» Some Rulings Have Either Been Tough to Enforce in Other Jurisdictions

Some Rulings Have Either Been Tough to Enforce in Other Jurisdictions

Uncategorized 21 Jan 2012

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Finance tribunal opens to disputes

Disputes as a result of complex transactions can be put for possible resolution with the world’s first international specialist finance tribunal from Monday.

The Hague-based tribunal, funded with the Dutch government, aims to develop internationally recognised legal precedent in a area which can be opaque to even the most senior national judges who’ve previously heard disputes over credit derivatives, collateralised debt obligations or another exotic products that gained notoriety throughout the economic crisis.

The tribunal provides a three-member panel to choose disputes, with parties deciding their panel coming from a list of 80 specialists in either litigation or finance from around the world.

“National courts and ad hoc arbitration have been not able to create a settled and authoritative body of law,” said Jeffrey Golden, a professor in the London School of Economics along with the chairman from the management board overseeing the tribunal who made the case for the court inside the Financial Times in ‘09. “Decisions are unpredictable, too decentralised, often taken too slowly and not always enforceable in other jurisdictions.”

The financial disaster, exacerbated through the collapse of Lehman Brothers in September 2008, hastened demands a specialist tribunal to determine thorny matters of finance. While judges relaxing in courts inside london and Manhattan have traditionally presided over financial disputes – because contracts usually are written under Ny or English law – some rulings have either been tough to enforce in other jurisdictions or one court has ruled towards another.

A recent example was the Belmont decision due to Lehman’s bankruptcy. A London court ruled in July that noteholders of your particular CDO during the time of Lehman’s collapse were entitled to have priority on collateral being held by way of a third-party trustee due to a so-called flip clause. An american court, meanwhile, had decided that flip clauses were unenforceable.

While judges in national courts normally have to make a decision complicated disputes in areas in which they’re not expert, Mr Golden said the hazards were especially just the thing for finance.

“There is a bit more than $600tn notional outstanding, at the mercy of the terms of one standard-form contract,” Mr Golden said, referring to value of over-the-counter derivatives contracts not yet been settled. Those contracts are generally governed with the International Swaps and Derivatives Association (ISDA) master agreement, which Mr Golden helped draft.

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