Draft Conciliation and Arbitration Rules

Draft
Conciliation and Arbitration Rules of
the International Centre for
the Financial Safeguard of States

 

Chapter I
General Provisions

Section 1
Preliminary Provisions

Article 1.      Scope

          The purpose of the present Rules, adopted pursuant to the International Convention for the Financial Safeguard of States, is to provide conciliation and arbitration facilities for the settlement of disputes arising among parties to the same bond loan in accordance with, and to the extent provided for in, the aforementioned Rules.

Article 2.      Definitions

          For the purpose of the present Rules:

(1)     The term “Convention” designates the International Convention for the Financial Safeguard of States.

(2)     The term “Centre” designates the International Centre for the Financial Safeguard of States established by the International Convention for the Financial Safeguard of States.

(3)     The term “State” is understood as any sovereign entity, any political subdivision of the State or any State institution or agency having accepted the jurisdiction of the Centre by contract or by declaration in accordance with Article 4.

(4)     The term “creditor” designates any natural or legal person, public or private, that holds a bond at the date on which the Centre is seized.

(5)     The term “bond debt” refers to any contract issued on the bond market by which a creditor provides a State with a nominal value to be reimbursed at maturity and interests, determined by contract.

(6)     The term “parties” designates collectively the issuer State and the creditors parties to the same proceedings organized under the auspices of the Centre.

Section 2
Jurisdiction of the Centre

Article 3.      Object of the Jurisdiction

  1. The Centre has jurisdiction on any bond debt having provided, in the contract, for the jurisdiction of the Centre.
  2. The Centre also has jurisdiction on any bond debt with respect to which a State has made a declaration accepting the jurisdiction of the Centre under the conditions of Article 4.

Article 4.      Declaration on Jurisdiction

  1. For a bond loan which has not provided, in the contract, for the jurisdiction of the Centre, the issuer State has the possibility to address to the Secretary-General a declaration accepting jurisdiction in writing.
  2. Any creditor holding bonds of the abovementioned bond loan can accept such offer of jurisdiction by filing an application for debt registration in accordance with Article 13.

Article 5.      Scope of Jurisdiction

          The jurisdiction of the Centre shall extend in particular to the following claims:

(a)     the payment date of bonds;

(b)     the nominal value of bonds;

(c)     the capital or interest rate of bonds;

(d)     the currency of payment or the accounting currency;

(e)     the place of payment;

(f)     the events considered by the issuance contract as triggering acceleration;

(g)     the law applicable to bonds;

(h)     the immunity from jurisdiction or from execution, which the issuer State could claim.

Chapter 2
Seizure of the Centre

Article 6.      Admissibility of a Creditors’ Request

          The Centre can be seized by a group of creditors, representing at least 10% of the nominal value of the bonds issued for the same bond loan by a State, when the latter is in default on a payment at the date of seizure of the Centre.

Article 7.      Admissibility of a State’s Request

          The Centre can be seized by a State that considers that one or more of his bond loans are in risk of default.

Article 8.      Registration of the Request by the Secretary-General

  1. When a request is deposited in accordance with Article 6, the Secretary-General registers it and notifies it to the issuer State. The Secretary-General assures its publicity by any means.
  2. When a request is deposited in accordance with Article 7, the Secretary-General registers it and ensures its publicity by any means.
  3. When the Secretary-General considers that the admissibility requirements of a request made pursuant to Articles 6 or 7 are manifestly not met, he notifies the author of the request of his decision to refuse registration.

Chapter III
Preliminary Phases for Conciliation and Arbitration Proceedings

Section 1
Designations of the Conciliator and of the Experts

Article 9.      Designation of the Conciliator

  1. The Secretary-General designates the Conciliator from the Panel of Conciliators and Arbitrators referred to in Article 13 of the Convention, within 15 days from the registration of the request.
  2. The Conciliator designated in accordance with the provisions of the present Article must not hold the nationality of the State party to the procedure.

Article 10.    Disqualification and Replacement of the Conciliator

  1. If the Conciliator accepts his designation, he must disclose all circumstances which might raise a doubt in the mind of the parties as to his independence and impartiality. This duty of disclosure continues throughout the proceedings.
  2. Any party to the proceedings can request the Secretary-General to modify his decision of designation of the Conciliator if the party considers that the independence and impartiality of the Conciliator are not guaranteed. Absent a challenge within a period of 30 days from the date on which the party had or should have had knowledge of the events which could justify a disqualification, this party is considered to have waived his right to raise such challenge.
  3. The Secretary-General shall take his decisions promptly.

