Non-Judicial Dispute Settlement in International Financial Transactions
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Non-Judicial Dispute Settlement in
International Financial Transactions
Edited by
Norbert Horn
Professor at thè University of Cotogne, Germany
Law CentrefarEuropean and International Cooperation (R.I.Z.),
Cotogne
and
Joseph J. Norton
Professor ofLaw
SMULaw School, Dallas
University ofLondon
University ofHong Kong
KLUWER LAW INTERNATIONAL
London / The Hague / BostonContents
Foreword xv
NORBERT HORN / NON-JUDICIAL DISPUTE SETTLEMENT IN
INTERNATIONAL FINANCIAL TRANSACTIONS 1
I. Introduction 1
II. Judicial versus Non-Judicial Dispute Settlement 2
A. Court Procedures 2
B. Arbitration 3
C. Other Alternative Dispute Resolution (ADR) 3
D. Differing and Complementary Functions of thè Various
Settlement Mechanisms 4
III. Arbitration in International Financial Transactions 5
A. Fields of Application 5
1. General Observations 5
2. Loans 6
3. Bonds 6
4. Bank Guarantees 7
5. Letters of Credit 7
6. Securities Markets and Financial Services to Customers 8
7. International Development Banks 8
8. Sovereign Borrowers 9
B. Drafting Arbitration Clauses 10
IV. Other ADRs in International Financial Transactions 10
A. Are They Suitable for Financial Transactions? 10
B. Various Types of ADRs as Applied to Financial Transactions 11
1. London City Dispute Panel 11
2. Experts: ICC DOCDEX Rules 11
3. Conflict Management of Long-Term Contracts 12
4. Mini-Trials 12
5. Managerial Judging 13vi Contents
V. Restructuring of Debt in an International Debt Crisis 14
A. The International Debt Crisis of Countries 14
B. The Restructuring Process 14
C. Debts Not Suitable for Rescheduling 15
D. Clauses with a View to Restructuring 16
VI. Concluding Remarks 16
ROBERTO G. MACLEAN / THE GROWING IMPORTANCE OF
ARBITRATION IN INTERNATIONAL FINANCE 17
I. Introduction 17
II. A View of thè Landscape 18
III. A Sobering Reflection 19
IV. The Necessary Context for Arbitration 20
V. Why is Arbitration of Growing Importance 22
A. The Costof Arbitration 22
B. The Administration of Arbitration 23
C. The Nature of thè Procedure 23
D. The Training for Arbitrators 23
E. Participation by thè Community 24
F. The Impact of Arbitration in Society 24
VI. The Social Responsibility of Arbitrators 25
VII. Conclusion 26
GEORGE WALKER / BANK REMEDIES: JUDICIAL AND
ARBITRAL RECOVERY 27
I. Introduction 27
II. General Bank Remedies 31
A. Right to Demand Repayment 32
B. Right to Combine Accounts or Appropriate Payment 34
C. Right ofLien 35
D. Right to Close thè Account 36
E. Enforcement of Security or Guarantees 36
F. Voluntary Arrangements and Administration 36
III. Formai Rights of Action and Recovery 37
A. Right to Sue 39
B. Right to Summary Judgement 40
C. Mareva Injunctions and Anton Piller Orders 41
D. Right to Formai Enforcement 42
E. Bankruptcy and Liquidation 42
IV. Banks and Arbitration 43
V. Conclusions and Comment 49
JESWALD W. SALACUSE / DIRECT NEGOTIATION AND MEDIATION IN
INTERNATIONAL FINANCIAL AND BUSINESS CONFLICTS 53
I. Conflict in International Business and Finance 53
A. The Potential for Conflict 53
B. Dispute Settlement Processes 53
II. Direct Negotiation and Renegotiation 55
A. The Role of Negotiation in thè Life of thè Transaction 55
B. The Sourcesof Conflict 55
1. Changing Circumstances 56
2. Lack of Common Understanding between thè Parties 57Contents vii
C. Some Negotiation Principles to Reduce Conflict 59
1. A Signed Contract Does Not Necessarily Create an International
Business Relationship 59
2. Provide for Renegotiation in Appropriate Transactions 60
3. Take Full Advantage of Pre-negotiation 60
4. Consider a Role for Mediation or Conciliation in thè Deal 61
III. Mediation in International Transactions 61
A. Deal-Making Mediation 62
1. Case: Deal-Making Mediation in Hollywood 62
