Chapter 10 Partiesto International Arbitration (Gary Born)

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Chapter 10: Parties to International Arbitration
Publication Agreements
International Commercial [Chapter 10] (1)
Arbitration (Second Edition) P 1404
P 1405 An issue which arises recurrently in connection with the enforcement of international
arbitration agreements is the identity of the parties to such agreements: what entities
are bound by, and what entities may invoke, an international arbitration agreement? This
Bibliographic reference Chapter addresses these issues.
P 1405
'Chapter 10: Parties to P 1406 The Chapter first discusses the basic principle that international arbitration agreements
International Arbitration are, as consensual instruments, binding only on the parties to such agreements. Second,
Agreements', in Gary B. Born , the Chapter examines the various legal doctrines that have been used to give effect to
International Commercial arbitration agreements as to entities that did not execute such agreements (“non-
Arbitration (Second Edition), signatories”), including theories of agency, alter ego status (or veil piercing), “group of
2nd edition (© Kluwer Law companies,” estoppel, guarantor relations, third party beneficiary rights, succession,
International; Kluwer Law assignment, assumption and miscellaneous other doctrinal bases. Third, the Chapter
International 2014) pp. 1404 examines the choice-of-law rules governing the foregoing issues. Fourth, the Chapter
- 1524 discusses the allocation of competence, between national courts and arbitral tribunals, to
decide disputes regarding the identity of the parties to an international arbitration
agreement. Finally, the Chapter addresses the subjects of arbitration in corporate contexts
and “class arbitrations.”
§ 10.01 INTRODUCTION
As discussed above, international commercial arbitration is fundamentally consensual in
nature. (2) As a consequence, the effects of an arbitration agreement extend only to the
agreement’s parties, and not to others. (3) Presumptively, and in most instances, the
parties to an arbitration agreement will be its formal signatories.
Nonetheless, as detailed below, there are a number of legal bases by which non-
signatories may be held to be parties to – and consequently both bound and benefitted by
– an arbitration agreement. The extent to which non-signatories may be bound by an
arbitration agreement is among the most delicate and complex issues in international
commercial arbitration. (4)
[A] International Arbitration Agreements Are Binding On “Parties” and Not Others
The principle that the rights and obligations of an arbitration agreement apply only to the
P 1406 agreement’s parties is a straightforward application of the doctrine of privity of contract,
P 1407 recognized in both civil and common law jurisdictions. (5) In some legal systems, the
identity of the parties to an arbitration agreement is referred to as a question of the
“subjective” scope of the arbitration agreement or jurisdiction “rationae personae.” (6) In
other legal regimes, the identity of the parties to the arbitration agreement is
characterized as a question of formation or existence of the agreement to arbitrate. (7)
Whatever terminology is employed, the principle that only the parties to an international
arbitration agreement are either bound or benefitted by that agreement is fundamental to
international arbitration. That principle is uniformly reflected in international arbitration
conventions, national arbitration legislation, judicial decisions and arbitral awards.
All leading international arbitration conventions adopt the non-controversial principle
that an agreement to arbitrate binds only the parties to such agreement. Article II(1) of the
New York Convention impliedly recognizes the subjective limits on the binding nature of
arbitration agreements, providing that Contracting States “shall recognize an agreement in
writing under which the parties undertake to submit [their disputes] to arbitration.” (8)
Other international conventions, including the European Convention, are similar. (9) Each
of these instruments rests on the principle that an arbitration agreement is a contract
P 1407 between, and binding on, the “parties” to that agreement, and not on other persons.
P 1408 Equally, each of these instruments requires recognition of arbitration agreements insofar
as their “parties,” and not other entities, are concerned. (10)
National law also recognizes the limited subjective scope of arbitration agreements.
Article 7(1) of the UNCITRAL Model Law defines an arbitration agreement as “an agreement
by the parties to submit to arbitration all or certain disputes which have arisen or which
may arise between them.” (11) Other national arbitration legislation is similar. (12)
Even in the absence of statutory provisions to this effect, settled law in all developed
jurisdictions provides that it is the parties to an international arbitration agreement – and
not other persons – that are bound by the agreement. (13) In the words of one U.S. judicial
decision, “[a]rbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.” (14) Similarly, a recent
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English decision concludes:
“The ‘validity’ of the arbitration agreement depends in the present case upon whether
there existed between Dallah and the Government any relevant arbitration agreement at
all.” (15)
Or, from a civil law perspective, both the consensual nature of an arbitration agreement
and the agreement’s lack of effects on third parties are recognized by French judicial
decisions:
P 1408
P 1409 “The law of arbitration, based on the consensual nature of the arbitration clause, does
not allow to extend to third parties, foreign to the contract, the effects of the disputed
contract, and bars any forced intervention or guarantee procedures.” (16)
Equally, as discussed below, it is only parties to the arbitration agreement that are subject
to the arbitrators’ awards of relief, (17) disclosure orders (18) and provisional measures. (19)
One arbitral award analyzed the subject as follows:
“Contrary to litigation in front of State Courts where any interested party can join or be
adjoined to protect its interests, in arbitration only those who are parties to the arbitration
agreement expressed in writing could appear in the arbitral proceedings either as
claimants or as defendants. This basic rule, inherent in the essentially voluntary nature of
arbitration, is recognized internationally by virtue of Article II of the New York Convention.”
(20)
Likewise, commentators have consistently concluded that, because arbitration rests on
consent, only the “parties” to an arbitration agreement are bound by the agreement. (21)
Institutional rules also uniformly assume that only parties to an arbitration agreement are
P 1409 bound by that agreement. Article 1(1) of the 2010 UNCITRAL Rules provides that the Rules
P 1410 apply “[w]here parties have agreed that disputes between them in respect of a defined
legal relationship, whether contractual or not, shall be referred to arbitration.” (22) Other
institutional rules are similar. (23)
[B] Signatories and Non-Signatories to Arbitration Agreement

In most cases, the parties to an arbitration agreement are – and are only – the entities that
formally executed, and expressly assumed the status of parties to, the underlying contract
containing the arbitration clause. In the vast majority of cases, the way to determine the
parties to the arbitration clause is simply to look at the signature page, and/or the recitals
of a contract, and see what entities are designated there. (24)
Simply, but correctly, put, it is the signature of an agreement that is the “customary
implementation of an agreement to arbitrate.” (25) It is these “signatories” of an agreement
that are the parties to the arbitration agreement, and that are therefore bound by, and
able to enforce, the provisions of that agreement; other entities, who are “non-signatories,”
are ordinarily not parties to the arbitration agreement and are therefore typically not
bound by, or able to enforce, its terms.
Despite the foregoing, the party that executes a contract is not necessarily a party to either
that agreement or the arbitration clause associated with it. Under most legal systems, an
agent or representative may execute an agreement on behalf of its principal, producing
the result that the principal is a party to the agreement (but the agent or representative is
not). (26) The most obvious and frequent application of this rule is when agreements are
executed on behalf of corporate or other legal entities by their officers or agents, with the
result that the corporate or other legal entity is a party to the agreement, but the officer or
agent, in his or her personal capacity, is not a party. (27)
P 1410
P 1411 The more general point is that, while signatory status is usually a basis for concluding
that an entity is a party to a contract, this is ultimately an issue of applicable contract law.
That law will usually, but not necessarily, provide that signatories are parties to the
agreements that they execute.
Conversely, it is also clear that entities that have not formally executed an arbitration
agreement, or the underlying contract containing an arbitration clause, may nonetheless
be bound by the agreement to arbitrate. Notwithstanding their status as non-signatories,
there are circumstances in which entities that have not signed or similarly assented to an
arbitration agreement may be both bound and benefitted by its terms. As one U.S. court
reasoned:
“Arbitration is consensual by nature.…It does not follow, however, that under the [FAA] an
obligation to arbitrate attaches only to one who has personally signed the written
arbitration provision. This court has made clear that a non-signatory party may be bound
to an arbitration agreement if so dictated by the ‘ordinary principles of contract and
agency.’” (28)
Civil law judicial decisions adopt identical reasoning:
“in principle, an arbitration clause is binding only on those parties which have entered into
a contractual agreement to submit to arbitration, whether directly or indirectly through
their representatives. Exceptions to this rule arise in cases of legal succession, retroactive
approval of an arbitration clause or attempts to pierce the corporate veil of a legal entity
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in the case of abusive objections to the clause.” (29)
P 1411 Or, in the words of a leading European commentator, “[p]ersons other than the formal
P 1412 signatories may be parties to the arbitration agreement by application of the theory of
apparent mandate or ostensible authority or because they are third-party beneficiaries [or
on other grounds].” (30)
As discussed below, determining when a non-signatory is bound, or benefitted, by an
international arbitration agreement typically requires application of generally-applicable
contract, agency and corporate law principles. (31) Additionally, in a few instances,
specialized rules, applicable only to international arbitration agreements, (32) have been
developed, but these are exceptional.
[C] Absence of Legislative Provisions Regarding Non-Signatory Issues

In virtually all instances, international arbitration conventions and national arbitration
legislation provide no express guidance in identifying the parties to an international
arbitration agreement. As discussed above, the New York Convention refers only to the
basic principle that international arbitration agreements bind their parties, without
addressing the question of how an arbitration agreement’s parties are determined. (33) The
UNCITRAL Model Law and most other national arbitration legislation is substantially
identical. (34) There are a few national arbitration statutes that address the identities of
the parties to an arbitration agreement, (35) but these are very unusual.
Instead, disputes over the identities of the parties to international arbitration agreements,
and the application of non-signatory doctrines, have been left almost entirely to national
courts, arbitral tribunals and commentary. For the most part, as discussed in the following
sections, these authorities have applied generally-applicable principles of contract,
agency and corporate law to resolve such non-signatory disputes.
[D] Generally-Applicable Rules of Contract Law

A variety of legal theories have been invoked by national courts and arbitral tribunals to
P 1412 bind entities that have not executed an arbitration agreement. These legal theories are in
P 1413 most cases based on generally-applicable rules of contract and commercial law,
including rules regarding agency (actual and apparent), alter ego, implied consent, “group
of companies,” estoppel, third party beneficiary, guarantor, subrogation, legal succession
and ratification or assumption theories. (36) In each of these instances, non-signatories of a
contract can be bound by, and may invoke, the arbitration clause contained within it.
In most circumstances, “general” or “ordinary” principles of contract and agency law govern
the question whether a non-signatory is party to an agreement to arbitrate. (37) This
application of generally-applicable legal rules to non-signatory issues parallels the
application of similar generally-applicable contract law rules to the validity of
international arbitration agreements (discussed above). (38) Nonetheless, there are a few
instances in which specialized rules, applicable only to non-signatory issues in the context
of international arbitration agreements, have been developed. These include the so-called
“group of companies” doctrine, rules regarding corporate officers and employees and
“class arbitration.” (39)
Critically, regardless of the legal basis for application of an arbitration agreement to a
non-signatory, analysis must focus on the separable arbitration agreement. Paralleling
issues of contract formation and validity, (40) the decisive question is whether a non-
signatory is bound by the arbitration agreement, not by the underlying contract. This is a
straightforward application of the separability presumption, discussed in detail above,
but it is fundamental to resolution of non-signatory issues. (41)
P 1413
P 1414 Judicial case law and commentary on international arbitration sometimes make
reference to the “extension” of an arbitration agreement to non-signatories, (42) or to
“third parties,” (43) on the basis of one or more of the foregoing theories. These expressions
are inaccurate, in that they imply that an entity which is not a party to an arbitration
agreement is nonetheless subject to that agreement’s effects, by virtue of something other
than the parties’ consent. Contrary to the references to “extension” or “third parties,” most
of the theories discussed below provide a basis for concluding that an entity is in reality a
party to the arbitration agreement – which therefore does not need to be “extended” to a
“third party” – because that party’s actions constitute consent to the agreement,
notwithstanding the lack of its execution of the agreement. (44) The arbitration agreement
is therefore not ordinarily “extended,” but rather the true parties that have consented to
the arbitration agreement are identified.
[E] Application of Legal Bases for Subjecting Non-Signatories to Arbitration

Agreement
Also preliminarily, it is obvious, but nonetheless fundamental, that each of the legal
doctrines discussed below is the basis or framework for determining whether a particular
non-signatory is bound by an agreement to arbitrate, but not the conclusion. Each of these
doctrines provides the structure for evaluating particular contractual language and factual
settings, which must be examined to determine the parties’ intentions and the legal
consequences of those intentions in particular cases. In many instances, analysis proceeds
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on a fact-intensive, case-by-case basis. One arbitral award put this clearly:
“the question of whether persons not named in an agreement can take advantage of an
arbitration clause incorporated therein is a matter which must be decided on a case-by-
P 1414 case basis, requiring a close analysis of the circumstances in which the agreement was
P 1415 made, the corporate and practical relationship existing on one side and known to those
on the other side of the bargain, the actual or presumed intention of the parties as regards
rights of non-signatories to participate in the arbitration agreement, and the extent to
which and the circumstances under which non-signatories subsequently became involved
in the performance of the agreement and in the dispute arising from it.” (45)
Although analysis differs under each of the non-signatory doctrines discussed below, in all
cases the inquiry is whether particular facts satisfy applicable legal standards for either
establishing consent to an arbitration agreement or a nonconsensual basis for binding an
entity to the agreement.
The focus in many cases involving questions of non-signatory status is on the parties’
intentions. (46) In particular, the focus is on the parties’ intentions – actual or presumed –
that their arbitration agreement will accomplish the purposes for which such agreement is
designed. (47) This inquiry recurs in various forms under most of the legal doctrines
discussed below, and is central to explaining the application of these doctrines. One
aspect of this inquiry is the underlying requirement in all developed legal systems that
parties act in good faith, which often affects the assessment of issues of consent in the non-
signatory context. (48)
The focus in some non-signatory contexts is not limited to issues of consent. Rather, in a
few instances, applicable law will subject an entity to an arbitration agreement even if it
did not consent – or even intend – to be bound by that agreement. This result is mandated
by the force of applicable law and considerations of equity, typically under theories of veil
piercing (alter ego), estoppel, apparent authority, or succession. (49)
It is also often said that subjecting a non-signatory to an arbitration agreement is an
exceptional act. As noted above, the ordinary mode of acceding to a commercial contract
P 1415 is through formal execution by or on behalf of all parties. (50) Although other modes of
P 1416 binding a non-signatory are possible, they are often characterized as exceptions that
must be established by the party relying on them. Courts, (51) arbitral tribunals (52) and
other authorities (53) have emphasized that non-signatories are only exceptionally bound
by agreements to arbitrate and that reserve must be exercised in reaching this conclusion.
It is sometimes said that such reserve should be particularly pronounced when a signatory
to an arbitration agreement seeks to assert claims against a non-signatory. (54) In the
words of one commentary: “arbitral jurisdiction over non-signatory parties is more easily
established when they act as claimants than when they are sought to be joined as
respondents.” (55)
It is difficult to see, however, why different standards should apply depending on whether
a non-signatory is the party invoking, or the party resisting, arbitration. Arbitration is a
matter of consent and, in particular, consent to arbitrate particular disputes with
particular counter-parties, not consent to arbitrate generally or with the entire world.
In principle, therefore, there is no reason to think that a signatory to an arbitration
agreement with one party is more likely to be willing to arbitrate against a different (non-
signatory) party, than that a non-signatory to the agreement would be willing to arbitrate
P 1416 against a signatory. Arbitration is a consensual means of dispute resolution, between
P 1417 specified parties, and there is no justification for assuming that signatories to an
agreement to arbitrate with particular counter-parties intended to arbitrate with other,
nonparties, absent application of one of the legal grounds discussed below.
Finally, different characterizations have been adopted of the question whether a non-
signatory is bound by an arbitration agreement. Some authorities have characterized the
issue as one concerning the scope of the agreement to arbitrate (e.g., to what persons does
the agreement extend?). (56) Other authorities have categorized the question whether a
non-signatory is bound by an arbitration agreement as one of contract formation (e.g., has
an arbitration agreement been formed between parties A and C?). (57)
These characterizations can have considerable practical importance. As discussed above,
in some circumstances, different standards of proof apply to issues of formation of the
arbitration agreement, on the one hand, and issues of scope of the arbitration agreement,
on the other hand. (58) Characterization may also be important for choice of law and
allocation of jurisdictional competence (where construction of the scope of the arbitration
agreement may be subject to different allocations of competence and degrees of judicial
review that determine whether any agreement to arbitrate exists). (59)
The better view is that the question whether a party is bound by an agreement to arbitrate
should be categorized as a question of the scope of the arbitration agreement. In cases
where there is concededly a valid agreement to arbitrate between some parties, the
question whether that agreement extends to another party is more closely akin to
determining the scope of the agreement than to determining whether any agreement has
been formed or whether an agreement is valid.
Among other things, where there is a valid arbitration agreement between some parties to
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a dispute, pursuant to which their disputes will be resolved, there are powerful interests in
efficiency and fairness in resolving related disputes, involving the same contractual
relationships, in the same forum and proceeding: this parallels similar considerations
involving interpretation of the scope of the arbitration agreement, where parties are
generally presumed to desire “one-stop” dispute resolution. (60)
P 1417
P 1418 This is particularly true because, in most instances, non-signatories have a substantial
and close relationship with one of the parties to the arbitration agreement (e.g., agency,
alter ego, guarantor, third party beneficiary). In these cases, determining whether that
relationship is sufficient to subject the non-signatory to the arbitration agreement is
principally a question of interpreting the parties’ underlying commercial relationship (as
distinguished from determining the validity of the agreement to arbitrate). It is
appropriate, in these circumstances, to treat the decision whether a non-signatory is
bound by the arbitration agreement as an issue of determining the scope of that
agreement, including for purposes of choice of law and allocation of competence.
[F] Distinction Between Jurisdiction and Substantive Liability

Finally, it is well-settled that there is a distinction between jurisdiction and substantive
liability. (61) An entity may be a party to an arbitration agreement (despite its non-
signatory status), but not liable substantively in the parties’ underlying dispute;
conversely, an entity may not be bound by an arbitration agreement, despite being liable
in the underlying dispute. This is a consequence of both the separability presumption
(pursuant to which an entity may become a party to an arbitration agreement, but not the
underlying contract) (62) and potentially differing standards of jurisdiction and substantive
liability under the applicable law or laws. (63)
§ 10.02 LEGAL BASES FOR BINDING NON-SIGNATORIES TO INTERNATIONAL

ARBITRATION AGREEMENTS
Although the principle that arbitration agreements are consensual is straightforward, the
application of this principle gives rise to numerous and complex issues. In particular, there
is a wide range of circumstances in which entities that do not themselves execute a
contract (“non-signatories”) may nonetheless be parties to, and bound by or permitted to
invoke, the associated arbitration agreement.
The principal legal bases for holding that a non-signatory is bound (and benefitted) by an
arbitration agreement are discussed below. These bases include both purely consensual
theories (e.g., agency, assumption, assignment) and nonconsensual theories (e.g., estoppel,
alter ego). Each of these various theories gives rise to both substantive and choice-of-law
issues. The authorities discussed below, which address these issues, are relevant both in
actions to enforce agreements to arbitrate and in actions to annul or recognize arbitral
awards. (64)
P 1418
P 1419 [A] Agency Relationship
The simplest, least controversial circumstance in which a non-signatory will be bound by
an arbitration agreement is when an agent executes a contract on behalf of its principal. It
is well-settled, under all developed legal systems, that one party (an “agent” or similar
representative) may in certain circumstances legally bind another party (a “principal”) by
its acts. (65) Among other things, an agent may execute contracts, including arbitration
agreements, which will be legally binding on its principal, (66) although not necessarily on
the agent. (67)
P 1419 Consistent with these principles, a number of arbitral awards (68) and national court
P 1420 decisions (69) have held that, in appropriate cases, an entity may be bound as principal
by an arbitration agreement which it has not signed, but which was executed on its behalf
by an agent.
For the most part, courts and arbitral tribunals have relied on generally-applicable
principles of agency law when considering questions of agency in the specific context of
international arbitration agreements. In the words of one court, the “theories under which
non-signatories may be bound to the arbitration agreements of others…arise out of
common law principles of contract and agency law.” (70) Other courts have referred to
“traditional principles of agency law” or “ordinary principles of contract and agency law.”
(71)
Principles of agency law in most legal systems require proof that the agent was granted
authority, express or implied, to enter into the relevant contractual relationships on behalf
of the principal. (72) In one highly-publicized decision during the 1980s, the Swiss Federal
Tribunal annulled an award applying an agency theory to bind a sovereign state to an
arbitration clause. The arbitral tribunal had held that four Middle Eastern states were
bound by a contract, including its arbitration clause, which had been entered into by an
P 1420 international organization that the four states had founded. (73) The Swiss Federal Tribunal
P 1421 annulled the award on the application of one of the states, reasoning that there was
insufficient evidence that the state had granted the international organization power to
bind the state to an arbitration agreement: (74)
“The arbitration clause cannot be opposed to a party which did not sign it unless this party
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is nevertheless bound by the clause by the signature of an entity or third party empowered
to act on behalf of the first party, on the basis of an act granting to that entity or third
party the power to refer a dispute to arbitration.” (75)
It is generally essential, in order to bind a non-signatory party to an arbitration agreement,
that the non-signatory’s agency relationship with a signatory party pertain to the specific
contract, and arbitration agreement that is in dispute, and not involve only other
relationships between the parties or their affiliates. For example, one U.S. decision
rejected agency as a basis to bind a non-signatory to an arbitration agreement, reasoning
that “the requirements for…vicarious responsibility [under an agency theory] are exacting,”
and concluding:
“although InterGen [the non-signatory] may have had an agency relationship with a Bechtel
entity [the signatory] for certain (limited) purposes, the record is bereft of any evidence
suggesting that a Bechtel entity acted as InterGen’s agent in committing to carry out [the
arbitration agreement or underlying contract].” (76)
Nonetheless, it is possible under some legal systems for one party to have a “general”
agency relationship with its principal, not limited to any specific contract or transaction,
which would result in all (or many) agreements executed by the agent being binding on the
principal. (77) In practice, this result is unlikely in most settings, for reasons explained by
one recent English decision:
P 1421 “In commercial terms the creation of a corporate structure is by definition designed to
P 1422 create separate legal entities for entirely legitimate purposes which would often if not
usually be defeated by any general agency relationship between them.” (78)
Accordingly, care should be taken in applying theories of general agency to conclude that
one party’s contract was binding on another party, by virtue of the first party’s status as a
general agent for the latter. Nonetheless, there are cases where one party so consistently
acts entirely on behalf of, and at the direction of, another party that a general agency
relationship will be found. (79)
Despite the applicability of ordinary agency principles to international arbitration
agreements, (80) there are exceptions to this approach, which arise from the peculiar
character of arbitration agreements. In particular, some authorities have held that an
agent may invoke an arbitration agreement contained in a contract which it executes on
behalf of a principal, (81) notwithstanding the fact that the agent would not be bound by
the substantive terms of the underlying contract (made on behalf of the principal). (82) As
one court observed, there is a “well-settled principle affording agents the benefits of
arbitration agreements made by their principal.” (83) Likewise, as discussed below, a few
authorities have reached similar results with regard to corporate officers and employees,
sued for actions taken in the course of their employment, holding that they may invoke
arbitration clauses contained in their employer’s contracts with the adverse third party.
(84)
These results do not rest on a straightforward application of traditional principal-agent
rules, which would provide that the agent and/or employee is not a party to the underlying
contract. Instead, as discussed below, the approach is an exceptional one, which appears
to rest on the separable character of the agreement to arbitrate and to be primarily
attributable to the parties’ presumed intention to provide protections for agents and/or
employees against joinder in oppressive litigation and to prevent the circumvention of
agreements to arbitrate through satellite litigation. (85)
P 1422
P 1423 More generally, it is essential to consider issues of agency with regard specifically to the
arbitration agreement, and not only the underlying contract. This is a straightforward
application of the separability presumption. (86) In most instances, an agency relation will
either exist, or not, for both the underlying contract and the arbitration agreement.
Nonetheless, there may be instances where a principal-agent relation is said to exclude
conclusion of an arbitration agreement, or allegedly applicable national law will be said to
impose particular requirements on the conclusion of arbitration agreements by agents. (87)
Determining the relevant legal standards for establishing an agency relationship presents
choice-of-law questions (also discussed below). (88) Most authorities have applied
national law to the question of agency status (rather than international principles). (89)
Lower U.S. courts historically applied federal common law agency principles, derived from
the Restatement (Second) of Agency, rather than applying the law of any particular
jurisdiction. (90) More recent U.S. authority looks to generally-applicable state law rules of
agency in domestic cases under Chapter 1 of the FAA; (91) the better view is that federal
common law rules of agency remain applicable in cases arising under the New York
Convention and Chapter 2 of the FAA. (92)
In some cases, it is suggested that the law applicable to the question whether a principal is
bound by an arbitration agreement is that of the agency agreement (between the putative
P 1423 principal and agent) itself. The better view, however, is that the law governing a principal’s
P 1424 status as a party to an arbitration agreement should be either (a) that of the place
where the agent was either headquartered or acted, (93) or (b) that of the arbitration
agreement itself, insofar as other parties to the arbitration agreement are concerned, as
with other issues of formation. (94) These alternative choices rest on the view that the law
governing the principal-agent relationship will likely not be known or readily accessible to
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a counter-party. (95)
In principle, as with other choice-of-law issues in the context of arbitration agreements,
(96) a validation principle should apply to the effects of an agency relationship on a non-
signatory party’s status under an arbitration agreement. If either the law governing the
underlying arbitration agreement or the law governing the agency relationship would
subject the principal (or the agent) to the arbitration agreement, then the non-signatory
should be bound (and benefitted) by that agreement. This is consistent with the likely
intentions of the parties and serves more general interests in efficiency and fairness, by
centralizing disputes in a single forum. (97)
[B] Apparent or Ostensible Authority

