A body of experts has changed rules to more quickly determine fanciful defences and weak claims in financial disputes, such as private equity. Mikhail Vishnyakov of law firm Cooke, Young and Keidan explains.

The Panel of Recognised International Market Experts in Finance, known as PRIME Finance, is a specialist organisation that offers dispute resolution to financial institutions, their customers and counterparties. Recently PRIME updated its arbitration rules and, notably, the updated rules now expressly permit early determination of weak claims/defences. This lacuna has been perceived as a disadvantage of arbitration.

By permitting a faster process for such claims, arbitration may become a more appealing choice for resolving potential disputes arising out of financial transactions.

The stated aim of PRIME Finance is ensuring that requisite expertise is available for resolving potential disputes in financial markets. One of its core activities is dispute resolution services, including arbitration. The organisation’s arbitration rules are intended to be suitable for a “wide range of financial disputes”, including banking, financing, private equity and fintech.

Since the changes, the PRIME Finance rules now expressly permit tribunals to deliver “early determination” of a claim/defence provided it is manifestly “without legal merit”. Such determination would need to be made within 60 days of the request (whereas an arbitration may take 12 to 24 months).

In recent years, arbitration rules of other major arbitration institutions have also been amended or clarified to expressly provide for this. Given that parties are free to choose their arbitration rules, these changes should help the PRIME Finance rules remain competitive. Further changes to the rules include:

• An expedited procedure for claims below €4 million.
• Imposition of deadlines for holding a case management conference (after the tribunal has been constituted) and for issuing the award (after the final hearing).
• Powers to consolidate suitable arbitrations.

Ease of enforcement
Should parties to financial transactions agree to arbitrate?

The advantages of arbitration may include:

• Ease of enforcement of arbitral awards.
• Neutrality.
• Technical expertise.
• Finality.
• Confidentiality.

However, arbitration tribunals do not have powers over third parties, and generally cannot issue orders without providing the other party with advance notice. Courts are therefore typically better placed to issue robust interim measures, such as freezing orders, which may protect a party from the risk of dissipation of assets. The perceived inability to resolve suitable claims quickly has also been seen as a disadvantage of arbitration, particularly in lending transactions; if potential disputes are deemed likely to be relatively simple, then the possibility of quick resolution is desirable.

The changes may lead to arbitration under the rules being selected more frequently. In particular, the ability to quickly determine fanciful defences (perhaps raised to prolong the arbitration) or weak claims (perhaps brought for tactical reasons) is likely to be seen as welcome, as this may reduce the risk of an unnecessarily protracted (and expensive) arbitration.

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