PRIME Finance

What is PRIME Finance?

Following a meeting of leading legal and financial experts organized by the Dutch not-for-profit organization World Legal Forum Foundation at the Peace Palace on 25 October 2010, it was proposed that a new global finance disputes resolution service should be established with its base in The Hague.

The Panel of Recognised International Experts in Finance Foundation (“PRIME Finance”) was the result of that proposal, its expressed function being to provide a sophisticated service in support of financial markets (both mature and developing) dispute settlement.

PRIME Finance had its first board meeting in June 2011 and since then has been engaged in the development of judicial training programmes and library resources relevant to complex product and standard form financial contract disputes – functions that it will continue to perform. As of 16 January 2012, PRIME Finance has been open for the business of hearing disputes.

The foundation’s panel

As its name suggests, at the heart of PRIME Finance’s organisation is a panel of experts (known as the "List of Experts"). Most are internationally renowned practitioners in finance and dispute resolution and consist of a mix of judges, central bankers, regulators, representatives from private practice, and derivative market participants. The composition of the panel is diverse both in terms of gender and geographical background and includes two Linklaters capital markets partners, Simon Firth and Akihiro Wani.

Members of the List of Experts will act as arbitrators in accordance with PRIME Finance’s rules (see further below). It is clear that access to this expertise pool is intended to be a significant incentive for parties to arbitrate disputes under PRIME Finance’s arbitration rules.

PRIME Finance’s current List of Experts is available on its website.

What are the features of PRIME Finance arbitration?

PRIME Finance exists as an arbitral institution, so parties that wish to submit their dispute to arbitration under its rules can elect to do so by using an appropriate arbitration clause.

The PRIME Finance Arbitration Rules (the “Rules”) (the current version of which have been in force since 9 February 2016) are largely based on the 2010 UNCITRAL Arbitration Rules (albeit with adaptations to enable PRIME to act as an administering institution). They therefore have a solid foundation. In addition, there are a number of features which are intended to assist in the resolution of finance disputes; in particular:

  • Composition of the tribunal: PRIME Finance’s List of Experts forms the principal source from which tribunal members may be drawn (although arbitrators not included on the list may also be appointed).
  • Streamlining of proceedings: The Rules contain provisions which, it is hoped, will help to achieve a speedy resolution of disputes, a concern voiced by market participants in advance soundings. (see, for example, article 2a of the Rules regarding expedition of proceedings and article 11’s requirement that potential arbitrators make disclosures regarding their availability).
  • Interim relief: The Rules contain extensive provisions governing the availability of interim relief from the arbitral tribunal. There is power for the arbitral tribunal to grant such measures. In addition, the Rules provide (article 26a), like the 2012 ICC Rules, for an emergency arbitral procedure for use in urgent cases (although the parties can agree to opt out of these rules). The Rules also have provisions permitting, and governing, applications for urgent relief under referee proceedings brought under the Dutch Civil Code.However, this only applies where the parties have chosen to have their seat of arbitration in the Netherlands and have expressly agreed to their application.
  • Publicity: One of PRIME Finance’s stated aims is, in order to enhance legal certainty, to generate legal authority on the instruments it adjudicates upon. To that end the Rules allow for the publication of awards where the parties consent. In addition, unless a party objects within one month of the award, PRIME Finance may publish, in an anonymised form, an award or an order in its entirely (article 35(5)).

In respect of administration fees, there is an initial registration fee (EUR 2,000) paid by the claimant. PRIME Finance then fixes its fees by reference to an indicative scale relating to the amount in dispute, whose bandings reflect the greater likelihood of high value claims in this forum (see generally Annex E of the Rules). PRIME Finance does, however, reserve a discretion to charge greater or lesser amounts than these indicative sums in exceptional cases, albeit a minimum fee of EUR 10,000 is stated to always apply. The Rules leave the arbitrators fees, and their basis, to be determined by the tribunal, although there is mechanism for challenge (article 45).

In addition to its arbitration rules, PRIME Finance has released a set of mediation rules which parties can use if they wish to incorporate this form of ADR into their dispute resolution provisions. These are based on the 1980 UNCITRAL Conciliation Rules, with some amendments.

Should I use PRIME Finance for the resolution of disputes?

There is no doubt that PRIME Finance has some significant attractions for the type of dispute it is designed to hear. The quality of the expert panel associated with it is high and diverse and, should a counterparty, particularly from an emerging market, perceive institutions associated with leading financial centres as somehow lacking impartiality it arguably provides a more “neutral” alternative. Further, its Rules are soundly designed and, as noted above, contain some “bespoke” attractions.

However, it should be noted that its focus, particularly in terms of the finance experts’ credentials, is primarily on capital markets transactions and complex financial products such as derivatives. The appropriateness of referring disputes to it in other areas of finance such as mainstream loan transactions is, therefore, less clear. In addition, although solid dispute resolution fundamentals are in place, in terms of quality of experts and supporting processes, it admittedly remains to be seen what kind of track record the institution establishes for itself.

So, in conclusion, a welcome alternative, particularly for capital markets disputes. But, financial institutions and their advisers may wish to see how PRIME Finance develops and performs before more generally embracing it over their usual choice of institution. In that regard, the inclusion of PRIME Finance specific clauses (alongside those for other institutions) in the 2013 ISDA Arbitration Guide may provide some momentum.

If using the PRIME Finance Arbitration Rules, our precedent clause waives any right of appeal against the award (the PRIME Rules themselves do not do so).

Unlike our LCIA and UNCITRAL clauses, our precedent PRIME clause contains no exclusion of general discovery. In our experience, this is not a common provision in finance documentation due to the issues involved. However, in principle, it could be added if it would be beneficial in a particular type of contractual arrangement.

In our three arbitrator PRIME clause, wording providing for the presiding arbitrator to be appointed by the two party appointed arbitrators is not included as the PRIME Rules do this themselves. In addition to the wording shown, parties can consider the following modifications under the PRIME Rules

  • Exclusion of the PRIME Finance Emergency Arbitrator procedure (see Annex C of the PRIME Rules). Our precedent clause does not do this on the grounds that this is a useful mechanism for the protection of parties’ rights.
  • In cases where the seat of arbitration is in the Netherlands only, activation of the Referee Arbitration Rules for urgent provisional relief in Annex D of the PRIME Rules.

Under the PRIME Rules, unless agreed otherwise, the Secretary-General of the Permanent Court of Arbitration acts as appointing authority in situations where this is required. Our precedent clause confirms this choice.