There are a number of legal implications of the good faith concept that may not be clear to alliance Participants when this concept is discussed in an aspirational way (rather than with reference to a specific definition). In particular, it is important for alliance Participants to understand that:
• Including an obligation to act in good faith in an alliance agreement will have the effect of importing that legal duty and the requirement for reasonableness into all provisions of the agreement.
• As noted above, an alliance agreement needs to exhaustively define what is meant by good faith-in its context. If the concept of good faith is not defined, then a court may be left to rule on its requirements, and this would be undesirable.
• The good faith obligation may not be terminated if legal proceedings begin between the parties, noting the unlikelihood of this occurring in the general no fault context (see section 4.1 above). This means that the parties may be required to continue to act in good faith during a dispute. However, it is also important to note that the obligation to act in good faith should generally be limited to the performance of the collective obligations and responsibilities of the alliance, rather than attaching to the Owner Participant's unilateral obligations, rights and entitlements (e.g., payment and issuing directions).
From a practical and commercial perspective, even if the alliance Participants meet their obligation to act in good faith, this does not change the outcome or financial implications of their performance under the Commercial Framework or Risk or Reward regime. Good faith may be fundamental to the success of the project, and it is important that the alliance Participants understand what good faith means so that they can meet the required standard of conduct. However, whether or not good faith has been exercised in the decision-making process, the cost and time objectives of the project will still need to be achieved, and the actual cost and non-cost outcomes will be dealt with via the Commercial Framework. Ultimately, the Owner will bear the consequences of the project's outcomes regardless of the exercise of good faith by the alliance Participants.
As discussed, one of the key value propositions of alliancing is that governments are willing to forego the traditional contractual rights that would apply (under a traditional 'risk transfer' contract) in exchange for Non-Owner Participants bringing to the project their 'good faith' in acting with the highest level of integrity for the best of the project.
The question therefore becomes how to enforce the good faith bargain. Most alliance contracts seek to do this. Failure to act in good faith is treated as a wilful default. However, identifying what is not good faith can be difficult (as is the case with identifying what is best-for-project). The concept is perhaps easier to say than to define. The proposed development of an agreed charter of behaviours could allow for a more objective test of the conduct of the alliance Participants.