Материал: Amy C Kläsener
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Joinder and Consolidation in M&A Arbitration
of civil procedure should be honoured by the arbitral tribunal. Usually, this would depend on whether the party to be bound by the decision had an opportunity to participate in such proceedings.
Theoretically, a similar provision could also be added regarding related arbitrations, stating that awards rendered by arbitral tribunals relating to disputes between the target and third parties giving rise to subsequent claims between the purchaser and the seller shall be taken into account in arbitration proceedings between the parties to the SPA. In practice, however, it often will not be possible to involve the parties to the SPA in such arbitrations without adding further detailed provisions on how they can participate in the first dispute. The consent of the parties to the SPA to be joined in the first arbitration could be added to the arbitration clause in the SPA. In some situations, it may even be possible that all affected parties enter into a multilateral arbitration agreement.45
Furthermore, when drafting the clause on third-party claims, the parties should consider implementing the binding effect of a decision between the target and the third party.46 Many SPAs already contain in their clauses on third-party claims a provision as to whether the seller must actively support or even take over the defence of the claims brought against the target. Rather surprisingly, many clauses end there without stating that the seller is bound by the outcome of the proceedings between the target and the third party if the seller took over the defence or refused to effect the defence after it had been requested to do so. In subsequent arbitrations between the purchaser and the seller, the arbitral tribunal would have to honour a respective provision when deciding on the effect of the decision on the parties to the SPA. Also other substantive provisions of the SPA should be assessed with a view to potential arbitration proceedings. As discussed above, the joinder may be facilitated if the purchaser could assign certain claims against the seller to the target if the SPA so provides.47
Finally, as a more general note, the parties should always ensure the arbitration clause in the SPA is compatible with the dispute resolution mechanism of other agreements concluded in the broader context of the SPA.48 Typically, there are several other contracts between the parties to the SPA and third parties, such as escrow agents, which also create relations to the SPA. Even if these agreements do not create the highest potential for later disputes, effective dispute resolution would only benefit if there were compatible arbitration agreements.
45Wolff, Gestaltung einer vertragsübergreifenden Schiedsklausel, SchiedsVZ 2008, 59, 62 discusses the scenario of a purchase price adjustment depending on a separate contract between the target and the seller which could be solved through a multilateral arbitration agreement that relates to the SPA as well as the contract concluded between the target and the seller.
46Welser,‘The Arbitration Agreement and Arbitrability – M&A Post Closing Issues:Arbitration and Third Party Joinder’, AustrianYearbook on International Arbitration, 2011, 3, 14.
47Drude, Post-M&A Arbitration and Joinder: Process and Drafting Considerations for M&A Transactions, SchiedsVZ 2017, 224, 235.
48Fischer/Walbert,‘The Arbitration Agreement and Arbitrability, Efficient and Expeditious Dispute Resolution in M&A Transactions’, AustrianYearbook on International Arbitration, 2017, 21, 47; Dorda, M&A und alternative Streitbeilegung, Der Gesellschafter 2012, 5, 7.
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Joinder and Consolidation in M&A Arbitration
Conclusion
When negotiating SPAs, the parties need to consider multiparty and multi-contract situations arising out of the transaction. Using boilerplate arbitration clauses without considering the content of the arbitration rules is insufficient.The parties need to assess which rules serve their needs best to effectively deal with multiple parties in multiple SPAs. Often, it will be best practice to negotiate a joint arbitration agreement covering different SPAs in complex transactions.This should properly address the individual challenges arising out of the structure of the transaction.
Dealing with multiparty and multi-contract situations arising out of disputes between the target and third parties that give rise to claims between the purchaser and the seller requires the parties to take particular care when negotiating the SPA.49 The purchaser should begin analysing during the due diligence what type of dispute resolution mechanism the target typically uses, to adjust the SPA to the target’s practice. Further, the parties should consider including provisions in the arbitration agreement that address how the arbitral tribunal shall deal with court decisions or arbitral awards rendered on disputes between the target and third parties. Finally, when drafting the provisions on third-party claims, the parties should consider adding provisions with respect to the effect of decisions in relation to third-party claims on the seller and specify under which circumstances the seller is bound by them.
Given how difficult it is to align multiple disputes arising between multiple parties out of multiple contracts, the question arises whether the parties would be better off if they refrained from using arbitration in the SPA and submitted their disputes to the jurisdiction of the courts. This would only improve the situation if disputes under the SPA and the third-party claims are subject to the courts of the same jurisdiction. This argument could only hold true for domestic transactions related to targets that also have primarily a domestic business.As soon as there is a cross-border transaction or the target is engaged in international business, it is not feasible to concentrate all disputes before the same courts. The parties should therefore continue to refer disputes arising out of the SPAs to international arbitration, provided that they make deliberate choices with respect to the details of the arbitration clauses.
