Our Insights

On 22 January 2015 the Commercial Court (Popplewell J) rejected a request to overturn an arbitral tribunal’s decision that it did not have jurisdiction to hear the defendant’s claims.

The case concerned an agreement for consultancy services which provided for ICC arbitration. Following a contractual dispute the parties entered into a further, settlement agreement conferring exclusive jurisdiction on the courts of England and Wales. A dispute also arose over the settlement agreement. The claimant brought proceedings both in the English courts and in arbitration. The defendant made counterclaims in arbitration, which were dismissed by the tribunal for lack of jurisdiction.

Popplewell J held that:

• The appeal under s. 67 of the Arbitration Act 1996 was rejected. The section provided that upon a party’s challenge of an arbitral award as to the tribunal’s substantive jurisdiction the court could confirm, vary or set aside the award.
• In Fiona Trust & Holdings v Privalov & others [2008] 1 Lloyd’s Rep 254, the House of Lords (Lord Hoffmann) held that it was to be presumed that rational businessmen parties to a contract intended all questions arising out of their legal relationship to be determined in the same forum. The presumption was a strong one, and required clear words to the contrary to be displaced. This was what Hoffmann LJ had called the “presumption in favour of one-stop adjudication” in Harbour Assurance Co (U.K.) Ltd v Kansa General International Assurance Co [1993] QB 701. The presumption applied to both jurisdiction clauses and arbitration clauses (Continental Bank N.A. v Aeakos Compania Naviera S.A. [1994] 1 WLR 588).
• Where there was more than one agreement between the same parties, and they contained conflicting dispute resolution provisions, the presumption of one stop adjudication dictated that the parties would not be taken to have intended that a particular kind of dispute would fall within the scope of each of two inconsistent jurisdiction agreements. They would fall to be construed on the basis that they were mutually exclusive in the scope of their application, rather than overlapping, if the language and surrounding circumstances so allowed (Deutsche Bank AG v Sebastian Holdings Inc (No 2) [2011] 2 All ER (Comm) 245 and UBS AG v HSH Nordbank [2009] 1 CLC 934).
• The presumption in favour of one-stop adjudication may have particular potency where there was an agreement entered into for the purpose of terminating an earlier agreement between the same parties or settling disputes which had arisen under such an agreement. Rational businessmen would intend that disputes under the underlying and the settlement agreements be resolved in a single forum. If the settlement agreement contained a dispute resolution provision incompatible with that in the earlier agreement, the parties were likely to have intended that the settlement agreement clause should govern all aspects of outstanding disputes and supersede the clause in the earlier agreement. This was because:
  • The settlement agreement clause came second in time and had been agreed by the parties in the light of the specific circumstances giving rise to the disputes being settled and the circumstances leading to the termination of the earlier agreement.
  • The settlement agreement clause was the operative clause governing issues concerning the validity or effect of the settlement agreement and therefore the only clause capable of applying to disputes which arose out of or related to the settlement agreement.
  • In considering any dispute about the scope or efficacy of a settlement agreement, the tribunal was likely to have to consider the background, of which an important element would often be the circumstances in which the dispute arose and the rights of the parties under the earlier contract. There would often be a risk of inconsistent findings if the tribunal addressing the validity or efficacy of the settlement jurisdiction was not seised of disputes arising out of the earlier contract, and the latter fell to be determined by a different tribunal.
• The case should be distinguished from DDT Trucks of North America Ltd v DDT Holdings Ltd [2007] 2 Lloyd’s Rep 213, which was not a case where there was a new dispute resolution clause in the terminating agreement, or any risk of fragmentation of issues. “Where the terminating agreement contains a new dispute resolution provision which differs from that in the agreement which it terminates, different considerations arise. It is then necessary to determine which dispute resolution clause applies and it is likely that the parties should wish the earlier dispute resolution provision, in the form of an arbitration agreement, to be superseded for the reasons I have endeavoured to identify. Whether that is so will depend upon the proper construction of the clause in the terminating agreement in all the surrounding circumstances, but I would not accept that it could only have that effect by making express reference to termination of the arbitration agreement and DDT Trucks is not authority for any such proposition”.
• In conclusion, the tribunal had correctly decided that it had no jurisdiction in relation to the defendant’s claims.

Monde Petroleum SA v Westernzagros Ltd [2015] EWHC 67 (Comm), 22 January 2015