Third parties successfully obtain ASI against party in breach by relying on the Contract (Rights of Third Parties) Act 1999

Summary

In Manta Penyez Shipping and Uraz Shipping v Zuhoor Alsaeed Foodstuff Company [2025] EWHC 353 (Comm), the owners of two vessels (“the Claimants”) sought anti-suit relief to prevent the defendant, Zuhoor (who was the buyer of wheat to be transported on the vessels) (“the Defendant”) from continuing proceedings brought in the courts of Djibouti and Yemen. The Claimants relied on contractual covenants given by the Defendant in two separate agreements to which one or both of them were not party: a guarantee given in the course of foreign proceedings (“the Guarantee”) and the original charterparty agreement itself (“the Charterparty”).

The Claimants’ first argument – that they were third parties pursuant to the Contract (Rights of Third Parties) Act 1999 (“the CRTPA”) under the Guarantee – succeeded before Mrs Justice Cockerill. She also accepted, albeit obiter, an alternative argument based on the arbitration clause and the Defendant’s conduct in foreign proceedings.

Background

The Claimants, Penyez and Uraz, are SPVs and own the Manta Penyez and the Manta Uraz vessels respectively. The vessels were chartered by the Seller to carry wheat from Russia to Yemen, to the Defendant.  Under clause 28 of the Charterparty, to which Uraz was not a party, all disputes arising out of it were to be determined by London-seated LMAA arbitration. Neither the cargo nor the vessel ever made it to Yemen: the Seller instructed Penyez to instead deliver at Djibouti as the Defendant had allegedly not made payment. The Seller issued a letter of indemnity in favour of Penyez.  

The Defendant commenced various foreign proceedings in the courts of Djibouti and Yemen, which also led to the arrest of the vessels. As part of the Djibouti proceedings, a Guarantee was issued to the Defendant, which was intended to resolve that litigation by stipulating the release of the vessels.

The Claimants eventually approached the English courts, requesting various injunctions, including anti-suit relief (see for instance, the judgment here by Sir Stephen Houseman KC). As a basis for the anti-suit relief, the Claimants relied primarily on the Guarantee. Clause 1 provided:

“In consideration of Zuhoor (i) immediately procuring the release of the Vessel [i.e. the Manta Penyez] and Zuhoor and/or assignees and/or associates and/or subrogees refraining from re-arresting or otherwise detaining the Vessel or any other vessel in the same or associated ownership, beneficial ownership, management, and (ii) immediately withdrawing or procuring the setting aside of all legal proceedings, actions, judgments, and/or orders in Yemen in relation to or against the Vessel or Owners [i.e. Penyez] or the Charterparty…"

The Claimants also relied, in the alternative, on the original Charterparty. Although the Claimants had successfully obtained interim anti-suit relief twice, before Mrs Justice Cockerill, they sought to vary the orders made to include the Djibouti proceedings (which had not been brought to the attention of the court, not due to any fault of the Claimants) and also to make the anti-suit relief final.

Decision

The key hurdle for the Claimants to overcome was that they were not parties to the express contractual covenant not to sue in the Guarantee and Uraz was not a party to the Charterparty itself.

The Guarantee

As third parties, the Claimants sought to apply the CRTPA to the Guarantee to prove the existence of an express contractual covenant not to sue to a high degree of probability. Successful applicants can seek injunctive relief as s1(5) CRTPA expressly states that third parties enforcing a contract under the CRTPA are entitled to "injunctions" as if they were contracting parties.

The judge remarked that the CRTPA rarely applies in this context because parties usually expressly exclude it. However, it was not excluded in the Guarantee and as such, Penyez and Uraz could both rely on it. The judge held that both parties fulfilled the CRTPA's requirements:

1. A purpose of the contract must be for the third party to benefit (s1(1)(b) CRTPA): it was clear that the Guarantee 'self-evidently' had the purpose of benefitting Penyez and also any related party that might be sued by the Defendant, such as Uraz by protecting them against suit in Yemen. Clause 1 also prohibited the Defendant from arresting "any other vessel in the same or associated ownership", which was "plainly" for the benefit of parties such as Uraz.
2. The parties must be expressly identified in the Guarantee (s1(3) CRTPA): Penyez was expressly named in the Guarantee's Preamble and defined as "Owners", which was itself referred to in Clause 1. On the other hand, Uraz was considered to be a member of a class of parties that was named in the Guarantee (a class of parties "in relation to… Owners").
3. This gives rise to a "strong presumption" that the contract (or contractual term) is enforceable by that third party (s1(2) CRTPA): this may be rebutted by an express contractual term – noting that the courts will rarely imply one into the contract. However, it is not necessary for the parties to "positively intend" that the term should be enforceable by the third party. Here, there was nothing in the Guarantee to suggest that the parties did not intend Clause 1 to be enforceable by the Claimants.

The judge then considered that the standard Angelic Grace principles applied to the case, as the Defendant had acted in breach of the covenants contained in the Guarantee. As there were no strong reasons militating against the grant of anti-suit relief, the judge awarded the Claimants the relief sought – both final and in wider form than previous orders.

Charterparty arbitration clause

Alternatively, the judge considered (albeit obiter) that the Claimants would also have been able to obtain anti-suit relief on the basis that clause 28 of the Charterparty expressly provided that any dispute arising out of it was to be referred to London-seated LMAA arbitration. This would have been broad enough to cover both Yemeni and Djibouti proceedings. Counsel for the Claimants relied on a series of cases "where the respondent seeks to obtain relief under or in relation to a contract from a non-contracting party in a non-contractual forum, the respondent should be restrained from doing so by an ASI" (at [82]). Those cases allowed a non-party who specifically denies being a contracting party to enforce an arbitration or exclusive jurisdiction clause against a claimant in foreign proceedings who is "asserting in those proceedings a claim which is subject to that clause" (at [84]). This applied especially to Uraz, who had repeatedly asserted before the Yemeni courts that the Defendant was suing the "wrong party" (at [52]) as it had not ever been privy to the Charterparty.

The judge found that the Defendant's conduct in commencing those proceedings rendered the proceedings "inequitable or oppressive and vexatious" (at [86]). This was because, amongst others, the Defendant seemed to be seeking relief against Uraz for the same dispute between the Defendant and Penyez, which was a collateral attack on the arbitration and gave rise to the possibility of double-recovery by the Defendant. Though ultimately it was unnecessary, the judge considered this a "plainly… feasible alternative basis" for the grant of final injunctive relief (at [88])).

Indemnity costs

Cockerill J also awarded costs on an indemnity basis, recognising that this is “the usual practice” for contractual anti-suit relief granted by the English Commercial Court (at [95]). Indemnity costs were also considered appropriate because of the alternative “vexatious and oppressive ground” and the Defendant’s breaches of previous interim relief orders, which took the Defendant’s “conduct out of the norm”.

Comment

This judgment is a rare example of the CRTPA being relied upon to seek injunctive relief. As most commercial contracts tend to expressly exclude its application, it is a welcome statement of how the CRTPA's principles apply in the context of an anti-suit injunction.

There are also arbitration-specific provisions in the CRTPA that may be easily overlooked. In particular, where a contractual term that may be enforceable by a third party is subject to a term providing for the submission of disputes to arbitration, section 8(1) CRTPA stipulates that the 'third party shall be treated for the purposes of that Act as a party to the arbitration agreement as regards disputes between [the third party and the promisor]'. In addition, if the third party has a right to submit the dispute to arbitration as a result of the CRTPA applying, section 8(2) states that upon exercise of the right, the third party is treated as a party to the arbitration agreement in relation to the dispute.

The consequences of the CRTPA can be complex and careful consideration of how it may apply to a contract should be considered at the drafting stage. Any document that may give rise to covenants not to sue (such as the Guarantee here) should also be carefully scrutinised to determine whether the CRTPA may or may not apply – and whether an exclusion of the CRTPA ought to be included.  

Finally, the non-contractual route considered in relation to the Charterparty arbitration clause is also worth noting as it may be invoked in relation to any conduct in a "non-contractual forum". This potentially wider ground of relief may also be considered by any non-party to a contract even where the CRTPA has been excluded.

The authors would like to thank Kristy Chan for her contribution to this post.