A seat at the table: third parties and exclusive jurisdiction clauses

The High Court has looked at when a third party can rely on (and be bound by) an exclusive English jurisdiction clause in Campeau v Gottex. 

Director seeks to enforce third party rights

The case concerned a sale and purchase agreement with an exclusive English jurisdiction clause and which granted an indemnity to a director not party to the agreement.

The seller, Gottex, brought claims in Luxembourg alleging fraud and negligence by Mr Campeau which, it said, had caused the sale to be undervalued. As well as objecting to jurisdiction in those proceedings, Mr Campeau served English proceedings, out of the jurisdiction, to enforce his third party rights. The seller applied in England to set aside service on the basis that Mr Campeau could not rely on a jurisdiction clause in an agreement to which he was not party.

The court dismissed the seller's application since Mr Campeau had shown he had a good arguable case that his claim fell within the jurisdiction clause even though it did not mention him expressly.

Question of interpretation?

The court addressed the question as one of interpretation. The starting point is that jurisdiction clauses only bind parties to the contract, but context is crucial. Here, the clause was drafted broadly using the words “any dispute arising out of or in connection with this deed.” The agreement also conferred express rights to third parties like Mr Campeau. You could say, if you invite third parties to a seat at the dinner table, do not be surprised if they use the cutlery. [Ed.: Too far?] The rights in question applied to parties and non-parties alike. The court didn't think the parties could have intended these disputes to be resolved in different places.

The court also considered the question more closely by reference to the Contracts (Rights of Third Parties) Act 1999. Section 1(4) of the Act says that a third party must enforce a contract “subject to and in accordance with” its other relevant terms. If the jurisdiction clause is wide enough, it is a relevant term, and third parties are bound by it (even though they are not parties to the contract).

The last word?

Here only a declaration and no injunction was granted, but we are seeing (and A&O Sheaman is acting in) a number of applications for anti-suit injunctions. Another court (admittedly in a single paragraph) reached the opposite view on this point. The question of third partes being subject to burdens is controversial.  All this suggests we have not heard the last word. 

Judgment: Campeau v Gottex