Arbitration in banking and financial matters : ASA Swiss Arbitration Association Conference in Geneva of January 31, 2003 : presentations

Conference Proceedings

Reference

Arbitration in banking and financial matters : ASA Swiss Arbitration Association Conference in Geneva of January 31, 2003 :

presentations

KAUFMANN-KOHLER, Gabrielle (Ed.), FROSSARD, Viviane (Ed.)

KAUFMANN-KOHLER, Gabrielle (Ed.), FROSSARD, Viviane (Ed.). Arbitration in banking and financial matters : ASA Swiss Arbitration Association Conference in Geneva of January 31, 2003 : presentations . Bâle : Association suisse de l'arbitrage, 2003, 212 p.

Available at:

http://archive-ouverte.unige.ch/unige:44151

Disclaimer: layout of this document may differ from the published version.

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ASA Special Series No. 20 August 2003

ARBITRATION IN BANKING AND FINANCIAL MATTERS

ASA Swiss Arbitration Association Conference of January 31, 2003 in Geneva Edited by Prof. Gabrielle Kaufmann-Kohler and Viviane Frossard

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ARBITRATION IN BANKING AND FINANCIAL MATTERS

ASA Swiss Arbitration Association Conference in Geneva of January 31,2003 Presentations

Edited by Prof. Gabrielle Kaufmann-Kohler and Viviane Frossard

Association Suisse de I' Arbitrage Swiss Arbitration Association

Schweiz. Vereinigung :fiir Schiedsgerichtsbarkeit Associazione Svizzera per I' Arbitrato

• •

ASA Secretariat attn. Dr. Rainer Fiieg Aeschenvorstadt 67 P.O. Box

CH -4010 Base1

Te1: + 41 61 270 60 15 Fax: +41 61270 60 05

Association Suisse de 1' Arbitrage Swiss Arbitration Association Schweiz. Vereinigung fur Schiedsgerichtsbarkeit Associazione Svizzera per 1 'Arbitrate

E-mai1: info@arbitration-ch.org

Website: www.arbitration-ch.org

~

1 'Arbitrage Association richtsbarkeit :r 1 'Arbitrato

TABLE OF CONTENTS

Preface ... page V General survey on arbitration in banking and financial matters ... page 1

Prof Otto Sandrock

Arbitration in banking and financial matters -

Some general reflections on arbitration in banking and finance ... page 11 Prof Peter Nobel

Arbitrability of financial disputes ... page 33 Prof Bernard Hanotiau

The "cloak" of arbitrability: Is the securities industry trying to have it both ways? ... page 45

John Beechey

Presentation of "EUROARBITRATION": European Center for Financial Dispute Resolution ... page 55

Prof A lain Hirsch

A banker's approach to arbitration ... page 63 Dr. Georges A.ffaki

ADR in banking: The Swiss Ombudsman Foundation ... page 77 Dr. Otto Schoch

Arbitrability and American securities law: A tale of two cases ... page 81 Prof William W. Park

Arbitration of asset management disputes ... page 89 Dr. Laurent Levy

Conclusions ... page 115 Prof A lain Hirsch

Annexes:

• Euroarbitration: European Centre for Financial Disputes Resolution -

Rules of the Centre ... page 117

• Is international arbitration inept to solve disputes arising out of international loan agreements? ... page 163

Prof Otto Sandrock

N.B.: Professor Luc Thevenoz's contribution entitled "Arbitration as enforcement of self- regulation in the financial industry: Does it really work?" will appear in a later issue of the ASA Bulletin.

PREFACE

This volume of the ASA Special Series contains the papers· presented at the ASA 2003 Annual Conference entitled "Arbitration in Banking and Financial Matters".

Opinions vary about arbitration in this area - from being a non-topic to the most promising possible field, with great potential for development. As usual, the truth probably lies somewhere between these two extremes. Banking and finance activities are multi- faceted. They involve a broad range of very different types of transactions and, consequently, the disputes arising out of these transactions also tend to differ considerably in nature.

The purpose of the ASA conference and this publication is to explore the fields of banking and finance in an effort to identify those categories of disputes that may be well suited to resolution through arbitration. As part of this process, the contributors have re- examined several longstanding issues and ventured onto previously untested grounds. It is our hope that this process of exploration will bring the worlds of arbitration and banking and finance one step closer, by defining those areas in which arbitration may offer a practical service to the banking and finance sector.

Geneva, April 25, 2003

Prof. Gabrielle Kaufrnann-Kohler, President of ASA

Schweizerische Vereinigung fiir Schiedsgerichtsbarkeit Associazione Svizzera per l'Arbitrato

Swiss Arbitration Association ASA Conference January 31,2003 9:00 a.m. to 5:00 p.m.

Arbitration in banking and financial matters

Hotel des Bergues Geneva

www.arbitration-ch.org

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VIII

I

ARBITRATION IN BANKING AND FINANCIAL MATTERS

Chair morning session: Prof. Otto Sandrock, Dusseldorf

9.00- 9.10 WELCOME ADDRESS Prof. Gabrielle Kaufmann-

Kohler, Geneva

9.10-9.40 SOME GENERAL REFLECTIONS ON Prof. Peter Nobel, Zurich ARBITRATION IN BANKING AND

FINANCE

9.40- 10.00 ISSUES OF ARBITRABILITY Prof. Bernard Hanotiau,

Brussels

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10.30- 10.50 THE "CLOAK" OF ARBITRABILITY: IS John Beechey, London THE SECURITIES INDUSTRY TRYING TO

HAVE IT BOTH WAYS?

10.50- 11.10 THEEUROPEANCENTREFOR Prof. Alain Hirsch, Geneva

FINANCIAL DISPUTE RESOLUTION

11.10- 11.30 A BANKER'S APPROACH TO Dr. Georges Affaki, Paris ARBITRATION

11.30-12.15 PANEL AND FLOOR DISCUSSION Prof. Otto Sandrock, Dusseldorf

12.30- 14.00 LUNCH ^c

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dorf Chair afternoon session: Prof. Alain Hirsch, Geneva

brielle Kaufmann- 14.15- 14.40 ARBITRATION AS ENFORCEMENT OF SELF- Prof. Luc Thevenoz, Geneva

Geneva REGULATION IN THE FINANCIAL

INDUSTRY: DOES IT REALLY WORK?

ter Nobel, Zurich

14.40- 15.00 ADR IN BANKING: THE SWISS OMBUDSMAN Dr. Otto Schoch, St Gallen FOUNDATION

rnard Hanotiau, 15.00 - 15.36

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15.30- 15.50 FINANCIAL SERVICES ARBITRATION IN Prof. William W. Park, Boston THE UNITED STATES: DEVELOPMENTS

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AND PERSPECTIVE echey, London

15.50- 16.10 ARBITRATION AND ASSET MANAGEMENT Dr. Laurent Levy, Geneva

ain Hirsch, Geneva 16.10-17.00 PANEL AND FLOOR DISCUSSION- Prof. Alain Hirsch, Geneva

CONCLUSION rges Affaki, Paris

to Sandrock, Dusseldorf

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- AN

INTRODUCTION-

Otto Sandrock'

1.

