[PPT] - Settlement of China-Related M&A Disputes by Arbitration CEAC as PowerPoint Presentation

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Clifford Chance

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Chinese European Arbitration Centre

Settlement of China-Related M&A Disputes by Arbitration – CEAC as an Alternative Arbitration Institution? Dr Dominik Ziegenhahn

Member of the Advisory Board of CEAC Vice President of the Chinese European Legal Association e.V. (CELA)

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Clifford Chance

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Chinese European Arbitration Centre

Overview

 Introduction  Typical Disputes in connection with M&A Transactions  Advantages of Arbitration for M&A Disputes  Selection of Arbitration Procedures for M&A Disputes  Using CEAC for China-related M&A Disputes  Conclusions

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Clifford Chance

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Chinese European Arbitration Centre

Introduction

 Foreign direct investments between Europe and China through cross-border M&A transactions are continuously increasing  Cross-border M&A disputes as complex as M&A transactions itself; broad variety of typical disputes during and after the negotiation process  Disputes often arise as a consequence of vague or even missing contractual clauses  Parties of M&A transactions prefer arbitration in particular for confidentiality reasons, the speed of arbitration procedures and competence of arbitrators  Difficult to provide statistics as information on arbitration proceedings and arbitral awards not public  CEAC as an alternative arbitration institution for China-related M&A disputes

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Clifford Chance

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Chinese European Arbitration Centre

Typical Disputes in connection with M&A Transactions (1)

Pre-Closing Disputes  Violation of a letter of intent  Violation of non-disclosure or exclusivity agreements  Disputes regarding pre-contractual disclosure requirements  Disputes regarding the occurrence of closing conditions  Withdrawal from negotiation in bad faith

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Clifford Chance

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Chinese European Arbitration Centre

Typical Disputes in connection with M&A Transactions (2)

Post-Closing Disputes  Disputes regarding purchase price adjustments and closing accounts  Disputes regarding the valuation  Violation of representations and warranties  Disputes regarding indemnification obligations  Disputes regarding calculation and compensation of damages  Violation of pre-contractual information duties  Violation of post-contractual non-compete or non-solicitation obligations  Disputes regarding put and call options

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Clifford Chance

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Chinese European Arbitration Centre

Advantages of Arbitration for M&A Disputes

 Exclusion of a home field advantage  Competence of the arbitrators  Speed  Confidentiality  Flexibility  Enforceability  Costs

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Clifford Chance

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Chinese European Arbitration Centre

Selection of Arbitration Procedures for M&A Disputes

 Choice of arbitrators and type of procedure key to the outcome of any dispute  Institutional arbitration  Ad-hoc arbitration  Fast track arbitration  Expert proceedings  Choice of the arbitration institution  Asia: CIETAC, BAC, HKIAC, SIAC, etc.  Europe: ICC, DIS, VIAC, CEAC, etc.  Choice of the seat of arbitration in China-related disputes

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (1)

CEAC and CEAC Arbitration Rules at a Glance  International dispute resolution institution focusing on China-related disputes worldwide with seat in Hamburg, Germany  CEAC arbitration rules based on UNCITRAL arbitration rules  Deviations from UNCITRAL meet specific needs of China-related disputes  CEAC ‘core rules’ show deviations from UNCITRAL rules  Special focus on neutrality, in particular with respect to the composition of the appointing authority  Neutrality also evidenced by foundation of CEAC on UNCITRAL rules and the integration of neutral model choice of law clauses

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (2)

Advantages of CEAC Arbitration in China-related M&A Disputes  Enforceability of arbitral awards in China ensured  Neutral appointing authority  Based on international rules accepted worldwide and, in particular, in China  Respecting party autonomy  Combination with conciliation or mediation  Service orientation of CEAC  Time and cost efficiency of CEAC arbitration procedures

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (3)

Deviations from UNCITRAL Rules  Institutional arbitration only  Combination with conciliation or mediation possible  Model arbitration clause  Model choice of law clause  Place of the arbitration proceedings  Time limit for the award  Costs and fees

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (4)

Specific Needs of Arbitral Proceedings for Cross-Border M&A Disputes  Multi-party proceedings and multi-contract disputes  Extension of arbitration agreements to third parties  Interim measures  Production of documents  Decisions based on documents only  Examination of witnesses through means of telecommunication  Tailor-made arbitration awards

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (5)

CEAC Model Arbitration Clause  Institutional arbitration  Place of Arbitration  Number and Choice of Arbitrators  Qualification of Arbitrators  Language of Proceedings and Documents  Confidentiality

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (6)

Composition of Arbitration Tribunal  Number of arbitrators  Appointment of arbitrators  Three-party-concept for the appointing authority  Appointment of sole arbitrator or presiding arbitrator (if necessary)  Challenge of arbitrators  Replacement of arbitrators

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (7)

Arbitral Proceedings  Statement of claim  Statement of defence  Interim measures  Evidence  Hearings  Experts  Closure of hearings  Issuing an arbitral award

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (8)

Arbitral Award  Time limit  Form and effect  Interpretation and correction  Enforcability

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Clifford Chance

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Chinese European Arbitration Centre

Using CEAC for China-related M&A Disputes (9)

Costs  Set out in fee schedule and annex  Appropriate (half of HKIAC frame, comparable to fee schedules of other European arbitration institutions)  Divided in steps based on amount in dispute  Special rule for cases with extreme workload for the arbitrators

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Clifford Chance

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Chinese European Arbitration Centre

Conclusions

 Arbitration in general offers great freedom and opportunities to solve M&A disputes efficiently  CEAC provides for modern and internationally recognized arbitration rules adopted to the specific needs of China-related transactions and disputes  With its specific emphasis on neutrality CEAC is a proper alternative to purely Chinese

r purely European arbitration institution

 Therefore, the parties of any China-related M&A transaction are encouraged to submit their potential disputed to CELA arbitration

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Clifford Chance

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Chinese European Arbitration Centre

Thank you!

Dr. Dominik Ziegenhahn (金道明博士)

Vice-President (副主席) CHINESE EUROPEAN LEGAL ASSOCIATION e.V. (中国欧洲法律协会) c/o Hanseatische Rechtsanwaltskammer Bleichenbrücke 9 20354 Hamburg (汉堡) Germany (德国) Phone (电话): +49 (0)40 35922-185 Fax (传真): +49 (0)40 35922-293 Mobile (手机): +49 (0)151 16128067 E-Mail (邮箱): ziegenhahn@cela-hamburg.com http://www.cela-hamburg.com

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Clifford Chance

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Chinese European Arbitration Centre

Back-up

CEAC Model Arbitration Clause

„Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by institutional arbitration administered by the Chinese European Arbitration Centre (CEAC) in Hamburg (Germany) in accordance with the CEAC Hamburg Arbitration Rules a) The number of arbitrators shall be […] ((i) one or (ii) three or unless the amount in dispute is less than € […] in which case the matter shall be decided by a sole arbitrator) b) Regardless of the seat of arbitration, the arbitral tribunal is free to hold hearings in […] (town and country); c) The language(s) to be used in the arbitral proceedings shall be […]; d) Documents also may be submitted in […] (language). e) The Arbitration shall be confidential. f) The parties agree that also the mere existence of an arbitral proceeding shall be kept confidential except to the extent disclosure is required by law, regulation or an order of a competent court. g) The arbitral tribunal shall apply the CEAC Hamburg Arbitration Rules as in force at the moment of the commencement of the arbitration unless one of the parties requests the tribunal, within 4 weeks as of the constitution of the arbitral tribunal, to operate according to the CEAC Hamburg Arbitration Rules as in force at the conclusion of this contract.”