The aspect of Enforceability of Arbitration clause in Cross Border Mergers and Acquisitions serves as a redressal mechanism for the contractual conflict between two parties engaging in either cross border Mergers or Acquisitions since the legality of two different entities varies due to the variance in law system and difference in the intricacies of contract. The clause adding the factum of dispute resolution serves as the circumvention scheme of disputation in the future. Additionally, In this manuscript, we would thoroughly discuss the future aspects of arbitration with the inculcation of technological and futuristic aspects of it. The very pertinence of the methodology of dispute resolution when combined with company laws so constructs a conglomeration of legality with commercial and arithmetical aspects which transpire to be a constituent of the incongruity of minds of the corporate houses reasonably due to variance in applicability or the modus operandi being contradictory, To which Arbitration is a substantial elucidation.

Introduction:

1. Types of Mergers & Acquisitions

   The very concept of Mergers & Acquisitions in the juncture of the companies is very salient and with the advent of globalization there has been a rise in the scenario of Cross-Border Mergers, However since there are jurisdictional variations and there can transpire, A series of legal disputes. Arbitration is a fairly contemporary facet in the case of two or more companies coming together.
   
   Mergers are not accurately defined in either the Companies Act or the Income Tax Act, Mergers are of different brackets. There are certain mergers that need to be approved by the Competition Commission of India when we talk about the jurisdictional aspect of India. India lately has become the hub of countries trying to have transactional relationship with. When companies get money from outside India, Foreign Exchange Management Act comes into account.
   
   The different types of Mergers are namely, Horizontal mergers, Vertical mergers, Congeneric mergers, Conglomerate mergers, Cash mergers and Triangular mergers. Mergers are a type of scheme economical in nature and invites varying law points to be taken into consideration, Arbitration ensures pre- and post-closing transactions of Mergers and Acquisition to be mutually adjudicated upon such that the relationship of two parties namely the companies are not embittered. In modern times, The incorporation of the Arbitration clause has become a norm in order to avoid future disputation.
    

2. The Indian Perspective

   When we talk about the stature of Mergers in India, It is a court-driven procedure. However, when we talk about Acquisition, It refers to A company buying B company. The M&A concept transcends a risk allocation mechanism as well as for the greater good. The companies need to water down the past liabilities and get acquainted with the liabilities the company would from a fresh point behold since if it is later alleged for a liability, It can contest and plead innocence.
   
   The concept of My Watch and Your Watch also seeps in. My watch pragmatically refers to me as an entity being responsible for all my liabilities till the other entity does not come into the picture and your watch would be the liabilities so accruing after I as an entity handover my company to the other person as his transcending that fact that the other company has now the sovereignty over it. So as to safeguard itself from the aegis of fraud in the future, All declarations & disclosures are needed to be done so as with regards to the past liabilities of the company, It is indemnified and losses are not bear by it. The concept of Material adverse effect is also put forth to contention.
   
   We need to in the context of the companies need to have a holistic approach to the transactions such that all compliances are done and none of the lacunas are left behind. There is importance of the inclusion of some very important clauses such that the government is also notified about the prudency of the company and for it to represent the company in the case of cross-border disputes. However, The very facet of material adverse effect is not inclusive of facts that are apparent to the world at large. There should in the cases of contracts that are cross-border be a lack of adding up blanket statements and the legality in its very basic premise shall entail the aspects of legality and accuracy.
   
   The new approach entails the addition of anti-nuisance clause as well which transcends the withdrawal of petty liabilities from one company to the other. Emphasizing upon the facet of Cross-Border mergers, This very transaction is in consonance with Section 234 of the Companies Act, The prior approval of the Reserve Bank of India is a requisite since it is the foremost regulator and supervisor of the overall financial system of the country. Some countries are exceptions to the Cross Border Merger engagement with for instance India and Pakistan cannot enter into such transaction. The valuation of the companies is required to be exhibited.
   
   The judicial system is hitherto burdened by the enumeration of pending listed cases, This is when the beauteous aspect of Arbitration can be deemed convenient. During the contractual correspondence between two entities of varying countries, the cherry-picking of arbitrators, laws and jurisdiction is what can be decided under the aegis of the contracts and dispute, if any accrues, the same can be resolved through a peaceful and intellectual settlement take into consideration all the factors and providing an amicable solution to the same.
   
   Arbitration takes into account confidentiality, a specialised arbitrator, the liberating facet of drafting of contracts in preferred language, and other factums into account which make it a convalescent approach than dispute resolution. However, a contractual facet may account the presence of hefty implication of monetary contrivances, the applicability of travel, and other differences that may as well accrue. Arbitration can be deemed to be a methodology of dispute resolution that is expensive and may as well require sizeable solicitisation of capital.
   
