Embracing arbitration for Australian financial services disputes

In the world of financial services arbitration is increasingly being embraced as a flexible, efficient, and private way to resolve disputes. In Australia, uptake has been slower but for certain types of financial services disputes, arbitration provides a fast, confidential and efficient alternative which financial institutions need to consider.

A global shift towards arbitration in financial services

Historically, financial institutions have favoured courts for dispute resolution, gravitating to the specialist financial lists of London, New York and, in the domestic context, the Commercial List of the NSW Supreme Court. These preferences have been attributed to a perception that these institutions provide greater legal certainty than arbitration.

However, given the increasing complexity of financial transactions and prevalence of cross-border elements, the past decade has seen a shift, with arbitration becoming an established option for financial disputes.

This shift is reflected in industry surveys: in 2018, the Queen Mary Arbitration survey indicated that 56% of respondents anticipated increased use of arbitration in the banking and finance sector. Caseload data from leading arbitral institutions confirms that this sentiment has translated into an upward trend in financial services arbitration:

• The London Court of International Arbitration (LCIA) reported that financial services accounted for the second most referrals in both 2022 and 2023, and in 2021 even surpassed the usual forerunner, transport and commodities.
  
  
• The International Centre for Dispute Resolution (ICDR) in the United States reported a 65% increase in its financial services caseload in 2022 and a further increase of 5% in 2023.
  
  
• The Hong Kong International Arbitration Centre (HKIAC) reported that financial services arbitration doubled from 6.2% of its total caseload in 2017 to 11.4% in 2023, with an all-time peak of 36.9% in 2022.

Other arbitral institutions, such as the Singapore International Arbitration Centre (SIAC), do not publish statistics that separately account for financial services arbitration but have reported steadily increasing arbitration caseloads overall.

The Australian landscape: untapped potential

By contrast, financial services arbitration remains relatively underutilised in Australia. The Australian arbitration landscape continues to be dominated by disputes in the construction and infrastructure, energy and resources, and maritime sectors. Meanwhile, financial disputes accounted for only 3.5% of the total amount claimed cases administered by the Australian Centre for International Commercial Arbitration (ACICA) in 2022. Generally, Australian arbitration practitioners believe that ‘the full potential of arbitration remains untapped’ in Australia.

Why arbitration is well-suited to financial services disputes

Financial institutions and their legal advisors should consider arbitration when structuring their dispute resolution frameworks. Arbitration offers distinct advantages, particularly in cross-border transactions and complex financial arrangements:

Confidentiality

Unlike courts, where there is a strong presumption in favour of open justice, confidentiality is the default starting point for arbitration in Australia. Confidentiality makes arbitration particularly well suited to:

• disputes involving large, public-facing financial institutions such as banks; and
  
  
• disputes involving proprietary and commercially sensitive financial products, technologies or practices, such as derivatives disputes where market sensitivity is a concern.

Procedural flexibility

Arbitration enables parties to tailor their dispute resolution process by selecting arbitral rules, the seat of arbitration, language, and number of arbitrators. In this way, parties have greater control over how their dispute is adjudicated and the speed and cost of proceedings. This makes arbitration particularly well suited for:

• parties seeking a swift resolution of disputes through expedited appointments of arbitrators, limited document production, shorter hearings, or decisions without hearing; and
  
  
• disputes involving Islamic Finance, which several national court systems have expressed reservations in applying to resolve disputes.

Specialised expertise

Arbitration allows parties to appoint arbitrators with subject-matter expertise and direct experience in complex financial transactions, industry practice and broader economic and policy concerns. This makes arbitration particularly well suited to:

• disputes involving inherently complex products such as derivatives and structured finance, which require financial or actuarial expertise; and
  
  
• asset management disputes involving questions of commercial judgment and discretion.

Final and binding awards with global enforceability

One of arbitration’s most compelling benefits is the enforceability of arbitral awards under the New York Convention, which allows for streamlined cross-border enforcement in 172 states. In this way, parties are able to avoid the legal challenges, delays and jurisdictional risks that can arise when attempting to enforce a foreign court judgment. This makes arbitration particularly well suited for:

• cross-border disputes, such as international financing (and particularly project financing); and
  
  
• transactions involving counterparties in jurisdictions where local legal systems create jurisdictional risk in litigation or court judgment enforcement.

Addressing perceived limitations of arbitration

The 2016 International Chamber of Commerce (ICC) Commission Report, Financial Institutions and International Arbitration, identified that financial institutions perceived there to be a number of limitations for arbitration. In response, arbitral institutions, including ACICA, have reformed their rules to address these concerns. 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’.

Consolidation

A key concern identified in the ICC Report was the potential for financial institutions to face multiple parallel arbitrations in complex transactions involving multiple contracts, such as project finance or syndicated loans.

