It's settled: English Court rules that exclusive dispute resolution clause in Settlement Agreement supersedes earlier arbitration clause

In the case of Destin Trading Inc v Saipem SA [2025] EWHC 668 (Ch) (24 March 2025) the English Chancery Division refused to grant a stay of proceedings under section 9 of the Arbitration Act 1996 (AA 1996) and held that the exclusive dispute resolution clause in favour of the English courts contained in a Settlement Agreement (SA) superseded the dispute resolution clause in a previous agreement concluded between the parties in favour of arbitration. The decision highlights the importance of parties turning their mind to the issue of whether dispute resolution clauses in settlement agreements and prior contracts should be consistent and, if they are to be different, being clear as to whether the settlement agreement is intended to supersede the earlier agreement in this regard.

Background

Destin and Saipem had a longstanding commercial partnership. In 2011 and 2012, the parties concluded three Frame Agreements (the FAs), which provided that the parties were bound by Saipem's general terms and conditions which included a dispute resolution provision in favour of ICC arbitration seated in London. A dispute arose between the parties in 2013 over amounts allegedly due to Destin from Saipem under the FAs. On 5 November 2013, the parties entered into an SA settling the claim and terminating the FAs, agreeing under clause 4 to "release and forever discharge" each other from their contractual obligations under the FAs. Clause 10 of the SA contained an exclusive jurisdiction clause whereby the parties agreed to "settle any dispute arising out of or in connection with" the SA in the English courts.

The proceedings

In July 2024, Destin commenced a claim in the English courts alleging that Saipem had induced it to enter into the SA through fraudulent or negligent misrepresentation. It sought to enforce the payment of various amounts allegedly owed to it by Saipem. Saipem applied for a stay of proceedings under section 9 of the AA 1996, arguing the disputed amounts were covered by the arbitration agreements concluded under the FAs. The question for the court was whether the dispute between the parties was subject to the exclusive jurisdiction of the English courts under the SA or to London-seated ICC arbitration under the dispute resolution provisions of the FAs.

Decision

The court refused to stay the proceedings for the following reasons, amongst others:

• The SA was an agreement to bring the FA (and any claims thereunder) to an end. Where dispute resolution provisions in an SA are inconsistent with those contained in a previous agreement, the SA should generally be construed as superseding the earlier agreement. This is because it is usual for the "centre of gravity" to have changed such that the relationship is centred on the settlement agreement. The court relied heavily on the leading case on this principle, Monde Petroleum SA v Westernzagros Ltd [2015] (Monde). In Monde, an English court held that the jurisdiction clause in a termination agreement between the parties superseded an arbitration clause in a prior consultancy agreement in favour of ICC arbitration.
• The SA included an entire agreement clause, which emphasised the intention of the parties that the jurisdiction clause would include rights under the parties' prior contractual arrangements. Indeed, here the SA expressly terminated the FAs and considered them "null and void", making clear that the parties did not intend the original dispute resolution clause to survive.
• As an alternative line of reasoning, the court emphasised that the basis of Destin's claim was for rescission of the SA for misrepresentation, and that the damages sought were for "deceit inducing the Settlement Agreement". This meant that Destin's claim was squarely based on the SA and not the FAs, and therefore subject to the exclusive jurisdiction clause in the SA. 

Comment

This decision is of important practical value for parties who are entering into settlement agreements to resolve their dispute. The default position is that the dispute resolution clause in a relationship-ending agreement (such as a settlement agreement) would supersede the dispute resolution provision in the underlying agreement, particularly where the parties have also incorporated an entire agreement clause and mutually released each other from their obligations under previous contracts.

In this case, as the claimant was seeking to rescind the SA, the court readily concluded that the relevant claims arose under the SA and not the FAs. However, the conclusion may not be as straightforward under a more complex set of facts.

Accordingly, parties settling their disputes would be advised to expressly turn their minds to the dispute resolution clause in their settlement agreement. In particular, they should consider whether they would like to apply an identical dispute resolution clause as in the underlying contract. Where parties opt for a different dispute resolution provision, they should be clear as to the scope and application of the new clause in order to avoid uncertainty and limit the scope for any unwanted jurisdictional disputes. If the dispute resolution clause in a settlement agreement is intended to supersede a different and previously agreed dispute resolution clause in the underlying agreement, this should be expressly stated in the settlement agreement.

The authors would like to thank Raphael Beaulieu for his contribution to this post.