Third parties and arbitration agreements: Fortress Value v Blue Skye

In the recent case of Fortress Value Recovery Fund I LLC and others v Blue Skye Special Opportunities Fund LP and others, the English Court of Appeal considered the relationship between the Arbitration Act 1996 and the Contracts (Rights of Third Parties) Act 1999 to determine the extent to which third parties to a contract will be subject to an arbitration clause in that contract.

The claimants brought proceedings in the English court against the defendants, who were managers of an investment structure holding underlying assets comprising businesses in Italy. The investment structure was based around an English limited partnership, called the Blue Skye Fund, which was regulated by a deed of limited partnership.

The claimants alleged that the defendants, acting in concert with three other individuals and 12 corporate entities, designed and implemented a dishonest scheme to reorganise the fund and its assets, the purpose and effect of which was to diminish or eliminate the rights and interests of the partners of the fund in relation to the assets, to take control and benefit of the assets themselves and to enable them to extract fees and other value from the assets. The claims brought were English law tort claims on the basis of, among other things, conspiracy, unlawful interference and dishonest assistance…

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