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This article is written by Kushal of BA.LLB of Chanderprabhu Jain College of Higher Studies and School of Law, New Delhi, an intern under Legal Vidhiya


Cross-border mergers and acquisitions, which are advantageous to both parties, present a once-in-a-lifetime opportunity to accelerate economic growth and globalisation. However, mergers and acquisitions also present a unique set of difficulties, including but not limited to hiring losses, adverse environmental effects, foreign legal and fiscal issues, and cultural hurdles. Determining if companies offer a long-term development model, or sustainability, is therefore far more important. The processes of combining two businesses or assets through a number of financial agreements, including tender offers, asset purchases, and management acquisitions, are referred to as “merger” and “acquisition.” Despite the fact that the terms “acquisitions” and “mergers” have different meanings, people are observed using them interchangeably. The term “acquisition” describes the process of assuming control of a company and transferring ownership. A “merger” occurs when two businesses of roughly equivalent size band together to advance collectively rather than separately. An acquisition agreement may also be part of a merger when the CEOs of the two companies decide to combine their interests in the respective businesses. Globalisation has led to an increase in cross-border mergers. Additionally, India is becoming a more sought-after site for businesses and is continuously raising its rankings for ease of doing business. With the economy doing so well, cross-border mergers have become more common. The purpose of this paper is to outline a few essential clauses that can revolutionise global commerce.


Merger, acquisition, transaction, arbitration, international, dispute, agreement, arbitrator.


Mergers and acquisitions (M&A) are regarded as difficult business transactions, especially when they involve multiple corporate organisations, cross international borders, and extensive, comprehensive agreements.

M&A transactions are defined from a corporate standpoint as the combination of two businesses in a specific industry that leads to the growth of the market economy. Every M&A transaction involves a number of steps and procedures that could lead to disagreements between the parties, particularly when they happen internationally. For instance, a foreign investor, or another firm from another nation, may purchase a corporation in a particular nation. This would combine the assets and liabilities of the two companies into a single, newly formed legal entity.

These large-scale international transactions may give rise to legal disputes between the parties, involving, questions about due diligence, contractual obligations, pre-closing and post-closing obligations, representations and warranties, and adjustments to the purchase price.

Owing to the impact these large-scale cross-border transactions have on the economy, international arbitration becomes the best option for regulating these transactions and providing a swift, effective, and private means of resolving any disputes that may occur. In today’s environment, when M&A transactions are becoming more common globally, arbitration is the widely utilised alternative dispute resolution mechanism by the parties to settle their differences.


Disputes, whether they arise before closing or later in an M&A deal, have increased in parallel with the amount of mergers and acquisitions that are occurring. In order to protect the organization’s members from financial damage resulting from information that was not given, parties engage in arbitration as a method of resolving disputes, which is a normal element of business dealings and can arise at any time. Following are some of the main justifications for selecting arbitration over alternative dispute resolution procedures in M&A transactions

  1. First of all, having a specialist in the subject as the arbitrator is highly convenient for the parties. It’s also a very profitable alternative because you can choose from both ends.
  2. Second, although it can be challenging to maintain confidentiality during court proceedings, arbitration gives the option to do so.
  3. Thirdly, it is simpler to draft contracts in the native tongue of the parties to a cross-border transaction when they speak different languages. For example, one predetermined language, English, can be used to conduct proceedings, something that is not feasible in a court of law.
  4. Finally, it fosters ties between the enterprises and offers a more amicable and business like environment than litigation.


As previously said, arbitration is typically the most favoured dispute resolution option that parties may use in M&A transaction disputes, particularly those that include cross-border parties. However, depending on whether it is used during the pre-closing or post-closing phases of the transactions, its application may vary.

A. Pre-Closing Stage

During the pre-closing period, disagreements that may surface from the representations and warranties, the purchase price negotiating phase, and the due diligence phase may be resolved by arbitration.

  • Disputes arising from due diligence: Prior to moving on with business deals, a thorough review and study of the company, its assets, and financials is done. Due diligence investigations are typically the first step in M&A transactions, with the goal of evaluating the target company’s operations and legal and business elements. Disputes may develop as a result of parties occasionally breaking their agreement and opting not to proceed with the acquisition process after this evaluation’s unexpected findings. As a preferred method of resolving disputes, arbitration can offer the parties the chance to settle their disagreement more quickly, amicably, and discreetly than litigation while safeguarding their private information and enabling them to modify the process to their specific requirements.
  • Purchase Price Dispute: Even when parties reach an agreement on a purchase price in the purchase agreement, they may nevertheless change it later on as a result of disagreements over the target company’s operational, legal, and financial aspects as well as the findings of the due diligence investigation. Conflicts regarding the adjusted purchase price computation may surface at this stage. At this point in the M&A process, arbitration can work to the parties’ benefit by giving them the chance to find a workable solution faster than through litigation without jeopardising the transaction.
  • Representations and Warranties Disputes: One party’s breach of the essential warranties and representations made and disclosed by them regarding several facets of the target business and the transaction may give rise to these disputes. Arbitration might be a useful tool for these kinds of disagreements, allowing the parties to work out a settlement and move on with the transaction.

