when or how the process will be exhausted or properly terminable without breach.
The judge concluded that the conciliation clause in this case did not satisfy the test for
enforceability. While the clause made clear that a reference to the chief executive was required, it
did not make clear what form the conciliation process should take, who was to be involved in it
(eg, the parties to the dispute) and what they were required to do by way of participation in the
process; nor did the clause clarify what the obligation to attempt to resolve the dispute required
the chief executive to do.
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Negati ve obl igations
In the context of a negative stipulation or injunction preventing a reference or proceedings until a
given event, the question is whether the event is sufficiently defined and its occurrence
objectively ascertainable in order to enable the court to determine whether and when the event
occurred.
The judge rejected the submission by the Hong Kong partnership that the conciliation clause
constituted a permanent bar to any party commencing arbitration if either the three-member panel
had not been established or no request for conciliation had been referred to it. He held (in the
alternative to his conclusion that the conciliation clause was not enforceable) that on its true
construction, the clause did not prevent any party from commencing arbitration proceedings
either:
two months after a request for conciliation had been made; or
if a three-member panel could not be established because there were no board members
willing to serve or because the board as a whole took the view that the dispute could not be
resolved by such a panel.
Comment
In reaching his conclusion, the judge appears to have aligned conciliation with mediation, for
which procedures are required if an obligation to mediate is to be enforceable, rather than
discarded as a mere agreement to agree.
The decision highlights important aspects to be borne in mind when drafting enforceable
conciliation clauses:
In addition to applicable time limits, a conciliation clause should make clear the process for
conducting conciliation, including what is required of the conciliators and the parties to the
dispute by way of participation.
The conciliators or a process for their appointment should be identified. If possible, the
conciliators should be independent of the parties and the dispute that is being referred to
them for resolution.
If the parties' intention is that engagement in the conciliation process is a condition precedent
to any reference of a dispute to arbitration, the conciliation clause should make this clear and
specify when or how the conciliation process will be exhausted or properly terminable without
breach.
For further information on this topic please contact Marie Berard or Katharina Lewis at Clifford
Chance LLP by telephone (+44 20 7006 1000), fax (+44 20 7006 5555) or email
(marie.berard@cliffordchance.com or katharina.lewis@cliffordchance.com).
The materials contained on this website are for general information purposes only and are subject
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Authors
Marie Berard
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Kathari na Lewis
Copyright 1997-2013 Globe Business Publishing Ltd
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