LITIGATION V. ARBITRATION V. MEDIATION

Disputes in banking and in financial matters may be - and indeed are - solved in fundamentally different ways: either by "normal" litigation before state courts or by arbitration or finally by mediation. These three modes of dispute resolution are at disposal when parties establish contractual relations in banking and financial matters or when they look for a mode of dispute resolution after a dispute has arisen. Now the basic issue of this conference is to answer two questions: first, under which circumstances the one or other of these three different modes of dispute resolution is either de facto followed and, second, which one of the three modes is most suitable to the individual matter in dispute.

There is no unique answer to these two questions. Rather, one must distinguish between different types of situations. The reason therefore being that the two questions do come up under so multifaceted circumstances that simple replies are not possible. Each situation has to be examined individually on its own merits. In some situations litigation before state courts is widely practiced and may- also be the best way to solve disputes. In other situations arbitration or mediation may commend itself as the most suitable procedure to settle a controversy, although banks and other financial institutions together with their contractual partners may de facto still follow another path to deal with the conflicts they eventually face. In still other categories of situations, arbitration or mediation may already be practiced with great success and may therefore be widespread. The answer for the optimal mode of dispute resolution may also depend upon the respective national court systems which a bank, a financial institution and their contractual partners may be confronted with when they consider whether to go to court or, instead, agree upon another mode to solve their eventual disputes.

' Prof. emeritus, Universities ofBochum and Munster; attorney-at-law, Dusseldorf.

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2

2. TYPICAL SITUATIONS AS REPRESENTED IN THE CHART AT THE END OF THIS INTRODUCTION

The reader will find attached to the end of this introduction a kind of chart or syllabus which indicates, in its left column, the most important types of situations in which banks and other financial institutions may find themselves when they have to agree with their contractual partners on a mode of dispute settlement. In the right column of that chart, the different ways by which disputes de facto seem to be settled nowadays, are then described .

That chart, however, neither claims to be exhaustive nor all persuasive (some subjects, e. g., overlap). The chart merely means to convey to its reader, from a bird's eye perspective, a comprehensive view on the most different factual and legal circumstances in which the two questions mentioned above (Which means of dispute resolutions are de facto applied? And which means would be most suitable?) arise and in which manner they are actually solved.

As the first speaker of ·this conference, Prof. No bel will present to you a comprehensive cross-section of the subject of our conference. Inter alia, he will clearly demonstrate which advantages and disadvantages are connected with the different modes of dispute resolution in banking and financial matters.

3.

LOANS

When we turn back to the chart, we will find mentioned, under its no. (1), the general consumer-bank relationship. Problems arising from that relationship seem to be more and more solved by mediation today: Reference is made to the report to be presented this afternoon by Dr. Schoch. In Germany disputes of that kind are also mostly solved by mediation.

Further, under no. (2) of the chart, reference is made to the repayment of such loans by consumers. Those claims are still tried before state courts, and that seems to be the exclusive means of dispute resolution in all industrial states. The same may be true - at least where no cross-border relationship comes into play - for the repayment of loans by private enterprises. These circumstances are recorded under the No. (3) of the chart.

.T THE END OF

kind of chart or tuations in which eve to agree with mm of that chart, vadays, are then

Jersuasive (some from a bird' s eye circumstances in tions are de facto manner they are

·esent to you a

1, he will clearly ifferent modes of

- its no. (1), the tship seem to be

i to be presented nostly solved by

ent of such loans seems to be the 1ay be true- at nent of loans by the chart.

The situation is a little bit different, however, when - still under no. (3) of the chart international loans ar~ considered which may have been granted either to private enterprises or to States. In the case of loans to private enterprises, forum-selection-clauses still seem to prevail. But with loans granted to foreign states, the jurisdiction of state courts does not appear too persuasive under certain circumstances. In view of the possibility that a defendant state raises, e. g., the defense of immunity, lenders may, and often do, prefer arbitration.

Finally, under its no. (4), the chart mentions the disputes between members of loan consortiums, i.e., of syndicated loans. Arbitration also seems to be chosen rather frequently · for the resolution of that kind of disputes.

4.

FINANCING OF TRADE

In the field of trade finance, the two questions asked at the beginning of this article (Which practice is de facto followed ? And which solution is best suited ?) present themselves in a still different manner. Where, e. g., goods have sold under the "Uniform Customs and Practices for Documentary Credits" of the ICC which also cover "Stand-by letters of guarantee", arbitration seems to be more common (see the issue of Documentary credit under no. (5) of the chart and of Bank guarantees ibid under no. (6)).

Closely connected with this field of financing are the ICC "Rules for Documentary Credit Dispute Resolution Expertise", the so-called DOCDEX of 1997. Prof. Nobel as well as

Mr.

Affaki will refer in their reports to these most important Rules. They do not provide, however, for arbitration but merely for a procedure before an expert. When a sale, however is backed by an ECA, i. e. by an Export Credit Agency, such Agency will frequently insist on the insertion into its contracts of arbitration clauses. Mr. Affaki, as Vice Chairman of the Banking Technique and Practice Commission of the ICC and as Chairman of the ICC Task Force on Guarantees, will launch a vivid appeal in his report for cooperation between bankers and lawyers in this filed.

5. SECURITIES

The issue next mentioned in the chart, is the "Purchase and Sale" of securities.

Indeed, this is a very vast subject for deliberation during this Conference.

• •

4

First, Prof. Hanotiau will profoundly deal with the touchiest problem in this field, namely the problem of arbitrabilitv. In the right column under no. (7) of the chart, the attitudes taken in this respect by some national jurisdictions are summarized in a few key- words. Mr. Beechey, on his turn, will report' on the disputes which have arisen in the aftermath of the fall of the stock market during the past years when, on the basis of professional liability, disappointed purchasers of securities raised claims against their brokers or when disgruntled owners of security deposits filed claims against their banks for the recovery of their losses amounting, sometimes, to millions, if not, billions of British pounds or US dollars .

