FinTech, an abbreviation for Financial Technology, is a term used to describe modern technology which aims to improve and automate the delivery and usage of financial services through digital platforms. FinTech has emerged in the recent times as a reliable mode of obtaining financial services across the world.
With the rapid evolution of FinTech services, circumstances are likely to arise which would lead to disputes involving financial organisations such as banks, credit card issuers, and insurance companies, as well as technological service providers such as digital platform and software providers, based in different jurisdictions.
Exchanges between established and new FinTech enterprises may unavoidably lead to more economic disputes. Prior to market affiliation, it is critical to identify potential sources of future commercial disputes. The following sources may cause a lot of disagreements:
- contract turnover high
- tracing a product’s creator
- the use of blockchain technology and smart contracts; and
- the chasm between business behaviour and regulatory infrastructure
As international investments in the FinTech industry grow, it is essential for the agreements between such parties to stipulate the domestic and international regulatory and dispute resolution frameworks. The current market frameworks may not be adequate to sustain the expansion of the FinTech business along with dispute resolution.
The blog provides an overview of the various international rules of arbitration for dispute resolution in the FinTech industry; and analyzes the most favourable set of rules for resolution of FinTech disputes.
INTERNATIONAL ARBITRATION FOR THE RESOLUTION OF FINTECH DISPUTES
Due to globalisation and the rising participation of parties from emerging economies in the FinTech industry, International Arbitration is the preferred method for settling FinTech disputes. Parties to the financial services industry took longer than most to warm up to Arbitration as a means of settling disputes, but the use of International Arbitration in this industry is on the rise.
Arbitration is popular in certain areas of the financial services industry, such as insurance and reinsurance disputes, as well as disputes between members of certain stock exchanges.
FinTech is revolutionising the financial services business and introducing new product ideas to consumers. Arbitration, with its specific qualities, provides a method for effectively resolving FinTech disputes.
Furthermore, given the nature of FinTech services, avoiding costly and time-consuming public litigation is a top priority for disputing parties. Many FinTech investors are adopting a strategy of employing Alternative Dispute Resolution (ADR) procedures, including Arbitration, to resolve disputes and protect the value of their business relationships and financial investments.
PREFERABLE RULES OF INTERNATIONAL ARBITRATION IN THE FINTECH INDUSTRY
1. THE SINGAPORE INTERNATIONAL ARBITRATION CENTRE RULES, 2016
The Singapore International Arbitration Centre (SIAC) Rules, 2016 (“SIAC Rules, 2016”) is framed in a manner keeping in mind the practical challenges that users of its rules face. The SIAC Rules, 2016 have adopted efficient changes, such as the Early Dismissal of Claims and Defences mechanism, indicating that SIAC has introduced such to improve the certainty, efficiency, and cost-effectiveness of such Arbitration proceedings.
1. Claims and Defences may be Dismissed Early by the Arbitral Tribunal
In civil litigation procedures before the Singapore Courts, a plaintiff may seek summary judgement against a defendant who lacks a triable defence. A defendant may also seek to have a plaintiff’s claim dismissed if, among other things, the claim fails to establish a plausible cause of action.
Similarly, the Arbitral Tribunal may grant an application for early dismissal under the SIAC Rules, 2016. In such a case, the Tribunal shall make a decision or pass an Award within 60 days from the day the application was filed.
2. Joinder of Parties and Consolidation of Disputes
Under the SIAC Rules, 2016, a claimant can consolidate multiple Arbitration proceedings in respect of disputes arising out of or in connection with multiple contracts under Rules 6 and 8 of the SIAC Rules, 2016.
This alternative was not accessible in prior editions of the SIAC Rules, but it was specifically provided for in the SIAC Rules, 2016, in order to save time, money, and the possibility of conflicting awards in disputes arising out of or in connection with several contracts.
Rule 7 of the SIAC Rules, 2016 further allows a party to the Arbitration to seek for a joinder of parties and a non-party to apply to intervene in the Arbitration, both before and after the Arbitral Tribunal is formed.
3. Emergency Arbitration
The Emergency Arbitration procedure under the SIAC Rules, 2016 addresses a situation where an emergency interim relief is sought by a party to the Arbitration, prior to the constitution of the Arbitral Tribunal. has been refined to reflect SIAC’s understanding of users’ business demands for clarity, expediency, and cost-efficiency. An Emergency Arbitrator is to be appointed within one calendar day, as per Rule 30 read with Schedule 1 of the SIAC Rules 2016.
2. INTERNATIONAL CHAMBER OF COMMERCE RULES OF ARBITRATION
The International Chamber of Commerce (ICC) Rules of Arbitration (“ICC Rules”) has laid down a set of principles that address the uncertainty surrounding digital trade transactions, such as how parties can present electronic records to evidence a sale or payment obligation for goods, how electronic data relating to digital trade transactions must match, etc.
