Implementation of alternative dispute resolution mechanisms in cross border mergers: International legal study

B- The significance : the American approach

ADR mechanisms tend to have different significance within the business practice. This significance can be expressed regarding the existing forms to resolve business disputes, particularly, those created by agreement, on the one hand and regarding how these mechanisms are viewed by businesses.

The most used techniques of dispute resolution that find broad acceptance in practice within the international business context is the one created by agreement of the parties. Dispute resolution mechanisms that are available to business companies could be divided in two categories: binding techniques such as Arbitration by contrast to the non binding techniques such as Mediation. A brief outline of the two category of ADR techniques need to be made before exploring the hypothesis of adjusting these mechanisms in the merger transaction.

Considered the preferred mode of dispute resolution in civil law and common law business practice, and as it was remarkably defined by Motulsky, Arbitration is said to be "a private justice which origin is normally contractual"¹⁵⁵. Arbitration is said to have a number of practical advantages over transnational litigation in regards on how it copes with the problems arising from the lack of coordination between legal systems:

Arbitration can reduce some uncertainties connected with transnational litigation, for example, forum shopping can be avoided through properly drafted arbitration clause inserted in the contract. Forum shopping is eliminated since the arbitral tribunal is selected by request of the parties¹⁵⁶ or failing agreement, by an institution or appointing authority¹⁵⁷, following sort of attempt at negotiating a settlement that

took place . The place of the Arbitration (article 67 Tunisian Arbitration Code) and with

it the applicable procedural law, are specified in the Arbitration clause or will be fixed by the institution or the arbitrators themselves. A strong determination to avoid delays in the constitution of the arbitral tribunal is reflected in the London Court of International Arbitration rules that mandate the appointment of the entire arbitral tribunal "as soon as practicable" after receipt of the response or expiry of 30 days after receipt by the respondent of the request for arbitration¹⁵⁸.

Another available ADR mechanism, mediation, called conciliation outside the US, which is considered the oldest form of structured dispute resolution. It is informal, confidential, non binding and gives the parties control over the process. It is a "structured negotiation process" conducted by an impartial third party selected by the parties who will assist them in settling the dispute by guiding them through each stage of the process. Mediation works well for parties that do not want to submit to a jurisdiction, whether it is the jurisdiction of another state or an arbitral

¹⁵⁵ Motulsky, B. Ecrits 72 : Etudes et notes sur l'Arbitrage, préface de Goldman, B. et Fouchard, Ph., Dalloz 1974

¹⁵⁶ Article 3.2 United Nations UNCITRAL rules

¹⁵⁷ Article 3.1 ICC rules

¹⁵⁸ Article 3.5 LCIA ( London Court of International Arbitration)

tribunal. Contrasting traditional and modern business mediation practice has to be understood. According to Buhring, C.¹⁵⁹ while in modern business mediation, the mediator is simply assisting the parties in developing their own solutions, not being motivated by social pressures, traditional mediation occurs in the context of a coherent social group and is characterized by the dominating role of the third party who is typically a higher respected member of the business or legal community whose suggestions carry great authority with the parties (in Tunisia usually in practice judges play the role of mediators) . Example of traditional mediation can be found in many civil law countries¹⁶⁹, particularly in Tunisia where modern business mediation culture is not very spread within legal and business community. By contrast, in some Arab countries, like in Lebanon and Egypt, ADR techniques are benefiting from a favorable legal environment¹⁶¹. Whether Mediation or Arbitration is preferred by the parties, in business field, depends on the cultural and legal traditions of the parties involved. When parties decide to consider dispute resolution clauses during the negotiation of their contract, their support for conducting these mechanisms may be not viewed in the same way.

From American perspectives, when a dispute arises, business people need to know how their rights and obligations in the contract will be enforced. Without a dispute resolution clause, the parties would have to rely on uncertainties and difficulties of trans-national litigation in foreign courts. Several factors however must be considered, including the nature of the international contract, the cultural differences between the parties and the expectations of the parties involved.

¹⁵⁹ Buhring, C. and Uhle., Arbitration and Mediation in International Business: Designing procedures for effective conflict management, Op.cit note 1 page 60

¹⁶⁹ Buhring , Id

¹⁶¹ Najjar, I., " les Models alternatives de règlement des conflits, arbitrage et médiation, droit libanais", in Tunisian Jurisprudence and legislation Review (RJL), 1999

Ultimately, they should reflect the parties^, explicit intention to anticipate disputes and to resolve them in a manner helpful to preserving the business relationship. There is, however no perfect model dispute resolution provision applicable to the entire range of possible international business contracts, particularly the merger contract.