Moreover, in the United States, arbitration agreements into which many customers and their investment banks had entered since the beginning of nineties, have come under critical scrutiny by courts. Many of those customers had suffered serious losses when stock prices fell during the recent quasi-crash of the market. Some of them sued their banks before the competent courts under the allegation that the arbitration agreements they had voluntarily signed, were null and void. They believed to fare better before courts than before arbitral tribunals. Prof. Park will report about some of these cases.

Finally, still under the topic of Securities, stock exchanges or other financial associations are listed under no. (8) of the chart. The articles of these associations often provide for arbitration procedures where either a conflict arises between the association on the one side and one or several of its individual members on the other or where the individual members among themselves are engaged in a dispute. Prof. Hirsch will this morning deal with a most interesting institution of that kind, namely with EUROARBITRATION, an association r~cently established for solving disputes between professionals in the fmancial markets. The ''National Association of Securities Dealers"

(NASD), i. a. in New York, or the "International Financial Futures and Options Exchange"

(LIFFE), i. a. in London, may also be mentioned in that respect.

Further, reference has to be made to the report this afternoon by Prof. Thevenoz on the issue of "Arbitration in the Enforcement of Regulation and Self-Regulation in the (Swiss) Financial Industry"- a report to be recurred upon later in another context.

6.

PROJECT FINANCING

The two essential questions asked at the beginning of this introductory article, also come up in the realm of Project Financing. That kind of financing may be carried on either

blem in this field, 1 of the chart, the ized in a few key- Iave arisen in the , on the basis of .ims against their nst their banks for billions of British

1 many customers have come under losses when stock sued their banks eements they had ,efore courts than

,r other financial associations often the association on her or where the

·. Hirsch will this J, namely with disputes between ecurities Dealers"

ptions Exchange"

,rof. Th6venoz on Regulation in the -context.

ctory article, also

~ carried on either

by private institutions (see no. (9) of the chart) or by public institutions (see no. (10) of the chart).

If a project is publicly funded, arbitration seems to be rather common. As an example, I refer to the well-known ICSID in Washington. Further, reference has to be made. in this context to the various national "Export Credit Agencies" (ECA's). Their contracts often are so intimately linked to the contracts on the respective projects that it seems advisable to have both contracts, the project contract as well as the financing contract, governed by the same arbitration agreement.

7.

INTERBANK TRADING AND MANAGEMENT OF FUNDS AND TRUSTS

Another important subject is interbank trading, for example in Swaps and Derivatives The statutes of the respective association, the ISDA, do however not provide for arbitration, but for state court jurisdiction.

As mentioned above, Prof. Th6venoz will answer the question of whether arbitration really works when the (Swiss) fmancial industry has to enforce either self-regulations concerning, e.g., the standards introduced by the "Due Diligence Agreement" of the Swiss Bankers Association, or certain state regulations, e. g., against money laundering.

Further, there is the most interesting issue of the Management of Funds and Trusts.

Where, e.g., a bank in Geneva manages the assets of a private trust or of a pension fund and where disputes then arise out of such management, arbitration agreements seem to be preferred for a number of reasons which will be pointed out by Dr. Levy at the end of this afternoon.

ARBITRATION IN BANKING AND FINANCIAL MATTERS

ASk

CONFERENCE JANUARY

31

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2003,

GENEVA

Otto Sandrock

SURVEY ON SOME PROBLEM AREAS

LOANS

Disputes arising out of Modes of Dispute Resolution

l l

(1) The general Consumer

-

^bank Mediation seems to be more and more relationship preferred: The "Ombudsman" (e. g. in (except repayment of loans) Switzerland, Germany)

(2) ("National") Loan Agreements - State Courts

-

with consumers: Repayment of

loans to Consumers - State Courts or Arbitration

-

with Enterprises

(3) International Loans by Private

Lenders - State CoUrts or Arbitration

- to Private Enterprises

- State Courts and increasingly

- to States Arbitration

(4) Disputes between Members of Arbitration seems to be wide-spread Loan Consortiums

8

TRADE FINANCING Disputes arising out of

!

(5) Documentary credit

(6) Bank guarantees

SECURITIES

Disputes arising out of/between

!

(7) Purchase and Sale of Securities

Modes of Dispute Resolution

!

Arbitration sometimes practiced (in particular when ECA backed)

Arbitration sometimes practiced (in particular when ECA backed)

Modes of Dispute Resolution

!

Switzerland and France: Arbitrability given Germany: Arbitrability with consumers denied (see § 37h of the Securities Trade Act [Wertpapierhandels-Gesetz] in effect as of July I st, 2002). But arbitrability affirmed with full merchants and public authorities Great Britain: Arbitrability given

USA: Arbitrability by USSpCt in - Wilko v. Swan (1953): denied - Scherk v. Alberta Culver (1974):

aff'd

- McMahon (1987): affd

(8) Members of Stock Exchanges or Arbitrability given; arbitration often other Associations (e. g. Euronext practiced

or EUROARBITRA TION)

lesolution

.ced ked)

ced ked)

esolution

bitrability given ,vith consumers Securities Trade setz] in effect as rability affirmed lie authorities

~iven

,et

in 53): denied '::ulver (1974):

affd

1itration often

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I

9 PROJECT FINANCING

Disputes arising out of Modes of Dispute Resolution

t t

(9) Private Funding Arbitration often practiced

(10) Public Funding Arbitration often practiced

e. g. by World Bank and national institutions

INTERBANK TRADING

e. g. in International Swaps and Derivates Association (ISDA): see above sub no. 8.

MANAGEMENT OF FUNDS AND ESTATES

Disputes arising out of them: Arbitration often practiced

ARBITRATION IN BANKING AND FINANCIAL MATTERS

SOME GENERAL REFLECTIONS ON ARBITRATION IN BANKING AND FINANCE

Peter Nobel'

1. HISTORY

1.1 Antiquity

Financial arbitration was certainly already known in the classical time of Greece.

With the restoration of democracy around 400 B.C., the Athenians also enacted a law on private arbitration (preserved by Demosthenes 21.94). Out of all this material, it is noteworthy that some really sophisticated cases on ship financing have been found which are still worth studying today. Commercial matters had to be dealt with by private arbitration and even though the law allowed complete freedom of choice, in commercial matters the arbitrators were chosen from the professional people. The arbitrators sat openly in public spaces, usually near the Agora or temples.¹ You might wonder why, or even disagree, but it. is my experience that the formal setting also influences the arbitral proceedings: Courthouses are more impressive than Hotels or Law Offices.

