On 15 November 2021, the Panel of Recognised International Market Experts in Finance (“P.R.I.M.E”) launched its revised P.R.I.M.E. Finance Arbitration Rules (the “2022 P.R.I.M.E Rules”), which came into force as of 1 January 2022, superseding the previously applicable 2016 P.R.I.M.E Finance Arbitration Rules (the “2016 P.R.I.M.E Rules”). The key changes introduced by the 2022 P.R.I.M.E. Rules are discussed below.
Established in 2012 in The Hague, Netherlands, P.R.I.M.E. Finance is an independent, non-profit foundation of finance experts aiming to reduce legal uncertainty and systemic risk and promote confidence in global finance. As indicated on its website, P.R.I.M.E. Finance’s main activities involve (i) dispute resolution services, including arbitration (under the 2022 P.R.I.M.E. Rules discussed herein), mediation (under the 2016 P.R.I.M.E. Finance Mediation Rules, which are based on the 1980 UNCITRAL Conciliation Rules) and engagement of expert witnesses, (ii) judicial training, (iii) continuing education via conferences, as well as (iv) maintenance of a central database of precedent and materials in collaboration with LexisNexis.
The P.R.I.M.E Finance Arbitration Rules are tailored to cover a wide range of financial disputes, related to, inter alia, “derivatives, sovereign lending, investment and advisory banking, financing, private equity, fintech and sustainable finance”, as explained on its website. The P.R.I.M.E Finance Arbitration Rules are also institutional rules, administered by the Permanent Court of Arbitration (“PCA”), which has extensive experience and expertise in dispute resolution.
While the often strictly-regulated finance sector has not always favoured arbitration for the resolution of financial disputes, as opposed to the construction industry for instance, it can certainly benefit from the advantages that arbitration has to offer, particularly the appointment of arbitrators with expertise in increasingly complex financial disputes, procedural flexibility, as well as the finality and enforceability of resulting awards in nearly all countries across the globe (170 States with the accession of Turkmenistan on 4 May 2022) under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
The 2016 P.R.I.M.E. Rules previously in force were based on the 2010 UNCITRAL Arbitration Rules. The 2022 P.R.I.M.E. Rules introduce a series of changes to enhance the efficiency of arbitrations, as discussed below.
Whereas Article 45(1) of the 2016 P.R.I.M.E. Rules merely stipulated that the fees of the tribunal had to be “reasonable”, Article 49(1) of the 2022 P.R.I.M.E. Rules now specifies that the fees of the tribunal shall be determined based on either an hourly rate or the amount in dispute, as fixed in the Schedule of Fees in Annex D. If the parties cannot agree on the method of calculating the tribunal’s fees, the hourly rate system will apply by default (Article 49(2) of the 2022 P.R.I.M.E. Rules).
Under the new Rules, parties are now in a better position to predict and monitor the fees of the arbitral tribunal, and to plan their finances accordingly.
Under the revised Article 7 of the 2022 P.R.I.M.E. Rules, the default number of arbitrators, if the parties have not agreed otherwise, is now a sole arbitrator. A sole arbitrator is also the default option under other leading institutional rules, such as Article 5(8) of the 2020 LCIA Arbitration Rules. This reduces the cost of arbitration and often leads to speedier decisions.
To compare, under Article 7(1) of the 2016 P.R.I.M.E. Rules, the default number was three arbitrators, mirroring Article 7(1) of the 2010 UNCITRAL Arbitration Rules, based on which the 2016 P.R.I.M.E. Rules were drafted.
The 2022 P.R.I.M.E. Rules also simplify the procedure for the appointment of the arbitral tribunal (Articles 8 to 11). Under Article 9 (Nomination of Sole Arbitrator) of the 2022 P.R.I.M.E. Rules, if the parties cannot agree on a sole arbitrator within 30 days of receipt by the respondent of the notice of arbitration, a sole arbitrator is appointed by the PCA.
Similarly, under Article 10 (Nomination of Three Arbitrators) of the 2022 P.R.I.M.E. Rules, if a party fails to nominate its arbitrator or the two appointed arbitrators have not agreed on the nomination of the presiding arbitrator within 30 days of the appointment of the second arbitrator, the presiding arbitrator is appointed by the PCA.
The new provisions displace the previously applicable default “list-procedure”, pursuant to which the appointing authority had to send both parties an identical list of at least three candidates, and each party would then return the list “after having deleted the name or names to which it objects and numbered the remaining names on the list in the order of its preference” (Article 8(2), Article 9(3) and Article 10(3) of 2016 P.R.I.M.E. Rules).
The “list-procedure” was not harmful, but it is time-consuming and often fruitless, unless the parties are willing to cooperate (which is frankly rare). The simplified procedure adopted under the revised Rules is thus preferable, as it should reduce both the time needed to constitute the tribunal and the associated administrative costs of the PCA.