Article 11.    Designation of Experts

          The Conciliator may designate up to five Experts from the Panel of Experts referred to in Article 13 of the Convention. They shall assist the Conciliator at the stage of the examination of the existence of the debts.

Article 12.    Disqualification and Replacement of Experts

  1. If an Expert accepts his designation, he must disclose all circumstances which might raise a doubt in the mind of the parties as to his independence and impartiality. This duty of disclosure continues throughout the proceedings.
  2. Any party to the proceedings can request the Secretary-General to modify his decision of designation of the Conciliator if the party considers that the independence and impartiality of the Conciliator are not guaranteed. Absent a challenge within a period of 30 days from the date on which the party had or should have had knowledge of the events which could justify a disqualification, this party is considered to have waived his right to raise such challenge.
  3. The Secretary-General shall take his decisions promptly.

Section 2
Registration of Debts

Article 13.    Request for Registration of a Debt

          Any creditor of the issuer State under the bond loan concerned may request the registration of his debt during a period of 90 days after the date on which the existence of the request before the Centre by the issuer State or a creditor of such State has been made public.

Article 14.    Notification of the Request for Registration

  1. As soon as possible, the Secretary-General:

(a)     Registers the debt and immediately notifies the registration to the issuer State and to the creditors having already registered a debt; or

(b)     Notifies the applicant, in light of the information communicated by him, of his refusal to register the debt in case of manifest inadmissibility. The creditor may challenge this decision before the Conciliator within fifteen days. The Conciliator’s decision is binding.

  1. The Secretary-General establishes a register of registered debts, which he shall make available to the parties.

Section 3
Creditors’ Representation

Article 15.    Constitution of Creditors’ Committees

  1. The creditors whose debts are registered may form one or more committees of creditors.
  2. More than one committee of creditors may be formed, provided that each of them represents at least 10% of the nominal value.

Article 16.    Designation of Representatives of Creditors

  1. Each committee of creditors designates a representative who may, if appropriate, be chosen from the Panel established in accordance with Article 18 of the Convention. He has the power to act in the name and on the behalf of the committee of creditors for the purpose of the proceedings established by the present Rules.
  2. Failing the constitution of a committee of creditors, and for the creditors who have not expressed their will to join an existing committee, the Conciliator shall designate one or more representatives from the Panel established in accordance with Article 18 of the Convention. He takes into account the diversity of situations in which creditors find themselves.
  3. At any stage of the proceeding, the committee representatives are kept informed of the measures and decisions adopted by the Secretary-General or by the Conciliator. The representative is responsible for the transmission of such information to the members of his committee.

Section 4
On the Procedure for the Verification and Certification of Debts

Article 17.    Verification and Certification of Debts

  1. After the expiration of the deadline for the registration of debts, the Conciliator examines the reality and value of the registered debts.
  2. He delivers a decision on the certification of debts that are subject to the proceeding at the Centre within a reasonable time.
  3. He may consult the parties and be assisted by the Experts designated in accordance with Article 33.
  4. Unless the parties have agreed otherwise, the Conciliator shall satisfy himself that the nominal value of certified debts represents at least 50% of the nominal value of the bond loan at issue. If this is not the case, the Conciliator renders a decision on the closure of the proceedings.
  5. The Conciliator shall render a decision on the jurisdiction of the Centre and the admissibility of the request in a reasonable time.

Article 18.    Control and Certification of the Committees of Creditors by the Conciliator

  1. The Conciliator verifies that the committees of creditors designated before him represent each at least 10% of the nominal value of the debt object of the restructuring procedure as determined by him. If this is the case, the Conciliator certifies the committee.
  2. The Conciliator may grant creditors whose committee he has refused to certify a period not beyond 30 days to constitute a new committee. After that period, the Conciliator shall decide on the validity of the newly constituted committee. Under exceptional circumstances, this period may be renewed once.
  3. He shall render a decision on the certification of the committees of creditors who are parties to the proceeding before the Centre.

Chapter IV
Conciliation Proceeding

Section 1
Organisation of the Conciliation Proceeding

Article 19.    Conciliator’s Role

          The Conciliator considers the assertions and objections of the parties and makes proposals for a settlement including, if appropriate, a restructuring plan.