To streamline proceedings, arbitral institutions have revised their rules to allow for consolidation of related arbitrations. The ACICA Arbitration Rules 2021 allows for the consolidation of two or more arbitrations where:

…the claims in the arbitrations are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions, and ACICA finds the arbitration agreements to be compatible.

Similar provisions exist in the rules of major arbitral institutions, including the SIAC, LCIA, ICC, and HKIAC.

Summary judgment

Financial institutions often seek to enforce debt claims by means of summary judgment in circumstances where there is no factual dispute over payment. Arbitration has been evolving to increase access to summary judgment. Now parties can authorise arbitral tribunals to decide claims or defences on a summary basis in their arbitration clauses, and arbitral rules are increasingly incorporating explicit provisions allowing for such procedures in financial disputes.

Interim measures

The ICC Report also highlighted the perceived difficulty in accessing urgent interim relief, such as injunctions or freezing orders to prevent the dissipation of funds, through arbitration. To address this, many arbitral institutions enable the appointment of an emergency arbitrator to decide applications for interim relief before a tribunal is constituted.

The ACICA Arbitration Rules 2021 provide, inter alia, that:

(i) ACICA shall use its best endeavours to appoint an emergency arbitrator within 1 business day of an application for emergency interim measures;

(ii) the decision on an application for emergency interim measures shall be made within 5 business days of the application being referred to the emergency arbitrator;

(iii) the emergency arbitrator shall have the power to order any interim measure they deem necessary; and

(iv) the emergency arbitrator’s decision shall be binding on the parties.

Similar emergency relief provisions exist under the rules of other leading arbitral institutions.

Most recent revisions of some of the leading arbitration rules, such as the SIAC Arbitration Rules 2025, go a step further and provide for the ability of parties to apply ex parte for an Emergency Arbitrator to grant a ‘preliminary order’. This preserves the status quo until such time as the emergency relief application is determined on an inter partes basis. It brings the emergency relief procedures in arbitration even closer to what is typically available before local courts, reducing the risk of dissipation of assets or other action that interim relief is intended to safeguard against.

Drafting arbitration clauses with care

A well-drafted arbitration clause ensures that arbitration delivers on its key benefits: enforceability, neutrality, and efficiency. On the other hand, a poorly drafted clause can lead to delays, additional costs, and, in some cases, unwanted litigation. In addition to the usual cautions parties should take, in the context of financial services disputes, parties choosing arbitration will wish carefully to consider the below.

Whether the clause is enforceable

Arbitration will not be appropriate in every financial services context. For instance, in the retail banking sector, arbitration may be incompatible with obligations under the Australian Consumer Law (ACL), the Financial Accountability Regime (FAR) and the unfair contracts terms (UCT) regime. Legal advice should be sought on the enforceability of arbitration agreements in standard form contracts in particular, and in relation to disputes involving consumer protections.

Split or hybrid clauses

Split or hybrid clauses allow for different dispute resolution methods depending on the type of dispute, or give one party the ability to elect between arbitration and litigation. Such clauses can offer strategic advantages to financial institutions in some contexts. However, they should be drafted carefully to ensure enforceability across relevant jurisdictions.

The seat

The seat of arbitration determines the procedural law that applies. Parties have the ability to select a jurisdiction that supports arbitration and aligns with their needs. Some jurisdictions—Australia among them—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. In Australia, arbitration is private but not inherently confidential at common law. However, statutory provisions now provide for confidentiality in both domestic and international arbitrations seated in Australia, unless parties expressly opt out. That said, it is important to bear in mind that court proceedings related to arbitration, such as enforcement or challenges, are generally public, and statutory exceptions allow disclosure in certain circumstances.

For more comprehensive guidance on how to draft arbitration clauses, see our Guide to drafting arbitration clauses.

The future of Australian financial services arbitration

Australia is home to a sophisticated financial services sector with global reach and a well-developed arbitration framework. Conditions are ripe to capitalise on this potential, with financial institutions well-advised to consider choosing arbitration seated in Australia for their disputes.

This is particularly so for Australian financial institutions with international operations, including those with a presence in the Asia-Pacific. Instability in other traditional arbitral hubs in the region has increased demand for Australia as a stable, well-regarded arbitral seat, while reforms by arbitral institutions – including ACICA – addressing traditional limitations, mean that arbitration is now more suitable for financial disputes than ever before. A well-drafted arbitration clause allows a financial institution to choose to have disputes decided under familiar and predictable procedures, with an arbitral award enforceable in any of the 172 states which are currently party to the New York Convention.

The question is no longer whether arbitration is suited to financial services disputes, but how financial institutions can better harness its potential in Australia.