CL-2025-000010 and CL-2025-000091 - [2025] EWHC 1842 (Comm)

It is necessary separately to address a narrower, and more formidable, formulation of the Directors’ argument, namely that the undoubted rights of the Directors to enforce clause 33 (as “first parties” under clause 33.3, and as “third parties” under clause 38.5) carries with it the right to enforce clause 42 to the extent that the proceedings in question engage the clause 33 rights. I shall refer to this as “the Narrow Construction.”

Taking clause 33.3 first, I accept that it gives rise to a separate contract between the Parties and the Representatives (either a “separate or collateral” contract, adopting Lord Millett’s phrase in The Starsin at [196], or “collateral”, as Lord Hoffmann described it at [114], or with the Representatives only being parties to the SHA “to a limited extent”, in the language used by Lord Bingham at [26]). I will refer to this as the “Clause 33 Contract”. To the extent that clause 33 cross-refers to other provisions of the SHA – to take an obvious and uncontroversial example, the definitions – I accept that these too are terms of the Clause 33 Contract. Similarly, given that the substantive content of clause 33 must be the same for those who are just parties to the Clause 33 Contract, and the parties to the SHA, I accept that the interpretation of the terms of Clause 33 will be influenced by the other terms of the SHA.

There is scope for argument as to whether other SHA terms are terms of the Clause 33 Contract and, if so, which – for example the “no oral modification”, assignment or choice of law clauses (cf. the issue in another “agreement within an agreement” context, albeit where there are the same parties to both, as to the effect of an express choice of law clause in the matrix contract and whether it forms part of the arbitration agreement or operates as an implied choice of law for the arbitration agreement). The fact that the parties to the Clause 33 Contract are not (all) the same as those to the SHA has the potential to raise further issues as to incorporation of the kind which have generated an extensive jurisprudence when considering which clauses of a charterparty or primary insurance are incorporated into a bill of lading or reinsurance (for example the width of the language of incorporation, the “germaneness” of the incorporated term or whether the language of that term prevents its operation in the incorporated context), albeit in the present context the agent entering into the Clause 33 Contract on the Representatives’ behalf is necessarily aware of all the provisions of the SHA, making arguments for incorporation easier.

I did not hear argument on many of these questions, and I have approached the issue largely as a matter of the interpretation of the SHA, and from first principles, both in relation to clause 41 (which I address at [180] below) and clause 42. At this stage of the judgment, I am only concerned with clause 42. For the reasons I set out below, I am not persuaded that clause 42 is part of the Clause 33 Contract.

First, clause 33.3 grants rights and imposes obligations on Representatives (which is capable of encompassing the wide class of persons appearing within the definition of that term): it provides the Representatives of one party with a defence to certain types of claim by the other party or its Representatives, but also provides a defence to those same types of claim brought by those Representatives against the other party or its Representatives. However, it does not (expressly at least) purport to confer the further right, or impose the further obligation, that any proceedings brought against or by those Representatives against the other party or its Representatives must be brought in accordance with clause 42. That is true:

Second, the extent of the rights and obligations which would follow on the Narrow Construction are unclear. The Narrow Construction could involve clause 42 operating as part of the Clause 33 Contract to the extent only of disputes as to the scope of clause 33 and whether it was engaged by a particular claim (i.e. what Tomlinson LJ referred to in Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund LP [2013] EWCA Civ 367, [29] as “the ability … to have the efficacy of that protection determined” in the clause 42 forum); or of all claims by one party to the SHA or its Representatives against another party or its Representatives in relation to the subject matter of the SHA; or only to such claims to the extent that the proviso to clause 33 is not engaged; or (per the Directors’ formulation in closing written submissions) “in relation to any claim arguably falling within the scope of the exclusion clause”. The first, third and fourth of those constructions involve significant scope for dispute fragmentation, and cannot lightly be attributed to the parties. The second would involve the application of clause 42 not simply to disputes concerning the engagement of clause 33 (in circumstances in which it is the Representatives’ contractual right to enforce clause 33 which provides the legal foundation of their reliance on clause 42), or even disputes actually engaging clause 33, but a wider category of disputes, even though there is no language supporting a wider application (cf. the point made by Tomlinson LJ in Fortress, [30] in relation to the operation of s.8(1) of the 1999 Act).

Third, for the reasons outlined at [46] above, the terms of clause 42 do not readily lend themselves to incorporation into the Clause 33 Contract.