Already in earlier times, arbitration had its own characteristics. Aristotle tells us about the following advantages of early arbitration:

"And it is equitable [ . .} to prefer arbitration to the law court, for the arbitrator keeps equity in view, whereas the dicast looks only to the law, and the reasons why arbitrators were appointed was that equity might prevail"

(Rhetoric 1374b).

The leading playwright of the New Comedy, Menander (344- 292 BC), has left behind a play (which was only discovered in the 19¹h century), entitled "Epitrepontes", translated: Men at arbitration.² The story is as follows:

The shepherd Daos finds a child with a bundle of jewellery. The child was very much desired by the charcoal-burner Syros and his wife and given to them: later, the

' Prof., University of St. Gallen; attorney-at-law, Nobel & Hug, Zurich.

E. Karabelias, L 'arbitrage prive dans l'Athimes classique, Symposion 1995, in: ThiirNelissanopoulos- Kanakostas (ed.), Koln!Weimar/Wien 1997, p. 142 et seq.

Menander I, Loeb 's classical library, vol. 132, edited and translated by W.G. Arnott, p. 379 et seq.

12

charcoal-burner having heard about the jewellery, came back and asked for it. The parties negotiated, the shepherd· Daos was ready to give a part, but the negotiations failed and therefore the conclusion was:

"This dispute needs an arbitrator."

'&mr:parr:&ov n vz '&an 7r&pz r:ovr:mv.

They asked Smikrines to serve as an arbitrator, because

"On all occasions justice should prevail, The whole world over. Any man should feel Concerned about it- that's a general Rule of society."

Having first received the promise that the parties would abide by his decision, Smikrines listened to the pleadings. Daos regretted very much that he had offered a share:

n yap f.l&r:&8z8ovv.

The judgement was:

"All the things left with the baby go to it. So I decree."

Daos was very much dissatisfied.

"The verdict's terrible, by Zeus the saviour!

I found the lot, I lose the lot.

The one who didn't find them, gets them."

But he obeyed.

We see that not only arbitration is ancient, but also arbitration concerning the attribution of property rights: all or none and not only a share. It seems that even today the preferences of banks are "black or white": payment or no payment. Even in the antique sources we find opposing opinions, as we do today.

for it. The parties iations failed and

by his decision, d offered a share:

concerning the tt even today the n in the antique

It is also pleasing to read how Seneca phrased the large power of an arbiter in a more negative way:

"[ .. .]a just case is in a better position·

if

it is brought before a judge than

if

it is brought before an "arbiter" because the judge is restricted by the formula of instructions, which sets definite bounds that he cannot exceed, whereas the other has entire liberty of conscience and is hampered by no bonds; he can lessen the value of some fact or augment it, and can regulate his opinion, not according to the dictates of law or justice, but according to the promptings of humanity or pity." (Ill. 3.7.5.)

In an interesting article written by Peter Stein, the great English Romanist who also left us the famous book "Roman law and Europe", it is shown that in Rome as well as in England, arbitration comprised the possibility to depart from the stringent "formulas" of the action. ³ A Roman judge was not compelled to come to a decision; he could - in contrast to today - say: non liquet. But this was not so in arbitration about money claims; there, the Praetor intervened and said: "Qui arbitrium pecunia compromissa receperit eum sententiam dicere cogam." which means: Who has accepted to act as an arbitrator about a money promise, I force him to come to a judgement (so in the "Edictum perpetuum").

1.2 Middle Ages

Arbitration in commercial, mainly fmancial, matters (money claims) may also be seen, both actually and historically, as a form or a feature of self-regulation.

In more recent history, organiseq dispute resolution schemes developed within or around the medieval guilds of merchants. In markets, to a large extent taking place in the context of fairs, disputes required speedy resolutions because merchants had to travel on.

The proceedings were arbitration proceedings because the parties had to agree to be bound by the decisions. It was out of such arbitration proceedings that the institutions of the commercial courts evolved, which we still know today. Historians have not yet fully researched this evolution; but, there are examples, like the one of Nuremberg, where in 1621, after the example of Venice, a Bank was founded to combat the deterioration of coins. These "Banko rules of arbitration" then evolved into the "Mercantil and Banko

3 P. Stein, Roman arbitration: An English perspective, Israel Law Review, vol. 29, Nr. 1-2, Winter-Spring 1995, p. 215 et seq.

14 .

Court".⁴ For merchants, bona fide behaviour is the most important: "Bona fides est primum mobile de spiribus vivificanes commercii".

1.3 Comparison to commercial Courts

We may thus see here a substitution of arbitration by commercial courts, which are specialised courts, evincing a passing over from self-regulation to state power of the judicial system. Nowadays, it would be worthwhile to explore how such a substitutive transition has taken place or can take place from state courts to arbitration, especially in those areas where there are no properly functioning commercial courts or where the truly international character of an affair or other reasons call for arbitration.

In any case, the process of substitution, both historical and functional, seems to be worth considering.

At this juncture, I would like to elaborate on some thoughts involving the quality of the judges, the proceedings, the participation of the parties, the speed of the proceedings, the quality of the judgement and its finality. With these thoughts, I will now focus on the core of the theme entrusted to me today.

I might say that this subject is also a matter of personal concern for me as I have been serving not only as an arbitrator, but also as a judge at the commercial court of Zurich for more than 20 years, and I dare to speak partly out of my own experience and observations.

a) Selection of judges

It is my opinion that having a mixture of professional judges (experienced lawyers) and experts in the field of a case present in the court is not only very useful but also something that improves the quality of proceedings. We find this in the distinction made in the Anglo-Saxon world between "public" and "industry"

arbitrators.⁵ In order to avoid conflicts of interest, for example, the NYSE and the NASD rules provide that in an arbitration panel, the industry arbitrators, i.e., finance

4 Cf. H. Krause, Die geschichtliche Entwicklung des Schiedsgerichtswesens in Deutschland, Berlin 1930, p.

70 et seq.

5 See, e.g., L. Jaeger/D. Dupuis, Arbitration in the Financial Marketplace, in: Arbitration, Finance and Insurance - Special Supplement 2000, ICC International Court of Arbitration Bulletin, Paris 2000, p. 28.