49Drude, Post-M&A Arbitration and Joinder: Process and Drafting Considerations for M&A Transactions, SchiedsVZ 2017, 224, 234 stating that ‘[c]urrently prevailing transactional practice does not adequately protect the buyer in an M&A transaction against the risk of divergent decisions’.
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3
Conflicts between Expert Determination Clauses and
Arbitration Clauses
Wolfgang Peter and Daniel Greineder1
One of the most commonly cited attractions of international commercial arbitration is that it provides parties with a single forum for the resolution of all their disputes under a given contract. Moreover, as other chapters in this volume illustrate, arbitral procedures can readily be adapted to ensure the efficient resolution of parties’ disputes, in particular those relating to M&A transactions. Nonetheless, in addition to the usual broadly worded arbitration agreement, the parties to an arbitration agreement frequently provide for a subset of narrowly defined valuation questions to be referred to an industry expert, typically a valuation specialist, for determination. Parties cannot always agree the final price of a company and will in that case appoint an expert familiar with the relevant type of transaction to set or adjust the price according to specified criteria.This chapter contrasts the two procedures and examines the conflicts that may arise between them. Many of those difficulties can be minimised if parties have a clear understanding of the differences between the procedures from the outset.
In some respects, arbitration and expert determination are alike. Both arise under the parties’ contractual agreement. Both limit or exclude the jurisdiction of the courts. Both result in a more or less binding non-judicial decision. And both have historically been seen as forms of alternative dispute resolution, although commercial arbitration, particularly international arbitration, has evolved into a discipline in its own right.2 In an age of complex, high-value disputes, arbitration is no longer an invariably quick and informal alternative to the courts. However, although expert determination is often seen to be swift, complex contested valuations may take a year or more to resolve.
1Wolfgang Peter and Daniel Greineder are partners at Peter & Kim.The authors are indebted to
Axel Schmidlin, former junior associate at Peter & Partners, who provided invaluable research assistance in the preparation of this chapter, and to Amélie Oppliger, at Peter & Kim, who assisted in its revision.
2E Fischer, M Walbert, Chapter I:‘The Arbitration Agreement and Arbitrability, Efficient and Expeditious Dispute Resolution in M&A Transactions’, in AustrianYearbook on International Arbitration, 2017, 21.
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Conflicts between Expert Determination Clauses and Arbitration Clauses
There are also important differences. Expert determination should not be mistaken for arbitration by different means. Whereas parties appoint arbitrators for their ability to decide a legal dispute, the value of experts lies principally in an ability to apply specialist knowledge to solve a problem that is blocking or complicating a transaction, or otherwise one that has arisen after closing. Even the most fair-minded expert has no general aptitude as an adjudicator. This distinction informs the different procedural safeguards, practices and scope for challenging a decision. Moreover, expert determination is largely a matter of domestic law, usually that of the main contract.3 Parties may then supplement the provisions in the main contract with detailed terms of appointment as appropriate. Expert determinations do not have a juridical seat. By contrast, parties to international arbitration frequently choose a seat unconnected to the transaction, as well as international institutional rules, and the New York Convention sets an international standard for the recognition and enforcement of awards.
Aspects of expert determination
As a matter of convenience,‘expert determination’ is used here to describe any binding resolution of a disagreement by a decision-maker with specialist knowledge, who is appointed under a contract and acts as neither a judge nor an arbitrator. Beyond that, generalisations are difficult. Procedural requirements and the powers of an expert will vary, sometimes significantly, according to jurisdiction.4 Moreover, any expert’s mandate will depend on the detailed terms of the parties’ agreement.There are ‘no international standards’,5 although the ICC, DIS and WIPO, for example, have issued procedural rules suitable for international use.
Expert determination clauses
A well-drafted provision for determination will reflect the expert’s function. The value of experts lies, above all, in their valuation and industry expertise. For this reason, parties should define the mandate or authority of any expert – or experts, where there is a panel
– precisely and narrowly.6 They should not push an expert into making complex legal
3B Gross,‘M&A disputes and expert determination: getting to grips with the issues’, Arbitration (11), 2010, 2.
