The ancient principle si vis pacem, para bellum (if you wish for peace, prepare for war) still holds true for modern-day M&A deals. During the drafting of the transaction agreement, the parties should prepare themselves for future disputes. Since arbitration can ensure that the tribunal deciding on the merits will have the special expertise required for complex disputes such as those arising out of M&A deals, it is common for parties involved in such transactions to submit their disputes to arbitration.
Other commonly known advantages to arbitration include confidentiality and procedural effectiveness. In complex M&A transactions, the dispute between the parties will often involve numerous agreements; thus it is important to draft arbitration clauses in way that will cover all agreements and all aspects of the dispute. In such deals, the disputes also tend to be based on corporate rights and obligations such as claims for the invalidity of corporate decisions.
Under Hungarian law, these claims may only be submitted to arbitration if they go against the decision of the members’ (shareholders’) meeting; thus it is advisable to take this into consideration when delegating corporate powers. During the drafting of the arbitration clause, the parties should clearly establish the relevant institution for arbitration, the procedural rules, the number of arbitrators and the governing law.
The price aspect of these decisions should also be taken into consideration, as a complex procedure could significantly raise the (generally high) costs of arbitration, and thus could hinder some parties, especially minority shareholders, from enforcing their rights in the future.