10.01  The use of the term ‘quasi-contractual’ in this chapter is not meant to revive the shadows of the old fiction of quasi-contractual promises used to justify restitutionary claims. Instead, it refers to anti-suit injunctions which are granted where the injunction defendant may not fully be party to and bound by a contractual forum clause as a matter of contract law, but should nevertheless be required to comply with the effect of the clause, ‘as if’ the injunction was contractual.¹ Substantively we are concerned with the ‘penumbral’ effect of forum clauses on third parties who are not fully contractually bound by the clause.

10.02  There are two types of case where quasi-contractual injunctions may be granted: third-party situations, and cases where the injunction claimant himself denies that the exclusive forum clause is binding.

10.03  Assume a contract between A and B which contains a forum clause. Between each other, A and B must respect the clause. A third party, C, may obtain rights against A which flow from B’s contractual rights against A. Two different ways in which he may have acquired rights against A must be distinguished.

10.04  First, there is a variety of rules under which a third party can become, or be deemed to become, an actual contracting party who acquires the burden together with the benefit of the contract, such as collateral contracts, novation, the doctrine of undisclosed principal, statutory succession,² and the Carriage of Goods by Sea Act (p. 212) 1992.³ In those cases, the analysis is usually uncomplicated: C has become contractually bound by the forum clause and normal contractual principles apply. In such a situation, an anti-suit injunction is not quasi-contractual, but contractual.

10.05  Second, a third party may obtain derived rights under or in respect of a contract without becoming party to the contract, under rules such as assignment, subrogation, the Third Parties (Rights Against Insurers) Act 2010, the Contracts (Rights of Third Parties) Act 1999, or similar rules of foreign law. Anti-suit injunctions against a third party C with derived rights, which seek to compel C to respect the forum clause, on the ground that C cannot take the benefit of the contract without its burden, are quasi-contractual injunctions in the sense used here.

10.06  In some cases, the injunction defendant asserts, and the injunction claimant denies, that a contract containing an exclusive forum clause exists; but the injunction defendant nevertheless seeks to sue the injunction claimant on the merits, in a forum inconsistent with that provided for by the contract whose validity he himself asserts. The injunction defendant’s contractual claims are potentially inherently inconsistent. An injunction sought by the injunction claimant in such a case can also be called quasi-contractual, because the injunction claimant does not himself assert that a contractual right exists, although the situation is not quite the same as more conventional quasi-contractual injunctions granted in cases of derived rights.

10.07  This chapter will consider third-party derived rights and quasi-contractual anti-suit injunctions, in Sections B–E. It will consider ‘inconsistent claims’ situations where the injunction claimant denies the existence of the forum clause in section F, ‘Inconsistent Contractual Claims’.

10.08  The English courts have consistently held that, where a third party makes claims for derived rights ‘in the shoes’ of an original party to a contract (the creditor) against the other party to the contract (the debtor), then however the third party acquired derived rights, those rights are subject to and should not be exercised inconsistently with any arbitration or jurisdiction clause⁴ contained in the original contract.⁵ This approach is uncontroversial when both the (p. 213) forum clause, and the method by which the third party acquires derived rights, are governed by English law.

10.09  Thus, an assignee is entitled to benefit from, and is bound by, any relevant contractual forum clause governing the contract under which the assignor’s rights against the debtor arose, when enforcing the assigned right.⁶ Where an insurer brings claims in the name and right of his insured under the English doctrine of subrogation those claims are subject to any arbitration or jurisdiction clause binding on the insured in respect of the relevant right.⁷ Further, it has been held that if an insured has tortious claims, but is bound by a forum clause in a connected contract which covers such connected tortious claims, then a subrogated insurer claiming in the shoes of the insured must respect the forum clause just as the insured would have been obliged to do—because the duty to arbitrate is an ‘inseparable component’ of the tortious rights transferred by subrogation to the insurer.⁸ The same approach has been applied to trustees in bankruptcy.⁹

10.10  Similarly, where a third party brings a direct claim against an insurer under the Third Parties (Rights Against Insurers) Act 2010,¹⁰ and the contract of insurance contains a forum clause, any claim brought by the third party against the insurer is subject to the ‘incidents’ of the insured’s claim against the insurer, including the forum clause. The third party’s rights are subject to the forum clause; can benefit from the forum clause; and can only be claimed in the agreed forum.¹¹ The courts have rejected any distinction between derived rights (p. 214) acquired by some form of voluntary transfer like assignment and subrogation, and derived rights acquired under statutes like the Third Parties (Rights Against Insurers) Acts 2010.¹²

10.11  The Contracts (Rights of Third Parties) Act 1999 has its own specific provisions in this regard, in sections 1(4), 8(1), and 8(2). The effect of these is that a third party enforcing his substantive rights under the Act has the ability to enforce against the promisor a forum clause which was intended to give rights to him,¹³ and unless the original contracting parties objectively appear to have intended otherwise, the third party’s rights can only be enforced consistently with any relevant exclusive jurisdiction or arbitration clause in the original contract.¹⁴

10.12  If an arbitration clause is subject to the Arbitration Act 1996, section 8(1) of the Contracts (Rights of Third Parties) Act 1999 goes further and provides expressly that if the third party seeks to enforce his rights against the promisor, and the original contract contained an arbitration clause governing the substantive rights in question, the third party shall be treated as a party to the arbitration agreement for the purpose of the 1996 Act.¹⁵ However, (p. 215) it seems that this provision had the narrower purpose of ensuring that the Arbitration Act 1996 would have full statutory effect in relation to the third party’s claims, and possibly also to ensure that the third party has a positive right to arbitrate if he sues on his third-party claims, if this was otherwise in any doubt. It is submitted that it should not be treated as creating by statute a positive contractual right to prohibit litigation elsewhere which could support a full contractual anti-suit injunction.¹⁶

