Latham & Watkins
May 1, 2016
McGill Journal of Dispute Resolution, Vol. 2, No. 1, 2016
Escalation clauses providing for negotiating in good faith have evolved from mere unenforceable agreements to negotiate to agreements that could be enforced under certain conditions. English courts, however, have usually held some of these requirements to be missing which, in turn, precluded the enforcement of escalation clauses. The paper discusses the general idea of these agreements, gives an overview of their treatment before English courts, and emphasises the key elements that warrant their enforceability. Through a comparative analysis of the American and Canadian approaches to good faith, the paper aims to provide clarity on the issue of enforceability. In the author’s view, the recent ruling in Emirates Trading v Prime Mineral, as well as judicial positions held in other common law countries, will inspire English courts to be more lenient in enforcing escalation clauses providing for negotiating in good faith.