Court presumes parties intended their disputes to be resolved in one-stop adjudication

Petroleum Exploration (PVT) Ltd -v- Frontier Holdings Ltd & another [2026] EWHC 56 (Comm)

This decision demonstrates that where parties have entered into a settlement agreement to resolve their disputes under an earlier contract, or where they enter into a termination agreement to end their previous contractual relationship, then there will be a presumption that all their disputes will be resolved in one forum pursuant to the dispute resolution provision in the later agreement, namely the settlement/termination agreement.

This decision demonstrates that where parties have entered into a settlement agreement to resolve their disputes under an earlier contract, or where they enter into a termination agreement to end their previous contractual relationship, then there will be a presumption that all their disputes will be resolved in one forum pursuant to the dispute resolution provision in the later agreement, namely the settlement/termination agreement.

The background facts

The claimant, Petroleum Exploration (PVT) Ltd (PEL) is a Pakistani company that holds various petroleum exploration licences and production leases granted by the President of Pakistan relating (amongst others) to the Badin IV North and South oil and gas blocks. The first defendant, Frontier Holdings Ltd (FHL) is incorporated in Bermuda and the second defendant, Spud Energy Pty Ltd (Spud) in Australia.

In April 2006, PEL entered into a quasi-joint venture arrangement with FHL in relation to the Badin-IV North and South gas blocks. There were a number of agreements governing this relationship, including farm-in agreements which resulted in PEL holding a 47.5% Working Interest in the Badin IV North and South oil and gas blocks and FHL obtaining a Working Interest in each block of 27.5%.

There were also Joint Operating Agreements (JOAs), which governed the operational and financial aspects of exploration and production at the relevant gas blocks. FHL became a party to the JOAs following the execution of deeds of assignment on 2 June 2006. The JOAs each contained an arbitration agreement.

In 2015, a series of disputes arose between the parties relating to the Badin-IV North and South Blocks, as well as the Kandra Block, in respect of which FHL also had an interest. Spud also had an interest in another concession, the Badar Concession.

Two arbitrations were commenced: one arbitration was commenced by PEL against FHL and another arbitration was commenced by FHL against PEL.

Settlement Agreement

These disputes were settled by a Settlement Agreement dated 12 August 2016 between PEL, FHL and Spud. The Settlement Agreement was governed by English law, contained an entire agreement clause and provided for ICC arbitration in London.

The Settlement Agreement provided among other things that, subject to the approval of the Director General of Petroleum Concessions of the Government of Pakistan (DGPC), FHL and Spud would use reasonable commercial efforts to assign and transfer their Working Interests in the Kandra block and Badar Concession to PEL with FHL and Spud holding their respective Interests on trust for PEL pending receipt of DGPC approval.

As part of the settlement structure within the Settlement Agreement, PEL withdrew various default and forfeiture notices, the parties agreed various releases and the arbitrations that had been commenced were discontinued.

The DGPC declined to give its consent as required by the Settlement Agreement. PEL contended that FHL and Spud were in breach of the Settlement Agreement and sought to reverse the financial settlement contained in it.

In December 2022, FHL and Spud commenced ICC arbitration in London under the Settlement Agreement (London Arbitration).

Singapore Arbitration

In January 2023, PEL issued Notices purporting to forfeit FHL's interests in Badin IV North and Badin IV South blocks and to withhold FHL's 27.5% share of the gas produced from the Badin IV South concession on the basis that its interest had been forfeited.

In February 2023, FHL commenced separate ICC proceedings against PEL in Singapore pursuant to the arbitration agreements contained in the JOAs (Singapore Arbitration). FHL alleged that PEL was in breach of the terms of the JOAs and claimed damages in respect of revenues from sales of gas produced from the Badin IV South block which it alleged had been withheld in reliance on PEL's forfeiture.

PEL successfully challenged jurisdiction in the Singapore Arbitration on the basis that the disputes should have been referred to domestic arbitration in Pakistan. The decision of the tribunal in the Singapore Arbitration that it did not have jurisdiction was subsequently overturned by the Singapore International Commercial Court.

