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American Arbitration May Not Apply to International Disputes

Tuesday, October, 11, 2011

Those who employ American arbitration to resolve disputes have become accustomed to the rules and procedures in effect in this nation through such organizations as the Financial Industry Regulatory Authority (FINRA).  Investments in the modern world, however, frequently cross international boundaries and in these cases, it can be difficult to determine whether American arbitration even applies.


A recent example illustrates the point.  Two investors from Saudi Arabia have tried to block FINRA from having any arbitration authority over their claim of losses.  At issue is almost $400 million dollars that the Saudis claim Citigroup, Inc. is responsible for losing.


Citigroup, Inc, however, has filed suit to makes sure that the dispute will indeed be settled by FINRA rather than by another arbitration organization or a court of law either in the United States or Saudi Arabia.


Abbars not in Favor of American Arbitration


The two Saudi men in question are Abdullah and Ghazi Abbar.  They invested their family fortune, which originated with travel, tourism, and oil interests, into hedge funds and blame Citigroup for mismanaging the funds.  Natalie Marin, speaking for Citigroup, a New York-based broker-dealer, indicated that American arbitration is an appropriate venue for dispute resolution in this case: “We are confident this matter will be appropriately resolved when it is reviewed by legal authorities in the jurisdictions that the parties agreed to when they executed their trades."