Financial institutions should look beyond courts

Yet, in Australia, financial institutions have been slower in embracing its potential. Despite Australia’s robust arbitration framework and strong judicial support, financial disputes remain a minority in domestic arbitral proceedings. The Australian Centre for International Commercial Arbitration (ACICA) reported that finance-related claims accounted for just 3.5 per cent of its caseload by amounts claimed in 2022 – well behind sectors like infrastructure, energy and shipping. This cautious approach likely reflects historical preferences for court litigation, including the longstanding use of the NSW Supreme Court’s Commercial List. But it no longer reflects global best practice.

As international institutions refine their arbitration offerings to better suit finance-related disputes, the time is ripe for Australian financial entities to rethink their approach.

Global momentum behind financial arbitration

Financial institutions have traditionally relied on the courts – particularly specialist financial lists in London, New York, and, locally, the NSW Supreme Court’s Commercial List – to resolve disputes. However, the increasing complexity of modern finance, coupled with the international nature of many transactions, has fuelled a growing preference for arbitration over the past decade.

Caseload data from leading arbitral bodies reflects this evolution:

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• The London Court of International Arbitration (LCIA) identified financial services as the second-most frequent case type in both 2022 and 2023, even eclipsing transport and commodities in 2021.

• The International Centre for Dispute Resolution (ICDR) in the United States recorded a 65 per cent jump in financial cases in 2022, with continued growth in 2023.

• The Hong Kong International Arbitration Centre (HKIAC) saw its finance-related caseload nearly doubled from 6.2 per cent in 2017 to 11.4 per cent in 2023, with an unprecedented 36.9 per cent in 2022.

Why arbitration aligns with financial sector needs

Arbitration’s features make it especially attractive for the financial services industry. Its advantages are particularly clear in the context of cross-border transactions, emerging markets, and complex financial products.

• Discretion and confidentiality: Arbitration’s private nature is a major drawcard for large institutions seeking to avoid reputational risk or the disclosure of commercially sensitive data. In contrast to the public nature of court proceedings, arbitration in Australia is confidential by default – making it a more suitable forum for disputes involving large, public-facing financial institutions, proprietary and commercially sensitive financial products, technologies or practices, or market-sensitive transactions such as derivatives.

• Tailored procedure: Parties have far more procedural control in arbitration. They can determine the seat, rules, language, number of arbitrators, and even opt for streamlined procedures. This flexibility is especially beneficial for institutions seeking expedited resolution through limited document production or expedited hearings, or disputes governed by specific legal concepts – for example, Islamic finance disputes in jurisdictions with limited experience applying Sharia principles.

• Access to specialist arbitrators: Arbitration enables parties to appoint arbitrators with direct experience in finance – something not guaranteed in litigation. This is invaluable in disputes involving complex financial instruments, such as derivatives and structured finance or asset management, where deep industry knowledge is essential.

• Ease of global enforcement: One of arbitration’s most strategic benefits is enforceability. Thanks to the New York Convention, arbitral awards are enforceable in 172 countries. This makes arbitration a powerful tool in international financing disputes, where enforcement of a local court judgment could be uncertain or impossible.

Traditional reservations addressed

Financial institutions have, in the past, expressed scepticism about arbitration. Concerns have centred on issues such as parallel proceedings, delays in obtaining urgent relief, and the perceived lack of summary resolution mechanisms.

Arbitral institutions have recognised these concerns and, as recognised in the 2018 Queen Mary Arbitration Survey, “arbitration centres are making every effort to enhance their arbitral rules with a view to better accommodating finance disputes”.

• Consolidating multiple disputes: Complex financial deals often involve multiple contracts, raising the risk of overlapping arbitrations. Many arbitral institutions now allow for the consolidation of related proceedings – reducing costs and avoiding inconsistent outcomes. Under the ACICA Arbitration Rules 2021, for example, related arbitrations may be consolidated where claims arise from a series of transactions and the arbitration agreements are compatible.

• Availability of summary dismissal: Courts frequently rely on summary judgment procedures to dispose of uncontentious debt claims. Arbitral institutions now offer similar tools containing express provisions for summary procedures. Parties may authorise arbitrators to dismiss claims or defences without a full hearing.

• Emergency interim relief: Another historical concern has been arbitration’s perceived limitations in granting urgent relief – such as freezing orders to prevent dissipation of funds. Today, many institutional rules provide for the rapid appointment of emergency arbitrators to decide applications for interim relief before a tribunal is constituted. The ACICA Arbitration Rules 2021 provide for the appointment of an emergency arbitrator with authority to issue binding interim orders within one business day, with decisions required within five. Other rules, such as the 2025 SIAC Rules, go further by allowing ex parte applications for preliminary orders – bringing arbitration even closer to the interim relief regimes available in national courts.

Drafting arbitration clauses with care

To make the most of these advantages, care must be taken when drafting arbitration clauses in financial contracts, as highlighted by Corrs’ head of arbitration when speaking on an episode of The Lawyers Weekly Show. Poorly drafted clauses can lead to delays, additional costs, and, in some cases, unwanted litigation – potentially undermining the benefits of arbitration.

• Enforceability: Arbitration clauses may not be suitable in all contexts. For example, arbitration clauses in consumer credit arrangements and standard form retail banking contracts in Australia may be incompatible with obligations under the Australian Consumer Law, the Financial Accountability Regime and the unfair contracts terms regime.

• Split or hybrid clauses: These clauses allow for different dispute resolution mechanisms depending on the type of dispute or give one party an election between arbitration and litigation. While strategically useful, they must be carefully drafted to avoid enforceability issues.

• Seat of arbitration: The seat determines the procedural law and the extent of court support for the arbitration. Some jurisdictions – like Australia – have a particularly strong track record of supporting arbitration proceedings and enforcing awards, making them attractive choices.

• Confidentiality: The level of confidentiality in arbitration will vary depending on the chosen seat and institutional rules. While Australian law provides statutory confidentiality for domestic and international arbitrations seated in Australia, enforcement, set-aside, or other proceedings in support of arbitration brought in court may still be public.

The future of Australian financial services arbitration

Australia is well-positioned to become a leading jurisdiction for financial services arbitration. It has a modern legislative framework, experienced practitioners, and strong judicial support for arbitration, plus it is home to a sophisticated financial services sector with global reach. Global arbitral institutions, including ACICA, are tailoring their rules to suit the needs of financial institutions. With careful drafting and strategic foresight, Australian financial entities – particularly those with international operations, including those with a presence in the Asia-Pacific – can access the full advantages of arbitration.

As financial markets continue to globalise, arbitration provides a mechanism for resolving disputes swiftly, privately, and across borders. The question is no longer whether arbitration is suited to financial services disputes, but how financial institutions can better harness its potential in Australia.

Nastasja Suhadolnik and David Anthony are partners, Anna Grunseit is a special counsel, and Betty Choi and James Brannan are associates at Corrs Chambers Westgarth.

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