   There are numerous contentions in the favour of the arbitration clause in terms of cross-border merges & acquisitions however, there are some factors such as the proceedings being complex and sometimes full of pitfalls being relevant but the virtuosity supersedes the shortfalls and there is no exposition of toppling of the particular procedure and only magnification and success is in deliberations. [1]
    

3. Arbitration : A global Evolution

   Arbitration when we conjunct it with respect to M&A includes a lot of foreign seated agreements for instance, In Singapore there is a requisite of compliance of CIAC rules, Since India perceives Singapore to be cost effective there are a lot of Arbitration instances with regards to that particular country. Agreements are with regards to India are governed by law of India. There persists the factor of inhibiting number of arbitrators for both parties and third arbitrator who purports a neutral side and the entire proceeding is adjudicated by an arbitral tribunal.
   
   The requisite seat of arbitration governs what law would govern the arbitration, Sometimes the seat and venue for arbitration could be two distinct jurisdictions. Another facet is the selection of language which is then fixated. The order purported by the arbitral tribunal is final & binding and the parties mutually and contractually agree to it. The varying contentions and clauses have to set out through the arbitration clause. Hereby dictating the importance of crisp drafting and the importance of being prescriptive and erasing ambiguities. After 30 days of sending notice to the other party, the arbitration process begins.
   
   However, owing to the variability in agreement styles of different countries, The arbitrator needs to disseminate and debunk the expectations of the parties of two different countries for instance UK's pattern of draft is detailed and language is deemed to be of utmost importance however USA's agreements are of a simpler language. The countries need to amicably settle for such a resort that they do not circumvent the law. The very premise of arbitration in the context of M&A transcends the factor of the commercial interest which needs to be satiated between the parties. Company's control can be held by different persons variedly since it is a complex phenomenon depending upon the type of the company and its tenets and when the conflict seeps in, a lot of legality is also put into picturization.
   
   There might as well be an alteration of the agendas of the company and a change in its economic dogmas since its inception and that might as well be a condescending factor of disputation between companies of two different countries. The very fact that the merger for instance between two companies is transpiring for instance, The Articles, numbers, agendas, and expectations can be entirely variable and hence there is a possibility of conflict to accrue, this is where arbitration is procedurally esteemed to suit the parties' respective narratives and formulate a coherent solution and dissipate the problems and bestow conclusions.
   
   There is a colossal upscale in the diasphora of Mergers & Acquisition in the global sphere hence naturally accrues the probability of conflict with regards to the transactions and that is where the concept of Arbitration plays an integral role. Arbitration has emerged to be a form of dispute resolution largely by people on the basis of the flexibility that it provides and imbibes. The choice of arbitrators bindingly provides the parties to choose specialized arbitrators who are specifically specialized in their respective genres,
   
   Secondly, the commercial disputes include many numbers and hence the dispute with regards to the commercial aspects may as well be conflictual. The forum in its very premise is flexible and allows neutrality to seep in where
   
   The parties can very coherently put forth their contentions and the conclusive point is an amicable solution and settlement. The autonomy of the parties too is very well respected and there is choice with regard to many aspects. Variedly, The Indian accounts of cross-border transactions include hefty and intertwined/complex transactions which may as well need specific and intrinsic solutions to the problem so posed.
   
   The very facet of expert determination is an alternative of arbitration however there is a lack of legislation being present to govern the same and it is not enforceable as well. The Apex Court of India has laid down three tests to cast differences between expert determination with arbitral award. The very importance of the stakeholders drafting their arbitration agreement becomes very important since the facet of certain clauses in the contract may as well be a factor of triumph or compromise. [2]
    

4. Prospects of Arbitration in India

   Indian companies tend to have jurisdiction outside India for the advent of neutrality in the Cross Border Mergers & Acquisitions and by the element of globalization there are a lot of nuances to the contracts of Indian companies with foreign companies. There is a constituent of the addition of the arbitration clause as a recourse and it is an optional aspect however lately companies have started to add the particular clause to avoid disputes in future prospects of friction between the companies or when a party fails to be in compliances with certain clauses.
   
   To settle the strife between the companies since it may as well transcend a lot of pecuniary elements and legality accompanied by it. Arbitration in its essence serves as platform for the parties to come to a conclusive clarification by the presence of arbitrators being the pundits who have through numerous years of skill and mastery have gained the prospect of the ability to provide solutions in case of a tiff between companies engaging in contracts, they may as well be commercial or of different archetype and conflict may as well accrue in the same.
   
   The parties while one of them being an Indian company in a cross border merger for instance decide upon the applicability of law beforehand for instance, The contract may as well priorly decide that The Indian Arbitration and Conciliation Act, 1996 will be the point of the decisive factor of legality in case of a conflict, It has catered to have the intricacies in case of Indian v. Foreign company's transactions.
   
   It is a very opulent aspect for Indian companies to opt out for the arbitration proceedings outside of India since there are many aspects such as geographical, financial and legal conveniences that make it a vogueish practice in the juncture of the corporate world at present. Pragmatically, Companies tend to respect the resolutions provided by foreign forums since there is a lot of expenditure involved and the particularity of autonomy and esteem is higher in the global forum.
   