All things considered, arbitration at the pre-closing stage can help maintain the contract since it provides a quicker and more efficient means of settling conflicts than litigation. This enables the parties to carry out the transaction and preserve their commercial partnership.

B. Post-Closing Stage

We will discuss the utilisation of arbitration to resolve conflicts resulting from the Earnout, modifications to the purchase price, and integration and synergy issues after the closing.

  • Disputes involving Earnouts: Earnouts are the method used by the parties to determine the amount that the buyer must pay for the shares and assets that are being acquired, as well as the success of the target company’s operations following the purchase date. The Earnout clause aims to encourage sellers to contribute to the development of the firm after the sale by binding them to it for a predetermined amount of time. To resolve disputes more quickly and effectively than through litigation, which could lead to a more drawn-out and expensive legal process, parties may choose to use arbitration as a dispute resolution mechanism if they are unable to agree on how to calculate the Earnout amounts and to avoid any delays in closing the transaction.
  • Purchase Price Disputes: Following the closure of a merger or acquisition, purchase price disagreements are frequently encountered. During this phase, the purchase price provisions are frequently adjusted, particularly in large-scale international deals. Post-closing disagreements over the purchase price have an impact on time and may divert the owners’ attention, who the purchasers are depending on to run the business. As a result, arbitration offers parties a faster, more cost-effective method of resolving disputes than litigation, which frequently involves a lengthy legal procedure.
  • Integration and Synergy Disputes: Post-closing conflicts may also surface about the target company’s integration into the acquiring business or the achievement of synergistic benefits. By resolving these conflicts through arbitration, the parties are able to concentrate on realising the full value of the deal.

It implies that arbitration may be helpful in resolving conflicts pre- and post-closing of M&A transactions. It might improve the working relationship between the parties, guarantee adherence to the terms set forth, and facilitate the transaction’s balance conclusion.


Procedural issues have often surfaced in the context of M&A arbitrations.

1. Disputes between Multiple Parties and Contracts

Arbitrations pertaining to M&A frequently result from multi-party scenarios or multi-contract arrangements, particularly when the buyer is involved. Due to equal participation, or each party’s power to designate its “own” arbiter, this raises issues with the arbitral tribunal’s constitution.

The rules of most contemporary arbitration institutions, such as the ICC and LCIA Rules[1], take into consideration the well-known 1992 Dutco judgement[2] of the French Cour de Cassation, which held that it was against public policy to require several defendants to jointly pick an arbitrator. For transactions involving numerous parties and/or contracts, it might be adequate to include model terms from these kinds of institutions in the agreements.

If the parties agree to combine their separate procedures, it will be crucial to avoid making decisions that are in conflict with one another.

2. Extension of Third-Party Arbitration Agreements

The question of whether to extend the proceedings to other parties who have not signed the arbitration agreement is one that attorneys handling M&A arbitrations routinely face. This is especially problematic when group business arrangements and transactions are involved.

Unlike in the case of multi-party conflicts, the rules of national and international arbitration tribunals rarely offer any direction because there are so many potential scenarios. One way that an extension to non-signatories might occur is through letters of comfort or various legal theories like legal succession. It is advisable to specify which parties are bound by the arbitration agreement and to have them all sign it, nevertheless, as many arbitral courts are hesitant to extend the arbitration to third parties for these reasons.

Whether an arbitration agreement can be extended to other companies in the same group is a debatable question. The “group of companies’ doctrine” was established in the well-known French case Dow Chemical Firms et al. v. Isover Saint-Gobain[3]. It states that the “corporate veil” may be “pierced” if the other group company satisfies the following three requirements:

  1. It actively participated in the agreement’s execution or termination;
  2. It can be considered the “actual” party to the agreement; and
  3. It has a unique economic interest in the contract.

However, this approach has been rejected by courts in other European nations, including Germany and Switzerland, on the grounds that it conflicts with the parties’ intentions and the principle of privity of contract.

3. Redress Granted

More often than in other arbitrations, arbitrators in M&A disputes may be asked to customise the judgement to the specific circumstances, in addition to determining the amount of a price adjustment or awarding damages to the winning party. If the relevant substantive law and the jurisdiction of enforcement allow it, this could include the creation of additional agreements between the parties, like buy/sell options, or particular performance awards.  It’s also possible that the relief that was initially sought will no longer be relevant if the corporation has changed since the arbitration process started.


  • FAX(France) v. SL (Netherlands)[4]

In this case, arbitration procedures ensued after an “audit arbitration” involving the purchase of shares with assured value. The buyer asked the ICC arbitration panel to declare the sale in violation of the guarantee provision, hold the accounts to be false, and impose damages on the seller. However, the arbitral tribunal’s first task was to assess its own competence in light of the share purchase agreement’s arbitration clause and the “price adjustment procedure” (audit arbitration). The arbitral panel determined that it was not bound by the audit arbitration and that it was competent after interpreting the terms.

