Материал: Amy C Kläsener

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transaction – for example, a party who wants the right to sell out of the joint venture if its partner changes ownership – must carefully bargain for the conditions that may trigger its right to sell out and how its stake in the business will be valued in such a sale.34

Conclusion

For many reasons, arbitration is an attractive alternative to litigation when resolving high-profile, high-stakes disputes, and it is becoming increasingly popular for M&A disputes, particularly in the cross-border arena.To ensure that their contractual expectations are fulfilled, parties to M&A contracts governed by arbitration agreements should carefully consider arbitration’s drawbacks as well as its advantages, and think about how they will be able to obtain relief in the event of a dispute, both preand post-closing.

34Arbitral proceedings arising from disputes in this regard are not uncommon. See, e.g., Lat Am banking merger leads to ICC award, Global Arbitration Review, 6 March 2019.

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Part II

Survey of Substantive Laws

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Austria

Andrea Gritsch and Stefan Riegler1

Frequency of M&A disputes

The relative frequency of M&A disputes is quite volatile, and seems to depend to a large extent on the performance of the M&A market in general and the types of parties to a transaction in particular.

According to statistics published by the Vienna International Arbitral Centre (VIAC), disputes arising out of share purchase agreements in the context of M&A transactions amounted to 6 per cent in both 20162 and 2015.3 M&A disputes accounted for 17 per cent of all disputes administered by VIAC in 2014, only 2 per cent in 2013 and 14 per cent in 2012.4 VIAC did not publish detailed figures on sale and purchase agreement (SPA) disputes for 2017 and 2018 but stated that arbitral proceedings relating to business ownership accounted for 14 per cent of  VIAC administered cases in 20175 and 7 per cent in 2018.6

The transaction parties are another factor in determining the frequency of M&A disputes.While in the case of professional investors of similar (significant) size, arbitration is often the very last resort and alternative dispute resolution mechanisms (such as business mediation or other forms of settlements) seem to be preferred, small-scale transaction parties tend to seek arbitral relief more frequently.

1Andrea Gritsch and Stefan Riegler are partners at Wolf Theiss.

2VIAC statistics 2016, available at https://www.viac.eu/en/service/content/viac-statistics-2016.

3VIAC statistics 2015, available at https://www.viac.eu/en/service/statistics/2015.

4VIAC statistics 2014, 2013 and 2012, available at https://www.viac.eu/en/service/statistics/2014, https://www.viac.eu/en/service/statistics/2013 and https://www.viac.eu/en/service/statistics/2012.

5VIAC statistics 2017, available at https://www.viac.eu/en/service/statistics/2017.

6VIAC statistics 2018, available at https://www.viac.eu/en/statistics.

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Austria

Form of dispute resolution

As the Austrian courts do not track statistics on the frequency of M&A disputes, the figures provided byVIAC described above cannot be compared with those for court proceedings. Therefore, any statements on the relative frequency of arbitration compared with litigation in the context of M&A disputes can only be based on market experience.

It is standard market practice in international and large-scale M&A transactions to agree on arbitration clauses.7 Often, confidentiality aspects and the possibility of choosing a tribunal with experience in international business dealings and knowledge of the underlying economic implications are viewed as the main advantages compared with court litigation.8 In addition, when considering that M&A transactions are increasingly cross-border, parties may find it useful to agree on the governing language of the arbitration. Finally, recognition and enforcement of arbitral awards under the New York Convention9 is a strong ‘selling point’ for arbitration over litigation in an international context.

However, the general preference for arbitration to resolve international M&A disputes leads to some concern that this may limit Austrian Supreme Court jurisprudence and, thereby, publicly available case law on contentious issues typically arising in M&A transactions. Critics hold that this is further aggravated by arbitral awards not usually being published, since confidentiality is often a primary motive for parties to choose arbitration.

