DENMARK Trends and Developments Contributed by: Thomas Weitemeyer and Jonas Høst, Moalem Weitemeyer
Against this backdrop, effective risk management requires more than a well-drafted arbitration clause in the SPA. Deal teams are increasingly focused on designing a coherent and integrated dispute archi - tecture that spans the SPA, W&I insurance and agree - ments with key individuals. This includes clearly defining recourse and exclusive remedies, aligning non-recourse provisions with W&I policy mechanics, and ensuring that management and board members are contractually tied into the same dispute resolution and confidentiality framework. Recent Danish case law confirms that, where prop - erly structured, arbitration clauses in board member agreements can support this approach and help pre - vent parallel court proceedings and unintended public exposure. FSR/Expert Determination in Earn-Outs and Completion Accounts – the “Final and Binding” Question Earn-out and completion accounts mechanisms remain a frequent trigger for post-closing disputes in Danish M&A, not least because they sit at the inter - section of technical accounting judgement and the parties’ negotiated risk allocation. To keep such dis - putes proportionate – and to avoid turning every work - ing capital adjustment into full-scale arbitration – SPAs increasingly provide for expert determination by an independent auditor or accountant, with the expert’s decision commonly stated to be “final and binding”. Under Danish law, the SPA will typically suggest that the expert is appointed by the auditors’ organisation “FSR – danske revisorer”. This reflects a genuine commercial need. Many disa - greements are best resolved by a specialist who can take a pragmatic view of accounting methodologies, consistency with agreed policies, and the treatment of one-off or cut-off items. Expert determination is also attractive because it is typically faster, more stream - lined, and less costly and adversarial than arbitration, while still producing a decision the parties can imple - ment promptly. On the other hand, it may reduce legal certainty, as an expert valuation is not equivalent to an arbitral process in which evidence is formally tested and legal issues are examined in a structured and comprehensive manner.
In larger and more complex transactions, however, this model is increasingly being stress-tested. The first fault line concerns scope. Completion accounts and earn-outs rarely involve only mechanical calcu - lations. Disputed items often turn on the interpreta - tion of defined terms such as “normalised EBITDA”, “ordinary course” or “consistent with past practice”, raising the question of whether the expert is permitted to decide issues that are arguably legal or contractual in nature. This difficulty is amplified where the SPA contains both (i) an expert determination clause for accounting matters and (ii) a broadly framed arbitra - tion clause for “all disputes”, creating an obvious risk of overlap and forum disputes. The second, and increasingly prominent, fault line concerns finality. While expert determinations are “binding” as a matter of contract, market practice increasingly recognises that “final and binding” does not necessarily mean immune from challenge. Even where the merits are not open for review, expert deter - minations may still be susceptible to challenge on lim - ited grounds – eg, where the expert has exceeded the agreed mandate, where the appointment or process is materially defective, or in cases of bias, fraud or manifest error – depending on the wording of the SPA and the circumstances. This is where the interaction with arbitration becomes important practically. Parties are increasingly testing whether, and on what basis, an auditor’s “final” deter - mination can be reviewed in arbitration, particularly where there are alleged defects in the appointment process (for example, where the agreed nomination mechanism was not followed or where issues of com - petence arise) or procedural shortcomings (such as a failure to give a party the agreed opportunity to com - ment). In response, Danish deal drafting is becoming more deliberate in its “finality design” of expert determina - tion clauses. The clearer the SPA is on (i) the expert’s role and mandate (expert, not arbitrator), (ii) what con - stitutes an “accounting issue”, (iii) the appointment and procedural steps, and (iv) whether any challenge is limited to defined, exceptional grounds (and in which forum), the lower the risk that the parties end up in a prolonged dispute about whether a supposedly
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