Deal-Related Litigation in Colombia and Latin America

This is an Insight article, written by a selected partner as part of Latin Lawyer's co-published content. Read more on Insight

M&A deal flow in Latin American jurisdictions has not been as prominent as in other jurisdictions, including the United States.

For example, for the first three quarters of 2020, according to KPMG,[2] approximately 8,391 M&A transactions were announced or consummated in the United States, while, according to Transaction Track Record,[3] 1,517 M&A transactions were announced or consummated in Latin America, and the aggregate value of those transactions was US$1,136.5 billion and US$46.8 billion, respectively.

It is not surprising, then, that there is also less deal-related litigation in Latin America than in the United States. However, even on a proportional basis, there also appears to be less deal-related litigation in Latin America than in the United States and other common law jurisdictions, where the system itself favours the development of corporate law through judicial precedent.

For example, according to Cornerstone Research,[4] between 2009 and 2018 an average 86.5 per cent of M&A deals over US$100 million resulting from acquisitions of publicly traded companies in the United States were challenged by M&A related litigation from shareholders claims (that is, excluding all private target deals, disputes between buyers and sellers and representations and warranty insurance claims). This type of litigation is almost non-existent in Latin America, given the size of the capital markets and the minimal number of M&A transactions in our jurisdictions that occurred over publicly traded targets.[5]

This chapter addresses disputes between buyers and sellers and other signatories to the M&A agreements, as opposed to derivative claims by shareholders of the target or of the seller or acquirer and other third-party claims, the manner in which these are usually resolved in Colombia and in Latin America and the parties’ incentives to proceed (or not) with arbitration or litigation once a dispute arises.

There is a common view across Latin America that our jurisdictions are not as litigious as the United States or Europe when it comes to M&A deals. This seems to be aligned with the perceptions of our colleagues across countries in Latin America.

Colombia is in fact highly litigious across the board, on torts, criminal matters, general civil and commercial litigation, administrative and government contracting matters, real property, family and estate matters, corporate governance issues, etc. This is one of the reasons why our court system is so heavily congested, and even though lawsuits and criminal investigations are common and numerous, final decisions take years or even decades to obtain.

However, the overly litigious nature of the Colombian market had not historically permeated the M&A dealmaking arena. As a result, decisions in the court system related to M&A deals are extremely limited, and while there has been some activity over the past years in arbitration, only a handful of publicly available arbitration awards have been produced regarding M&A matters. Most of those arbitration awards are fairly recent and started emerging back in the early 2000s.

However, it appears that deal-related disputes in Colombia have been on the rise. Some years ago, the norm would be that parties would shy away from initiating claims, whereas in recent years we have seen that parties will increasingly consider presenting post-closing, deal-related claims whenever they have a contractual right to do so. Our colleagues throughout Latin America attest that our experience in Colombia is similar to what they seem to be facing in their home jurisdictions.[6]

In recent years, there appears to be a trend of a moderate increase in deal-related, pre-litigious claims. However, the numbers of actual lawsuits generally seems to have remained consistent with a slight trend of moderate increase in the region up to March 2020.[7] Unsurprisingly, lawsuits related to post-M&A operations apparently reduced from the beginning of the covid-19 pandemic.[8]

It may be that parties are more wary to begin full-blown litigation or arbitration, whereas they are becoming more and more comfortable with initiating claims to at least prompt a negotiation with opposing parties to resolve differences. We generally perceive that a majority of deal-related claims are resolved by direct negotiations of the parties, outside of courts or arbitration tribunals.[9]

It further seems that arbitration as a dispute resolution mechanism is highly popular compared with domestic courts or other dispute resolution mechanisms.[10] The result is unsurprising, considering the rise in number of arbitrations, arbitrators and arbitration centers in Latin America in the past 20 years.

This chapter addresses the reasons why Colombian parties usually agree to resolving disputes via arbitration rather than litigation. It also highlights issues that should be considered in the drafting of dispute resolution clauses of M&A transactions.

Lastly, we provide a brief mention of certain topics that are commonly litigated or disputed, such as post-closing indemnification, purchase price adjustment and issues regarding escrow arrangements and amounts that may be retained. Additionally, claims regarding pre-closing matters such as conditions precedent, the occurrence of a material adverse change and compliance with interim covenants appear to have become more common due to the covid-19 pandemic.