2. Other Deal-Making Mediators 64
B. Deal-Managing Mediation 65
1. Case: Deal-Managing Mediation in thè Construction Industry 65
C. Deal-Mending Mediation 66
1. International Commerciai Arbitration 66
2. Mediation in International Business Disputes 68
3. Conciliation 68
4. Case: Deal-Mending Mediation in Trinidad 69
IV. Conclusion 71
A. The Required Pre-Conditions for Mediation 71
1. Disputant Motivation 71
2. Mediator Opportunity 71
3. Mediator Resources 72
B. Mediation and thè Future of Global Business 72
HORACIO A. GRIGERA NAÓN / ICC DISPUTE RESOLUTION AND
INTERNATIONAL FINANCE 73
CLAUS VON WOBESER / NON-JUDICIAL SETTLEMENT
OF FINANCIAL DISPUTES IN LATIN AMERICA 85
I. General Aspects of International Finance in Latin America 85
II. General Development of Arbitration in Latin America 86
III. Specìfic Application of Alternative Dispute Resolution
in Resolving Financial Disputes in Latin America 89
IV. Advantages and Disadvantages of Arbitration in Financial Disputes 91
V. Conclusions 93
KATHERINE LYNCH / INTERNATIONAL COMMERCIAL DISPUTE
RESOLUTION IN GREATER CHINA: THE PROSPECTS AND
PROBLEMS FOR INTERNATIONAL COMMERCIAL ARBITRATION:
ONE COUNTRY, THREE SYSTEMS? 95
I. Introduction 95
II. International Commerciai Arbitration in thè Hong Kong SAR 98
A. The Hong Kong SAR Arbitration Ordinance 98
1. Overview of thè Provisions of thè Arbitration Ordinance 99
2. Legislative History of thè Arbitration Ordinance 101
B. Recognition and Enforcement of International Arbitrai Awards 104
1. Prior to thè Transfer of Sovereignty 105
2. The Impact of thè Transfer of Sovereignty 108
III. International Commerciai Arbitration in thè People's Republic of China 109
A. The PRC Arbitration Law 111
1. Overview of thè Provisions of thè Arbitration Law 112viii Contents
1. Important Reforms Introduced in thè Arbitration Law 113
3. Revisions to thè CIETAC Arbitration Rules 115
B. Recognition and Enforcement of Foreign-Related Arbitrai Awards 117
IV. International Commerciai Arbitration in Taiwan, Republic of China 120
A. The New Taiwanese Arbitration Act 121
1. Overview of thè Provisions of thè Arbitration Act 122
2. Important Reforms Introduced in thè Arbitration Act 123
B. Recognition and Enforcement of Foreign Arbitrai Awards 125
1. Definition of "Foreign Arbitrai Award" 126
V. Problems with thè Cross-Border Recognition and Enforcement
of Arbitrai Awards in thè HKS AR and thè PRC 127
A. Legai Vacuum for Reciprocai Enforcement of Arbitrai Awards 127
B. Possible Solutions to thè Problem 128
1. Adoption of Unilateral Legislation by both
HKSAR and PRC Governments 128
2. Reciprocai Legislation Enacted by thè HKSAR and
other Regions of thè PRC 129
3. The PRC Central Government Legislates Rules
Applicable to both thè HKSAR and thè PRC 129
4. Establishment of a Judicial Assistance Regime
(under Artide 95, Basic Law) 130
VI. Conclusion 132
TIMOTHY KAUTZ / THE NON-JUDICIAL SETTLEMENT OF
FINANCIAL DISPUTES IN RUSSIA 135
I. Arbitration and its Options 135
A. The Option of Foreign Courts: No Enforcement 136
B. The Option of Russian Courts: No Confidence 136
C. Other Options in thè Russian Economy 1999? 137
1. The State of Financial Transactions 137
a. Before thè Fall 137
i. Russian banks 138
ii. Foreign banks 138
b. After thè Fall 139
2. Bankruptcy 140
3. Negotiations, Re-negotiations, and
Offers You Can't Refuse 141
II. Russian Arbitration Law: An Effective International
Dispute Resolution Framework 142
A. Adoption of thè UNCITRAL Model Law 142
1. Agreements to Arbitrate outside Russia are Enforceable 142
2. Modifications of thè Model Law 142
a. Expansion of thè Definition of "International" 143
b. Maintains Existing Arbitration Treaties 143
e. President of thè Chamber of Commerce and
Industry as Appointing Authority 143
d. Omission of Party Agreement to Decision