10.13  The principle that someone who sues in the shoes of another should be subject to the same conditions as the person he replaces could be viewed as merely imposing inherent restrictions on the exercise of rights without adding additional positive obligations, through a ‘conditional benefit’ analysis. Yet the English courts have gone further, and have held that there is a form of positive obligation on a third party who claims under derived rights not to sue in any forum other than the forum specified in the original contract (at least where all the relevant relationships are governed by English law). This applies not only where the third party acquires his derived rights under doctrines of equity such as assignment or subrogation but also, it seems, where he acquires them under third-party rights statutes such as the Third Parties (Rights Against Insurers) Acts 1930 and 2010¹⁷ or the Contracts (Rights of Third Parties) Act 1999.¹⁸

10.14  The third party is not a party to the exclusive forum clause ‘in the full sense’, and is not under full contractual obligations, but he is ‘bound’ by the forum clause by a form of obligation, at least if he has made a substantive claim on the underlying contractual obligations, and is treated as bound by the clause for the purposes of the Arbitration Act 1996¹⁹ and the State Immunity Act.²⁰ The obligation in question has been held to be sufficient to support an (p. 216) application for the appointment of an arbitrator against the third party provided that the third party has asserted claims in respect of the substantive rights under the contract;²¹ to allow arbitrators to have jurisdiction to make declarations on the merits against the third party even if he denies they have jurisdiction;²² to permit a declaration that the third party must make any claims arising from the contract in the chosen forum (although not a declaration that he is in breach of contract if he does not),²³ and to justify an application to enforce an award of declaratory relief under section 66(1) of the Arbitration Act 1996.²⁴ Further, the courts have also consistently concluded that the obligation is sufficient to support a quasi-contractual anti-suit injunction against the third party in appropriate cases.²⁵

10.15  However, it is not entirely easy to identify the juridical basis of the obligation or obligations by which the third party with derived rights is bound, and this may vary, dependent on the nature of the way in which the derived rights arise.

10.16  The obligation will not, it seems, be an actual contractual duty, as that would amount to imposing the burden of a transferred contract on an assignee or subrogor or third party under the third-party rights statutes, which would be contrary to conventional principle.²⁶

(p. 217) 10.17  In some specific cases, such as assignment and subrogation, the third party’s attempt to evade the contractual jurisdiction clause will be inconsistent with an established independent substantive equity, such as the equitable principle that an assignee is subject to the equities that bind an assignor. But other situations where the third party acquires derived rights, such as claims under third-party rights statutes, do not fall within such pre-existing equitable doctrines.

10.18  It would be possible to escape the need for a substantive positive obligation, and to justify and support the case law on quasi-contractual injunctions, by basing such injunctions on general principles of vexation and oppression. Where the third party’s rights are derived from a contract between a creditor and a debtor, it is well arguable that it will often be vexatious and oppressive, and thus something which the court will restrain in the exercise of its powers under section 37(1) of the Senior Courts Act 1981 and in equity, for the third party to seek to claim those derived rights against the debtor without accepting the limitations to which they were inherently subject.²⁷

10.19  The authorities are not definitive in this regard, although the bulk of the current case law appears to be best explained on the basis that the positive obligation binding on the third party is a substantive equitable obligation, binding a third party not to seek to take the benefit of a contract without the burden of the exclusive forum clause to which that contract is subjected, which arises because it would be unconscionable, or contrary to good conscience, (p. 218) for the third party to seek to do so.²⁸ This specific equity differs from the debatable general equitable rights and obligations which may (but may not) underlie non-contractual anti-suit injunctions in general,²⁹ as it means the third party is ‘bound’ to respect the clause. It is distinct from any such general equitable obligations and it may exist even if they do not. It appears that such specific equities may arise not only where the third party’s derived rights themselves arise in contract or equity, but also where they arise under third-party rights statutes, although the law in this regard is not yet fully developed.³⁰

10.20  The third party will have the right to elect to choose not to rely on the derived rights at all. If it does not, then no obligation will arise binding it with respect to the exclusive forum clause. However, it may not be necessary for the third party to have actually commenced proceedings: the assertion of derived claims which, if commenced, would be bound by the exclusive forum clause may be sufficient.³¹

(p. 219) 10.21  The question of whether a specific equitable obligation exists, and if so, what that means, has not yet been fully examined. It intertwines with the choice of law analysis, with questions of territorial jurisdiction,³² and also with the nature of the threshold tests for the grant of anti-suit injunctions.³³ The correct juridical basis is therefore not a technical question, nor to be blindly determined by authority: it must be shaped with open eyes to make the law work sensibly in multiple dimensions.

10.22  Difficult questions of the conflicts of laws can be posed where the contract out of which underlying rights arise or to which underlying rights were subject is governed by English law, but the third party’s acquisition of rights is governed by a foreign law. Examples include where an insured creditor’s relationship with his insurer is governed by an insurance contract which is subject to a foreign law, but the insured’s contract with the debtor is an English law contract, which contains an exclusive forum clause; or where a third party claims under a foreign third-party rights statute to, in effect, enforce an English law contract against the debtor.

10.23  If the third party’s acquisition of derived rights occurs under a foreign law which provides, similarly to English law, that the third party’s rights are subject to any contractual forum clause that would have bound the creditor, then no difficulty is likely to arise, and the third party’s rights will be held to be subject to the forum clause.³⁴ Obviously the law of the transferred right cannot transfer more to the third party than the law of the transfer purports to transfer.

10.24  However, where the foreign law under which derived rights are conferred analyses the issues in a different fashion, in particular if under the foreign law the third party’s rights would not be subject to the forum clause in the original contract, the court is faced with a problem of conflicts of laws. Should the question of whether the third party’s rights to sue the debtor are subjected to the forum clause be determined by English law, the law of the contract in which the forum clause is found, or should it be determined by the foreign law applying to the transaction under which the transference of rights to the third party was effected, or by some other law?

