M&A Disputes: Why Dispute Resolution Clauses Should Not Be an Afterthought

Abstract

Mergers and acquisitions are negotiated through detailed contractual architecture: price, warranties, indemnities, disclosure, completion mechanics, restrictive covenants and post-completion obligations. Yet dispute resolution clauses are often treated as secondary provisions, inserted late in the drafting process or carried across from precedent documents with limited scrutiny.

This article argues that dispute resolution clauses in M&A transactions should be understood as part of the deal’s commercial and legal risk design. Different disputes require different processes. A completion accounts dispute may require an accounting expert. An earn-out dispute may involve both calculation and post-completion conduct. A warranty claim may require legal analysis, evidence, causation and assessment of loss. A cross-border dispute may require a neutral forum and an enforceable outcome.

From an English law perspective, the parties’ choice of process matters. Expert determination, arbitration, mediation and litigation each serve different functions. The key is not to select a process in the abstract, but to design a framework that reflects the transaction, the parties, the likely disputes and the commercial consequences of escalation.

This is the first article in a short series examining how dispute resolution mechanisms can be used more thoughtfully in M&A transactions. Later articles will consider expert determination, arbitration, mediation and drafting in greater detail. This opening article focuses on the central point: dispute resolution clauses should not be an afterthought.

1. Introduction

M&A transactions are often negotiated under pressure. Timetables are tight. Due diligence may be compressed. Finance may be conditional. Regulatory issues may need to be addressed. Commercial momentum can shape the pace of drafting.

In that environment, parties understandably focus on the headline provisions: price, structure, warranties, indemnities, disclosure, liability limitations, completion conditions and post-completion obligations. These are the provisions that appear to allocate value and risk most directly.

By contrast, dispute resolution provisions can sometimes receive less attention. They may be treated as standard legal machinery rather than as part of the substantive deal design.

That is where problems can begin.

When a dispute arises, the dispute resolution clause becomes central. It determines not only where the dispute will be heard, but how it will be approached, who will decide it, whether the process is private, how long it may take, whether the outcome can be enforced and whether there is scope for commercial settlement before positions harden.

In my view, this is where M&A drafting sometimes underestimates the value of dispute resolution strategy. A dispute clause is not merely a closing provision. It is the route map the parties will need when commercial confidence has been lost.

A badly drafted clause can create a dispute about the dispute. Parties may argue about whether expert determination or arbitration applies, whether mediation must occur first, whether an expert can decide questions of contractual interpretation, whether court proceedings are permitted, or whether related claims under connected documents should be heard together.

Those preliminary disputes can be costly. They can delay payment, distract management, unsettle investors and affect the ongoing performance of the acquired business.

A well-designed clause, by contrast, can provide clarity before conflict arises. It can direct technical issues to an expert, legal disputes to arbitration or court, and commercial disagreements to negotiation or mediation where appropriate.

The purpose of this article is to explain why that design exercise matters.

2. The English law context: party autonomy, process and proportionate dispute resolution

From an English law perspective, dispute resolution provisions sit within a wider legal culture that gives considerable weight to party autonomy in commercial contracts. Sophisticated commercial parties are generally expected to be held to the bargain they have made.

That matters in M&A transactions because the wording of the dispute resolution clause can have significant consequences.

Arbitration is supported by a statutory framework under the Arbitration Act 1996, now amended by the Arbitration Act 2025. The framework reflects principles of party autonomy, procedural fairness and limited court intervention.

Expert determination is different. It is primarily contractual. The expert’s authority comes from the agreement between the parties. This means that the drafting of the expert determination clause is critical. The clause must define the expert’s role, mandate and the consequences of the determination.

Mediation sits differently again. It is consensual and non-adjudicative. It does not produce a binding decision unless settlement terms are agreed. However, the direction of travel in English civil justice increasingly recognises ADR as part of proportionate dispute resolution. The Court of Appeal’s decision in Churchill v Merthyr Tydfil County Borough Council is important in this respect. Although not an M&A case, it reflects a broader judicial willingness to view non-court dispute resolution as a legitimate part of the dispute process where appropriate.

The practical message is this: English law gives parties significant freedom to design their dispute resolution framework. But with that freedom comes responsibility. If the clause is vague, inconsistent or poorly matched to the transaction, the parties may inherit avoidable procedural uncertainty.

3. Why M&A disputes arise

M&A disputes rarely arise simply because one party changes its mind. More often, they arise because the assumptions underpinning the transaction become contested.

At signing, the parties may have agreed a price, a set of warranties, an allocation of risk and a mechanism for adjusting value. After completion, the factual and financial picture may look different. The buyer may believe that the target’s performance, liabilities or financial position were not as represented. The seller may believe that the buyer is attempting to reopen the commercial bargain.

