Interserve Industrial Services Ltd v ZRE Katowice SA

Where parties enter a supplemental or settlement agreement while their underlying construction contract remains operative, the court must examine the subject matter and relationship between the agreements. A supplemental agreement may contain an implied term that disputes arising under it are subject to the underlying contract’s dispute-resolution machinery, particularly where it does not finally settle all contractual claims and the parties remain in an ongoing contractual relationship.

An exclusive-jurisdiction clause in the supplemental agreement may govern the law and supervisory jurisdiction of an arbitration without displacing the underlying arbitration agreement. The clauses can operate together.

The defendant applied under section 9 of the Arbitration Act 1996 for a stay of proceedings concerning unpaid sums under a December agreement between the parties. The parties had previously entered into scaffolding and insulation subcontracts containing adjudication and ICC arbitration provisions.

The December agreement settled unpaid interim invoices by reference to milestones. It also provided for exclusive jurisdiction of the courts of England and Wales and stated that the subcontracts remained in force, subject to necessary amendments. The central issue was whether the December agreement was a stand-alone agreement governed only by its jurisdiction clause, or whether disputes under it were subject to the subcontract dispute-resolution provisions.

1. The stay was granted. The proceedings were stayed to arbitration under section 9 of the Arbitration Act 1996.
2. The proper question was whether the December agreement contained an implied term that disputes under it would be subject to the same dispute-resolution procedure as applied under the subcontracts. It was not necessary to decide whether the two agreements should be treated as one agreement.
3. The parties remained in an ongoing contractual relationship concerning incomplete subcontract works. The December agreement was not a full and final settlement of all present or future claims under the subcontracts. It resolved the particular dispute concerning unpaid invoices and regulated payment by milestones. Those features supported incorporation of the subcontract dispute-resolution provisions.
4. A “stand alone agreement” is one entirely independent of a prior agreement, containing all terms necessary to found a cause of action and capable of operating without recourse to the prior agreement. The December agreement did not meet that description.
5. Clause 67 of the subcontract was a self-contained regime for resolving disputes. Clause 8 of the December agreement identified English law and the English courts’ supervisory jurisdiction, including the curial law governing arbitration under clause 67. The provisions were capable of reconciliation and were both valid and binding.
6. Shepherd Construction Ltd v Mecright Ltd was materially different because its agreement finally settled all claims under the contract. Quarmby Construction Co Ltd v Larraby Land Ltd, McConnell Dowell Constructors (Aust) Pty Ltd v National Grid Gas plc and L Brown and Sons Ltd v Crosbie supported the analysis where contractual obligations remained to be performed. Deutsche Bank AG v Sebastian Holdings Inc (No 2), PT Thiess Contractors Indonesia v PT Kaltim Prima Coal and Ors and Habas Sinai v Sometal S.A.L were distinguished on their facts.