UK: Arbitrating M&A Disputes How The Arbitration Landscape Has Changed And Where Technology Might Take It Next

Last Updated: 19 September 2019
Article by James Rogers and Matthew Buckle


Few Latin phrases are remembered better by law graduates than caveat emptor, meaning "buyer beware". It is the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made. Sophisticated M&A lawyers have long since mitigated this buyer risk through expansive due diligence exercises and tight contractual controls. In particular, M&A deals feature often heavily negotiated representations and warranties, designed to provide a purchaser with a cause of action against the seller in case of skeletons in the closet. Post-acquisition price adjustment mechanisms are another means for the parties to revisit the equilibrium of the transaction after the deal has closed. This article examines the growth of arbitration as a forum for resolving disputes that arise from these contractual mitigants of risk, before considering the impact of legal technology in this area.

Getting what you pay for and paying for what you get

Representations and warranties are simply statements contained in the contractual transaction documents and made by the seller to promise that certain facts are true, usually pertaining to the target business and in particular its financial and operational health. A common example is that: "The company is not involved in any litigation". Where after closing, the statement turns out to be false, the buyer has a contractual cause of action, usually to recover monetary damages.

As corporate lawyers have sought to minimize buyer risk, so representations and warranties have become increasingly expansive, designed to provide belt and braces protection to a buyer, and plug gaps (known and unknown) in the buyer's due diligence exercise.

Lawyers on the other side look to protect the seller by including within the sale and purchase agreements terms designed to exclude, reduce or carefully delimit the seller's liability, including for example through the use of disclaimers or exclusions, contractual limitation periods and de minimis and de maximis thresholds for claims.

Price adjustment mechanisms are another important means for the buyer to ensure that it only pays for what it gets and that the seller gets fair value for what it sells. Earn-out provisions, for example, subject the purchase price to adjustment post-closing based on some future metric, normally turnover or profit performance.

Risk mitigation means disputes

Of course disputes can arise at all stages of an M&A transaction, including before the deal is signed and between signing and closing. At the pre-signing stage, these disputes commonly relate to alleged breaches of whatever agreements have been put in place at the nascent stage of the deal: memoranda of understanding, letters of intent and confidentiality agreements, for example.

In between signing and closing, it is common for disputes to arise over the non-fulfilment of conditions precedent or other contingent obligations set out in the agreement, requiring procurement of certain outcomes, for example, relevant authority approvals for the deal or putting in place appropriate escrow arrangements.

But post-closing disputes can often be the most difficult. Although designed to reduce and mitigate risk, representations and warranties and price adjustment mechanisms are themselves a common source of disputes, given that in essence they each provide a means for one party to challenge the quantum of the transaction consideration after the event. This can result for the other party in a significant shift away from the deal that it thought it had done, which is a recipe for a bitter fight.

Arbitration of M&A disputes

Arbitration has become a prominent forum for the resolution of corporate disputes, including those arising from M&A deals. The LCIA's 2018 Annual Casework Report records that 2018 saw a significant increase in the number of shareholder, share purchase and joint venture agreements being referred to LCIA arbitration. The proportion of total LCIA cases involving disputes arising from such agreements was 21 per cent in 2018, up from 15 per cent in 2017. By contrast over the same period there was a 3 per cent fall in the number disputes involving loan and other debt facility agreements.

One particular advantage of LCIA arbitration in the context of an M&A dispute is that the LCIA Rules (unlike some other forms of arbitration) contain an express confidentiality obligation. As a general rule, transaction parties will often prefer to address disputes over the deal in private. Particularly, for example, disputes in relation to purchase price arising potentially many months after the deal has become public knowledge or the target has been merged into the purchasing entity.

Another attraction of arbitration is the parties' ability to choose their arbitrator, thus tailoring the expertise of the tribunal to suit the particular facts at issue. Post-closing disputes in particular often centre on factual, accounting or technical issues (establishing whether the warranty was true or whether the price should be adjusted) rather than purely legal issues.

For the same reason, it is also common in an M&A context for the parties to include provision in their transaction documentation for expert determination, either as a preliminary or parallel step to pursuing claims in arbitration. Although decisions of an expert determiner might be contractually binding, they are not enforceable like a judgment or arbitration award, and so must be the subject of a separate further action in court or arbitration if not voluntarily complied with.

Evolution of arbitration

There is sometimes a sense that arbitration might have risked becoming a bit of a victim of its own success in resolving commercial disputes. Having begun life as a shorter, cheaper, alternative process for resolving disputes privately on a bi-partisan basis, its huge growth to become a predominant forum for cross-border commercial cases has meant that it has had to evolve to meet the needs of more and more complex circumstances. Big-ticket arbitrations are now likely to involve at least the same time, costs and complexities as English litigation.

Recent years have seen significant efforts by the leading arbitral institutions to ensure that arbitration remains a flexible and effective forum and to meet other challenges in relation to complex corporate disputes.

