Third Party Rights Where There Is An Arbitration Clause

Fortress Value Recovery Fund (1) LLC & Others v Blue Skye Special Opportunities Fund LP & Others [2013] EWCA Civ 367

Arbitration clauses have a special status in relation to third party rights.

Section 8 of the Contracts (Rights of Third Parties) Act 1999 provides that, where a right to enforce a term under the Act is subject to a term providing for arbitration, the third party is to be treated as a party to the arbitration agreement as regards disputes relating to the enforcement of the term. It is a difficult area, with this case helping to clarify some of the issues.

The upshot is that if you are drafting an agreement which contains an arbitration clause and also confers rights on third parties (whether to enforce the contract or to benefit from exclusion clauses), take care.