10.25  The response of the English courts has so far been consistent, wherever the underlying contract between the initial debtor and creditor is governed by English law. The approach developed in a line of cases such as Through Transport and The Prestige is that the court will (p. 220) ask itself, from the perspective of English law,³⁵ whether the substance of the right which the third party sought to enforce against the debtor was contractual, and arose under the English law contract in which the contractual forum clause was found. If so, then whether or not the foreign law under which the third party was given rights would itself treat the third party’s rights as bound by the forum clause, English law will be treated as the applicable law to determine whether the third party is obliged to respect the forum clause. As a result, the English law principles we have identified mean that the forum clause will be treated as requiring the third party to sue in the chosen forum, in any situation of derived rights which are in substance contractual, irrespective of the approach taken by the foreign law governing the conferral of the derived right.³⁶ On the existing case law, this applies to cases of statutory transfer under foreign third-party statutes, just as much as to transfer by voluntary doctrines such as assignment and subrogation, provided that the right conferred is characterized as a contractual and not an independent statutory right.

10.26  In The Front Comor, Colman J confronted a related situation where owners and charterers agreed a charterparty subject to an arbitration clause, which was broad enough to capture connected tortious claims. So, if charterers had sued owners in tort, they would have been obliged to arbitrate. The charterers’ subrogated Italian insurers sought to bring the charterers’ tortious claims by way of subrogation, in their own name as Italian insurance law allowed, without respecting the arbitration clause. It was argued that Italian law would permit this, and it was common ground that Italian law was the law of the tortious claims. This situation is not capable of being resolved by asking whether the transferred tortious rights are in themselves contractual. Colman J nevertheless concluded it was the law of the arbitration agreement which should govern whether the tortious claims could be brought independently of the arbitration clause, not the law of the tort, because this was a question of the effect of the arbitration clause on the tortious claims.³⁷

(p. 221) 10.27  In contrast, if the third party is given an independent statutory right by the foreign statute, the logic of the Through Transport/Prestige derived-rights approach does not impose the binding force of the forum clause by virtue of the application of the law of the contract.³⁸ Not all claims by third parties in respect of contracts are claims for derived rights. For example, in BNP Paribas v Russian Machines, a Russian company had concluded an English law guarantee allegedly subject to an arbitration clause with the injunction claimant. One of the company’s Russian shareholders brought a claim before the Russian courts, to which the Russian company and injunction claimant were both defendants, to annul the guarantee on the basis that it was inconsistent with Russian company law. Blair J found the question of whether the Russian claim should be characterized as contractual, and so treated as subject to the forum clause in the guarantee by reference to English law, as of ‘very considerable difficulty’, and although he did not need to decide the point, was not persuaded that the Russian claim was subject to the clause. Indeed, the shareholder was not asserting any contractual rights against the injunction claimant, and it did not stand ‘in the shoes’ of the Russian company. Its claims were ones which would not have been available to the Russian company itself in an action against the injunction claimant.³⁹

10.28  In such cases, an injunction could in principle be granted applying more general non-contractual principles for anti-suit injunctions, such as vexation or oppression. There will be cases where the evasion of a forum clause in an underlying contract is vexatious even if the claim made abroad is not in substance contractual.⁴⁰

10.29  The justifications given for the Through Transport approach have been variable, although the courts have tended to proclaim their consistency. In The Prestige, Moore Bick LJ regarded the relevant issue as being ‘whether the Club’s liability can be enforced only in arbitration’ and reasoned that if the underlying right transferred to the third party was essentially contractual, ‘it is necessary to look to the contract of insurance to determine the extent of that right … since that contract is governed by English law, it is necessary to turn to English law to determine the scope of the insurers’ liability and the terms on which it may be enforced’.⁴¹ This was essentially the approach he took in The Yusuf Cepnioglu, although he also added that in the view of English law, where the claimant must sue:

But for his part in The Yusuf Cepnioglu, Longmore LJ approached the characterization question differently, saying: ‘it would be too narrow to characterise the issue in the case as whether the Club has the right not to be vexed by foreign proceedings or even whether the Club has the right to rely on the London arbitration clause in its rules’. Instead, he regarded the question as simply being ‘whether the charterers’ right to sue the Club direct is essentially a contractual right (in which case it will be governed by English law as the proper law of the contract) or an independent right (in which case it will be governed by Turkish law).’⁴² As we will explain, we submit that it is Moore-Bick LJ’s additional comments in The Yusuf Cepnioglu that give us a path to the best answer, although the issues are not easy.

10.30  In recent years, the compatibility of the Through Transport/Prestige analysis with the logic of private international law has been questioned. Distinguished academic commentary has contended for a different approach.⁴³ The Supreme Court granted permission to appeal in The Yusuf Cepnioglu, although the case settled before the hearing. The Through Transport/Prestige approach appears at first sight to make robust sense, but on closer examination has an elusive, lapidary quality. At least in its simpler formulations, it does not seem to be a methodologically orthodox application of choice of law principles whether English or European, and with respect, it begs the question. In such third-party situations, the law of the original right between creditor and debtor, the law of any transfer, and even the law of the third party’s claim against the debtor, could all be relevant. Simply stating that the derived right is in itself contractual does not answer why the conditions of its exercise in the hands of the third party must be governed by the law of the original contract with the debtor, nor demonstrate that the issue for characterization when assessing an anti-suit injunction is itself a contractual issue. Nor does it give an answer to the situation in The Front Comor, where the derived tortious right is plainly not contractual, and the question is whether the forum clause which would bind such right against the original victim should also affect it when claimed for by a transferee. And generally, the approach was initially formulated before the Rome I and Rome II Regulations and assumes without examination, even in the cases post-dating those Regulations, that the European instruments have no role to play. (In the following discussion we assume that the Rome I and II Regulations will continue to be the law; but as matters stand this is likely to be the case, in substance and so far as relevant, irrespective of how Brexit is resolved: see Ch 1, section I, ‘Brexit’.)

10.31  The following analysis therefore re-examines matters from first principle and concludes:

1. (1)  The issue of whether there is a quasi-contractual obligation to enforce against the third party, or whether a quasi-contractual injunction should be granted, is a (p. 223) question which falls outside both Rome I and Rome II. The applicable law is therefore governed by English choice of law rules.

2. (2)  The applicable law for that question is probably unaffected by Article 18 of Rome II, even in the limited cases of direct claims against insurers where Article 18 has potential relevance.

