ISDA publishes model arbitration clauses
By Monique Carroll and Susan Zhuang
The International Swaps and Derivatives Association (ISDA) has published model arbitration clauses for use in ISDA agreements. The move to arbitration to resolve swap and derivative disputes recognises the increasingly global nature of these transactions and seeks to address the legal uncertainty that can occur in cross-border transactions.
On 9 September 2013, ISDA published its 2013 ISDA Arbitration Guide, featuring a range of model arbitration clauses for use in ISDA master agreements in place of clauses referring disputes to English or New York courts. The move to arbitration for ISDA dispute resolution reflects the increasingly global nature of swap and derivative transactions and the need for legal certainty in cross-border transactions. Arbitration improves legal certainty primarily because foreign arbitral awards have significantly greater prospects of cross-border enforcement than foreign court judgments. Arbitration also allows parties to choose in advance how disputes will be resolved, including the governing law to be applied.
The 2002 and 1992 ISDA master agreements refer disputes to English or New York Courts (although, as a matter of practice in Australia, it is common to change this to a reference to an Australian court, together with the governing law). However, the use of courts for dispute resolution may involve enforcement risk, especially when the transaction involves parties based in emerging jurisdictions that may not recognise foreign court judgments. Conversely, arbitration provides access to the global regime for cross-border enforcement of arbitral awards under the New York Convention whereby arbitral awards can be enforced in the courts of approximately 150 countries…
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