Closely related to agency as a basis for concluding that an entity is party to an arbitration
agreement is ostensible or apparent authority. (98) This is referred to as the “principle of
appearance” or “mandat apparent” in some jurisdictions. (99)
P 1424
P 1425 Under the apparent authority theory, a party may be bound by another entity’s acts
purportedly entered into on its behalf, even where those acts were unauthorized, if the
putative principal created the appearance of authorization through words or conduct,
leading a counter-party reasonably to believe that authorization actually existed. (100) In
particular, this theory of apparent authority can bind the “apparent” principal to a
contract (including an arbitration agreement) entered into putatively on its behalf by the
“apparent” agent. (101) In the words of one U.S. decision: An “agent enjoys implied
P 1425 authority to enter into a transaction when verbal or other acts by a principal reasonably
P 1426 give the appearance of authority to the agent.” (102) Or, from a civil law perspective,
“[w]hat French law calls ‘la théorie du mandat apparent’ (the principle of apparent
authority) is generally accepted in international arbitration.” (103)
This doctrine rests in part on principles of contract law and good faith, aimed at
objectively identifying the parties to a contract, but also on notions akin to estoppel and
abuse of right, which operate independently from principles of consent. (104) As explained
by one authority:
“Ostensible authority, on the other hand, derives not from any consensual arrangement
between the principal and the agent, but is founded on a representation made by the
principal to the third party which is intended to convey, and does convey, to the third
party that the arrangement entered into under the apparent authority of the agent will be
binding on the principal.” (105)
As with agency, the apparent authority doctrine raises choice-of-law issues. Possibly
applicable national laws include the law governing the arbitration agreement, (106) the
law of the state where the putative principal’s or putative agent’s conduct occurred, or the
law of the state where the counter-party apprehends the putative principal’s conduct or
statements. (107)
P 1426 There are few principled grounds for choosing among the options presented by existing
P 1427 choice-of-law rules, providing the basis for a substantial argument that a specialized
rule of international law governing apparent authority should apply to international
arbitration agreements. (108) Such a rule would not upset private expectations (for
example, reflected in choice-of-law agreements), given that apparent authority does not
rest on principles of consent. A rule of substantive international law, governing apparent
authority, would also be consistent with the better-reasoned approach, discussed below,
to the choice of law governing estoppel in the context of international arbitration
agreements. (109)
[C] Implied Consent

As discussed above, it is not only by formal execution of an agreement, as a specifically
identified contractual party, that an entity can become a party to that agreement. Under
most developed legal systems, an entity may become a party to a contract, including an
arbitration agreement, impliedly – typically, either by conduct or non-explicit
declarations, as well as by express agreement or formal execution of an agreement. (110)
In general, ordinary principles of contract law apply to issues of implied consent (as to
other issues) with respect to arbitration agreements. (111) As discussed above, authorities
in some jurisdictions impose requirements for express consent to arbitration agreements,
but these decisions are dated and contrary to Article II and the New York Convention. (112)
The fundamental question in the context of implied consent is whether the parties’
objective intention was that a particular entity be a party to the arbitration agreement.
Although the non-signatory’s intent is often most controversial, the intention of other
parties to be bound by the agreement to arbitrate with the non-signatory is also necessary.
(113) That is, even if a non-signatory intended to be bound by the arbitration agreement,
P 1427 one must also determine whether the signatory (and other) parties to the agreement
P 1428 accepted it as such: for commercial or other reasons, signatories to an arbitration
agreement may wish to extend their obligations to arbitrate only to those entities that
have signed the agreement, and not to others.
Questions of implied consent arise in numerous factual settings. Some arbitral tribunals
7
have held that negotiation and/or performance of some or all of the obligations of a
contract, even when unsigned by a counter-party, can bind a party to that agreement,
including its arbitration provision. (114) As one award reasoned, the “scope of an
arbitration clause may be extended to non-signatory companies with separate legal
[existence] only if they played an active role in the negotiations leading to the clause, or if
they are directly implicated in the agreement.” (115)
Other tribunals have held that a company’s awareness of a contract (including an
arbitration clause) between other parties, and its confirmation of one aspect of the
underlying contract, does not necessarily make the company a party to the arbitration
clause. (116) In general, arbitral awards have also held that merely incidental involvement
in contractual performance is insufficient to constitute consent to the underlying contract,
or its arbitration clause. (117)
National courts have adopted similar approaches to issues of implied consent to an
international arbitration agreement. Where a party conducts itself as if it were a party to a
commercial contract, by playing a substantial role in negotiations and/or performance of
P 1428 the contract, it may be held to have impliedly consented to be bound by the contract. (118)
P 1429 In the words of the Swiss Federal Tribunal, “a third party who interferes in the execution
of the contract containing the arbitration agreement is deemed to have accepted it, by
way of conclusive acts.” (119) Again, however, merely incidental involvement in
negotiations or performance is consistently held to be insufficient to constitute implied
consent to be bound by the contract, or its arbitration clause. (120)
P 1429 Implied consent to be bound by the arbitration clause in one contract can also be inferred
P 1430 from a party’s conclusion of a related agreement. (121) This type of analysis has close
parallels to the incorporation of arbitration agreements by reference, which is discussed
above, (122) and which some courts have referred to as a basis for binding a non-signatory
to an arbitration agreement. (123)
As with other non-signatory issues, it is essential to consider questions of implied consent
to an arbitration agreement in the context of the separability presumption. As discussed
above, it is a party’s implied consent to arbitrate – not to deliver or purchase goods – that
is decisive. (124)
Nonetheless, in most instances, a party’s consent to the underlying contract will carry with
it consent to the associated arbitration clause, just as a party’s formal execution of the
underlying contract carries with it consent to the arbitration agreement; there are
circumstances where this will not be the case, but these are exceptional. (125) Again,
negotiation or involvement in performance of only isolated aspects of a contract is less
likely to constitute consent to the arbitration clause than broad involvement in many or
central aspects of the contractual relationship.
There are also instances in which a party’s conduct after a dispute arises evidences its
implied consent to an arbitration clause. A classic example of such consent is where a non-
signatory party affirmatively invokes an arbitration clause or fails to object when another
party invokes the clause against it (126) (with this factual scenario often also being
considered under principles of estoppel (127) ). It remains essential, however, that all the
relevant parties agree to a non-signatory’s inclusion as a party to the arbitration
agreement. (128)
P 1430
P 1431 As with other non-signatory doctrines, questions of implied consent raise choice-of-law
issues. Questions of implied consent should be governed by the law applicable to the
arbitration agreement, as is the case with other questions of interpretation and formation.
(129) Given the contractual character of the implied consent doctrine, this approach is in
keeping with private expectations. (130)
U.S. courts are divided with regard to the choice of law governing implied consent. Some
courts have applied principles of federal common law, (131) while other courts have
applied state (or foreign) law, particularly when the parties’ agreement contains a choice-
of-law provision. (132) A few U.S. courts have concluded that, when a non-signatory objects
to being subjected to an arbitration clause, the existence of consent on its part is governed
by federal common law, while the question of consent by a non-signatory who seeks to
invoke an arbitration clause is governed by any choice-of-law agreement associated with
the clause. (133)
[D] Alter Ego and Veil-Piercing (134)

P 1431
P 1432 Authorities from virtually all jurisdictions hold that a party who has not assented to a
contract containing an arbitration clause may nonetheless be bound by the clause if that
party is an “alter ego” of an entity that did execute, or was otherwise a party to, the
agreement. This is a significant, but exceptional, departure from “the fundamental
principle…that each company in a group of companies (a relatively modern concept) is a
separate legal entity possessed of separate rights and liabilities.” (135)
The alter ego doctrine is referred to in German as “Durchgriff,” (136) in French as “levée du
voile social,” (137) in Spanish as “levantamiento del velo societario” (138) and in many
English language contexts as “piercing” or “lifting” the “corporate veil.” (139) As discussed
below, whatever the terminology, the veil-piercing doctrine has broadly similar elements
in most jurisdictions, at least in the context of international arbitration agreements.
8
The International Court of Justice explained the veil-piercing doctrine in Barcelona
Traction as follows:
“the process of ‘lifting the corporate veil’ or ‘disregarding the legal entity’ has been found
justified and equitable in certain circumstances or for certain purposes. The wealth of
practice already accumulated on the subject in municipal law indicates that the veil is
lifted, for instance, to prevent misuse of the privileges of legal personality, as in certain
cases of fraud or malfeasance, to protect third persons such as creditor or purchaser, or to
prevent the evasion of legal requirements or of obligations.” (140)
Definitions of “alter ego” vary materially in different legal systems, and are applied in a
number of different contexts. Nonetheless, the essential theory of the “alter ego” doctrine
in most jurisdictions is that one party so strongly dominates the affairs of another party,
and has sufficiently misused such control, that it is appropriate to disregard the two
P 1432 companies’ separate legal forms, and to treat them as a single entity. In the context of
P 1433 arbitration agreements, demonstrating an “alter ego” relationship under most
developed legal systems requires convincing evidence that one entity dominated the day-
to-day actions of another and/or that it exercised this power to work fraud or other
injustice or inequity on a third party or to evade statutory or other legal obligations.
The “alter ego” doctrine differs from principles of agency or implied consent, in that the
parties’ intentions are not decisive; rather, the doctrine rests on overriding considerations
of equity and fairness, which mandate disregarding an entity’s separate legal identity in
specified circumstances. (141) In the words of one arbitral award, “[e]quity, in common with
the principles of international law, allows the corporate veil to be lifted, in order to
protect third parties against an abuse which would be to their detriment.” (142) Or, as a
U.S. judicial decision reasoned: “The concept of ‘piercing the corporate veil’ is equitable in
nature and courts will pierce the corporate veil ‘to achieve justice, equity, to remedy or
avoid fraud or wrongdoing, or to impose a just liability.’” (143)
Many national courts have been circumspect in applying the alter ego doctrine. (144) In
England, an alter ego relationship may be found where the corporate structure is used to
P 1433 evade mandatory legal obligations or the enforcement of existing and legitimate third
P 1434 party rights. (145) This standard generally requires fraud or other misconduct calculated
to avoid or conceal liability through the use of company structure. (146) In a frequently-
cited decision, an English court declared:
“English law insists on recognition of the distinct legal personality of companies unless the
relevant contract or legislation requires or permits a broad interpretation to be given to
references to members of a group of companies or the legal personality is a mere façade
or sham or unlawful device.” (147)
The court emphasized that it is legitimate to structure a corporate group so as to allocate
risk between members of the group and limit the liability of particular companies:
“we do not accept as a matter of law that the court is entitled to lift the corporate veil as
against a defendant which is the member of a corporate group merely because the
corporate structure has been used to ensure that the legal liability (if any) in respect of
particular future activities of the group (and correspondingly the risk of enforcement of
that liability) will fall on another member of the group rather than the defendant company.
Whether or not this is desirable, the right to use a corporate structure in this manner is
inherent in our corporate law.” (148)
Likewise, Swiss courts (149) and tribunals applying Swiss law (150) only disregard the
corporate form in exceptional circumstances, amounting to fraud or an abuse of right. In
the words of a leading Swiss commentator:
P 1434
P 1435 “Swiss law…is resolutely committed to the legal independence of the company in
relation to its sole shareholder or of the subsidiary in relation to the parent company. It
will only be disregarded in exceptional circumstances, where the fact of resorting to such a
subsidiary to escape one’s obligations would amount to fraud or to a patent abuse of
right.” (151)
German courts are also cautious in applying veil-piercing (Durchgriff) theories, (152)
requiring fraud or other misconduct. (153) Indeed, some German authorities question
(wrongly) whether the veil-piercing theory, which is traditionally used for purposes of
substantive liability, may ever be used to bind non-signatories to arbitration agreements.
(154)
While also relying on a potentially expansive “group of companies” theory (discussed
below), (155) French courts appear willing, often without clearly distinguishing the
doctrines, (156) to disregard corporate identities in cases amounting to fraud. (157) Courts
in Canada, (158) Ireland, (159) the Netherlands, (160) Korea, (161) Hong Kong (162) and China
(163) are also prepared to pierce the corporate veil, at least in some circumstances.
P 1435
P 1436 U.S. courts have often been more willing than many other authorities to apply an alter
ego analysis to subject a non-signatory to an arbitration agreement. (164) According to one
U.S. decision:
“To apply the alter ego doctrine to justify the disregard of a corporate entity, the court
must determine that there is such unity of interest and ownership that separate
9
personalities of the corporations no longer exist, and that failure to disregard the
corporate form would result in fraud or injustice.” (165)
Even in U.S. courts, the standard for establishing alter ego status is ordinarily difficult to
satisfy. The starting point is a strong presumption that a parent corporation and its
affiliates are legally separate and distinct entities. (166) In the memorable words of one
early authority:
P 1436
P 1437 “Normally, the corporation is an insulator from liability on claims of creditors.…Limited
liability is the rule not the exception; and on that assumption large undertakings are
rested, vast enterprises are launched, and huge sums of capital attracted.” (167)
Many U.S. courts have also held that piercing the corporate veil is an exceptional action, in
both international and other contexts, requiring persuasive evidence to overcome the
separate corporate identities of the parties. (168) The existence of overlapping boards of
directors and management, 100% share ownership and common corporate logos or
trademarks are not sufficient to establish (or even particularly probative of) alter ego
status. (169) Similarly, undercapitalization of a company is not sufficient, independently,
to justify piercing the corporate veil. (170)
Most U.S. courts have held that overcoming the presumption of separateness requires
showing: (a) the domination of a corporate affiliate, including disregard of corporate
P 1437 formalities, such that it has no separate identity or existence, (171) and (b) fraudulent or
P 1438 collusive misuse of that control, or equivalent misconduct, to the injury of other parties.
(172) In cases of complete domination or control of one company’s day-to-day activities by
another company, this may in some circumstances be independently sufficient to pierce
the corporate veil. (173)
U.S. judicial decisions have generally conducted fairly extensive factual inquiries in
deciding claims of domination or control. (174) Different U.S. authorities have identified a
variety of factors that are relevant to an inquiry into control for purposes of alter ego
status. (175) For example, in a recent U.S. decision arising from the attempted recognition
of an international arbitral award, the court identified fifteen “private law” factors, which it
described as always “concerned with reality and not form”:
“(1) the parent and subsidiary have common stock ownership; (2) the parent and subsidiary
have common directors or officers; (3) the parent and subsidiary have common business
departments; (4) the parent and subsidiary file consolidated financial statements; (5) the
P 1438 parent finances the subsidiary; (6) the parent caused the incorporation of the subsidiary;
P 1439 (7) the subsidiary operated with grossly inadequate capital; (8) the parent pays salaries
and other expenses of the subsidiary; (9) the subsidiary receives no business except that
given by the parent; (10) the parent uses the subsidiary’s property as its own; (11) the daily
operations of the two corporations are not kept separate; (12) the subsidiary does not
observe corporate formalities…(13) whether the directors of the ‘subsidiary’ act in the
primary and independent interest of the ‘parent’; (14) whether others pay or guarantee
debts of the dominated corporation; and (15) whether the alleged dominator deals with
the dominated corporations at arm’s length.” (176)
Assessing these various factors, the court held that a foreign state-owned entity was not
financially independent from the foreign state that owned it (Turkmenistan), and that the
foreign state’s intentional “bleeding [of] a subsidiary to thwart creditors is a classic ground
for piercing the corporate veil.” (177) The court also noted that “[u]ndercapitalization is
often critical in alter ego analysis.” (178)
As noted above, many U.S. courts have held that there must be a showing of fraud or other
wrongful or inequitable conduct in order to bind a non-signatory to an arbitration
agreement. (179) As explained by one U.S. court: “While complete domination of the
corporation is the key to piercing the corporate veil,…such domination, standing alone, is
not enough; some showing of a wrongful or unjust act toward plaintiff is required.” (180)
P 1439 Other courts have expressed the same view, (181) although a considerable body of
P 1440 authority holds that, in some circumstances, sufficiently extensive day-to-day control or
domination is sufficient to pierce the corporate veil. (182)
Typically, alter ego status can only be established with respect to an entity or person
which owns shares (directly or indirectly), or holds a corporate position, in a company.
Nonetheless, in unusual cases, other sorts of control relationships or corporate affiliations
have been regarded as sufficient to establish alter ego status. (183)
International arbitral tribunals have also generally been circumspect in applying alter ego
theories. Most awards have required persuasive evidence of overlapping ownership,
management and (often) involvement in negotiation and performance of the contract, as
well as (occasionally) affirmative statements that the affiliated company is involved in the
transactions in question. (184) Use of a common logo, brand, or trademark is generally not
a decisive factor in alter ego analysis, (185) nor is the mere fact of overlapping
P 1440 management or supervisory boards or shared employees. (186) On the other hand,
P 1441 fraudulent or similarly abusive misconduct, (187) undercapitalization of a corporate
body, (188) deliberate tortious actions, (189) or siphoning off of assets (resulting in
undercapitalization) (190) are strong indicators of an alter ego relationship.
Some awards have also relied on the existence of reasonable, good faith mistake or
10
confusion as to the identity or character of a counter-party. (191) As one tribunal explained,
in the context of an effort to subject a controlling shareholder to the arbitration
agreement:
“arbitration is essentially based upon the principle of consent. So too, any extension of the
scope of application of the arbitration clause must have a voluntary basis. Of course, such
an intention can be merely implicit, otherwise any discussion of extension would have no
meaning.…[T]he fact that two companies belong to the same group, or that a shareholder
P 1441 has a dominant position, are never sufficient, in and of themselves, to legally justify lifting
P 1442 the corporate veil.… One would entertain this exception where confusion is fostered by the
group or by the majority shareholder.…An arbitrating body must be very circumspect in
matters of extending the effect of a clause to a director or manager who has acted strictly
in an official capacity. Any such extension presupposes that the artificial person has been
no more than the business implement of the natural person, so that one can ascribe to the
natural person the contracts and undertakings signed by the artificial person.” (192)
Other awards have emphasized the importance of principles of good faith in conducting an
alter ego analysis. (193) This approach parallels that of most national courts (summarized
above) (194) and the expectations of parties engaged in international commercial
transactions, being to give effect to corporate forms, save in exceptional cases.
As with other non-signatory theories, the critical question in the alter ego context is
whether one party’s relationship with another justifies treating it as a party to the
agreement to arbitrate (not the underlying contract). (195) There may, for example, be
instances where one party’s domination of another party’s participation in a particular
transaction (or in an arbitration) results in it being bound by the associated agreement to
arbitrate, notwithstanding the absence of any such control or alter ego relationship more
generally. More frequently, however, an alter ego relationship will exist with regard to a
particular commercial contract or relationship, which will also be applied with regard to
the associated arbitration agreement. (196)
Finally, as with other bases for binding non-signatories to arbitration agreements,
questions of alter ego status and veil piercing raise choice-of-law questions. Various
authorities have applied the law of the state of incorporation of a company, (197) or the law
P 1442 governing the arbitration agreement, (198) or the law governing the underlying contract,
P 1443 (199) to the question whether the company’s corporate veil may be pierced. The weight
of authority rejects these analyses, (200) instead applying either international principles
(201) or general principles of law. (202)
Thus, a leading U.S. Supreme Court decision held that the question whether to pierce the
veil of a Cuban state-owned company was governed by principles of international law
(rather than Cuban law). (203) The Court reasoned:
P 1443
P 1444 “To give conclusive effect to the law of the chartering state in determining whether the
separate juridical status of its instrumentality should be respected would permit the state
to violate with impunity the rights of third parties under international law while effectively
insulating itself from liability in foreign courts.” (204)
Accordingly, the Court applied veil-piercing principles “common to both international law
and federal common law” (205) (reflecting an approach bearing some similarities to the
“cumulative” choice-of-law analyses adopted in a number of contemporary arbitral
awards): (206)
“Our decision today announces no mechanical formula for determining the circumstances
under which the normally separate juridical status of a government instrumentality is to be
disregarded. Instead, it is the product of the application of internationally recognized
equitable principles to avoid the injustice.” (207)
This authority is persuasive, and applies more broadly to veil-piercing issues arising in
determining whether either state or non-state entities are parties to an international
arbitration. As with the doctrines of apparent authority and estoppel, (208) it is artificial to
select the law of any particular national jurisdiction to define those circumstances in which
basic principles of fairness and good faith in international business dealings require
disregarding a corporate identity conferred by national law and subjecting a party to an
international arbitration agreement. Rather, uniform international principles better
achieve the purposes of the veil piercing doctrine, without materially interfering with the
parties’ expectations. (209)
[E] ”Group of Companies” Doctrine (210)

