On 9 September 2013, the International Swaps and Derivatives Association (ISDA) published its long-awaited Arbitration Guide. The Guide comprises an explanatory memorandum which provides an overview of arbitration, together with model arbitration clauses (and guidance notes) for use with the ISDA 2002 Master Agreement and ISDA 1992 Master Agreement (Multicurrency – Cross Border). The model clauses are designed to be included in the Schedule to new Master Agreements, but are readily adaptable for use when amending an existing Maser Agreement to provide for arbitration.
The model clauses provide for a number of different combinations of arbitral rules/institution and seat of arbitration, including the ICC Rules (London, New York or Paris seat), LCIA Rules (London seat), AAA-ICDR Rules (New York seat), HKIAC Rules (Hong Kong seat), SIAC Rules (Singapore seat), Swiss Chambers’ Arbitration Institution Rules (Zurich or Geneva seat), and PRIME Finance Rules (London, New York or The Hague seat). In each case, the governing law of the Master Agreement will be either English or New York law.
The publication of ISDA’s Arbitration Guide marks the conclusion of an extensive consultation process, which began in January 2011 with the aim of gauging whether there was interest in the market in using arbitration as a dispute resolution mechanism under the Master Agreements. The consultation has involved all levels of ISDA membership across the globe, including trading, commodities and other financial firms, legal practitioners, arbitral institutions, and academics. Herbert Smith Freehills (among others) was actively involved in the consultation.
The release of ISDA’s Arbitration Guide reflects (and responds to) the growing popularity of arbitration in the derivatives markets (and financial services sector more generally) in recent years, an area where English or New York court jurisdiction has traditionally been favoured. This trend has been driven by the perceived advantages of arbitration, notably the superior enforcement mechanisms for arbitration awards (as compared to court judgments) under the New York Convention. This is of particular importance given the increasing prevalence of cross-border finance transactions involving emerging markets jurisdictions (in Asia, Africa and elsewhere), where arbitration awards are often more readily enforceable than foreign court judgments. ISDA’s support for arbitration will reinforce this trend and ensure that disputes relating to the derivatives markets are an increasingly prominent feature of the arbitration landscape in years to come.
The Arbitration Guide is available online from ISDA’s bookstore at the following address: http://www.isda.org/publications/isdamasteragrmnt.aspx
For further information, please contact Nicholas Peacock, Partner, Dominic Kennelly, Associate, or Emily Blanshard, Associate, or your usual Herbert Smith Freehills contact.