here are some of the most valuable aspects of international
Enforcement of Awards Almost Anywhere.
Unlike decisions from local courts, international arbitration awards
are often enforceable in any of the 159 signatory states to the
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (New York Convention). By way of example, this means a bank can
take an arbitration award against a defaulting party or guarantor and
attach it to that party’s assets in 159 countries — something that does
not occur as simply with court decisions.
Choice of Arbitrator.
Parties need not fear biased judges in a foreign court because the
parties play a role in deciding who will be the fact-finders that
decide their international arbitration. Parties can choose arbitrators
based on experience, industry expertise and nationality. For instance,
some arbitration rules prohibit appointment of an arbitrator with the
same nationality as one of the parties to the arbitration. Some
arbitration institutions also have specialist panels with recognised
experts in finance from which parties may choose arbitrators.
International arbitrations typically are seated in neutral forums
selected by the parties or, in some instances, by the administrator or
the arbitrators. This ensures that the dispute is secure from the
biases of local courts, providing a sense of comfort for parties
seeking to bring claims against influential local companies or local
government entities. Simply put, arbitration is a means to avoid
bringing a claim against a government in its own courts.
Unlike court proceedings, parties in international arbitrations can
tailor the arbitral procedure to their needs, either at the start of
the underlying transaction when drafting their dispute resolution
clause, or once a dispute arises. Among the numerous procedural
options, parties can agree to restrict the number of written memorials
or submissions, the amount of and presentation of evidence, the
language of the arbitration and the location of hearings. Some arbitral
rules also offer an expedited procedure. Such procedural planning can
help control costs and make for a more efficient arbitration, as the
parties can fit the process to their needs.
Finality of Decision.
Absent party agreement, awards are not generally subject to appeal and
can be challenged only on limited grounds.
These benefits also make international arbitration a valuable
risk-mitigation tool. They provide a sense of security for lenders in
international transactions, particularly those doing business in
jurisdictions with poor reputations for the treatment of foreign investors.
The deterrent for bad actors is, as explained above, that an international
arbitration award can be enforced almost anywhere relevant assets are
Further developments opening the way for increased use of arbitration in
the banking and finance sector include
from the International Swaps and Derivatives Association (ISDA) in December
2018 on the use of an arbitration clause with an ISDA Master Agreement.
This guidance includes a range of model arbitration clauses for a larger
number of arbitration institutions and seats.
In short, international arbitration is the most logical dispute-resolution
mechanism for international banking and finance dealings. Besides providing
an effective means to resolve disputes, it can serve as a risk-mitigation
tool to counter the uncertainty of today’s global economic scene.
The McGuireWoods international arbitration team regularly advises banking
and finance clients with international arbitration-related issues,
including contractual provisions to lessen commercial risk. Most recently,
the firm advised a major U.S. bank on its arbitration options for a large,
complex matter involving guarantors in 10 foreign jurisdictions, and
advised another major U.S. bank in a large investment in a foreign
country’s power sector.
For further information
For further information, please contact Richard Deutsch or
any other member of the McGuireWoods international arbitration team.