negotiation for the cost of the upgrade was based on an amended specification
against the original specification. Therefore, the court could identify the likely result
of negotiations in good faith.
52
Furthermore, in maritime contracts, dispute resolution remains a critical clause.
Can a clause to exhaust friendly discussions to resolve a dispute hold back the other
party from proceeding towards immediate invocation of arbitration?
In Emirates,
53 the Court held that the obligation to seek to resolve disputes by
friendly discussions must import to seek to do so in good faith. In traditional terms,
such an obligation goes without saying and is necessary to give business efficacy to
the contract. A time limited obligation to seek to resolve a dispute in good faith
should be enforceable. Such an agreement is not incomplete.
It does not follow however, that an agreement to undertake negotiations in good faith fails
for the same reason. An agreement to agree to another agreement may be incomplete. An
agreement to negotiate, if viewed as an agreement to behave in a particular way may be
uncertain, but is not incomplete. The objection that no Court could estimate the damages
because no one could tell whether the negotiations ‘would be’ successful ignores the
availability of damages for the loss of a bargained for valuable commercial opportunity.
54
On the contrary, courts may at times retreat to decide on an agreement to
negotiate, In Itex v. Shipping,
55 no payments were made by the charterers under
the Settlement Agreement and the owners sought an arbitral award. The submission
by the charterers that amicable settlement was a condition precedent to the submission of the arbitration was rejected. The Court held that the clause did not qualify as a
condition precedent and in any event, it was clear from the correspondence of the
parties that they were unable to reach an amicable settlement.
In United Group Rail Services v. Rail Corporation New South Wales,
56 it was
propounded that, in the field of dispute resolution clauses, the Court ought not to
regard an obligation to seek to resolve a dispute in good faith as inherently inconsistent with the position of a negotiating party. It is not inconsistent where there is a
material, voluntarily accepted, restraint on the parties’ freedom of action, namely, a
promise to seek to resolve a dispute, be friendly discussions in good faith.
In Abbot Labs v. Baxter Int’l Inc.,
57 the seat of the arbitration was Chicago; the
applicable law was Illinois Law. The Tribunal found that, under the Dispute Resolution Agreement invoking the Original Commercial Relationship, Baxter’s proposed sales of generic sevoflurane could be enjoined because they would reduce
Abbott’s revenues below monopoly levels, even though the expectation of generic
competition was not new. There stood one dissenting member who opined that the
52 Ibid.
53 Emirates Trading Agency LLC v. Prime Mineral Exports Private Ltd. [2014] EWHC 2104
(Comm).
54 Chaplin v. Hicks, ALL ER Rep 224.
55 Itex Shipping Pte Ltd v. China Ocean Shipping Co. [1989] [Q.B. (Com.Ct).
56 [2009] NSWCA 177 (3 July 2009).
57 Abbott Labs v. Baxter Int’l Inc., 315 F.3d 829, 834 (7th Cir. 2003).
126
S. Choudhury and P. Das
against the original specification. Therefore, the court could identify the likely result
of negotiations in good faith.
52
Furthermore, in maritime contracts, dispute resolution remains a critical clause.
Can a clause to exhaust friendly discussions to resolve a dispute hold back the other
party from proceeding towards immediate invocation of arbitration?
In Emirates,
53 the Court held that the obligation to seek to resolve disputes by
friendly discussions must import to seek to do so in good faith. In traditional terms,
such an obligation goes without saying and is necessary to give business efficacy to
the contract. A time limited obligation to seek to resolve a dispute in good faith
should be enforceable. Such an agreement is not incomplete.
It does not follow however, that an agreement to undertake negotiations in good faith fails
for the same reason. An agreement to agree to another agreement may be incomplete. An
agreement to negotiate, if viewed as an agreement to behave in a particular way may be
uncertain, but is not incomplete. The objection that no Court could estimate the damages
because no one could tell whether the negotiations ‘would be’ successful ignores the
availability of damages for the loss of a bargained for valuable commercial opportunity.
54
On the contrary, courts may at times retreat to decide on an agreement to
negotiate, In Itex v. Shipping,
55 no payments were made by the charterers under
the Settlement Agreement and the owners sought an arbitral award. The submission
by the charterers that amicable settlement was a condition precedent to the submission of the arbitration was rejected. The Court held that the clause did not qualify as a
condition precedent and in any event, it was clear from the correspondence of the
parties that they were unable to reach an amicable settlement.
In United Group Rail Services v. Rail Corporation New South Wales,
56 it was
propounded that, in the field of dispute resolution clauses, the Court ought not to
regard an obligation to seek to resolve a dispute in good faith as inherently inconsistent with the position of a negotiating party. It is not inconsistent where there is a
material, voluntarily accepted, restraint on the parties’ freedom of action, namely, a
promise to seek to resolve a dispute, be friendly discussions in good faith.
In Abbot Labs v. Baxter Int’l Inc.,
57 the seat of the arbitration was Chicago; the
applicable law was Illinois Law. The Tribunal found that, under the Dispute Resolution Agreement invoking the Original Commercial Relationship, Baxter’s proposed sales of generic sevoflurane could be enjoined because they would reduce
Abbott’s revenues below monopoly levels, even though the expectation of generic
competition was not new. There stood one dissenting member who opined that the
52 Ibid.
53 Emirates Trading Agency LLC v. Prime Mineral Exports Private Ltd. [2014] EWHC 2104
(Comm).
54 Chaplin v. Hicks, ALL ER Rep 224.
55 Itex Shipping Pte Ltd v. China Ocean Shipping Co. [1989] [Q.B. (Com.Ct).
56 [2009] NSWCA 177 (3 July 2009).
57 Abbott Labs v. Baxter Int’l Inc., 315 F.3d 829, 834 (7th Cir. 2003).
126
S. Choudhury and P. Das