London Arbitration

In December 2024, the Tribunal issued a Final Partial Award (Award). It held that the claims in question arose under the Settlement Agreement and found that PEL had breached the Settlement Agreement so that it was not entitled to forfeit FHL's Working Interest in the Badin IV blocks.

The Tribunal made various declarations. Among others, the Tribunal declared that PEL was in breach of the terms of the Settlement Agreement by failing to discharge its obligations to the DGPC, thereby causing the DGPC to withhold its consent to the transfers of the Kandra Discovery Area and Badar Working Interests. The Tribunal also declared that neither PEL nor Spud were in breach of the Settlement Agreement.

The Tribunal additionally made various declarations confirming FHL’s Working Interests in the relevant Concessions and also that PEL was not entitled to seek forfeiture of those Working Interests.

The Tribunal awarded FHL damages of almost US$2.5 million.

Jurisdictional challenge

In January 2025, PEL applied to the English Court under ss.67 and 68 of the Arbitration Act 1996 (1996 Act), challenging the Award and the Tribunal’s subsequent Costs Award. PEL subsequently dropped the s.68 challenge (serious irregularity amounting to substantial injustice) and maintained only the jurisdictional challenge under s.67.

It argued essentially that the Tribunal did not have the jurisdiction to make declarations regarding FHL’s 27.5% Working Interests, nor that PEL was not entitled to seek forfeiture of those Interests. Nor was it entitled to award FHL damages in this regard. Rather, those were issues to be dealt with by the Tribunal in the Singapore Arbitration, which had jurisdiction under the arbitration agreements in the JOAs.

FHL and Spud disagreed, maintain that their claims were not causes of action under the JOAs but remedies they sought for breach of the Settlement Agreement.

The Commercial Court decision

The Court dismissed the jurisdictional challenge. The wording of the arbitration agreement in the Settlement Agreement was wide enough to encompass any disputes relating to the JOAs.

In the circumstances, the Court thought it was appropriate to apply the presumption of one-stop adjudication in construing the arbitration clause in the Settlement Agreement, highlighting that the parties, as rational businessmen, were likely to have intended any dispute arising out of the relationship into which they had entered to be decided by the same tribunal.

One-stop adjudication was particularly apt where there was an agreement entered into for the purpose of terminating an earlier agreement between the same parties or settling disputes which had arisen under the earlier agreement. Where parties to a contractual dispute entered into a settlement agreement, the disputes which subsequently arose often gave rise to issues which related both to the settlement agreement itself and to the underlying contact.

Where one of the parties sought to impeach a settlement or termination agreement and advance a claim based on its rights under the main contract, the parties will have intended the dispute resolution clause in the settlement/termination agreement to govern all of their outstanding disputes, and to supersede any dispute resolution clause in the earlier agreement. This was because:

1. the settlement/termination agreement came second in time and was intended to supersede the earlier agreement.

2. the dispute resolution clause in the settlement/termination agreement was the operative one governing issues concerning the validity or effect of the termination/settlement agreement and therefore the only clause capable of applying to disputes which arose out of or related to the termination/settlement agreement.

3. in considering any dispute about the scope or efficacy of a settlement or termination agreement, the tribunal was likely to have to consider the background, of which an important element would often be the circumstances in which the dispute arose and the rights of the parties under the earlier contract. There would, therefore, often arise a risk of inconsistent findings if the tribunal addressing the validity or efficacy of the termination/settlement jurisdiction was not seised of disputes arising out of the earlier contract and the latter fell to be determined by a different tribunal.

The Court thought it was artificial to maintain that the subject matter of the disputed declarations were disputes under the JOAs. The claims between the parties concerned allegations of breach of the Settlement Agreement by FHL and Spud against PEL and a counterclaim in damages by PEL. The claim succeeded and the counterclaim was dismissed. The remedies awarded by the Tribunal were not for claims under the JOAs but because of a failure on the part of PEL to give effect to what had been agreed in the Settlement Agreement. The declarations were of what PEL was required to do in order to place FHL and Spud in the position they would have been had PEL not breached the terms of the Settlement Agreement.

Comment

While one-stop adjudication is a rebuttable presumption, parties entering into related, interlinked contracts should carefully consider aligning the dispute resolution provisions in the different agreements.