Contracts rights of third parties act – Arbitration under the Contracts (Right of Third Parties) Act 1999 and Enforcement of an Award

The Contracts (Rights of Third Parties) Act 1999 has redressed many of the criticisms made against the English privity of contract rule. Regrettably, however, Parliament ignored the recommendations of the Law Commission and extended the application of the Contracts (Rights of Third Parties) Act 1999 to include arbitration. While this has little impact where a dispute is purely domestic it does have an impact where a dispute has an international character. It may surprise many foreign parties to contracts that are subject to the law of England and Wales that they have, by including reference to English law, potentially given rights to a third party. A third party who has obtained those rights will however find itself having an up-hill struggle to enforce an arbitration award that it might obtain in a foreign jurisdiction. This is because the third party is not a party to the arbitration agreement and the New York Convention applies only to parties to the arbitration agreement. There has not yet been a case on enforcement in a foreign jurisdiction of an award made under the Contracts (Rights of Third Parties) Act 1999 but as the Act is now being used more often this is an issue that may soon have to be addressed by the courts.