P 1444
P 1445 Another significant, but controversial, basis for binding non-signatories to an arbitration
agreement is the “group of companies” doctrine. Under this principle, non-signatories of a
contract may be deemed parties to the associated arbitration clause based on factors
which are often roughly comparable to those relevant to an alter ego analysis. In
particular, where a company is part of a corporate group, is subject to the control of (or
controls) a corporate affiliate that has executed a contract and is involved in the
negotiation or performance of that contract, then that company may in some
circumstances invoke or be subjected to an arbitration clause contained in that contract,
notwithstanding the fact that it has not executed the contract itself.
11
Unlike other bases for binding a non-signatory to an arbitration agreement (such as
agency, alter ego, estoppel, third party beneficiary, or assignment), the group of
companies doctrine was developed specifically in the arbitration context and is not
typically invoked outside that context. At least thus far, the group of companies doctrine
has also been explicitly accepted in only a limited number of jurisdictions (211) (in
particular, as discussed below, France). In part for that reason, the doctrine has given rise
to substantial controversy. (212)
The weight of earlier (and more recent) authority adopting the group of companies
doctrine was French. (213) One of the seminal group of companies decisions is the Interim
Award in ICC Case No. 4131, between Dow Chemical Company (“Dow”), together with various
of its subsidiaries, and Isover Saint Gobain (“Isover”). (214) Several of Dow’s 100%
subsidiaries (but not Dow itself) and Isover were signatories of several contracts containing
P 1445 ICC arbitration clauses. Various difficulties arose under the contracts, leading Dow and
P 1446 three of its subsidiaries to commence an ICC arbitration against Isover pursuant to the
contractual arbitration clauses. In response, Isover challenged the arbitral tribunal’s
jurisdiction to hear claims asserted by Dow, as well as one of its subsidiaries, on the
grounds that they had not executed the contract in question.
The arbitral tribunal issued an award which upheld the rights of Dow and its subsidiaries to
invoke the arbitration clause. The tribunal applied what it referred to as general principles
of international arbitration law, (215) reasoning:
“Dow Chemical France at the time of signature of the 1965 contracts as well as the
negotiations which led to the 1968 contract, appeared to be at the center of the
organization of the contractual relationship with the companies succeeded by the present
Defendant. Moreover, this relationship could not have been formed without the approval
of the American parent company, which owned the trademarks under which the relevant
products were to be marketed in France.…[I]t is indisputable…that Dow Chemical Company
has and exercises absolute control over its subsidiaries having either signed the relevant
contracts or, like Dow Chemical France, effectively and individually participated in their
conclusion, their performance, and their termination.” (216)
The tribunal referred to earlier awards, concluding, with some overstatement, (217) that
these awards:
“progressively create case law which should be taken into account, because it draws
conclusions from economic reality and conforms to the needs of international commerce,
to which rules specific to international arbitration, themselves successively elaborated,
should respond.” (218)
The tribunal concluded that “irrespective of the distinct juridical identity of each of its
members, a group of companies constitutes one and the same economic reality (une réalité
économique unique),” and that the arbitration clause bound all the Dow companies which,
“by virtue of their role in the conclusion, performance, or termination of the contracts
containing said clauses, and in accordance with the mutual intention of all parties to the
proceedings, appear to have been veritable parties to these contracts or to have been
principally concerned by them and the disputes to which they may give rise.” (219) The
P 1446 award was subsequently upheld by the Paris Cour d’appel, rejecting Isover’s application for
P 1447 annulment. (220) Later French judicial decisions also approved awards based on the
group of companies doctrine, albeit not always relying expressly on that doctrine. (221)
The Dow Chemical award has been cited or followed by a substantial body of subsequent
international arbitration authority as establishing the “group of companies” theory. (222) A
more recent award summarizes the theory as follows:
“When concluding, performing, nonperforming and renegotiating their contractual relations
with [defendants], the three claimant companies appear, pursuant to the common
intention of all parties engaged in the procedure, to have been real parties to all the
contracts. In its formulation and in its spirit, this analysis is based on a remarkable and
approved tendency of arbitral rulings favoring acknowledgement, under those
circumstances, of the unity of the group.…The security of international commercial
relations requires that account should be taken of its economic reality and that all the
companies of the group should be held liable one for all and all for one for the debts of
which they either directly or indirectly have profited at this occasion.” (223)
This formulation is particularly expansive, arguably departing from the Dow Chemical
group of companies analysis by permitting an entity to be deemed party to an arbitration
agreement without regard to the parties’ intentions, and instead based, at least in
substantial part, on general notions of the “security of international commercial relations.”
The foregoing analysis would misstate the group of companies doctrine, incorrectly
conflating it with an (overly expansive) alter ego analysis. The better, and more common,
approach to the group of companies doctrine has been to ascertain the parties’ objective
intentions in entering into a particular transaction, and specifically to determine whether
a specific non-signatory was intended to be bound (and benefitted by the agreement in
question): (224) Thus:
P 1447
P 1448 “although the existence of a group is the first condition for joining a third party to the
arbitration proceedings, it is also necessary to determine the parties’ actual intention at
12
the time of the facts or, at the very least the intention of the non-signatory third party.”
(225)
General presumptions concerning the parties’ desire for security are relevant to
ascertaining the parties’ intentions in particular transactions, but it is those intentions, as
reflected in the terms of the parties’ agreements, that are the cornerstone of the group of
companies doctrine.
It is clear, under most formulations, that the “group of companies” doctrine must be
applied with caution, (226) and that it requires showing more than a non-signatory’s
membership in a group of companies. (227) Rather, the doctrine provides that a non-
signatory may be bound by an arbitration agreement where a group of companies exists
P 1448 and the parties have engaged in conduct (such as negotiation or performance of the
P 1449 relevant contract) or made statements (228) indicating the intention, assessed
objectively and in good faith, that the non-signatory be bound and benefitted by the
relevant contracts. (229) In the words of one representative award:
“there is no general rule, in French international arbitration law, that would provide that
non-signatory parties members of a same group of companies would be bound by an
arbitration clause, whether always or in determined circumstances. What is relevant is
whether all parties intended non-signatory parties to be bound by the arbitration clause.
Not only the signatory parties, but also the non-signatory parties should have intended (or
led the other parties to reasonably believe that they intended) to be bound by the
arbitration clause.” (230)
Some authorities have also suggested (as with the alter ego doctrine) that some showing of
fraud or comparable lack of good faith is necessary to bind a non-signatory to an
arbitration agreement under the group of companies doctrine. (231) In contrast, a few
decisions appear to have focused entirely (and, as discussed below, incorrectly) on the
mere existence of a group of companies. (232)
P 1449
P 1450 As noted above, and as has been frequently observed, the group of companies doctrine
“depends on the intentions of the parties.” (233) This observation is generally correct, but
must be qualified. The statement underscores the fact that the affiliation of companies
(and/or individuals) or the membership of companies in a related corporate group does
not by itself suffice to bind them to one another’s arbitration agreements. As with other
consent-based legal doctrines in the non-signatory field, such as guarantee, implied
consent, assumption, assignment, or agency, the decisive question is whether all of the
circumstances of the parties’ relationship evidence an intention by the parties to bind a
non-signatory to a particular arbitration agreement. (234)
This reflects a fundamental difference between the alter ego doctrine and the group of
companies doctrine. The alter ego theory is a rule of law that is invoked to disregard or
nullify the otherwise applicable effects of incorporation or separate legal personality. The
outcome of this analysis is that one entity is deemed either nonexistent or merely an
unincorporated part of another entity. This result is often achieved without regard to the
parties’ intentions at the time of contracting, based on overriding considerations of equity
and good faith. (235)
In contrast, the group of companies doctrine is ordinarily a means of identifying the
parties’ intentions, which does not disturb or affect the legal personality of the entities in
question. Rather, as usually formulated, the group of companies doctrine is akin to
principles of agency or implied consent, whereby the corporate affiliations among distinct
legal entities provide the foundation for concluding that they were intended to be parties
to an agreement, notwithstanding their formal status as non-signatories. (236)
Commentators have observed the same distinctions between the group of companies
doctrine and veil-piercing principles. (237)
P 1450
P 1451 Consistent with this distinction, most decisions relying on the group of companies
doctrine involve facts which indicate that non-signatories in a group of companies were
intended by the parties to be bound by an arbitration agreement. (238) The most
straightforward application of this aspect of the group of companies theory is at the time
of formation of a contract, when the group of companies doctrine is applied to hold that a
non-signatory was intended to be bound by the signatories’ contract and arbitration
P 1451 agreement; (239) this result is sometimes reached even without adopting the “group of
P 1452 companies” label. (240) Nonetheless, the doctrine can also apply subsequently, as an
instance of a non-signatory’s assumption of contractual obligations. (241) This was foreseen
by the Dow Chemical decision, (242) and has been confirmed in subsequent awards (243)
and judgments. (244)
Not all authorities have been receptive to the group of companies doctrine and some
national courts have been affirmatively hostile. English courts have expressly rejected the
doctrine as a matter of English law. (245) As one English court put it, in emphatic terms,
“the Group of Companies doctrine…forms no part of English law.” (246) English commentary
has also generally been skeptical of the group of companies doctrine. (247) As another
English court concluded, in rejecting a similar argument:
“[Counsel] suggests beguilingly that it would be technical for us to distinguish between
parent and subsidiary company in this context; economically, he said, they are one. But we
are concerned not with economics but with law. The distinction between the two is, in law,
13
fundamental and cannot here be bridged.” (248)
P 1452
P 1453 Swiss courts have been more ambivalent. Some Swiss commentators have concluded
that “Swiss law ignores the notion of group of companies.” (249) Nonetheless, Swiss judicial
authority is mixed, with some decisions suggesting that the group of companies doctrine
would not be recognized under Swiss law (250) and other decisions implying the opposite.
(251) Dutch courts also appear to reject the group of companies doctrine (but take account
of evidence that the parties intended that a non-signatory be bound by an arbitration
agreement). (252)
Similarly, a number of published arbitral awards have declined to apply the group of
companies doctrine to non-signatory respondents. (253) That has been particularly true in
arbitrations seated in Switzerland or England. (254)
Particularly in light of the hesitations or rejections reflected in some national court
decisions and arbitral awards, it is important to note that the group of companies doctrine
ordinarily concerns only the parties to the arbitration agreement, not the underlying
contract. It is entirely possible for non-signatories to become party to an agreement to
arbitrate without thereby becoming party to the underlying commercial contract. (255)
Properly understood, the group of companies doctrine rests on the presumption that
P 1453 commercial parties within corporate groups engaged in a business transaction will
P 1454 ordinarily desire – when entering into a contract – that their arbitration agreements
provide efficient, centralized dispute resolution mechanisms for all disputes relating to a
particular transaction. (256) That assumption, in turn, argues for interpreting an arbitration
agreement to encompass those members of a corporate group, involved in a transaction,
without altering the identities of the parties to the underlying contracts.
English and Swiss authorities declaring that the group of companies doctrine is no part of
national law (257) are rhetorically impressive in their invocations of corporate identities
and party autonomy. They nonetheless miss the essential focus, and importance, of the
doctrine and arrive at unsatisfactory conclusions.
Properly understood, the group of companies doctrine is a way of applying well-accepted
principles of agency and implied consent to agreements to arbitrate in the context of
modern, multi-party business transactions, in order that the parties’ true objectives and
intentions can be ascertained. Whether denominated “group of companies,” or something
else, is less important than the effective interpretation and enforcement of dispute
resolution mechanisms among commercial parties.
Critical to this effort is the premise that companies in a corporate group can agree to be
bound by an agreement to arbitrate, in order to ensure the efficacy of that agreement
between its signatories, without signing the arbitration agreement and without being
bound by the underlying contracts. (258) Giving effect to this principle serves in particular
to prevent the circumvention of an arbitration through satellite litigation by non-signatory
corporate affiliates of signatories – with each set of parties contriving extracontractual
theories to justify home-court litigation. From this perspective, criticism of the group of
companies doctrine is ultimately unsatisfyingly, missing the fundamental commercial
objectives of agreements to arbitrate international disputes.
It is also important to recognize that the group of companies doctrine can extend beyond
situations where the intention of the parties was to bind the non-signatory. Limiting
application of the doctrine solely to cases of consent would omit an important aspect or
application of the group of companies theory. (259)
In some instances, neither the affiliated entities in a group of companies nor the counter-
party will have “intended” – in a subjective sense – that these entities be bound, either at
the inception of their contract or later. Indeed, the affiliated company may have
P 1454 deliberately structured its affairs in an effort not to be contractually bound by a contract
P 1455 (or an arbitration agreement), while the counter- party may have been unaware of, or
misled as to, the affiliated company’s involvement. Accordingly, in some cases, the group
of companies doctrine operates precisely to correct mistaken subjective assumptions or
understandings at the time of contracting, by looking through ordinarily applicable legal
forms and contractual arrangements. (260) In this respect, the doctrine can be applied in a
manner similar to principles of alter ego, apparent authority, estoppel and abuse of right,
relying on principles of good faith, equity and objective intent to supplement or correct
subjective intentions of the parties to an arbitration agreement. (261)
The group of companies doctrine raises choice-of-law issues (particularly given the
different approaches of Swiss, English, French and other courts to the subject). French
courts, and arbitral tribunals seated in France, have generally treated the group of
companies doctrine as a rule of international law. (262) Other awards adopt the same
analysis. (263) In principle, however, the better view is that, insofar as the group of
companies doctrine is directed towards ascertaining the existence of consent or
assumption, the national law governing the arbitration agreement should apply (subject to
the validation principle and to international prohibitions against discriminatory and
idiosyncratic national laws (264) ). Where the group of companies doctrine is applied as a
variation of estoppel or alter ego principles, then international principles are appropriate
(for reasons outlined elsewhere). (265)
14
[F] Third Party Beneficiaries
In some legal systems, nonparties to a contract may, in certain circumstances, claim the
benefits of that contract as third party beneficiaries. (266) In such circumstances, the third
party may either be able to invoke or may be bound by an arbitration clause contained in
the contract. This analysis is well stated in a recent award:
P 1455
P 1456 “It is generally accepted that if a third party is bound by the same obligations
stipulated by a party to a contract and this contract contains an arbitration clause or, in
relation to it, an arbitration agreement exists, such a third party is also bound by the
arbitration clause, or arbitration agreement, even if it did not sign it.” (267)
Applying this analysis, a number of national courts and arbitral tribunals have held that a
party who invokes the provisions of a contract, claiming third party beneficiary rights, is
bound by the arbitration clause contained in the contract, (268) and also entitled to invoke
that clause. (269) In a few jurisdictions, issues of third party beneficiary status are
P 1456 governed generally by statutory provisions (and often include provisions that apply
P 1457 specifically to arbitration agreements). (270) Even in jurisdictions where neither
statutory provisions nor judicial decisions address the issue, commentary suggests that
third party beneficiary status will provide a basis for subjecting a non-signatory to an
arbitration clause contained in the contract that benefits it. (271)
Some courts or tribunals have parsed the language of arbitration clauses or other
contractual provisions carefully, holding in some circumstances that they were drafted so
as not to extend to third party beneficiaries. (272) As one court reasoned:
“In the circumstances presented here, the Court is compelled to follow the plain language
of the Banking Agreement that limits the right to demand arbitration to BNP and the
United Nations. Accordingly, even if the Republic were to be a third-party beneficiary
entitled to sue for breach of contract, the Banking Agreement does not grant the Republic
a right to compel arbitration.” (273)
The essential inquiry in third party beneficiary cases is the parties’ intentions: did they or
did they not intend to confer rights under the arbitration agreement on third parties? The
P 1457 goal of this analysis is to determine the parties’ objective, good faith intentions. (274)
P 1458 Some authorities have suggested that a particularly clear showing must be made of
third party beneficiary status sufficient to permit a party to invoke (or be bound by) an
arbitration agreement:
“Because third-party beneficiary status constitutes an exception to the general rule that a
contract does not grant enforceable rights to non-signatories, a person aspiring to such
status must show with special clarity that the contracting parties intended to confer a
benefit on him.” (275)
It is doubtful, however, that this analysis is well-considered; for the same reasons that
“anti-arbitration” standards of proof of the existence of an arbitration agreement are
inappropriate, (276) and that pro-arbitration rules of interpretation are appropriate, (277)
third party beneficiary status should require no special or elevated standard of proof in
the context of international arbitration agreements. On the contrary, considerations of
efficiency and “one-stop” dispute resolution argue for a reduced standard of proof. (278)
The parties’ intentions regarding a third party beneficiary must be analyzed with the
separability presumption in mind. (279) In determining whether a third party is benefitted
by an arbitration agreement, the decisive issue is whether the signatories intended to
confer that benefit on the third party (i.e., the right to invoke the arbitration agreement). In
addition, however, a third party may be bound by an arbitration agreement if it asserts
rights that it enjoys by virtue of its status as a third party beneficiary to a contract
containing an arbitration agreement; (280) in these instances, the relevant intentions of
the signatories will focus on the underlying contractual rights (as distinguished from the
arbitration agreement). Some courts have required that the third party be entitled to, and
assert, contractual rights (as distinguished from limitations of liability) under a contract in
order to be subject to its arbitration clause. (281)
P 1458 In some instances, the conclusion that a non-signatory party is bound by, or may invoke, an
P 1459 arbitration clause on third party beneficiary grounds may involve considerations akin to
estoppel, rather than exclusive consideration of issues of intent. (282) For example, one
court held that a company was “equitably estopped” from resisting arbitration against the
respondent because “the very basis of [its] claim [in the dispute was] that [the respondent]
breached the duties and responsibilities assigned and ascribed to [the respondent] under
[an] agreement,” which contained an arbitration clause. (283) Although ostensibly analyzed
as an issue of third party beneficiary rights, the true basis for such decisions is estoppel
(discussed below). (284)
Issues of third party beneficiary status should in principle be governed by the law
applicable to the arbitration agreement or (less likely) the law applicable to the
underlying contract. That is because the third party beneficiary’s status is a question
related to interpretation and formation of the arbitration agreement, which should be
governed by the same law as other issues of interpretation and formation. (285)
Alternatively, a few authorities have reasoned that the basis for subjecting a third party
beneficiary to an arbitration clause is the grant of substantive rights under the underlying
15
contract, which carry with them the associated arbitration clause; as such, the law
applicable to the underlying third party beneficiary rights would arguably govern the
question whether the third party beneficiary is subject to the arbitration clause. (286)
[G] Guarantors (287)

It is not uncommon in international commercial transactions for one party to guarantee
P 1459 the obligations of another party under a contract to which the guarantor is not party. (288)
P 1460 When this occurs, questions may arise as to the extent to which the guarantor is bound
by provisions of the underlying contract – including particularly its arbitration clause.
The starting point for analysis is that, because the guarantor is not party to the guaranteed
contract, the guarantor is also not party to the arbitration agreement contained in the
guaranteed contract. That is true under both common law (289) and civil law (290) regimes.
Despite this, a number of arbitral awards (291) and judicial decisions (292) have held,
without detailed analysis, that guarantors are bound by arbitration clauses in the
guaranteed contracts. There are a number of bases, not always clearly articulated, that
permit such a conclusion.
P 1460
P 1461 First, a guarantor may be benefitted by an assignment of the guaranteed party’s rights
under the underlying contract if the guarantor is required to pay under the guarantee. In
these circumstances, as discussed below, (293) the guarantor’s exercise of the assigned
contractual rights may be subject to an arbitration agreement contained in the underlying
contract. (294)
Second, the guarantor may provide substitute performance under the guaranteed contract.
As discussed above, where a non-signatory performs a contract containing an arbitration
agreement, the non-signatory may be bound by the arbitration clause. (295) This analysis
also applies in cases where a guarantor performs the guaranteed party’s obligation under
the guaranteed contract. (296)
Third, the guarantee may incorporate the terms of the underlying contract, including the
arbitration agreement. This involves application of general principles relating to the
incorporation of arbitration clauses, (297) which can result in a conclusion that the
guarantee incorporates the arbitration provision of the guaranteed contract. (298)
Fourth, in some cases, the guarantor may qualify as a party to the underlying contract, on
the basis of an implied agreement granting it that status, and will therefore be liable
P 1461 under both the guarantee (to the guaranteed party) and the underlying contract (to the
P 1462 party who is owed the obligation). (299) In determining whether the guarantor is
impliedly a party to the underlying contract, the nature of the guarantee and the
guarantor’s contractual role is important. (300) Typically, the more commercially-
significant the role of the guarantor in performance of the underlying contract or
transaction, the more likely it will be that the parties intended the guarantor to be a party
to the arbitration agreement. (301)
As in other non-signatory contexts, the correct analysis requires consideration of the
relations between the parties and the contractual language that they have adopted. The
language of the guarantee agreement and the underlying arbitration clause will be
significant in ascertaining whether the parties intended that the guarantor be bound (and
benefited) by the arbitration clause in the underlying contract. (302) If the guarantee
agreement is narrowly drafted (303) or if the arbitration clause refers specifically and only
to identified parties, (304) then the guarantor will likely not be bound by the arbitration
agreement.
P 1462
P 1463 Issues relating to the application of the guarantor doctrine to non-signatories have often
been held to be governed by the national law applicable to the underlying guarantee
relationship. That is the approach taken by most national courts and arbitral tribunals.
(305) The better view, however, is that a validation principle applies, providing that a
guarantor is subject to an arbitration agreement if either the law governing the underlying
guarantee agreement or the law governing the arbitration agreement provides for this
result. (306)
[H] Succession (307)

It is well-settled that an entity that does not execute an arbitration agreement may
become a party thereto by way of legal succession. (308) In the words of the Swiss Federal
Tribunal, “in principle, an arbitration clause is binding only on those parties which have
entered into a contractual agreement to submit to arbitration.…Exceptions to this rule
arise in cases of legal succession.” (309) The most common means of such succession is by a
company’s merger or combination with the original party to an agreement. (310)
Under many national legal regimes, corporate or company law permits the merger or
combination of two or more previously separate legal entities into either a new legal entity
or one of the preexisting legal entities. The consequence of such “mergers” or “business
combinations” is that the “surviving” entity will be the owner of all the assets and
P 1463 liabilities (including contract rights and obligations) of the previously-existing entities.
P 1464 This is confirmed by national law, (311) arbitral tribunals (312) and commentary. (313)
When such a combination occurs, most national laws provide that the merged or surviving
16
entity succeeds by operation of law as a party to the contracts, including the arbitration
agreements, of the previously-existing entities. (314) There is no apparent contrary
authority.
P 1464 National courts (315) and arbitral awards (316) have held that the same result generally
P 1465 applies in other instances of corporate succession, when one entity assumes the rights
and obligations of another entity as a matter of applicable national company law. (317) As
the French Cour de cassation concluded: “The international arbitration clause is binding on
any party that is a successor to one of the contractual partners.” (318)
Some authorities note the possibility that an arbitration agreement could be drafted to
preclude its transfer, by way of universal or other succession (in a manner paralleling
prohibitions against assignment, discussed below (319) ). Thus:
“The dominant trend in case law holds that an arbitration agreement is not only valid
between the parties, but can also be relied upon against their heirs, their legatees, their
assignees and all those acquiring obligations. The only exceptions are cases where the
arbitration agreement is drafted in such a way as to exclude successors and assignees.”
(320)
Most authorities have held that the national law governing the issue of succession also
applies to a non-signatory’s succession to an arbitration agreement. (321) The better view
is that the validation principle applies, providing for succession to the arbitration
agreement if that result would be obtained under either the law governing the underlying
succession (e.g., the merger) or the arbitration agreement. (322)
[I] Assignment and Other Transfers of Contractual Rights (323)

P 1465
P 1466 In contemporary commerce, contracts are frequently transferred from one party to
another by way of assignment, novation, assumption, or other contractual transfer
mechanisms. In these circumstances, disputes sometimes arise as to whether the
transferee or assignee of a contract is bound by an arbitration clause contained in the
transferred/assigned agreement. (324)
Some early judicial decisions suggested that arbitration agreements were not capable of
being transferred, apparently on the theory that they were “personal” obligations, which
were specific to and binding upon only the original parties. (325) These decisions have
been superseded, and it is now almost universally accepted that parties have the
contractual autonomy to transfer or assign arbitration agreements, just as they have the
power to assign or transfer other types of contracts. (326) Again, the touchstone in such
cases should be the intention of the parties, both in the original agreement and in the
assignment.
In principle, an assignment of a contract should have the effect of conveying the
arbitration clause associated with the contract, as one part of the parties’ agreement, to
P 1466 the assignee, at least absent some sort of contractual or legal prohibition that renders the
P 1467 assignment ineffective. (327) Indeed, in most jurisdictions, it is presumed that
assignment of the underlying contract entails the assignment of the associated arbitration
agreement. As one arbitral award reasoned, “an arbitration clause must be considered an
ancillary right (Nebenrecht) to the assigned principal rights which…follows the assigned
rights.” (328)
In the United States, most courts have held that, when a contract is transferred from one
party to another entity, the arbitration clause passes along with the underlying contract.
(329) English courts have reached similar conclusions. (330)
The same approach is adopted in civil law jurisdictions, (331) including in Switzerland,
where recent decisions of the Swiss Federal Tribunal have confirmed that a valid
assignment of the underlying contract “automatically” transfers the arbitration agreement
(which is regarded as an ancillary or incidental right, accompanying the underlying
P 1467 commercial contract). (332) Likewise, under French law, there is a presumption of
P 1468 “automatic” assignment of the arbitration clause together with the underlying contract.
(333) A Russian decision similarly concluded that:
“Unless otherwise provided for by law or agreement, rights of the initial creditor are
transferred to a new creditor in full and under the conditions which existed at the time of
transfer.…The right to protect interests…in a particular forum, initially chosen by the
parties, also is transferred to an assignee.” (334)
In a few jurisdictions, the effects of an assignment of a contract on the agreement to
arbitrate are prescribed by statute. (335)
The “automatic” transfer of the arbitration agreement is properly understood as only
presumptive, leaving the parties generally free to agree upon a different disposition of the
arbitration agreement. Particularly in common law jurisdictions, close attention is
sometimes paid to the wording and intention of the original arbitration clause and the
subsequent assignment contract, to determine whether the parties intended to provide for
assignment of the arbitration clause. (336) If the assignment agreement excluded the
arbitration clause, then this will ordinarily be sufficient to prevent the assignee from
becoming a party to that clause. (337) In most instances, however, assignment agreements
will not specifically address the transfer of the arbitration agreement, leaving that issue to
17
the general presumption of “automatic” transfer of the agreement to arbitrate together
with the underlying contract.
A few decisions suggest that the autonomous nature of the agreement to arbitrate argues
against the arbitration clause’s automatic transfer together with the underlying contract. In
the words of one award:
P 1468
P 1469 “due to the legal autonomy of an arbitration agreement vis-à-vis the contract in which it
is included, a power of agency, whether implied or in writing, or an endorsement of rights
and obligations, with respect to that contract, shall not necessarily result in an agency or in
an endorsement of rights relating to the arbitration convention.” (338)
This reasoning is ill-considered. The fact that the arbitration agreement is presumptively
separable does not mean that it has no relationship or association with the underlying
contract; rather, the separability presumption means only that there are circumstances in
which the legal status and characterization of the arbitration agreement will differ from
that of the underlying contract. (339) As discussed above, the purpose of virtually all
arbitration agreements is to provide means of dispute resolution for a particular
substantive contractual (or other) relationship. (340) Thus, just as execution of the
underlying contract will virtually always automatically result in conclusion of the
associated agreement to arbitrate, so the assignment or transfer of the underlying contract
(or its rights and obligations) will presumptively result in the automatic transfer of the
arbitration agreement; the separability of the arbitration agreement does not alter that
conclusion.
There are often contractual limits on assignment in commercial agreements that may
forbid one party from assigning the underlying contract, either absolutely or without its
counter-party’s consent. These contractual limits may render a purported assignment
invalid or ineffective. There may also be instances where a contract cannot legally be
transferred or assigned, at least not without regulatory approvals.
If the assignment of the underlying contract and the arbitration clause are in violation of a
contractual restriction, then the putative assignee arguably has no rights under the
arbitration clause (since the contract and arbitration clause were arguably never
assigned). (341) This is potentially a jurisdictional defect (as distinguished from a
substantive defense or admissibility objection) and, again potentially, an issue that is
subject to interlocutory judicial decision. (342)
In some legal systems, an assignment in breach of a contractual prohibition is
P 1469 presumptively not invalid, even if it is wrongful, but rather is effective while giving rise to a
P 1470 damages claim for breach of the anti-assignment provision. (343) In these legal systems,
the breach of an anti-assignment provision would arguably not affect the tribunal’s
jurisdiction; on the other hand, the basic requirement, in Article II(3) of the New York
Convention and most contemporary arbitration statutes, that arbitration agreements be
specifically enforced, (344) argues strongly for a contrary result.
The wrongful assignment of a contract also gives rise to issues under the separability
presumption. It is at least theoretically possible that an arbitration clause will have been
validly assigned even if the underlying contract has not been (and vice versa). (345)
There are circumstances in which the parties will have concluded a contract containing a
specific prohibition on the assignment of an arbitration agreement. In principle, these
prohibitions should be given effect. In addition, the circumstances of a particular
contractual relationship may give rise to implied prohibitions on assignment of the
arbitration agreement, which should also be given effect. For example, a U.S. company
might agree to arbitrate under CIETAC Rules in China with a German company, and then
one of the parties might purportedly assign the agreement to a Chinese state-owned
entity. It is appropriate to take these circumstances into account in considering whether
the parties intended to permit the assignment of the arbitration agreement.
If an assignment of an arbitration clause is validly effected, then the assignee will have
rights (and obligations) under the clause. In addition, the original assignor may also retain
such rights (either as to pre-assignment events or generally, depending on the terms of the
assignment and any restrictions on assignability). (346)
There are instances in which an arbitration agreement is purportedly assigned during the
pendency of an arbitration. While finding the validity of an assignment in such
circumstances “rather more difficult” than pre-arbitration assignments, some national
courts have generally permitted post-arbitration assignments. (347) This may be subject to
the condition that the arbitrator consent to the assignment. (348)
P 1470
P 1471 As with other non-signatory theories, questions of assignment give rise to choice-of-law
issues. (349) Commentators have noted the lack of uniform substantive rules concerning
the assignment of arbitration agreements. (350) In the absence of applicable international
rules, arbitrators and commentators have tended to look to domestic legal regimes for a
solution.
There is also a lack of uniformity among national choice-of-law rules for selecting the law
governing the question whether an arbitration agreement has been validly assigned. In
some jurisdictions, the question whether an arbitration agreement has been validly
assigned is treated as a procedural matter to be determined by the law of the arbitral
18
seat. (351) In other jurisdictions, the substantive law that governs the underlying contract
has been applied to determine issues of assignability. (352) As in other contexts, the better
view is that the validation principle should apply to the assignability of the arbitration
clause, upholding the assignment if that is the result under either the law governing the
assignment agreement or the arbitration agreement. (353)
[J] Subrogation
Under many national legal systems, there are circumstances where one party may be
subrogated to the contractual rights of another party. This frequently occurs in the case of
P 1471 insurers, who are subrogated to the rights of insureds. In these circumstances, the insurer is
P 1472 typically entitled to invoke (and is bound by) the arbitration provisions of the insured’s
underlying contract (from which the subrogated rights arise). (354) In principle, the
validation principle should apply to the effects of subrogation on an arbitration
agreement. (355) In some jurisdictions, direct action statutes have also been applied to
permit claims by non-signatories. (356)
[K] Estoppel and Related Doctrines (357)