1 fides est primum

courts, which are wer of the judicial 1tive transition has those areas where ruly international

tonal, seems to be

ving the quality of f the proceedings,

now focus on the

1 for me as I have ial court of Zurich n experience and

dges (experienced Jt only very useful I e fmd this in the :" and "industry"

the NYSE and the rators, i.e., finance

-hland, Berlin 1930, p.

bitration, Finance and n, Paris 2000, p. 28.

practitioners and practical experts, are always the minority compared to public arbitrators, i.e., arbitration practitioners. ⁶

My employment of the term "expert" does not merely signify what an American judge has stated: "An expert is a man from another town." I believe that an expert must be a person who is knowledgeable in the technicalities of the dispute which has arisen. Such eo-judges are helpful in many ways. They can hold a dialogue with the parties and within the court and allow, in many cases, for a shortening of the evidentiary proceedings. They can also easily evaluate the value or the bias of the expert opinions of the parties. (Here I would not dare to repeat what another American judge said: "There are liars, bloody liars and experts.")

I think that lawyers are very useful people but they have, as do other people, their limits, and if they engage in arbitration as a means to learn about new things, they also need their time; this is an obstacle for the requirement of speed.

On the other hand, to entrust a non-lawyer with the management of the conduct of a case is not recommended.

For fmancial arbitration, the panel composition from both sides, i.e. trained lawyers and practitioners, seems to me essential.

b) Proceedings

Proceedings in commercial courts are, on one side, usually more open and less formal than proceedings in ~ormal state courts. On the other side, they are nevertheless shaped along rules of a procedural code, something which introduces a certain firm conduct into the going of the case. ⁷

To find the balance is not easy, and it might sometimes tip to one side or the other.

All in all, I think that such a mixture of firm rules and flexibility is desirable, also in financial arbitration.

6 Rule 10308 of the NASD Uniform Code of Arbitration; Rule 634 of the NYSE Rules.

7 Cf., e.g., P. Nobel, Zur Institution der Handelsgerichte, ZSR 102 (1983) Bd. I, S. 149.

• •

16

In arbitration proceedings, I sometimes miss the clear procedural points of reference and the attitude of "anything goes"; this might lead to lengthy and cumbersome discussions (which do not improve in quality when they are conducted under the heading of the right to be heard).

Looking at the statistics of the commercial court of Zurich, it is noteworthy that in 2002, around 60% of the cases were settled, and judgements on the merits comprised only 10% of the cases. Settlement discussions, at an early stage, seem to be something useful.

I sometimes wonder why there is a reluctance in arbitration to foster a settlement with the more or less active help of the court.

I must confess that my memory of hearing witnesses in commercial cases is bleak. I only remember one bank director loosing his nerves in lying and thus turning a case around. In another matter, an investment adviser turned out to be a jobless actress revealing to the court by her appearance why the plaintiff had invested against the will of his wife. (The whole story was a leading Federal Court case under the heading of responsibility for bad organisation of investments in derivatives. The German text speaks about "Miss-organisation", deliberately written without a hyphen).

The possibilities of settling very much depend, in my opinion, not only on the intentions and the role of the court, but also on the persons present. The commercial court of Zurich there[ore requires the presence of responsible persons from the litigating firms. They not only hear legal reasoning, but also take business·

considerations into account. The managers of a firm might be impressed by the unfiltered hearing of the considerations of the court and see the implications and risks of the continuation of the proceedings. The worst is the mere presence of persons, not seldom in-house lawyers, whose destiny is linked, one way or the other, to the origin or the outcome of the case.

All such experiences must be considered when talking about arbitration, and especially about arbitration in the field of finance, where knowledgeable handling of a dispute and the speed of ending it are, in my view, essential.

>rocedural points of

~ad to lengthy and

1 they are conducted

eh, it is noteworthy nents on the merits early stage, seem to

·itration to foster a

:omrnercial cases is in lying and thus

· turned out to be a y the plaintiff had 1ding Federal Court of investments in deliberately written

pinion, not only on rsons present. The responsible persons t also take business

~ impressed by the 1e implications and : mere presence of 1e way or the other,

•out arbitration, and .igeable handling of

r '

2.

A much-discussed topic has always been the pros and cons of institutional versus ad hoc arbitration.

If we take the requirement of a selection of professionals as ( arbitral) judges seriously, there are clear advantages to the so-called institutional arbitration: the designation of the arbiters and also the development and the outcome of the proceedings are somewhat controlled.

Finance is, to a large extent, a highly specialised field requiring professional knowledge and experience. There could be a model case for the development of institutional arbitration out of a necessity; however, as I see it, a strong Finance Arbitration Court does not yet exist. Also, the institution of "EuroArbitrage", which we will hear a:bout, is a necessary recent set up worthy of development and increased attention. ⁸

LAW AND ECONOMICS

Arbitration has also been the object of studies in the field of law and economics. The findings are most interesting: A key difference between the resolution of disputes in arbitration and in a court, however, is in the nature of the fact-finding.

The process of selecting the arbitrator(s) also seems, still today, to underscore the ultimately co-operative nature of arbitration systems. It is seen as an advantage that parties have a considerable control over the design of a system that will be used to resolve their disputes.

Typically, an arbitrator is a professional who is selected, at least in part, by mutual agreement of the parties. An arbitrator's popularity seems to be mainly determined by the amount of the arbitrator's past experience (Bloom and Cavenas). Despite the experience, the arbitration entails an unpredictable component. An attempt has been made with statistics to demonstrate the "arbitrator exchangeability hypothesis": "It is this exchangeability that also leads to the continued acceptability of arbitration systems." With the same set of facts, arbitrators come, statistically, to the same conclusions. Arbitration may therefore be seen as merely a "forecast error" and thus statistically exchangeable. Arbitration decisions might be said to follow a stochastic nature. In the arbitrator selection process, parties try to gather as

8 EuroArbitration/EuroArbitrage, 17, square Edouard VII, F-75009 Paris, www.euroarb.org.

17

• •

18

much information as possible to rule out arbitrators that might be unfavourable to their position; at the same time, they seek to secure a slight probabilistic edge in their favour. On the other hand, it is argued that banks place a higher reliability on the outcome of a case in a state court than in arbitration; it is also said that this is one of the reasons for the limited amount of arbitration in Finance.⁹

Of importance is also the idea that it is rarely worth making contracts so specific as to cover every contingency. Arbitration is then not only a conflict resolution system, but a threat, creating a "contract zone" or a range of pre-arbitration settlement which is preferred by the parties to the risky alternative of actually proceeding to arbitration .

Juries also provide unexpected results, but jurors are usually chosen because they know nothing about a specific field, whereas arbitrators are expected to be experienced.¹⁰

In my view, such experience is also the main basis of successful arbitration in the field of banking and finance, perhaps to a higher degree than in other fields.

3.

