By: Luis Gerardo Ramírez Villela
Dispute management is relevant in any merger and acquisition and to the extent it is in a cross-border transaction, several considerations must be taken into account whether as purchaser or seller, for purposes of handling carefully any controversy in connection with the relevant agreement.
Cross-border transactions may raise disputes between merger parties including issues related to due diligence, contractual obligations, breach of pre-closing obligations and post-closing obligations, representations and warranties, and adjustments to the purchase price, amongst others.
In this respect, an arbitration procedure may be a more efficient way to manage any dispute in an M&A transaction besides litigation process, which could be time and cost effective in some events and depending on the specific jurisdiction of the competent courts.
Choosing arbitration as dispute resolution mechanism under an M&A transaction, may generate some risks, specifically related to discovery process which may limit the ability of the parties to enforce the rights and obligations under the purchase agreement, but at the same time could help the merger parties of avoiding publicity and preserving confidentiality.
To the extent the merger parties decide on an arbitration procedure as dispute resolution mechanism under the relevant purchase agreement, then such parties may opt between the Rules of the Mexican Arbitration Center (Centro de Arbitraje de México) or the Rules of the International Chamber of Commerce (Cámara de Comercio Internacional), although there are other options that may be considered by the parties.
Such is a practice considering that in our country, the Mexican Arbitration Center is a specialized institution in private commercial arbitration procedures, which is recognized for its support in national and international regulations, while the International Chamber of Commerce is an organization in charge of providing protection to companies from different countries in the world in terms of commercial operations (advisable in cross-border transactions).
Please be advised that under M&A disputes, arbitrators may not only decide on the amount of a price adjustment or to award specific damages and loses to a party, but to create any resolution awarding any specific needs under the relevant agreement.
Please note that in order to have a successful M&A arbitration process, it is necessary to be careful in drafting an effective arbitration clause, and deciding previously on the experts that would be assisting to the extent a dispute arises.
