INTERACTION BETWEEN AN EXCLUSIVE JURISDICTION CLAUSE IN A SETTLEMENT AGREEMENT AND PRIOR ARBITRATION AGREEMENTS
The England and Wales High Court ruled in Destin Trading Inc v Saipem SA [2025] EWHC 668 (Ch) (“Judgment”) that the exclusive jurisdiction clause in a settlement agreement superseded the arbitration agreements that was previously entered into between the parties. As a result, the Court rejected the request to stay court proceedings under section 9 Arbitration Act 1996 on the basis that the claims in question fell within the scope of the exclusive jurisdiction clause.
Background. Saipem, a French engineering company in the offshore oil and gas sector, and Destin, a Panamanian logistics provider, had a long-standing partnership in Africa (Judgment [2]) – [4]).
They entered into multiple agreements between 2011 and 2012, where Saipem engaged Destin for services related to offshore oil projects, including a series of Memoranda of Understanding and Frame Agreements, each of which incorporated Saipem’s General Terms and Conditions for Agreement Documents, which, in turn, incorporated ICCC arbitration clauses providing for ICC arbitration seated in London (Judgment [5]). The relevant clause is set out below (taken from Judgment [11]):
“50 SETTLEMENT OF DISPUTES
…
50.2 Unless otherwise stated in the AGREEMENT, all disputes arising out of or in connection with the AGREEMENT DOCUMENTS which are not settled amicably under the preceding paragraph of this Clause within forty-five (45) Calendar Days after receipt of the above-mentioned written request, shall be submitted by either PARTY to arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with the said rules.
50.3 Unless otherwise stated in the AGREEMENT, the arbitration proceeding shall be held in London (United Kingdom) and conducted in the English language.”
There was also the following clause in the General Terms and Conditions for Agreement Documents (taken from Judgment [11]):
“30 SURVIVAL OF PROVISIONS
Those provisions of the AGREEMENT DOCUMENTS which by their nature extend beyond the completion of the SERVICE(S) shall survive any expiration, cancellation or termination of the AGREEMENT DOCUMENTS and/or WORK ORDER.”
Based on a plain reading of the above clauses, it would seem to suggest that even if the agreements in question were terminated, the arbitration clause would still bind the Parties.
A dispute arose when Destin claimed Saipem owed it an additional US$6.8 million for the Congo River Crossing Project, but Saipem denied any shortfall in payments (Judgment [6]).
In November 2013, the parties signed a Settlement Agreement, which settled Destin’s claim and terminated the Frame Agreements (Judgment [7]). The Settlement Agreement provided that any dispute arising out of or in connection with the agreement would be subject to the exclusive jurisdiction of the Courts of England and Wales (Judgment [7]). The relevant clause is set out below (taken from Judgment [12]):
“10 The Parties irrevocably agree that the Courts of England and Wales shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement).”
It suffices to say, at this juncture, that the reasons for entering into the Settlement Agreement was disputed (Judgment [8]). However, Destin commenced court proceedings (Judgment [13]), and Saipem applied for a stay of the said proceedings in favour of arbitration (Judgment [15]).
The issue. And the key legal issue was whether the dispute resolution clause in the Settlement Agreement superseded the prior arbitration agreements.
Destin argued that the dispute resolution clause in the Settlement Agreement should govern all disputes between the parties, including those arising from prior agreements, based on the general principle that a subsequent settlement agreement would be intended to replace any previous dispute resolution mechanisms (Judgment [19]).
Saipem, on the other hand, contended that there was no general rule that a settlement clause automatically superseded a prior dispute resolution clause, and that the interpretation should depend on the specific language of the clauses and the context of the agreements (Judgment [28]).
However, as noted by Andrew Lenon KC (sitting as a Judge of the High Court) (“Judge”) at [34], “[i]t was common ground between the parties that the issue of whether or not the [claims in question] are within the scope of Clause 10 the Settlement Agreement turns 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 clauses in an earlier agreement.”
What is the High Court’s decision? Nonetheless, the Judge stated at Judgment [35] that the case of Monde Petroleum v Westernzagros Limited [2015] 1 Lloyd's Rep 330 was “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”, and that the “factors underlying the Fiona Trust presumption 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, are reinforced where parties have agreed on a dispute resolution clause in a settlement/termination agreement”.
In doing so, the Judge at Judgment [36] made the following observations on Clause 10:
“… Rather than being silent as to the subject matter of what was to be subject to the court's jurisdiction, as the clause in Monde was, the wording of Clause 10 makes clear that it has the widest possible scope ("any dispute"). It plainly covers disputes about what rights were extant in the Frame Agreements at the time of termination since such disputes would arise out of or in connection with the subject matter of the Settlement Agreement. Similarly to the Termination Agreement in Monde, the Settlement Agreement expressly "terminates" the Frame Agreements and considers them "null and void" making clear that the parties did not intend the dispute resolution clause in the GTCs to survive.”
The Judge also rejected Saipem’s argument on commercial rationale at Judgment [37] for maintaining the original arbitration clause, stating that the exclusive jurisdiction clause in the Settlement Agreement served to “wrap up in one place the parties' future rights and obligations and avoid the risk of a fragmented dispute resolution process”.
Conclusion. It is not unusual for Parties to enter into a settlement agreement to resolve disputes arising out of and in connection with a prior agreement (or agreements).
What this case shows is that in such situations, it is important to pay attention to the dispute resolution mechanism for the settlement agreement, and the dispute resolution mechanism in the prior agreement(s).
If there is a conflict between the two, it is important to consider if it is, in fact, clear how future disputes would be resolved, and if not, whether it is necessary to amend the dispute resolution clause to be clear.
While the Judgment suggests that there is a general principle, it bears highlighting that at the end of the day, the issue would turn on the specific clause in question. As such, this is a point which drafters should consider, in order to avoid further disputes.
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