Arbitration vs Litigation in Cross-Border M&A Disputes: What’s Best for You

Cross-border M&A Disputes: Heating Up or Cooling?

There is little doubt that the last few years have been troublesome for dealmakers active in the merger and acquisitions (“M&A”) sphere, particularly where cross-border disputes are concerned. However, approximately half of the global population participated in elections in 2024, ushering in new administrations and offering greater clarity regarding regulatory regimes. Additionally, interest rates and inflation both declined in 2024 and 2025 leading to increased investor confidence.

Against that can be set rising geo-political tension, economic policies, tariffs (which tend to fuel inflation), sanctions and foreign exchange volatility, all of which may act as a break on activity. Nevertheless, a more resilient economy, improved financing conditions and an eagerness by private equity could lead to greater activity this year.

What key factors could be driving a rise in disputes in cross-border M&A transactions?

Warming Factors

Anecdotally, it appears that dealmakers are reflecting finance risks by utilising carefully crafted contracts and seeking new ways to extract value from transactions. These often are the catalyst for disputes between buyers and sellers.

What typically causes cross-border M&A disputes?

As might be expected, the majority of international disputes arise from financial or operational performance issues. Earn-outs remain a significant area of disagreement, particularly when business conditions have changed for the worse post-completion. Ambiguity in performance metrics, changing business conditions, disagreements about financial reporting and earn-out calculation methods all contribute to disputes.

Attempts to make purchase price adjustments are as prevalent as ever. These include issues relating to tax liabilities, working capital, net debt and restrictive cash or cash-equivalent adjustments. These factors lead parties to include more and more complex and technical language in the Sale and Purchase Agreements (“SPAs”), which can lead to differences in interpretation and give rise to disputes.

How do cultural, regulatory, or legal differences between countries impact the resolution of cross-border disputes?

The other main contributors to cross-border disputes include government interventions, regulatory and compliance concerns, foreign investments, border security and tax policies. For example, in deals affecting the United States, tax policies are a significant factor, due in large part to the complexity in dealing with federal, state, local and cross-border taxes.

Purchasers’ due diligence exercises and the resulting warranties and indemnities frequently cause issues between the parties. Insurance is usually available in respect of representations and warranties but, counter-intuitively, that tends to increase the number of purchaser claims, particularly where the sellers still retain equity or continue to have a leadership role within the business. The purchasers do not necessarily jeopardise the ongoing business relationship by making a claim against the insurers.

How is the increasing focus on ESG obligations creating new categories of disputes in global M&A deals?

Regulatory and compliance structures remain front and centre, especially as the United States and the European Union regulators have adopted a more aggressive stance regarding anti-trust, environmental, social and governance (“ESG”) issues.

Finally, foreign exchange volatility is often cited as a driver of disputes in cross-border transactions. Investors have deployed capital abroad during better times, which investments are subsequently rendered worthless in their national currency. A recent example of such volatility (albeit in relation to the costs of a dispute) can be found in the Supreme Court’s judgment in Process & Industrial Developments Limited (Appellant) v The Federal Republic of Nigeria (Respondent).

The Republic had been successful in the proceedings and was awarded its costs. The issue was which currency those costs should be paid. The value of Sterling had appreciated significantly against the Naira since the Republic had been invoiced by its lawyers and paid those invoices in the period from 2019 to 2024. P&ID argued that an award in Sterling would provide the Republic with a substantial windfall. 

The claimed costs were approximately £44,000,000 (forty-four million Sterling). At the time the Republic paid its lawyers, that equated to about ₦25,000,000,000 (twenty-five billion Naira). As at October 2025, the equivalent was ₦95,000,000,000.00 (ninety-five billion Naira). The Supreme Court confirmed that the Republic’s costs were to be paid by P&ID in Sterling.

Cooling Effects

Inevitably, risk is inherent in any asset sale, including the shares in or the assets of a business. That is particularly the case where payment of part of the purchase price is deferred and is conditional upon the production of accounts or achieving earn-outs.

What role do dispute resolution clauses play in avoiding cross-border disputes in the future?

The risk (for all parties) can be mitigated to some extent by a tightly drawn contract, setting out in detail the agreement reached and anticipating potential future difficulties. A particular difficulty encountered in some cases is not those negotiated terms, but the usual terms (often called “boilerplates”) included in almost all agreements.

All boilerplate clauses should be reviewed, with priority given to those having the greatest commercial and legal impact. Examples of these include:

1. An “entire agreement” clause confirming that the signed contract contains all agreed terms and supersedes prior negotiations, representations and understandings;
2. “Amendment” clauses, which specify any formalities necessary to vary the contract terms (usually that amendments need to be in writing and signed by authorised representatives of all parties).
3. A “no oral modification” clause which seeks to prevent informal or unconsidered variations.
4. An “assignment and novation” clause, which controls whether the parties may transfer their rights and obligations and, if so, the methods by which that can be achieved. An assignment can transfer rights (but not obligations) while a novation creates a new contract, most often with a substitute party (which may or may not be in the same jurisdiction as the original parties).
5. “Governing law” and “jurisdiction” clause which specify which country’s laws govern the contract and which country’s courts (or arbitral tribunals) are authorised to resolve disputes.

