Section 2: Adaptations of Alternative Dispute
Resolution mechanisms in merger agreement
No single procedure exists that would be suitable for any type
of
dispute. Alternative Dispute resolution processes have to be adapted
to
meet the particularities of the type of the transaction involved. During
the
merger negotiations, parties should agree to address the issue of
dispute
resolution mechanisms in their contract at the earliest stage of the
deal.
Non binding ADR techniques, such mediation must, not only be
structured in a way to fit with the transaction's needs (pargl) but also,
associated with arbitration (parg2)
Pargi: structuring non binding ADR mechanisms
Negotiation is the primary method of resolution of business
disputes. (A) and during the closing of a merger deal, must be facilitated by
mediation (B)
A- Negotiation process as conceptual root
Conflicts have become a natural component of business
relationships. For this they have to be managed in ways that satisfy parties
underlying interests. In merger context, negotiating the deal is crucial
particularly when the deal crosses borders.
Mergers are almost never without problems and invariably some
unexpected aspect of the deal will surface. No matter how well the due
diligence process has been carried out, it is impossible for everything to be
taken into account. And, unfortunately in many cases, this can lead to conflict
between the parties involved. The most constructive way of resolving conflicts
is by reconciling interests through consensus. Consensual solutions are the
products of negotiation. According to Raîffa, H., negotiation can be
analyzed according to characteristic steps, by distinguishing "a preparation
phase, the opening moves, the ensuing negotiation dance, and the end phase of
concluding the agreement or breaking off the discussions"162. In
mergers context, international mergers transactions are the product of a
negotiation among the parties. Although lawyers like to think that negotiations
end when merging companies agree on all the details and sign the contract, this
view hardly ever reflects reality. An international deal is a continuing
negotiation between the parties to the transaction as they seek to adjust their
relationship to the rapidly changing international environment in which they
must work. In international business merger, negotiations are generally
conducted between companies as the first step before the closing of the deal.
The usual model is that of representatives of the two merging companies from
different countries sitting across a table in faceto-face discussions to shape
the terms of the merger contract. It is vital for each side to understand the
particular decision making style of the other company and the various
particular interests that have to be satisfied.
Cross border mergers require, in addition to this, services of
one or more third parties to facilitate the deal making process. These
individuals are not usually referred to as "mediators." They instead carry a
variety of other labels: accountants, investment bankers, among others. Their
role sometimes resembles that of mediators trying to reconcile
162 RAIFFA, H., The Art & Science of Negotiation",
Cambridge, Harvard University Press, 1982
conflicting positions. However cultural differences tend to
create a significant barrier to effective communication because they intensify
the potential for misunderstandings and increase the time and attention
required for the explanation of issues, positions and interests.
The following are some aspects of negotiation etiquette
considered useful to know by Tunisian lawyers representing their clients to
negotiate a merger deal with foreign: -don't use first names too soon with
French or don't be irritated by moments of silence in conversations with the
Japanese; American in a contract negotiation tends to view the goal as coming
up with a signed contract, by contrast Japanese view it as establishing a
relationship between the two sides; Negotiators from Germany communicates
directly , other cultures like French rely of figures of speeches; Americans
are said to prefer to approach deals by settling each step one a time, the
French are seen as having the top down approach of agreeing on a few general
principles that are used to fill in the specific issues; Japanese tend to be
risk averse and operate on a team basis whereas Americans , by comparison are
risk takers and tend to be organized from the top...&163.
Another situation in which actions by one side could be interpreted by the
other side without taking into account the cultural context in which they
occur, in business negotiations is the use of lawyers. In the US, the
consultation of lawyers and their presence in negotiations is routine behavior
in any dealing of certain significance.
From the perspective of other civil law cultures, the involvement
of lawyers could be a signal of distrust. It has to be borne in mind that
influence of national cultures on negotiation behavior has to be taken into
consideration and may signify a fetter to reach the best deal. Consequently, a
more cooperative form of dispute resolution facilitating negotiation,
particularly during the negotiation of a cross border merger that places
greater emphasis on the parties' interest, is required.
163 Buhring, C. and
uhle., Arbitration and Mediation in /nternational Business: Designing
procedures for effective conflict management op.cit note 1 page 60
B- Mediation process as prototype facilitating negotiations
It is well established that negotiation is the principle activity
of lawyers and the primary method for resolution of legal disputes. By virtue
of negotiation, many cases settle without the necessity of a complaint being
filed with a court. However, even with good faith efforts by all parties, not
all business disputes are settled through unassisted negotiation between the
parties. When preservation of a business relationship is the priority, which is
the case in a merger, what would be the next more powerful process to resolve
potential disputes? Although the automatic response is to think "litigation,"
lawyers and litigants are beginning to recognize alternatives that offer
advantages over negotiation and yet stop short of litigation.
