Joint research agreement / Contract provides for a mutual obligation on both parties to note the agreement to the EEC Commission with a view to obtaining exemption under Article 85(3) of the Treaty of Rome / Absence of notification, consequences

Claimant is an American corporation and Respondent is a French corporation. Both the Claimant and the Respondent are large companies with extensive interests in the chemical industry.

The dispute arises out of a Joint Research Agreement (JRC) entered into between the Claimant and the Respondent in December 1987.

'The parties expressed their desire to cooperate to develop technology for the manufacture of certain substances. The methods by which the cooperation between the parties was to be promoted were, first, that each party would exchange with the other its technical information and know-how relating to the products; secondly, that a jointly formed Project Management Committee would establish projects (that is to say, joint research programs relating to the manufacture of products) and annual resources dedicating budgets in connection with such projects; thirdly, that each party would dedicate effort to the projects allocated to it by employing research units to work on them during the term of the JRA; and, fourthly, that the results of the work on the projects would be shared between the parties.

. . .

For a defined period in its respective territory each party was granted the royalty-free, exclusive right and license (without the right to sublicense except to its affiliates), under any applicable patents of the other party and under any technical information received from it, to manufacture products. Each party was similarly granted a royalty-free, non-exclusive right and license to manufacture products outside the exclusive territories.

Claimant's territory was defined as meaning the United States, Puerto Rico, Canada and Mexico: the territory of Respondent consisted of the member states of the European Economic Community ("the EEC") together with Austria, Finland, Norway, Sweden and Switzerland.

It was agreed that neither party would enter into any agreement with or cooperate with any other party for the purpose of performing joint research or development on the production of products.

The parties agreed to notify the JRA to the Commission of the EEC with a view to obtaining exemption under Article 85(3) of the Treaty of Rome. The parties agreed to cooperate in this regard, with Claimant undertaking the primary responsibility for preparing, submitting and prosecuting the notification.

The JRA is governed by the law of Switzerland.

. . .

Section 8 of the JRA contained the following provision:

EEC Law

The parties agree to notify this Agreement to the Commission of the European Economic Community (EEC) with a view to obtaining exemption under Article 85(3) of the Treaty establishing the EEC. The parties agree to cooperate with one another in this regard.

It is agreed that [Claimant] shall be primarily responsible for preparing, submitting and prosecuting the notification and that [Claimant] may choose a joint representative with authority to act on behalf of [Claimant] and [Defendant].

[Defendant] agrees to cooperate in all reasonable respects with regard to the notification activities with a view to obtaining the exemption.

[Each party to bear own costs and expenses]

The parties agree to promptly negotiate in good faith any changes in the Agreement which may be necessary in order to obtain the exemption. To the extent possible, the parties agree to attempt to maintain mutuality in their respective rights and restrictions as provided for herein in accordance with the original intent and objectives.

. . .

Section 8 of the JRA dealt with the problem of notifying the EEC Commission about the existence and terms of the JRA. As will be recalled, this whole problem had arisen in the course of the negotiations, and Respondent with its knowledge of Community Law began to feel concerned about the Commission's likely attitude towards the JRA arrangements. One consequence of this was the side letter which became the Non-Binding Memorandum of Understanding. Another aspect was the insertion of section 8 into the JRA. By Subsection 8.1 both parties agreed to notify the Commission with a view to obtaining Article 85(3) exemption. Both agreed to cooperate. By Subsection 8.2 it was, however, agreed that Claimant was to be primarily responsible for preparing, submitting and prosecuting the notification. By Subsection 8.3 Defendant agreed to cooperate in all reasonable respects with respect to the notification activities with a view to obtaining the exemption.

The position under Section 8 of the JRA was, therefore, that there was a mutual obligation by both parties to notify the Commission, but that Claimant assumed primary responsibility for the notification process. No time limit was laid down in Section 8 for the carrying through of the notification process. In fact, the parties appear to have done very little about getting on with notifying the Commission, and the Tribunal is left with the very clear impression that but for the existence of this arbitration, nothing would have been heard of any allegation of breach of contract in connection with the notification process. The current position is that Claimant claims that it has been ready and willing since October 1989 to move forward with due notification, but that it has been thwarted in this effort by the refusal of Defendant to cooperate, no response having been received to a draft notification sent to Defendant on . . . In the circumstances, the Tribunal concludes that no breach of Section 8 has been established and it accordingly dismisses the third Counterclaim.'