WHAT IS ARBITRATION IN BANKING AND FINANCE?

Let us now take a closer look at the field: Arbitration is the method of conflict resolution, which we focus on. Arbitration proceedings are different from pure mediation, which, however, is also practised within arbitration. Arbitration is a juridical proceeding in the true sense, which I would hesitate to describe as an "Alternative Conflict Resolution"

mechanism. It should rather be viewed as a manner of judicial conflict resolution bearing certain particularities that have developed through history. Arbitration in financial matters is not the place for conflict resolution "ex aequo et bono". If we look at literature delineating characteristics of arbitration that foster its use in financial matters, we might fmd the following: speed and confidentiality, expert handling of complex matters, understanding of an international context, avoidance of cumbersome jury trial, little or no interference of state courts and broad enforceability under the New York Convention.

But frankly speaking, the overall importance of arbitration in fmancial matters is still minor in view of the enormous importance of the fmance sector. We will have to ask why this is, even though we will hopefully see growth factors. We must, however, bear in

9 See M. C. Boeglin, The Use of Arbitration Clauses in the Field of Banking and Finance - Current Status and Preliminary Conclusion, in: Journal oflntemational Arbitration, Vol. 15, No. 3, 1998, p. 24.

1

°

Cf. New Palgrave Dictionary of Economics and the Law.

'avourable to their in their favour. On

~ome of a case in a ons for the limited

racts so specific as 1tion system, but a which is preferred

Losen because they

0 10

e expenenced.

tl arbitration in the ds.

method of conflict lm pure mediation, dical proceeding in onflict Resolution"

· resolution bearing financial matters is terature delineating we might find the s, understanding of

no interference of

financial matters is

lo.f e will have to ask

;t, however, bear in

'nance- Current Status , 1998, p. 24.

mind that the absence of arbitration is not just a mystery. Banks appreciate clarity about payment obligations I "yes or no" and "no fuss". The ascertainment and enforcement of money claims is often linked to bankruptcy law, which is public law and hostile to arbitration.

Let us now look first at what "banking and finance," as activities delivering cases, are:

What a bank is seems to be sufficiently clear, even though our Banking Act does not say more than that a bank is a bank. ¹¹ However, the requirement of a licence for the professional deposit taking from the public is decisive. A bank is therefore legally, and primarily, a deposit taking as well as a credit granting institution and/or, secondly (depending on the system), a business organisation trading in the capital markets. The latter signifies investment banking. European "universal banking" traditionally combines both business lines, but regulation will always have to differentiate.

With regard to banking in the classical sense, once upon a time (1936) our Federal Court said:

"La caracteristique d'une banque, c 'est de faire le commerce de !'argent, c 'est-a-dire de rea/is er professionnellement et sur une vaste echelle, la mobilisation des capitaux, en se faisant bail/er des fonds par les capitalistes et epargnants pour ouvrir a son tour des credits a des tiers et realiser un

· benefice sur la difference entre les interets passifs, dont elle est debitrice, et les interets actifs, dont elle est creanciere. " ¹²

Banking is therefore trading on interest differentials.

The word "finance" comes from the middle Latin and means, if it is not taken as an equivalent to "money" (pecunia), something "coming to term," "ending" and, fmally, a

"payment due" - especially a fme. Therefore, the field of finance delineates the relationships connected to money flows.

11 Art. I of the Swiss Banking Act.

12 BGE 62 I 275.

20

We can only fmd a satisfactory focus for arbitration about "finance" if we look at the situations where there are money obligations on both sides of a legal relationship, and not just a payment to be made from one side. Financial contracts are, in the view adopted here, contracts where money flows are exchanged, in whatever sophisticated form this might take place. Let me therefore propose to circumscribe the field of finance as the field where money for money contracts are concluded or where financial intermediaries or professionals are dealing or transacting.

Lending is a field fulfilling these criteria. That these situations lead to quarrels was already evoked by Shakespeare in his play "Hamlet", where we can also view some general wisdom:

''Neither a borrower nor a lender be, For loan oft loses both itself and friend

And borrowing dul/eth the edge of husbandry." ¹³

Lending contracts, however, only rarely seem to contain arbitration clauses. There is one main exception and this is the multilateral fmancial institutions like the World Bank and the Regional Development Banks. Their Standard Terms and Conditions do contain an arbitration clause such as the UNCITRAL arbitration rules, but there seem to be no cases. ¹⁴

4. ABOUT ARBITRABILITY

If we look into the fmance realm, we see many dispute possibilities, and the question arises as to whether they are all open to arbitration.

The Swiss law (art. I 77 al. I of the Federal Act on International Private Law) clearly states that every pecuniary claim may be the subject of arbitration.

Such a circumscription, analogous to the one used in Germany¹⁵, might be easier to handle than the French approach, which also contains a reference to "ordre public" for -

13 Hamlet, I, iii, 75.

14 See M. C. Boeglin, supra note 9, p. 26; also B. Aron, Correspondence to the Co-Editor in Chief, American Journal oflnternational Law, Vol. 91, No. 3, 1997, p. 490.

15 Cf. § 1030 ZPO.

,nee" if we look at JJ relationship, and

1 the view adopted isticated form this finance as the field intermediaries or

!ad to quarrels was

• view some general

•

m clauses. There is

;::e the World Bank tions do contain an n to be no cases.¹⁴

!S, and the question

'rivate Law) clearly

, might be easier to

"ordre public" for

itor in Chief, American

limiting the field of arbitration. ¹⁶ Most of these disputes about arbitrability, however, nowadays seem to be se~led in a sufficiently satisfactory manner. This is particularly the case in the US, where the recognition of arbitrability in the field connected to the (SEC-) regulated securities industry had to go through a whole series of cases.¹⁷

· There also seems to be a consensus that arbitration cannot enter the field of the competency of regulatory authorities. This is easy to understand, but a few questions still remain to be solved.

In modern regulatory legislation, the so-called "rules of conduct" play a major role.

Such rules may be, according to prevailing theory, of a double nature, involving regulatory as well as civil law; their breach might lead to recoverable damages. In this situation, a judge, and also arbitrators, will refer to the regulatory content of the rules and their purpose but will stay out of regulation. This is something that might thus lead to parallel proceedings.