Ex Aequo Et Bono 143
e. Addition of Mandatory Contents for Award 143Contents ix
3. Maintaining Key Model Law Principles 144
a. Primacy of thè Party Agreement 144
b. ChoiceofLaw 144
e. Limited Court Involvement 144
d. Narrow Grounds to Set Aside Awards 145
B. Arbitrability 145
1. Definition of International Commerciai
Arbitration 145
a. International 145
b. Commerciai 146
2. Excluded Subject Matters 146
3. Validity of thè Arbitration Clause 146
C. Arbitration Conventions 146
1. New York Convention 146
2. European Convention 147
3. Other Conventions 148
a. Moscow Convention 148
b. BITs/ICSID/MIGA 148
e. Other Trade Agreements 148
III. Arbitrating Financial Disputes in Russia 149
A. Multiple Dangers of Confusion Getting to Arbitration 149
1. State "Arbitration" Courts v. Private Arbitration 149
2. Domestic v. International Arbitrai Institutions 149
a. The Arbitration Court for Settlement of Economie
Disputes at thè Chamber of Commerce and Industry of thè
Russian Federation 150
b. The International Commerciai Arbitration Court
(ICAC) at thè Chamber of Commerce and Industry
of thè Russian Federation in Moscow 150
i. History 150
ii. The leading Russian international institution 151
iii. The standard ICAC arbitration clause 151
B. Where to Arbitrate in Russia 151
l.ICAC 151
a. Jurisdiction 151
b. Situs 152
e. Language 152
d. Selection of Arbitrators 152
i. Party autonomy 152
ii. Substitute arbitrators 152
iii. The ICAC list of arbitrators 152
e. Procedure 153
i. Preliminary relief 153
ii. Witnesses 153
f. Counterclaims 153
g. Application of Law 153
h. Arbitration Fees 154
i. Enforcement 154
2. St. Petersburg 154x Contents
3. Others 154
a. Maritime Arbitration Commission (MAC) at thè
Chamber of Commerce and Industry of thè
Russian Federation 154
b. Arbitration Court of thè Union of Jurists 155
e. Arbitrai Tribunal at thè Moscow Interbank
Currency Exchange (MICEX) 155
d. Arbitration under thè Auspices of thè Association
of Russian Banks 155
e. Arbitration Commission of thè Moscow Commodities
Exchange (MCE) 156
4. Ad Hoc 156
IV. Special Issues in Arbitration of Financial Transactions 156
A. Traditional Objections to Arbitration to Resolve
Financial Disputes 156
B. Mandatory Law and IMF Regulations 157
C. Russian Currency Laws 159
1. Currency Regulations regarding Russian Residents 159
2. Currency Regulations regarding Non-residents 160
3. Recent Developments 161
D. Other Financial Regulations 162
1. Accounting Regulations 162
2. Securities Laws 162
3. Corporations Laws 163
E. Cases 163
1. Novokuznetsk Aluminum Plant: Swiss Federai
Tribunal, 9 July 1997 163
2. Russian Court Decisions under thè New York
Convention 164
3. Decision of thè State Arbitration Court 164
V. Practical Enforcement Issues 165
A. Enforcement of Finance-Related Non-Russian Awards:
Soinco S.A.C.I v. Novokuznetsk Aluminum Plant (NKAP) 165
B. Enforcement of Russian Awards Abroad: Far
Eastern Shipping Co. v. AKP Sovcomflot 165
C. Enforcement of Awards in Russia 166
HANI SALAH SARIE-ELDIN / FINANCIAL DISPUTES
IN THE ARAB-MIDDLE EAST WITH SPECIAL
REFERENCE TO EGYPT 167
I. Introduction 167
II. Legai Framework, and Foundations of Arbitration
in Egyptian and other Arab Laws 168
A. The Role of UNCITRAL Model Law in Inspiring
New Arbitration Laws in Arab-Middle East 168
B. General Principles Found in thè Egyptian
Arbitration Law and other Arab Legislation 170
III. Establishment of Arbitration Centres and their Impacts
on thè Development of Arbitration in thè Region 170Contents xi
IV. Adoption of thè New York Convention in thè Region 171
V. New Judicial Trends in Dealing with Arbitration in 1990s 172
VI. Arbitration as a Mechanism for thè Resolution of
Disputes Arising from Financing Agreements and
Banking Transactions in thè Arab World 174
A. General 174
B. Reasons claimed against Arbitration
