Key takeaways
Later agreement takes precedence in dispute
The Court ruled that the exclusive jurisdiction clause in the settlement agreement superseded earlier ICC arbitration provisions.
Single forum helps avoid conflicting outcomes
The judgment reinforces the principle that parties likely intend all disputes to be resolved in one forum when settling prior agreements.
Later clauses must reflect intended scope
This case highlights the importance of carefully drafting dispute resolution clauses in settlement or termination agreements.
The Court has held that the exclusive court jurisdiction clause in a settlement agreement superseded the arbitration provision in an earlier agreement between the parties and that, on its true construction, the exclusive jurisdiction clause encompassed the claims brought. Consequently, the Court dismissed an application to stay court proceedings in favour of arbitration.
The background facts
Saipem SA (Saipem) a French engineering company, had a longstanding partnership with Destin Trading Inc (Destin), a Panamanian management and logistical services company, to jointly deliver services to clients in the offshore oil and gas industries in Africa. Saipem provided the project management, infrastructure and plant services. Destin provided marine vessels and other equipment and services to Saipem in connection with its offshore oil projects.
In 2011 and 2012, they entered into a series of Memoranda of Understanding relating to various projects. In September and October 2012, they concluded three more specific Frame Agreements concerning certain of these projects. Each of the Frame Agreements provided that the parties were bound by Saipem’s General Terms and Conditions for Agreement Documents (GTCs). The GTCs incorporated ICC arbitration clauses, providing for ICC arbitration seated in London.
Disputes subsequently arose between the parties in relation to the Frame Agreements, with Destin claiming certain amounts were owed to it and Saipem denying the claim. In November 2013, the parties entered into a Settlement Agreement, whereby the parties settled Destin’s claim, gave a mutual release of claims and terminated the Frame Agreements. There was also a clause providing for the Courts of England and Wales to have exclusive jurisdiction to settle any dispute arising out of or in connection with the Settlement Agreement.
The reasons for entering into the Settlement Agreement were disputed. Destin alleged that it had been induced to enter into the Settlement Agreement by fraudulent or negligent misrepresentations by Saipem, which Saipem denied. Destin contended that it was entitled to rescind the Settlement Agreement and claim amounts that would have been due to it under one of the Frame Agreements.
Destin commenced English Court proceedings pursuant to the exclusive jurisdiction clause in the Settlement Agreement. Saipem sought a stay of those proceedings pursuant to s.9 Arbitration Act 1996 on the basis that Destin’s claims (the Monetary Claims) were matters to be referred to arbitration under the ICC arbitration clause in the Frame Agreements.
In essence, Saipem argued that the Monetary Claims were sums that Destin alleged were due to it under the Frame Agreements and that Destin had not demonstrated that the jurisdiction clause in the Settlement Agreement, properly construed, would survive the rescission of the Settlement Agreement such that it could apply to the Monetary Claims.
Destin relied primarily on the general principle said to be derived from the authorities that a dispute resolution clause in a settlement or termination agreement is to be construed on the basis that the parties are likely to have intended it to supersede a different dispute resolution clause in a prior agreement and that the jurisdiction agreement in the Settlement Agreement was therefore to be construed as embracing all the claims brought by Destin.
Specifically, Destin relied on the leading case on the application of this principle, Monde Petroleum -v- Westernzagros Limited [2015] 1 Lloyd’s Rep 330, in which the Court stated that the presumption in favour of one stop adjudication might have particular potency where there is an agreement which is entered into for the purpose of terminating an earlier agreement between the same parties or settling disputes which have risen under such an agreement. In such circumstances, rational businessmen would intend that all aspects of such a dispute should be resolved in a single forum.
The High Court decision
The Court stated that the issue of whether or not the Monetary Claims were within the scope of the jurisdiction clause in the Settlement Agreement turned ultimately on the correct construction of the parties’ contractual provisions rather than on the application of a hard and fast principle that dispute resolution clauses in a subsequent settlement or termination agreement supersede a dispute resolution clause in an earlier agreement.
The Monde case was nevertheless clear authority for the proposition that dispute resolution clauses in a settlement or termination agreement should generally be construed on the basis that they are intended to have a superseding or overriding effect. The factors underlying the Fiona Trust presumption (from the 2007 House of Lords decision in Fiona Trust -v- Privalov) in favour of one-stop adjudication, in particular the desirability of having all questions arising out of parties’ legal relationship determined by a single tribunal, were reinforced where parties had agreed on a dispute resolution clause in a settlement or termination agreement.
In this situation, it might be readily inferred that the parties intended that the dispute resolution clause in the settlement or termination agreement would replace and supersede a dispute resolution clause in an earlier agreement. The later clause was the only operative clause concerning disputes arising out of the settlement or termination agreement, it had been agreed to in the light of the disputes arising under the earlier agreement and there would be a risk of inconsistent decisions if disputes arising out of an earlier agreement were determined by a different tribunal. The parties were terminating their prior agreement and replacing it with new rights and obligations for the future. The likely conclusion was that the centre of gravity of the parties’ relationship had changed and become a relationship centred on the settlement or termination agreement rather than the earlier agreement.
The Court thought that there was an obvious commercial rationale for including an exclusive jurisdiction clause in a relationship-ending agreement that was intended to wrap up in one place the parties’ future rights and obligations and avoid the risk of a fragmented dispute resolution process.
The Court, therefore, dismissed the stay application.
Comment
While much will depend on the contractual context and the true construction of the relevant contractual provisions, the Court in this case clearly favoured the “one stop shop” presumption as the most sensible way to resolve the parties’ disputes.
This case highlights that when parties enter into settlement or termination agreements, they should consider carefully the wording and scope of any dispute resolution provision in the light of the dispute resolution clauses in their earlier agreement(s).