The relationship between regulatory law and civil law is one of the issues to dispute about: mainly, questions arise as to whether the civil judge can deviate from the vision of the regulatory authorities, whether proceedings could or should be stayed until regulatory decisions are taken etc. ¹⁸

Self-regulation is an important part of stock exchanges. It also comprises eventual proceedings against members of a disciplinary nature. Here, arbitration may even enter into the field of regulation, and it is not easy to determine the nature of such arbitration. The practical commentaries are usually content to say that all this is admissible because the rules are made in agreement with and with the approval of the supervisory authorities.¹⁹

16 P. Leboulanger, L 'arbitrage de litiges relatift aux operations sur les marches financiers, in Leben/Loquin/Salem (ed.), Souverainete etatique et marches intemationaux a la fin du 20eme siecle, Melanges en l'honneur de Philippe Kahn, Bourgogne 2000, p. 554.

17 P. Marini, Arbitrage, mediation et marches financiers, in: Revue de jurisprudence commerciale [2000], p.

155 et seq.; see also decision of the US Supreme Court of May 15, 1989, Rodriguez de Quijas et al. vs Shearson/American Express Inc., etc. (109 S. CT. 917 (1989), published in ASA Bulletin 1989, p. 404 et seq., stating that a claim based on the Securities Act of 1933 may be subject to arbitration and thereby overruling a former decision of the US Supreme Court of 1953 (Wilko v. Swann).

18 Cf. P. Marini, supra note 17, p. 157 and 160 et seq.; P. Marini/F. Fages, Le centre europeen de reglement des differendsfinanciers, EuroArbitrage, Euredia 2001-2002, p. 179.

19 M. Lanz, in: Vogt!Watter (ed.), Kommentar zum schweizerischen Kapitalmarktrecht, Base! 1999, Art. 9 BEHG, N 10; R. Briner, in Honsell/Vogt/Schnyder (ed.), Kommentar zum schweizerischen Privatrecht, lnternationales Privatrecht, BaseVFrankfurt a.M. 1996, Art. 177 IPRG, N 14; T. Rtiede/R. Hadenfeldt, Schweizerisches Schiedsgerichtsrecht, seconded., Zurich 1993, p. 48 et seq.

• •

22

Disputes of a purely debt enforcement or bankmptcy nature are never arbitrable as they can also affect third parties.²⁰

Another chapter in this field of organised financial markets with financial intermediaries as participants (mainly of exchanges) involves the various types of sales contracts which are concluded, collateralised and executed (settled, which means delivered against payment). Here, there is a defmite need not only for clear mles in case of default but also for quick and market adaptable conflict resolution.²¹ Traditionally, the exchanges have referred to arbitration for disputes between the institution and its members or between members. The conflict mechanisms are more or less built into the Exchange organisation .

5. PRACTICAL EXAMPLES

5.1 NYSE

In 1817, we note the first discussion about arbitration in the NYSE, where arbitration is often viewed as a more practical alternative to lengthy and expensive litigation.²² The NYSE now provides neutral arbitration panels to hear and decide disputes in more than 35 cities throughout the United States (in some cases, a hearing may be held outside the U.S.). The introduction to the essential characteristics of this system read as follows^23:

• "Arbitration enables a dispute to be resolved quickly and fairly by impartial people, known as arbitrators, who are knowledgeable imd trained in the art of resolving controversy.

• A securities customer has the right to require a stockbroker that works for a NYSE member firm to submit to arbitration.

• When a customer chooses arbitration to resolve the dispute, he waives the right to pursue the matter in court.

•

Arbitration is fmal and binding .

20 See, e.g., T. Riiede/R. Hadenfeldt, supra note 19, p. 51; 0. Vogel/K.. Spiihler, Grundriss des Zivilprozessrechts, 7lh ed., Bern 2001, 14. Kapitel, N 32.

21 Cf. M. C. Boeglin, supra note 9, p. 21; F. Fages/J. Rossi, Arbitrage en matiere jinanciere: Nouvelles perspectives, Gazette du Palais, Les cahiers de l'arbitrage, N° 2002/2- lre partie, p. 32.

22 F. Fages/J. Rossi, supra note 21, p. 29.

23 See "About the NYSE," on <http://www.nyse.com/about/about.html>.

never arbitrable as ·

ets with financial ious types of sales eh means delivered

1 case of default but the exchanges have

;:mbers or between : 11ge organisation.

the NYSE, where thy and expensive and decide disputes earing may be held this system read as

1 fairly by impartial trained in the art of

ker that works for a

pute, he waives the

• piihler, Grundriss des

·e financiere: Nouvelles ). 32.

' r _{[ •}

•

•

Pre-arbitration discovery is generally more limited than court discovery .

The arbitrators' award is not required to include factual fmdings or legal reasoning.

The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry."

In June 1987, the United States Supreme Court upheld the arbitration process as a

"fair, equitable and efficient method for settling disputes in the securities industry".²⁴

Injunctions have also been granted by English state courts in cases where respondents registered proceedings in a foreign state court, although they were obliged by contract to submit the dispute to an arbitration panel. In such cases, English courts have protected the arbitration clauses in question and issued injunctions restraining the party from proceeding in a foreign court in breach of the arbitration agreement.²⁵

5.2 NASD

90% of all arbitration cases received by self-regulatory organisations in the United States in 1997 were filed at the National Association of Securities Dealers (NASD) and 8%

at the NYSE. The NASD operates the largest dispute resolution forum in the securities industry. Broker-dealers typically require prospective customers to sign an agreement with a pre-dispute arbitration clause. Under the agreement, the parties agree to resolve future disputes through arbitration.²⁶ The SEC has statutory authority to ensure that the self- regulatory arbitration procedures are adequate and consistent with the Securities Exchange Act of 1934. The Uniform Code of Arbitration, which was adopted by the self-regulatory organisations in 1979-80, established a uniform system of procedures for all self-regulatory organisation arbitration. ²⁷

24 Shearson/American Express INC. v. Mcmahon, 482 U.S. 220 (1987); see also the subsequent Court ruling, Rodriguez de Quijas et al. vs Shearson/American Express Inc., supra note 17.

25 Queen's Bench Division, Commercial Ct., 12 March 1999, Bankers Trust Co. and another v. PT Jakarta International Hotels and Development, [1999] all ER (D) 314, published in Lloyd's Law Reports [1999]

Vol. 1,p. 910-916 .

26 See Rule 3080 of the NASD Conduct Rules (NASD Manual p. 569) in connection with Article VII Sec. I (a) (iv) of the NASD By-Laws.

27 United States Securities and Exchange Commission, Office of Inspector General, Oversight of Self- Regulatory Organization Arbitration, p. 1 et seq.

