A Supreme Court judgment examining what constitutes economic duress is due to be published tomorrow. The decision could have major ramifications for commerical negotiations and reset the boundaries of duress. 

Pakistan International Airline Corporation v Times Travel will decide whether economic duress can arise in a situation where a party makes lawful acts or threats in support of a demand which it genuinely believes it is entitled to make.

The case concerns a dispute between Pakistan International Airline Corporation (PIAC) and Times Travel, a small family-owned travel agency in Birmingham. PIAC entered into a contract with Times Travel in 2008, under which Times Travel agreed to act as ticketing agent.

At the relevant time, PIAC was the only airline operating direct flights between the UK and Pakistan, and Times Travel relied almost exclusively on the sale of flight tickets to members of Birmingham’s Pakistani community.

By 2012, a large number of PIAC's ticketing agents had either commenced or threatened proceedings to recover substantial sums they said PIAC owed by way of commission. The same year, PIAC gave lawful notice of the termination of its existing agency contracts and offered Times Travel a new contract. The new contract contained a waiver by Times Travel of its claims for unpaid commission under the prior arrangements. Times Travel accepted and signed the new contract.

In 2014, however, Times Travel brought proceedings to recover unpaid commission and other payments which it said it was due. At first instance, the High Court held that Times Travel was entitled to avoid the contract with PIAC on the grounds of economic duress. The Court of Appeal allowed PIAC's appeal, and Times Travel now appeals to the Supreme Court.

In its 2019 judgment, the Court of Appeal relied on the argument that economic pressure was exerted by PIAC in support of a demand which it genuinely believed it was entitled to make, regardless of whether it had reasonable grounds for the belief. It also stressed that it was able to apply economic pressure because of it its position as a monopoly supplier.

‘The common law has always rejected the use, or abuse, of a monopoly position as a ground for setting aside a contract, leaving it to be regulated by statute. In my judgment, it would be unprincipled to develop the doctrine of economic duress as a means of controlling the lawful use of monopoly power,’ Lord Justice David Richards said.

Economic duress is when illegitimate economic pressure is exerted so that the weaker party has no other practical option but to agree to enter into a contract or accept particular terms.

The Supreme Court’s judgment is due to be published at 9.45am on 18 August. An oral hand-down will be recorded in October at the start of the new legal year.