Rise of Financial Institutional Arbitration

By: Yamini Daga


Ever since now litigation has been the most used kind of system for the resolution of the disputes. Though nowadays quite many ways are available through which we can seek the resolution of the disputes like Arbitration, Mediation, Litigation, etc. Then also it is difficult for people to decide that which kind of method they want to opt in. And through time all these methods are emerging in their own fields and ways though litigation are believed to be the oldest form and most opted way. As through litigation people go to the court to seek justice and follow the same age old process.

The Arbitration is also one of a kind of dispute resolution process where the parties privately resolve their dispute as when the party faces a dispute in their agreement they seek the help of the arbitrator. Arbitrator is considered as a third party who listen to both the sides of the party and in return try to resolve their dispute by giving their decision in the form of arbitral award. This is the method where party try to resolve their disputes outside of the courtroom which seems less complex then the proper litigation process as less paperwork is required and experienced person are appointed as an Arbitrator.

Mediation is also a part of the dispute resolution process though in India there are no particular laws related to the mediation at present, but it is still opted by many parties though the decision given by a mediator is not binding in nature unlike the arbitral award which has the same binding authority like the decree passed in the court. In the process of mediation, there is a third party who helps in resolving the dispute by guiding them into the right direction through an informal meeting among the parties to the agreement.

And among all of the above mentioned few methods, arbitration has gained more preference over the age old court systems and the informal meetings with the mediator among the financial sector because of the globalization. As of nowadays people don’t have enough time to go to the court to seek remedy or justice they seek a process which is less complex and which is less time consuming. Thus the emergence of Arbitration is rising in the financial sector too.




Firstly, the procedure of arbitration nowadays require the element of confidentiality. Like whatever is being going on the meetings are not supposed to be seen into the limelight unlike happening in the courtrooms. As there are many mergers & acquisitions cases are coming forward because of the globalization. It is a delicate situation as the sensitive information of the companies can be leaked and be used the competitors to gain an upper hand in the market and use that against the parties of arbitration. Therefore arbitration is a process where the third person who is the decision maker or the arbitrator are bound to maintain the secrecy about the case as they are part of contract to maintain the confidentiality about the parties or about the case.

Secondly, the kind of expertise which is being needed by the arbitrator generally is being lacked by the courts. The Institutional Arbitration have a well-qualified arbitrators with the specific knowledge regarding the subject matter, which in return makes it easier for the parties to seek the justice or solution to their argument.

Additionally, the proceedings of arbitration are generally custom made which provides the level of convenience to the parties by suiting the requirements laid down by the parties and applicability of the arbitral award is easier as compared to the decree or judgment of any court.



As we know, Arbitration is a process which is custom made as in the way it gives option to the parties to decide that how, when, where and in which manner they want to proceed further in the process of arbitration. It provides freedom to parties to decide their method unlike the age old court systems.

  • Parties are free to decide the seat of arbitration, like parties can decide that at which place they would like to hold the meetings and where the whole procedure should take place can be completely decided by the parties. Basically the place of arbitration is decided at the convenience of the parties.
  • Parties are free to determine the way of procedure or procedural rules, the procedural rules are to be decided by the parties in the agreement and if they fails to conclude at a mutual decision than the procedure is being set by the arbitrator themselves.
  • Parties are free to determine the language for arbitration, the language in which they want to hold their proceedings during the process of arbitration.
  • Parties are free to select their arbitrators, parties are free to choose an arbitral institution of their choice like by whom they want their case to be taken care of and the qualifications required by the arbitrator chosen by the parties can also be specified by the party.




The International Swaps & Derivatives Association (ISDA) in the year of 2013 September issued a guide relating to how one can use arbitration in ISDA Master Agreement. Earlier it included sample clause in the agreement, later on an expanded range of model clauses were introduced around the year 2018 for huge number of usage of institutional arbitration all over the world.



When courts were not able to deal with the nexus disputes arose from the financial sector thus this resulted in the creation of international finance center which is known as P.R.I.M.E. Finance. This deals with the cases related to ADR and in return provides resolution by medium if mediation, arbitration and other disputes resolving services. They have their own rules and clauses which was released with this center on 16th January 2012, situated at Hague. The reason behind opening this center was to fulfill the need of arbitration process required in the financial sectors. All the provisions made under this has only one aim that was to encourage the use of arbitration or law in the financial markets also and to provide justice to people who suffered or went through the wrongdoing or scam of others in this area.



This report was prepared after conversing with at least more than or about 50 financial institutions around the globe and banking counsels or sectors with various policies, awards from minimum about 13 arbitral institutions were also being examined while preparing this particular report.

This report speaks about arbitration that is being performed in the regulatory method, in international finances matters, the disputes between the banking sectors, disputes relating to trade finances, etc. and quite huge growth sectors of arbitration were also recognized in this report.

This report turns out to be were helpful in determining the rise of financial institutional arbitrations among the world by classifying the types of disputes and by recognizing the strength of arbitration process too.



Previously the main purpose behind referring to the national courts over the process of arbitration was to assure speedy resolution of disputes via the judgment given in the format of summary elsewhere, in the process of arbitration the arbitrators are bound by their duty that they have to provide equal, fair and full opportunities to the respective parties of the agreement to set out their cases.

Nonetheless this thought process has been changed now, the institutional arbitration centers around the globe like the Singapore International Arbitration Center (SIAC), the Hong Kong International Arbitration Center (HKIAC), the International Chamber of Commerce (ICC) and many other institutions now provide the summary disposal of the disputes just like old court system which makes the process of arbitration more applicable option.


Though the process of arbitration is gaining its pace and being more frequently used method for resolving dispute in the financial market or sector, there are still some justifications that why sometimes this method of arbitration can be avoided. Like in few cases like the criminal cases arbitration is not possible as because these issues are not arbitrable in nature, as the third person can resolve the dispute where the parties to the agreement enter into an argument not where a person committed a crime and being guilty of murder or anything as those cases needed proper justice with the relevant punishments prescribed under the law.


The reason why people opt arbitration may be because of the myth that arbitration process are cost effective process. The Ad-hoc method of arbitration is precisely cheaper and affordable but it lacks experience and some required qualifications too that are being needed by the parties but the institutional arbitration is an expensive method.  As in the financial matters the parties sometimes doesn’t belong to same country which means a matter of cross border agreements are usually being held by the institutional arbitration centers, and it does cost a huge amount of money as the expenditure of procedure and transportation is expensive in nature. The arbitrator might also belong to a different country than any of the party to the agreement which make way for delay in the coordination between the parties to the agreement and the appointed arbitrator which ends up resulting in slow remedies.



As the P.R.I.M.E. Finance Rules, the ICC report and other initiatives are being encouraged and set as a means for resolution of disputes by the process of arbitration is being more frequently being recognized by the financial institutions or sectors.

The process of arbitration is most favorable as compared to the other methods of ADR and the age old system of litigation. Though there are many advantages and disadvantages of the process of arbitration but it will still be the most favorable option to be considered for resolving the disputes in the financial sector and the demand for arbitration will grow higher only in the near future too.




[1] Allen & Overy, The rise and rise of Arbitration in Banking and Finance Disputes, (2018, 9th February),


[2] Shreya Shrivastava and Sachin Bhatnagar, The Rise of Arbitration in the Financial Sector, (April 11,2020),