Article 20.    Obligation to Negotiate in Good Faith

          The opening of the conciliation proceedings entails for the parties and their representatives the obligation to negotiate in good faith. The parties commit to seek a common solution in order to avoid a disorderly default of the issuer State, and to equitably share the costs of the restructuring.

Article 21.    Timetable of the Proceeding

          The parties determine the timetable for the proceedings. If they fail to do so, the Conciliator determines the timetable.

Article 22.    Proposal by the State

  1. The State communicates to the representatives of the creditors and to the Conciliator, within the period determined by the timetable of the proceedings, the relevant information on the circumstances calling for a renegotiation on the outstanding part of the bond loan concerned and on the prospects of its evolution. It presents its proposals for a debt restructuring.
  2. The State can propose to the Conciliator the opening of a trust account through which it may make the reimbursements established by the restructuring plan.

Section 2
Termination of the Conciliation Proceeding

Article 23.    Termination of the Conciliation

  1. The voting process is organised under the responsibility of the Conciliator. When he notes that a majority representing 75% of the nominal value of the debts certified in accordance with Article 17 has reached an agreement with the State, he draws up a conciliation report which is binding for all the parties.
  2. In the opposite case, he draws up a report recording the failure of the conciliation proceeding.

Chapter V
Arbitration Proceeding

Section 1
Organisation of the Arbitral Tribunal

Article 24.    Designation of Co-Arbitrators

  1. At the end of the conciliation phase and if it has not succeeded under the conditions of Article 23, paragraph 2, and within a period of thirty days, two Co-Arbitrators are designated in accordance with the provisions of the present Article.
  2. The issuer State designates an Arbitrator chosen from the Panel of Conciliators and Arbitrators established pursuant to Article 13 of the Convention.
  3. The creditors’ representatives choose by simple majority an Arbitrator from the Panel of Conciliators and Arbitrators established pursuant to Article 13 of the Convention.
  4. Failing a designation of Co-Arbitrators in accordance with paragraphs 2 and 3 of the present Article, the Secretary-General designates the Co-Arbitrators from the Panel of Conciliators and Arbitrators established pursuant to Article 13 of the Convention.

Article 25.    The President of the Arbitral Tribunal

          Within a period of fifteen days, the Co-Arbitrators so appointed choose by common agreement the President of the Arbitral Tribunal from the Panel of Conciliators and Arbitrators established pursuant to Article 13 of the Convention. Failing such agreement, the Secretary-General designates the President.

Article 26.    Place of Arbitration

          The place of arbitration is at the seat of the Centre. However, the Arbitral Tribunal may accomplish any act of the proceeding in any place it deems appropriate. The award is considered to have been rendered at the place of the arbitration.

Article 27.    Language of Arbitration

  1. The languages of the proceeding are the languages of the Centre.
  2. When they differ from the language in which the bond loans concerned by the proceeding are drafted, the Arbitral Tribunal may, after consultation with the representatives of the parties, decide to choose such language for the communication of any written statement and, in case of a hearing, for the language to be used in such hearing.
  3. If it deems it appropriate, the Arbitral Tribunal may order the translation of any document produced by a party at the cost of the party concerned.

Section 2
Opening of the Arbitration Proceeding

Article 28.    Starting Point of the Arbitration Proceeding

          The Arbitral Tribunal is constituted on the day on which the last designated Arbitrator has accepted his appointment. On such date, the arbitral proceedings are opened.

Article 29.    Scope of the Arbitration Proceedings

          The debts concerned by the arbitration proceedings are those certified under the conditions of Article 17.

Article 30.    Suspension of Payments

          The Arbitral Tribunal may, if it deems that the circumstances so require, order a temporary suspension of the payments on the bonds concerned by the proceeding.

Section 3
Guiding Principles for the Arbitration Proceedings

Article 31.    Rules of Procedure

  1. The arbitration proceeding is conducted in accordance with the present Rules, in the strict respect of the principle of equality of the parties and of the right of the parties to be heard. If the present Rules are silent and unless otherwise agreed by the parties, the Arbitral Tribunal shall decide, so far as may be necessary, on the procedural difficulties.
  2. The proceedings are conducted as follows:

(a)     The issuer State submits a restructuring plan within the period determined by the Arbitral Tribunal;

(b)     The creditors submit their written observations on such plan, within the period determined by the Arbitral Tribunal;

(c)     On the basis of the proposed plan and the written observations submitted by the creditors, the Arbitral Tribunal decides, if necessary, on the restructuring plan under the conditions of Article 32.

