Various companies based in West Europe and East Asia entered into a consortium agreement in order to bid for a BOT concession in an East Asian country, X. The claimant, a consortium consisting of two West European companies, initiated arbitration proceedings, alleging that the respondent breached the consortium agreement by not contracting with them after being awarded the concession. The issues to be resolved included whether the consortium agreement was an agreement or an agreement to agree, whether it was enforceable under the applicable law, and whether the agreement allowed the respondent to contract with companies other than the claimant. The respondent's witness referred to the UNIDROIT Principles as confirming that the parties were under an implied obligation to perform their obligations in good faith.

'With respect to the relationship between the members of the . . . Consortium, [Respondent] and [Claimant], there are three fundamental norms which arise logically and necessarily from the common interests that gave rise to and sustained the legal relationship of these parties and which are confirmed, indeed sometimes reiterated, in the various instruments. Without these normative elements, the legal relationship into which the diverse profit-maximizing entities were entering would have made little sense; any interpretation of the agreements and legal instruments with such a result would be untenable. The three fundamental and necessary norms are:

1. The preferred and priority bidder status of [Claimant];

2. The power of [Respondent] to refuse to contract with [Claimant] if [Claimant]'s proposal was in material non-compliance that would have frustrated the common interest of the Consortium members by allowing, if not requiring, the Government of [Country X] to reject the proposal of the Consortium;

3. A requirement of good faith and loyalty to the other members of the Consortium, which would, for example, have obliged [Respondent], as the negotiating agent, to try to dissuade the Government from changing a requirement that would have precluded the participation of another Consortium member.

These normative elements are the architectural struts of the legal relationship and each must be considered in more detail.

. . . . . . . . .

It is perfectly clear that, in this complex legal relationship, good faith and "fair play", as the official of the Government of [Country X] put it . . ., were as indispensable as the previous normative elements. The expectation that this was a necessary part of the regime was expressed in the Consortium Agreement and in the communication from the Government of [Country X] and it was implicit in the essential nature of the legal parties' relation. It is, moreover, required by [Country X] law. Article 219 of Book II of The Civil Code provides that

Every person is bound to execute his obligations and to exercise his rights in accordance with the rules of honesty and good faith.

Respondent's witness, Professor [A], testified "in the UNIDROIT principles, which may have some relevance to an international case, there is an implied obligation of good faith even if the parties don't agree on it".1

The . . . Opinion, mentioned above, appeared to rely on a dictum in Walford v. Miles in which Lord Ackner said "the concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations".2 With all respect to that distinguished jurist and to the possible position in English law on this matter (which is, in any event, not the parties' choice of law in the case before us), the legal relations that were created by the agreements and instruments in the instant case meant that the parties to them did not find themselves in strict adversary relations, but were indeed bound by obligations of good faith as required by [Country X] law.

In the course of the Hearing, [Respondent]'s position changed. Counsel for [Respondent] stated that "there was an obligation to negotiate in good faith, not derived from a contract provision, Article 5.3, which is now defunct, but arising from the fact that we undertook negotiations with [Claimant] to begin with".3 In addition, Professor [A], [Respondent]'s witness, confirmed his statement in his second witness statement, to the effect that he understood that [Respondent] did not dispute that there was an obligation to negotiate in good faith.4'

1
Hearing Transcript . . .

2
Walford and others v. Miles and another, [1992] 1 All ER 453 at 460; 1992 2 [AC] 128; [1992] 2 WLR 174.

3
Hearing Transcript . . .

4
Hearing Transcript . . .