Emirates Trading Agency Plc v Prime Mineral Exports Private Ltd

[2014] EWHC 2014 (Comm)

Clause 11 of the contract between the parties provided the following procedure for resolving disputes:

“In case of any dispute or claim arising out of or in connection with or under this LTC...,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 consuLTCtion to resolve a dispute or claim. If no solution can be arrived at in 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.”

ETA said that this  amounted to a condition precedent which had to be satisfied before the arbitrators would have jurisdiction to hear the claim and if it was not satisfied this would mean that the tribunal lacked jurisdiction. Prime argued (as did the arbitrators) that the clause was unenforceable as it was merely an agreement to negotiate and in any event, it had been satisfied.

Teare J accepted that the first part of clause 11.1 provided that before a party can refer a claim to arbitration there must be friendly discussions to resolve the claim. Such friendly discussions were a condition precedent to the right to refer a claim to arbitration. However, the Judge doubted that the second part of the clause required the friendly discussions to continue for four weeks.

The clause provided that “if no solution” could be found “for a continuous period of 4 (four) weeks” then arbitration could be invoked. The discussions may last for a period of four weeks but if no solution is achieved a party may commence arbitration. Or the discussions may last for less than four weeks in which case a party must wait for a period of four continuous weeks to elapse before he may commence arbitration. The reference to a period of four continuous weeks ensured both that a defaulting party could not postpone the commencement of arbitration indefinitely by continuing to discuss the claim and that a claimant who is eager to commence arbitration must have the opportunity to consider such proposals as might emerge from a discussion of his claim for a period of at least four continuous weeks before he may commence arbitration.

Teare J dismissed Emirates Trading’s application and held that the arbitrators had jurisdiction over the dispute as the clause was enforceable and on the facts of the case had been satisfied.