Whether or not to proceed with arbitration or litigation

While deal-related claims may be on the rise in Latin America, parties seem hesitant to proceed with full-blown litigation or arbitration. Pre-litigious, deal-related claims seem to be on the rise in the region. This trend is not as overwhelming for full-blown litigation or arbitration proceedings.

Parties in M&A deals appear more comfortable initiating formal claims to seek to enforce their rights, but still not as convinced to go through with a full-blown litigation or arbitration to resolve disputes.[11]

Based on our experience, cost, time and effort are most likely the main reasons for parties to avoid full-blown litigation or arbitration. Considering that the majority of post-M&A disputes are resolved via arbitration, costs typically run high.

Furthermore, we perceive that clients are always hesitant to initiate litigation or arbitration unless there is a positive cost-benefit expectation. However, even though less common, there are cases where clients decide to initiate full litigation or arbitration as a matter of principle to defend their organisation’s interests and reputation in the market, regardless of the potential costs and benefits. Some clients may also go into court or arbitration proceedings with the expectation that a settlement early on may be available, often believing that initiating a lawsuit is a necessary step to bring the counterparty into settlement territory.

In some cases, parties may avoid litigation over a certain topic, as it may produce the effect of triggering the other party’s determination to also pursue full-blown litigation over other claims that could have not evolved into lawsuits or could have been resolved otherwise by negotiations. Once the door to litigation is open, when engaged and focused on litigation, and knowing that legal fees and other costs will begin to accrue, parties will usually decide to go ahead and claim for all other matters pending to be resolved. Therefore, parties may be hesitant to trigger the domino effect that could result from initiating litigation.

M&A agreements often include multi-tiered dispute resolution clauses, which provide for a mandatory negotiation period and for the submission of notifications of disputes within a specific time frame. If, as required by the agreement, parties to an M&A deal present detailed descriptions of their claims and defences prior to submitting a claim to litigation or arbitration, each could more readily realise the weaknesses of their allegations. It could also allow parties to more effectively assess the risks of moving forward with a litigation or arbitration, and thus incentivise direct negotiations.

Escrow agreements may have a significant impact on post-closing, deal-related litigation. It is unclear whether parties are more swayed to initiate claims when there is an escrow in place, allowing for retention of cash amounts in the escrow as a result of such claims. As we see it, the buyer’s opportunity to retain cash in an escrow arrangement has the potential to change the mindset of both parties when deciding whether to initiate claims. Absent an escrow (or similar guarantee)[12] the defendant to such claim will have no immediate economic incentive to dedicate substantial time and efforts to amicably resolve claims, unless such claims have a strong basis or have the ability to cause increased damages. In our view, a lack of escrows or similar guarantees in an M&A deal disincentivise parties to pursue claims or initiate lawsuits such as M&A deals that include liability-restricting provisions (e.g., caps, baskets and de minimis).

Parties prefer to submit their disputes to arbitration rather than to domestic courts

Arbitration seems to be the prevalent choice as a dispute resolution mechanism in M&A deals in Latin America.[13] Arbitration, whether domestic or international, appears much more popular than litigation in domestic courts, because of the ‘often complex, specialised, cross-border and sensitive nature of many M&A transactions’.[14]

Parties’ preference towards arbitration in Latin America could be related, in part, to the estimated period of time that it takes for each proceeding to conclude. Once a lawsuit has been initiated, arbitration seems to be the mechanism that will deliver a quicker judgment, most usually within 24 months.[15] It is no secret that, across the board in Latin America, courts are generally slower in resolving disputes.

Furthermore, in the past five years, most international arbitral institutions have updated their arbitration rules to provide for expedited arbitration. According to the ICC 2020 statistics, of the total of 115 final awards rendered under the expedited procedure provisions since they were implemented, 67 per cent were delivered six months after the case management conference.[16] In the case of the SCC Rules for Expedited Arbitration, almost 50 per cent of the awards were rendered within three months from referral.[17] Expedited rules, which are usually applied in arbitrations when the amount in dispute is low, have thus opened the door to resolving disputes much faster.

The covid-19 pandemic has also showed how arbitration easily adapted to a fully online dispute resolution system, with minimal delays compared to those experienced by local courts in Colombia. Emergency arbitration and the arbitral tribunals’ power to award interim relief were particularly important in this context.

Arbitration also provides for a more neutral ground for the resolution of disputes between parties that are domiciled in different jurisdictions. Parties usually prefer to submit their dispute to experienced arbitrators, rather than to the home courts of the opposing side. Such fear of unconscious (or conscious) bias of the other party’s home courts may be unjustified; however, a party may feel at a disadvantage in a litigation subject to a particular set of unfamiliar procedural rules.

