Practical tips for parties to settlement agreements

The recent decision in Interserve Industrial Services Ltd v ZRE Katowice SA [2012] EWHC 3205 (TCC) (9 November 2012) highlights the importance the court places on the dispute resolution mechanism in the main contracts between the parties and the importance of making clear in any settlement agreement how disputes arising under the settlement agreement are to be determined.

The case arose out of scaffolding and insulation works carried out at Pembroke CCGT power station in West Pennar in Pembrokeshire. The claimant (Interserve) and the defendant (ZRE) had entered into two construction contracts in respect of these works, both of which contained provisions stating that arbitration was to be the final dispute resolution mechanism. The works were delayed and when Interserve applied for various payments ZRE declined to make payment alleging a right of set-off. This dispute was settled by way of a settlement agreement that provided that it was governed by English law and that the English court ‘shall have exclusive jurisdiction in respect of any dispute arising under this agreement’. Interserve then alleged that ZRE had breached the terms of the settlement agreement and sought to enforce the terms of the settlement agreement in court proceedings…

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