Dispute Resolution Mechanisms in M&A Transactions: Commercial Arbitration and Litigation

Disputes arising in mergers and acquisitions (M&A) can significantly impact the efficiency and value of a transaction. Once the causes and stages of dispute emergence have been identified, parties must select and apply an appropriate dispute resolution mechanism. Following our previous article, this article focuses on the remaining mechanisms commonly used in M&A transactions – commercial arbitration and court proceedings. The article also offers comparative assessments and practical recommendations to assist parties in selecting the optimal mechanism at the contract drafting stage.

1.Commercial Arbitration

Arbitration is widely regarded as a suitable mechanism for resolving M&A disputes, particularly those involving cross-border elements or requiring strict confidentiality. Pursuant to the Law on Commercial Arbitration 2010, a valid and enforceable arbitration agreement – either embedded in the contract or set out in a separate document – is a prerequisite for arbitration. Parties should clearly specify the number of arbitrators, the arbitral institution (e.g., VIAC, SIAC, HKIAC), the governing law, the seat of arbitration, and the language of the proceedings.

Arbitration offers several advantages, including flexible procedures, expedited timelines, and a high degree of confidentiality especially beneficial for publicly listed companies or transactions involving proprietary technologies. Arbitral awards are final and binding, and they may be recognized and enforced internationally under the 1958 New York Convention. However, arbitration also presents certain limitations:

• Arbitration costs tend to be higher than court litigation;
• The enforcement of interim emergency measures remains limited, as such measures often require court assistance;
• Arbitral awards may be annulled under procedural grounds stipulated in the Civil Procedure Code and arbitration laws.

2.Litigation

Where the contract does not include an arbitration clause or where disputes arise outside the contract’s scope (e.g., shareholder disputes or charter-related conflicts), courts may be the competent authority for adjudication. Court litigation may also be preferable in specific scenarios, such as:

• When interim relief is urgently required: For example, bank account freezing, attachment of contested assets, or injunctions to suspend share/equity transfers. Although arbitration permits emergency relief, courts generally have broader authority and more direct enforceability in practice.
• When disputes involve administrative decisions: In cases concerning investment licenses, policy approvals, or administrative sanctions, only courts are authorized to invalidate such decisions under current Vietnamese law.

Despite these advantages, court proceedings are often prolonged and conducted publicly, which may damage trade reputation and confidentiality. Moreover, proper identification of the competent court is crucial to avoid dismissal of the lawsuit. Under the 2015 Civil Procedure Code, parties may agree on the competent court based on the respondent’s registered office (Article 39) or the place of contract performance (Article 40). Where foreign elements are involved, the governing law (Vietnamese or foreign) should also be expressly determined.

3.Recommendations on Selecting Dispute Resolution Mechanisms

There is no one-size-fits-all solution. Therefore, parties are encouraged to adopt a tiered dispute resolution clause, comprising the following stages: Mandatory negotiation – Mediation within a fixed period – Arbitration (or court proceedings if no arbitration clause is in place). This approach maximizes the opportunity for amicable resolution before escalating the dispute. In addition, legal documentation should be coherent and comprehensive, ensuring consistency between the M&A agreement and ancillary documents such as NDAs, MoUs, and LOIs.

Disputes in M&A transactions are often inevitable given the strategic nature, high value, and legal complexity of such deals. Nevertheless, in practice, most disputes can be mitigated or avoided altogether if parties adopt sound legal risk management principles – including contract standardization, thorough legal due diligence, appropriate selection of dispute resolution mechanisms, and consistent engagement of legal counsel throughout the transaction lifecycle.

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