Flexibility of international arbitration proceedings is another key advantage. Parties may tailor the proceedings to suit the specific needs of the dispute at hand. Such flexibility applies, for example, with regard to:

  • the number and order of pleadings submitted by each party;
  • the moments at which such pleadings are presented;
  • the taking of evidence, the manner in which evidentiary hearings are conducted;
  • whether the dispute will be decided in different phases (jurisdiction, responsibility or damages); and
  • the language of the proceedings.

Furthermore, because of its flexibility, arbitration is generally preferrable (compared to litigation) when parties carve out certain disputes into a separate and distinct dispute resolution mechanism, such as expert determination, and where parallel or subsequent proceedings may arise.[18]

Additionally, Colombian practitioners have the perception that, while in arbitration, the parties will have the ability to appoint arbitrators who have experience and have had exposure to M&A transactions or to issues related to M&A matters and contracts law, there is significant uncertainty in the ordinary court system and its unclear whether the appointed judge has comparable experience to that of hand-picked professional arbitrators. This is especially relevant since M&A agreements in Latin America now follow the drafting that has been typically used in common law jurisdictions. It would take some time for local judges to familiarise themselves with these provisions. In contrast, we believe that arbitration has managed to keep up with international or foreign practices. Local courts may also be ill-equipped to appropriately handle M&A disputes compared with international arbitrators with respect to cross-border M&A transactions in which the deal documents are frequently drafted in English or governed by an internationally recognised foreign substantive law with comprehensive case law on M&A matters (such as New York law).

Parties can handle the challenges that arise from a multiparty or multicontract transaction through the careful drafting of the arbitration agreement in the M&A agreements.[19] In addition, institutional arbitration rules today provide for clear rules that apply to the joinder of additional parties, to the consolidation of arbitrations and to the way the arbitral tribunal is constituted, where the arbitration involves more than one party.

In contrast with litigation, arbitration may provide a confidential means of resolving disputes. ‘Trial by press release’ is disallowed, resulting in a more efficient dispute resolution process. Parties often look to keep certain reserved information regarding commercial and industrial practices such as profit margins, production costs, pricing policies, trade secrets and know-how.[20] In the case of Colombia, however, parties should still be wary that domestic arbitral awards are not confidential and are usually published by local arbitration centres.[21]

There is a particular advantage to international arbitration in Colombia, as opposed to domestic litigation or domestic arbitration.[22] In international arbitration there is legal certainty in the parties’ agreement to subject the resolution of the dispute to a law different to Colombian law.[23] The parties’ choice of law applies regardless of the place of performance of the M&A agreement.

Usually, awards resolving disputes are more easily enforceable in other jurisdictions, compared with court judgments. This is also the case for enforcement of awards and judgments in Colombia. Where the seat of an arbitration is located abroad, an arbitral award can be enforced in local courts if the award was made in a state that is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

Virtually all Latin-American states are parties to the New York Convention. The enforcement regime is straightforward and efficient, especially compared to local exequatur rules applicable in order to enforce foreign court judgments.[24] By way of example, the Colombian General Procedure Code provides that the exequatur of a foreign court judgment would be refused if there is a Colombian court judgment or pending proceedings before Colombian courts regarding the same matter. Parties may thus seek to commence local court litigation to block the enforcement of a foreign judgment.

Select issues in arbitration agreements regarding M&A transactions

In our experience, it is common for parties to reach agreements on applicable law and dispute resolution clauses at the end of the negotiation of M&A agreements. This often results in pathological arbitration agreements, or in arbitration agreements that are not best suited to the particular M&A transaction. However, the complexities of an M&A transaction call for careful planning of its dispute resolution mechanisms.

Put succinctly, a well-drafted arbitration clause provides for mandatory resolution of disputes via arbitration, is valid and enforceable and includes a broad scope setting out the disputes that shall be referred to arbitration. It also includes agreements on the seat of the arbitration, the applicable arbitration rules, the language of the arbitration and the number and appointment of arbitrators.

M&A transactions often involve multiple contracts and multiple parties. If the purchaser, the seller or the target company is composed of multiple entities, the arbitration would most likely involve multiple parties. Viewed broadly, an M&A transaction could also involve a share purchase agreement (with one or multiple buyers or sellers, as well as the target company), a shareholder agreement, an escrow agreement (including a financial institution) and a guarantee (signed by the buyer’s parent company).

