Multi-tier clauses - dispute resolution on many levels

To what extent are multi-tiered dispute resolution clauses enforceable? David Greene, senior partner and commercial litigator at Edwin Coe, says a recent decision is another stage in the development of modern judicial thought in various jurisdictions that clauses providing multi-tier dispute resolution can be enforceable.

Original news

Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] EWHC 2104 (Comm), [2014] All ER (D) 40 (Jul)

The claimant agreed to purchase iron ore from the defendant, pursuant to a contract, which contained, as a condition precedent, pre-arbitration conciliation steps, the first being time-limited friendly discussion between the parties. A dispute arose under the contract, which the defendant referred to arbitration. The claimant applied, pursuant to the Arbitration Act 1996, s 67 for an order that the tribunal had lacked jurisdiction. The Commercial Court, dismissing the application, held that the arbitral tribunal had jurisdiction to hear and determine the claim because the condition precedent to arbitration had been satisfied.

What is the significance of this decision?

Multi-tiered dispute resolution clauses are increasingly common, particularly in large and on-going contracts in which a resolution process that does not destroy a continuing relationship is all important. Historically, anything short of submitting to arbitration has been unenforceable. The problem is that, for instance, an obligation to seek to resolve issues in good faith lacks the certainty or hard edges that the court seeks in order to enforce or police such a provision. It is not unlike an agre