Climate Monitors

Turning to venues for handling merger and acquisition disputes, preferences vary widely depending upon the diverse needs and considerations of dealmakers.

The options include; court proceedings, arbitration; and alternative dispute resolution (“ADR”).

What’s the difference between arbitration and litigation when dealing with a cross-border disputes?

Court proceedings benefit from judicial authority, with structured procedures, predictable outcomes derived from precedent and enforceability of judgments within the Court’s jurisdiction.

A particular difficulty lies in the public nature of such proceedings. For example, from the 1st January 2026, certain members of the Business and Property Courts have embarked on a two-year pilot scheme seeking to promote open justice by making important court documents available to the public. 

The categories of documents to be made available (subject to the Court making a different order) include witness statements and experts’ reports, skeleton arguments and written opening and closing submissions. This new process may have a huge impact if, for example, commercially sensitive or reputationally delicate material is to be made available to the public. It also raises questions about confidentiality, litigation strategy and the potential for increased public scrutiny.

For those wishing to resolve their disputes privately, Arbitration offers a practical alternative. Arbitration is a private and binding method of resolving disputes, founded upon the parties agreement to submit their disputes to an Arbitrator.

The advantages include:

1. The proceedings remain private with no automatic public access;
2. Sensitive commercial information can be protected, confidentially being contractually enforced
3. The parties are able to retain procedural flexibility, as compared to that afforded by the Courts.

What risks should companies be aware of before committing to arbitration or litigation in an international deal?

Great thought and care should be given at the time of negotiating the terms of the agreement relating to the governing law and jurisdiction, particularly in cross-border arrangements and if Arbitration is considered the best way of resolving disputes.

It should be appreciated that the Arbitration clause is considered to be separate from the main contract. Consequently, the agreement to arbitrate may still be valid even if the other terms of the contract are found to be voidable.

The position, over the last 30 years, has been incredibly complicated, as demonstrated by the judgment of the UK Supreme Court in Enka v Chubb in 2020. That unsatisfactory position has now been addressed by the Arbitration Act 2025, which came into force in August of that year.

What are some emergency remedies that businesses can use in these types of disputes?

Where an international contract contains a clause requiring disputes to be referred to Arbitration, at least three systems of national law are engaged:

1. The law governing the substance of the dispute;
2. The law governing the agreement to arbitrate; and
3. The law governing the Arbitration process.

The 2025 Act does not affect the parties’ ability to define which country’s laws will govern the substance of the dispute. It does, however, provide that (if the Arbitration clause does not expressly state which country’s laws are to apply to the Arbitration), then the laws of the country where the Arbitration is deemed legally to occur (the “seat” of the arbitration) will prevail.

The Arbitration Act 2025 makes clear that, in the absence of the parties’ agreement, the Tribunal may make an award on a summary basis if it considers that the Claimant has no real prospect of succeeding on the claim or issue or the Respondent has no real prospect of succeeding in the defence of that claim or issue.

If the Tribunal’s powers are insufficient, then an application can be made to the High Court for various orders including:

1. the enforcement of a peremptory order by the Tribunal;
2. securing the attendance of witnesses;
3. making orders in relation to property (such as preservation of them or their sale);
4. ordering freezing injunctions and other interim compulsory injunctions to assist the Arbitration process.

How enforceable are arbitration awards compared to court judgments across different jurisdictions?

Arbitration in particular provides enforceability benefits across borders. If parties have a dispute about a business located in Country A and resolve that dispute in the Courts of Country A, it can prove difficult to enforce the judgment in Country B, where the losing party trades or has significant assets. In contrast, Arbitration awards are more easily enforced in any country which is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Mediation

ADR (usually by mediation) allows the parties greater latitude over the process and provides both a speedy and cost-effective option.

Mediation is a flexible, voluntary and confidential formal process in which a neutral third party assists the parties in dispute to work towards a negotiated settlement, with the parties retaining control of the decision whether or not to settle and upon what terms. The mediator does not decide the case on its merits. Mediation instead provides a forum in which the parties can obtain a better understanding of each other’s positions and work together to explore options for resolution. It is often the most cost-effective means of dispute resolution, particularly if used before proceedings are commenced either before the Courts or an arbitral tribunal.

As international deal activity accelerates, cross-border disputes are likely to remain an inherent feature of global M&As. Heightened regulatory scrutiny, evolving ESG expectations, currency volatility and increasingly complex transaction structures all contribute to a more challenging post-completion landscape.

In this evolving environment, risk is best managed proactively. Clear contractual drafting, careful consideration of law and jurisdiction, and a well-thought-through approach to dispute resolution can significantly influence outcomes long before any dispute materialises.

When disagreements do arise, early strategic decision-making is often decisive in preserving value and maintaining commercial leverage in cross-border disputes.

As members of the International Advisory Group (IAG) our dedicated Aaron International team is closely connected to a wide network of legal professionals across the globe. This enables us to provide you with the seamless legal services across borders. Contact our team today if you are facing an international dispute or require international legal services.

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