From this perspective, the next step should be Mediation. In the
public mind, Mediation is often confused with Arbitration. People assume, for
example, that mediators are informal judges who will hear the arguments of both
sides and render a decision in the matter. This is mistaken. Mediation is best
understood as "assisted negotiation." A mediator is a facilitator, a neutral
third person who helps the party's move, step by step, through a process
intended to help them find and agree upon a mutually acceptable resolution.
From this description, it is also easy to see why lawyers sometimes resist the
idea of Mediation. Since most lawyers are experienced negotiators, they may
feel they do not really need a neutral facilitator to assist them in the
negotiation
process. But this misses the point. The purpose of Mediation is
not to help the lawyers move toward agreement, but rather to help the parties
do so. The Mediation process is non-adversarial and focuses on the parties'
resolving the dispute themselves using the skills of a mediator. The key
principle of Mediation is that the parties work together to arrive at an
agreement that suits both.
This is in contrast to litigation and Arbitration where a judge
or arbitrator imposes a decision which may be disappointing for one or both
parties. A mediator is appointed by the parties to help establish effective
communication and by doing so find a solution which satisfies both their needs
and interests. The informal process is speedy and cost effective for on-going
business relationships. In other words, the assistance of a thirdparty neutral
during negotiations can help bring about successful resolution, even though
skillful negotiators may have previously tried and failed
Mediation can be a flexible and powerful tool, particularly
welldesigned for the resolution of international business disputes. In
particular, the mediator needs to be sensitive to the number of deep
differences among countries, cultures, and areas of the world and take
account. Mediation is accepted in the business milieu in many
common law countries like in
the US, while in many civil law countries it has not yet achieved
a mature acceptance as a viable mean having its established legal framework.
Mediation must be distinguished from other non binding processes
such as conciliation. conciliation is: "a process by which a third party, the
conciliator, makes recommendations to the parties in order to settle their
difference; the mediator, for his part, will simply arrange for the parties to
discuss together and will abstain from making them any
recommendations.164" Conciliation is a peaceful way to settle
litigations that need the intervention of a third party in charge of trying to
reach a solution accepted by parties. Although the two methods (Mediation and
Conciliation) have similar aspects165, they are fundamentally
different166.
164 Schwartz, E., "La conciliation internationale et
la CCI," Bulletin ICC-CCI Vol. 5 No. 2 1994 pages 5-19 and in particular page
6.
165 « ... Mediation is simply a variant of conciliation ...
» DE BOISESSESSON, M.,, « Le droit Français de l'Arbitrage
», Ed. GLN Joly page 191-186 LGDJ Paris 1987 pp 176 et seq.
166 Mediation (or Al Wasata) and Conciliation (or
Solh) Arabic Translation
The conciliator plays a relatively direct role in the actual
resolution of a dispute and even advises the parties on certain solutions by
making proposals for settlement. He is usually seen as an authority figure that
is responsible for the figuring out the best solution for the parties. In other
words, he, not the parties, often develops and proposes the terms of
settlement. In this regard, the role of a conciliator is distinct from the role
of a mediator. The mediator does not assume sole responsibility for generating
solutions. Instead, he works together with the parties as a partner to assist
them in finding the best solution to further their interests. Put it
differently, his priority is to facilitate the parties' own discussion and
representation of their own interests, and guide them to their own suitable
solution- a good common solution that is fair, durable, and workable. The
parties play an active role in mediation, identifying interests, suggesting
possible solutions, and making decisions concerning proposals made by other
parties. They come to mediator seeking help in finding their own best
solution.
Conciliation and mediation both look to maintain an existing
business relationship and to renew a lost balance of power between two parties.
These concepts are sometimes used as synonyms, but they do indeed vary
substantially in their procedures.
In mediation, the mediator controls the process through different
and specific stages: introduction, joint session, caucus, and agreement, while
the parties control the outcome. By contrast, in conciliation the conciliator
may not follow a structured process, instead administering the conciliation
process as a traditional negotiation, which may take different forms depending
on the case. Conciliation is used almost preventively, as soon as a dispute or
misunderstanding surfaces: a conciliator pushes to stop a substantial conflict
from developing.
Mediation is closer to arbitration since it intervenes in a
substantial dispute that has already surfaced that is very difficult to resolve
without "professional" assistance.
However, the inability to guarantee the finality of the
settlement may render the entire process futile, as long as national legal
systems have not yet developed the necessary structure to support non binding
ADR and coordinate between different jurisdictions on how to treat them. In
this regards, Arbitration may offer the best legal frame work to support non
binding ADR procedures.
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