Litigation Practitioners will be aware that over recent years the Courts have been taking every opportunity to encourage parties to attempt to resolve their disputes by negotiation or by mediation rather than using the courts. For example,
There is a standard “case management” direction that requires parties to mediate at all stages in the litigation process and, requiring any party who chooses to refuse to mediate to give a statement to the Court explaining how they can justify that approach.
There have been a series of cases in which successful parties have been denied all or part of their legal costs on the basis that earlier conduct on their part (say in terms of their approach to mediation or settlement negotiations) was regarded as unreasonable.
Against this background it has been odd that the Courts have been so reluctant to uphold contractual dispute resolution clauses that are designed to require the parties to make strenuous efforts to resolve their differences using some form of agreed dispute resolution process before they become entitled to issue proceedings. In several previously decided cases, the Courts have refused to uphold such a dispute resolution process unless it has been very clearly defined.
However, contracting parties have been given a little more encouragement to use these clauses by the recent decision of the Commercial Court in the case of Emirates Trading Agency LLC –v- Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm).
In that case the clause required the parties to “first seek to resolve the dispute or claim by friendly discussion”. It then went on to provide that if no solution could be arrived at between the parties for a continuous period of four weeks then the non-defaulting party could refer the matter to arbitration.
In that particular case the parties did have a dispute, arbitration was commenced and then the Claimant applied to Court for an Order under Section 67 of the Arbitration Act 1996 that the Tribunal lacked jurisdiction to determine the claim because the condition precedent set out in the clause had not been fulfilled and therefore arbitration could not take place. The court decided that the parties had not completed the pre-arbitration process set out in the contract.
Summary
The decision is a welcome one. Litigation proceedings are invariably expensive and uncertain and should always be an option of last resort.