Derivatives Disputes: ISDA revises Arbitration Guide, expanding the model arbitration clauses

The International Swaps and Derivatives Association (ISDA) has revised its Guide to Arbitration (the Guide).  First published in 2013, after considerable stakeholder consultation, the Guide includes an explanatory memorandum which provides an overview of arbitration for parties to derivatives transactions, and includes a broad choice of model arbitration clauses (and guidance notes) for use with both the ISDA 1992 Master Agreement and the ISDA 2002 Master Agreement.  The model clauses can be included in new Master Agreements or can be included when amending an ISDA Master Agreement.

The new version of the Guide is best described as an enhancement, rather than a wholesale revision.  It reflects developments in the field of arbitration since the Guide was first launched in 2013, such as the increasing availability of emergency arbitration, and the possibility of early dismissal of claims and defences.  The Guide also now features model arbitration clauses for various additional institutions, including the German Arbitration Institute (DIS) Rules clause to which Herbert Smith Freehills contributed (see here for further information).

As discussed below, arbitration offers a number of procedural features which may be attractive to parties to derivative transactions.  Further, there are certain considerations relevant in derivatives disputes in particular which the parties may wish to bear in mind when including an arbitration clause in their contractual documents.

As the International Chamber of Commerce (ICC) confirmed in a report on Financial Institutions and International Arbitration, arbitration has been steadily growing as a chosen method of dispute resolution in derivatives contracts, particularly as the participants entering the market of traded derivatives become more diverse (see here for further information).  ISDA’s continued support for arbitration is likely to encourage parties in the derivatives market to consider arbitration for their transactions and to facilitate the inclusion of workable arbitration clauses in ISDA Master Agreements and related contracts.

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ICC report on financial institutions and international arbitration: a condensed overview of a gradually changing landscape

This autumn, the ICC Commission on Arbitration and ADR published a report on Financial Institutions and International Arbitration (the "Report"). The Report offers a detailed analysis of the use of international arbitration in specialist sectors of the banking and finance industry, from derivatives and sovereign finance to advisory matters and asset management. The Report is based on interviews with over 50 financial institutions from across the globe, data received from 13 arbitration institutions and a review of relevant awards, internal policies and scholarly writing. Overall, the Report finds that despite a recent gradual shift towards more arbitration in the finance and banking industry, the use of arbitration by financial institutions remains limited. It concludes that this appears to be due to a lack of awareness of the benefits of international arbitration, combined with the traditional view that arbitration does not meet the needs of specialist financial disputes. In order to tackle these two findings, the Report seeks to give specific recommendations on how to tailor arbitration to the needs of the finance industry.

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Inside Arbitration: Issue #2 of the publication from Herbert Smith Freehills’ Global Arbitration Practice

We are delighted to share with you the latest issue of the publication from Herbert Smith Freehills' Global Arbitration Practice, Inside Arbitration.

Inside arbitration #2


In addition to sharing knowledge and insights about the markets and industries in which our clients operate, the publication offers personal perspectives of our international arbitration partners from across the globe.

In this issue:

  • Sarah Grimmer, the new Secretary General for the Hong Kong International Arbitration Centre shares her insights on, and ambitions for, HKIAC.
  • Nick Peacock and Dr Mathias Wittinghofer consider whether arbitration is a suitable tool for resolution of derivative disputes, as well as the future of the ISDA arbitration guide.
  • Jessica Fei, Chinese national and NY lawyer, talks about the unique blend of cultures and legal qualifications that shape her perspective as a practitioner.
  • Mark Lloyd-Williams, Hamish Macpherson, Craig Shepherd, Emma Kratochvilova and Thomas Weimann give a global perspective on arbitrating construction and infrastructure disputes.
  • Dominic Roughton and Andrew Cannon consider the impact of territory and maritime boundary disputes on commercial investments and the role of private actors and states in their resolution.
  • Peter Leon and Ben Winks give their view from Johannesburg on the future of arbitration in South Africa.
  • Vanessa Naish and Hannah Ambrose take a practical look at the effect of Brexit on dispute resolution choices, both now and in the future.
  • Andrew Cannon talks about his experience working at the Foreign and Commonwealth Office and how it has shaped his public international law practice.

The full digital edition can be downloaded in PDF by clicking on this link.

We hope that you enjoy reading Issue #2 of Inside Arbitration. We would welcome your feedback.