23

24

5.3 London

The Rules of the Stock Exchange do not contain an arbitration clause. The Non- Investment Products Code, applicable to trading in the wholesale markets in Non- Investment Products (sterling, foreign exchange and bullion wholesale market) between professionals, provides for arbitration in the foreign exchange and the bullion market.²⁸ The rules of the LIFFE (London International Financial Futures and Options Exchange) provide detailed Arbitration Rules in its Section 6: Disputes arising from or in relation to an exchange contract are subject to arbitration independent of whether or not the parties are members of the LIFFE. In connection with this, it is noteworthy that the parties to such an arbitration proceeding shall, in principle, not be represented by counsel or solicitor²⁹, but as a consequence of the latter, by any other person. This reminds me of a decision of the Superior Court of the Canton of Zurich, where it stated the following:

"In the plaintiff's claim, this. was correctly stated at the beginning, however only until she procured a lawyer who changed her complaint. "³⁰

The Financial Services Authority, being in charge of the supervision of the fmancial activities at the London market place, provides for an arbitration secretariat. Its work is focused on the Consumer Arbitration Scheme, which is only available to private customers and limits awards to£ 50,000.³¹

An interesting example of an arbitration body in financial matters used to be the

"City Disputes Panel" in London. Belonging to the FSA, it settled disputes in the Wholesale . Financial Services Industry.³² As part of the regulatory reform under the Financial Services and Markets Act, it was taken over in July 2002 by the Financial Ombudsman Service, a massive organisation that is responsible for handling complaints both by consumers and by firms.³³

28 The Non-Investment Products Code, p. 4 and 24 et seq.

29 Section 6.4.5 (e) of the LIFFE-Ru!es.

30 ZR 90, Nr. 80.

31 The Securities and Futures Authority, Board Notice 407: The SFA Consumer Arbitration Scheme Revised Rules (18 March 1997), on: <http://www.fsa.gov.uk/pubs/additionaJ/407.pdt>.

32 See M. C. Boeglin, supra note 9, p. 26.

33 The Financial Ombudsman Service employs 450 staff and has an annual budged of£ 27 million. For more information see chapter 3 of the FSA handbook ,Complaint handling procedures of the Financial Ombudsman Service" on: <http://www.fsa.gov.uklhandbook/BL4DISPpp/DISP/chapter_3.pdt> and press release No. 6/2002 on: <http://www.fsa.gov.uk/pubs/press/2002/006.html>.

clause. The Non- markets in Non- market) between lion market.²⁸ The :<:xchange) provide in relation to an not the parties are parties to such an r solicitor²⁹, but as a deci~ion of the

ing, however only

;on ofthe fmancial

~tariat. Its work is , private customers

ers used to be the

~s in the Wholesale Financial Services udsman Service, a consumers and by

ration Scheme Revised

£ 27 million. For more ures of the Financial 1pter_3.pdf> and press

5.4 Euronext

Euronext was crt?ated by the merger of the exchanges in Paris, Amsterdam and Brussels in September 2000. In Chapter 1.8 of its Harmonised Market Rules, it provides for settlement through arbitration with regard to ·disputes arising between Euronext and its members.

5.5 Switzerland

a) Stock Exchange

The Swiss Federal Act on Stock Exchanges and Trading in Securities (SESTA) provides that in matters of admission, a party may- in the end- always approach a judge for "civil matters" (art. 9 al. 3). Such 'judge" may well be an Arbitration Panel, but a valid arbitration agreement is needed.³⁴

Until the "demutualization", which is the transformation from an association into a stock corporation, in 2002 (which was done here in Geneva), the by-laws of SWX Swiss Exchange also contained an arbitration clause for litigation with and amongst members (art. 23). ³⁵ This has been abolished.

According to art. 9 al. 1 of the SESTA in connection with art. 1 of the SWX Swiss Exchange Regulations for the Appeals Board, an independent appellate body is competent to decide appeals from decisions concerning admission, suspension and disqualification of participants, as well as decisions on admission, suspension and revocation of registration of traders within the meaning of the General Conditions;

and on appeals from decisions and preliminary decisions on listing, as well as on suspension of trading and cancellation of listing (de-listing) within the meaning of the Listing Rules.

Today, art. 6.3 of the General Conditions of the SWX Swiss Exchange provides for a comprehensive arbitration clause. The arbitration court is competent for matters concerning participants or issuers, but not in client matters:

34 M. Lanz, supra note 19, N I 0 with further citations; Kting/Huber/Kuster, Kommentar zum Borsengesetz II, ZUrich 1998, Art. 9 N 18 et seq.

35 Article 19 para. 3 of the By-Laws of the SWX Swiss Exchange provides for the competence of the Appeals Board in cases of appeals against the non-admission of a trader or an issuer and/or their debarment.

26

,D;sputes between participants and SWX and disputes among participants arising from participation, especially those in connection with contractual penalties imposed, shall be settled exclusively and without right of appeal by a court of arbitration with its seat in Zurich. Where appropriate, the internal remedies available at SWX (Disciplinary Commission, Appeals Board) shall be exhausted before redress can be sought at the court of arbitration.

The court of arbitration shall consist of a chairman and two arbitrators, with both parties nominating one arbitrator each on a case-by-case basis. The chairman and his deputy shall be appointed by the president of the Swiss Federal Supreme Court for a period of four years.

The chairman may conduct oral mediation proceedings. The cantonal concordat on arbitration shall be applicable in other respects. "

Pursuant to art. 6.9 of the SWX Swiss Exchange Regulations for the Appeals Board, a dismissed decision may be brought before the arbitration panel pursuant to the above-cited provision of the SWX Swiss Exchange General Conditions. The SWX is also subject to arbitration in cases where the applicant is not a participant of the SWX (e.g., a company listed at the SWX).³⁶

The above mentioned arbitration clause is, therefore, also applicable when the listing of an issuer or a security is at stake (art. 83 al. 3 of the Listing Rules of . the SWX Swiss Exchange) or (according to the words as an appeal) in cases of disciplinary sanctions against an issuer (art. 83a al. I of the Listing Rules of the SWX Swiss Exrhange).

In 2000 and 2001, no cases were brought before the SWX Board of Arbitration.

The regulation of arbitration at Eurex Zurich AG is congruent with that of the SWX Swiss Exchange.³⁷ However, Eurex Clearing, situated in Germany, does not provide for arbitration.

Contrary to the wording of the above quoted arbitration clause, the court of arbitration does not have the right to settle disputes finally ("without any right to

36 Art. 6.9 para. 2 of the SWX Swiss Exchange Regulations for the Appeals Board. ·

37 See art. 2.2.4 and 2.3 of the Eurex Exchange Regulations.