P.R.I.M.E. Finance also has its own list of over 200 legal and financial experts, who may be, but are not necessarily, appointed as arbitrators or experts in arbitrations under the 2022 P.R.I.M.E. Rules (Article 8 and Article 28 of 2022 P.R.I.M.E. Rules). The full P.R.I.M.E. Finance Panel of Experts may be accessed here, as it stands at the time of writing.
Modified Article 18 (Place of Arbitration) of the 2022 P.R.I.M.E. Rules introduces the possibility of holding virtual hearings and procedural meetings (“the arbitral tribunal may meet for any purpose, including hearings, in person at any location it considers appropriate or through means of communication that do not require physical presence”). Virtual hearings became the norm during the COVID-19 pandemic, so this change comes as no surprise.
The possibility to hold virtual hearings is then reiterated in Article 27(3) (Hearings) of the 2022 P.R.I.M.E. Rules, which provides, “The arbitral tribunal may direct that witnesses, including expert witnesses, be examined in any manner it considers appropriate, including through means of communication that do not require physical presence.”
Under the new Article 35 of the 2022 P.R.I.M.E. Rules, the tribunal is now empowered, upon the request of a party, to make an early determination on whether a claim or defence is manifestly a) “outside the jurisdiction of the arbitral tribunal”, b) “inadmissible”, or c) “without legal merit.”
The aim of an early determination is, amongst others, to act as a deterrent to frivolous claims. A similar provision is also found in Article 22.1(viii) (Additional Powers) of the 2020 LCIA Arbitration Rules.
The 2022 P.R.I.M.E. Rules include new, detailed provisions on joinder of additional parties (Article 31), consolidation of two or more pending arbitrations (Article 32), as well as holding a single arbitration under multiple “compatible” contracts (Article 33).
They also include a new provision allowing for coordination of proceedings “by aligning specific procedural aspects of two or more pending arbitrations”, where a) “the same arbitral tribunal is constituted in each arbitration” and b) “a common question of law or fact arises in all the arbitrations” (Article 34 of 2022 P.R.I.M.E. Rules).
The 2022 P.R.I.M.E. Rules also aim to promote greater transparency in arbitration.
Parties are obliged to disclose the identity of third-party funders, pursuant to Article 5(3)(g) (Notice of Arbitration), Article 6(2)(b) (Response to the Notice of Arbitration), as well as Article 12(2) (Disclosures by Arbitrators) of the 2022 P.R.I.M.E. Rules.
Under Article 29(1) (Amicus Curiae) of the 2022 P.R.I.M.E. Rules, arbitral tribunals are also empowered, where necessary or appropriate for the determination of the dispute, to invite or grant leave to a third party to appear as amicus curiae and make submissions on any issues relevant for the proceedings.
Under Article 39.10 (Awards) of the 2022 P.R.I.M.E. Rules, anonymised copies of awards may also be published, unless any party objects to the publication within 30 days of receipt of an award.
The 2022 P.R.I.M.E. Rules now also provide more detailed provisions for emergency arbitrations to parties “in need of urgent interim measures that cannot await the constitution of the arbitral tribunal” (Article 25 of 2022 P.R.I.M.E. Rules). Interim measures can also be taken by the constituted arbitral tribunal at any time prior to the issue of the final award (Article 24 of 2022 P.R.I.M.E. Rules).
The new Article 17 (Expedited Proceedings) of the 2022 P.R.I.M.E. Rules also lays down a detailed provision for expedited proceedings, unlike Article 2a (Expedited Proceedings) of the previously applicable 2016 P.R.I.M.E. Rules, which merely provided that “[t]he parties may agree to shorten time lines set out in these Rules”, without further guidance. The expedited resolution of disputes is always welcome, yet not unique to the financial sector.
The expedited proceedings apply where the amount in dispute does not exceed EUR 4 million at the time the response to the notice of arbitration is filed or where the parties so agree (Article 1(4) of the 2022 P.R.I.M.E. Rules). In expedited arbitrations, a sole arbitrator is by default appointed (Article 17(1) of the 2022 P.R.I.M.E. Rules), and he/she shall render the final award within 180 days from the constitution of the arbitral tribunal (Article 17(6) of the 2022 P.R.I.M.E. Rules).
In conclusion, P.R.I.M.E. Finance has made a real effort to ensure that its arbitration rules remain fully fit-for-purpose for users in the financial sector and reflect current best practices in international arbitration. The changes introduced by the 2022 P.R.I.M.E Finance Arbitration Rules should promote efficiency, transparency, greater predictability of the arbitral tribunal’s fees and an overall speedier resolution of disputes.
To have potential financial disputes resolved via the 2022 P.R.I.M.E Finance Arbitration Rules, the model arbitration clause available here may simply be inserted into a financial agreement.