The High Court’s recent decision in Destin Trading Inc v SAIPEM SA [2025] EWHC 668 confirms that an arbitration agreement can be inoperative where it is inconsistent with a subsequent dispute resolution clause in a settlement agreement.

Facts

Destin Trading Inc (“Destin”) and Saipem SA (“Saipem”) were longstanding partners in the oil and gas industry in Africa. Destin provided equipment and services on Saipem’s offshore oil projects. Their partnership was governed by three Frame Agreements, which included ICC arbitration clauses for dispute resolution. A dispute arose over payments allegedly due to Destin under one of the Frame Agreements, which was settled by a Settlement Agreement. The Settlement Agreement contained an entire agreement clause and explicitly terminated the original Frame Agreements. It also provided the courts of England and Wales with exclusive jurisdiction to settle any disputes arising out of or in connection with the Settlement Agreement.

Destin brought a claim to rescind the Settlement Agreement on grounds of fraudulent misrepresentation and for payment of sums that it argued would have been due to it under the relevant Frame Agreement, but for the Settlement Agreement (and fraudulent misrepresentation) (the “Monetary Claims”). Saipem applied for a stay of the Monetary Claims (but not the rescission claim) in favour of arbitration under s9 of the Arbitration Act 1996, on the basis that those claims arose out of or in connection with the Frame Agreements and were not covered by the exclusive jurisdiction clause in the Settlement Agreement.

Decision

The High Court dismissed the stay application. It held that the question of whether the Monetary Claims fell within the scope of the dispute resolution clause in the Settlement Agreement depended on the proper construction of the parties’ contractual arrangements, and not on any “hard and fast” principle (at [34]). However, the court found that there is “clear authority”, established in Monde Petroleum v Westernzagros [2015] 1 Lloyd’s Rep 330, that a dispute resolution clause in a subsequent settlement or termination agreement will generally supersede an earlier and inconsistent dispute resolution clause in a prior agreement (at [35]).

On the facts, the following factors indicated that the parties intended the dispute resolution clause in the Settlement Agreement to cover disputes concerning the Frame Agreements (at [36]): it was an “exclusive” jurisdiction clause, the Settlement Agreement contained an entire agreement clause, and the jurisdiction clause had the widest possible scope (“any dispute”).

The court confirmed that the principle in Monde remains applicable following the Supreme Court decision in Mozambique v Privinvest [2023] UKSC 32. Mozambique set out the following test for the application of s9:

“[72] First, as I have stated … the court in considering such an application [to stay proceedings pursuant to Section 9] adopts a two-stage process. First, the court must determine what the matters are which the parties have raised or foreseeably will raise in the court proceedings, and, secondly, the court must determine in relation to each such matter whether it falls within the scope of the arbitration agreement.”

The court found that applying the test in Mozambique led to the same result on the facts. In particular, Saipem was wrong to argue that the Monetary Claims arose from the Frame Agreements and were therefore governed by the ICC arbitration clause. Rather, while the Monetary Claims were for sums Destin allegedly lost under the Frame Agreements, in substance, the Monetary Claims were claims for damages for deceit inducing the Settlement Agreement (at [40]).

It is worth noting that the court drew a distinction between the allocation of disputes between competing dispute resolution provisions, and the construction of a dispute resolution clause in a settlement or termination agreement. The latter clause is “a special category”, to which the principle in Monde applies(at [38]).

Commentary

This case serves as a reminder that a settlement agreement can override dispute resolution clauses in earlier contracts, particularly if it contains an entire agreement clause and an exclusive jurisdiction clause. It emphasises the importance of careful drafting of settlement agreements to ensure that there is no inadvertent inconsistency with a prior dispute resolution clause which may be ousted by application of the Monde principle.

If you would like to discuss the contents of this article further, please contact Richard Levett.