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Litigation Versus Arbitration

               The practitioner preparing to participate in an arbitration proceeding either on behalf of a party or as a
               neutral should understand the primary differences between court litigation and arbitration.

               On the most basic level, courts operate pursuant to set rules and procedures within a vertical pyramidal
               structure, with legal precedent operating to provide guidance about interpretation of the applicable law
               that will be applied to resolve the substantive dispute. The applicable rules, procedures, and laws are al-
               ready in place, and the parties must abide by them. Courts also provide an explicit means to appeal and,
               possibly, overturn an erroneous decision.

               In contrast, arbitration can best be viewed as operating on a horizontal plane. Individual arbitrations oc-
               cur without the necessity of resorting to controlling precedent and, generally, with a minimal or nonex-
               istent right of appeal. Arbitration is a matter of contract or agreement between the parties, which means
               that the parties can determine the law, rules, and procedures that will apply to the resolution of a dispute.
               Theoretically, arbitration provides benefits such as less cost, confidentiality, and the avoidance of pro-
               tracted litigation; however, arbitration occurs at the expense of the known procedures and the ability to
               meaningfully appeal the arbitration in decision through the courts.

               Although the trend is for M&A agreements to include arbitration provisions, recently, some parties are
               considering a reversion back to the traditional court system. The expectations of some parties have been
               disappointed by the seemingly unfettered discretion and lack of appellate review provided by arbitration.
               Further, traditional courts offer extensive published case law acting as precedent. Such judicial prece-
               dent affords parties better prediction capabilities in terms of outcomes. The advantages of speed, special-
               ty, cost, and the avoidance of the uncertainties that accompany the resort to unfamiliar courts and proce-
               dures continue to be compelling rationales in favor of arbitration. Nonetheless, parties with significant
               risk in a possible acquisition-related dispute may feel more comfortable with a judicial system that of-
               fers more checks on outlier decisions.


        Administration of the Dispute

               The agreement to arbitrate a dispute and the law, rules, and procedures to be applied are matters of con-
               tract and are generally contained within the M&A agreement. The detail and specificity contained in
               such agreements varies widely.

               The standard merger or acquisition agreement does not contain detailed guidelines for the administration
               of arbitration or a neutral dispute resolution. Instead, the agreement typically establishes simply whether
               the parties will self-administer the arbitration or hand over administration to a specific neutral institu-
               tion. However, in the event of a dispute, the decisions made at the time of drafting the agreement regard-
               ing how any dispute is to be administered will play a large role in the procedure and, perhaps, the out-
               come of the dispute. Therefore, this chapter offers an overview of the most common administration op-
               tions for a merger- or acquisition-related dispute.


        Self-Administration

               One option is self-administration. When the parties decide upon self-administration, they should be care-
               ful to set forth rules and procedures within the acquisition agreement in sufficient detail to reduce uncer-
               tainty before a dispute arises and to lessen side disputes regarding procedures if and when a dispute de-
               velops. In a self-administered arbitration, the neutral arbitrator is left with broad and almost unfettered
               powers in determining how the arbitration will precede, limited only by the procedures contained in the

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