Finally, there is some (albeit limited) force in JPM’s suggestion that clear (or at least some) words will ordinarily be required before a contract which comes into existence with a non-signatory pursuant to the terms of a contract between other parties will include the EJC in the latter contract. The authorities providing support for a proposition along these lines are to be found in the very different context of a Himalaya clause in a bill of lading: The Mahkutai [1996] AC 650, 665-669 and Maersk Guiné-Bissau, Sarl v Almar-Hum Bubacar Baldé SARL [2024] EWHC 993 (Comm). There are obvious grounds of distinction between that context and the present case. The beneficiaries of Himalaya clauses generally only become parties to the Himalaya contract after the bill of lading contract has been entered into and its terms fixed (by assenting to those terms through some act of performance such as discharging cargo) rather than being parties to such a contract from the outset. The connection between the place where the servant or agent undertakes the acts giving rise to liability in a Himalaya context may have no connection with the jurisdiction agreed between the shipper and carrier in the EJC. Further, in this case, clause 33 does impose burdens as well as benefits on the Representatives (in that they agree that others will have no liability to them in certain circumstances), with the result that the issue is not whether the Himalaya clause can give rise to a term of a contract imposing burdens as well as benefits on a third party becoming party to a “contract within the contract”. For that reason, I have given them only limited weight. However, these authorities, and those concerned more generally with the issue of whether an EJC in a contract between two parties becomes a part of a related contract between one of those parties and a third party (discussed in Sir Kim Lewison, The Interpretation of Contracts (8^th), [3.66]-[3.75]), reflect a careful approach to this issue, and a reluctance to make the third party subject to the EJC in the absence of supportive language.

Against those matters is the fact that it would have been very easy to achieve the result contended for by express reference to clause 42 in clause 33 or clause 38.5, or for an express reference to the Representatives to be made in clause 42.

For those reasons, I am unable to accept the Narrow Construction that clause 42 forms part of the Clause 33 Contract.

Turning to clause 38.5, it is important to note in this regard that there is no general principle that third parties who acquire rights under the 1999 Act are necessarily subject to or able to invoke any dispute resolution clause in that contract. In contrast to an assignee, or statutory transferee, the third party is not exercising the right of one of the parties to the contract in its place (such that the “conditional benefits” analysis discussed at [70] below in the context of quasi-contractual ASIs is engaged). The Law Commission, in Privity of Contract: Contracts for the Benefit of Third Parties (1996) (Law Com No. 242) discussed the issue of jurisdiction and arbitration clauses at [14.14]-[14.20]. They proposed leaving those clauses outside of their proposed reforms, noting at [14.18] that “our preferred approach … is that arbitration and jurisdiction agreements should fall outside our reform and can neither be enforced by nor are enforceable against a third party.” As is well-known, Parliament reached a different view in relation to arbitration agreements, and it is apparent from the Explanatory Notes to the 1999 Act that they were influenced by the conditional benefits analysis in assignment and statutory transfer cases in doing so. The resultant scheme created by s.8 of the 1999 Act has not been a wholly happy one (see Fortress Valuation, [1]). However, there was no similar attempt for jurisdiction clauses.

It is right to note that clause 38.5 makes the third party right afforded to Representatives “subject to … (ii) the other terms and conditions of this Agreement”. However, I am not persuaded by the suggestion that this serves to incorporate clause 42 so that the Directors are able to assert the negative covenant in clause 42 against JPM. This language in clause 38.5 essentially tracks s.1(4) of the 1999 Act (“this section does not confer a right on a third party to enforce a term otherwise than subject to and in accordance with any other relevant terms of the contract”) which was clearly not intended to place the third party in a position to enforce and be made subject to EJCs and arbitration agreements (the former having been disavowed by the Law Commission and the latter being dealt with separately and comprehensively in section 8 inserted after the Law Commission’s bill had been prepared). Like s.1(4), this part of the proviso to clause 42 is phrased as a limit on the Representative’s right to enforce clause 33, and is naturally understood as referring to some form of substantive limit on that right. Tomlinson LJ’s observation in Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund LP [2013] EWCA Civ 367, [36] tells against this attempt to bring clause 42 within the ambit of clause 38.5:

“There is no express language in the agreement to the effect that … the exclusion is subject to the arbitration clause. … [T]hat result can only be achieved by way of inference. It is however to impute to the parties a really very far-reaching intention if it is to be inferred that they positively intended to bring about the result that third parties would be bound by the outcome of arbitration proceedings which they had not themselves initiated in order to secure a benefit apparently conferred upon them by the agreement. … [T]he consequences are so far-reaching that very clear language is I think required to bring about the result that the right of a third party to avail himself of an exclusion clause in an agreement to which he is not party is in turn subject to an arbitration clause in the same agreement.”

Finally, clauses 38.5 and 38.6 limit the Directors’ third party rights to the enforcement of clause 33. That precludes the argument that the Directors’ third party rights extend to clause 42 as well.