Certainly, a claimant will always prefer a swift and cost-effective resolution of the dispute. Furthermore, parties to an M&A transaction could generally benefit from having their dispute decided in a single arbitration, as there would be no risk of contradictory decisions stemming from parallel proceedings. The parties could thus look to include compatible arbitration clauses in each of the relevant transaction agreements. Arbitration clauses are usually deemed compatible if they provide for the same arbitration rules, seat, language, method for the constitution of the tribunal and number of arbitrators.

Depending on the law applicable to the arbitration agreement or the law of the seat, it may be difficult to resolve a dispute under multiple contracts in a single arbitration, even if the contracts include compatible arbitration clauses. Parties may thus wish to expressly provide for this scenario in each of the arbitration clauses in the transaction agreements and for the possibility of consolidation of arbitrations.[25] Parties could also agree to a separate umbrella arbitration agreement that applies to all M&A agreements.[26]

Multitiered dispute resolution clauses are often used in M&A agreements. These generally provide for one or more of the following prior to initiating litigation or arbitration:

  • the submission of notice of a claim or a notice of a dispute and an answer to the notice;
  • a period of negotiations between the parties (sometimes calling for structured negotiations or negotiations advancing within the hierarchical structure of each party); or
  • other forms of alternative dispute resolution such as mediation or conciliación in the case of Colombia).

There is a question of whether parties must exhaust each alternative method for resolving disputes or whether parties must wait until a negotiation period ends prior to submitting a claim to arbitration. In the case of Colombian domestic arbitrations, local procedural law allows parties to initiate the proceeding regardless of whether such pre-arbitral dispute resolution mechanisms are met.[27] Because such local procedural rule does not apply to international arbitrations seated in Colombia, and since there are no publicly available awards or court judgments on the matter, it is unclear whether the requirement would be deemed mandatory in an international arbitration. Other jurisdictions may provide for different approaches, such as the inadmissibility of claims or a lack of jurisdiction of the arbitral tribunal. Subject to the applicable law, parties may consider initiating an arbitration and then requesting for the stay of proceedings to attempt to exhaust a contractual negotiation period.

Parties should also bear in mind the applicable law regarding privilege and confidentiality of arbitrations, and of the scope of any confidentiality clause in an M&A agreement. Confidentiality rules or agreements may prohibit parties from disclosing hearing transcripts, written pleadings, evidence or the arbitral award, or third parties from attending arbitral hearings. The agreed upon institutional arbitration rules and conflict of law rules are also relevant. The ICDR Rules, for example, provide that whenever the parties, their counsel or their documents would be subject under applicable law to different rules, the tribunal should, to the extent possible, apply the same legal rule to all parties, giving preference to the rule that provides the highest level of protection.[28] Under the ICC Rules, arbitral tribunals may make orders concerning confidentiality of the arbitration proceedings or any other matters in connection with the arbitration, and they may also take measures to protect trade secrets and confidential information.[29]

Common disputes in M&A litigations and arbitrations in Colombia and Latin America

Based on our experience, parties are mostly focused on claiming issues with direct monetary implications, such as purchase price adjustments and post-closing indemnification provisions.[30] Litigation over pre-closing matters is generally uncommon.

We find that in Colombia, most of the issues that rise to a level of a claim or lawsuit revolve around provisions regarding adjustments to the purchase price and post-closing indemnification obligations where the calculation and payment of monetary damages is critical, and less on specific performance with injunctive relief.

While some may think that purchase price adjustments should be merely an update of uncontroversial figures, there are many details on the way in which accounts are developed and reflected, and variations in methodology that may cause disputes. This raises a few questions that we believe should be analysed by practitioners with their clients: are we using the purchase price adjustment provision to renegotiate the purchase price, or as a backdoor avenue to bring claims that would otherwise be indemnification claims on the basis of breach or inaccuracy of representations and warranties, which are subject to specific limitations and survival provisions?

Does this mean that the parties are not fully aligned on their agreement on the purchase price, which is absolutely critical? Therefore, it may be a question on whether parties are silently delaying a discussion on purchase price.

Alternatively, maybe the parties are just not really aligned on how the purchase price adjustment provision will be applied after closing. If this is the case, practitioners should be focusing more during negotiations to ensure that both parties and their financial and accounting teams understand and fully appreciate the implications on how the purchase price adjustment provision will be applied.