The costs and length of arbitration,10 which seem especially disproportionate in complex proceedings, cause further concern. Although, according to VIAC, the average duration of arbitrations it handles is approximately one year, this is not likely to apply to highly complex cases (e.g., those with an unusually high number of interim or partial awards, or a bifurcation of proceedings). However, this average figure does not include the time required to initiate the procedure and constitute the tribunal. Note that while Austrian court proceedings are generally regarded as swift, before state courts such complex disputes will also last a considerable amount of time (in particular in light of appeal rights to the second and the third instance).

There is no uniform answer to the question whether litigation or arbitration is more costly. For example, the costs of arbitral procedures under the Vienna Rules with a three-member tribunal are regularly higher than the corresponding court fees (when calculating the cumulative fees for all three state court instances) for amounts in dispute below approximately €2 million; the costs of arbitrations relative to litigation start to decline for amounts in dispute above €2 million.Therefore, for higher amounts in dispute, and in particular when the tribunal consists of a sole arbitrator, the costs of arbitral procedures might become lower than the corresponding court fees. The above-mentioned time and cost

7Dorda,‘M&A und alternative Streiterledigung’ in Festheft für Karl Hempel zum 75. Geburtstag, GesRZ 2012, p. 5 et seq.

8Fischer/Walbert,‘Efficient and Expeditious Dispute Resolution in M&A Transactions’ in AustrianYearbook of International Arbitration 2017, 21, 21 and 45 with further references (Klausegger, Klein, Kremslehner, Petsche, Pitkowitz, Power,Welser & Zeiler eds., 2017) [Fischer/Walbert].

9UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NewYork, 1958).

10See Fischer/Walbert (footnote 8, above).

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factors sometimes motivate domestic transaction parties and parties involved in small-scale M&A deals to prefer litigation to arbitration.Yet, in larger deals and in an international setting, arbitration is the preferred dispute resolution mechanism.

Grounds for M&A arbitrations

Based on experience and market insight, a broad range of grounds including failure to complete the transaction, price adjustment, earn-out, pre-contractual failure to disclose or fraud, breach of representations and warranties are subject to M&A arbitration. Disputes over financial aspects of a deal (such as price adjustment disputes or earn-out disputes) may alternatively be subjected to arbitral expert (Schiedsgutachter) procedures if accounting principles, calculation aspects or auditing processes are concerned. On the other hand, disputes arising over factual or legal matters (such as failure to disclose or breach of representations and warranties or indemnities) are typically referred to an arbitral tribunal (Schiedsgericht).

There is no statistical or other publicly available information on the relative frequency of any of these types of M&A arbitrations.

Fraud and failure to disclose

The concept of fraud (and also of error) is regulated by Section 870 et seq. of the Civil Code; those provisions also apply to M&A transactions. Fraud requires a party to intentionally mislead the counterparty at the time of contract conclusion. It may be committed by intentionally making misrepresentations or by suppressing correct information; it might even suffice that an already existent error is not clarified. However, the suppression of correct information may only constitute fraud where there was an obligation to provide the respective information.The right to challenge a contract owing to fraud cannot be waived in advance.

A contract may be challenged on the grounds of error if (1) the error is significant (basically, only errors concerning circumstances sufficiently related to the content of the contract are significant), (2) the error induced the contract (if the erring party would have concluded the same contract also without the error, the error did not induce the contract) and (3) one of three requirements exists (the contractual partner caused the error, the contractual partner must have been aware of the error owing to the circumstances of the case or the error was clarified before the contractual partner made any financial dispositions). The right to challenge a contract on the grounds of error can – except by consumers – be waived in advance.

Austrian law also recognises the concept of culpa in contrahendo pursuant to which the parties when commencing negotiations assume pre-contractual obligations (that exist irrespective of whether the contract is concluded). Those obligations comprise the duty to inform each other of the respective object or objects of the contract and of facts that might hinder the conclusion of the contract. Already negligent breach of those obligations might lead to the liability of the party in breach.

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