The ICC released its Uniform Rules for Digital Trading Transactions (URDTT), which is intended to serve as an overarching foundation for a completely digital trade environment in the future.
From a corporate standpoint, the URDTT is about end-to-end digitization. Rather than being bank-centric, the URDTT is developed for everyone participating in global commerce, including a wide range of financial service providers. Thus, the URDTT becomes squarely applicable on FinTech industry related disputes.
The ICC Banking Commission has already approved and issued electronic Rules to advance the digitalization of trade finance practices, releasing electronic supplements to the existing Uniform Rules for Collections (URC 522) and Uniform Customs and Practice for Documentary Credits (UCP 600) Rules.
3. WORLD INTELLECTUAL PROPERTY ORGANIZATION ALTERNATE DISPUTE RESOLUTION RULES, 2020
The World Intellectual Property Organization (WIPO) Arbitration and Mediation Centre provides for ADR of FinTech disputes at a global level. The ADR procedures are established after consultation with FinTech stakeholders to provide time and cost efficient dispute resolution.
WIPO ADR is suited for disputes arising in FinTech sectors as it enables the parties to choose a Mediator, Arbitrator or an expert with legal and technical expertise of FinTech and its workings. WIPO ADR acts as a neutral forum for parties from multiple jurisdictions to resolve their disputes through a single procedure.
1. The use of WIPO ADR procedures is voluntary. The WIPO Centre provides recommended contract terms and submission agreements for use by parties when forming business contracts in order to facilitate party agreement and eliminate any ambiguity, which could subsequently complicate or prolong the dispute resolution process. It also gives users access to an online Clause Generator, which suggests additional contractual provisions based on WIPO case laws.
2. The tailored adaption of the WIPO ADR framework can benefit certain components of FinTech services involving Intellectual Property (IP) transactions, such as rules, neutrals, fees, and clauses. As a result, the WIPO Centre has created a variety of specialised ADR schemes in the fields of information and communication technology, research and development, processes before national IP authorities, financial IP usage, etc.
3. Model submission agreements are also available from the WIPO Centre, which can be customised by parties to handle standards-related disputes involving telecom patents in several jurisdictions. The WIPO model submission agreements, which were developed in cooperation with patent law, standards, and Arbitration specialists from a variety of jurisdictions, are intended to allow for the cost- and time-effective evaluation of what is fair, reasonable, and non-discriminatory.
ANALYSIS: WIPO ADR RULES, 2020 AS THE PREFERRED RULES FOR ARBITRATION OF FINTECH DISPUTES
The WIPO ADR procedures are well suited for FinTech disputes at an international level, as their Rules cater to disputes arising from technological and IP-related aspects of commerce, which includes FinTech services.
The following reasons indicate that WIPO ADR may be successfully utilised for resolution of FinTech disputes:
1. Panel of technical and specialized experts on FinTech at WIPO: The quality of the Mediator, Arbitrator, or Expert is often critical to the success of the proceedings. The WIPO Centre maintains a roster of approximately 2,000 neutrals with knowledge in IP and technology, including FinTech, from across the world. Parties can choose neutrals from the WIPO list in disputes governed by WIPO Rules, but they can also choose Mediators, Arbitrators, or Experts from outside the WIPO list.
2. Guidance and Training on Procedures: The WIPO Centre assists interested parties and organisations in the FinTech industry with procedural guidance for recommended contract terms and submission agreements upon request. This includes writing and adapting ADR clauses in linked contracts along with assisting in the facilitation of ADR between opposing parties.
3. Flexibility: The WIPO ADR procedure grants the parties a considerable amount of flexibility in conducting ADR, which include pre-structuring of entire proceedings, modifications by arrangement with Mediator or Arbitrator and parties.
4. Consolidated FinTech Dispute Resolution: All disputes pertaining to a specific FinTech transaction or event arising at different jurisdictions can be consolidated into one procedure under the WIPO ADR procedure, enabling cross-border solutions for FinTech disputes.
Technological advancements under FinTech are accelerating, introducing innovation and transforming the way financial services are delivered and accessed in the market. These technologies necessitate ongoing engagement among a variety of stakeholders (e.g., financial institutions, software developers, service providers, and users), which naturally raises the risk of conflict.
Arbitration has a number of characteristics that make it ideal for resolving disputes in the FinTech industry. Various Rules of International Arbitration issued by different ADR Institutes/Centres can be adopted by parties to resolve an international FinTech dispute.
The SIAC Rules, 2016 and the ICC Rules stipulate provisions for the conduct of International Arbitration of FinTech disputes in an efficient and expedited manner. However, the WIPO ADR Rules, 2020 stand out as the preferred Rules for resolution of FinTech disputes due to their specialized focus on FinTech industry and the availability of Arbitrators, Mediators and Experts possessing adequate knowledge of FinTech technology and innovations in the WIPO panel.
– Team AMLEGALS assisted by Ms. Unnati Jain (Intern)
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