Key takeaway
The High Court’s decision in Campeau v Gottex Real Asset Fund 1 (OE) Waste highlights that third parties may, in certain circumstances, be able to rely on jurisdiction clauses in commercial contracts. Where a contract confers third-party rights and contains broadly drafted dispute resolution wording, those procedural provisions may extend beyond the named signatories.
How do third-party rights and jurisdiction clauses interact in commercial contracts?
In Campeau v Gottex Real Asset Fund 1(OE) Waste, the High Court considered third-party contract enforcement rights and the application of dispute resolution clauses in commercial contracts.
The judgment focused on what can happen where rights and obligations are expressly set out in an agreement, but their effect is later disputed. In particular, the court considered how third-party rights apply to procedural provisions, such as jurisdiction clauses, where the person seeking to rely on the clause is not a signatory to the contract.
What was the dispute in Campeau v Gottex about?
The dispute arose from a share purchase agreement (SPA) under which a company was sold. While Mr Campeau was not a party to the original SPA, he was a director of the target company and benefited from a stipulation in the contract, clause 10.3, which restricted claims against directors and expressly conferred rights on third parties.
The SPA also contained a broadly drafted, exclusive jurisdiction clause for dispute resolution to take place in England and Wales. Following the transaction and the issues that followed, proceedings were brought against Mr Campeau in Luxembourg. He then challenged this, arguing that any dispute connected to the SPA, including those involving him, should be resolved in England.
Can a third party rely on a jurisdiction clause?
A key issue for the court was whether a person outside the parties to a contract could rely on a jurisdiction clause. As a starting point, English law generally assumes that jurisdiction clauses apply only to the contracting parties. However, as the court found, that position is not absolute.
The court emphasised that the question ultimately turns on contractual interpretation, taking into account the wording of the clause, the structure of the agreement as a whole, and the commercial context.
Why did the exclusive jurisdiction clause for England and Wales matter?
The jurisdiction clause was drafted in broad terms to cover disputes “arising out of or in connection with” the SPA. Therefore, the court found that a dispute concerning the scope of clause 10.3 was clearly within that wording. Thus, on that basis, Mr Campeau was entitled to rely on the clause, despite not being a signatory to the SPA.
How can dispute resolution clauses apply to third parties?
This decision highlights that third parties may benefit from and rely on jurisdiction clauses even where they are not expressly referenced within the clause. The rights conferred on individuals, such as directors, may still fall within the contractual framework, especially in cases where the commercial context and agreement structure allow those rights to be exercised.
For businesses, this judgment exposes another potential liability in contracting and the management of cross-border disputes. The judgment also reinforces that contractual provisions cannot always be viewed in isolation, particularly where third-party protections are included. They must be analysed within the context and purposes of the agreement, as exemplified in clause 10.3, which was intended to support the directors.
How should commercial contract drafting address third-party rights?
If parties intend jurisdiction clauses to apply only to signatories, that intention should be clearly and expressly stated. Where third-party rights are included, consideration should also begiven to whether procedural provisions, including jurisdiction clauses, are intended to apply to those parties. Even where there is the inclusion of a broadly drafted clause, clients should be aware of the potential interpretations of the clause in the eyes of the law. Read more in our recent article on boilerplate clauses.
Barnes Law’s Commercial Litigation and Dispute Resolution team advises clients on complex contractual disputes, jurisdiction challenges, enforcement issues and strategic dispute resolution.
Written by Barnes Law Managing Partner Yulia Barnes.