Common disputes include:

• completion accounts disputes;

• working capital, cash or debt adjustments;

• earn-out disputes;

• warranty claims;

• indemnity claims;

• tax covenant claims;

• valuation disputes;

• misrepresentation allegations;

• restrictive covenant disputes;

• shareholder or joint venture conflicts; and

• post-completion integration disputes.

Each of these disputes has a different character.

A completion accounts dispute may be primarily technical. It may require an accountant to determine whether working capital, cash, debt or provisions have been treated correctly.

An earn-out dispute may be partly technical and partly behavioural. It may involve the calculation of revenue, EBITDA or profit, but it may also involve allegations that the buyer has operated the business in a way that suppresses the earn-out.

A warranty claim may require legal and factual adjudication. It may involve the construction of the share purchase agreement, the scope of the disclosure letter, causation, loss and contractual limitations.

A cross-border dispute may require attention to neutrality, confidentiality and enforcement.

The problem is not that parties choose expert determination, arbitration, mediation or litigation. The problem is that they sometimes choose them without first mapping the disputes that the transaction is most likely to produce.

4. A practical distinction: different disputes, different processes

At a high level, the process should fit the dispute.

The following table is not a substitute for drafting advice, but it illustrates the point.

Type of M&A dispute	Process likely to be considered	Reason
Completion accounts dispute	Expert determination	Often technical and accounting-led
Working capital, cash or debt adjustment	Expert determination	Usually a calculation against agreed criteria
Valuation dispute	Expert determination	May require specialist valuation expertise
Earn-out calculation	Expert determination	Suitable where the issue is limited to calculation
Earn-out conduct dispute	Arbitration, litigation or mediation	May involve breach, good faith, operational conduct or factual evidence
Warranty claim	Arbitration or litigation	Requires legal analysis, evidence, causation and loss assessment
Indemnity claim	Arbitration or litigation	Requires contractual interpretation and liability assessment
Misrepresentation or fraud allegation	Arbitration or litigation	Requires procedural safeguards and factual findings
Cross-border SPA dispute	Arbitration may be appropriate	Neutrality and enforcement may matter
Relationship-sensitive dispute	Mediation may be appropriate	May preserve commercial value and ongoing relationships
Mixed technical and legal dispute	Layered process	Different issues may need different mechanisms

The practical lesson is simple: M&A disputes are not uniform. A clause that assumes they are may create avoidable difficulty.

5. The hidden risk of boilerplate dispute clauses

The phrase “boilerplate” can be misleading. Some clauses that appear standard can become highly consequential when a dispute arises.

A dispute resolution clause may determine:

• whether the parties must negotiate before commencing proceedings;

• whether mediation is required or optional;

• whether technical disputes go to expert determination;

• whether legal disputes go to arbitration or court;

• whether arbitration is seated in England or elsewhere;

• whether the process is confidential;

• whether related disputes can be consolidated;

• whether urgent interim relief is available;

• whether the outcome is enforceable internationally; and

• whether one party can delay the substantive dispute by challenging the process.

In M&A transactions, this is particularly important because there are often multiple related documents: the share purchase agreement, disclosure letter, tax deed, escrow agreement, shareholders’ agreement, management incentive plan, transitional services agreement and guarantees.

If those documents contain inconsistent dispute resolution provisions, the parties may face procedural uncertainty before the merits are even considered.

For example, the SPA may require arbitration, while the completion accounts schedule may require expert determination. That may be perfectly sensible if the boundary between the two processes is clear. It becomes problematic if the dispute contains both accounting and legal issues and the agreement does not explain how those issues are to be separated.

This is how parties end up disputing the forum before they resolve the substance.

The lesson from cases such as Drax Energy Solutions Ltd v Wipro Ltd, although not an M&A case, is that sophisticated commercial parties can still find themselves in expensive disputes over the meaning and operation of contractual machinery. The case is a useful reminder of the importance of clear drafting. In M&A, the same principle applies with particular force because the sums, timing pressures and commercial sensitivities can be significant.

In my experience, the most effective dispute clauses are not necessarily the most elaborate. They are the clauses that reflect how the deal is actually structured and where disagreement is most likely to arise.

6. Process should be designed around the transaction

A dispute clause should be tested in the same way as any other important risk allocation provision.

The parties should ask:

• What disputes are most likely to arise from this deal?

• Are those disputes likely to be technical, legal, factual, relational or cross-border?

• Who is best placed to resolve them?

• Is speed more important than procedural depth?

• Is confidentiality important?

• Is international enforcement relevant?

• Is there an ongoing relationship to preserve?

• Are there related agreements that need aligned dispute provisions?

• Could a poorly drafted clause allow tactical delay?

These questions are not theoretical. They go directly to commercial risk.

For example, in a transaction involving completion accounts, the parties should consider whether technical accounting disputes should be referred to an independent accountant. In a transaction involving an earn-out, they should consider whether the clause distinguishes between calculation disputes and conduct disputes. In a cross-border transaction, they should consider whether arbitration is needed because of neutrality and enforceability. In a founder-led sale, they should consider whether mediation could preserve relationships and business continuity if disagreement arises.