A higher frequency of post-closing indemnification matters would imply that parties negotiate post-closing indemnification rights and find, after closing, that the target may suffer losses that are indemnifiable under the contract. In fact, these provisions are allocations of risk that need to be honoured when the risk materialises, and often the disputes revolve around the scope of the assumed risk and the qualification and assumption of the identifiable losses.

In Colombia, we believe that even though the discussion of sandbagging (whether the buyer knew or should have known and whether such knowledge or constructive knowledge should preclude the buyer from benefiting from indemnification rights) is rather common, it is not necessarily the focus of the attention in a claim.[31] This may be because the whole discussion on ‘sand-bagging’ issues opens up a much broader question on whether the parties, buyer and seller, have been acting in good faith or have been diligent throughout the negotiation and after closing. It is certainly a hot topic that, if elicited by a court, has the potential to raise questions on indemnification rights that parties may have thought were uncontroverted under the contract.

Finally, we generally consider that disputes relating to escrows and the amounts that may be retained are also common. The question on whether retention of cash during the pendency of a final resolution of a claim is available under the escrow, and how claims are valued, are the aspects of escrow agreements that are more frequently debated.

We believe that deal-related litigation in Latin America will continue to evolve, in numbers and in substance, which underscores the critical role of M&A practitioners in constantly improving practices, procedures and forms to ensure that agreements are well-equipped to reduce disputes with abundantly clear language that can withstand future litigation or arbitration.

[1] Carolina Posada and Jaime Cubillos are partners and Estefanía Ponce is an associate at Posse Herrera & Ruiz Abogados.

[2] Pitchbook – KPMG, ‘North American M&A Report Q3 2020’, 2020.

[3] Transaction Track Record, ‘Latin America Quarterly Report – 3Q 2020’, 2020.

[4] Cornerstone Research, ‘Shareholder Litigation Involving Acquisition of Public Companies – Review of 2018 M&A Litigation’, 2019.

[5] See Chapter 8 of this guide, 'Public M&As, Hostile Takeovers and Shareholder Activism'.

[6] To test our theory, in 2020 and 2021, we conducted surveys of M&A, litigation and arbitration practitioners from Latin Lawyer 250 firms who had substantial experience. Also in 2020 and 2021, we delivered a Q&A survey form to some of the most important law firms in Latin America. Eighteen respondents participated on an anonymous non-attribution basis and provided their responses between 28 August 2020 and 10 September 2020, while 22 respondents participated on the same basis between and 3 August 2021 and 23 August 2021. The results were not surprising. The general perception across Latin American jurisdictions is that deal-related litigation may have been on the rise until March 2020. Hard data is not available at this point and therefore in this chapter we offer comments based on our experience and on the results of the survey.

[7] Participants in the survey (see footnote 7) generally perceived that pre-litigious claims had moderately increased in the past five years and that deal-related litigation has maintained or moderately increased.

[8] Regarding the initiation of litigations or arbitrations since March 2020, respondents of the 2021 survey (see footnote 7) answered as follows: 29 per cent considered that these reduced significantly, 14 per cent considered that these reduced moderately; 33 per cent considered that these remained consistent, 19 per cent considered that these increased moderately and 5 per cent considered that these increased significantly.

[9] Practitioners also generally perceive that parties overwhelmingly prefer to submit dispute resolution to arbitration over the court system of their respective jurisdictions. Between 70 per cent and 80 per cent of respondents in our 2020 and 2021 surveys (see footnote 7) believed that the vast majority of post M&A disputes were solved via arbitration.

[10] The majority of respondents of the 2020 and 2021 surveys (see footnote 7) believed that over 70 per cent of M&A agreements selected arbitration (rather than litigation) as the applicable dispute resolution mechanism. No respondent in the 2020 or 2021 surveys considered that the majority of disputes (more than 75 per cent of disputes) would be resolved via litigation.

[11] It appears that a majority of deal-related claims are resolved by direct negotiation of the parties. Both the 2020 and 2021 surveys (see footnote 7) showed that a significant majority of disputes would be resolved by avoiding litigation or arbitration. Our 2021 survey showed that only 10 per cent of respondents considered that it was more likely that disputes would be resolved via litigation or arbitration via negotiation. In our 2020 survey, 60 per cent of respondents believed that 75 per cent to 100 per cent of disputes are resolved by direct negotiation (or with the assistance of mediators), whereas all respondents believe that less than 50 per cent of disputes are resolved by arbitration or litigation. It would seem that parties in Latin America consistently seek to resolve M&A-related matters outside of courts or arbitration tribunals.