4BK-ZPO, B Berger, Berner Kommentar zur Zivil Prozessordnung - Band I, 2012, ad Art. 189 ZPO, 1859 et seq.; M Würdinger, Münchener Kommentar zum Bürgerlichen Gesetzbuch, 2016, ad §§ 317-319 BGB; J Kendall, Expert Determination, 2015, Section 12.1; V Triebel,‘Der Wirtschaftsprüfer als Schiedsgutachter bei
M&A Transaktionen’, in Der Experte im Verfahren, 2005, 132, 135, 136; N Erk, Streitbeilegungsmechanismen im Aktionärbindungsvertrag, in REPRAX 4/2017, on the binding procedural or substantive nature of expert determination, 154; C Klausegger, Chapter III:‘The Arbitrator and the Arbitration Procedure,Ad Hoc Expert Determination – Useful Tool or “Too Much of a Headache”’, in AustrianYearbook on International Arbitration, 2013, 168 with reference to the Austrian Civil Code, § 1056 ABGB.
5C Klausegger, op. cit. 4, 167.
6See B Gross, op. cit. 3, 2; R Tschäni, H Frey, Streiterledigung in M&A-Transaktionen, 2010, 81; R Tschäni,
H Frey, D Müller, Streitigkeiten aus M&A-Transaktionen, 2013, 105-106. For drafting suggestions see: Centre for Effective Dispute Resolution, Model Expert Determination Agreement, including guidance notes, 2017;
J-B Zufferey, L’expertise-arbitrage, Texte explicative, Modèle de contrat (en français et en anglais), 2013; N Erk, op. cit. 4, 156; BGB Erman Kommentar, Hager, 2017, ad §317, paras. 6 to 8; V Triebel, op. cit. 4, 138; R Tschäni, H Frey, D Müller, op. cit. 6, 111.
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Conflicts between Expert Determination Clauses and Arbitration Clauses
findings. In particular, they must specify whether the end result should be limited to a simple figure or extend to a fully reasoned analysis in a report. It is desirable to specify minimal procedural rules, such as the number of experts, whether members of a panel of experts may reach majority decisions, a possible time line, or how costs will be allocated. Even where the main contract contains detailed provisions on the expert’s role, parties do well to draw up detailed terms of appointment, identifying procedures for gathering evidence, interviewing witnesses and ensuring confidentiality.As a matter of good sense and indeed law in some jurisdictions, the agreement should be in writing.7
By contrast, typical arbitration agreements provide that any arbitral tribunal will have jurisdiction to resolve all disputes arising out of or in relation to a given contract. Parties to an arbitration agreement can easily adopt a substantial package of procedural law, rules and practices by specifying a seat of arbitration and the applicable institutional rules.This makes detailed terms of appointment unnecessary.The difference between the narrow remit of an expert and the broad remit of an arbitrator may be reflected in different approaches to the interpretation of expert determination and arbitration clauses.The English Court of Appeal has held that, since, in a particular contract, the parties did not intend expert determination to serve as a single forum for resolving disputes but only a narrow range of issues, there could be no presumption in favour of a broad interpretation of an expert determination provision.8
Historically, English agreements specified that a valuer would decide as an expert and not an arbitrator.9 Although the label ‘expert’ or ‘arbitrator’ may of itself not be conclusive, this is helpful where certain types of valuation, such as rent reviews, are in practice sometimes settled by an arbitrator.10 There is less likely to be confusion where an M&A contract also includes an arbitration agreement, which is clearly different in specifying a seat of arbitration and probably institutional rules. Still, it is worth making the distinction.
In an expert determination agreement, it may be desirable to consider conflicts of interest specific to the profession, especially because a firm or team of valuers or auditors rather than an individual will sometimes act as experts. For example, it may be helpful to address whether the auditor of any of the parties could undertake a valuation.11
7Like an arbitration agreement, to be valid under Swiss law an expert determination agreement must be in writing or in any other form allowing it to be evidenced by a text (Art. 189 para. 2 cum 17 para. 2 of the Civil Procedure Code [CPC]), see CR-CPC, P Schweizer, Commentaire Romand: Code de procédure civile, 2019, para. 10, ad Art. 189 CPC; V Triebel, op. cit. 4 (on German law), 138.
8Barclays Bank Plc v. Nylon Capital LLP [2012] Bus. L.R. 542 (2011), at para. 28.
9A Redfern, 2001,‘Experts and arbitrators - an international perspective’, in International Arbitration Law Review (4), 2001, 106; J Kendall, op. cit. 4, Section 1.1-8.
10A Kotb,‘Alternative Dispute Resolution:Arbitration Remains a Better Final and Binding Alternative than Expert Determination’, in Queen Mary Law Journal (8), 2017, 130.
11See V Triebel, op. cit. 4, 126; J Kendall, op. cit. 4, Section 3.2-5 and 3.2-6; F Borde,‘Expert determination by accounting firms’, in ICC Dispute prevention and settlement, 2017, Sections 20 to 32.
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