3. (3)  As a matter of principle under English choice of law rules, the law to be applied to the quasi-contractual obligation and quasi-contractual injunction is the law of the underlying contract (or the law of the forum) and not the law of the transfer. The Through Transport result is thus right, although reached by different reasoning.

10.32  The initial problem is whether either, and if so which, of the European instruments apply (assuming that they remain the law, or are in substance continued). This poses a question of characterization that probably should be determined, not by English common law conflicts of laws principles, but by the autonomous interpretation of the Regulations or whatever continues their substantive effect.⁴⁴

10.33  The Rome I Regulation applies to ‘contractual obligations’, although by Article 1.2(e) it does not apply to arbitration agreements and agreements on the choice of court; and both the Rome Regulations exclude ‘evidence and procedure’. Further, Article 14(2) of Rome I states in terms that, in relation to voluntary assignment or contractual subrogation, the law governing the assigned or subrogated claim shall govern ‘the relationship between the assignee or subrogee and the debtor’ and ‘the conditions under which the assignment or subrogation can be invoked against the debtor’. In contrast, the Rome II Regulation applies to ‘non-contractual’ obligations, and contains no exclusion for forum clauses. In relation to third-party claims against insurers, it contains a specific rule in Article 18, that the third party may bring his claim directly against the insurer ‘if the law applicable to the non-contractual obligation or the law applicable to the insurance contract so permits’.

10.34  There is a range of different possible situations against which these issues need to be tested, including: (a) claims by third parties under general laws providing for third-party rights in contract (such as the Contract (Rights of Third Parties) Act 1999); (b) underlying contractual claims brought against debtors by assignees or subrogees; (c) underlying tortious claims against debtors brought by assignees or subrogees of a creditor who also has contractual claims subject to a forum clause (the Front Comor situation); (d) claims under statutes granting third-party rights against insurers, or similar, where the underlying claim against the debtor by the insured is contractual; (e) the same, where the underlying claim against the insured is tortious.

10.35  In this context, there are different ways of approaching the characterization question.

10.36  One threshold point is whether we should be focusing on underlying obligations at all, or whether the issue is instead merely whether the third party can be compelled to respect the forum clause—potentially, we are just characterizing the claim for an injunction itself, not any underlying obligation. If so, this may simplify the analysis.

(p. 224) 10.37  If, however, the analysis is focused on substantive underlying obligations, we can, like Moore Bick LJ, identify the relevant issue as being whether the third party’s claim against the creditor is bound by the forum clause in the contract between creditor and debtor—or in other language the ‘penumbral’ effect of the forum clause—and seek to characterize that issue. But this may require further refinement: is the issue of whether the third party is ‘bound’ a question of conditional benefit, or positive obligation, or both; and are those separate issues or just parts of the overall question of whether the third party is ‘bound’? The alternative approach, looking at the possible underlying obligations from the perspective of the third party, is to identify the relevant issue as being what are the incidents or conditions of the third party’s claims against the creditor, or possibly against both debtor and creditor, and whether those incidents include the ‘penumbral’ effect of the clause.

10.38  Yet whichever way the issue is identified, it does seem incomplete to ask solely whether the third party’s claim against the creditor is contractual or independent. That appears to be an element of the characterization and choice of law reasoning, rather than actually the issue to be characterized.

10.39  It is suggested that, if forced to confront the application of the Rome instruments, the English courts will be strongly tempted to regard these questions, however they are diced up, as outside both Rome I and Rome II, and in particular as outside Rome II. There are three principal ways this might be achieved.

10.40  First, a quasi-contractual anti-suit injunction, together with any non-contractual anti-suit injunction, could be regarded as a procedural matter, outside both Rome I and Rome II.⁴⁵

10.41  Second, even if the question is viewed as one of substantive obligation, the relevant obligations could be regarded as non-contractual, but nevertheless outside Rome II, on the basis that Rome II applies to tort/delict obligations flowing from damage; while the obligation which the anti-suit injunction enforces, if equitable, should be regarded as of a different kind (and perhaps quasi-procedural).⁴⁶

10.42  In Chapter 4, this work has suggested that something along the lines of these first and/or second solutions may be the right analysis for non-contractual anti-suit injunctions in general.⁴⁷

10.43  Third, and in particular if the issue for characterization is identified as being whether the third party is bound by the clause or can be compelled to obey it, quasi-contractual (p. 225) injunctions or any substantive obligations they enforce could be characterized as contractual matters for the purposes of the conflict of laws (to the extent they are substantive and not procedural). This would be on the basis that any quasi-contractual equitable obligation, or quasi-contractual injunction based on vexation or oppression, is essentially concerned with whether the contractual obligation in the forum clause should be respected. It is a ‘penumbral’ obligation which exists around and in relation to that contractual obligation.⁴⁸ In all the situations where the original right is contractual, it would be difficult to characterize the issue of conditional benefit as anything other than contractual; and that conditional benefit must be very closely linked to any matching positive obligation.

10.44  In turn, the issue of whether the third party is bound by the forum clause, if viewed as contractual, would seem to be a matter relating to the arbitration clause, or the choice of court agreement (as the case may be), and so outside Rome I under Article 1(2)(e), with the result that the applicable law will be determined by English choice of law rules. But even if that were not so, and Rome I applied, it would seem unlikely that the law of the transfer would be applied. Where the underlying claim of the creditor against the debtor is contractual, Article 14(2) would suggest that in situations of transfer, all aspects of the relationship between (p. 226) debtor and third party, presumably including the binding effect of the forum clause, should be governed by the law of the debtor–creditor contract.

10.45  The contractual analysis will be all the stronger if surrounding aspects of the three-cornered relationship are also contractual in the particular case. Thus, where there is an assignment or subrogation to a third party of an underlying contractual claim against the debtor governed by a forum clause, it would be surprising if the question of conditional benefit, and any connected positive obligation, could be regarded as anything other than contractual matters. Similarly, if the third party has acquired rights from an English law contract under the Contracts (Rights of Third Parties) Act 1999, the question of conditional benefit (under ss 1(4) and/or 8(1)) will inevitably be contractual questions governed by English law⁴⁹ (and probably outside Rome I) and in turn it would be very difficult to give the scope of any positive obligation (equitable or otherwise) any different analysis. Even if a third party acquires rights against an insurer under a third-party rights statute, but the third party’s original claim against the debtor was contractual, two sides of the triangle will push towards a contractual analysis.

10.46  Andrew Dickinson has advanced a contrary analysis in relation to the problem of third-party rights against insurers which arose in The Yusuf Cepnioglu. He regards the issue to be characterized as the existence or otherwise of the positive obligation, which he regards as substantive, and suggests that there is a ‘strong, if not irresistible’ argument that the correct characterization of that issue is tortious and so within Rome II. Applying the European Court’s decision in Engler on Article 7 of the Brussels I Recast, he argues that the matter could only be contractual, and Rome I could only apply, if the third party had ‘freely consented’ to any actual contract with the insurer to respect the forum clause, but that this will not be the case for third parties claiming under such third party statutes.⁵⁰

10.47  However, the European Court’s case law on when an obligation has been ‘freely consented’ to, developed in the context of the Brussels–Lugano regime, is relatively flexible. It allows a contractual classification to be applied to a range of situations arising between A and C, where A and B have freely agreed a contract, there is no direct agreement between A and C, but C’s claims against A derive from B’s freely consented contractual rights.⁵¹ Further, when characterizing matters for the Rome I and Rome II Regulation, in Ergo v If the European Court concluded that an insurer’s liability to compensate a third-party victim of his insured was a contractual matter (to which the law of the insurance contract applied).⁵² Dickinson’s logic would risk applying different laws to the closely linked questions of on the one hand, conditional benefit—which is inescapably contractual—and on the other hand, of positive obligation on the third party.

10.48  It is suggested, therefore, that if we focus on the question of whether the third party is bound by the forum clause, the contractual analysis is the more persuasive.

(p. 227) 10.49  The arguments for a tortious characterization become more substantial where the third party’s claim against the creditor (or insured) is tortious, and where, additionally, the third party acquires his claim against the debtor (or insurer) by statutory transfer. It then becomes more credible to characterize the issue as being what are the incidents of the third party’s separate tortious claim, and who is a legitimate defendant to that claim and on what conditions, and thus subject to the law applicable to the tort.⁵³ In another context, prior to Rome II, and with less at stake, Moore-Bick LJ was prepared obiter to characterize the question of whether a victim of injury had a direct claim against the wrongdoer’s insurer as a question of substantive tort law.⁵⁴ Yet, even in such a tortious situation, the English courts are more likely to regard the issue in play for the purposes of anti-suit injunctions as being the penumbral effect of the forum clause—whether or not the third party is bound by the forum clause when claiming against the insurer—and so as a contractual question.

10.50  Finally, even if the question of the existence of such a penumbral equitable obligation binding on the third party were tortious, there would be arguments that the obligation was ‘manifestly more closely connected’ to the contract under which the third party has acquired a conditional benefit (under Article 4(3) of Rome II).

10.51  If the third party has acquired rights by way of a foreign statute creating third-party rights against insurers, Article 18 of Rome II introduces an additional complication. It provides: ‘The person having suffered damage may bring his or her claim directly against the insurer of the person liable to provide compensation if the law applicable to the non-contractual obligation or the law applicable to the insurance contract so provides.’ This provision is difficult to grasp.

10.52  Two points should be made. First, it seems it will only apply to third-party rights based on underlying tortious claims against the insured, not those based on underlying contractual claims—because if the underlying claim is contractual, there is no basis to apply Rome II to its incidents, and there is no equivalent in Rome I (where the closest analogy is the different provision of Article 14(2) of Rome I, albeit directly dealing with voluntary assignment only). Second, even for underlying tortious claims, Dickinson has suggested that Article 18 does not apply to direct actions against insurers brought outside the EU,⁵⁵ in which case it will be of little relevance to anti-suit injunctions (given Turner v Grovit and Front Comor).

10.53  In relation to those direct actions to which it applies, Article 18 supports an argument that since it gives the third-party victim the option of suing the insurer under either the law applicable to the tort, or the law applicable to the non-contractual obligation, then the law applicable to the tort, if selected, will govern all incidents of the direct action, including (p. 228) whether the third party is bound by jurisdiction or arbitration clauses. This can be viewed as reinforced by Pruller-Frey, where the European Court of Justice concluded that:

10.54  However, Pruller-Frey should be treated with care. The European Court also made clear that Article 18 was not a true choice of law provision: ‘it does not constitute a conflict-of-laws rule with regard to the substantive law applicable to the determination of the liability of the insurer or the person insured under an insurance contract’, and ‘merely makes it possible to bring a direct action where one of the laws to which it refers provides for such a possibility’. The European Court was not focusing on whether the exercise of the victim’s option should be subject to jurisdiction or arbitration clauses, and the question in Pruller-Frey was the narrow point whether the choice of law provision in the insurer–insured contract would in itself override the power granted by Article 18 to use the law of the non-contractual obligation, which obviously should not be the case. The judgment of the European Court in Ergo v If also reiterates a narrow view of Article 18, stressing that it merely creates an option and that it cannot affect the scope of the insurer’s obligations.⁵⁷

10.55  It is possible to argue that Article 18 is concerned only with the limited question of whether the right of direct action exists, but does not affect the contractual question of whether the insurer’s obligations under the insurance contract are inherently subject to a forum clause by conditional benefit, which must be determined by the law of the contract. In turn, it is arguable that Article 18 does not regulate the law applicable to whether the third party, when exercising any option to bring a direct action which the law of the non-contractual obligation gives him, must be ‘bound’ by the forum clause. In general, the effect of forum clauses is left out of the Rome instruments, and although there is no specific exclusion in those respects in Rome II, it is arguable that this is because such questions are contractual.

10.56  If the justification of the quasi-contractual injunction is emancipated from any underlying substantive obligation, and viewed instead as intended to prevent the vexatious conduct constituted by evasion of the forum clause to which the rights are conditionally benefit, then the issue is still further removed from Article 18.

