Turning point for enforceable ‘friendly discussions’ before arbitration

In a recent controversial decision, the court held that a dispute resolution clause, which required the parties to the contract to enter into ‘friendly discussion’ before arbitration proceedings were started, was enforceable.

The reason that this decision is controversial is that it is seemingly at odds with the existing English law. In general, English law does not recognise an agreement to negotiate or an agreement to settle disputes amicably. In previous cases, such agreements have been held ‘too uncertain’ to enforce. As such, this case appears to mark a turning point in the enforcement of such clauses under English law.

The background facts of the dispute are not particularly relevant. It is sufficient to simply say that a dispute arose between the parties and the contract contained a clause that they should seek to resolve any dispute by ‘friendly discussion…for a continuous period of four weeks’. If a resolution was not achieved, the dispute could then be referred to arbitration…

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