Particularly in common law jurisdictions, “estoppel” is a well-recognized legal doctrine,
which can be invoked to preclude parties from denying that they are party to arbitration
P 1472 (or other) agreements. (358) In these jurisdictions, “estoppel” is defined in various ways,
P 1473 but generally means that a party is barred by considerations of good faith and equity
from acting inconsistently with its own statements or conduct. (359) As one commentator
summarized the doctrine:
“The doctrine of equitable estoppel exists to prevent fraud or injustice; to the extent that a
party has made a statement or acted in a particular way, it is unjust and tantamount to
fraud to permit that party thereafter to allege and prove facts contrary to its previous
statements.” (360)
It is sometimes said that the doctrine of estoppel is not, as such, extant in civil law
jurisdictions. According to one commentator, estoppel is “rarely applied” in Continental
European arbitrations. (361) Nonetheless, similar conceptions exist under rubrics of good
faith, abuse of right, or venire contra factum proprium, (362) or in connection with the group
of companies doctrine. (363)
A number of authorities, particularly in common law jurisdictions, have recognized
estoppel or related doctrines as a basis for either permitting a non-signatory to invoke an
arbitration agreement or holding that a non-signatory is bound by an arbitration
agreement. These authorities have held that, where a non-signatory claims or exercises
rights as a party under a contract, which contains an arbitration clause, the non-signatory
will typically be estopped from denying that it is a party to the arbitration clause. (364)
P 1473 Similarly, where a party invokes an arbitration clause in national court proceedings,
P 1474 claiming rights under that clause, it will ordinarily be estopped from subsequently
denying that it is bound by the arbitration agreement in other proceedings. (365)
Some U.S. courts have adopted a theory of “equitable estoppel” for application to
questions of arbitral jurisdiction. (366) Estoppel principles have frequently been applied
to hold that a party is bound by the arbitration clause associated with the substantive
contractual rights that it claims: that is, if a party claims or exercises rights under a
contract, then it is ordinarily bound by the arbitration clause in that contract. As one U.S.
court put it: “In short, [plaintiff] cannot have it both ways. It cannot rely on the contract
when it works to its advantage and ignore it when it works to its disadvantage.” (367)
Other U.S. lower courts have held that a party that receives a “direct benefit” under a
contract is estopped from denying that it is a party to the contract’s arbitration clause.
(368) In contrast, if not entirely clearly, a party that only receives an “indirect” benefit will
not be estopped from resisting arbitration on this theory. (369)
P 1474
P 1475 Some U.S. lower courts have gone further, either holding that signatories to arbitration
agreements are estopped from resisting arbitration with non-signatories of disputes that
are “intertwined” with arbitrable disputes (370) or relying on a theory of concerted
misconduct between one signatory and a non-signatory to compel arbitration between
that non-signatory and a different signatory. (371)
It is sometimes said that the proper application of the estoppel doctrine is as a “shield,”
and not as a “sword.” In particular, some courts have held that estoppel is most (or only)
appropriate where a non-signatory claimant seeks to invoke an arbitration agreement
against a signatory to the arbitration agreement, but less frequently (or not at all) in the
reverse posture, where a signatory seeks to bind a non-signatory to an arbitration clause:
“[Courts] have been willing to estop a signatory from avoiding arbitration with a non-
signatory when the issues the non-signatory is seeking to resolve in arbitration are
intertwined with the agreement that that estopped party has signed.” (372)
P 1475
P 1476 Conversely, other courts have suggested the reverse, indicating that a signatory may
more readily pursue claims that a non-signatory is estopped from challenging an
arbitration clause. (373)
In principle, it is difficult to see why estoppel should not be equally available to both
19
signatories and non-signatories, albeit under different analyses. For example, when a non-
signatory to a contract claims rights under that contract on third party beneficiary,
subrogation, or similar grounds, the signatories to that contract should be entitled to
invoke the contract’s arbitration clause against the non-signatory claimant, just as the non-
signatory claimant itself invokes the contract. Consistent with this reasoning, some U.S.
courts have allowed estoppel to be used as a “sword,” permitting a signatory to demand
that a non-signatory arbitrate its claims. (374)
As noted above, civil law jurisdictions do not necessarily recognize the estoppel doctrine
as such. (375) Nonetheless, the principles of good faith and equity or fairness that underlie
P 1476 the doctrine are universal, and are recognized, among other things, in the New York
P 1477 Convention. (376) As a consequence, civil law authorities have reached comparable
results to those provided under most forms of estoppel by different avenues. (377)
For example, in one decision, the Swiss Federal Tribunal disregarded the requirement for a
“signed” arbitration agreement where the clause was included in a bill of lading that was
exchanged by the parties. The Tribunal relied on the parties’ ongoing business relations
within the legal framework of the same general contractual conditions, including an
arbitration clause, and reasoned that obligations of good faith precluded one of the
parties from invoking a formal signature requirement. (378) Similarly, the Austrian Oberster
Gerichtshof recently relied on concepts of venire contra factum proprium and abuse of right
to bind a party to an arbitration agreement notwithstanding formal defects in the
agreement. (379)
Principles of estoppel and related doctrines have not frequently been the subject of
choice-of-law analysis. It is difficult to formulate predictable conflicts rules applicable to
the subject, because of the diversity of connecting factors: for example, if a party based in
State A asserts the existence of an arbitration clause, providing for arbitration in State B,
during litigation in State C, against a party based in State D, in connection with disputes
under a contract governed by the law of State E, what state’s law should apply? As in other
nonconsensual contexts, the better approach in these circumstances is to apply
international principles of estoppel and good faith, together with a validation principle,
rather than engaging in an unpredictable, potentially arbitrary choice-of-law analysis.
(380)
[L] Ratification
P 1477
P 1478 A non-signatory (and non-party) to an agreement may subsequently become a party to
that agreement by ratification. (381) Ratification can occur with regard to arbitration
agreements, as well as with other forms of commercial contracts. (382) For example, Party A
to an arbitration agreement may ratify Party B’s assignment of Party B’s rights and duties
under the arbitration agreement to a third party. Likewise, in the case of novation, a new
contract generally replaces a previous contract and one of the original parties is
substituted by a new party. (383) The same choice-of-law rules that apply to
guarantee/guarantor relations (384) should also apply in the context of ratification.
[M] Corporate Officers and Directors

Some national courts have adopted what appear to be sui generis rules with regard to the
application of arbitration clauses to officers and directors of companies who have
executed the arbitration agreement. In virtually all such cases, the officers and directors of
the corporate party will not be parties to the relevant contract. Even in cases where a
company’s officers or directors execute a contract on behalf of the company, they do not
ordinarily thereby become parties, in their personal capacities, to the contract. (385)
P 1478
P 1479 Occasionally, however, litigation relating to the underlying dispute will include the
officers and directors (or other agents) of one or both parties, with claims being asserted
personally against individual officers and directors. In these cases, the officers and
directors frequently seek to invoke the arbitration agreement (or, conversely, may have the
arbitration agreement invoked against them).
As noted above, some U.S. courts have permitted the officers and directors of a corporate
party to invoke the arbitration clause in that party’s underlying commercial contracts,
notwithstanding the fact that the individual officers, directors and employees are not
parties to the underlying contract under ordinary contractual principles. (386) In these
circumstances, a number of U.S. decisions have held that corporate employees, sued for
actions taken in the course of their employment, may invoke arbitration clauses contained
in their employer’s contracts with the adverse third party. (387) As one U.S. court reasoned,
with a degree of overstatement, a company can only act through employees and officers,
and “an arbitration agreement would be of little value if it did not extend to them.’” (388)
These decisions are not unanimously followed even in the United States. (389) One U.S.
court rejected them on the following grounds:
“courts must not offer contracts to arbitrate to parties who failed to negotiate them before
trouble arrives. To do so frustrates the ability of persons to settle their affairs against a
predictable backdrop of legal rules – the cardinal prerequisite to all dispute resolution.”
(390)
Outside the United States and a few other jurisdictions, this approach of permitting
20
corporate employees or agents to invoke arbitration agreements, to which they are not
parties, has not been widely considered. (391) Nonetheless, it has been adopted in a few
other jurisdictions, including France, (392) Canada (393) and Germany. (394)
P 1479
P 1480 The treatment of corporate officers by some U.S. and other courts does not rest on a
conventional analysis of the contractual consequences of the principal-agency
relationship, which would instead usually provide that the agent and/or employee is not a
party to the underlying contract. (395) The separability doctrine might provide an
explanation for this approach if one reasoned that the officers and directors of a corporate
signatory were intended to enjoy the benefits of the arbitration agreement, even if they are
not parties to the underlying contract. These results would be exceptional ones, which
appear to be primarily attributable to the parties’ presumed intentions to provide
procedural protections for their respective agents and/or employees against joinder in
oppressive litigation and to avoid the circumvention of agreements to arbitrate through
the medium of satellite litigation against related parties and individuals. As one court
explained:
“When contracting parties agree to arbitrate all disputes…they generally intend to include
disputes about their agents’ actions because ‘as a general rule, the actions of a corporate
agent on behalf of the corporation are deemed the corporation’s acts.’ If arbitration
clauses only apply to contractual signatories, then this intent can only be accomplished by
having every officer and agent (and every affiliate and its officers and agents) either sign
the contract or be listed as a third party beneficiary.” (396)
On the other hand, in reverse circumstances (i.e., when an adverse party sought, over the
agent’s objections to assert claims against it in arbitral proceedings), courts and tribunals
have been reluctant to hold that the agent or employee is subject to arbitral jurisdiction.
(397)
[N] Shareholder Derivative Rights

P 1480 In some legal systems, a shareholder of a company may in certain circumstances act for
P 1481 the company itself; in general, these circumstances are narrowly circumscribed,
involving only cases where the company’s interests are damaged and the company’s
management refuses to take steps to protect those interests, despite demands that it do
so, ordinarily because of some sort of self-dealing. (398) When a shareholder is permitted
by applicable substantive law to act on behalf of a company to enforce a contract,
questions may arise whether the shareholder may invoke (and is bound by) an arbitration
clause in the contract.
Historically, there was judicial aversion to the arbitration of shareholder derivative claims.
Objections to arbitrability were based on a perceived lack of the shareholders’ assent to
an arbitration agreement. (399) More recently, some courts have shifted the focus of
consent away from the assent of individual shareholders, towards an inquiry into the
corporation’s consent to arbitrate. These courts have reasoned that, in a derivative suit,
shareholders stand in the shoes of the corporation, asserting its rights and privileges, and
“those they choose to sue [may not] be deprived of defenses they could assert against the
corporation’s claims.” (400)
In principle, there is no reason that a minority (or other) shareholder should not be
permitted to invoke an arbitration clause of one of the signatories to that agreement,
provided that applicable national corporate law permits the shareholder to act on behalf
of the signatory. This conclusion was adopted in Frederick v. First Union Securities, Inc., a
U.S. case in which a plaintiff-shareholder brought a derivative suit against a brokerage firm
for allegedly participating in a scheme with company officials to manipulate the market
and engage in insider trading. (401) The court held that the plaintiff was compelled to
arbitrate his claim because the agreement between the corporation and the brokerage
P 1481 firm, which established the brokerage firm’s duties and pursuant to which the plaintiff had
P 1482 brought suit, contained an arbitration clause, and the plaintiff was bringing suit on
behalf of the company. (402) The court also held that the broad language of the arbitration
clause, which provided that it applied to “all claims or controversies” between the
corporation and the brokerage firm, argued for arbitration of the plaintiff’s claims. (403)
Other courts have reached comparable conclusions in holding that shareholder claimants
in derivative actions were bound by the corporation’s arbitration agreements. (404)
[O] Joint Venture Relations

A seldom-applied, but potentially important, theory of non-signatory status is that of joint
venture liability. Although not frequently invoked, some authorities have held that one
joint venture partner’s commitment to arbitrate disputes related to the joint venture binds
other joint venture partners. (405) Similar results can be reached through principles of
“civil conspiracy,” as applied in some national legal systems. (406) In both cases,
considerations similar to those arising under the group of companies doctrine apply, (407)
often justifying application of an agreement to arbitrate to non-signatories.
[P] State Non-Signatories (408)

States and state entities are important actors in international commercial transactions
P 1482 and the international arbitral process. Indeed, as discussed above, one of the reasons that
21
P 1482
P 1483 parties choose to arbitrate their international disputes is to ensure that states and state
entities can be required to participate in, and be bound by the results of, such processes.
(409)
Disputes sometimes arise as to whether a state or state entity is party to an international
arbitration agreement. The same legal rules that apply to private parties in such disputes
should in principle also apply to state entities. (410) Nevertheless, some national court
decisions have demonstrated a deep-seated, but misconceived, reluctance to hold that
non-signatory states (or state entities) are bound by international arbitration agreements.
One leading example was the frequently-debated Pyramids case, where agreements (that
included an ICC clause, providing for arbitration seated in Paris) to construct a complex
tourist resort were entered into between foreign investors and an Egyptian state entity. The
agreements were negotiated with the participation of the Egyptian Ministry of Tourism,
whose involvement in the contractual performance was both necessary and expressly
contemplated. Following the signature page of the agreement, the Minister for Tourism
executed the contract, with a declaration that the agreement was “approved, agreed and
ratified by the Ministry of Tourism.” (411)
After disputes arose, and the foreign investor commenced an ICC arbitration in Paris, the
Egyptian Ministry of Tourism resisted on jurisdictional grounds. The arbitral tribunal
rejected the objection, reasoning, inter alia, that:
“it does not seem in any way unlikely or improbable that the government would have
wished that all disputes concerning the same project would go to the same tribunal. In this
connection one should remember that…the transaction as a whole is to be viewed as a
unified contractual scheme…[T]he Claimant in future disputes might well have been either
the Egyptian government or [its state-owned entity] or both.” (412)
P 1483
P 1484 Despite the tribunal’s analysis, and the Ministry of Tourism’s signed declaration, the
Paris Cour d’appel annulled the award, holding that the signed declaration did not
evidence an intention to become a party to the agreement. (413) That conclusion is
inconsistent with the weight of international authority, and difficult to reconcile with the
plain language and obvious intentions of the signed statement that the Ministry of Tourism
“approved, agreed and ratified” the contractual terms.
An equally misconceived decision was reached by an ICC arbitral tribunal in a dispute
between Libya and a foreign investor. The Libyan state-owned oil company and the
investor had negotiated a “suspension agreement,” dealing with a period of force majeure,
which a representative of the Libyan state had executed with the declaration “Approved
and Endorsed.” (414) Nonetheless, the tribunal held that Libya was not a party to the
agreement, or the arbitration clause, on the ground that it had only signed in its capacity
as a regulatory authority. (415)
Likewise, the U.K. Supreme Court refused to recognize an award, rendered in Paris by a
distinguished arbitral tribunal (chaired by Lord Mustill, formerly of the House of Lords)
against a Ministry of the Pakistan government. (416) The tribunal made a carefully-
reasoned award, concluding that, although not a signatory, the Ministry had negotiated
and performed the underlying contract and then permitted the formal signatory to be
dissolved; in these circumstances, the arbitrators held, applying French law, that the
Ministry was bound by the contract and its arbitration clause. (417) Despite that (and
despite a French decision confirming the award (418) ), the U.K. Supreme Court held that
the tribunal had misapplied French law and that, under Article V(1)(a) of the New York
Convention, the award would not be recognized in England. (419)
These decisions reflect an unsatisfactory view of the manner in which regulatory
authorities exercise their powers. They also risk producing unfair fact-finding and legal
decisions, by absenting a potentially important party from the dispute resolution process.
§ 10.03 FUTURE DIRECTIONS: LEGAL BASES FOR BINDING NON-

SIGNATORIES TO ARBITRATION AGREEMENTS
P 1484 For the most part, authorities are agreed that consent is the essential foundation for
P 1485 ascertaining whether a particular entity has the status of a party to an arbitration
agreement. Whatever legal construct is utilized, the beginning and ending question is
ordinarily whether the parties, with their words and actions considered objectively and on
the basis of good faith in commercial relations, intended that a particular entity be a party
to the arbitration clause. This question arises in numerous contexts – ranging from implied
assent, to guarantee, to incorporation and assumption, to subrogation, to agency, to group
of companies analysis, to ratification – but the fundamental inquiry remains the same in
each case. (420) And, again in each instance, the resolution of this question requires careful
analysis of the language used in the parties’ agreements and communications, the parties’
actions and the commercial background of the parties’ dealings.
There are instances in which national courts lose sight of this principle. In one decision, the
Paris Cour d’appel declared:
“in the law of international arbitration, the effects of the arbitration clause extend to
parties which are directly implicated in the performance of the contract as long as their
situation and their activities give rise to the presumption that they were aware of the
22
existence and of the scope of the arbitration clause in order for the arbitrator to be seized
of all economical and legal aspects of the dispute.” (421)
Similarly, one U.S. appellate decision held that a non-signatory was bound by an arbitral
award because it had “related and congruent interests” with the parties, (422) while
another decision relied on a “nexus between” the parties’ claims and the “integral
relationship” between the parties. (423) Commentators have argued persuasively that
these types of decisions rest on general considerations of equity and efficiency, rather than
a contractual analysis, to support broad extensions of arbitration clauses. (424)
P 1485
P 1486 There are substantial grounds for criticizing these various decisions and for accepting
the foregoing assessment of their analyses. The fact that a party is “directly implicated” in
contractual performance and “aware of” an arbitration clause, or had “congruent interests,”
should generally be insufficient, without more, to subject that party to an arbitration
agreement. Rather, save in exceptional cases where alter ego, estoppel, or similar
nonconsensual theories are involved, it remains essential to root the application of
arbitration agreements to non-signatories in the parties’ intentions and in generally-
applicable contractual and legal principles. This is required by the bedrock principle that
arbitration agreements are consensual instruments, (425) and is necessary for reasons of
commercial predictability.
The touchstone should be whether the parties intended that a non-signatory be bound and
benefitted by the arbitration clause. Answering that question cannot be achieved through
abstract generalizations, but requires consideration of the arbitration clause’s language
and the relations and dealings among the parties in a specific factual setting.
On the other hand, some courts have erred in the opposite direction, declining to extend
arbitration clauses to non-signatories, on the basis of formalistic analyses that ignore the
parties’ objective, good faith expectations. For example, in one recent decision, a U.S.
appellate court considered a dispute in which certain subsidiaries of one company
(“Company A”) entered into contracts (containing arbitration clauses) with certain
subsidiaries of a second company (“Company B”). (426) After disputes arose, Company A
initiated U.S. litigation against Company B, carefully structuring its claims to avoid
inclusion of either party’s subsidiaries, or any contractual claims, in the litigation. Although
the claims were a fairly transparent device to circumvent the underlying arbitration
clause, the U.S. court rejected the argument that the parent companies were obligated to
arbitrate with one another. Among other things, it reasoned (427) that both companies were
P 1486 “sophisticated commercial actors” that were “quite deliberate in constructing and
P 1487 deploying an elaborate web of affiliates” to negotiate the transaction, and there was “no
compelling policy objective” that would be furthered by a finding of alter ego. (428)
Although formally plausible, and consistent with rhetoric about the parties’ freedom to
structure their corporate and commercial relations, this analysis overlooks the
separability of the arbitration agreement and the fundamental objectives of parties that
conclude international arbitration agreements. As discussed above, it is precisely to avoid
expensive, time-consuming litigation in multiple, potentially-partisan forums, with
potentially inconsistent and uncertain results, that parties agree to arbitrate. (429)
Permitting non-signatory corporate affiliates and other related parties to assert claims
based on the parties’ underlying transactions and agreements, while avoiding the express
terms of the arbitration agreement, frustrates these objectives and the parties’ agreement
to arbitrate in a very fundamental way. This reflects the most powerful rationale for the
group of companies doctrine, being that corporate affiliates of the signatory to an
international arbitration agreement should not be permitted to circumvent or frustrate
that agreement through the device of satellite litigation. This is not a question of extending
the arbitration agreement on the basis of a priori formulae, but of identifying which parties
– acting in good faith – should be regarded as having consented to arbitrate.
In this regard, it is important to apply the various legal bases for binding non-signatories
specifically to the separable agreement to arbitrate (as distinguished from the underlying
contract). It bears emphasis that the parties’ intentions – both actual and presumed – will
often be different with regard to their arbitration agreement, and its dispute resolution
mechanism, than with regard to their underlying commercial contracts. That is, there will
readily be cases where the parties desire a unified, “one-stop” dispute resolution
mechanism, particularly one extending to all the members of a corporate group involved
in a particular transaction, without altering the allocations of substantive contractual
rights contained in the underlying contracts.
The foregoing considerations suggest that most criticisms of the group of companies
doctrine (430) are unjustified. The doctrine is virtually unique, in that it was developed
P 1487 specifically with application to the agreement to arbitrate, rather than to other types of
P 1488 contracts. (431) The fundamental rationale for the group of companies doctrine, not
always well-articulated by its proponents, is to preserve the efficacy of the signatories’
agreement to arbitrate. An agreement to arbitrate has the objective of centralizing the
parties’ disputes in a single, neutral, expert forum: as already noted, satellite litigation by
or against corporate affiliates, officers, or other related parties frustrates this objective
entirely, returning the parties to the very jockeying for local court advantage that their
agreement to arbitrate was meant to prevent.
23
The group of companies doctrine serves – sensibly – to prevent this sort of circumvention
and frustration of arbitration agreements. It permits corporate affiliates who have become
materially involved in the signatories’ negotiation and performance to be subjected to
(and benefited by) the signatories’ agreement to arbitrate: the critical consideration in
determining whether the doctrine binds a non-signatory is whether the signatories to the
arbitration agreement would, considered objectively and in good faith, have intended to
bind (and benefit) their affiliates to their agreement to arbitrate. In many instances, while
the signatories may very well have had no intention at all to bind corporate affiliates to
the underlying contract, they will have intended to bind those affiliates to their dispute
resolution mechanisms – for the simple reason that this is necessary in order to make
those mechanisms work.
The foregoing rationale is typically limited to the group of companies doctrine, involving
corporate affiliates, and does not extend generally to other mechanisms for binding non-
signatories that are not corporate affiliates. Nonetheless, this rationale is also reflected in
a few other contexts, including the treatment of corporate officers and directors,
shareholder derivative rights and some versions of estoppel. In each of these settings,
courts and tribunals have correctly relied on fairly attenuated conceptions of consent and
party intent, to conclude, absent express language, that the parties’ desire for an effective,
centralized dispute resolution mechanism implied an agreement to subject corporate
affiliates, directors, officers, shareholders and other related parties to arbitration.
As discussed above, national courts in a number of jurisdictions apply a presumption in
favor of arbitrability in interpreting the scope of an admittedly valid arbitration
agreement. (432) A few lower courts have also applied this presumption to the question
whether a particular party is bound by an arbitration agreement. The same analysis may
explain some of the more expansive decisions of some courts identifying the parties that
are bound by international arbitration agreements. (433)
For the reasons already explained, however, it is inappropriate to adopt the same
approach to issues of interpretation as to the question of a non-signatory’s status: the
strong “pro-arbitration” presumptions that apply in the context of interpreting a valid
P 1488 arbitration agreement are relevant, but not fully applicable, in the context of determining
P 1489 whether an arbitration agreement binds a party. (434) It is one thing to determine
whether a party which concededly concluded a valid agreement to arbitrate some
disputes, also intended to arbitrate other disputes; it is another thing to determine
whether a party agreed to arbitrate anything at all.
Nonetheless, as also discussed above, it is appropriate to apply a liberal standard of proof
of consent that takes into account the pro-arbitration policies of the New York Convention
and national arbitration legislation. (435) For the reasons already discussed, this approach
makes particular sense in the context of corporate affiliates, officers and directors, groups
of companies, and other related parties, where there are strong reasons to conclude that
parties who have entered into an arbitration agreement do not intend or desire for it to be
circumvented by corporate affiliates or other related parties, but rather that it will
centralize all of the disputes related to the parties’ transactions in a single, neutral forum.
Moreover, even in other contexts, there is also substantial force to the notion that
commercial parties would presumptively desire that all related disputes be resolved
efficiently, in a unified, “one-stop” forum, rather than in multiple, potentially inconsistent
proceedings in different forums.
Finally, in limited circumstances, entities may be bound by arbitration agreements by
operation of law, without regard to questions of intent. Cases of succession (through merger
or similar doctrines) are the most obvious examples. (436) The same is true with regard to
doctrines of veil-piercing and estoppel, where a party’s actions subject it to an arbitration
agreement, signed by another entity, regardless of questions of assent or intent. (437) It is
critical to distinguish such cases, which do not involve traditional contractual analysis,
conceptually from other non-signatory theories, which do. Although these doctrines are
only exceptionally applicable, they play an essential role in ensuring the fairness of the
international arbitral process.
§ 10.04 FORMAL VALIDITY AND NON-SIGNATORIES