In particular, M&A deals often involve not a single bi-partisan agreement, but a suite of transaction documents between multiple parties. This might include the buyer, seller and the target company but also other shareholders, any guarantors and even any key suppliers, subsidiaries or other stakeholders. As most arbitral rules are written on a bi-partisan basis (i.e. claimant versus respondent), arbitration does not at first sight readily lend itself to disputes arising from such multi-party, multi-contract disputes, particularly where each transaction document might have its own arbitration agreement. Clearly such an arrangement runs the risk of multiple parallel proceedings relating to the same set of facts.

Many institutions, including the ICC, have therefore added clear provisions on consolidation and joinder into their procedural rules and by incorporating such rules into their arbitration agreement, parties will normally have consented in advance to the possibility of the consolidation of proceedings and the joinder of third parties in disputes arising under compatible arbitration agreements.

What is a compatible arbitration agreement and whether there is clear consent from all parties for consolidation or joinder is not always straightforward of course. Although the institutional rules provide a clear procedure for consolidating proceedings or adding parties, arbitration is still a consensual process and the clear consent of all of the parties to the proceedings will need to be established following normal contractual principles. This means that arbitration clauses containing consolidation or joinder provisions are notoriously difficult to draft, generally requiring either something entirely bespoke and very specific, or else, at the complete opposite end of the spectrum, something very light touch.

Addressing time and cost concerns, many institutions have introduced or clarified rules designed to provide for expedited arbitration, with simplified procedures and restrictive time limits. The ICC expedited procedure rules for example do away with the Terms of Reference stage and foresee that a tribunal will generally determine the case on paper, on the basis of limited documents and pleadings, and without a final evidentiary hearing.

These elements can be tailored of course, and there remains in Article 22 of the ICC Rules both the duty on the tribunal to manage the case effectively and also the discretion over how the proceedings are carried out to discharge that duty. This is a duty that extends to the parties to ensure that the proceedings are carried out expeditiously but proportionately. As well as saving time in an appropriate case, the expedited procedure is cheaper. The ICC online costs calculator suggests anticipated arbitration costs are around 20 per cent lower following the expedited procedure versus the standard ICC procedure.

Finally, M&A disputes may require interim measures on an urgent basis, in particular in those cases arising between signing and closing, for example to compel or prevent actions being taken by either party that might affect the value of the target. Although arbitral rules have long since recognized the right of parties to go to a competent local court to obtain such relief on an urgent interim basis (see for example Article 28(2) of the ICC Rules), the introduction of emergency arbitrator provisions to provide interim relief from a promptly appointed sole arbitrator (who is thereafter prevented from acting in the main dispute on the merits), has reinforced the ability of parties to obtain such urgent relief within the agreed disputes forum, that is to say within the arbitration.

The decision of the English High Court in Gerald Metals SA v Timis Trust [2016] EWHC 2327 (Ch) further underlines the shift. The effect of the decision in that case was that by opting the availability of emergency arbitrator relief into the scope of their arbitration agreement (by incorporating by reference institutional rules containing emergency arbitrator provisions), parties are likely to have limited the jurisdiction of the English court to grant that interim relief.

These trends underline that arbitration is a preferred forum for resolving corporate disputes.

Future trends

Like many areas of legal practice, technology is changing the way that parties approach M&A deals and disputes. For example, Norton Rose Fulbright has developed a number of legal processes that automate and add significant efficiencies to the management of satisfying conditions precedent, a key stage of completing any M&A deal. As such processes become more and more standardized in order to be capable of being better and better managed by computers, so the data relating to such matters becomes more consistent. Consistent data sets and machine learning then allow for more exciting uses of artificial intelligence, including useful and error-free data analysis and, with that, outcomes prediction.

Many M&A disputes turn on accountancy data and the purchase price ultimately paid (and any adjustment to it) is often linked to the company's accounts or other financial reporting, carefully compared to contractual reference dates. Presently this typically requires an accountancy or valuation expert witness to undertake a forensic exercise, reviewing relevant data and documents, before filtering and analyzing the information revealed in order to opine on the outcome of those data and documents in a written report upon which the expert will be crossexamined in front of a tribunal.

Numerous legal technology tools are already available and utilized by the best legal and accountancy teams to assist and streamline this traditional approach – including e-disclosure tools that utilize predictive coding to sort data sets and data visualization and analytics tools that sort and present such data to the tribunal in the most comprehensible and persuasive way. This is the advocacy of the now, rather than the advocacy of the future.

However, as the objectivization of data continues (and particularly as legal technology solutions are increasingly used at the front end of a transaction, as in the case of conditions precedent automation), we will increasingly see innovative process-led solutions being applied not merely as bolt-on tools that augment a traditional approach to the resolution of disputes arising from such transactions, but as genuine alternatives to those traditional approaches. A dispute over whether a condition precedent has been complied with, a representation was true, or a price adjustment is required will, for example, become increasingly the product of a computer's reading of the consistent and objective data at the computer's disposal in relation to those promises, and less and less about human interpretations of that data.

About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see

Law around the world

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions