What? When related agreements have inconsistent dispute resolution provisions, the dispute resolution clause contained in the agreement under which the dispute arose was held to apply.
So what? It is important to ensure that dispute resolution clauses match up in related contracts or across a suite of documents.
The case of PT Thiess Contractors Indonesia v PT Kaltim Prima Coal [2011] concerned a dispute concerning two related agreements: an operating agreement, which provided for disputes to be resolved by arbitration in Singapore; and a cash distribution agreement (CDA), which gave the English courts non-exclusive jurisdiction.
The claimant commenced proceedings in the English Commercial Court seeking to enforce the CDA. The defendant argued that the issue of whether the claimant could enforce the CDA depended on whether it was entitled to receive payment for services under the operating agreement. Under the terms of the operating agreement, that issue was required to be arbitrated, so the court should stay the proceedings.
The judge refused to grant the stay, on the basis that the purpose of the CDA was to provide security pending the outcome of the underlying disputes arising under the operating agreement. Here, the substance of the dispute arose under the CD, so the English jurisdiction clause applied.
Conclusion
Although the claimant was able to enforce the contract in the English courts, this case serves as a reminder to ensure that your contracts do not contain any inconsistent dispute resolution provisions. If a contract or suite of contracts provides for more than one dispute resolution mechanism, you need to make it very clear in what circumstances and/or in what order each mechanism is to operate.
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