Application of the theories discussed above to bind a non-signatory raises questions of
compliance with applicable formal requirements, under many legal regimes, for a “written”
arbitration agreement. (438) There has been surprisingly little attention to issues of form in
non-signatory cases, with the issue apparently not frequently being raised.
Many courts have apparently concluded, usually without discussion, that there is no
requirement under the New York Convention (or national law) that an arbitration
P 1489 agreement be signed by all the parties thereto. In principle, this conclusion is difficult to
P 1490 accept. Although form requirements are archaic, for the reasons discussed above, (439)
where they exist these requirements logically must apply for the benefit of each party: a
party as to whom the “signature” or “exchange” requirements under the Convention or
national law were not satisfied would, in principle, not be bound by the agreement.
Nonetheless, those authorities who have addressed the issue have adopted a variety of
means of avoiding or satisfying applicable form requirements in non-signatory contexts.
There is, of course, no rule forbidding an agreement from being signed by one entity on
24
behalf of another entity (most obviously, in the case of agency relations). (440) For
example, although Article II(2) of the Convention requires an arbitration agreement “signed
by the parties,” it is clear that a “party’s” signature can be provided by another entity on
its behalf (most obviously, an agent, subrogator, or alter ego). To the same effect, one may
also reason that the “writing” requirement of the New York Convention and most national
laws can be satisfied by the existence of a written arbitration agreement, which may be
consented to by an exchange of writings other than the traditional arbitration agreement
(e.g., guarantees, assignments, agency agreements, ratification by written instrument).
More broadly, some authorities have held that form requirements apply only to the
arbitration agreement itself and not to extracontractual mechanisms by which an entity
may succeed to or assume a party’s obligations and rights under that agreement (e.g., by
merger, group of companies, alter ego); this effectively reduces the relevance of form
requirements in non-signatory contexts to a very small set of cases. (441) As the Swiss
Federal Tribunal explained this rationale:
“this formal [writing] requirement only applies to the arbitration agreement itself, that is
to the agreement…by which the initial parties have reciprocally expressed their common
will to submit the dispute to arbitration. As to the question of the subjective scope of an
arbitration agreement formally valid [under this writing requirement] the issue is to
determine which are the parties which are bound by the agreement and eventually
determine if one or several third parties which are not mentioned therein nevertheless
enter into its scope ratione personae.” (442)
P 1490
P 1491 Other authorities have reasoned more generally that “no overly strict requirements
should apply to the formal validity of an extension of the arbitration clause to a third
party,” (443) or have relied on principles of estoppel (to excuse compliance with form
requirements). (444)
The lack of attention to form requirements in non-signatory contexts is further indication of
the extent to which these requirements fail to reflect commercial practice and substantial
justice. (445) Given these critiques of form requirements generally, there is little
justification for extending these requirements beyond their role with regard to the initial
formation of arbitration agreements.
That conclusion applies with particular force insofar as the evidentiary role of form
requirements is concerned (446) – in cases involving a written, formally valid arbitration
agreement between parties A and B, there will be no question regarding the terms of that
agreement if party C is subjected to it. Instead, analysis in these circumstances focuses on
whether party C in fact agreed to be bound by the arbitration agreement – an inquiry as to
which the general form requirement for agreements to arbitrate is often ill-suited. That is
most obviously true in cases involving alter ego, agency, ratification, implied consent and
estoppel theories. The better view, in light of these considerations, is that the form
requirements of the New York Convention and national arbitration legislation apply only to
the initial agreement to arbitrate and not to legal bases for subjecting parties, that are by
definition “non-signatories,” to that agreement. (447)
§ 10.05 CHOICE OF LAW GOVERNING PARTIES TO ARBITRATION

AGREEMENT
Choice-of-law issues frequently arise in disputes over the identities of the parties to
P 1491 international arbitration agreements. (448) Nonetheless, there is little considered analysis
P 1492 focusing on the law applicable to determining the parties to an arbitration agreement.
(449)
As discussed above, some authorities have applied international principles (particularly to
the group of companies, estoppel and alter ego doctrines), (450) while other authorities
have applied national law rules (particularly to issues of agency, assignment, merger and
guarantee/ratification). (451) Generally speaking, as discussed below, the application of
these various international and national law standards to different non-signatory theories,
depending on the nature of the relevant theory, is appropriate: properly analyzed, the law
applicable to determine whether a non-signatory is bound by an arbitration agreement
depends on the particular theory that is invoked. (452) Also preliminarily, where national
law is applicable, the better analysis is to apply a validation principle, that gives effect to
an arbitration agreement vis-à-vis a non-signatory if that is the result provided for under
either the law applicable to the underlying legal event (e.g., third party beneficiary rights,
assignment agreement) or the law applicable to the arbitration agreement.
[A] Application of International Principles to Non-Signatory Issues

In practice, national courts and arbitral tribunals have adopted varying approaches to the
choice of law applicable to determining the parties to an arbitration agreement. A number
of arbitral awards have applied principles of international law to ascertain the parties to
an international arbitration agreement. (453) As one award reasoned:
“In international relations, the tribunal considers that it is preferable to apply rules
adapted to the conditions of the international market and which provide a reasonable
P 1492 balance between the company’s confidence in its distinct legal status and the protection
P 1493 of entities which may fall victim to the manipulations of a company controlling its
25
P 1493
subsidiary to deprive a creditor of the benefits to which it is entitled.” (454)
A number of the awards cited in support of the foregoing proposition expressly reject the
application of national law to non-signatory issues, instead concluding that the
application of international law is appropriate. (455) A few awards have characterized
these rules of international law as lex mercatoria or general principles of international law.
(456) Others have apparently relied on the parties’ incorporation of institutional
arbitration rules, as reflecting a choice of international or transnational law:
“The Arbitral Tribunal will not examine this delicate question [of the status of a non-
signatory under veil-piercing analysis] only on the basis of the law applicable to the merits
of the dispute, Egyptian law,…[as] the Tribunal is justified in referring to the lex mercatoria.
The principle of autonomy of arbitration clauses, now widely recognized, justifies this
reference to a non-national rule construed from international commercial usage alone. In
particular, it is justified to separate the merits from the validity and scope of the
arbitration clause. The Arbitral Tribunal will thus rule on the basis of general notions of
good faith in business transaction and international commercial usage.” (457)
Some national courts have also adopted international principles, rather than national
rules, in resolving non-signatory issues. This has been most pronounced in France, where
courts have applied more general French choice-of-law analysis, providing that
P 1493 international arbitration agreements are “autonomous” from national legal systems and
P 1494 subject to international law. (458) This analysis was well-articulated in the Dow Chemical
decision (discussed above), applying the group of companies doctrine as a “usage of
international commerce.” (459)
In a conceptually-analogous fashion, some U.S. courts have applied “federal common law,”
derived from general U.S. contract law and agency rules, to the question whether a non-
signatory is bound by an international arbitration agreement. (460) Although not ordinarily
denominated as “international” principles or rules, these U.S. decisions decline to apply
otherwise applicable U.S. state (or foreign) law to non-signatory issues in favor of neutral,
judicially-fashioned principles that focus on the parties’ consent and considerations of
fairness and equity – in a manner analogous to the application of general principles of law.
More recently, the U.S. Supreme Court has rejected the application of federal common law
to non-signatory issues in the context of domestic arbitration agreements under Chapter 1
of the FAA. The Court held, in Arthur Andersen LLP v. Carlisle, that, although the FAA “creates
substantive federal law regarding the enforceability of arbitration agreements,…
background principles of state contract law” govern “the question of who is bound by
them.” (461) The Court went on to conclude that “‘traditional principles’ of state law allow a
contract to be enforced by or against nonparties to the contract through ‘assumption,
piercing the corporate veil, alter ego, incorporation by reference, third party beneficiary
theories, waiver and estoppel.’” (462) That decision did not, however, address the
application of the New York Convention or Chapter 2 of the FAA, where the better view,
P 1494 generally adopted by U.S. lower courts, remains that federal common law should govern
P 1495 issues of alter ego, agency, estoppel and the like. (463)
[B] Application of National Law to Non-Signatory Issues

Despite these approaches, other courts and arbitral tribunals have rejected the notion that
international law rules apply to the determination of the parties to an international
arbitration agreement, and have instead applied various choice-of-law rules calling for the
selection of a national law. Thus, in a recent decision, an English court declared:
“The identification of the parties to an agreement is a question of substantive not
procedural law.…There [is] no basis for the tribunal to apply any other law [than that
selected by the parties].” (464)
This analysis went on to reject the application of an international “group of companies”
doctrine and to affirm the primacy of national law in structuring contemporary commercial
transactions. Other courts and arbitral tribunals have reached similar conclusions, holding
that national law, selected through the application of choice-of-law rules, applies to non-
signatory issues. Thus, some courts and tribunals have applied the law selected by the
choice-of-law clause in the underlying contract to non-signatory issues (465) (although
other authorities, set out above, have rejected these analyses); other courts have applied
the law of the arbitral seat. (466)
P 1495
P 1496 In contrast, some national courts and arbitral tribunals (467) have (wrongly) applied the
local law of the judicial enforcement forum to issues of non-signatory status. The clearest
example of this approach was a recent U.S. appellate decision which reversed a trial
court’s recognition of a foreign (Egyptian) arbitral award, where the arbitral tribunal had
applied a variant of the group of companies doctrine to bind a non-signatory parent
corporation. (468) Among other things, the U.S. court held that “American” law was
mandatorily applicable to determine whether a non-signatory U.S. company was a party to
an arbitration agreement:
“It is American federal arbitration law that controls. An American nonsignatory cannot be
bound to arbitrate in the absence of a full showing of facts supporting an articulable
theory based on American contract law or American agency law.” (469)
26
P 1496 To arguably the same effect, other U.S. courts have applied national law to a variety of
P 1497 non-signatory issues, such as alter ego status (470) and estoppel, (471) but have done so
based upon more generally-applicable choice-of-law rules, rather than (wrongly and
reflexively) applying the law of the judicial enforcement forum. (472)
[C] Future Directions: Choice of Law Applicable to Non-Signatory Issues

As discussed above, a number of different legal theories are invoked to subject non-
signatories to an arbitration agreement. (473) The better approach to the choice of law
applicable to non-signatory issues requires considering the particular legal theory that is
relied upon to subject a party to the arbitration agreement. In particular, the same law will
not necessarily govern purely consensual non-signatory theories (such as agency, third
party beneficiary, guarantor relations, assumption, or assignment), on the one hand, and
nonconsensual doctrines (such as estoppel and alter ego), on the other.
[1] Future Directions: Application of National Law to Non-Signatory Issues
In principle, issues of implied consent, assumption, ratification, third party beneficiary
status, joint venture relations and the group of companies doctrine should be subject to
the same choice-of-law rules and analysis as the underlying arbitration agreement. (474)
Issues of ratification and assumption are questions directly concerning either the
interpretation or formation of an arbitration agreement under generally-applicable
contract law mechanisms, and would therefore be governed by the law applicable to the
arbitration agreement under most conflicts systems. (475) Conversely, there is no reason
not to apply the law governing the arbitration agreement to these issues. (476)
P 1497
P 1498 The application of national law in this manner entails application of a validation
principle (for the reasons discussed above), which is mandated by the New York
Convention and many national arbitration regimes. (477) That principle provides for the
validity of the arbitration agreement, including as to the status of non-signatories as
parties to the agreement, whenever provided for by any of the laws potentially applicable
to the agreement (in particular, the law of the underlying contract and the law of the
arbitral seat). (478)
Questions of implied consent to an arbitration agreement, as well as application of the
group of companies doctrine, should also in principle be subject to the law governing the
arbitration agreement. This is consistent with general choice-of-law analysis with regard to
implied consent to other contracts. (479) For the reasons discussed above, it makes
particular sense to apply the law governing the arbitration agreement to application of the
group of companies doctrine (which was developed for specific application only to
agreements to arbitrate). (480)
The effects of agency, assignment, guarantee and subrogation agreements on the parties to
international arbitration agreements are more complex, but should be treated similarly,
by applying the law governing the original agreement to arbitrate. It is appropriate to
apply the rules prescribed by the law governing the original arbitration agreement
because, where actions by third parties (e.g., assignees, guarantors) purportedly impact
the substantive rights of the original parties to the arbitration agreement, those original
parties’ ability to arbitrate disputes concerning those rights should not be altered by a
“foreign law” (e.g., the law of an agency, assignment, or subrogation agreement which they
had no role in selecting). Rather, the law governing the arbitration agreement should be
available to preserve the original parties’ ability to arbitrate concerning their substantive
rights. Conversely, a “foreign” law, selected in a new agreement (of assignment, guarantee,
or the like), should not be permitted to intrude and affect the rights and obligations of the
original parties to the arbitration agreement, who did not agree to application of the new
law.
In principle, the effect of a merger (or other legal succession) should also be governed by
P 1498 national law. In particular, the effects of succession are properly governed by the law of
P 1499 the state under which the relevant corporate entities (or other persons) are organized
(e.g., a merger between Dutch companies is governed by Dutch law). At the same time, the
validation principle should also apply, to ensure that corporate reorganizations or similar
events under a foreign law do not have the effect of circumventing the arbitration
agreement.
[2] Future Directions: Application of International Principles to Non-Signatory Issues
More difficult choice-of-law considerations arise with regard to issues of alter ego status,
apparent authority and estoppel. In each of these cases, the better approach in
international matters is to apply international principles. (481) Each of these doctrines
rests on noncontractual theories, and doctrines based on general principles of equity and
justice, as to which there is ordinarily little principled basis in an international setting for
choosing a particular national law and where international principles of good faith have
particular applicability. In the context of international arbitration agreements, principles
of apparent authority, veil-piercing and estoppel, which are formulated to take into
account the transnational character of the parties and their international dealings, are
more appropriate than application of one state’s domestic law.
[3] Future Directions: International Limitations on National Law Applicable to Non-
27
Signatory Issues
As discussed elsewhere, national laws in the context of non-signatory issues should be
subject to international limitations, forbidding discriminatory or idiosyncratic rules. (482)
For example, the New York Convention would not permit a Contracting State to prohibit the
assignability, subrogation, or ratification of any arbitration agreement or to forbid parties
from entering into an arbitration agreement through an agent. Similarly, the Convention
would not permit giving effect to a Contracting State’s rule that a merger transferred all
substantive obligations, but not arbitration agreements. In each case, such rules would
both discriminate against arbitration agreements and be out-of-step with the treatment of
arbitration agreements in most developed jurisdictions.
Finally, as discussed above, it is generally inappropriate for a national court to apply the
law of the judicial forum in which an award might be, or is, enforced to non-signatory issues
in judicial enforcement proceedings. (483) As already noted, one recent U.S. decision –
Sarhank Group v. Oracle Corp. (484) – departs from this approach, instead holding that
P 1499 “[a]n American nonsignatory cannot be bound to arbitrate in the absence of a full
P 1500 showing of facts supporting an articulable theory based on American contract law or
American agency law.” (485)
This analysis is impossible to reconcile with either the New York Convention or generally-
accepted choice-of-law principles. There is no justification for a Contracting State to apply
its own substantive law to all claims that one of its nationals is bound by an arbitration
agreement. On the contrary, as discussed above, Article V(1)(a) of the New York Convention
prescribes a choice-of-law rule for the existence and validity of the arbitration agreement
– being the law selected by the parties or (absent such choice) the law of the arbitral seat.
(486) The Sarhank analysis flatly contradicts this rule, instead adopting a parochial
preference for local law, applied to protect local businesses. The Sarhank analysis also
contradicts contemporary international conflicts rules – none of which would permit
application of local law to protect local residents in such circumstances. (487)
§ 10.06 ALLOCATION OF COMPETENCE TO DETERMINE PARTIES TO

ARBITRATION AGREEMENT
As with other disputes over the enforceability and interpretation of international
arbitration agreements, determining the identities of the parties to such an agreement
gives rise to questions concerning the allocation of jurisdictional competence between
national courts and arbitrators. (488) Consistent with more general approaches to the
competence-competence doctrine, (489) arbitral tribunals have almost uniformly
P 1500 concluded that they have the authority to consider whether the parties’ arbitration
P 1501 agreement was binding on particular entities. (490) Indeed, there are virtually no
instances in which a tribunal has refused on jurisdictional grounds to consider arguments
that an arbitration agreement binds particular non-signatories.
National courts have reached less consistent results in addressing the competence of
arbitrators to resolve disputes over the parties to an international arbitration agreement.
As discussed above, many national arbitration statutes (and/or judicial authorities)
address the allocation of competence between national courts and arbitrators to decide
disputes over the enforceability and interpretation of arbitration agreements. (491) These
general principles of competence-competence are applicable, with few peculiarities, in
the specific context of determining the parties to arbitration agreements.
The Model Law’s regime for competence-competence, in Articles 8 and 16, (492) applies to
disputes over the parties to an arbitration agreement. Consistent with that regime, courts
applying the Model Law have affirmed the power of arbitral tribunals to consider disputes
over the identities of the parties to arbitration agreements, (493) while also entertaining
interlocutory litigation concerning this issue (494) and reviewing awards addressing the
subject. (495)
French courts have concluded (consistent with general French principles of competence-
competence) (496) that arbitral tribunals have the competence to decide initially what
parties are bound by an arbitration agreement; (497) the arbitrator’s jurisdictional award is
subject to subsequent de novo judicial review by French courts. (498) Once arbitral
P 1501 proceedings have been commenced, no interlocutory judicial consideration of
P 1502 jurisdictional issues is available in French courts; even before an arbitration is
commenced, no judicial consideration is permitted, save for a manifest nullity of the
arbitration clause towards the non-signatories. (499)
In contrast, U.S. courts have reached divergent results with regard to the allocation of
competence to decide non-signatory issues. Some courts have upheld the arbitral
tribunal’s authority to decide what parties are bound by an arbitration agreement, (500)
while others have reached the opposite result, reasoning that an “arbitration proceeding
[is] not the proper forum for deciding whether an arbitrator may afford relief against a non-
signatory who is not covered by an arbitration agreement.” (501)
The former position is clearly correct: as discussed above, it is well-settled under the FAA
that an arbitral tribunal has the inherent power to consider jurisdictional disputes and
make awards or orders on them. (502) Those determinations will generally be subject to de
novo judicial review, (503) except where the parties have agreed to submit jurisdictional
28
issues for arbitral determination. (504)
As discussed above, the U.S. Supreme Court held in First Options that so-called
“arbitrability questions” could be finally resolved by the arbitral tribunal, provided that
the parties agreed to grant the arbitrators such power. (505) Additionally, the Court held
that an agreement to arbitrate “arbitrability” issues must be established by “clear and
unmistakable” evidence. (506) These requirements were formulated by the First Options
P 1502
P 1503
Court in the specific context of a dispute over the identity of parties to an arbitration
agreement, and they clearly apply to disputes over the status of non-signatories.
In general, however, it is difficult to see how a non-signatory can be shown to have clearly
and unmistakably agreed to arbitrate the question whether it ever agreed to the
arbitration clause (save in after-the-fact submission agreements). (507) Nevertheless, some
recent U.S. decisions applying First Options have found this standard satisfied, typically by
arbitration agreements incorporating institutional arbitration rules: these decisions have
held that “a non-signatory can compel a signatory to arbitrate under an agreement where
the question of arbitrability is itself subject to arbitration.” (508)
§ 10.07 ARBITRATION IN CORPORATE AND PARTNERSHIP CONTEXTS (509)

It is common in some legal systems to include arbitration clauses in the constitutive
document for a legal entity. Examples include arbitration clauses in articles of association
P 1503 (or corporate charters) of a company or the deed of a partnership. (510) Parties include
P 1504 such provisions in corporate/partnership documents for obvious commercial and
business reasons: the members of a corporate body or partnership wish to have their
disputes resolved in a private, commercially-oriented manner, over which they have a
substantial degree of control. (511) The ongoing, cooperative nature of corporate or
partnership relations makes arbitration particularly well-suited for resolving shareholder
or partnership disputes.
In most legal systems, arbitration clauses in corporate or partnership documents are valid
and enforceable. (512) This is merely a straightforward and commercially-sensible
application of the general rule under leading international arbitration conventions and
national legislation that arbitration agreements are presumptively valid. (513) This rule
applies with particular force in corporate or partnership contexts, where parties have
special reasons for desiring a commercially-experienced tribunal and the privacy and
informality of the arbitral process.
Questions sometimes arise as to the effect of arbitration agreements in the case of
transfers of shares or partnership interests to new shareholders or partners. It is relatively
clear that any new partner or shareholder will be subject to the arbitration provision in a
company’s charter or a partnership’s deed, regardless of specific acceptance thereof.
Exercising rights and deriving benefits as a shareholder or partner within a corporate or
partnership agreement, which itself contains an arbitration clause, suffices to subject the
new party to that clause. (514) As one authority explains, with reference to German law:
P 1504
P 1505 “when a person becomes the holder of a general or a limited share in a partnership
which had already been organized before he joined it, he will be bound by an ‘intra-
partnership’ agreement which had been attached to the original partnership contract
before he joined the partnership. It is wholly irrelevant whether he acquired a general or a
limited share. It also does not matter on which legal basis his entry into the partnership
rests: on a statutory succession (for example, as an heir, a receiver or a liquidator), or upon
a corporate transaction (for example, as a purchaser or a donee).” (515)
The same analysis applies to transfers of corporate shares. (516) New shareholders are
automatically bound by the arbitration clause contained in a company’s constitutive
documents, simply by virtue of their status as shareholders, without the need for a
separate agreement. (517)
Equally, a party’s purported acquisition of corporate shares or partnership interests – even
if invalid – also generally subjects it to the corporate charter’s or partnership deed’s
arbitration clause with regard to disputes over the validity of that acquisition. The act of
exercising rights attached to corporate shares or partnership interests is sufficient to
subject the party claiming such rights to the arbitration clause associated with them.
It would be theoretically possible to include arbitration agreements in the constitutive
documents of publicly-held companies, requiring public shareholders to arbitrate claims
against the company and its management. As discussed above, such provisions are not
widely used in practice. (518)
In the United States, the Securities and Exchange Commission has an informal policy of
discouraging the registration of securities whose documentation includes mandatory
P 1505 arbitration provisions. (519) Nonetheless, there are exceptions to this general approach
P 1506 and there are, in principle, no reasons that an arbitration clause could not validly be
included in the constitutive instruments of a public company, binding all shareholders in
the company with respect to defined categories of claims. (520)
As discussed above, national courts have generally rejected arguments that shareholders’
disputes and the “internal affairs” of corporate governance are nonarbitrable. (521) There is
no reason that arbitral tribunals cannot satisfactorily resolve issues of corporate law, just
29
as they resolve other legal issues. Nonetheless, in some jurisdictions, questions have arisen
as to the arbitrability of particular matters (such as the validity of shareholder
resolutions). (522) Additionally, questions also arise as to the scope of the claims covered
by arbitration provisions in corporate constitutive instruments. (523)
§ 10.08 CLASS ARBITRATIONS (524)

