Dispute Resolution in Transnational Securities Transactions

Dispute Resolution in Transnational Securities Transactions

by Tiago Andreotti


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This book explores the transnational legal infrastructure for dispute resolution in transnational securities transactions. It discusses the role of law and dispute resolution in securities transactions, the types of disputes arising from them, and the institutional and legal aspects of dispute resolution, both generally and regarding aggregate litigation. It illustrates different dispute resolution systems and aggregate litigation methods, and examines the legal issues of dispute resolution arising from transnational securities transactions. In addition, the book proposes two systems of dispute resolution for transnational securities transactions depending on the type of dispute: collective redress through arbitration and a network of alternative dispute resolution systems.

Product Details

ISBN-13: 9781509908462
Publisher: Hart Publishing
Publication date: 12/14/2017
Pages: 272
Product dimensions: 6.14(w) x 9.21(h) x 0.80(d)

About the Author

Tiago Andreotti is a lawyer in private practice in Brazil. He has a PhD from the European University Institute and an LLM from New York University, and is admitted to practice law in Brazil and New York.

Table of Contents

Acknowledgements v

Table of Cases xiii

List of Abbreviations xix

1 Introduction: Transnational Securities Disputes and Legal Pluralism 1

I Setting the Scene 2

II The Objective of This Book 5

III Outline of the Argument 7

IV Scope and Limitations 8

2 States, Law and Dispute Resolution 11

I The Development of the Modern State 12

II The Modern State, the Rule of Law and the Judiciary 16

III The Economic Function of Law on Private Matters and Dispute Resolution 17

A Basic Structure: Property and Contract Rights 18

B Imperfect Markets and Regulatory Law 20

C The Role of Dispute Resolution Mechanisms 21

IV States and Transnational Disputes 22

3 Securities Regulation Theory and the Importance of Private Enforcement 24

I Financial Markets 25

A The Mechanics of Price Accuracy 27

B Consequences of Price Inaccuracy 29

i Non-optimal Capital Allocation 29

ii Market Liquidity 30

iii Corporate Governance Failures 30

II Securities Regulation 31

A Rationale for Securities Regulation: Disclosure 32

B Securities Regulation in the European Union 36

III Institutional Aspects of Securities Regulation and the Importance of Private Enforcement 37

A The Regulatory Regime-Institutional Aspects 38

i The Regulatory Mix for Securities Regulation 39

ii Standards for Private Enforcement: the Interplay Between Public Law and Private Law 40

B The Importance of Private Enforcement in Securities Regulation 41

4 The Liability Regime for Securities Disputes 45

I Transacting Securities and Disputes 46

A Issuing Securities 46

B Types of Disputes 47

C Transacting Transnationally 49

II Legal Framework for Securities Liability-Issuers 50

A The United States 51

i The Securities Act of 1933 51

ii Claims under the Securities and Exchange Act of 1934 54

B European Union 58

i The European Perspective 59

ii Implementation in Domestic Systems: the Case of Spain 60

iii Other Liability Regimes 62

C Brazil 63

D Disclosure Liability Standards: Similar But Not Equal 66

III Legal Framework for Securities Liability-Financial Intermediaries 66

IV Legal Framework for Securities Liability-Informational Intermediaries 71

A Compensation 72

B The Liability Regime 74

V Concluding Remarks 77

5 Building a Transnational Securities Dispute Resolution System 79

I Problems with Transnational Dispute Resolution of Securities Transactions 80

II Dispute Resolution Systems in Transnational Securities Transactions-Institutional Considerations 81

A Investor-Issuer 81

i Setting the Incentives 82

ii Overcoming the Prohibition of Opt-Out Aggregate Litigation 83

iii Transnational Aspects 84

iv System Design and Rule of Law 84

v Implementation Aspects 85

B Investor-Financial Intermediary 85

i Transnational Aspects 86

ii Implementation Aspects 87

C Investor-Informational Intermediary 88

III Two Systems for Transnational Dispute Resolution of Securities Transactions 90