Article 32.    Applicable Law

  1. The Arbitral Tribunal decides in accordance with such rules of law as may be agreed by the parties and in accordance with the applicable rules and principles of international law.
  2. In case a restructuring plan is established, the Arbitral Tribunal shall

(a)     respect the principle of equality of creditors, to the extent that the latter do not waive it;

(b)     take into account the essential human needs of the population of the issuer State and the individual rights and freedoms guaranteed by international law and the domestic law of the issuer State;

(c)     take into account the level of development of the issuer State and its real capacity to pay;

(d)     reach a solution which is, under the specific circumstances of the case, both reasonable and feasible, both for the issuer State and for its creditors.

Article 33.    Arbitral Hearings

  1. Unless the Arbitral Tribunal decides otherwise, after consultation with the parties, the hearings are held in a closed session.
  2. The Arbitral Tribunal has the power to hear third parties, after consultation with the parties, to the extent that such hearing allows to offer a perspective, particular knowledge or insight that is distinct from that of the disputing parties.

Article 34.    Closure of the Proceeding

  1. When the Arbitral Tribunal considers that the presentation of the case by the parties is completed, it declares the closure of the proceedings.
  2. If, before the award is rendered, the parties reach an agreement settling the dispute, the Arbitral Tribunal renders an order on the closure of proceedings.
  3. The Arbitral Tribunal communicates to the parties a copy of the order on the closure of the arbitration proceedings or of the award rendered, signed by the Arbitrators.

Section 4
On the Award

Article 35.    Time Limit to Render the Award

  1. The Arbitral Tribunal shall render its final award within a period of six months from the date of the opening of the proceedings established in accordance with Article 28.
  2. The Secretary-General of the Centre may, upon a reasoned request of the Arbitral Tribunal or if necessary ex officio, and after consultation with the parties, extend that period.

Article 36.    Establishment of the Award

  1. The award is rendered by the majority of the votes of the members of the Arbitral Tribunal. The deliberations of the Arbitral Tribunal are confidential.
  2. The award is signed by all the members of the Arbitral Tribunal. The refusal of a member to sign is recorded in the award.

Article 37.    Form and Content of the Award

  1. The award shall be rendered in writing. It shall state the reasons upon which it is based.
  2. The award shall include, if adopted, a detailed restructuring plan for the debts of the issuer State. In particular, the restructuring plan may include a rescheduling and a reduction of the debt of the issuer State, as well as a revision of the interest rates of such debt.
  3. The Centre publishes the award with the consent of the parties.

Article 38.    Deposit and Availability of the Award

  1. The original of any award rendered in accordance with the present Rules is deposited with the Secretary-General of the Centre.
  2. The Secretary-General of the Centre makes available a certified copy of the award for each party.

Section 5
Interpretation and Rectification of the Award

Article 39.    Interpretation of the Award

  1. If any dispute shall arise between the parties as to the meaning or scope of an award, either party may request interpretation of the award by an application in writing addressed to the Secretary-General.
  2. The request shall be submitted to the Arbitral Tribunal which rendered the award, if such Tribunal can be constituted again. Failing that, a new Arbitral Tribunal is constituted under the conditions of Articles 24 and 25 of the present Rules.
  3. The Arbitral Tribunal may, if it considers that the circumstances so require, stay enforcement of the award pending its decision.
  4. The decision on the interpretation of the award is rendered in the form of an addendum, which shall form part of the award. The addendum is deposited and made available under the conditions set out in Article 38 of the present Rules.

Article 40.    Rectification of the Award

  1. Any request by a party to rectify a clerical, arithmetical or similar error shall be addressed to the Secretary-General of the Centre within 15 days from the date on which the award is made available to the parties. The request shall state in detail the clerical, arithmetical or similar errors whose rectification is requested.
  2. After the request is submitted to the Arbitral Tribunal, the latter grants the other parties a period not exceeding 15 days to submit their observations.

3.         The decision to rectify the award is rendered in the form of an addendum, which forms part of the award. The addendum is deposited and made available to the parties under the conditions set out in Article 38 of the present Rules.

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