[A] United States
Under some legal systems, “class actions” are an important part of the domestic litigation
system. A class action is a civil suit, often a mass torts or consumer litigation, in which one
P 1506 or more named plaintiffs represent a large, sometimes indeterminate, number of
P 1507 similarly-situated individuals in pursuing related claims against one or more
defendants. (525) The logic of class actions is to permit large numbers of comparatively
small claims that would not otherwise readily be pursued to be heard efficiently in a single
proceeding.
Class actions are frequently used in the United States, and broadly similar devices are
available in some other common law systems. (526) The historical development of so-
called “class arbitration” in the United States illustrates, however, the complexities and
difficulties that arise from efforts to implement such a system of dispute resolution.
[1] Historical Background
Historically, courts in the United States held that only the parties to a particular contract
(or set of contracts) could participate in an arbitral proceeding and, thus, that class action
arbitrations were impermissible, because they involved nonparties to the particular
contract in question. In Vernon v. Drexel Burnham & Co., for example, the court denied the
claimants’ request to order a class arbitration of claims by multiple claimants and instead
ordered individual arbitrations. (527) The court rejected the argument that a consolidated
arbitration could be ordered because all of the claimants were party to contracts, each
one with the defendant and each one containing an arbitration clause, relying instead on
traditional notions of privity of contract:
“A class action cannot be used to subvert an otherwise enforceable agreement to arbitrate
contained in a valid contract merely because other individuals, who might qualify as
members of a class, were subject to the same provision.” (528)
P 1507
P 1508 Despite this, other U.S. courts held that class actions could, in principle, be asserted in
arbitral proceedings. In Keating v. Superior Court, franchisees of a grocery chain argued
that their claims against the grocery chain franchisor under state law were nonarbitrable
and that, if this objection were rejected, arbitration should proceed as a class action,
rather than in multiple individual arbitrations. (529) The franchisor responded that class
procedures in arbitration were impermissible, insisting that its various bilateral
agreements to arbitrate with individual franchisees contemplated only individual
arbitrations. (530)
On appeal, the California Supreme Court ordered arbitration on a class basis, describing
class arbitration as “giv[ing] expression to the basic arbitration commitment of the
parties.” (531) The Court’s analysis began from the premise that a class action is an
important means of vindicating the rights of large groups of persons and that adhesion
contracts involving consumers, franchisees and similar parties present an ideal setting for
class actions (and class arbitrations). The Court reasoned:
“An adhesion contract is not a normal arbitration setting, however, and what is at stake is
not some abstract institutional interest but the interests of the affected parties. Classwide
arbitration, as Sir Winston Churchill said about democracy, must be evaluated, not in
relation to some ideal but in relation to its alternatives. If the alternatives in a case of this
sort is to force hundreds of individual franchisees each to litigate its cause with Southland
in [a] separate arbitral forum, then the prospect of classwide arbitration, for all its
difficulties, may offer a better, more efficient, and fairer solution. Where that is so, and
gross unfairness would result from the denial of opportunity to proceed on a classwide
basis, then an order structuring arbitration on that basis would be justified.” (532)
After the California Supreme Court’s decision in Keating, authorizing class arbitration,
California state courts ordered class arbitration in a wide variety of circumstances. (533)
P 1508
P 1509 Nonetheless, courts in a number of other U.S. states rejected the possibility of class
arbitration. (534) At the same time, federal courts generally refused to order class
arbitration unless the arbitration agreement contained express provisions to that effect.
(535) A representative decision was Champ v. Siegel Trading Co., which refused to order
class arbitration absent a specific agreement between the parties authorizing it. (536)
Given that the vast majority of arbitration agreements did not provide expressly for class
arbitration, these decisions appeared to render class arbitration, at least outside of
California, extremely unusual. (537)
[2] Green Tree Financial Corp. v. Bazzle and Its Progeny
Beginning in 2003, the U.S. Supreme Court issued a series of decisions on the subject of
class arbitration which initially appeared to authorize (and encourage) class arbitration. It
30
was only subsequently that the Court (appears to have) substantially retrenched,
producing a resolution that remains unclear but that appears inhospitable to class
arbitration absent a clear agreement providing for class procedures.
The Supreme Court’s first consideration of class arbitration was in Green Tree Financial
Corp. v. Bazzle. (538) There, the South Carolina Supreme Court had adopted the reasoning
of the California courts, holding that “class-wide arbitration may be ordered when the
arbitration agreement is silent if it would serve efficiency and equity, and would not result
in prejudice.” (539) The U.S. Supreme Court reviewed the South Carolina decision and, in a
badly-fragmented set of opinions, reversed and remanded to the arbitral tribunal. The
Supreme Court held that class action arbitrations are not inconsistent with the FAA and
that the availability of class arbitration depends on the terms of the parties’ arbitration
P 1509 agreement; the Court’s badly-divided plurality decision also appeared to leave resolution
P 1510 of the question whether an arbitration agreement authorized class arbitration largely to
the arbitrators, subject only to minimal judicial review. (540)
Justice Breyer’s plurality opinion in Bazzle initially considered whether the South Carolina
court had correctly decided that the parties’ arbitration agreement was silent on the issue
of class arbitration or whether the agreement in fact, as Green Tree contended,
affirmatively forbade class arbitration. (541) The plurality opinion concluded that this
question was for the arbitrators, not the courts, to decide: according to the plurality, the
question whether an arbitration agreement authorized class arbitration did not fall within
the category of “gateway matters” (such as the validity or scope of an arbitration
agreement) that are for courts presumptively to decide on an interlocutory basis. (542)
Rather, the plurality thought the question whether an arbitration agreement permits class
arbitration “concerns contract interpretation and arbitration procedures. Arbitrators are
well situated to answer that question.” (543) The plurality therefore remanded the case to
the arbitral tribunal to determine whether the parties’ arbitration agreement authorized
class arbitration; moreover, the almost inevitable corollary of Justice Breyer’s plurality
analysis was that an arbitral tribunal’s interpretation whether an arbitration agreement
authorized class arbitration would be subject to de minimis judicial review in a vacatur
action. (544)
This conclusion was bolstered by Justice Stevens’ opinion, concurring in the judgment.
Justice Stevens wrote that the plurality’s opinion was “close to [his] own” and that he
concurred so that there would be a controlling opinion. (545) Nonetheless, Justice Stevens
would have affirmed the South Carolina court on other grounds – in particular, because he
thought that its decision compelling class arbitration was “correct as matter of law.” (546)
Justice Stevens reasoned:
“The Supreme Court of South Carolina had held as a matter of state law that class-action
P 1510 arbitrations are permissible if not prohibited by the applicable agreement, and that the
P 1511 agreement between these parties is silent on the issue.…There is nothing in the [FAA]
that precludes either of these determinations by the Supreme Court of South Carolina.”
(547)
The Court’s decision in Bazzle ushered in a very substantial increase in class arbitrations in
the United States, with numerous requests for class arbitration being filed in wake of the
decision. The AAA alone administered nearly 300 class arbitrations, collectively involving
billions of dollars in claims, which were filed over the space of several years, (548) while
JAMS administered a smaller, but substantial, number of additional class arbitrations.
(549) Both the AAA and JAMS also adopted institutional rules designed specifically for class
arbitrations. (550)
Some of these class arbitrations proceeded pursuant to arbitration agreements that
expressly provided for class arbitration or pursuant to the parties’ stipulation that an
arbitration clause allows class arbitration. (551) A large number of class arbitrations
proceeded, however, under arbitration provisions that were silent as to class arbitration,
where the arbitral tribunals – exercising their authority under Bazzle to interpret the
parties’ arbitration agreement – construed silence in the parties’ agreement to allow class
arbitration. (552)
P 1511
P 1512 [3] Class Actions Waiver and Unconscionability: Discover Bank Rule
Following Bazzle, a number of corporations began to include so-called “class arbitration
waivers” in their standard form arbitration agreements (precisely to avoid the possibility
of being subjected to class arbitrations brought by large numbers of customers or
employees). A number of courts held, however, that these provisions were unenforceable
(on unconscionability, public policy, or other grounds), ordering or permitting arbitrations
to proceed on a class-wide basis notwithstanding the putative waiver. One U.S. court
adopting this position explained:
“Corporations should not be permitted to use class action waivers as a means to exculpate
themselves from liability for small-value claims. We thus conclude that the enforceability
of a particular class action waiver in an arbitration agreement must be determined on a
case-by-case basis, considering the totality of the facts and circumstances. Relevant
circumstances may include, but are not limited to, the fairness of the provisions, the cost
to an individual plaintiff of vindicating the claim when compared to the plaintiff’s
potential recovery, the ability to recover attorneys’ fees and other costs and thus obtain
31
legal representation to prosecute the underlying claim, the practical affect [sic] the waiver
will have on a company’s ability to engage in unchecked market behavior, and related
public policy concerns.” (553)
In turn, the application of state unconscionability (or other) rules to invalidate class action
waivers presented the question whether the FAA preempted this application of state law
(and instead required enforcement of the parties’ bilateral or individual arbitration
agreements in accordance with their terms). The California Supreme Court addressed this
issue in a decision titled Discover Bank v. Superior Court of Los Angeles. (554)
The California Supreme Court emphasized the importance of class action proceedings in
protecting consumers by deterring fraudulent business practices and reducing the burden
of duplicative litigation involving identical claims and small amounts in dispute. (555) The
Discover Bank court announced a generally-applicable rule of unconscionability with
regard to class action waivers:
“when the waiver is found in a consumer contract of adhesion in a setting in which disputes
between the contracting parties predictably involve small amounts of damages, and when
it is alleged that the party with the superior bargaining power has carried out a scheme to
deliberately cheat large numbers of consumers out of individually small sums of money,
P 1512 then, at least to the extent the obligation at issue is governed by California law, the waiver
P 1513 becomes in practice the exemption of the party ‘from responsibility for [its] own fraud,
or willful injury to the person or property of another.’” (556)
The Discover Bank court also held that the FAA did not preempt this unconscionability rule.
The court’s analysis focused on Perry v. Thomas, (557) where the U.S. Supreme Court held
that the FAA preempted a California statutory provision that authorized claims for the
collection of wages “without regard to the existence of any private agreement to arbitrate.”
(558) According to the California Supreme Court, Perry rested on a “critical distinction…
between ‘a state-law principle that takes its meaning precisely from the fact that a
contract to arbitrate is at issue,’ which is preempted by the FAA, and a state law that
‘govern[s] issues concerning the validity, revocability, and enforceability of contracts
generally,’ which is not [preempted by the FAA].” (559) Applying this distinction, the court
held in Discover Bank that California’s unconscionability rule prohibiting class action
waivers was not preempted because “it applie[d] equally to class action litigation waivers
in contracts without arbitration agreements as it does to class arbitration waivers in
contracts with such agreements.” (560)
Adopting this or similar analysis, a number of U.S. lower courts held that arbitration
agreements excluding class actions were unconscionable (typically applying state law
unconscionability doctrines). (561) In cases where courts found a waiver of class actions
P 1513 unconscionable, they sometimes overturned the waiver and allowed arbitration to
P 1514 proceed as a class action, (562) and in other cases held that the class action waiver
rendered the entire arbitration agreement unenforceable. (563) Some courts and
arbitrators reasoned that interpreting a silent arbitration agreement to allow class
arbitration was necessary to give effect to the parties’ agreement to arbitrate, even if the
parties did not necessarily contemplate a class proceeding. (564)
At the same time, other U.S. courts rejected arguments that class action waivers in the
context of arbitration agreement are unconscionable. (565) According to one such decision,
the “right to a class action…is ‘merely procedural’ and ‘may be waived,’” and therefore that
“an arbitration agreement barring class wide relief for claims…is not unconscionable.”
(566)
[4] Post- Bazzle U.S. Supreme Court Decisions
The U.S. Supreme Court revisited the issue of class arbitration in three more recent
decisions – Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., (567) AT&T Mobility LLC v. Concepcion
(568) and Oxford Health Plans LLC v. Sutter. (569) Considered together, these decisions
substantially retrenched from the Court’s apparent treatment of class arbitration in Bazzle.
The Court’s decisions leave the status of class arbitration in the United States uncertain,
although the outlines of a legal framework appear to be emerging.
P 1514
P 1515 [a] Stolt-Nielsen SA v. AnimalFeeds Int’l Corp.
In Stolt-Nielsen, the claimant, AnimalFeeds, brought a class arbitration against Stolt-
Nielsen, a major ocean shipping company, asserting antitrust claims (based on allegedly
illegal price fixing by shipping companies). (570) The arbitration agreement in the
AnimalFeeds-Stolt-Nielsen contract was silent on whether class arbitration was permitted;
indeed, pursuant to the parties’ stipulation, there was “no agreement” on the subject of
class arbitration. (571) In the arbitral proceedings, the tribunal considered whether class
arbitration was nonetheless permissible, given the concededly silent arbitration
agreement, and concluded that it was, issuing an award requiring class arbitration
between Stolt-Nielsen and its various customers (who had similar arbitration clauses in
their shipping contracts). Stolt-Nielsen then applied to vacate the arbitrators’ award,
construing the parties’ arbitration agreements.
The U.S. Supreme Court vacated the arbitrators’ award requiring class action arbitration.
Applying the “excess of authority” provision of §10(a)(4) of the FAA, the Court held that the
arbitral tribunal had not actually interpreted the parties’ various arbitration agreements
32
in making its determination and had instead “simply imposed its own conception of sound
policy” and view “that class arbitration is beneficial in ‘a wide variety of settings.’” (572)
The Court’s decision noted, in particular, that the parties had stipulated that “no
agreement” had been reached as to class arbitration (which resulted in the arbitrator, in
ordering class arbitration, to look outside the parties’ agreement). (573)
In Justice Alito’s view, writing for the Court, “the panel proceeded as if it had the authority
of a common-law court to develop what it viewed as the best rule to be applied in such a
situation,” ignoring the supposed fact that “the task of an arbitrator is to interpret and
enforce a contract, not to make public policy.” (574) The Court concluded:
“the panel regarded the agreement’s silence on the question of class arbitration as
dispositive. The panel’s conclusion is fundamentally at war with the foundational FAA
principle that arbitration is a matter of consent.…An implicit agreement to authorize class-
action arbitration…is not a term that the arbitrator may infer solely from the fact of the
P 1515 parties’ agreement to arbitrate. This is so because class-action arbitration changes the
P 1516 nature of arbitration to such a degree that it cannot be presumed the parties consented
to it by simply agreeing to submit their disputes to an arbitrator.” (575)
As a consequence, the Court held that the arbitrators’ decision to proceed with class
arbitration exceeded their authority, requiring that their award be vacated. (576) The Court
also held that an arbitration agreement could not be interpreted to permit class
arbitration unless it was clear that “the parties agreed to authorize class arbitration.” (577)
The Supreme Court’s Stolt-Nielsen decision appeared to undo, in substantial part, the
results in Bazzle, which had left to arbitrators the largely unreviewable authority of
determining whether particular arbitration agreements permitted class arbitration. In its
place, Stolt-Nielsen suggested that the availability of class arbitration was a matter for de
novo judicial determination in a vacatur action; at the same time, the Court also suggested
that silent arbitration clauses did not provide the basis for class arbitrations under the
FAA. (578) More generally, and more worryingly, the relatively discursive text of the Stolt-
Nielsen opinion also suggested that the scope of judicial review under §10(a)(4)’s “excess of
authority” basis for vacatur was expansive, permitting courts to review the substantive
correctness of arbitrators’ contract interpretations. (579)
Finally, Justice Alito went out of his way in Stolt-Nielsen to note that, in Bazzle, a plurality,
rather than a majority, of the Court had said that “an arbitrator, not a court, [must] decide
whether a contract permits class arbitration.” (580) While evidently skeptical of this notion,
Justice Alito stated that the Court did not need to revisit the question because the parties
had “expressly assigned this issue to the arbitration panel.” (581) In sum, the Court’s Stolt
Nielsen decision placed substantial limits on class arbitration, in the form of judicial
review of arbitrators’ determination that class arbitration was appropriate, while raising
the possibility of further obstacles to class arbitrations.
[b] AT&T Mobility LLC v. Concepcion
In AT&T Mobility LLC v. Concepcion, (582) some eight years after its decision in Bazzle
opened the door to class arbitration in the United States, the Supreme Court further
closed what was left of that door after Stolt-Nielsen. Concepcion arose from a class action
filed in U.S. courts by customers of AT&T, a U.S. telephone company, alleging that AT&T had
P 1516 defrauded them by charging sales tax (about $30) on mobile telephones that were
P 1517 advertised as free. AT&T sought dismissal of the claims, moving to compel individual
arbitrations pursuant to an arbitration clause contained in AT&T’s contracts with its
customers. The relevant clause contained a detailed class action waiver providing that all
claims be brought in the parties’ “individual capacity, and not as a plaintiff or class
member in any purported class or representative proceeding.” (583)
Despite these provisions, the customers argued that they were free to pursue a class
action, on the grounds that their class action waiver was unconscionable. The lower federal
courts agreed, rejecting AT&T’s motion to compel individual arbitrations and holding that
the class action waiver was unconscionable; instead, the lower courts permitted the
customers’ class action litigation to proceed. (584)
In a 5-4 decision, which was only slightly less fragmented than that in Bazzle, (585) the
Supreme Court reversed. Writing for the Court, Justice Scalia concluded that California’s
Discover Bank rule of unconscionability (discussed above) was preempted by the FAA
because it permits consumers to demand class arbitration, which, in his view, is a
procedure that is incompatible with the character of arbitration under the FAA.
In concluding that class arbitration was contrary to the “fundamental” character of
arbitration, Justice Scalia reasoned that “the point of affording parties discretion in
designing arbitration processes is to allow for efficient, streamlined procedures tailored to
the type of dispute.” (586) In contrast, he said, “class arbitration requires procedural
formality” and “the switch from bilateral to class arbitration sacrifices the principal
advantage of arbitration – its informality – and makes the process slower, more costly, and
P 1517 more likely to generate procedural morass than final judgment.” (587) The Court also found
P 1518 it significant that class arbitration did not exist in 1925, when the FAA was enacted –
apparently suggesting that class arbitration was thus inconsistent with “arbitration as
envisioned by the FAA.” (588)
33
Justice Scalia concluded that state law may not require procedures that are “not
arbitration as envisioned by the FAA,” and that “[r]equiring the availability of classwide
arbitration interferes with fundamental attributes of arbitration and thus creates a scheme
inconsistent with the FAA.” (589) The Court therefore held that California’s
unconscionability rule (formulated in Discover Bank) “stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress” and is
preempted by the FAA. (590)
Although its ultimate holding may be correct, as a matter of interpreting the FAA, the
Supreme Court’s apparent analysis in Concepcion is, in important respects, misconceived.
Justice Scalia’s opinion suggests that the FAA only contemplates, and protects, a particular
type of arbitration – the archetype of arbitration supposedly envisioned by the U.S.
Congress in 1925. On this view, class arbitration is simply “not arbitration as envisioned by
the FAA,” and class arbitration “interferes with fundamental attributes of arbitration and
thus creates a scheme inconsistent with the FAA.” (591)
Justice Scalia’s reasoning – which, if given effect on its own terms, would apparently
withhold the statutory protections of the FAA from any type of arbitration not envisioned
by Congress in 1925 – is manifestly wrong. Taken at face value, this reasoning would mean
that class arbitration agreements – including express class arbitration agreements – would
be denied the protections of §§2 and 4 of the FAA, because class arbitration is supposedly
not arbitration within the meaning of the FAA at all. In Justice Scalia’s view, those
arbitration agreements would be “inconsistent with the FAA.”
It is very difficult to imagine that this result is what the Court intended or would hold in
future cases; both this result and the reasoning underlying it plainly contradict the
language of §2, which requires that “agreements to arbitrate” be enforced, and the Court’s
repeated pronouncements that the FAA “ensur[es] that private arbitration agreements are
enforced according to their terms.” (592) Likewise, that conclusion contradicts the
fundamental purpose of the FAA, which is to give effect to parties’ agreements to submit
their disputes for final resolution by an arbitrator – which is plainly what a class
arbitration clause does. (593)
P 1518
P 1519 Moreover, the Court’s suggestion that arbitration is somehow limited to what Congress
supposedly envisioned in 1925 is also impossible to accept. Arbitration in the 21st century
has no necessary resemblance to that in 1925 – nor should it. Arbitration has historically
evolved and been tailored to respond to economic, social and technological
developments. As a consequence, contemporary arbitration now routinely addresses
statutory claims (under legislation enacted decades after 1925), (594) using
telecommunications, online and other technologies (developed decades after 1925), (595)
dealing with new commercial businesses and industries (again, developed decades after
the FAA was enacted). (596)
Ironically, the result reached in Concepcion could have been arrived at in a sensible
manner, without threatening to limit the protections of the FAA. Concepcion could very
readily, and correctly, have been decided on the basis that the California Supreme Court’s
Discover Bank rule is preempted because it does not comply with §2 of the FAA – providing
that arbitration agreements “shall be valid, irrevocable and enforceable,” subject only to a
“saving clause” for generally-applicable contract law defenses that apply to “the
revocation of any contract.” (597) Contrary to §2’s requirements, the “unconscionability”
rule announced in Discover Bank does not treat arbitration agreements as valid and
enforceable, but instead invalidates them – on the basis of a rule not designed for or
applicable to contracts generally.
P 1519
P 1520 The Discover Bank rule clearly did not accord with §2’s basic requirement that
arbitration agreements are “valid, irrevocable and enforceable.” Instead of treating AT&T’s
arbitration agreements – which provided expressly and only for bipartite arbitration – as
valid and enforceable, the Discover Bank rule did the opposite. It expressly invalidated a
central provision of those agreements (the class action waiver) and required either
litigation or a form of arbitration not provided for, and indeed expressly excluded, by the
parties’ agreement. That plainly violated the basic requirements in §§2 and 4 of the FAA:
namely, that arbitration agreements be enforced in accordance with their terms.
The disputed issue in Concepcion was instead whether, as Justice Breyer’s dissent
concluded, the Discover Bank rule was nonetheless permitted by the FAA because it was a
generally-applicable rule of contract law, applicable to all contracts within the meaning of
§2’s “savings clause.” On this question, the proper interpretation of the savings clause is
that it does not rescue the asserted rule of “unconscionability” adopted by the California
courts in Discover Bank.
The Discover Bank rule was tailored for, and specifically directed, only to class action
waivers, in both arbitration and forum selection (choice-of-court) agreements. Under that
rule, class actions waivers in both arbitration and forum selection clauses are invalid
whenever they involve adhesion contracts, multiple small claims and an alleged scheme to
defraud consumers; (598) no further inquiry into the generally-applicable criteria of
unconscionability is required to invalidate a class action waiver under Discover Bank.
As such, the Discover Bank rule was not a generally-applicable rule of contract law,
applicable to “any contract,” as required by §2’s savings clause. Rather, the rule created a
34
unique standard of invalidity, not requiring any showing of most traditional
unconscionability factors, that was necessarily applicable to only class action waivers and
not to other contractual provisions (i.e., the price, delivery, warranty and other provisions
of consumer contracts, which were not, and never could be, affected by the Discover Bank
rule). (599) Because the California rule automatically applied only to this fairly narrow
subset of contractual provisions, it was not, as demanded by §2, an unconscionability rule
generally-applicable to all contracts. It was, instead, a specially-tailored rule applicable
only to class action waivers. As such, the Discover Bank rule was not rescued by §2’s savings
clause and is instead preempted by the requirement of §§2 and 4 that arbitration
agreements be enforced in accordance with their terms.
Contrary to Justice Breyer’s dissent, the fact that the Discover Bank rule applied to both
forum selection clauses and arbitration agreements does not bring it within §2’s savings
clause. That conclusion is clear from a few examples.
A state law that invalidated all agreements to resolve disputes in either out-of-state courts
or out-of-state arbitrations would be preempted by §2 no less than a law that invalidated
only agreements to arbitrate in an out-of-state location. Similarly, a state law that
required all forum selection and arbitration clauses to be signed separately, or to be
reaffirmed by both parties after a dispute arose, would violate §2 no less than a law that
P 1520 imposed these requirements only on arbitration agreements. Likewise, a state law that
P 1521
invalidated any forum selection clause or arbitration agreement as applied to disputes
below (or above) a specified monetary sum would again plainly violate §2, once more, no
less than a provision applying only to arbitration agreements. The fact that the Discover
Bank rule also invalidates class action waivers in forum selection agreements does nothing
to save it, as applied to arbitration agreements, under §2. (600)
Moreover, as already noted, the Discover Bank rule applied a flat rule of unenforceability
to a substantial subset of all class action waivers – invalidating all class action waivers in
adhesion contracts in cases involving claims of fraud seeking small amounts of damages,
without any further requirement for proof of traditional indicia of unconscionability.
Although denominated “unconscionability,” the California rule was in fact an automatic
rule of invalidity directed at a defined, and fairly substantial, set of arbitration and forum
selection agreements.
Thus, the Discover Bank rule is precisely the type of state law invalidation of arbitration
agreements that the FAA has repeatedly been held to prohibit. As applied in Concepcion,
the Discover Bank rule required resolution of a defined category of disputes (involving
specified types of fraud claims arising from particular types of contract) in a different
forum from the bipartite arbitral forum agreed to by the parties. In particular, following
Stolt-Nielsen, the Discover Bank rule required that disputes which are subject to bipartite
arbitration agreements nonetheless be brought in class action litigation. (601)
[c] Oxford Health Plans LLC v. Sutter
The U.S. Supreme Court returned again to the subject of class arbitration, and its prior
decision in Stolt-Nielsen SA v. AnimalFeeds, in Oxford Health Plans LLC v. Sutter. (602) The
Court held in Oxford Health that the award-debtor bore the burden of proving an excess of
P 1521 authority under §10(a)(4), that this was a very significant burden and that it had not been
P 1522 satisfied in a case where the arbitral tribunal ordered a class arbitration. (603) The
Supreme Court emphasized the unusual circumstances of its decision in Stolt-Nielsen,
effectively confining the decision to its facts:
“In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify
any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision,
we found not that they had misinterpreted the contract, but that they had abandoned
their interpretive role.…Nor, we continued, did the panel attempt to ascertain whether
federal or state law established a ‘default rule’ to take effect absent an agreement.
Instead, ‘the panel simply imposed its own conception of sound policy’ when it ordered
class proceedings. But ‘the task of an arbitrator,’ we stated, ‘is to interpret and enforce a
contract, not to make public policy.’ In ‘impos[ing] its own policy choice,’ the panel ‘thus
exceeded its powers.’” (604)
Underscoring this point, the Court in Oxford Health refused to vacate an arbitral tribunal’s
award requiring class arbitration on excess of authority grounds. Reaching the opposite
result from that in Stolt-Nielsen, the Oxford Health Court reasoned:
“Here, [in contrast to Stolt Nielsen,] the arbitrator did construe the contract (focusing, per
usual, on its language), and did find an agreement to permit class arbitration. So to
overturn his decision, we would have to rely on a finding that he misapprehended the
parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral
decision only when the arbitrator strayed from his delegated task of interpreting a
contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on
opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral
decisions.” (605)
Simply put, the Court reemphasized the very narrow scope of the FAA’s “excess of
authority” ground for vacatur in Oxford Health, underscoring that the function of judicial
review is not to determine whether the arbitrator committed “error” – or even “grave error”
35
– but solely to consider whether the arbitrator refused to perform his “delegated task of
interpreting a contract.” (606)
Finally, the Court again suggested pointedly that its earlier (plurality) decision in Bazzle –
that the question whether an arbitration agreement provides for class arbitration is not a
jurisdictional or “gateway” issue – may have been wrongly decided. In particular, the
Oxford Health Court noted that: “Stolt-Nielsen made clear that this Court has not yet
decided whether the availability of class arbitration is a question of arbitrability.” (607)
Lower courts have reached divergent conclusions on the question whether an arbitration
agreement authorizes class arbitration is for interlocutory judicial determination (as
P 1522 Justices Alito and Kagan suggested in Stolt-Nielsen and Oxford Health) or initial arbitral
P 1523 determination (as the plurality opinion in Bazzle held). (608)
The future of class arbitration in the United States remains unsettled. It appears likely that
the Supreme Court will reverse its prior (plurality) decision in Bazzle, and instead hold, as
intimated by the Court in both Stolt-Nielsen and Oxford Health, that the question whether
an arbitration agreement authorizes class arbitration is a jurisdictional (or gateway) issue,
for resolution by courts, rather than arbitrators. It also appears likely, as intimated in
Stolt-Nielsen, that the Court will require some affirmative basis for concluding that an
arbitration agreement authorizes class arbitration (while also upholding, as the Court
concluded in Concepcion, waivers of class action arbitration). If these predictions are
correct, class arbitrations will become a relatively unusual creature in the United States,
theoretically possible, but rare as a practical matter.
[B] Other Jurisdictions

