UK court upholds “friendly discussion” as valid ADR

A justice of the UK High Court recently held that “friendly discussion” is a legitimate form of alternative dispute resolution. The parties had a contract requiring them to “first seek to resolve [a] dispute or claim by friendly discussion”; if it was unsuccessful, they would move to binding arbitration. Asked to rule on whether the clause was valid, Teare J said: “There is obvious commercial sense in such a dispute resolution clause. Arbitration can be expensive and time consuming. It is far better if it can be avoided by friendly discussions to resolve a claim. …[T]here is a public interest in giving effect to dispute resolution clauses which require the parties to seek to resolve disputes before engaging in arbitration or litigation.” The NSW Court of Appeal has previously found that an agreement to undertake genuine and good faith negotiations” to resolve disputes was valid.