Undisclosed principal entitled to enforce arbitral award

Summary

In its decision in MSH Limited v HCS Limited [2025] EWHC 815 (Comm), the High Court considered and dismissed a jurisdictional challenge to an arbitral award under section 67 of the Arbitration Act 1996, in circumstances where the award was made in favour of an undisclosed principal to a commodities contract.

The judgment contains a helpful overview of the legal principles relating to enforcement of contractual rights by undisclosed principals.

Background

The Claimant (the respondent in the arbitration), MSH Limited (MSH), challenged an arbitral award in favour of the Defendant (the claimant in the arbitration), HCS Limited (HCS). 

The award related to a contract for the sale and purchase of Colombian nut coke dated 28 September 2020 between MSH and CTW Ltd (CTW). MSH argued that HCS was not entitled to enforce the contract as an undisclosed principal and accordingly the arbitral tribunal did not have jurisdiction to determine the claim. 

Legal principles

An "undisclosed principal" is a person or entity who acts through an agent, but whose existence is not revealed to the third party with whom the agent is contracting. The third party therefore believes that it is contracting directly with the agent. An undisclosed principal may sue and be sued on a contract made by an agent on its behalf. 

The Court referred to some key principles relating to the undisclosed principal doctrine by reference to the case law: 

• at the time of entering into the contract, the agent must be acting within the scope of its actual authority and intending to act on the principal’s behalf;
• in terms of enforcement, any defence which the third party may have against the agent is available against the undisclosed principal; and
• the terms of the contract may expressly or impliedly exclude the principal’s right to enforce the contract.

The key issues for the Court to determine were:

1. Whether, and if so in what circumstances, CTW was able to transact on HCS’s behalf?
   
   The Court determined, based on the evidence, that CTW’s general business strategy was to contract as agent with HCS providing the financing. CTW had intended to enter into the contract on HCS’s behalf rather than as a principal. This was supported by the fact that CTW was dependent on HCS providing the financing for the contract and by the interactions between HCS and CTW in relation to the contract and the onsale of product obtained under the contract. 
    
2. When was the contract concluded (this was an issue due a contention by HCS that it could contend for a different date to the date which formed the basis of its argument at the arbitration hearing)? 
   
   The court found that both parties had agreed to forgo the right to call any further evidence other than the documents that were before the arbitral tribunal and to depart from that agreement would prejudice MSH. The contract was therefore determined to have been made on 28 September 2020, the date determined by the arbitral tribunal, notwithstanding that the signed agreement with additional terms was executed the following month.
    
3. Did CTW have authority to enter into the contract on HCS’s behalf when the contract was concluded? 
   
   Based on a review of the evidence, the Court determined that HCS had authorised CTW to enter into the contract on its behalf. The fact that CTW’s renumeration had not been agreed by 28 September 2020 did not preclude this finding given the relative informality of the interactions between the parties. 
    
4. Did the terms of the contract preclude HCS enforcing the contract as undisclosed principal?
   
   The Court observed that “the circumstances in which the terms of a commercial contract will impliedly exclude the operation of the undisclosed principal doctrine are likely to be infrequent” and they did not arise in this case not least because the contract specifically referred to HCS as a nominee in respect of a CTW guaranteed obligation. MSH sought to rely on the entire agreement, confidentiality, assignment and limitation clauses to exclude the operation of the undisclosed principal doctrine however all of these arguments were dismissed by the Court. 

In light of the above, the Court held that MSH’s section 67 challenge failed.

Commentary

In addition to providing a useful summary of the circumstances/context in which the undisclosed principal doctrine may come into operation, this case highlights the importance of due diligence and incorporating exclusory drafting in commercial contracts in circumstances where a party may wish to prevent an undisclosed principal from being able to enforce the terms of the agreement.