By mutual agreement (the most consensual superlative) When an agreement contains an alternative dispute settlement clause (ADR), it often has either a simple REL clause or “escalation clauses” (sometimes referred to as “animal” or “stepped”). In the event of a commercial dispute, the parties to such an agreement are generally required to negotiate a settlement of the dispute. This could involve a single step (which could involve mediation for a simple REL clause) or escalation measures (usually good faith negotiations, if not dispute resolution, discussions between senior officials of the parties` management teams, and then, if this fails, mediation). However, in Cable- Wireless/IBM , Colman J gave hope to the aggrieved party seeking to impose an REL clause, finding that a contract that provided the parties negotiated in good faith a dispute resolution procedure “as recommended to the parties by the Centre for Dispute Resolution” was sufficiently safe to be enforced. The recommended dispute resolution procedure required the parties to participate in the procedure advocated by the Centre for Effective Dispute Resolution (CEDR), which provided “sufficient security for a court to easily determine whether they were followed.” If the negotiation or mediation procedures are clearly defined in an agreement, the courts will apply it. Holloway v Chancery Mead Ltd  stated that this would require: (1) a sufficiently precise process that would not require an agreement before business could proceed; (2) a defined procedure for selecting a party for the settlement of the trade dispute and paying that party; and (3) the details of the process itself (or at least a model of that process). In the Emirates Trading Agency/Sociedade de Fomento  Popplewell J also addressed issues that stemmed from the lack of friendly discussions prior to the initiation of formal proceedings (the agreement required that arbitration proceedings be invoked if friendly discussions “for an ongoing period of three (3) months” were not resolved. The judge declined to rule on whether a “friendly discussion” set a precedent for an enforceable condition, but commented on the type of discussions that would boil down to friendly discussions, provided they were enforceable. A final warning from Anzen Ltd against Hermes One Ltd , in which a shareholders` pact stipulated that each party “may” submit a dispute to arbitration. Their Lordships held that clauses that deprive a party of the right to litigation should be clearly articulated and that there is a clear linguistic difference between a promise to bring disputes to arbitration and a provision agreed by both parties that each party can submit a dispute to arbitration.
English courts have been slow to recognize settlement agreements or agreements to be negotiated. In Itex Shipping v China Ocean Shipping , Steyn J found that a clause stipulating that “any dispute in this agreement is settled out of court” before it can be adjudicated is not applicable. In Walford v Miles , the House of Lords stated that a simple negotiation agreement was too uncertain to be applicable and that the duty to bargain in good faith was not feasible in practice and was inherently inconsistent with the position of a party to the negotiations. In the Emirates Trading Agency/Prime Mineral Exports  case, a contract provided that in the event of a dispute, the parties should first attempt to resolve the issue through “friendly conversations”. The application of Itex Shipping and Walford was able to reach the conclusion that Emirates Trading`s request to settle a dispute through “friendly discussion” was just as unenforceable as Itex Shipping`s requirement to settle a dispute out of court.