  • Agropur, Cooperative Agro-Alimentaire v. Agrifoods International Cooperative Ltd. [5]

A share purchase option was included in the shareholders’ agreement in the Canadian arbitration case. In order to prevent a shareholder from exercising the purchase option while arbitration procedures regarding the legality of the sale and the fulfilment of a trigger event specified in the shareholders’ agreement are in progress, the Ontario Superior Court of Justice granted an injunction. The applicable portion of the shareholders’ agreement was placed on hold by the court until the fifth day following the arbitration panel’s final ruling.

  • Richard Hoeft III v. MVL Group, Inc. et al.[6]

In this case, the parties stipulated that the seller would be entitled to a purchase price adjustment in the event that the firms’ value improved and that the seller could postpone paying a portion of the purchase price until the following year. The definition of EBITDA, which was updated in the stock purchase agreement, would serve as the foundation for the modification. The point of contention was how specific one-time payments to staff members in connection with a stock sale should be handled. The certified accountant who presided over the arbitration decided in the seller’s favour and granted damages as a result.  Due to the arbitrator’s clear disdain for the law in not computing Primary Year EBITDA in compliance with generally accepted accounting standards (GAAP), the District Court overturned the award.

However, the United States Court of Appeals for the Second Circuit overruled and remanded that ruling, preserving the arbitral process’s finality.


From the foregoing, it can be concluded that arbitration is an effective dispute resolution mechanism in mergers and acquisitions at every stage of a transaction, with features that make it an appealing alternative to court litigation, despite some procedural particularities and pitfalls to watch out for when drafting arbitration clauses. It’s important to remember two factors for both local and foreign M&A arbitration success: First, the thoughtful creation of a strong arbitration agreement, ideally in collaboration with the transactional and arbitration lawyers, or the thoughtful selection of a sample provision from a reputable arbitration organisation; and, secondly, the selection of qualified specialists, whose expertise and the impression they may leave on the arbitrators as professionals might be crucial in determining the case’s conclusion.

With benefits like efficiency, flexibility, and anonymity, the arbitration mechanism in M&A agreements may be a useful instrument for resolving disputes. As a result, parties should carefully consider the requirements and outcomes of arbitration when drafting M&A agreements and tailor the process to suit their particular circumstances. While arbitration may be helpful in cross-border M&A deals, parties should carefully assess its implications and application when potential disputes arise before and after the transaction closes.


  1. Aria.law.columbia.edu https://aria.law.columbia.edu/arbitration-in-cross-border-merger-acquisition-transactions-an-advantage/  (last visited on 20th Feb 2024)
  2. Blog.ipleaders  https://blog.ipleaders.in/arbitration-of-disputes-in-international-ma-transactions/ (last visited on 20th Feb 2024)
  3. Kluwer Arbitration Bloghttps://arbitrationblog.kluwerarbitration.com/2015/04/21/arbitration-of-cross-border-ma-disputes/ (last visited on 20th Feb 2024)
  4. Lalive.law https://www.lalive.law/wp-content/uploads/2019/10/beh_arbitration_as_a_dispute.pdf (last visited on 20th Feb 2024)
  5. Dlapiper https://www.dlapiper.com/en/insights/publications/arbitration-matters/2023/mergers-arbitration-an-increasingly-popular-choice-for-deal-disputes (last visited on 20th Feb 2024)

[1] The London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) are two of the principal arbitral organisations engaged in international arbitration.

[2] BKMI Industrienlagen GmbH et Siemens AG v Dutco Construction Bull. Civ. 1 No 2, decision of the Chambre Civile 1 of the Cour de Cassation of January 7, 1992 (no. 89-18.708, 89-18.726)

[3] Dow Chemical v. Isover-Saint-Gobain, ICC Award No. 4131, YCA 1984, at 131 et seq

[4] FAX (France) v. SL (Netherlands), Partial Award, ICC Case Number 8360, ASA Bulletin 1999, at pp. 338-354.

[5] Agrifoods International Cooperative Ltd. v. {J) Agropur, Cooperative Agro-Alimentaire, Decision of23 March 2001, ASA Bulletin 2001, at pp. 355-366.

[6] Richard Hoeft III v. MVL Group, Inc. et al (2003) 343 F.3d57 2d Cir.

Disclaimer: The materials provided herein are intended solely for informational purposes. Accessing or using the site or the materials does not establish an attorney-client relationship. The information presented on this site is not to be construed as legal or professional advice, and it should not be relied upon for such purposes or used as a substitute for advice from a licensed attorney in your state. Additionally, the viewpoint presented by the author is of a personal nature.

1 Comment

Dr. Raj kumar Yadav · March 8, 2024 at 7:31 am

Very informative article on merger & acquisition. Much needed topic these days when market is becoming more and more global.

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