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M&A DISPUTES AND ARBITRATION:THE ICC PERSPECTIVE
Tunde Ogunseitan
Counsel
International Conference for Promoting Arbitration
4th Edition
2017 Dispute Resolution in M&A Transactions
18-19 May 2017, Warsaw
MERGERS AND ACQUISITIONS (M&A)
Two distinct kinds of transactions:
A 'merger' combines two or more companies to form a newcompany,
An 'acquisition' (or 'takeover') does not lead to the formationof a new company but is simply the purchase of onecompany by another.
Despite this difference in meaning, the two terms are oftenused together to refer collectively to all legal transactionsleading to the consolidation of companies.
TRENDS
Arbitrations relating to share purchase agreements, shareholders agreements and joint
venture and cooperation agreements, which generally underlie M&A transactions, represent
a significant portion of the caseload of the International Court of Arbitration of the
International Chamber of Commerce (ICC Court).
One third of the M&A disputes submitted to ICC arbitration involve several parties, which is
in line with the ICC overall statistics.
In three quarter of the cases, the parties opt for a three-member arbitral tribunal and the
president is nominated by the co-arbitrators.
ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
ICC EXPERIENCE WITH ARBITRATION OF
M&A DISPUTES
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2015 13.6% of 108
cases
2016 17.7%of 141
cases
2017 16.0%of 121
cases
ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
BETWEEN 1986-2016, ICC M&A DISPUTES
INVOLVED
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31
Countries
16.58 %
From
France
10.36 %
From
U.S.A.
9.84 %
From
The
Netherlands
Wide range
of business
sectors
1/3 of cases
involve
more than
2 parties
Ranging
from
US$ 2
million to
US$ 400
billion
ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
M&A : BUSINESS SECTORS
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Range of
business
sectors
Construction
Tele-
communication
Energy
Insurance
Finance
Metallurgy
Pharma
Industry
Food
Industry
ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
MOST DISPUTES RELATED TO
POST-CLOSING PHASE
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0
2
4
6
8
10
12
14
16
18
Breach ofRepresentations &
Warranties
Price Adjustment Specific Performanceunder Purchase
Agreements
Conditions Precedent Parties' obligationsunder NDAs and
ExclusivityAgreements
M&A Disputes at the ICC
No. of cases
ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
JURISDICTION
The various instruments comprising an M&A transaction
may contain different dispute resolution clauses.
A single instrument may combine different dispute
resolution procedures (typically expert determination and
arbitration)
TYPES OF DISPUTES
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
Different dispute resolution clauses
Are the clauses are compatible?
Claims which are usually made under different instruments can be determined in
a single arbitration, as is explicitly foreseen in Article 6(4)(ii) of the 2012 and 2017
ICC Rules of Arbitration
It is also not uncommon for the relevant instruments to contain provisions aimed
at coordinating their respective regimes (including dispute resolution) such as an
'entire agreement' clause indicating that the instrument replaces and supersedes
all previous stipulations.
Arbitration and expert determination
M&A agreements frequently provide for expert determination to settle factual or
technical issues arising out of the transaction
Res judicata and enforceability issues
ISSUES ARISING
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
The coexistence of a clause providing for expert determination and an arbitration clause can
cause jurisdictional and procedural complications.
The cliché chicken and egg: Arbitration cannot usually be undertaken until the contractual
expert has determined the technical or factual matter at issue.
Not always easy to demarcate the tasks of the expert from those of the arbitrators.
ICC Case 11587: C agreed to sell to R all the shares of several companies incorporated in
various jurisdictions. The SPA provided two different closing dates. At each date, 50% of the
shares of the target companies were to be transferred against payment of 50% of the
purchase price. Price was subject to adjustment depending, amongst other things, on the
determination of the consolidated net equity of the target business.
Buyers claimed that any dispute relating to the calculation of the price was to be settled by
expert determination pursuant to the dispute settlement clause contained in the contract,
and requested the appointment of a contractual expert.
Seller objected, arguing that the dispute extended beyond mere price determination and
covered the buyers' compliance with their contractual obligations.
THREE PARTIAL AWARDS
ISSUES ARISING
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
Limited scope of the arbitration agreement and arbitral tribunal's jurisdiction over the
parties' pre-contractual liability
If preliminary negotiations fail, a party may raise claims related to the other party's
conduct during the pre-signing phase, alleging a breach of pre-contractual obligations or
the general duty to negotiate in good faith and relying on an arbitration agreement in the
negotiated agreement (eventually unsigned) or in one of the preliminary agreements
entered into during the negotiations.
Case 11789: Tribunal rejected the respondents' objections, and upheld its jurisdiction
over the pre-contractual liability claims made by the claimant. It determined that the
arbitration clause was not limited to claims 'arising out of' the agreement, but extended to
all disputes 'in connection with' the agreement.
PRE-CONTRACTUAL LIABILITY
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
Means of protecting the status quo and endanger the successful outcome an on-going
arbitration.
Conservatory measures can be used to:
Prevent the seller from aggravating the financial situation of the target company before the
closing;
Enforce confidentiality or exclusivity agreements pending finalization of the transaction;
Enjoin a party to abstain from disposing of the shares of the target; and
Order a party to refrain from calling a bank guarantee issued to secure the parties'
obligations under the contract, or require a party to place the purchase price or shares in
escrow.
Under the 2017 ICC Rules of Arbitration, arbitrators are empowered to order provisional
and conservatory measures pursuant to Article 28(1), which expressly authorizes the
arbitral tribunal to issue such measures in the form of an award: Unless the parties have otherwise
agreed, as soon as the file has been transmitted to it, the arbitral tribunal may, at the request of a party, order any interim
or conservatory measure it deems appropriate. The arbitral tribunal may make the granting of any such measure subject
to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving
reasons, or of an award, as the arbitral tribunal considers appropriate.
INTERIM AND CONSERVATORY MEASURES
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
Bifurcation: Common in M&A arbitrations, where arbitral tribunals often deal with preliminary
issues by means of interim or partial awards.
• Interim and conservatory measures: Important in M&A, SPEED
• Fast-track Procedures Versus Urgent Measures: Speed Vs. Finality
• Fast-Track, Expedited, Accelerated Procedures
ICC statistics: 15 cases related to M&A disputes conducted on the basis of shorter deadlines
out of 175 fast-track arbitrations administered by the ICC. This represent 8,50% of the fast-
track cases. If the 175 fast-track cases are compared with the cases filed in 22 years, the
result demonstrates that fast-track cases including the M&A cases represent an infinitesimal
percentage of 1.50%.
it is difficult to understand how time limits can be significantly shortened in complex disputes
especially where bifurcation is sometimes indispensable, for instance in cases where the
arbitral tribunal is required to decide about liability before hearing the parties on the quantum
IMPORTANT PROCEDURAL ELEMENTS
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
Confidentiality: Any breach of these obligations may be pre-empted by means of interim
measures, or may be subsequently sanctioned in an award on the merits. It is not always clear
whether the parties' obligation of confidentiality extends to the arbitration proceedings. Considering
the uncertainty that still surrounds this issue, parties should draft confidentiality provisions so as to
clearly indicate whether, and to what extent, the arbitral proceedings are covered by the duty of
confidentiality.
IMPORTANT PROCEDURAL ELEMENTS
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ICC INTERNATIONAL COURT OF ARBITRATION ®
ICC INTERNATIONAL CENTRE FOR ADR
Tunde Ogunseitan
Counsel
ICC International Court of Arbitration
33-43 Avenue du Président Wilson, 75116 Paris FR
+33 1 49 53 28 36
THANK YOU
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