Part III Subject-Matter Mediation of Commercial and Investment Disputes, 11 Mediation of Financial Disputes
Ilaria Forestieri, Philipp Paech
Edited By: Catharine Titi, Katia Fach Gómez
- International monetary law — Mediation
In recent years, a fragmented global picture of legislation supporting mediation in finance has emerged, and a number of alternative dispute resolution (ADR) service providers have started to offer mediation services specifically for the financial market. Although academics and practitioners express great appreciation for alternative resolution procedures in finance, mediation is said to lag behind its potential. This chapter shows that a number of characteristics of financial transactions suggest that mediation in finance could increase efficiency to an extent that would not be possible otherwise. However, there are clear limitations to mediation in finance: the main characteristic of financial transactions consists in the preparedness to take and manage counterparty risks. The financial industry has developed a framework to manage counterparty risk, in accordance with existing laws in nearly all developed financial markets. However, the main idea underlying mediation, that is to form a new agreement adjusting contractual obligations, is largely irreconcilable with risk management as practiced at the moment. Hence, only those disputes that do not touch upon issues associated with transfers of value can be the object of mediation, whereas all transactions that are ‘financial’ in nature must remain subjected to insolvency or bankruptcy procedures.