Good Faith or Bad Faith – Analysing the Enforceability of Pre-Arbitral Negotiation Clauses

– Aditya Mehta and Swagata Ghosh

Court proceedings have always been considered an expensive and time-consuming system of dispute resolution. Whilst arbitral proceedings have been a respite for those inclined to keep their disputes away from Courts, even such adversarial proceedings come with their own set of challenges. This has created a need for other alternatives/supplements. One such supplement, increasingly found tiered in dispute resolution clauses in commercial contracts, is the obligation to amicably negotiate on the disputes in good faith, prior to instituting adversarial proceedings. But how far can one ensure the element of ‘good faith’ in such negotiations and how far are such clauses enforceable? This article seeks to provide (i) a holistic view of the nature of pre-arbitral negotiation clauses; (ii) a comparative analysis of the judicial approach adopted in various jurisdictions and the role of Courts in enforcing such clauses; and (iii) practical guidelines for drafting enforceable tiered dispute resolution clauses.