Dispute resolution provisions in settlement agreement supersede those in earlier agreement

In Destin Trading Inc v Saipem SA [2025] EWHC 668 (Ch), the High Court held that an exclusive jurisdiction clause in favour of the English courts in a settlement agreement superseded the arbitration clause in an earlier agreement between the parties. On that basis, the Court allowed the litigation to proceed.

The ruling reinforces the principle that where the dispute resolution provisions contained in a settlement agreement are different from those contained in an earlier agreement between the parties, the settlement agreement's provisions should generally be construed as superseding or overriding those in the earlier agreement.

From a practical point of view, when drafting settlement agreements, parties should keep this in mind and consider whether the dispute resolution provision should be consistent with their earlier contract, and if not, be clear whether they intend the settlement agreement to supersede the earlier contract.

Background

The dispute arose out of a long-standing commercial relationship between Destin Trading Inc and Saipem SA. In 2012, the parties entered into a series of Frame Agreements under which Destin provided logistics and transport services for Saipem’s operations. These agreements were governed by English law and contained ICC arbitration clauses with London as the seat.

A dispute arose regarding payment allegedly due to Destin under the Frame Agreements. In November 2013, the parties entered into a Settlement Agreement to resolve that dispute. The Settlement Agreement expressly terminated the Frame Agreements, provided for the mutual release of claims and included an exclusive jurisdiction clause in favour of the English courts.

Subsequently, in 2024, Destin alleged that it had been induced to enter into the Settlement Agreement through fraudulent or negligent misrepresentation and initiated proceedings against Saipem in the High Court. Destin sought rescission of the Settlement Agreement and the payment of sums initially claimed under the Frame Agreements.

In response, Saipem applied for a stay of the proceedings under section 9 of the Arbitration Act 1996. It argued that the proceedings should be referred to arbitration as the claims fell within the arbitration agreements contained in the Frame Agreements.

Destin contended that the Settlement Agreement had extinguished the earlier arbitration clauses and replaced them with an exclusive jurisdiction clause in favour of the English courts.

Decision

The Court dismissed Saipem’s application and refused to stay the proceedings; the claims brought by Destin fell within the exclusive jurisdiction clause in the Settlement Agreement. As a matter of construction, the dispute resolution clause in the Settlement Agreement was intended to supersede the arbitration clauses in the Frame Agreements.

The Court held that where the dispute resolution clause in a settlement agreement is inconsistent with that in the earlier contract between the parties, the settlement agreement is generally construed as superseding the earlier contract. Relying on the leading case of Monde Petroleum SA v Westernzagros Ltd [2015] EWHC 67 (Comm), the Court endorsed the construction that a settlement agreement is often intended as a “one-stop-shop” for resolving disputes, thereby avoiding a risk of fragmented proceedings. The judge commented 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 this situation, it may be readily inferred that the parties intended that the dispute resolution clause in the settlement/termination agreement would replace and supersede a dispute resolution clause in an earlier agreement.”

In this case, the Settlement Agreement terminated the Frame Agreements, declaring them null and void, making it clear that the parties did not intend the arbitration agreements to survive. The dispute resolution provision in the Settlement Agreement was "exclusive" and the Settlement Agreement also contained an entire agreement clause, demonstrating it was not intended to sit alongside the provisions of the Frame Agreements. The Settlement Agreement jurisdiction clause was also drafted in broad terms covering "any dispute" arising in connection with the Settlement Agreement.

As an alternative ground for its reasoning, the Court emphasised that the legal basis of Destin’s claims was the Settlement Agreement, not the Frame Agreements. The Court explained that the monetary claim, though initially based on the relationship under the Frame Agreements, was in fact a claim for damages for deceit inducing the Settlement Agreement. As for the claim for rescission or setting aside of the Settlement Agreement, both parties had accepted that it fell within the Settlement Agreement clause.

Key takeaways

A dispute resolution provision in a settlement agreement will generally override any inconsistent dispute resolution provisions in earlier contracts between the same parties. To avoid unnecessary jurisdictional arguments, parties should pay close attention to the wording of the dispute resolution provision in their settlement agreement and make clear whether they intend it to supersede a different dispute resolution provision in their earlier contract.

Parties should also closely analyse the nature of, and legal basis for, their claim before bringing a jurisdictional challenge. Claims may fall under the settlement agreement even if the underlying facts relate to the earlier contract, as was the case here.

With thanks to Mathilde Guibert for her assistance in drafting this post.