In principle, class arbitrations should be possible in jurisdictions outside the United
States. (609) Nonetheless, with the exception of Canada, there are few reported judicial
decisions or arbitral awards addressing the question. Canadian courts have invalidated
contractual provisions including waivers of class action rights and requiring individual
arbitration of consumer claims. (610) In one court’s words:
P 1523
P 1524 “Clauses that require arbitration and preclude the aggregation of claims have the effect
of removing consumer claims from the reach of class actions. The seller’s stated preference
for arbitration is often nothing more than a guise to avoid liability for widespread low-
value wrongs that cannot be litigated individually but when aggregated form the subject of
a viable class proceeding.” (611)
There is, however, little experience with class arbitration even in Canada.
Similarly, arbitral institutions outside the United States have not adopted rules or
otherwise taken a position on administering class arbitrations. Nonetheless, where the
parties have provided for class arbitrations in their arbitration agreements, then
applicable national law in most developed jurisdictions (and the New York Convention)
should in principle give effect to such agreements. (612)
There is much to recommend the use of class arbitrations in international disputes
involving consumers, employees and similarly-situated claimants. That is particularly true
where “negative value” claims are involved, which cost more in unrecoverable expenses to
pursue by individual claimants than any recovery would warrant. (613) In many
jurisdictions, class action claims cannot presently be pursued in national courts, including
with regard to such claims. Properly administered, permitting arbitration of such class
P 1524 claims could enhance, not detract from, the rights of consumers, employees and others in
international disputes.
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2) See§1.02; §2.02[C][1][b][i]; §9.01.
3) See§§10.01[A]et seq. That extends to both the positive legal effects (i.e., the
requirement that a party arbitrates, rather than litigates, its disputes and that it
participates in good faith in the arbitral process) and the negative legal effects (i.e.,
the requirement that parties not litigate disputes which are subject to arbitration).
See§8.01.
4) Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Gov’t of
Pakistan [2010] UKSC 45, ¶105 (U.K. S.Ct.) (“One of the most controversial issues in
international commercial arbitration is the effect of arbitration agreements on non-
signatories.”) (Lord Collins).
5) See, e.g., Restatement (Second) Contracts §304 (1981) (“A promise in a contract creates
a duty in the promisor to any intended beneficiary to perform the promise, and the
intended beneficiary may enforce the duty.”) (emphasis added); Dunlop v. Selfridge
[1915] AC 847 (House of Lords); Judgment of 11 May 1993, 1997 Rev. arb. 599 (French Cour
de cassation comm.); Principles of European Contract Law, Art. 2:101(1) (1999) (“A
contract is concluded if: (a) the parties intend to be legally bound.”) (emphasis
added); Müller & Keilmann, Beteiligung am Schiedsverfahren wider Willen?, 2007
SchiedsVZ 113, 114; UNIDROIT, UNIDROIT Principles of International Commercial
Contracts Art. 1.3 (“A contract validly entered into is binding upon the parties.”)
(emphasis added).
6) See Judgment of 19 August 2008, DFT 4A_128/2008, ¶4.1.1 (Swiss Federal Tribunal)
(“The question as to the subjective bearing of an arbitration agreement – at issue is
which parties are bound by the agreement and to determine to what extent one or
several third parties not mentioned there nonetheless fall within its scope ratione
personae – relates to the merits and accordingly falls within Art. 178(2) [of the
SLPIL].”); Judgment of 16 October 2003, 22 ASA Bull. 364, 384 (Swiss Federal Tribunal)
(2004); Habegger, Extension of Arbitration Agreements to Non-Signatories and
Requirements of Form, 22 ASA Bull. 398, 400 (2004); Lévy & Stucki, Switzerland: The
Extension of the Scope of An Arbitration Clause to Non-Signatories, 2005 Int’l Arb. L.
Rev. N-5; P. Schlosser, Das Recht der internationalen privaten Schiedsgerichtsbarkeit
¶424 (2d ed. 1989).
7) See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (U.S. S.Ct. 2009)
(“background principles of state contract law” govern “the question of who is bound
by [the arbitration agreement]”); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938
(U.S. S.Ct. 1995); Aloe Vera of Am., Inc. v. Asianic Food (S) Pte Ltd, XXXII Y.B. Comm. Arb.
489 (Singapore High Ct.) (2007) (refusing to consider argument that non-signatory was
not bound by arbitration agreement under Article V(1)(c), on grounds that Article V(1)
(c) concerned “scope of the arbitration agreement, rather than…whether a particular
person was party to that agreement”).
8) New York Convention, Art. II(1) (emphasis added). See also New York Convention, Art.
II(3) (“an action in a matter in respect of which the parties have made an agreement”)
(emphasis added).
9) European Convention, Arts. I(1)(a), (2)(a) (arbitration agreement “shall mean either an
arbitral clause in a contract or an arbitration agreement, the contract or arbitration
agreement being signed by the parties”) (emphasis added); ICSID Convention, Art. 25
(“The jurisdiction of the Centre shall extend to any legal dispute arising directly out of
an investment, between a Contracting State (or any constituent subdivision or agency
of a Contracting State) and a national of another Contracting State, which the parties
to the dispute consent in writing to submit to the Centre.”) (emphasis added); Inter-
American Convention, Art. 1 (“An agreement in which the parties undertake to submit
to arbitral decision any differences that may arise or have arisen between them with
respect to a commercial transaction is valid.”) (emphasis added).
38
10) New York Convention, Art. II(3) (courts must “refer the parties to arbitration”)
(emphasis added).
11) UNCITRAL Model Law, Art. 7(1) (emphasis added).
12) See, e.g., French Code of Civil Procedure, Art. 1442 (“An arbitration clause is an
agreement whereby the parties to one or several contracts commit themselves to refer
to arbitration the disputes their contract or contracts may give rise to. A submission
agreement is an agreement whereby the parties to a present dispute commit
themselves to refer it to arbitration.”) (emphasis added); Chinese Arbitration Law, Art.
4 (“In settling disputes through arbitration, an agreement to engage in arbitration
should first of all be reached by parties concerned upon free will.”) (emphasis added);
Japanese Arbitration Law, Art. 2(1); Korean Arbitration Act, Art. 3.2; Brazilian
Arbitration Law, Art. 4 (“The arbitration clause is the agreement whereby contracting
parties oblige themselves to settle through arbitration all disputes that may arise
relating to the contract.”) (emphasis added). But seeEnglish Arbitration Act, 1996, §6
(omitting term “parties”); Scottish Arbitration Act, 2010, Art. 4 (same).
13) See, e.g., Invista Sàrl v. Rhodia SA, 625 F.3d 75, 85 (3d Cir. 2010) (“Although Rhodia
correctly notes that non-signatories can be compelled to arbitrate under the
doctrines of equitable estoppel and/or assumption, the argument overlooks the
rather crucial fact that Rhodia did not sign any agreement to arbitrate the claims.”);
InterGen NV v. Grina, 344 F.3d 134, 142-43 (1st Cir. 2003); Bridas SAPIC v. Gov’t of
Turkmenistan, 345 F.3d 347, 353-54 (5th Cir. 2003); E.I. DuPont de Nemours & Co. v.
Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187, 194-95 (3d Cir. 2001);
Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 766 (2d Cir. 1995) (“Arbitration is
contractual by nature – a party cannot be required to submit to arbitration any
dispute which he has not agreed so to submit.”); Dallah Real Estate & Tourism Holding
Co. v. Ministry of Religious Affairs, Gov’t of Pakistan [2010] UKSC 46 (U.K. S.Ct.).
14) United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (U.S. S.Ct.
1960). See also Granite Rock Co. v. Int’l Bhd of Teamsters, 130 S.Ct. 2847, 2857 n.6 (U.S.
S.Ct. 2010) (“arbitration is strictly a matter of consent – and thus…courts must
typically decide any questions concerning the formation or scope of an arbitration
agreement before ordering parties to comply with it”).
Pakistan [2010] UKSC 46, ¶11 (U.K. S.Ct.).
16) Judgment of 19 December 1986, OIAETI v. SOFIDIF, 1987 Rev. arb. 359, 363 (Paris Cour
d’appel). See also Decision of 23 December 2011, Case No. A40-56769/07-23-401, 6
(Russian S. Arbitrazh Ct.) (“Arbitration agreement due to a principle of the autonomy
of the parties’ will binds only the parties of that agreement and has no legal effect
with regard to third parties which are not parties thereto.”).
17) See§23.07.
18) See§16.01.
19) See§17.02[A][5][a].
20) Banque Arabe et Int’l d’Inv. v. Inter-Arab Inv. Guar. Corp., Ad Hoc Award of 17 November
1994, XXI Y.B. Comm. Arb. 13, 18 (1996). SeeInterim Award in ICC Case No. 7337, XXIVa Y.B.
Comm. Arb. 149 (1999); Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990)
(“arbitration is essentially based upon the principle of consent;” “Clearly, an arbitral
tribunal has power only with respect to the parties to the arbitration.”); Unpublished
Ad Hoc Award of 3 March 1999, discussed in de Boisséson, Joinder of Parties to Arbitral
Proceedings, Two Consenting Decisions, in ICC, Complex Arbitrations: Perspectives on
Their Procedural Implications 19 (ICC Ct. Bull. Spec. Supp. 2003).
21) SeeN. Blackaby et al. (eds.), Redfern and Hunter on International Arbitration ¶2.39 (5th
ed. 2009) (“Party consent is a prerequisite for international arbitration. Such consent
is embodied in an agreement to arbitrate which will generally be concluded ‘in
writing’ and signed by the parties. The requirement of a signed agreement in writing,
however, does not altogether exclude the possibility of an arbitration agreement
concluded in proper form between two or more parties also binding other parties.”);
Brekoulakis, The Relevance of the Interests of Third Parties in Arbitration: Taking A
Closer Look at the Elephant in the Room, 113 Penn. St. L. Rev. 1165, 1166 (2009) (“The
principal of ‘procedural party autonomy’ provides parties with the freedom to
contractually determine the circle of persons entitled to participate in the
arbitration proceedings.”); Hanotiau, Problems Raised by Complex Arbitrations
Involving Multiple Contracts-Parties-Issues – An Analysis, 18 J. Int’l Arb. 253, 256 (2001);
Jagusch & Sinclair, The Impact of Third Parties on International Arbitration – Issues of
Assignment, in L. Mistelis & J. Lew (eds.), Pervasive Problems in International
Arbitration 291, 292 (2006) (“At the heart of the problems which can arise is that
arbitration is a consensual process. Tribunals cannot accommodate non-signatories
to the arbitration clause in the same way that a court may join third parties.”); Pavić,
“Non-Signatories” and the Long-Arm of Arbitral Jurisdiction, in P. Hay, L. Vekas & N.
Dimitrijevic (eds.), Resolving International Conflicts 213, 214 (2009).
22) 2010 UNCITRAL Rules, Art. 1(1). Compare 2006 UNCITRAL Rules, Art. 1(1).
39
23) 2012 ICC Rules, Art. 6(1) (“[w]here the parties have agreed to submit to arbitration
under the Rules”); ICDR Rules, Art. 1(1) (ICDR Rules apply “[w]here parties have agreed
in writing to arbitrate disputes under [these rules]”); LCIA Rules, Preamble (“[w]here
any agreement, submission or reference provides in writing and in whatsoever
manner for arbitration under the rules of the LCIA,” “the parties shall be taken to have
agreed [to these Rules]”); BAC Rules, Art. 2(1); BCICAC Rules, Art. 1(2)(a); 2013 DIA Rules,
Art. 2(1); DIFC-LCIA Rules, Preamble; 2011 JAMS Rules, Art. 1(1); 2011 KCAB Rules, Art.
3(1); 2013 KLRCA Rules, Rule 1(1); 2013 SHIAC Rules, Art. 4.1; 2013 SIAC Rules, Art. 1(1).
24) See, e.g., Final Award in ICC Case No. 10758, 128 J.D.I. (Clunet) 1171, 1176 (2000) (“if the
Claimant had intended [the non-signatory] to be a party to either the Contract or its
arbitration clause it could have so insisted at that time”); Bridas SAPIC v. Gov’t of
Turkmenistan, 345 F.3d 347, 353 (5th Cir. 2003) (“to be subject to arbitral jurisdiction, a
party must generally be a signatory to a contract containing an arbitration clause”).
See also Schramm, Geisinger & Pinsolle, Article II, in H. Kronke et al. (eds.), Recognition
and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York
Convention 62 (2010) (“In most cases, the answer is clear: arbitration proceedings are
conducted between the parties who signed the instrument containing the arbitration
agreement.”).
25) Repub. of Ecuador v. ChevronTexaco Corp., 376 F.Supp.2d 334, 351, 356 (S.D.N.Y. 2005).
26) See§10.01[D].
27) See§10.01[D]; §10.02[A], p. 1422. As discussed below, there are instances where
national law may extend the benefits of the arbitration clause to officers or
representatives of a corporate party. See§10.02[A].
28) Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995). See also Merrill
Lynch Inv. Managers v. Optibase, Ltd, 337 F.3d 125, 130 (2d Cir. 2003); E.I. DuPont de
Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187 (3d Cir.
2001); Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GmbH, 206 F.3d 411 (4th
Cir. 2000); McCarthy v. Azure, 22 F.3d 351, 355 (1st Cir. 1994); Interocean Shipping Co. v.
Nat’l Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir. 1975) (“The mere fact that a
party did not sign an arbitration agreement does not mean that it cannot be held
bound by it.”); Fisser v. Int’l Bank, 282 F.2d 231, 233 (2d Cir. 1960); Repub. of Ecuador v.
ChevronTexaco Corp., 376 F.Supp.2d 334, 356 (S.D.N.Y. 2005); W. Tankers Inc. v. RAS
Riunione Adriatica di Sicurit [2005] 2 All ER (Comm) 240, 250 (Comm) (English High Ct.)
(subrogated insurer compelled to arbitrate: “[T]he defendant insurers have, under
Italian law, by subrogation become entitled to enforce, the insured charterer’s right
of action in delict against the owners, but that, by reference to English law, their duty
to refer their claim to arbitration is an inseparable component of the subject matter
transferred to the insurers.”); Montedipe SpA v. JTP-RO Jugotanker [1990] 2 Lloyd’s Rep.
11, 19 (QB) (English High Ct.) (“[The assignee] is entitled under the Law of Property Act
to exercise all the legal remedies of the assignor.”).
29) Judgment of 19 May 2003, 22 ASA Bull. 344, 348 (Swiss Federal Tribunal) (2004). See
also Judgment of 19 August 2008, DFT 4A_128/2008, ¶3.3 (Swiss Federal Tribunal)
(“According to the principle of relativity of contractual obligations, the arbitration
agreement included in a contract binds only the parties to the contract. However, in a
number of cases, such as the assignment of a claim, the assumption of an obligation
(simple or joint) or the transfer of a contractual relationship, the Federal Tribunal has
long recognized that an arbitration agreement may bind even those who did not sign
it and are not mentioned there.”).
30) B. Hanotiau, Complex Arbitrations ¶12 (2005). International arbitral institutions also
must consider arguments regarding the admissibility of requests for arbitration
against non-signatories. See Mráz, Extension of An Arbitration Agreement to Non-
Signatories: Some Reflections on Swiss Judicial Practice, 3 Annals FBL Belgrade L. Rev.
54, 55 (2009); Whitesell & Silva-Romero, Multiparty and Multicontract Arbitration:
Recent ICC Experience, in ICC, Complex Arbitrations 7 (ICC Ct. Bull. Spec. Supp. 2003);
§18.02[B][1][d].
31) See§10.01[D].
32) See§10.02[E] (group of companies); §10.02[M] (corporate employees).
33) See§10.01[A].
34) See§10.01[A].
35) The Peruvian Arbitration Law supplements the UNCITRAL Model Law’s definition of an
arbitration agreement by adding that “the arbitration agreement comprises all those
whose consent to submit to arbitration is determined in good faith by their active
and decisive participation in the negotiation, execution, performance or termination
of the contract that contains the arbitration agreement or to which the agreement is
related. It also comprises all those who seek to attain any rights or benefits from the
contract, pursuant to its terms.” Peruvian Arbitration Law, Art. 14.
40
36) See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (U.S. S.Ct. 2009) (non-
signatory may be bound by theories of assumption, veil-piercing, alter ego,
incorporation by reference, third party beneficiary, waiver, or estoppel); Century
Indem. Co. v. Certain Underwriters at Lloyd’s, London, 584 F.3d 513, 520 n.5, 534-35 n.18
(3d Cir. 2009) (non-signatory principles); Merrill Lynch Inv. Managers v. Optibase, Ltd,
337 F.3d 125, 131 (2d Cir. 2003); Smith/Enron Cogeneration LP v. Smith Cogeneration
Int’l, Inc., 198 F.3d 88 (2d Cir. 1999); Thomson-CSF, Thomson-CSF, SA v. Am. Arbitration
Ass’n, 64 F.3d 773, 776 (2d Cir. 1995) (five theories arising out of common law principles
of contract and/or agency law that would permit binding non-signatories to
arbitration agreement: incorporation by reference, assumption, agency, veil-
piercing/alter ego and estoppel); Dallah Real Estate & Tourism Holding Co. v. Ministry
of Religious Affairs, Gov’t of Pakistan [2010] UKSC 46 (U.K. S.Ct.) (estoppel, implied
consent, succession and ratification).
37) See, e.g., Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003)
(“Ordinary principles of contract and agency law may be called upon to bind a
nonsignatory to an agreement whose terms have not clearly done so.”); InterGen NV v.
Grina, 344 F.3d 134, 142-43, 147-148 (1st Cir. 2003) (applying “traditional principles of
agency law”); Merrill Lynch Inv. Managers v. Optibase, Ltd, 337 F.3d 125, 130 (2d Cir.
2003) (“Traditional principles of agency law may bind a nonsignatory to an arbitration
agreement.”); McCarthy v. Azure, 22 F.3d 351, 355 (1st Cir. 1994) (federal common law
rules for binding non-signatories “dovetail[] precisely with general principles of
contract law”); Letizia v. Prudential Bache Sec. Inc., 802 F.2d 1185, 1187-88 (9th Cir.
1986) (“signatories as well as nonsignatories of an arbitration agreement may be
bound by the agreement based on ordinary contract and agency principles”);
Judgment of 22 December 1992, 14 ASA Bull. 646, 649 (Swiss Federal Tribunal) (1996)
(citing principle of reliance (“vertrauenbegründendes Verhalten”)); Int’l Research Corp.
plc v. Lufthansa Sys. Asia Pac. Pte Ltd, [2012] SGHC 226, ¶51 (Singapore High Ct.) (“I will
therefore start from the first principles of contractual interpretation.”).
38) See §1.04[A][c][i]; §2.01[A][1]; §4.04[B][3][a].
39) See§10.02[E] (group of companies); §10.02[M] (corporate employees).
40) See§5.02; §5.04.
41) See§3.03[A].
42) See, e.g., Poudret, L’extension de la clause d’arbitrage: approches française et suisse,
122 J.D.I. (Clunet) 893 (1995); Sandrock, Extending the Scope of Arbitration Agreements
to Non-Signatories, in The Arbitration Agreement – Its Multifold Critical Aspects 165
(ASA Spec. Series No. 8 1994); Stauffer, L’extension de la portée de la clause arbitrale à
des non-signataires, in The Arbitration Agreement – Its Multifold Critical Aspects 229
(ASA Spec. Series No. 8 1994). Compare Park, Non-Signatories and International
Arbitration: An Arbitrator’s Dilemma, in PCA, Multiple Party Actions in International
Arbitration 3 (2009); J.-F. Poudret & S. Besson, Comparative Law of International
Arbitration ¶250 (2d ed. 2007).
43) Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 355 (5th Cir. 2003) (“federal courts
have held that so long as there is some written agreement to arbitrate, a third party
may be bound to submit to arbitration”).
44) This is true with regard to agency, third party beneficiary, guarantor, subrogation,
implied consent and group of companies theories. This rationale does not apply to
alter ego, estoppel, or succession (merger) theories where considerations of
applicable corporate law, good faith, or equity can require treating an entity as a
party to an agreement to arbitrate without a showing of consent. See§§10.01[D]et seq.;
S. Brekoulakis, Third Parties in International Commercial Arbitration ¶¶1.05 to 1.06 (1st
ed. 2010); B. Hanotiau, Complex Arbitrations ¶6 (2005). See also Voser, Multi-Party
Disputes and Joinder of Third Parties, in A. van den Berg (ed.), 50 Years of the New York
Convention 343, 370 (ICCA Congress Series No. 14 2009) (phrase “extension of the
arbitration agreement to non-signatories” is misleading because “the methodological
basis for being bound by an arbitration agreement is, in principle, the same for
signatories as for non-signatory third parties”).
45) Interim Award in ICC Case No. 9517, quoted in B. Hanotiau, Complex Arbitrations ¶203
(2005).
46) See, e.g., Sherer v. Green Tree Servicing LLC,548 F.3d 379, 381 (5th Cir. 2008) (“Who is
actually bound by an arbitration agreement is a function of the intent of the parties,
as expressed in the terms of the agreement.”) (quoting Bridas SAPIC v. Gov’t of
Turkmenistan, 345 F.3d 347, 355 (5th Cir. 2003)); McCarthy v. Azure, 22 F.3d 351, 355, 359
(1st Cir. 1994) (“give effect to the mutual intentions of the parties”); Judgment of 5
December 2008, DFT 4A_128/2008, ¶8.4 (Swiss Federal Tribunal) (“if it can be inferred
from this interference his intention to be party in the arbitration agreement”);
Whitesell & Silva-Romero, Multiparty and Multicontract Arbitration: Recent ICC
Experience, in ICC, Complex Arbitrations 7, 8-9 (ICC Ct. Bull. Spec. Supp. 2003).
47) See§1.02[B].
48) Blessing, Extension of the Arbitration Clause to Non-Signatories, in The Arbitration
Agreement: Its Multifold Critical Aspects 151, 162 (ASA Spec. Series No. 8 1994) (“Again,
the ‘heart’ of all the above notions or doctrines clearly is the bona fides principle,
respectively the requirement to act in good faith and the notion that positions or
defences which stand in contradiction to the exigencies to act in good faith will not
deserve legal (or arbitral) protection.”).
49) See§§10.02[B], [D], [K] & [H].
41
50) See§5.04[A][5]. Alternatively, parties may exchange orders, invoices, or other
communications. See§5.02[A][2][g][v].
51) See, e.g., InterGen NV v. Grina, 344 F.3d 134, 143 (1st Cir. 2003) (“courts should be
extremely cautious about forcing arbitration in situations in which the identity of the
parties who have agreed to arbitrate is unclear”) (quoting McCarthy v. Azure, 22 F.3d
351, 355 (1st Cir. 1994)); Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir. 2002) (non-
signatory bound by arbitration agreement only “in rare circumstances”); Smith/Enron
Cogeneration LP, Inc. v. Smith Cogeneration Int’l, Inc.,198 F.3d 88, 97 (2d Cir. 1999)
(“court should be wary of imposing a contractual obligation to arbitrate on a non-
contracting party”); Judgment of 20 January 2006, Case No. LJN:AU4523, ¶¶4, 5 (Dutch
Hoge Raad) (non-signatory can be bound to arbitration agreement only on basis of
specific showing); Judgment of 11 May 2004, BASF Argentina SA v. Capdevielle y Cia,
Case No. 1651 (Argentine Corte Suprema de Justicia) (“Such extension of jurisdiction,
must arise from the contract that relates to the parties in dispute.…This requires a
concrete, clear and express manifestation of the consent of the parties in favor of
arbitration.”).
52) J.-F. Poudret & S. Besson, Comparative Law of International Arbitration ¶227 (2d ed.
2007) (only one-quarter of some 30 published awards recognized extension of
arbitration clause to non-signatories).
53) Blessing, Extension of the Arbitration Clause to Non-Signatories, in The Arbitration
Agreement: Its Multifold Critical Aspects 151, 160 (ASA Spec. Series No. 8 1994) (“an
extension of the scope, reach and effects of an arbitration clause to a non-signatory
third party has only been affirmed if very special circumstances existed which
justified or necessitated such extension”).
54) Nitro Distrib. Inc. v. Alticor, Inc., 453 F.3d 995, 999 (8th Cir. 2006) (distinguishing
“situations where a nonsignatory attempts to bind a signatory to an arbitration
agreement” from those where “the signatory…is attempting to bind the
nonsignatory”); Merrill Lynch Inv. Managers v. Optibase, Ltd, 337 F.3d 125, 131 (2d Cir.
2003) (“it matters whether the party resisting arbitration is a signatory or not”).
55) See, e.g.,Judgment of 16 October 2003, DFT 129 III 727 (Swiss Federal Tribunal) (question
whether non-signatory is bound by arbitration agreement is issue of determining
scope of agreement); Judgment of 7 December 1994, Société V 2000 v. Société Project
XJ220ITD, 1996 Rev. arb. 250, 253 (Paris Cour d’appel) (arbitration clause can “extend
to parties directly involved in the performance of the contract provided that their
respective positions and activities give rise to a presumption that they were aware of
the existence and the scope of the arbitration clause, so that the arbitrator can
consider all economic and legal aspects of the dispute”).
56) W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration ¶11.05
(3d ed. 2000). See also Rau, “Consent” to Arbitral Jurisdiction: Disputes With Non-
Signatories, in PCA, Multiple Party Actions in International Arbitration 69, ¶3.83 (2009)
(“That an arbitration clause may in fact sweep most broadly when asserted against a
signatory to the agreement is not a novel proposition, and indeed…explain[s] our
common acceptance of non-mutual defensive collateral estoppel.”).
