The Mahkutai - 1996

The Mahkutai [1996] AC 650

Considers the effect of ‘Himalaya clauses’ on the application of exclusive jurisdiction clauses.

Facts

A cargo owner contracted with a charterer to organize for the transportation and delivery of their cargo with a bills of lading which contained a ‘Himalaya clause’ extending any immunities granted to the charterer to their agents and featuring an exclusive jurisdiction clause. The charterer subsequently sub-contracted a ship owner to manage the cargo using a secondary bills of lading which did not feature a comparable exclusive jurisdiction clause. Following an incident, the cargo owner brought an action against the ship owner in a jurisdiction different to that specified in the original bills of lading, submitting that they were not bound by this clause as they were bringing an action against the ship owner, who had not been privy to the original contract.

Issue

Whether an exclusive jurisdiction clause could be enforced against a party by a third party not privy to the contract containing the exclusive jurisdiction clause.

Decision/Outcome

The Court found for the cargo owner, holding that whilst the Himalaya clause in the bills of lading stated that third parties may rely upon any ‘exceptions, limitations, provision, conditions and liberties herein benefiting the carrier’, this did not entitle third parties to the protection of an exclusive jurisdiction clause as this type of clause represents a mutual agreement rather than conferring a benefit. Moreover, the Court viewed that it was bound to interpret a contract to give commercial effect. Notably Lord Geoff commented that it was ‘perhaps inevitable… [that] a fully-fledged exception to the doctrine of privity of contract’ would be recognized and developed.

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