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Article contents
Arbitration Clauses as Alternative Mechanisms for the Settlement of Conflicts Involving International Syndicate Loan Agreements and Restructuring Agreements
Published online by Cambridge University Press: 21 May 2009
Extract
The aim of all debt restructuring programmes covered by the term menu approaches was the return of deeply indebted developing countries to the financial markets by means of a debt reduction policy substantially in conformity with market principles. At the same time, the provision of the new credits needed in order to finance the structural adjustment was to be ensured by a differentiation in the classes of creditors, as can be seen in the trend towards securitization of claims. However, the Mexico Agreement concluded at the beginning of February 1990 revealed the lack of interest of most commercial banks in supplying new credits. This was only to be expected, in view of the heavy losses of the commercial banks on credits to ailing Third World countries. Evidently, the creditor banks will only be willing to become involved in fresh money commitments if they are granted preferential payment from the foreign exchange earnings secured by the transactions or if they are offered a privileged position in the innovative arrangement of corporate finance products. This is the case, for example, in regard to participation in debt-equity programmes, debt-for-bond swaps or financing on the capital market.
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References
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38. The following is an example from a recent contract:
32. Jursdiction
32.1 Submission
(a) For the benefit of the Agent, the Arranger, each Manager and each Bank, all the parties irrevocably agree that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that accordingly any suit, action or proceedings (together in this Clause referred to as ‘Proceedings’ (arising out of or in connection with this Agreement) may be brought in such courts.
(b) The Borrower irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as it is referred to in this Clause and any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgement in any Proceedings brought in the English courts shall be conclusive and binding upon the Borrower and may be enforced in the courts of any other jurisdiction in accordance with the applicable laws of that jurisdiction.
(c) Nothing contained in this clause 32 shall limit the right of the Agent, the Arranger, any Manager or any Bank to take Proceedings against the Borrower in any other court of competent jurisdiction including, without limitation, the courts of Denmark which have jurisdiction by reason of the Borrower's domicile of residence, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.
32.2 Process Agent
The Borrower hereby irrevocably and unconditionally:
(a) Appoints The Law Debenture Trust Corporation p.l.c., currently of Princes House, 95, Gresham Street, London EC2V 7LY to receive, for and on its behalf, service or process in England in any Proceedings with respect to this Agreement;
(b) agrees to maintain in England a duly appointed process agent notified to the Agent, for the purposes of paragraph (a) above;
(c) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgement based thereon;
(d) consents to the service of process out of any of the said courts in any such proceedings by the airmailing of copies, postage prepaid, to it at its address for the time being applying for the purposes of Clause 24; and
(e) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law
39. Section 12.08 of the Combined Old New Money Agreement of 1990 with Mexico; section 13.08 of the Combined Multi-Year Restructure Agreement of 1990 with Mexico; section 12.06 of the Bond Subscription Agreement of 1990 with the Philippines.
40. 304U.S.64 (1938).
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Where a receiving Bank has recovered an excess amount as a consequence of dissatisfaction of enforcement of a judgement obtained in any legal action or proceedings to which it is a party, clause 28.1 [sharing clause, Anmerkung des Verfassers]shall not apply so as to benefit any other Bank which (being entitled to do so) did not join with the receiving Bank in such action or proceedings unless the receiving Bank did not give prior notice of its involvement in such action or proceedings to the Agent for disclosure to the other Banks.’
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55. The relief achieved by the restructuring of the Mexican debt is calculated for die 1990s at approximately US$3 billion.
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70. 22 USC section 2370(e)(2): ‘No court in the United States shall decline on the grounds of the Federal Act of State doctrine to make a determination on the merits giving effect to the principles of international law in a case in which a claim of title or other rights to property is asserted by any party.… based upon (or traced through) a confiscation or other taking.… by an act of state in violence of the principles of international law, including the principles of compensation.…’
71. 807 F. 2d 820, 832 (9th Cir. 1987).
72. 700 F.Supp. 114(S.D.N.Y. 1988).
73. 700 F. Supp. 114, 122 (S.D.N.Y. 1988).
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100. The court had decided that a contractual regulation which fixes the form and governing law in advance eliminates the danger that a controversy might be brought before a forum which is hostile to one of the parties or not familiar with the subject-matter.
101. 9 USCA section 15, introduced as Section I by Public Law 100–669.
102. Libyan American Oil Company v. People's Libyan Arab Jamahirya, 482 F. Supp. 1175 (1980 D.D.C.); Branson, D. and Wallace, R., ‘Neuere Entwicklungen auf dem Gebiet der Schiedsgerichtsbarkeit in den USA’, in Glossner, , ed., op. cit. n. 95, pp. 268, 270Google Scholar.
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105. The question will be dealt with in a separate article. The present account of arbitral jurisdiction in the USA is necessarily superficial, as it is impossible in the space availabe to do justice to the abundance of literature and legal judgements.
106. Occasionally in the past a syndicated Eurocredit has been classified as a ‘joint venture’: Créedit Francçais International S.A. v. Sociedad Financiera de Comerco, 490 NYS 670 (Sup. Ct. N.Y. 1985). This view is rejected in Buchheit, L., ‘Is Syndicated Lending a Joint Venture?’, Int. Fin. LR (08 1985) pp. 12–14Google Scholar; Buchheit, L. and Reisner, R., ‘The Effect of the Sovereign Debt Restructuring Process on Inter-Creditor Relationships’, in University of Illinois LR (1988) pp. 493, 503; Penn, op. cit. n. 20, section 7.34, 7.35Google Scholar.
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110. 84 Stat. 692 (1970 Amendment).
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112. Section 202 Agreement or award falling under the Convention
‘An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this tide, falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of die United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages or performs enforcement abroad, or has some other reasonable relation with one or mare foreign states. For the purpose of this section a corporation is a citizen of the United States if it is incorporated or has its principal place of business in the United States’; on this point see Berg, A. J. van den, ‘When is an Arbitral Award Non-Domestic under the New York Convention of 1958?’, 6 Pace LR (1985) p. 25Google Scholar.
113. In as far as enforcement in the USA is requested.
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122. Scherk v. Alberto Culver Co., 417 US 506 (1971); on this point see, for example, Dietrich, H., ‘Internationale Schiedsvereinbarungen vor amerikanischen Gerichten’, 40 RabelZ (1976) p. 1 et seqGoogle Scholar.
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