By Justin Hogan-Doran -
Snapshot
- In Dnata v Polar Air, the NSWCA held a clause framed in permissive terms — where the parties ‘may elect’ arbitration and must later ‘agree’ the process — was properly construed as no more than an agreement to agree, rather than a binding agreement to arbitrate.
- The decision illustrates how a preference for generality over specificity in multi‑tier dispute resolution clauses may result in arbitration remaining only a contemplated option, with litigation prevailing absent concluded agreement.
- More broadly, effective dispute resolution clauses require both careful design and clear drafting, including defined pathways to arbitration or litigation, articulated rights of election and identification of key procedural matters.
It is perhaps axiomatic that a dollar spent today on clear drafting is many dollars saved tomorrow. This is often true of dispute resolution clauses. These are often relegated to the miscellaneous provisions of a contract by transaction-focused lawyers, creating problems resolved only by litigation that may exceed the value of the claim, the contract or even the enterprise.
Dnata v Polar Air and the agreement to agree
This is not a problem confined to local or overworked practitioners. In the recent decision, Dnata Airport Services Pty Ltd v Polar Air Cargo Worldwide Inc [2026] NSWCA 105 (‘Dnata v Polar Air’), the Court reconsidered a standard form industry agreement developed over some decades by the International Air Transport Authority (‘IATA’) for use in any jurisdiction in the world. The agreement’s arbitration clause favoured tantalising generality over clarifying specificity, resulting in a bare ‘agreement to agree’ to arbitrate.