in relation to thè Unsuitability of Arbitration
to Financial and Banking Disputes 174
C. New Trends in thè Financial Industry
of thè Middle East 175
VII. Conclusion 178
J.D. BERCHILD, JR. AND J.J. NORTON / THE EVOLVING
UNITED STATES EXPERIENCE WITH ALTERNATIVE DISPUTE
RESOLUTION RESPECTING FINANCIAL INSTITUTION DISPUTES 179
I. Introduction 179
II. Precipitating Factors for Move toward ADR Techniques 180
A. Lender Liability Claims 180
B. Rise of Structure Fìnance 182
C. Intercreditor Issues 182
D. Specialized Issues (e.g., Environment) 182
E. Cross-Border Arrangement (NAFTA and Beyond) 183
F. Restructurings 183
III. Types of ADR 183
A. Mediation 183
B. Arbitration 184
C. Preventative Dispute Resolution (PDR) 185
IV. A Closer Look at Arbitration Specifically 185
A. The Statutory Basis for Arbitration 185
B. Administrative Organizations and Forum 186
C. Arbitrators and their Selection 187
D. Discovery and Motion Practice 188
E. The Arbitration Hearing 188
F. Enforcement of thè Award 189
G. Judicial Review 189
V. Arguments and Issues Concerning Arbitration 190
A. Excessive Jury Awards 190
B. "Threatened" Liability Claims 191
C. Time and Expense 191
D. Arbitrators' Special Knowledge and Expertise 191
E. Adversarial Nature, Privacy 191
F. Limitation on Class Actions 192
G. The Arbitration Award 192
H. Judicial Review and Non-Appealability 192
I. Avoiding Arbitration through Non-Joinder
of Necessary Parties 193
J. Provisionai Remedies: Scope of Clause 193
K. Formalities 194xii Contents
L. Contracts of Adhesion 194
M. Recision: Fraud in thè Inducement 194
N. Waiver 195
O. Third Party Claims 195
P. Punitive Damages 195
Q. Multiple Damages and Attorneys' Fees 196
VI. Conclusion Observations 196
Appendix A: Checklist for Arbitration 197
Appendix B: Sample Commerciai Mediation Clause 199
Appendix C: Wells Fargo Bank, N.A. Arbitration Language 201
Appendix D: Bank of America NT & SA Arbitration Language 204
Appendix E: Union Bank of California, N.A. Arbitration Language 206
MICHAEL WALLACE GORDON / NAFTA AND
FINANCIAL DISPUTE RESOLUTION 209
I. Introduction 209
II. The NAFTA as a Transitional Stage from
thè CFTA to thè FTAA 212
III. The CFTA and NAFTA Dispute Resolution Provisions 213
IV. The Process of Negotiations for Financial Services
Provisions in thè NAFTA 216
V. The Settlement of Financial Services Disputes
under Chapter 14 217
VI. The Choices of Dispute Settlement under thè
NAFTA and/or thè World Trade Organization (WTO) 228
VII. What is a Financial Services Dispute? 230
Vili. What is a Financial Services Investment? 230
IX. The Experience to Date - No Cases Brought to
Dispute Processes 231
X. Some Concluding Comments 231
WILLIAM M. BERENSON / MECHANISMS FOR THE NON-JUDICIAL
RESOLUTION OF FINANCIAL DISPUTES IN THE AMERICAS,
WITH A FOCUS ON THOSE PROMOTED BY THE
ORGANIZATION OF AMERICAN STATES 233
I. Introduction 233
II. The Organization of American States: A Framework Conducive to thè
Promotion of Arbitration and other Non-Judicial Dispute Resolution
Mechanisms in thè Hemisphere 234
A. An Overview of thè Organization 234
B. The Organization as an Historical Engine for thè Promotion of
Arbitration in thè Hemisphere 235
III. OAS Mechanisms for thè Peaceful Resolution of Disputes 236
A. State against State 236
B. Individuai against State 238
1. The International Center for Settlement of
Investment Disputes ("ICSID") 238
2. The Multilateral Investment Guarantee Agency 240
C. Individuai against Individuai 242Contents xiii
1. The Panama Convention and thè
IACAC Rules of Procedure 242
a. The Rules of Procedure 244
2. The Montevideo Convention 245
IV. Recent OAS Efforts to Promote thè Use of Alternative
Dispute Resolution ("ADR") in thè Americas 246
A. The Inter-American Juridical Committee's Resolution 1-4/92,
Endorsed by General Assembly Resolution AG/RES.
