Материал: Amy C Kläsener

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Introduction

regarding joinder and consolidation, expert determinations, court support of arbitration, and special issues involving set-aside or recognition and enforcement.

My thanks go to the talented and experienced team of lawyers and experts who have come together to deliver a truly pragmatic guide for M&A and disputes practitioners.This book breaks new ground by considering the procedural, substantive and strategic aspects of M&A disputes.We are all grateful to Global Arbitration Review for including this book in the series of GAR Guides and for the team’s highly professional guidance and support.

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Part I

Key Issues in M&A Arbitration

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Drafting Arbitration Clauses in M&A Agreements

Anne Véronique Schlaepfer and Alexandre Mazuranic1

M&A arbitration often relates to price adjustment disputes, misrepresentations and breach of warranties, or the pre-contractual failure to disclose relevant information (usually involving allegations of fraud, wilful misconduct or gross negligence with a view to avoiding the application of clauses limiting liability).2 The specificities of M&A disputes may have an impact on the drafting of the arbitration clauses themselves.

This chapter is therefore divided into two main Sections. The first recalls some basic rules that apply to the drafting of arbitration clauses in general. The second focuses on certain aspects related to M&A disputes, in particular, matters that drafters may wish to consider when drawing up arbitration clauses.

Basic drafting rules for arbitration clauses

Validity

The arbitration clause must reflect the parties’ consent to have their dispute settled through arbitration. Including the word ‘arbitration’ in a contract is generally sufficient to demonstrate the intention of the parties.3 To avoid confusion and interpretation issues at a later stage, it is advisable to avoid language that could contradict or call into question that intention, for instance, by providing recourse to both arbitration and litigation, or by incorporating an appeal mechanism in respect of the arbitral award.

1AnneVéronique Schlaepfer and Alexandre Mazuranic are partners at White & Case SA.

2In the case of failure to disclose, the seller would have hidden important information, which if known would have had a substantial impact on the price or even prevented the transaction. In this circumstance, the party raising a claim for fraud will seek to disapply the limitation of liability clauses.This type of dispute is not specific to M&A transactions and does not call for any specific drafting in the arbitration clause.

3Gary B. Born, International Commercial Arbitration (Second Edition), Kluwer Law International 2014, p. 764.

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Drafting Arbitration Clauses in M&A Agreements

Most national laws governing the arbitration process and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) require the arbitration agreement to be ‘in writing’.4 The rationale is that a decision to use arbitration constitutes a waiver to a fundamental right of access to national courts (an approach that may be seen as obsolete, possibly even contradictory, given that it is broadly accepted nowadays that arbitration is the ordinary means of dispute resolution for international commercial disputes).This requirement should not be an issue in M&A transactions, which are usually governed by written agreements.

Scope

The arbitration agreement should contain broad language to ensure that any dispute arising from the M&A transaction will be resolved by arbitration, unless the parties intend to proceed otherwise, for instance, by submitting specific disputes to an expert.Whenever possible, the arbitration agreement should reflect the wording recommended by the selected arbitration institution. Broad wording used to describe a dispute or contractual relationship covered by the arbitration agreement will include wording similar to the following clause recommended by the IBA:

All disputes arising out of or in connection with this agreement, including any question regarding its existence, validity or termination shall be finally resolved by arbitration.5

Issues regarding the scope of the arbitration clause can arise when parties refer specific disputes to different mechanisms, for instance, price adjustment disputes to an expert and all other disputes to an arbitral tribunal.The contract needs to set up precisely what disputes will be submitted to what mechanism and how they might interact.This issue is discussed in more detail in the Section on expert determination, below, and in Chapter 3 on conflicts between expert determination and arbitration clauses.

Seat of the arbitration

The seat of the arbitration (usually a city) determines the law that will govern certain procedural aspects of the arbitration, such as the powers of the arbitrators and judicial oversight of the arbitral process as well as challenge to awards.6 The law of the seat of the arbitration determines the extent to which local courts may intervene in the arbitration proceedings, be it to hinder (by unwanted interventions) or to support them. To the extent it is possible, it is therefore appropriate to choose a seat where the legislation and the courts are supportive of arbitration and, for enforceability purposes, located in a signatory state to the NewYork Convention.7

4Often the writing requirement will be interpreted in light of the evolution of technology. France does not require the arbitration agreement to be in writing (see Article 1507 of the Code of Civil Procedure, as amended by Decree No. 2011-48 of 13 January 2011:‘La convention d’arbitrage n’est soumise à aucune condition de forme.’‘The arbitration agreement is not subject to any form requirement.’ ).

5IBA Guidelines for Drafting International Arbitration Clauses, Guideline 3, para. 18.

6ibid., Guideline 4, para. 21.

7ibid. Guideline 4, para. 22.

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Drafting Arbitration Clauses in M&A Agreements

In M&A agreements as in other types of contracts, agreeing on a seat is not always easy, and it may be that one party will try to impose a seat that the other party deems inappropriate. In this event, rather than agreeing on a seat, which may prove inadequate for the reasons stated above, it may be wiser not to designate any seat. In such a scenario it is critical to choose an arbitration institution that will be able to decide on the seat, taking into account the interests of the arbitration.

Institutional or ad hoc arbitration

The parties need to decide whether they want their arbitration to be administered by an arbitral institution under a relatively pre-determined procedure or opt for ad hoc arbitration where the proceedings are managed by the parties, and subsequently by the arbitral tribunal.The trend (to the extent that we may determine it) in M&A practice seems to be to refer disputes to institutional arbitration.

Being assisted by a reputable institution will help parties and tribunals run the proceedings (e.g., by monitoring the process, or handling communications with arbitrators). More importantly, it may provide guidance and support if the arbitration clause is silent on an issue or if the parties cannot agree on some procedural steps (such as the appointment of arbitrators).

Some institutions also scrutinise the draft awards and verify, to a certain degree, that all issues have been determined, without, however, making any review on the merits of the decision itself.8

When opting for ad hoc arbitration, it may be easier to choose a set of predetermined arbitration rules available for such arbitration (such as the UNCITRAL Arbitration Rules9). Otherwise, the arbitration clause should include a minimum set of rules regarding the composition and appointment of the tribunal, and an appointing authority in the event that the parties fail to appoint an arbitrator.

Constitution of the arbitral tribunal

In recent years, some practitioners have voiced concerns about the nomination or appointment of arbitrators by the parties. Nevertheless, parties often see the ability to choose their own nominated arbitrator as one of the main advantages of arbitration.This is, of course, also true in M&A transactions where parties value the possibility of appointing arbitrators who, in addition to their experience as arbitrators, understand the complexities and mechanics of their transactions.

Parties may therefore specify the number and method of appointment of the arbitrator or arbitrators in the arbitration clause. Alternatively, both institutional and ad hoc arbitration rules provide default mechanisms for selecting or replacing arbitrators. Since these default mechanisms vary from one institution to the other, it may be useful to have a look at them before finalising the arbitration clause.

8e.g., the ICC scrutinises the entire award, while the Court of Arbitration of the Swiss Chambers’Arbitration Institution will only review the cost decision contained in the award.

9Blackaby, Partasides, Redfern et al., Redfern and Hunter on International Arbitration (Sixth Edition), Oxford University Press 2015, p. 42, para. 1.141.

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