A standard clause may not answer these questions. A deal-specific clause can.

7. A case study: the earn-out dispute

Consider a founder who sells a technology company to a larger corporate group. Part of the consideration is payable through an earn-out based on revenue growth over two years.

After completion, the buyer integrates the business into its wider group. Reporting lines change. Certain customers are moved to another group entity. Some costs are reallocated. The founder then argues that the earn-out has been suppressed. The buyer says the financial targets were simply not met.

This kind of dispute illustrates why process design matters.

If the only issue is whether the revenue target was achieved, expert determination may be appropriate. A financial expert can review the accounts and determine the calculation.

If the issue is whether the buyer breached post-completion conduct obligations, diverted revenue or acted contrary to the agreed earn-out structure, the dispute may require adjudication through arbitration or litigation. It may involve contractual interpretation, factual evidence, disclosure and legal submissions.

If the founder remains involved in the business, mediation may also be commercially valuable. The parties may be able to agree a revised earn-out formula, an accelerated payment, a management transition, a release of claims or a revised framework for future cooperation.

A single generic dispute clause is unlikely to manage all of this well.

The better approach is to think about the dispute before it exists. That does not mean assuming the relationship will fail. It means recognising that a sophisticated transaction deserves a sophisticated route for disagreement.

8. What a well-designed M&A dispute clause should do

A well-designed dispute resolution clause should not merely identify a forum. It should create a coherent route through disagreement.

At a minimum, it should aim to:

• allocate technical disputes to an appropriate expert process;

• allocate legal disputes to arbitration or court;

• preserve mediation where commercial settlement may protect value;

• explain what happens where technical and legal issues overlap;

• align dispute clauses across related transaction documents;

• preserve urgent relief where necessary;

• address confidentiality;

• consider seat, governing law and enforcement in cross-border deals;

• reduce opportunities for tactical delay; and

• remain proportionate to the value and complexity of the transaction.

This does not mean that every M&A agreement requires a lengthy and complex clause. It means that the clause should be purposeful.

The best drafting is often clear, practical and deal-specific.

9. Why ADR advice should come before signing

ADR input before signing should not be seen as pessimistic. It is not an assumption that the deal will fail. It is part of good transaction planning.

An ADR adviser, mediator or arbitration practitioner can help stress-test the clause against the deal. That may include asking:

• What is the most likely source of disagreement?

• What should happen if there is a completion accounts dispute?

• What should happen if an earn-out dispute involves both calculation and conduct?

• Should mediation be required before formal proceedings?

• Should technical issues be carved out for expert determination?

• Is arbitration needed for confidentiality, neutrality or enforcement?

• Are all related documents aligned?

• What happens if urgent relief is needed?

These questions can be asked calmly before the dispute arises. If they are left until after the relationship has deteriorated, the parties may interpret the clause through the lens of conflict.

That is when process itself can become tactical.

My own view is that dispute resolution design is at its best when it is quiet, early and practical. It should not dominate the transaction, but it should protect it. It should sit behind the commercial bargain as a clear route map if the parties later need it.

10. Conclusion

M&A dispute resolution clauses should not be treated as boilerplate. They are part of the transaction’s commercial and legal design.

The nature of M&A disputes varies. Some are technical. Some are legal. Some are relational. Some are cross-border. Some require speed. Some require enforceability. Some require a commercial settlement rather than a binary determination.

Expert determination, arbitration, mediation and litigation each have a role. The task is not to choose one process reflexively. It is to design a clause that sends the right dispute to the right process at the right time.

The best dispute resolution clause is not necessarily the longest clause. It is the clause that reflects the deal, anticipates likely areas of disagreement and gives the parties a clear path forward if the relationship fractures.

For buyers, sellers and advisers, the question should be asked before signing:

If this transaction later becomes disputed, have we created a clear, proportionate and commercially sensible route to resolution?

If the answer is uncertain, the clause deserves further attention.

Disclaimer

This article is for general information only and does not constitute legal advice. Specific legal advice should be obtained in relation to the facts of any transaction or dispute.

References and resources for further reading

• Arbitration Act 1996.

• Arbitration Act 2025.

• Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, commonly known as the New York Convention.

• Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416.

• Flowgroup plc v Co-operative Energy Ltd [2021] EWHC 344 (Comm).

• Drax Energy Solutions Ltd v Wipro Ltd [2023] EWHC 1342 (TCC).

• ICC Arbitration Rules.

• LCIA Arbitration Rules.

• CIArb guidance and resources on arbitration and dispute resolution.

• ICC materials on expertise and expert determination.

• Commentary on expert determination in M&A disputes, including completion accounts, earn-outs and purchase price adjustments.

About the author

Avinder Laroya is a Senior Consultant Solicitor, Mediator and Arbitrator and conflict coach, she is an expert in International Dispute Resolution.