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In the current case OOPS has disputed the claim of BEST of approaching the arbitral tribunal

as the negation clause was not fulfilled as decided in the agreement.

A) The arbitral tribunal has the jurisdiction to decide on the negotiation clause.

1
In a famous case the Zurich Court of Appeals decided that it was not its function to
determine whether the requirements for arbitration had been met. It held that issues regarding
Jurisdiction were to be decided by the arbitrators and not by the court2.

This statement was understood by commentators as an expression of the courts view that the
issue of mandatory conciliation proceedings was a matter of procedural prerequisites to
jurisdiction and not, as held in the earlier decision of the Court of Cassation, a matter of
substantive law leaving the issue of jurisdiction unaffected3.

Some authors argue that the failure to comply with the escalation clause commitment is
irrelevant to the issue of admissibility. They treat this failure as a breach of contract with the
consequences provided for in contract law (e.g. damages), but with no adverse effect on the
admissibility of the claim.4In contrast, agreements for pre-litigation negotiation and/or
conciliation are private agreements to be treated like any other private contract. If these

1 Decision by Zurich Court of Appeals of September 11, 2001, published in ZR 101 (2002),No.21, 7781,
especially p.78.

2 Behorde i.S.v. Art. 12 KSG pruft die angerufenen Instanz neben ihrer Zustandigkeit und der
Gultigkeit der Schiedsabrede auch die Frage, ob der Gesuchsgegner bei der Bestellung effective
saumig ist . . .. Daraus folgt aber nicht, dass die um Ernennung eines Schiedsrichters angerufene
Behorde (auch) die Prozessvoraussetzungen der Schiedsverfahrens pruft. Dies bleibt vielmehr dem
Schiedsgericht vorbehalten, welche diese gleich den staatlichen Gerichten von Amtes wegen zu prufen
hat . . . It is unclear whether the Court of Appeals intentionally commented on the qualification of the
conciliation procedure as procedural condition precedent to the commencement of a judicial procedure,
or whether this happened at random. However, it examined, and rejected, the claim based on a lack of
jurisdiction within the context of qualification of a procedural condition precedent to the jurisdiction.

3 Nathalie Voser, Enforcement of Multi-tiered Dispute Resolution Clauses by National Courts and Arbitral
Tribunalsthe Civil Law Approach, report given at IBA Conference in Durban 2002, Committee D Session
on Multi-tiered Dispute Resolution Clauses.

4 Fridolin Walther, E-confidence in e-commerce durch Alternative Dispute Resolution, AJP/PJA; 7/2001,
p.762; Eiholzer, cited above, p.176 et seq
agreements were treated as conditions precedent to litigation or arbitration, they could result
in a party being entirely excluded from access to an adjudicatory body (court or arbitral
tribunal) depending on the parties definition of the condition precedent and the
circumstances under which these conditions can be met or obstructed.5

In ICC case 8462,27 the tribunal held that there were enough indications to conclude that the
claimant had made efforts to comply with the first-tier negotiation obligation, and therefore it
had jurisdiction over the matter.

There seems to be a consensus that, if there is a valid arbitration agreement, this issue is to be
decided by the arbitrators. This result corresponds to the principle of Kompetenz- Kompetenz.
The dispute whether pre-arbitration requirements have been met is a dispute arising out of, or
in connection with, the agreement containing the arbitration clause, for which reason the
issue has to be decided by the arbitrators6

In any event, the issue of whether a multi-tiered dispute resolution clause raises a valid
condition precedent to the tribunals authority to decide on the matter is a question of
jurisdiction, which under the principle of Kompetenz-Kompetenz is to be decided by the
tribunal itself.7

The practice of the courts and arbitral tribunals shows that courts and arbitral tribunals take a
case-by-case approach in determining whether a particular multi-tiered clause leading to
arbitration should be enforced or not8.

B) The negotiation agreement is not enforceable.

5 Eiholzer, cited above, pp.183 and 185

6 e.g. Decision by Zurich Court of Appeals of November 9, 2001, published in ZR 101 (2002),No.21, 77
81; Bernardo M. Cremades, cited above, p.7 et seq.

7 Article 13 of the UNCITRAL Model Law

8 Mecar marco
In Courtney & Fairbarn v Tolaini Brothers 9, the Court of held that bare agreements to
negotiate were not enforceable since they lacked certainty. This position was confirmed by
the House of Lords in Walford v Miles, an English landmark decision dealing with the
obligation to negotiate in good faith10. For a court, a partys rights and obligations, arising out
of a rather broadly formulated clause, were too unclear and it was hard to determine whether
the parties were complied with their duties.11

In Holloway v Chancery Mead, the court identified certain conditions to check whether the
pre arbitral clause are enforceable or not.12First, that the process must be sufficiently certain.
Secondly, the administrative processes for selecting a party to resolve the dispute and to pay
that person should also be defined. Thirdly, the process or at least a model of the process
should be set out so that the detail of the process is sufficiently certain.

In Wah & Anor v Grant Thornton International13, the English High Court ruled on the
enforceability of a stipulation providing for negotiations in good faith and established a test
for the enforceability of escalation clauses:

The test is whether the obligations it imposes are sufficiently clear and certain to be
given legal effect [T]he test is whether the provision prescribes, without the need for
further agreement: (a) a sufficiently certain and unequivocal commitment to commence a
process; (b) from which may be discerned what steps each party is required to take to put the
process in place; and which is (c) sufficiently clearly defined to enable the court to determine
objectively (i) what under that process is the minimum required of the parties to the dispute in

10 Walford v Miles, [1992] 2 A.C. 128 at 138, [1992] 2 WLR 174 (UKHL) [Walford].

11 Courtney, supra note 27 at 301: No court could estimate the damages


because no one could tell whether the negotiations would be successful or would
fall through: or if successful what the result would be.

12 Holloway v Chancery Mead Limited, [2007] EWHC 2495 (TCC) at para 81, 117
Con LR 30 [Holloway].

13 Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd. and others,
[2012] EWHC 3198 (Ch), [2012] CN 63 at para 60 [Wah].
terms of their participation in it and (ii) when or how the process will be exhausted or
properly terminable without breach.

The instrument of enforcement depends upon a decision by the court and is applied when
one party seeks to neglect its contractual obligation. In this context, some uncertainty entails
a lack of enforceability since a court would have insufficient objective criteria to decide
whether one or both parties were in compliance or breach of such a provision14.42 The
clause should, for example, determine whether the parties are to be referred to negotiation
and/or mediation, in which manner negotiations are to be held, and, in the case of mediation,
how the mediator is to be appointed. In short, the procedure relevant to the parties must be
objectively determinable15

14 Justice Colman in Cable, supra note 31 at para 23; compare Petromec Inc &
Ors v Petroleo Brasileiro SA Petrobras & Ors, [2005] EWCA Civ 891 at para 116,
[2006] 1 Lloyds Rep 121 [Petromec].

15 Wah, supra note 34 at para 57.