Recent Commercial Court case highlights the importance of consistency with past and future agreements
The Commercial Court have refused an appeal under Section 67 of the Arbitration Act 1996 by upholding an arbitral tribunal's decision that an arbitration clause contained within a consultancy agreement was succeeded by a subsequent jurisdiction clause within a settlement agreement.
The defendant in the proceedings, WesternZargos Limited ("WZL"), had previously entered into a consultancy agreement with the claimant, Monde Petroleum S.A. ("Monde") which also contained an arbitration agreement. Under the consultancy agreement Monde were to provide consultancy services to WZL in exchange for monthly payments and additional payments on the occurrence of specific events.
WZL ended the monthly payments in January and alleged that the consultancy agreement was terminated in March of the same year. Furthermore MZL denied that outstanding invoices issued by Monde were due and owning.
In the interests of settling their dispute, WZL and Monde entered into a settlement agreement. There was, however, a contrasting jurisdiction clause within the settlement agreement to that of the previous consultancy agreement between the parties.
Monde brought a claim against WZL in the Commercial Court. Monde alleged that its entry into the settlement agreement was obtained via misrepresentation and/or duress. As a precautionary measure (for limitation purposes), Monde also commenced arbitration proceedings but applied to stay the same as the principal action was intended for the Commercial Court.
WZL brought a counterclaim against Monde in the arbitration proceedings. The counterclaim was declined by the tribunal on the basis that the tribunal did not have jurisdiction over the matter. WZL appealed the decision of the tribunal.
WZL's appeal was dismissed by the Commercial Court. Mr Justice Popplewell, the judge presiding over the appeal, noted that the presumption in favour of one-stop adjudication may be particularly persuasive where the latter agreement i.e. the settlement agreement, was entered into for the purposes of terminating the earlier agreement (the consultancy agreement).
Furthermore, in the scenario where two agreements between the same parties provide inconsistent arbitration clauses, it is more likely that the settlement agreement clause is to govern all aspects of outstanding disputes. As a result, the clause within the settlement agreement replaced the earlier clause in the principal agreement.
The decision of the court emphasises the importance of uniformity between contract terms in different agreements between the same parties, especially in the context of arbitration clauses. It is important to remember that any settlement agreement should be read in conjunction with the earlier agreements between the parties to check for inconsistencies. Moreover, it highlights the need for careful drafting and reviewing of contracts, especially in a settlement scenario, to ensure that the arbitration clauses correctly set out how you wish to be bound in the event of a further dispute.
If faced with this issue it is important to seek legal advice to prevent your interests from becoming compromised in the event that the matter becomes litigious.