M&A in international arbitration: an Indian perspective
September 24, 2021
Globally, mergers and acquisition (‘M&A’) transactions have seen an upsurge in 2018, with announced transaction volumes reaching $4.1 trillion, with growth likely to carry on in 2019 as well.1 As the volume of M&As grow, disputes in relation to M&A transactions may correspondingly also be on the rise. In an increasingly globalised world, cross-border M&As should be of increasing relevance, and therefore merit consideration. This development, in itself, is significant and should inform understanding of future challenges, and trends in resolving the same.
The unique nature of M&A transactions especially in the context of cross-border transactions, very often leads to arbitration being the mode of dispute resolution of choice. This is largely because arbitration in M&A has the benefits of commercial effectiveness, neutrality of forum, choice of arbitrators, and more importantly, the arbitral process allows parties necessary flexibilities in handling proceedings.2
Unique concerns which arise in the case of crossborder M&A transactions include pre-closing disputes, post-closing disputes which include within its ambit purchase price adjustments, claims over indemnification rights, disputes over representations, warranties and indemnifications, as well as disputes over shareholder rights (such as rights of exit and buy-outs). Additional issues include the choice of international arbitration v expert determination, fraud claims and disputes over clauses in the nature of buy-out clauses, call and put options, and pre-emption rights.
In light of the significance of this topic, the present paper discusses the above issues in the context of the treatment of the same in the Indian experience. Thus, to that extent, the present paper aims to provide an overview of the legal treatment of the issues indicated above, in light of legal precedent in India, with the exception of Part I, which is a functional discussion.
The paper is structured into four parts. Part I deals with both pre- and post-closing disputes, and touches on price adjustments and earn-out provisions specifically. Part II deals with potential challenges arising out of the difference between expert determination and arbitration. Part III discusses the concepts of representations, warranties, indemnities and fraud claims in Indian law. Part IV deals with key issues that may arise in shareholder disputes involving put and call options, oppression & mismanagement, pre-emption rights, which are relevant in the context of arbitration under Indian law.
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