A Aggregate Litigation Through Arbitration 91

i Seat of Arbitration and Arbitrability 91

ii Arbitration Clauses 92

iii Importance of the Arbitral Institution 94

iv Possible Problems Remaining 95

B A Network of ADR Systems 96

IV Concluding Remarks 97

6 Institutional Aspects of Dispute Resolution 99

I Legal Aspects of the Institutional Framework 99

A The Legal Basis of the Dispute Resolution System 100

i Direct Jurisdictional Basis 100

ii Consent Jurisdictional Basis: Arbitration 101

iii Considerations of the Legal Basis of a Dispute Resolution System 106

B The Decision Maker's Independence and Accountability 106

i Public Officials 108

ii Private Decision Makers 109

C The Reasoning and Publicity of Decisions 110

II Economic Aspects of the Institutional Framework 112

A Costs of Maintaining a Dispute Resolution System 113

B Costs of Engaging in a Dispute Resolution Procedure 113

i Costs of Access 114

ii Costs of Evidence and Representation 115

III Implications of the Institutional Framework for a Dispute Resolution System 115

7 Alternative Models of Dispute Resolution Systems 118

I National Models 118

A Small Claims Court Model 118

B The Financial Ombudsman Service Model 120

C Self-Regulation Model 123

D Arbitration 124

i State-supervised Model 124

ii Private Arbitration Model 126

II International Models 128

A International Courts 128

B International Arbitral Institutions 130

C The European Cross-Border Mechanism for Financial Disputes: a Network of Dispute Resolution Bodies 130

III Implications 132

A General Implications 132

B EU Implications 133

8 Aggregate Litigation Design 134

I Aggregate Litigation Design: a Framework for Analysis 135

A Conflicts in Aggregate Litigation 137

i Conflicts Between Plaintiffs and Lawyer 137

ii Conflicts Between Group Members 138

iii Third-Party Financiers 139

iv Conflicts in an Opt-out Procedure 140

B Ethical Limitations 144

C Preclusion Principles and Limits on Choosing an Opt-in or Opt-out Mechanism 145

i The Operation of Preclusion - General Aspects 145

ii Types and Scope of Preclusion 149

iii Preclusion and Non-Mutual Parties: Possibility of the Opt-out Procedure 151

iv Preclusion in Arbitration: What Law Will Govern Its Operation? 156

D Final Considerations on Aggregate Litigation Design 158

II Aggregate Dispute Resolution and Securities Disputes 158

9 Aggregate Litigation Models 162

I The American Class Action 162

A A Brief History of the Class Action 162

B Types of Class Action and Their Prerequisites 165

C Class Certification 166

D Class Action and Securities Litigation 168

II Representative Actions: Brazil and Spain 170

III The Dutch Act on Collective Settlement of Mass Damages 173

IV The English Group Litigation Order 174

V The German Capital Market Model Claims Act 175

VI Aggregate Litigation and the European Union 176

VII Class Arbitration 179

A Historical Development of Class Arbitration 179

B Class Action Waivers 181

C The Types of Class Arbitration 182

i The Hybrid Model 182

ii The Provider-created Model 183

D Class Arbitration Outside the United States 184

E Class Arbitration and the European Union 185

VIII Concluding Remarks 185

10 Transnational Aspects of Dispute Resolution 187

I Jurisdiction and Enforcement 188

A Jurisdiction 188

i The Relationship Between Courts and Parties to the Disputes 190

ii The Relationship Between the Forum Court and Other Courts 191

B Recognition and Enforcement of Foreign Judgments 197

i Integrated Recognition and Enforcement Systems: the EU Example 198

ii Unilateral Recognition Systems 200

C An Attempt at a Global Convention on Jurisdiction 201

D Arbitration 202

E Jurisdiction and Enforcement Aspects of Aggregate Litigation 203

II Applicable Law 204

A Contract 206

B Tort 208

C Applicable Law in Arbitration 209

D Applicable Law in Aggregate Litigation with Transnational Elements 210

III The Public Policy Question 212

A Public Policy and Securities Disputes 212

B Public Policy and Notice in Aggregate Litigation 214

C Public Policy and Arbitrability of Securities Disputes 216

D Public Policy and Arbitration Based on Corporate Charters 218

IV Implications for Securities Disputes 220

A Investor-Issuer Disputes 220

i Exchange-based 220

ii Open Market 223

B Investor-Financial Intermediary Disputes 224

i Investor Acts Towards Financial Intermediary 225

ii Financial Intermediary Acts Towards Investor 226

C Investor-Informational Intermediary Disputes 227

V Concluding Remarks on the Transnational Aspects of Securities Disputes 228

Bibliography 229

Index 243

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