10.57  The Article 18 issues are not simple. But it is suggested that the English court is likely to continue to regard the law of the underlying contract between debtor and creditor as the most attractive answer, and to be unwilling to accept that Article 18 produces a different rule for quasi-contractual anti-suit injunctions, even with regard to direct actions against insurers based on underlying tort claims—in particular when occurring outside the (p. 229) Brussels–Lugano zone. Choice of law rules are not mechanical, and should be used to identify the most appropriate law to govern the issue in question.⁵⁸

10.58  If, following such reasoning, the question of whether the third party is ‘bound’ is outside Rome I and Rome II, or within the Article 1(2)(d) exception, applicable law will fall to be resolved by the common law rules. We could simply accept that the Through Transport/Prestige analysis states the current law as a matter of precedent. However, given its incomplete logic, we propose to reconsider the issues in principle. It is submitted that the result achieved is sound, and can be justified by reference to wider precedent and underlying principle.

10.59  First, although the common law’s development on this point has been confused, it may well have evolved a rule that ‘the conditions of assignability’ are subject to the law of the underlying right. This rule is very similar to Article 14(2) of Rome I, and is likely to be interpreted parallel to Article 14(2).⁵⁹

10.60  Second, such a rule is capable of extension, without much difficulty, to mean that the law of the underlying right should govern conditional benefit with respect to derived rights. If so, then there is good reason to think it can be applied, outside the assignment situation, in all cases of derived rights. There is no meaningful distinction between assignment and contractual subrogation, and the courts have consistently regarded third parties with statutory rights against insurers as in effect statutory assignees.⁶⁰

10.61  Third, this is sound in principle. The key principle which motivates the case law on choice of law for the conditions of assignability is that an assignment should not be capable of expanding the underlying right, no matter what the content of the law of the transaction effecting the assignment.⁶¹ By parity of reasoning, in any case of conditional benefit, the law of the transfer should not be capable of enabling the underlying right to be claimed independent of the conditions which, under the law applicable to the underlying right, are inherent limitations of that right. Logically, the same should be true for any transfer where the third party obtains a derived right, in which he stands in the shoes of the original creditor.

10.62  Although justified by policy, this is a valid principle of the conflicts of laws: it tells us why the relevant law should not be the law of the transfer, still less the law of any claim by the third party against the debtor which leads to the transfer. This builds on the reasoning (p. 230) of Moore-Bick LJ in The Yusuf Cepnioglu,⁶² but also connects it to wider authority and principle. Yet further, it illustrates why the focus of the Through Transport/Prestige line of authority, on whether the third party’s claim is contractual, has resonance. If the third party’s claim is in substance contractual, then it is a right derived from the underlying creditor–debtor contract, and if so, the law of the transfer should not be able to deform the original right.

10.63  Finally, if the law of the right transferred governs the question of conditional benefit, then it is submitted it should also govern the question of any penumbral positive obligation to comply with such conditions, at least for the purposes of anti-suit injunctions. It would be difficult sensibly to separate the two. We can add that if a third party chooses voluntarily to claim a benefit under a transferred right, then it is appropriate that it is the law which governs the conditions of the right assumed which should govern whether those conditions have a positive binding force, imposed by reason of his choice to assume the benefit.

10.64  The conclusion (if we use an analysis in terms of substantive obligations) is that as a matter of both authority and principle, the issue of conditional benefit and any parallel penumbral positive obligation is a question of the conditionality of the benefits of the underlying contract from which the third-party rights derive, and in turn, of the penumbral positive effect of the conditionality of those benefits on persons who seek to claim those benefits. It is therefore naturally governed by the law of that underlying contract, and inherently a contractual question.

10.65  Alternatively, if the quasi-contractual anti-suit injunction is viewed as a procedural matter, based on concepts of remedial equity, without requiring any positive obligation under which the third party is ‘bound’ by the forum clause, then English law as the lex fori will govern the conditions of the injunction.⁶³ On this approach, English law concepts of vexation will be applied to whether it is vexatious for the third party to claim the derived right abroad while not respecting the forum clause. However, the analysis will not in the end be very different, because whether or not there is vexation will be shaped by whether, as a matter of substantive contractual law, the benefit under the original contract is conditional on the forum clause.

10.66  A third party who seeks to rely on a derived substantive contractual right in a forum other than that agreed will not, in quasi-contractual cases, generally be in actual actionable breach of contract, although he may be in breach of an equitable obligation to respect the forum clause. When we turn to consider the criteria for the grant of anti-suit injunctions, this raises a question: should the approach in The Angelic Grace⁶⁴ apply by analogy, as if the third party were fully bound by a contractual right, so that an injunction will be granted (p. 231) unless there is ‘strong reason’ not to do so? Or should the lack of an actual contractual obligation weaken the force of the presence of the forum clause?

10.67  Until Through Transport,⁶⁵ the courts had uniformly concluded that the case of derived rights was closely analogous to the direct contractual situation, so that an anti-suit injunction should in general be granted against a third party seeking to take the benefit without the burden of the contract unless there was strong reason not to do so, even where the third party’s acquisition of rights occurred under a foreign law, and even if that foreign law might not require him to respect the forum clause.⁶⁶

10.68  However, in Through Transport, where there was a claim under a Finnish third-party rights statute, which under Finnish law could apparently ignore the arbitration clause in the original contract with insurers, the Court of Appeal did not use an Angelic Grace test. The third party’s rights against insurers were characterized as contractual, and thus subject to the contractual right to arbitrate, and the Court of Appeal accepted that a declaration could be granted that the third party was ‘bound’ to arbitrate in England. Nevertheless, the Court of Appeal concluded that, in a situation where insurers had no contractual right to enforce the clause against the third party, and where the only reason why the third party could be treated as ‘bound’ by the clause was due to the imposition of English principles of characterization, the contractual principles in The Angelic Grace did not apply directly or by parity of reasoning. The relevant criterion was vexation and oppression, and the Court of Appeal held that relying on the Finnish statute in Finland was not in itself vexatious or oppressive. In all the circumstances, the injunction should not be granted.⁶⁷

