Emirates trading, good faith, and pre-arbitral ADR clauses: a jurisdictional precondition?

Flannery, L. and Merkin, R. (2015) Emirates trading, good faith, and pre-arbitral ADR clauses: a jurisdictional precondition? Arbitration International, 31 (1). pp. 63-106. ISSN 1875-8398 doi: 10.1093/arbint/aiv005

Abstract/Summary

The 2014 High Court decision in Emirates Trading v Prime Mineral Exports is an interesting example (and possibly the first), of an English Court affirming that non-compliance with pre-arbitral dispute resolution procedures could remove the tribunal's jurisdiction entirely. It is also probably the first case to import into an ADR clause a binding obligation to conduct pre-arbitral settlement negotiations ‘in good faith'. The decision has worrying implications for arbitrators and arbitration generally, if followed. While professing to be based on emerging jurisprudence abroad (principally Australia and Singapore), and on one investment treaty decision (Tulip Real Estate v Amsterdam) the rationale (and the conclusion) on such an important issue is worryingly unsound, based as it is on questionable dicta on the role of good faith generally. The authors examine in considerable depth the English and Commonwealth authorities in relation to agreements to agree (stretching back over almost a century), the enforceability of agreements to negotiate and the implied term of good faith in commercial contracts, concluding that the correct approach to non-compliance with pre-arbitral dispute resolution procedures is one that is either procedural or substantive, but should not (in the absence of clear words expressing such an intention) deprive the tribunal of jurisdiction.