by Gary L. Benton
Disputes over private investment can arise with respect to a wide array of parties and transactions. Disputes can involve investment, management, exit or ancillary considerations. Private investment disputes can involve a small one-off investment by a high net worth investor or complex, syndicated transactions by large funds with significant investment portfolios over a long period.
Arbitration is the preferred method for resolving private investment disputes because it allows for practical, expert consideration of disputes in a private business setting.
Nearly all private investment transactions involve customary terms and practices, complex legal corporate, securities and tax law considerations, and business practicalities that are not readily conducive to resolution in the courts. Despite the range of transactions possible, nearly all private investors place value on deal-making, sound business management and return on investment.
In arbitration, the parties can appoint an arbitrator with private investment legal expertise and specify a process that is efficient, confidential and business-focused. None of these benefits are obtainable through litigation.
Private investors and the companies in which they invest desire efficient, practical and private resolution of disputes, and often benefit from win-win solutions that cannot be provided by judges and juries. International investors require additional out-of-court protections that can only be provided through arbitration.
Arbitration allows for a neutral forum and international enforcement of awards. International enforcement is not readily available through the courts.
This article will discuss the nature of private investment disputes that are commonly brought to arbitration, the issues that characterize these disputes, how they can best be resolved, and sample language for drafting an arbitration clause for private investment disputes.