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 is 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. On 16 January 2012, PRIME Finance also opened 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 "Panel 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 Linklaters capital markets partner, Simon Firth. 

Members of the Panel 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 Panel of Experts is available on its website.

What are the features of PRIME Finance arbitration?

The PRIME Finance Arbitration Rules (the “Rules”) were initially based on the 2010 UNCITRAL Arbitration Rules (albeit with adaptations to create an institutional framework). Parties that wish to submit their dispute to arbitration under PRIME Finance’s rules can elect to do so by using an appropriate arbitration clause. Under the Rules, the Permanent Court of Arbitration (“PCA”) at the Hague acts as the administering institution (more specifically, under the 2022 Rules, these functions are to be fulfilled by the PCA’s International Bureau).

The Rules were first revised in 2016, and again in late 2021. A new (2022) version of the rules will, consequently, apply to PRIME arbitration commenced as of 1 January 2022 (unless the parties have agreed another version should apply). From their inception the Rules  are a number of features which are intended to assist in the resolution of finance disputes; in particular, and taking into account revisions made by the 2022 Rules:

  • Composition of the tribunal: Although it is clear that PRIME Finance’s Panel of Experts is intended to form a ready source from which appropriate tribunal members may be drawn, there is no longer (by contrast with the first version of the Rules) any requirement that they be drawn from that list. Under the 2022 Rules, the general requirement is to have regard to appointing appropriate arbitrators, including by reference to those on the Panel.    
  • Streamlining of proceedings: The Rules contain provisions which, it is hoped, will help to achieve a speedy resolution of disputes. Even more emphasis is place on this in the 2022 Rules which, for example, contain an expedited procedure whose default application is where the amount in dispute does not exceed EUR 4 million. The 2022 Rules also contain provisions for the early determination of claims and defences, and a waiver of rights of recourse against the award.
  • 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, and, like many other institutional rules, an emergency arbitrator procedure (see, respectively, Articles 24 and 25 2022 Rules). 
  • 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, under the 2022 Rules, there is a somewhat greater push to the publication of anonymised awards than before with Article 39 (10) providing a default rule that, unless a party objects within 30 days of receipt of an award or decision, the PCA shall provide an anonymised version to PRIME Finance which it may then make public. 

Under the 2022 Rules, in respect of administration fees, there is an initial registration fee (EUR 2,000) paid by the claimant. The PCA then fixes administrative costs 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. It 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. As to arbitrators’ fees, under the 2022 Rules, the parties can agree that the basis will be either an hourly rate, or by reference to a fee schedule in the rules (in the absence of agreement the former will apply), albeit that the PCA has ultimate power to adjust amounts charged – and there is a mechanism for challenge to it. 

For more on the 2022 Rules, click here.

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.

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 ISDA Arbitration Guide (the latest edition of which was issued in 2018) may provide some momentum.

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 (our precedent clause does not do this on the grounds that this is a useful mechanism for the protection of parties’ rights).

  • Opt out from (or, conversely, extension of) the expedited arbitration provisions in the 2022 Rules (our precedent clause does not alter the default position on the basis that it is a reasonable compromise)