USE OF ARBITRATION IN CROSS-BORDER M&A DISPUTES

In recent years, the mergers and acquisitions (M&A) market has shown steady signs of recovery from the effects of the global financial crisis. According to a survey of over 1000 M&A professionals conducted by KPMG, 63 percent of those surveyed said they were planning acquisitions in 2014. Respondents cited large cash reserves, opportunities in emerging markets and the availability of credit on favourable terms as the key drivers of deal activity. Research conducted by Deloitte suggests that the surge in deal activity is set to continue into 2015. Eighty-four percent of 2500 corporate and private equity respondents surveyed reported that they anticipated a sustained pace of M&A activity over the next 24 months. This optimism has been shared by leading law firms, which have also predicted significant M&A activity going forward. Accordingly, extensive activity is expected across a wide range of sectors, including the financial services, energy, healthcare and TMT industries.

Arbitration clauses are now a regular feature of M&A contracts, particularly those of an international nature. A trend has emerged of subjecting M&A disputes to arbitration. For example, the €480m dispute between Philips and Funai Electric over a failed sale of the former’s consumer multimedia entertainment business is just one of a number of high-profile M&A cases which has seen one of the companies involved turn to arbitration over a soured acquisition.

In Hong Kong, the number of M&A disputes administered by the Hong Kong International Arbitration Centre (HKIAC) rose by more than half from 2012 to 2013. However the actual number of deals that have been resolved by arbitration could potentially be far higher as a number of cases are often resolved by ad hoc arbitrations in Hong Kong.

Jan-Mar 2015 issue

Hong Kong International Arbitration Centre