1166(XXII-O/92) 246
B. The General Secretariat's Cooperation and Technical Support
Programs in thè Area of Non-Judicial Dispute Resolution 248
1. Arbitrator Training 248
2. Negotiation Group on Dispute Settlement 249
V. Conclusions 250
WILLIAM M. BERENSON / REFLECTIONS ON THE USE OF
NON-JUDICIAL DISPUTE MECHANISMS AS A RESPONSE
TO THE LATIN AMERICAN DEBT CRISIS: THE MEXICAN CASE 251
I. Introduction 251
II. The Mexican Debt Crisis 252
A. The 1982 Crisis: Restructuring Commerciai Bank Debt
and Obtaining New "Working Capital" for Development 252
B. The 1994-1995 Crisis: Replenishing Foreign
Exchange Reserves so as to Avoid a Default on
Exchange Obligations to Investors 254
III. Commentary 256
A. Avoidance of Judicial Remedies 257
B. The Criticai Role of thè United States 257
C. The IMF as a Catalyst in Both Crises 258
D. Mexico's Acceptance of Structural Reforms 259
IV. Conclusions 260
G.N. OLSON / RENEGOTIATING DEBT IN A
BANKRUPTCY CONTEXT: LIVING IN THE
SHADOW OF THE LAW 261
I. Introduction 261
II. Principles of Consensual Debt Restructure 262
A. Full Disclosure 263
B. Fair Treatment of each Creditor within a Class and
among Classes of Creditors 263
C. Maximum Recovery by Creditors 264
D. Long-Term Survival of thè Debtor as a Going Concern 264
E. Demonstrate thè Superiority of Creditor Recovery on a
"Going Concern" Basis versus a "Liquidation" Basis 264
F. Provision for Federai Income Taxes 264
G. Release from Liability 265
HI. Theory of Consensual Debt Restructure 265
IV. Evolution of Bankruptcy Law as a Context for Consensual
Debt Renegotiation 268xiv Contents
V. Why Most Creditors do not Rush to Foreclose,
Precipitating Debtor Bankruptcy 271
VI. Advantages of Consensual Loan
Renegotiation in lieu of Bankruptcy 272
VII. Disadvantages to Consensual Loan Restructures in lieu of
Bankruptcy from thè Debtor's Perspective 273
Vili. Disadvantages of Consensual Loan Restructures in lieu of
Bankruptcy from thè Creditor's Perspective 273
IX. Conditions for a Successful Consensual Debt
Renegotiation 273
X. Pitfalls for Creditors to Avoid in a
Consensual Debt Renegotiation 274
XI. Some Observations regarding thè Debtors Preparation of a
Proposai for Consensual Debt Renegotiations in lieu of Bankruptcy 274
XII. Concluding Observations 276
MICHAEL GRUSON / RESTRUCTURING SYNDICATED LOANS:
THE EFFECT OF RESTRUCTURING NEGOTIATIONS ON THE
RIGHTS OF THE PARTIES TO THE LOAN AGREEMENT 277
I. Introduction 277
II. The Legai Relationship among thè Members of a Lending
Syndicate before a Restructuring 278
HI. Intercreditor Relations during a Restructuring 280
IV. Relationship between Lenders as a Group and
thè Borrower during a Restructuring 285
IV. Conclusion 288
JULIAN D.M. LEW /ARBITRATION AND OTHER DISPUTE
SETTLEMENT IN PROJECT FINANCING 289
I. Introduction 289
IL The Stages of Project Finance 290
HI. The Lender's Position 290
IV. Key Factors and Considerations 291
V. Dispute Resolution and Financial Risk
during thè Construction Phase 293
VI. Dispute Resolution and Financial Risk during thè
Start-Up/Testing Phase 294
VII. Dispute Resolution and Financial Risk during thè
Operational Phase 295
Vili. Global Issues Regarding Enforcement in International Project
Finance: Arbitration or Litigation? 296
IX. The Involvement of States in Project Finance 296
X. Multi-Party Issues 298
XI. Conclusions 299
Index 301You can also read
