Meaning
A dispute resolution method requires each party to submit a single final monetary figure to an arbitrator who must select one of the two options without modification. In cross-border joint ventures, baseball arbitration rules are commonly adopted to resolve valuation deadlocks during buyout proceedings or exit events. The mechanism avoids prolonged litigation by forcing both sides to propose realistic numbers, thereby reducing legal expenses during the restructuring.
Submission Mandate
Both parties must present their final valuation figures alongside supporting financial analyses within a pre-determined period following the declaration of an impasse. These written offers represent the only outcomes the tribunal can choose. The process eliminates the risk of a compromise ruling that satisfies neither side.
Arbitral Constraint
The presiding panel lacks the authority to construct an intermediate figure or split the difference between the submissions. By limiting the tribunal to a binary choice, the baseball arbitration rules prevent arbitrators from exercising independent valuation discretion. The tribunal selects the offer that aligns most closely with fair market principles.
Strategic Consequence
Parties typically moderate their demands because an extreme proposal is rejected in favor of a more reasonable alternative. This incentive structure accelerates settlement negotiations before the final submissions are made. The resulting decision provides rapid liquidity and certainty to the exiting investor.