10.69  However, the decision was reached in the interregnum between Turner v Grovit and The Front Comor.⁶⁸ Reading between the lines, there was a desire not to make a reference to the European Court on whether anti-suit injunctions to protect arbitration were precluded within the Brussels–Lugano zone. While the Court of Appeal held that the Brussels–Lugano regime did not preclude the grant of such injunctions, they nevertheless took the European context into account as a factor against granting the injunction.⁶⁹

(p. 232) 10.70  This decision was not welcomed,⁷⁰ and outside the Brussels–Lugano context, it was not possible to reconcile its reasoning with the previous authorities on quasi-contractual injunctions. In particular, the conclusion that where there was no actionable breach of contract, the Angelic Grace approach should not apply was (if generalizable outside the context of third-party rights statutes) not consistent with the logic of Hobhouse LJ’s approach in The Jay Bola, where the Court of Appeal reasoned that a party claiming derived rights inherently subject to a forum clause should be treated as if contractually bound.⁷¹ But The Jay Bola had not been cited to the Court of Appeal in Through Transport.⁷² There was also a striking internal disconnection in the Court of Appeal’s reasoning, which on the one hand held that the third party was ‘bound’ by the forum clause, yet on the other hand gave no apparent weight, when assessing vexation and oppression, to the vital factor that the third party was claiming rights derived from a contract which were inherently conditional on the forum clause.

10.71  In the subsequent first instance case law Through Transport was for the most part distinguished and confined to its specific facts, and either not followed as matter of wider principle, or simply ignored.⁷³

10.72  The tension between The Jay Bola and Through Transport came to a head in The Yusuf Cepnioglu, where the third-party victim sought to claim against a London insurer, under a Turkish third-party rights statute which, it seemed, enabled it to disregard the London arbitration clause in the insurance contract. The underlying issue of policy was whether the third party would be able to ignore the ‘pay to be paid’ clause in the policy, which would be enforced in London arbitration but which it seemed Turkish law might override. It was argued that the absence of any actual contractual obligation to abide by the forum clause meant it was inappropriate to apply The Angelic Grace; the injunction should be refused because the third party’s conduct was not vexatious or oppressive, and because as a matter of comity he should be able to exercise the rights available to him under Turkish law.

(p. 233) 10.73  In a robust judgment, the Court of Appeal adopted The Jay Bola and rejected Through Transport.⁷⁴ In Longmore LJ’s view, the third party claiming derived rights was bound in equity to respect the contractual obligation in the forum clause to which the rights were originally subject. It was right to apply the principles in The Angelic Grace. So, an injunction would be granted unless there were strong reasons not to do so, and it was unnecessary to show vexation and oppression.

10.74  Moore Bick LJ said he agreed with Longmore LJ (and Macfarlane LJ agreed with both), but went on to advance a slightly more qualified analysis. He observed that while there was no direct breach of contract, the case was much closer to a breach-of-contract situation than one of alleged general non-contractual misconduct, because ‘the right which equity is called upon to protect by injunction is the same in the case of the [third party] as in the case of an original party’ and so ‘there is no distinction of principle’ to the contractual situation. So, the:

Consequently, ‘the existence of the arbitration clause … provided sufficient grounds for the court to grant an anti-suit injunction’. But he did not directly use the framework of ‘strong reasons’.

10.75  The difference, to the extent that there is one, is that Longmore LJ is saying that The Angelic Grace applies;⁷⁵ Moore Bick LJ is saying that in the quasi-contractual situation, vexation and oppression should be treated as applying in parallel to The Angelic Grace. The result is almost the same.

10.76  The next stage of the analysis was then the same for both. Having concluded that The Angelic Grace, or parallel principles, should apply, the Court of Appeal concluded that no considerations of comity could apply. The arguments that (a) the third party was merely claiming Turkish statutory rights, which under Turkish law could be enforced in Turkey irrespective of any agreed forum clause; and that (b) the imposition of the injunction would interfere with Turkish public with regard to ‘pay to be paid’ clauses, were thought by Longmore LJ simply not to be capable of amounting to strong reasons not to grant an injunction. Nor were they even a relevant consideration of comity; comity did not apply where the question was whether to give effect to the arbitration clause by which the third party was treated as bound.

For Moore-Bick LJ, who was not directly using the ‘strong reasons’ framework, any such considerations of comity were incapable of meaning that the Turkish litigation was not vexatious and oppressive or preventing the injunction from being granted. To him, also, ‘comity in the established sense’ did not apply, since the third party should be held to the (p. 234) contract which was a condition of the rights he sought to exercise. He explained this by logic which purports to be universal:

10.77  The Supreme Court granted permission to appeal (and asked specifically for additional submissions on characterization), but the case settled before the hearing.

10.78  We are left with the Court of Appeal’s decision in The Yusuf Cepnioglu. If we stand back, the combined result of its reasoning would, if generalized, be capable of producing a stark and adamant doctrine, because of its apparent rejection of any deference to the perspective of another legal system. In the case of actual contracts which a foreign law purports to override by mandatory provisions, the English court has sometimes justified the imposition by injunction of its own law, as the law indicated by its own conflict of law rules, by reference to the system-transcendent importance of freedom of contract.⁷⁷ The questions of the ‘conflict of conflicts’ this gives rise to have been discussed elsewhere, and it is the suggestion of this work that in appropriate cases the perspectives and policies of other legal systems should be capable of amounting to strong reasons not to grant an injunction.⁷⁸

10.79  But in the quasi-contractual case, there is no actual contract, and the idea that a party claiming in another’s shoes should always be bound by the forum clause in the original contract is not universally shared. It is true there is real moral force in the notion that a third party claiming in the shoes of an original party should be bound by the conditions of the original party’s rights. Indeed, that notion is capable of being regarded as system-transcendent, and in The Yusuf Cepnioglu, Moore Bick LJ seems to have so viewed it. The error of Through Transport included giving no weight to it at all. Yet we can ask whether this concept’s moral force is so self-evident that, in all cases, it should be right to impose it by injunction, irrespective of how the foreign legal system characterizes such claims, and irrespective of the policy reasons which lead the foreign system to take a different approach. It is submitted, therefore, that in appropriate cases, in quasi-contractual situations, the conflict of conflicts may be capable of amounting to ‘strong reasons’ not to grant an injunction; or potentially may even displace the rigid Angelic Grace framework.

