Key takeaways
Only named parties are bound by arbitration clauses
The court confirmed that contracts must clearly identify who is legally involved.
Corporate structure doesn’t override contract terms
Being part of the same group doesn’t make a company liable under another’s agreement.
Courts can step in before arbitration begins
Non-participating parties have the right to challenge arbitration jurisdiction.
ABC -v- DEF [2025] EWHC 711 (Comm)
In this dispute over whether the claimant was a party to the underlying contracts and the arbitration agreements in them, the Court accepted that it should not interfere with an arbitration other than as permitted by the Arbitration Act 1996 (AA 1996). It also acknowledged that an arbitral tribunal has power to rule on its own jurisdiction pursuant to s.30 AA 1996.
However, a party has the right to resort to the Court, pursuant to s.72 AA 1996, to determine whether there was a valid arbitration agreement to which it was bound in circumstances where it had not previously participated in arbitration proceedings commenced under the disputed arbitration agreement.
This is a good example of how the English Court will approach its supervisory jurisdiction in respect of English-seated arbitrations.
The background facts
The dispute related to two contracts dated 18 August 2020 for the supply of pharmaceutical products. One contract was between 3UK Ltd (3UK) and the defendant (UK contract), the other contract was between 3 Malaysia and the defendant (Malaysia contract).
3UK and 3 Malaysia held the commercialisation rights for the products in question. 3UK and 3 Malaysia were also part of the same group of companies, the parent of which was 3 Limited. The claimant was a direct subsidiary of 3 Limited and controlled part of the 3 pharmaceutical business. 3UK was a UK registered company and a direct subsidiary of the claimant. 3 Malaysia was a Malaysian registered company and also a direct subsidiary of 3UK.
The parties entered into the two contracts as part of or following a tendering process. Each contract was expressed to be a contract only between the parties to the contract concerned. The claimant was not a named party to either of the contracts.
Both contracts provided for English law and LCIA arbitration seated in London. The effect of clause 14 of each of the contracts (governing law/dispute resolution) was that the arbitration agreements were governed by English law. Clause 17 of both contracts also provided that no amendment, modification or discharge of the contract would be valid and binding unless it was in writing and duly executed by the parties.
A dispute arose in relation to the performance of the contracts and the defendant commenced LCIA arbitration proceedings. In each of the defendant’s Requests for Arbitration (RfAs) it named the claimant, in addition to 3UK and 3 Malaysia respectively, as the respondent.
The claimant did not participate in either arbitration and applied to the Court under s.72 AA 1996 for an order declaring that there was no valid arbitration agreement between the claimant and the defendant in either of the two contracts. The claimant also sought a declaration that it was not liable to be a party to the arbitral proceedings commenced by the defendant.
The defendant sought to rely on the arbitration agreements contained in the two contracts (to which the claimant is not a party) and argued that:
The claimant performed, in part at least, the obligations of 3UK and 3 Malaysia under the contracts.
Consequently, the claimant was properly a party to the arbitration agreements.
If that was disputed, it was for the arbitrator to rule on her jurisdiction under s.30 AA 1996 and/or the Court should exercise any case management discretion available to it to leave the issue to be decided by the arbitrator.
The Commercial Court decision
The Court stated that any attempt by the defendant to avoid the effect of clause 17 by maintaining that the claimant was a party to the written agreements was bound to fail, given that the terms of the contracts were clearly unambiguous in identifying the only parties to the contracts. That was not only the starting point for ascertaining the parties to a contract, but also the endpoint because there was no uncertainty about the meaning and the effect of the express terms of the contracts concerned.
The Court added that it was not possible to treat, as a matter of law, the parent and a subsidiary company as the same unless this was necessary to prevent an abuse of the concept of corporate personality.
It was also not possible to ignore corporate personality in order to make a company party to a commercial agreement when the clear intention was that it was not to be a party, so as to force on a party the obligations of an arbitration agreement to which it was not a party and was not intended to be a party. This would exclude a party against its will from access to the courts.
The defendant had sought to argue that the 3 Group functioned on an integrated basis and that the claimant and its subsidiaries shared responsibility for the liabilities and obligations of the relevant subsidiaries. However, even if this were correct, it did not mean that the claimant was a party to the contracts, or the arbitration agreements contained in them.
The Court considered the claimant’s argument that there was an implied agreement between the claimant and the defendant in the same terms as the contracts between the claimant and its subsidiaries, which included an arbitration agreement identical to that in the contracts. As this argument had not formed part of the RfAs, the defendant would have to commence a new reference to run this argument if it believed it could substantiate it.
As to whether the Court should leave the issue of the tribunal’s jurisdiction over the claimant to be decided by the arbitrator, the claimant had the right to resort to the Court to determine whether there was a valid arbitration agreement under s.72 where it had not previously participated in the arbitration references. The primary remedies under s.72 – injunction or declaration – were discretionary in nature and, in this case, it was appropriate to grant the declaration sought by the claimant.
The Court declined to grant leave to appeal.
Comment
The case provides a timely reminder that it is important to be clear who are the counterparties to a contract (including an agreement to arbitrate) for the purposes of ascertaining who will be liable in case of any non-performance or other breach of contract. Attempts to bring arbitral or court proceedings against a parent company, where the subsidiary is the expressly stated contracting party, are likely to falter in the face of the corporate veil.
The dispute also highlights the importance of considering the contents of a request for arbitration to ensure that it is comprehensive and include all potential contracts (express or implied) and the necessary parties.