Mergers and acquisitions are complex processes, often involving multiple and sometimes conflicting interests. When something goes wrong, resolving the issue quickly and effectively must be a top priority. But which option is best: arbitration, courts, or mediation?
Arbitration is a particularly useful tool when the parties come from different countries, when there is little trust in each other’s judicial system, or when they simply want to keep the dispute private. It works well because the parties can choose arbitrators with experience in the relevant field. For instance, in a deal involving a pharmaceutical company, experts from that sector can be appointed—something that rarely happens in court.
Another advantage is that arbitration is usually faster than traditional litigation. In addition, arbitral awards can be easily enforced in other countries, thanks to international treaties such as the New York Convention. And perhaps the most important benefit for many companies: the process can remain entirely confidential, with no public disclosure of the dispute or the settlement terms.
However, arbitration is not cheap. The parties must pay the arbitrators, the administering institution, and, of course, the lawyers. Therefore, while it is a strong option for large or highly technical transactions, it may not be cost-effective in smaller acquisitions.
Litigating an M&A conflict in court remains a valid option. It is often less expensive than arbitration and, importantly, if you disagree with the judge’s ruling, you usually have the right to appeal—something that is not always possible in arbitration.
That said, there is an important caveat: first-instance judgments can be enforced even while under appeal. This means a party may be required to pay a substantial amount before the case is fully resolved. If a higher court later rules in your favor, you can recover the money, but the damage may already have been done.
Thus, while courts provide certain safeguards, they often involve longer timelines and less control over the process. If speed and certainty are the priorities, litigation may not be the best route.
Mediation is becoming an increasingly popular way to resolve M&A disputes. Why? Because it allows the parties to sit down with a neutral third party, discuss the issue, and work toward a solution without going to court. It is faster, less costly, and less confrontational than either arbitration or litigation.
Another key advantage: everything discussed in mediation remains confidential. If the parties reach an agreement, it has legal force and can be enforced in court if necessary.
Moreover, mediation may soon become a mandatory step. In Spain, a new law is being considered that would require parties to attempt alternative dispute resolution—such as mediation—before filing civil or commercial lawsuits. This means that beyond being practical, mediation could soon be a prerequisite for accessing the courts.
Of course, mediation only works if both parties are willing to engage. If one refuses to participate, there is little that can be done.
At Confianz, we have years of experience helping companies close deals securely and resolve disputes without turning them into battles. Because prevention is also part of a sound strategy. If you are in the middle of a negotiation or foresee potential friction, let’s talk before it becomes a problem.
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