   Companies have the necessitated contrivances of finances since they largely are affluent and have since their inception gained capital and run mostly for the objective of capital gain and monetary interest. Even commercial transactions having the arbitral jurisdiction in India have to abide by the Indian act of Arbitration. And, in the case of exemption of the Indian Act in the companies' transaction they must avoid having India as the forum/jurisdiction of arbitration. [3]
   
   The future of arbitration may as well inculcate the factors of technology into account and there may as well accrue arbitration proceedings in subsequent years that would not mandate jurisdictional sanctions since by the very plinth of digitalization, Arbitration would become an easy, binding, and accessible method of resolving conflicts. Many arbitration institutions have taken efforts to digitalize the advent of arbitration and have tried to conclusively put it into practice in the future.
   
   However, the very factor of privacy and protection of confidential information needs to be taken care of, since there is a very possible chance of invaders barging in and creating tools that further dispense the authentic and confidential information from the proceedings. Digitalization most often comes up as a positive impact on the respective legal systems however the very cons cannot be put to ignorance. There should be altogether a new scope and discussion and the impartment of a robust framework while dealing with online arbitral proceedings.
   
   The very beauteous aspect of arbitration is that while the digital mode of arbitration not being in vogue so much but, the future prospects are thoroughly discussed to have a rough idea of what the future holds in these aspects. Economical feasibility, accessibility, and productivity are some of the essential factums of arbitration as a global intervention. While arbitral proceedings on a digital front might be an excellent instance of mutual exchange of insights it may as well too propagate communication and foster good relations between two states/entities.
   
   There would persist a high need for the countries/entities to safeguard their respective connections on the digital front to uphold their technological sanctity such that the dispensing of confidential information is avoided and productive and beneficial outcomes are accrued. However, the facet of in-person proceedings can be put to comparison with the digital form of arbitration since the very intricacies of the proceedings include emotional value, sympathy, and other such adulation that may as well not be transcended during the digital arbitration proceedings.
   
   The old-school maestros of arbitration may as well not be acquainted with the technological attributes of the digital proceeding and that may serve as a lacuna. The very future is ambiguous as to whether there would be positive ramifications or not. The very intricate fabric of the legal aspects comes with detailing and neutrality along with a grip on the subject matter that might as well vary for people belonging to different geographical boundaries. For instance, An arbitrator from a selected country may as well constitute different pre-conceived notions and that might affect the disposition of the arbitral proceedings along with cultural differences.
   
   However, the advantageous position includes the accessibility of multiple parties to be able to communicate through various platforms such as emails, video conferencing, and different systems such that at any point of time owing to any clarification, argumentation and conclusivity is deliberated upon. [4]Arbitral proceedings can too serve as the methodologies adapted to talk welfare about the entities so coming in conjunction. Owing to Limited foreign investment, Entities may as well impart limits in takeover in certain sectors.
   
   Pragmatically, The entire landscape of legality of a particular country is understood and made the entity well adversed with however during the cross border transactions, A concoction and complex web of legalities of two differing entities may as well entail for further disputation. The problem of due diligence compliances may as well not be purported to the satisfaction of the other entity and that is where the advent of arbitration may as well provide a avenue of coming to a particular stance.
   
   However, the entities so involving in cross-border mergers or acquisitions for that matter are distinguishably educated and prudent to be decisive and aware about the transaction transcending a valuable or beneficial niche. As we know businesses are a mechanism inclusive of huge risk-taking abilities of various entities and thus dispute resolution could be an illustrious method to go about.

Conclusion:
Being diligent about the intricacies of commercial transactions to be inclusive of risks is a normative fact and there is no such thing as a globalized conglomeration of business houses to be an avant-garde. There is no scope as to forbearance of Cross-Border convergence in the future hence, For India to be under the umbrella of globality there is a high need for business entities to come together regardless of geographical restrictions and mutually benefit one another pecuniarily and follow the inclusion of arbitration clause in the contracts between the two entities that would further constructively shield the entities and would prove to extricate the autonomy of two commercial establishments where there persists the essentiality of law and the fabric of sovereignty. Without injuring the tenets of the constitution of the entity ahead, The principle of mutual benefit shall prevail. [5]

End Notes:

1. Legal Vidhya, https://legalvidhiya.com/the-role-of-arbitration-in-cross-border-mergers-and-acquisitions/. (April 06, 2024)
2. Shardul Amarchand Mangaldas, https://www.amsshardul.com/insight/ma-in-international-arbitration-an-indian-perspective/. (April 16, 2024)
3. Arbitration clauses in cross-border transactions – Indian perspective, https://www.lakshmisri.com/insights/articles/arbitration-clauses-in-cross-border-transactions-indian-perspective/#. (April 17, 2024)
4. Maud Piers & Christian Aschauer, Arbitration in the Digital Age, 11-36, 2018
5. Brigitta Naunton, Cross border mergers & acquisitions: What are the legal issues? Harper James, 2022

Written By: Devika Raj