In the event of any dispute the Parties hereto shall seek in the first instance to resolve such dispute by way of good faith negotiations and no litigation or any other form of  procedings shall be instigated as between the Parties until such negotiations have been allowed to take place. A dispute resolution clause in a contract is widely used in jurisdictions such as Germany. It generally requires the parties to a contract to attempt to resolve any dispute by way of discussions (in good faith) and within a limited period of time before the dispute could be referred to court or arbitration. However, until the decision in Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm) the English courts had held in recent years that any purported agreement to engage in preliminary (good faith) steps (so-called “escalation” or “tiered” resolution clauses) before resorting to court or judicial proceedings was unenforceable. Indeed, up to the Emirates case the courts generally rejected such clauses by the application of a principle of English law that an agreement to agree is unenforceable (see Walford v Miles [1992] 2 AC 128 ). Moreover,  dispute resolution provisions were often struck down because of a lack of certainty in drafting that also rendered them, it was said, too vague to be enforceable. Thus, courts were rejecting clauses which did not set out a specific, defined mediation process or refer to the services of a specific mediation provider because these contract agreements were not interpreted to create an enforceable obligation to commence or participate in a mediation process (see SulAmerica v Enesa Engenharia [2012] 1 Lloyds Rep 671, Court of Appeal) But, in the new case of Emirates the court has held that although certainty in contract language is still required, “…an obligation to seek to resolve a dispute by friendly discussions in good faith has an identifiable standard, namely, fair, honest and genuine discussions aimed at resolving a dispute. Difficulty of proving a breach in some cases should not be confused with a suggestion that the clause lacks certainty…”(per Teare J) Notwithstanding the Emirates case, when drafting a conflict resolution clause, we must still take care to ensure that the particular agreement complies with the English law requirement of certainty. If the parties have to undertake any preliminary attempts at resolution, the drafting must be careful not to allow a party in default to delay the start of any litigation or referral to arbitration proceedings. This is particularly critical in cases of approaching (statutory or other) limitation periods. Time limits are therefore essential. The template clause at the top of this page falls well short of these requirements. Moreover, in...

English Law Exemplary Damages Punitive damages outside the U.S. jurisdictions are generally refereed to in the common law systems as exemplary damages and they have a relative minor role to play in legal cases compared to the U.S. situation. The English position that damages should compensate rather than be awarded as a deterrence or punishment is reflected in case law. In Rookes v Barnard (1964) Lord Devlin proposed two very limited and exclusive categories in which exemplary damages could be awarded: The first category related to “oppressive, arbitrary or unconstitutional action by the servants of the government”  and the second category where “the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff.”  Following Lord Devlin’s landmark judgment a bar of action was imposed on exemplary damage cases and this bar implemented by the case of AB v South West Water Services (1993) CA 1993 which involved an action for public nuisance and negligence. However, in the later case of Kuddus v Chief Constable of Leicester (2001) the strict limits of the categories of Lord Devlin were weakened. The court also heavily criticised Lord Devlin’s formulation because whatever the position forty years ago, it respectfully inclined to doubt the soundness of the distinction between government officials and companies and individuals. In other words, the rise of a modern, globalised economy and massive individual wealth meant that large companies, organisations or even individuals could also be regarded as “oppressive and arbitrary” and therefore should be potentially subject to exemplary damages claims. Nevertheless, it must be emphasised that generally exemplary damages in English law are rare in tort cases (see Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29) and almost certainly irrecoverable in contract cases (Addis v Gramophone, Abbar v Saudi Economic & Development Co (SEDCO) Real Estate Ltd [2013] EWHC 1414 (Ch) at para...

U.S. Punitive Damages In the United States jurisdictions punitive damages have taken on almost folkloric qualities with numerous cases (both true and false) circulating in the internet and elsewhere on astronomically-high awards being made by juries that go beyond compensation and are intended to see the wrongdoer (tortfeasor) punished. One of the most popular stories in this area involves a fast food chain and some very hot coffee. It is a true case from New Mexico. In Liebeck v. McDonald’s Restaurants (N.M. Dist. Ct. 1994), 79 year old Stella Liebeck spilled McDonald’s coffee in her lap which resulted in her suffering second and third degree burns on her thighs, buttocks, groin and genitals. The burns were severe enough to require skin grafts. Liebeck initially proposed  to settle the case for $20,000 in pre-trial negotiations, an amount which covered her already-incurred medical expenses, and those she anticipated to incur for future treatment. McDonald’s settlement offer however was a mere $800. Liebeck therefore sued. During the pre-trial discovery procedures internal documents from McDonald’s revealed that the company had received hundreds of similar complaints from customers claiming McDonald’s coffee caused severe burns. The jury decided at the trial the company had been aware of the coffee being dangerous and that the company had done nothing to mitigate the situation. As a result, the jury decided on compensatory damages of  $160,000. However, the jury also awarded Liebeck $2.7 million in punitive damages. A judge subsequently reduced the punitive damages to $480,000. However such reports should always be read with great care. Firstly, it should be remembered that (unlike the Liebeck case) many of these “reported” cases have no basis in fact or, at the least, are grossly exaggerated in the retelling.  Secondly, even in those cases that did in fact take place there is usually a further opportunity for a judge (e.g. on appeal) to reduce the dramatic amounts of punitive damages imposed by U.S. juries in the hearing of first instance. It should also be remembered that in the U.S. jurisdictions punitive damages are awarded under Torts (especially negligence) and not under Contract Law. Moreover, punitive damages are limited in many states to situations of gross negligence, wilful acts or negligence caused by economic reasons, or negligence motivated by fraud. Numerous states have also capped the amount of punitive damages by way of statute. In addition, the U.S. Supreme has moved to limit the impact of puntive damages whereby any awards should exceed compensatory damages by a single-figure ratio (9:1) (State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003)). Thus, for each dollar awarded as compensatory damages the court will allow only a maximum of 9 dollars as punitive...