[12] See Chapter 16 of this guide, 'Indemnity Escrows and Other Payment Guarantees'.

[13] The results of the survey across Latin America (see footnote 7) match what we are seeing in deals in Colombia. In Colombia, domestic courts are hardly ever considered, with the exception of the resolution of disputes by New York courts when at least one of the parties is based in the US or where the parties agree to having a New York-seated arbitration.

[14] Joseph Dyke and Catriona Nicol, England and Wales, in Edward Poultron (consultant editor), Arbitration of M&A Transactions, A Practical Global Guide (2020).

[15] Conferencia Latinoamericana de Arbitraje, Arbitraje en América Latina, Informe 2020 sobre encuestas, p. 4. This report presented the data of 2,765 arbitrations either seated in Latin America or involving a Latin American party, and administered by 26 arbitration centres. Whereas, in arbitration, 65 per cent of respondents in our 2021 survey (see footnote 7) believed that, on average, an arbitral proceeding takes less than 24 months to reach a conclusion, when it comes to the ordinary court system, 68 per cent of respondents believe that a proceeding on average will take more than 24 months to reach a first instance decision (which could be subject to appeal, and therefore a final decision in a second instance will take a longer period of time to be reached).

[16] International Chamber of Commerce, ICC Dispute Resolution, 2020 Statistics, 2021.

[17] Arbitration Institute of the Stockholm Chamber of Commerce, SCC Statistics 2020.

[18] Harald Frey, Dominique Müller, Chapter 8: Arbitrating M&A Disputes, in Manuel Arroyo (editor), Arbitration in Switzerland: The Practitioner’s Guide (2018), pp. 1133–1134.

[19] Anke Meier, Joinder and Consolidation in M&A Arbitration, in Amy C Kläsener (editor), The Guide to M&A Arbitration, Global Arbitration Review (2020).

[20] Marlon Meza-Salas, Confidentiality in International Commercial Arbitration: Truth or Fiction? Kluwer Arbitration Blog, 23 September 2018.

[21] Bogotá Chamber of Commerce, National Arbitration Rules, article 2.11; Chamber of Commerce of Medellín for Antioquia, Arbitration Rules, article 61; Cali Chamber of Commerce, Arbitration and Arbitral Proceeding Rules, article 4.11.

[22] In accordance with article 62 of Law 1563 of 2012 (Colombian Arbitration Statute), ‘an arbitration is international if: (a) The parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or (b) The place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected is situated outside the State in which the parties have their places of business; or (c) The dispute submitted to arbitration affects the interests of international commerce’ [authors’ translation].

[23] Law 1563 of 2012 (Colombian Arbitration Statute), article 101.

[24] Colombian General Procedure Code, articles 606–607.

[25] Anne Véronique Schlaepfer, Alexandre Mazuranic, Drafting Arbitration Clauses in M&A Agreements, in Amy C. Kläsener (editor), The Guide to M&A Arbitration, Global Arbitration Review (2020).

[26] Kanije Hablemitoglu, Arbitration and Expert Determination as Dispute Resolution Mechanisms in Stages of Cross-Border Mergers and Acquisitions Transactions, Universität wien (2016), p. 19.

[27] Colombian General Procedure Code, article 13.

[28] ICDR Rules of Arbitration, article 25.

[29] ICC Rules of Arbitration, article 22.

[30] Participants of the 2020 survey (see footnote 7) considered that the following were the most common issues addressed in post M&A disputes: purchase price adjustment (94 per cent), indemnification obligations (94 per cent), valuation of damages claims and right to retain amounts under escrow agreements (75 per cent), sandbagging related claims (53 per cent) and procedural aspects regarding claims (50 per cent). Participants of the 2021 survey considered that the following were the most common issues addressed in post M&A disputes: sandbagging related claims (95 per cent), purchase price adjustment (91 per cent), valuation of damages claims and right to retain amounts under escrow agreements (86 per cent), indemnification obligations (85 per cent), procedural aspects regarding claims (81 per cent), satisfaction of conditions to closing (71 per cent), compliance of interim covenants (62 per cent), application of limitations of liability (55 per cent) and material adverse change (52 per cent).

[31] It is interesting to see that in the 2020 survey (see footnote 7) respondents were divided in their responses as to whether issues relating to ‘sandbagging’ (whether the buyer knew or should have known and whether such knowledge or constructive knowledge should preclude the buyer from benefiting from indemnification rights). Thus, 53 per cent of respondents believe that discussions regarding sandbagging matters are common.

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