The Court also held that – although the notice of arbitration did not refer to the settlement sum and, instead, referred to “a claim for demurrage and heating costs as well as other possible claims” – the claim for the agreed sum could properly be regarded by commercial parties as a claim for demurrage and heating costs. Thus, the Court concluded that the notice of arbitration was effective. The arbitration clause allowed the parties to submit further disputes to arbitration after proceedings had commenced, as long as such disputes arose under the charterparty. Thus, the Court concluded that, even if the notice of arbitration as submitted had not encompassed a claim for the US $600,000, the owner could, in any event, have submitted such claim at a later stage in the arbitration as long as it was a claim under the charterparty. On that hypothesis, the Court found that this is what it did.
Conclusion
This case provides a reminder of the complexities that can arise (leading to delays and increased costs) if settlement agreements or contractual amendments do not expressly state the applicable governing law and dispute resolution mechanism.
In this instance, the English Court took a commercially pragmatic, pro-arbitration approach and held that the arbitration clause in one agreement could effectively be implied into a subsequent agreement seeking to settle a claim under the former. The outcome of this case turned on its particular facts, including the commercial context of maritime practice, and parties should not assume that the dispute resolution mechanism and governing law that is set out in an underlying agreement will necessarily apply to every agreement seeking to settle a claim arising under the original agreement. Parties are recommended to always document the settlement they have reached in express terms, including a governing law and dispute resolution clause.
About the Authors
Nicholas Peacock Partner, London
Charlie Morgan Associate, London
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