Whether the parties should arbitrate or litigate their dispute


The parties entered into a contract which provided for any dispute to be settled by London  arbitration. Following a dispute, they entered into a settlement agreement which conferred  exclusive jurisdiction on the English courts. The claimant commenced both court and arbitral  proceedings and when the arbitrators found that they did not have jurisdiction to hear the case  (involving the issue of whether the settlement agreement had been induced by misrepresentation),  the defendant applied to court pursuant to section 67 of the Arbitration Act 1996 to challenge that  ruling.

Popplewell J recognised the presumption (laid down by the House of Lords in Fiona Trust v Privalov  (see Weekly Update 40/07)), that rational businessmen normally intend all questions arising out of their legal  relationship to be determined in the same forum. He held that, although  that presumption may have  particular potency where a settlement agreement is reached: “Where the settlement/ termination  agreement contains a dispute resolution provision which is different from, and incompatible with,   a dispute resolution clause in the earlier agreement, the parties are likely to have intended that  it is the settlement/ termination agreement clause which is to govern all aspects of outstanding disputes, and to  supersede the clause in the earlier agreement”.

Although that is the parties’ likely intention, the language of the clause and other surrounding  circumstances should be considered by the court. In this case, he concluded that the parties had  intended the English courts to hear the case.

The judge also ordered security for costs to be provided by the claimant. The claimant’s solicitors  had offered to provide an undertaking, supported by a personal guarantee by the senior partner. It  was held that that form of security was not as good as security by payment into court or provision  of a first class London bank guarantee (the conventional forms  of security), and so was not  suitable. The evidence about the solicitors’ (and partner’s) financial position had been unsatisfactory.