Laemthong International Lines Co Ltd v Artis (The Laemthong ...

Facts

• A charterparty agreement was made between Laemthong International Lines Co Ltd (owners of the vessel “Laemthong Glory”) and charterers, containing an arbitration clause.
• The charterparty specified that all bills of lading issued under it would incorporate its terms, including the arbitration agreement.
• Mr. Artis, trading as Artis Maritime, subsequently became holder of bills of lading and thereby a party to the contract of carriage governed by those terms.
• A dispute arose concerning the carriage of goods, leading Mr. Artis to seek to enforce the arbitration clause against Laemthong International Lines.

Issues

1. Whether a third party, specifically the named holder of bills of lading, could enforce an arbitration clause under the Contracts (Rights of Third Parties) Act 1999.
2. Whether the requirements of Section 1(1)(b) and Section 1(3) of the 1999 Act were satisfied by the naming and terms of the contract.
3. Whether Section 8 of the Arbitration Act 1999 applied to permit a stay of court proceedings in favour of arbitration at the instance of such a third party.

Decision

• The Court of Appeal held that Mr. Artis, as a clearly named third-party beneficiary under the bills of lading, could enforce the arbitration agreement within the charterparty under the 1999 Act.
• The court found that the contract’s language directly named Mr. Artis, fulfilling Section 1(3), and that it was intended to benefit him, fulfilling Section 1(1)(b).
• It was confirmed that an eligible third party could also make use of Section 8 of the Arbitration Act 1999 to stay court proceedings in favour of arbitration.
• The judgment established the enforceability of arbitration agreements by named third-party beneficiaries in accordance with the statutory requirements.

Legal Principles

• Under the Contracts (Rights of Third Parties) Act 1999, a clearly named third-party beneficiary can enforce contract terms made for their benefit, including arbitration clauses.
• Section 1(1)(b) and Section 1(3) require express or clear identification and intended benefit within the contract for third-party enforcement rights.
• Section 8 of the Arbitration Act 1999 allows courts to stay court proceedings on the application of a party able to enforce an arbitration agreement, including a qualifying third party.
• Precise contractual drafting—specifying beneficiary identity and benefit—is essential for enforceability of third-party arbitration rights.

Conclusion

By determining that named third-party beneficiaries can enforce arbitration clauses under the 1999 Act, the Court of Appeal in Laemthong International Lines v Artis provided clarity and practical guidance on third-party rights in commercial contracts, emphasising the necessity of clear language and direct naming to secure such enforceability.