10.80  In justifying his more rigid framework, Longmore LJ explained that ‘invocation of comity in cases of this kind is not particularly apposite because it is never clear which country should give way to which’ (see at [34]). Certainly, the English court will not wish to accept that it should defer automatically to any foreign characterization or mandatory rule. There will be many cases where it is right in principle and policy⁷⁹ to hold the third party to the (p. 235) conditions of derived rights. It is true, also, that the evaluative judgments which any middle position requires may be awkward. But as a matter of comity, they may be preferable to imposing our law by injunction simply because it is our law.⁸⁰

10.81  This section addresses the situation where the injunction claimant denies the very existence of the contract under which he is sued, or otherwise denies the validity of the contract in a way which would also impeach the exclusive forum clause, or denies that he owes any contractual duties to or has any contractual rights against the injunction defendant (including derived duties or rights), but the injunction defendant in effect makes a claim under the contract, while seeking not to respect the forum clause which forms part of it. An anti-suit injunction sought in that context cannot be a contractual injunction, since the injunction claimant himself denies the existence or binding force of any relevant contractual right to enforce the forum clause. Nor can it be a conventional quasi-contractual injunction, of the kind discussed so far, because the injunction claimant cannot himself assert that the injunction defendant is bound by any derived contractual obligation.

10.82  The case law so far suggests that a form of quasi-contractual injunction may be granted in such cases to restrain the injunction defendant from bringing contractual proceedings abroad, which are inconsistent with the exclusive forum clause to which his claims would be inherently subject if any contractual relationship exists, even if the injunction claimant denies there is any relevant contractual relationship.⁸¹

10.83  Injunctions may fall within this principle if the injunction defendant asserts there is a contract with the injunction claimant (which the injunction claimant denies), under which he has a contractual claim, but seeks not to be bound by the exclusive forum clause to which any such contractual claims are inherently subject under the applicable law of the contract, if it exists.⁸²

10.84  Perhaps more controversially, the case law shows that injunctions may also fall within this principle even where the injunction defendant’s substantive claims are said by the injunction defendant not to be contractual under the local law, and in turn are said not to fall within the exclusive forum clause, but would be viewed as contractual, and subject to the exclusive forum clause, under English law principles of characterization, if and to the extent (p. 236) they are coherent claims (even though the injunction claimant denies that there is, in fact, any such contractual relationship). In this context, the English court has characterized as contractual, and regarded as inherently bound by the exclusive forum clause, claims which are in substance an attempt to enforce the contract.⁸³ The approach is similar to that taken in cases of derived rights and can overlap with it.

10.85  However, the juridical underpinnings of this jurisprudence are at present underdeveloped. There would appear to be three possibilities. First, it may be arguable in some cases that, for the purposes of assessing whether an injunction should be granted, the injunction defendant should be estopped from denying the existence of the contract under which his substantive claims are made, even though the injunction claimant denies the existence of the contract.⁸⁴ Second, it would be possible to postulate an equitable obligation on the injunction defendant not to bring a claim in a forum inconsistent with that agreed under the contract which he alleges exists, or which is the necessary condition of his claims.⁸⁵ Third, it could be said that it is vexatious and oppressive to bring an internally inconsistent claim which does not respect the exclusive forum clause which would be the condition of any coherent claim.⁸⁶ In a recent decision, Dell v IBMaroc, Teare J used the language of both ‘inequitable’ and ‘vexatious or oppressive’ without needing to decide between the two, and made reference to the injunction defendant being ‘bound’, but did not make any clear finding that there was any independent concrete equitable right, and saw differences to the derived rights situation.⁸⁷

10.86  In turn, the case law does not clearly resolve the issue, grappled with in The Yusuf Cepnioglu, as to whether the fact that the injunction defendant is seeking to advance a contractual claim (from the point of view of English law), inconsistently with the forum clause, means the appropriate test to apply is the logic of The Angelic Grace, applied quasi-contractually by analogy; or whether the situation is to be assessed by reference to the less adamant concepts of vexation and oppression, in which the fact of inconsistent claims is regarded as a (strong) factor in favour of a finding of vexation, or perhaps as in general inherently vexatious. The importance of the difference is that in the vexation-based analysis there would be more flexibility for other factors to defuse vexation.

10.87  In Sea Premium v Sea Consortium, David Steel J regarded the situation before him as sufficiently analogous to The Jay Bola and so subject to a test ‘to similar effect’ as The Angelic Grace.⁸⁸ But in The MD Gemini, Popplewell J’s obiter reasoning was that it would generally (p. 237) be oppressive and vexatious for a party asserting a contractual right to seek to enforce the rights without respecting the forum clause.⁸⁹ In Dell v IBMaroc, Teare J’s reasoning is somewhat ambivalent; there were references to the injunction defendant being ‘bound’ or being ‘bound to accept’ the contractual forum obligation, but his most concrete conclusion was that it would be ‘inequitable or vexatious or oppressive for a party to a contract … to seek to enforce a contractual claim arising out of that contract without respecting the jurisdiction clause within that contract’. He was prepared to envisage that the approach in The Yusuf Cepnioglu might apply, but did not need to decide this, and observed that it might be distinguishable because in that case the injunction claimant was a party to the contract and was asserting a right that was quasi-contractual.⁹⁰

10.88  The choice of law and characterization questions have not yet been explored in any detail. But the English court has so far applied English law without hesitation, and in Sea Premium v Sea Consortium David Steel J held that the question of whether the injunction defendant should be treated as ‘bound’ by a forum clause governed by English law, for the purpose of assessing whether to grant a quasi-contractual injunction of this kind, was to be determined by English law.⁹¹ (p. 238)