In a departure from the orthodox English approach, the
English High Court recently held that an agreement to participate
in "friendly discussions" was enforceable as a
condition precedent to arbitration. This more closely aligns
English law with decisions from New Zealand's Court of Appeal.
It is only a matter of time before the New Zealand Supreme Court is
called upon to consider similar contractual terms.
The decision
In Emirates Trading Agency v Prime Mineral Exports, the
High Court boldly side-stepped a 1992 House of Lords decision that
agreements to negotiate in good faith will not be enforced by the
courts.1
The background to the dispute was that Emirates had failed to
take a contracted level of iron ore supply from Prime Mineral
Exports (PME), which then terminated the supply contract
and began arbitration proceedings seeking US$45 million in
damages.
