An enforceable agreement to negotiate
Article by CMS Cameron McKenna LLP
11.07.2014
Summary
In Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm), the English High Court held that an agreement to negotiate was an enforceable condition precedent to the referral of a dispute to arbitration. As the condition precedent had been satisfied, the arbitral tribunal had jurisdiction to hear and determine the claim…
Comment
A key finding by the court in this case was that, contrary to (but distinguishable from) the relevant English case law examined, the agreement to negotiate in Clause 11.1 was sufficiently certain such that it was enforceable. Taking account of the reasoning set out in the Australian case United Group Rail Services v Rail Corporation New South Wales (2009) 127 Con LR 202, the court concluded that in relation to the Clause 11.1 agreement to negotiate, no essential term was lacking; the subject matter of the “friendly discussions” was limited to disputes arising out of and in connection with the Contract, and the duration of the discussions was limited to four weeks. Clause 11.1 was therefore sufficiently certain to be enforceable. In arriving at its conclusion, the court noted that “where commercial parties have entered into obligations they reasonably expect the courts to uphold those obligations”. Further, the court acknowledged that there was a public interest in giving effect to dispute resolution clauses requiring the parties to negotiate settlement of disputes prior to commencing proceedings.