Tony Allen: Solicitor, Senior Consultant to CEDR, CMC Emeritus Fellow
Settlement Agreements
Settlement agreements often include a provision as to where jurisdiction lies in the event that a dispute arises from its terms. These usually require an attempt at negotiation, followed by mediation, and finally an identified adjudicative procedure, usually either arbitration in a given seat, or recourse to an identified court jurisdiction, applying an identified legal system. But what happens if a dispute arises post-settlement over a commercial contract which itself earlier provided for a different dispute resolution process from what the settlement agreement specified? Which takes priority?
Destin Trading Inc v Saipem SA
This question was raised in Destin Trading Inc v Saipem SA[1]. Destin and Saipem had entered into commercial agreements for supply and delivery of oil and gas, and fell into dispute over payment. The original agreements provided for ICC arbitration seated in London, under the laws of England & Wales. Settlement of the dispute was agreed (it is not clear whether this emerged from a mediation, but this makes no difference) with various payments agreed to be made. The written terms included an entire agreement clause and also the following terms:
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).
Destin then objected that the settlement had been obtained by deceit or misrepresentation and initiated proceedings in the English courts. Saipem sought a stay under the Arbitration Acts, arguing that such claims should have been made in arbitration under the dispute resolution clauses in the original contracts.
The Fiona Principle
The judge rejected Saipem’s contention, following the decision of Popplewell K in Monde Petroleum v Westernzagros[2], as approved by Carr J (now LCJ) in C v D[3], both of which sought to apply the “Fiona principle”[4] that there is a presumption that parties want one-stop jurisdiction. Here Saipem had argued that even if Destin were entitled to proceed in the English courts with their allegations as to the settlement agreement, the question of what money was owing was related to the original contracts which were governed by the arbitration clause. The judge in Destin rejected this argument. He accepted that this is not a hard and fast principle, the outcome depending on the true construction of the settlement clause in question. However, he had no doubt that the dispute resolution clause in this case was indeed intended to eradicate the effect of the arbitration clauses in the original agreements and he refused a stay, thus allowing all issues to be litigated before the English court.
Conclusion
It would be sensible for parties and their lawyers to turn their minds to this point towards the end of any mediation when drafting terms of settlement, so as to be absolutely sure what is intended and agreed, so that those intentions are indeed embodied clearly in the settlement agreement.
[1] [2025] EWHC 688 (Ch), a c=decision of Andrew Lenon KC sitting as a High Court judge
[2] [2015] 1 Lloyd’s Rep 330
[3] [2015] EWHC 2126 (Comm)
[4] Propounded in Fiona Trust & Holdings v Privalov [2007] UKHL 40
