UK: A New Approach To Agreements To Negotiate In English Law?

Last Updated: 13 January 2015
Article by Jones Day

A recent decision from the High Court of England and Wales represents a marked departure from the English courts' approach to the enforceability of agreements to negotiate in commercial contracts. In Emirates Trading Agency LLC v. Prime Mineral Experts Private Limited [2014] EWHC 2104 (Comm), Mr. Justice Teare held that a time-limited obligation to seek to resolve disputes by "friendly discussions" was enforceable. In reaching this decision, the Court was influenced by judicial reasoning in a series of cases in Singapore and Australia.

How Does this Decision Affect You?

Commercial contracts usually include "multi-tiered" dispute resolution clauses that oblige parties to enter into negotiations in order to seek resolution of a dispute or difference. In the event that those negotiations do not result in a settlement of the dispute, the parties are then obliged to submit to mediation before commencing formal proceedings in arbitration or civil litigation. "Multi-tiered" dispute resolution clauses are particularly popular in construction and engineering contracts; for example, the FIDIC suite of contracts (sub-clause 20.5) provides that the parties should attempt to settle their disputes "... amicably before the commencement of arbitration." There are many commercial advantages and disadvantages with "multi-tiered" dispute resolution clauses. One advantage is that they compel parties to seek to resolve their disputes before having to incur the time and financial expense of commencing formal proceedings. One disadvantage is that the procedure can be protracted, resulting in delay, particularly if the issues that are the subject of the dispute are close to being time-barred.

Following the decision of Mr. Justice Teare, parties to contracts governed by the laws of England and Wales or laws that are heavily influenced by the laws of England and Wales should ensure that any multi-tiered dispute resolution clause is drafted in clear terms and that it is possible to assess, objectively, whether a party has complied with any conditions precedent to formal proceedings. They should also be aware that time-limited obligations to negotiate in good faith are likely to be enforceable if they are sufficiently certain on their terms, and therefore a failure by one party not to negotiate in good faith can result in them being in breach of contract.

Facts of the Case

Emirates and Prime Mineral entered into a long-term contract for the sale and purchase of iron ore. A dispute arose that resulted in Prime Mineral terminating the contract and claiming damages from Emirates. Prime Mineral then commenced arbitration proceedings in accordance with the dispute resolution clause in the contract. The dispute resolution clause provided:

In case of any dispute or claim arising out of or in connection with or under this [Agreement] ... the Parties shall first seek to resolve the dispute or claim by friendly discussion. Any Party may notify the other Party of its desire to enter into [consultation] to resolve a dispute or claim. If no solution can be arrived at between the Parties for a continuous period of 4 (four) weeks then the non-defaulting party can invoke the arbitration clause and refer the disputes to arbitration.

Upon the commencement of arbitration proceedings, Emirates petitioned the courts of England and Wales for an order that the arbitral tribunal lacked jurisdiction because Prime Mineral had failed to engage in "friendly discussions" before commencing the arbitration proceedings. The courts of England and Wales were, therefore, tasked with determining whether the dispute resolution clause and, in particular, the apparent obligation on the parties to "... resolve the dispute or claim by friendly discussion" was enforceable. 

The Court's Reasoning

There was a common understanding, in the laws of England and Wales, that a contractual obligation on a party to seek to resolve a claim by "friendly discussions" was a mere agreement to negotiate and therefore unenforceable. This understanding was derived from a series of authorities, including Itex Shipping v. China Ocean Shipping, Paul Smith v. H & S International Holding, Walford v. Miles, and Sulamérica v. Enesa Engenharia (a case in which the Court of Appeal in England determined that a contractual obligation on parties to "seek to have the Dispute resolved amicably by mediation" was too uncertain to be enforced).

In his judgment, Mr. Justice Teare reviewed the English authorities and expressed some doubt about the common understanding. He concluded that the obligation on Emirates and Prime Mineral to "resolve the dispute or claim by friendly discussions" was enforceable by using basic legal principles. In particular, he decided that: 

  • No essential term was lacking;
  • The term was not uncertain, because the obligation to resolve a dispute or claim by "friendly discussions" was akin to acting in good faith, which can be established on the facts;
  • The parties had freely agreed to a restriction on their right to commence arbitration; and
  • Enforcement of such an agreement was in the public interest because there is an overriding obligation on the court to seek to enforce obligations that have been negotiated freely in order to avoid the expense of arbitration.

The Court found (as a matter of fact) that Prime Mineral had complied with the obligation to "seek to resolve the dispute or claim by friendly discussions," and therefore the application brought by Emirates was dismissed. 

Approach in Singapore and Australia

In recent years, the courts in Singapore and Australia have diverged from the position in English law before Emirates v. Prime Mineral. For example, in United Group Rail Services v. Rail Corporation of New South Wales, the New South Wales Court of Appeal held that, while an agreement to agree was clearly unenforceable, it did not follow that an agreement to negotiate in good faith to settle a dispute arising under a contract was unenforceable. Similarly, in HSBC Institutional Trust Services v. Toshin Development Singapore Pte Limited, the Court of Appeal in Singapore distinguished Walford v. Miles on the basis that that case concerned a stand-alone agreement where there was no overarching contractual framework governing the parties' relationship. 


While there is always going to be an evidential issue as to whether a party has negotiated (or conducted the negotiations) in "good faith" or in a "friendly" manner, the decision in Emirates v. Prime Mineral demonstrates a shift away from the courts' traditional position of determining that "agreements to negotiate" are unenforceable to a more enlightened position that gives effect to the intentions of the parties based upon basic legal principles.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.