57) First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (U.S. S.Ct. 1995) (holding, in
case involving non-signatory issue: “When deciding whether the parties agreed to
arbitrate a certain matter (including arbitrability), courts generally…should apply
ordinary state-law principles that govern the formation of contracts.”); Aloe Vera of
Am., Inc. v. Asianic Food (S) Pte Ltd, [2006] 3 SLR 174, ¶¶64 et seq. (Singapore High Ct.)
(claim that arbitral tribunal made award against party not bound by arbitration
agreement relates to existence of arbitration agreement and not to scope of
tribunal’s mandate).
58) See§5.04[A][4]; §5.04[C]; §9.02.
59) See§7.03[E][2][a].
60) See§1.02[B][2].
61) See P. Blumberg et al., Blumberg on Corporate Groups§26.05 (2d ed. 2005); G. Born & P.
Rutledge, International Civil Litigation in United States Courts 178, 184 (5th ed. 2011).
62) See§§3.03et seq., pp. 401-03.
63) Judgment of 19 August 2008, DFT 4A_128/2008 (Swiss Federal Tribunal); P. Blumberg et
al., Blumberg on Corporate Groups§26.05 (2d ed. 2005); Scherer, Introduction to the
Case Law Section, 26 ASA Bull. 721, 729 (2008) (“[L]iability is not necessarily a basis for
jurisdiction. Indeed, the Federal Supreme Court has held repeatedly…that an
arbitration agreement cannot be extended to non-signatories, even if the latter are
liable for performance under a separate agreement or as a result of general liability
rules.”).
64) See§25.04[A]; §26.05[C][1].
42
65) SeeFinal Award in ICC Case No. 6268, XVI Y.B. Comm. Arb. 119 (1991) (upholding
arbitration agreement where buyer’s agent had actual authority to enter into both
arbitration agreement and underlying contract); Judgment of 22 November 1950, DFT
76 I 338, 351-54 (Swiss Federal Tribunal); Restatement (Third) of Agency§2.01 (2006);
Principles of European Contract Law, Chp. 3 (2002) (“Authority of Agents”); J. Herbots
(ed.), International Encyclopaedia of Laws: Contracts ¶223 (1993 & Update 2013) (H.K.),
¶251 (N.Z.), ¶331 (Romania), ¶344 (Spain), ¶358 (Sweden), ¶425 (Austria), ¶472
(France), ¶609 (India); UNIDROIT, Principles of International Commercial Contracts Art.
2.2 (2004) (“Authority of Agents”); G. Watts (ed.), Bowstead & Reynold on Agency ¶1-012
(19th ed. 2010) (“It is nevertheless more commonly said that the agent has authority.
When examined, this authority amounts to no more than a power of a special sort, a
power by doing an act to affect the principal’s legal relations as if he had done the
act himself.”).
66) See Restatement (Third) of Agency §1 (2006) (“Agency is the fiduciary relationship that
arises when one person (a “principal”) manifests assent to another person (an “agent”)
that the agent shall act on the principal’s behalf and subject to the principal’s
control, and the agent manifests assent or otherwise consents so to act”); J. Herbots
(ed.), International Encyclopaedia of Laws: Contracts ¶358 (1993 & Update 2013)
(Denmark), ¶438 (Belgium), ¶445 (Austria), ¶488 (France).
67) Typically, where the agency relationship is disclosed, the principal, but not the agent,
will be a party to the contract. See, e.g., Restatement (Third) of Agency§6.01 (2006); O.
Lando et al. (eds.), Principles of European Contract Law, Art. 3:202 (2000); UNIDROIT,
Principles of International Commercial Contracts Art. 2.2.3.1 (2004). See also McCarthy
v. Azure, 22 F.3d 351, 360-61 (1st Cir. 1994) (“It is well settled that when an agent acts on
behalf of a disclosed principal, the agent will not be personally liable for a breach of
the contract, unless there is clear and explicit evidence of the agent’s intention to be
bound.”); Capital Trust Inv. Ltd v. Radio Design TJ AB [2002] EWCA Civ 135 (English Ct.
App.); Judgment of 26 June 2003, Baba Ould Ahmed Miske v. Société AVC Shipping, 2006
Rev. arb. 143 (Paris Cour d’appel).
68) See, e.g.,Award of July 1995 in CRCICA Case No. 2/1994, discussed in M. Eldin (ed.),
Arbitral Awards of the Cairo Regional Centre for International Commercial Arbitration
141-44 (2000); Antoine Biloune v. Ghana Inv. Ctr, Ad Hoc Awards of 27 October 1989 & 30
June 1990, XIX Y.B. Comm. Arb. 11 (1994). See alsoFinal Award in ICC Case No. 10329, XXIX
Y.B. Comm. Arb. 108 (2004); Interim Award in ICC Case No. 9781, XXX Y.B. Comm. Arb. 28,
28 (2005) (applying Italian law: “agency relationship may be inferred from any
circumstances showing that the agent has made known to the contracting party
expressly and unequivocally that the contract it executed was not binding upon itself
but upon other persons”); Hanotiau, Problems Raised by Complex Arbitrations
Involving Multiple Contracts-Parties-Issues – An Analysis, 18 J. Int’l Arb. 253, 258-60
(2001); Hosking, Non-Signatories and International Arbitration in the United States: The
Quest for Consent, 20 Arb. Int’l 289, 292 (2004); Lamm & Aqua, Defining the Party – Who
Is A Proper Party in An International Arbitration Before the American Arbitration
Association?, 2002 Int’l Arb. L. Rev. 84, 88.
69) See, e.g., Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 896-97 (5th Cir. 2005);
Harvey v. Joyce, 199 F.3d 790 (5th Cir. 2000); Pritzker v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 7 F.3d 1110, 1122 (3d Cir. 1993); Arriba Ltd v. Petroleos Mexicanos, 962 F.2d
528, 536 (5th Cir. 1992); Hester Int’l Corp. v. Fed. Repub. of Nigeria, 879 F.2d 170, 176 (5th
Cir. 1989); Interbras Cayman Co. v. Orient Victory Shipping Co., 663 F.2d 4 (2d Cir. 1981);
Kiskadee Commc’ns (Bermuda), Ltd v. Father, 2011 WL 1044241 (N.D. Cal.); Herlofson Mgt
A/S v. Ministry of Supply, Kingdom of Jordan, 765 F.Supp. 78 (S.D.N.Y. 1991); Peterson
Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶¶63-66 (Comm) (English High Ct.);
Judgment of 14 October 1987, Ampafrance v. Wasteels, 1988 Rev. arb. 288 (French Cour
de cassation civ. 2e); Judgment of 8 December 1999, 18 ASA Bull. 546 (Swiss Federal
Tribunal) (2000); Judgment of 22 December 1992, 14 ASA Bull. 646, 649 (Swiss Federal
Tribunal) (1996).
70) Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995).
71) See, e.g., DK Joint Venture 1 v. Weyand, 649 F.3d 310, 312, 314 (5th Cir. 2011); Bridas SAPIC
v. Gov’t of Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003) (“Ordinary principles of
contract and agency law may be called upon to bind a nonsignatory to an agreement
whose terms have not clearly done so.”); InterGen NV v. Grina, 344 F.3d 134, 142-43,
147-48 (1st Cir. 2003) (“It is hornbook law that an agent can commit its (nonsignatory)
principal to an arbitration agreement”; applying “traditional principles of agency
law”); Phoenix Canada Oil Co. v. Texaco, Inc., 842 F.2d 1466, 1478 (3d Cir. 1988) (“usual
agency principles”); Letizia v. Prudential Bache Sec. Inc., 802 F.2d 1185, 1187-88 (9th Cir.
1986) (“signatories as well as nonsignatories of an arbitration agreement may be
bound by the agreement based on ordinary contract and agency principles”);
Interbras Cayman Co. v. Orient Victory Shipping Co., 663 F.2d 4 (2d Cir. 1981); Judgment
of 22 December 1992, 14 ASA Bull. 646, 649 (Swiss Federal Tribunal) (1996) (citing
principle of reliance (“vertrauenbegründendes Verhalten”) to conclude that under
Spanish law, no special mandate was required for agent to bind principal); R. Merkin,
Arbitration Law ¶¶17.39 to 17.41 (1991 & Update August 2013) (“general agency
principles”).
43
72) Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 356-57 (5th Cir. 2003) (agency is
“the fiduciary relation which results from the manifestation of consent by one person
to another that the other shall act on his behalf and subject to his control and
consent by the other so to act”) (quoting Restatement (Second) of Agency §1(1) (1958));
J. Herbots (ed.), International Encyclopaedia of Laws: Contracts ¶239 (1993 & Update
2013) (Ireland), ¶261 (New Zealand), ¶365 (Sweden), ¶427 (Austria), ¶474 (France),
¶621 (India).
73) Interim Award in ICC Case No. 3879, XI Y.B. Comm. Arb. 127 (1986). Among other things,
the tribunal reasoned: “The mandatory force of the arbitration clause cannot be
dissociated from that of the substantial contractual commitments; the reply to the
question as to whether the four states are bound by the acts of [the organization they
founded] must always be the same, whether the procedural aspect of the arbitration
clause is involved, or that of the substantive law concerning the financial obligations
of the four states.” Id. at 130.
74) The remaining three states did not seek annulment of the award, which therefore
remained in effect insofar as they were concerned. Judgment of 19 April 1994, DFT 120
II 155 (Swiss Federal Tribunal); Judgment of 19 July 1988, XVI Y.B. Comm. Arb. 180, 181
(Swiss Federal Tribunal) (1991).
75) Judgment of 19 July 1988, XVI Y.B. Comm. Arb. 180, 181 (Swiss Federal Tribunal) (1991).
The Swiss Federal Tribunal also refused to treat the international organization
established by the four states as their agent (or alter ego): “The predominant role
played by these states in [the international organization]…cannot affect [the
organization’s] independence and legal personality, nor can it lead to the conclusion
that [the organization] bound the founding states when dealing with third parties.” Id.
at 181.
76) InterGen NV v. Grina, 344 F.3d 134, 147-48 (1st Cir. 2003). See also Phoenix Canada Oil
Co. v. Texaco, Inc., 842 F.2d 1466, 1477 (3d Cir. 1988) (“Not only must an [agency]
arrangement exist…so that one acts on behalf of the other and within usual agency
principles, but the arrangement must be relevant to the [legal obligation in
dispute].”).
77) Restatement (Third) of Agency§2.01, comment d (2006) (“Courts have long
distinguished between ‘general agents’ and ‘special agents,’ a distinction that rests
on both the objects of the discretion granted an agent and the mode of regulating the
agent’s exercise of discretion. The labels matter less than the underlying
circumstances that warrant their application.…The prototypical general agent is a
manager of a business, who has authority to conduct a series of transactions and who
serves the principal on an ongoing as opposed to an episodic basis.”); G. Born & P.
Rutledge, International Civil Litigation in United States Courts 199-201 (5th ed. 2011); W.
Bowstead & M. Reynolds, Bowstead & Reynolds on Agency ¶¶1-041, 3-025 (19th ed.
2010).
78) Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶65 (Comm) (English High
Ct.).
79) In some cases, agency principles are conflated with alter ego analysis. This is not
analytically sound; the two legal bases are distinct and should be addressed
separately. See, e.g., Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 358-59 (5th
Cir. 2003) (“[T]he alter ego doctrine is equitable in nature, agency principles are
contractual”; “[c]ourts occasionally apply the alter ego doctrine and agency
principles as if they were interchangeable.…The two theories are, however, distinct.”);
E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d
187, 198 (3d Cir. 2001) (distinguishing between alter ego/piercing corporate veil and
agency); Pan E. Exploration Co. v. Hufo Oils, 855 F.2d 1106 (5th Cir. 1988); House of
Koscot Dev. Corp. v. Am. Line Cosmetics, Inc., 468 F.2d 64 (5th Cir. 1972).
80) See§10.01[D]; §10.02.
81) See, e.g., CD Partners, LLC v. Grizzle, 424 F.3d 795, 798-800 (8th Cir. 2005) (allowing non-
signatories to enforce arbitration agreement when non-signatories were officers of
signatory company); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110
(3d Cir. 1993) (same); Roby v. Corp. of Lloyd’s, 996 F.2d 1353 (2d Cir. 1993) (same); Kruse
v. AFLAC Int’l, Inc., 458 F.Supp.2d 375 (E.D. Ky. 2006) (same); Thomas v. A.R. Baron & Co.,
967 F.Supp. 785, 788 (S.D.N.Y. 1997) (allowing agent to invoke arbitration agreement “in
line with wide judicial consensus on this issue”); Leopold v. Delphi Internet Servs. Corp.,
1996 WL 628593 (E.D. Pa.); Brown v. Centex Homes, 171 N.C.App. 741, 746 (N.C. Ct. App.
2005).
82) See, e.g., Lerner v. Amalgamated Clothing & Textile Workers Union, 938 F.2d 2 (2d Cir.
1991).
83) Arnold v. Arnold Corp., 920 F.2d 1269, 1282 (6th Cir. 1990).
84) See§10.02[M].
85) See§10.02[M], p. 1480.
86) See§5.03[E][4].
87) See§10.05[B]. In many instances, such laws would conflict with the New York
Convention. See§10.05[C][3].
88) See§10.05.
44
89) See, e.g., Hague Convention of 14 March 1978 on the Law Applicable to Agency, Art. 11
(internal law of state where agent had business establishment or acted); Maspons v.
Mildred [1882] 9 QBD 530, 539 (English Ct. App.); Restatement (Second) Conflict of Laws
§292 (1971); L. Collins, et al. (eds.), Dicey, Morris and Collins on The Conflict of Laws
¶33R-432 (15th ed. 2012).
90) See, e.g., InterGen NV v. Grina, 344 F.3d 134, 147-48 (1st Cir. 2003) (“traditional” and
“usual” agency principles); E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber &
Resin Intermediates, 269 F.3d 187, 194, 198 (3d Cir. 2001) (“traditional principles of
agency law may bind a non-signatory to an arbitration agreement”); Int’l Paper Co. v.
Schwabedissen Maschinen & Anlagen GmbH, 206 F.3d 411, 417 (4th Cir. 2000) (“common
law principles of contract and agency law” could provide basis “for binding
nonsignatories to arbitration agreements”); Bel-Ray Co. v. Chemrite Ltd, 181 F.3d 435,
445 (3d Cir. 1999) (applying “traditional principles of contract and agency law”);
Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1122 (3d Cir. 1993); In
re Oil Spill by Amoco Cadiz, 659 F.2d 789, 795-96 (7th Cir. 1981); Repub. of Ecuador v.
ChevronTexaco Corp., 376 F.Supp.2d 334, 353-56 (S.D.N.Y. 2005); Hidrocarburos y
Derivados, CA v. Lemos, 453 F.Supp. 160, 167 (S.D.N.Y. 1977).
91) Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (U.S. S.Ct. 2009) (“‘traditional
principles’ of state law allow a contract to be enforced by or against nonparties to the
contract through ‘assumption, piercing the corporate veil, alter ego, incorporation by
reference, third party beneficiary theories, waiver and estoppel’”) (quoting 21
Williston on Contracts §57:19 (4th ed. 2001)). See also Wren Dist., Inc. v. Phone Mate,
Inc., 600 F.Supp. 1576, 1580-81 (E.D.N.Y. 1985) (“state contract law principles”); Farkar
Co. v. R.A. Hanson DISC, Ltd, 441 F.Supp. 841, 845 (S.D.N.Y. 1977) (“[W]e know of no such
federal law of contracts. For general principles of contract law, federal courts rely on
state law.”), modified on other grounds, 604 F.2d 1 (2d Cir. 1979).
92) See, e.g., Todd v. S.S. Mut. Underwriting Ass’n, 601 F.3d 329, 334 (5th Cir. 2010) (“in both
FAA and [New York] Convention cases, courts have largely relied on the same common
law contract and agency principles to determine whether nonsignatories must
arbitrate, and not law derived from statute or treaty”).
93) See, e.g., Hague Convention of 14 March 1978 on the Law Applicable to Agency, Art. 11;
Judgment of 4 September 2003, XXX Y.B. Comm. Arb. 528 (Oberlandesgericht Celle)
(2005) (law of place where agent acted); Pfeiffer, Hague Convention on the Law
Applicable to Agency, 26 Am. J. Comp. L. 434, 435-36, 439 (1977-1978) (law applicable to
relations between principal and third party is internal law of state where agent had
business establishment or acted). See also Award in ICC Case No. 5832, 115 J.D.I.
(Clunet) 1198 (1988) (distinguishing between (1) law governing arbitration agreement
(law of seat), (2) law governing agent’s capacity to conclude arbitration agreement on
behalf of principal (law of principal’s registered office) and (3) form in which such
capacity should have been conferred on agent (law of jurisdiction in which agreement
between agent and principal was concluded).
94) See§4.04; Sphere Drake Ins. Ltd v. Clarendon Nat’l Ins. Co., 263 F.3d 26, 32 n.3 (2d Cir.
2001) (applying contractual choice of law to determine whether non-signatory
principal was bound by arbitration agreement signed by agent). See also Restatement
(Second) Conflict of Laws §292 (1971) (entitled “Contractual Liability of Principal to Third
Person” and applying law of “state which, with respect to the particular issue, has the
most significant relationship to the parties and the transaction under the principles
stated in §6”); L. Collins et al. (eds.), Dicey, Morris and Collins on The Conflict of Laws
¶33R-432 (15th ed. 2012) (“The issue whether the agent is able to bind the principal to
a contract with a third party, or a term of that contract, is governed by the law which
would govern that contract, or term, if the agent’s authority were established.”). This
can be difficult, however, given that courts in one jurisdiction may apply different
laws as proper laws of arbitration agreement. See Pearson, Sulamérica v. Enesa: The
Hidden Pro-Validation Approach Adopted by the English Courts With Respect to the
Proper Law of the Arbitration Agreement, 29 Arb. Int’l 115 (2013).
95) The same concern applies to application of the law governing the arbitration
agreement to determine whether a non-signatory principal is bound. SeeFinal Award
in ICC Case No. 6268, XVI Y.B. Comm. Arb. 119, 120 (1991) (“we would not resort to a
choice of law in the contract itself to determine in the first instance whether that
contract binds [an entity] which contends it is not a party to the contract”).
96) See§4.04 (especially §4.04[B]); §4.05; §4.06; §4.07).
97) See§1.02[B][2].
45
98) See Restatement (Third) of Agency§2.03 (2006) (“Apparent authority is the power held
by an agent or other actor to affect a principal’s legal relations with third parties
when a third party reasonably believes the actor has authority to act on behalf of the
principal and that belief is traceable to the principal’s manifestations.”); Principles of
European Contract Law, Art. 3:201 (1999) (“A person is to be treated as having granted
authority to an apparent agent if the person’s statements or conduct induce the third
party reasonably and in good faith to believe that the apparent agent has been
granted authority for the act performed by it.”); H. Beale (ed.), Chitty on Contracts
¶31-057 (31st ed. 2012); UNIDROIT, UNIDROIT Principles of International Commercial
Contracts Art. 2.2.5(2) (2004) (“where the principal causes the third party reasonably
to believe that the agent has authority to act on behalf of the principal and that the
agent is acting within the scope of that authority, the principal may not invoke
against the third party the lack of authority of the agent”).
99) See, e.g.,Judgment of 7 October 1999, Société Russanglia v. Société Delom, 2000 Rev.
arb. 288, 289 (Paris Cour d’appel) (“principle of appearance applicable in
international commercial relations”); J. Herbots (ed.), International Encyclopaedia of
Laws: Contracts ¶477 (1993 & Update 1999) (doctrine of apparent agency under French
law (“mandat apparent”)).
100) See, e.g., Principles of European Contract Law, Art. 3:201(3) (2000); J. Herbots (ed.),
International Encyclopaedia of Laws: Contracts ¶242 (1993 & Update 2013) (in France,
considering “nature of the purported contract; the agent’s and the third party’s
profession and experience; the use by the agent of the principal’s headed notepaper;
the past habit to act in the principal’s name, and even the usual lack of autonomy of
the apparent agent towards the principal”); UNIDROIT, Principles of International
Commercial Contracts Art. 2.2.5 (2004); G. Watts (ed.), Bowstead & Reynold on Agency
¶8-014 (19th ed. 2010) (“principal may be bound by the acts of an agent which he has
not authorised, and even has forbidden”); 12 Williston on Contracts §35:11 (4th ed. 1990
& Update 2013) (“An agent has the power to make contracts that are binding on a
principal not only when the agent has actual authority, express or implied, but also
when the principal, though not intending to confer authority on the agent,
nevertheless holds the agent out to the public, or to the party with whom the agent
deals, as having the appearance of authority.”).
101) See, e.g., Award in ICC Case No. 5730, 117 J.D.I. (Clunet) 1029 (1990); Award in ICC Case No.
1434, 103 J.D.I. (Clunet) 978 (1976) (controlling person of group of companies led
counter-party to “justifiably believe that he engaged all of the companies of the
group that he managed”); Award of 11 February 1993 in Zurich Chamber of Commerce
Case No. 188/1991, 14 ASA Bull. 623 (1996) (Chinese official had apparent authority to
bind Chinese state entity); Telenor Mobile Commc’ns AS v. Storm LLC, 584 F.3d 396,
411-12 (2d Cir. 2009) (“agent has apparent authority if ‘a principal places agent in a
position where it appears that the agent has certain powers which he may or may not
possess’”) (quoting Masuda v. Kawasaki Dockyard Co., 328 F.2d 662, 665 (2d Cir. 1964));
Ayco Co. LP v. Frisch, 2012 WL 42134, at *7 n.5 (N.D.N.Y.) (“existence of ‘apparent
authority’ depends upon a factual showing that the third party relied upon the
misrepresentation of the agent because of some misleading conduct on the part of
the principal – not the agent”); Alamria v. Telcor Int’l, Inc., 920 F.Supp. 658, 674-75 (D.
Md. 1996); SEB Trygg Liv Holding AB v. Manches, [2005] EWCA Civ 1237 (English Ct. App.)
(successor company, which did not commence arbitral proceedings, was party to
arbitration and bound by award because former director of predecessor company
had ostensible authority (as well as apparent authority) from predecessor company
in 1997 and thereafter to instruct insurance expert, and through him solicitors, to
bring and continue proceedings on behalf of predecessor company); Judgment of 7
October 1999, Société Russanglia v. Société Delom, 2000 Rev. arb. 288 (Paris Cour
d’appel).
102) 99 Commercial St., Inc. v. Goldberg, 811 F.Supp. 900, 906 (S.D.N.Y. 1993).
103) Award in ICC Case No. 10504, discussed in Grigera Naón, Choice-of-Law Problems in
International Commercial Arbitration, 289 Recueil des Cours 9, 103 (2001). See also
Judgment of 8 July 2009, Societe d’etudes et representations navales et industrielles v.
Air Sea Broker Ltd, XXXV Y.B. Comm. Arb. 356, 358 (French Cour de cassation) (2010)
(“‘arbitration rules of the CLS bill of lading’ was signed on Soerni’s behalf by Y, the
sole contact of ASB during the negotiations – ASB not having been warned, either
before or after the signature of the Letter, of [Y’s] possible lack of power by the
managers of Soerni, who on the contrary tacitly ratified the operation by asking for an
estimate for a supplementary insurance”).
46
104) See, e.g., Award in ICC Case No. 10504, discussed in Grigera Naón, Choice-of-Law
Problems in International Commercial Arbitration, 289 Recueil des Cours 9, 103 (2001)
(“no more than an application of the principle of good faith considered as a basic
requirement in international business relations”); Utilities Optimization Group, LLC v.
TIN, Inc., 440 F.Appx. 249, 252 (5th Cir. 2011) (“Apparent authority is based on
estoppel.”); Marfia v. T.C. Ziraat Bankasi, 100 F.3d 243, 251 (2d Cir. 1996) (where there is
apparent authority, “the principal is estopped to deny that the agent’s act was not
authorized”); Miller v. Mueller, 343 A.2d 922, 926 (Md. App. 1975) (“Apparent authority
may arise when the actions of the principal, reasonably interpreted, cause a third
person to believe in good faith that the principal consents to the acts of the agent.”);
Geneva Convention on Agency in the International Sale of Goods, Art. 14(2) (1983) (not
in force) (“Where the conduct of the principal causes the third party reasonably and
in good faith to believe that the agent has authority to act on behalf of the principal
and that the agent is acting within the scope of that authority, the principal may not
invoke against the third party the lack of authority of the agent.”); G. Watts (ed.),
Bowstead and Reynolds on Agency ¶8-029 (19th ed. 2010) (in English law, doctrine
based on “weak form” of estoppel).
105) Kett v. Shannon, [1987] ILRM 364, ¶8 (Irish S.Ct.).
106) See L. Collins et al. (eds.), Dicey, Morris and Collins on The Conflict of Laws ¶33R-432
(15th ed. 2012).
107) See Restatement (Second) Conflict of Laws §292 (1971); Blessing, The Law Applicable to
the Arbitration Clause, in A. van den Berg (ed.), Improving the Efficiency of Arbitration
Agreements and Awards: 40 Years of Application of the New York Convention 168, 176-77
(ICCA Congress Series No. 9 1999); P. Schlosser, Das Recht der internationalen privaten
Schiedsgerichtsbarkeit ¶352 (2d ed. 1989); B. von Hoffmann & K. Thorn, Internationales
Privatrecht 302 (9th ed. 2007).
108) See§10.05[C][2], p. 1499.
109) See§10.02[K], p. 1477.
110) See§5.04[D][7]; Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990) (“Of
course, such an intention can be merely implicit, otherwise any discussion of
extension would have no meaning.”); E. Holding v. Z Ltd., Final Ad Hoc Award of 24
August 2010, 29 ASA Bull. 890 (quoting commentary with approval: “case law admits
the extension of an arbitration agreement to a third party (i) if such party has
intervened in a particularly intense manner in the execution of the contract
containing the arbitration clause or (ii) if the third party has reserved his right to
interfere in the contract by providing for this in a connected contract”); Principles of
European Contract Law, Art. 2:102 (1999) (“The intention of a party to be legally bound
by contract is to be determined from the party’s statements or conduct as they were
reasonably understood by the other party.”); J. Herbots (ed.), International
Encyclopaedia of Laws: Contracts ¶40 (1993 & Update 2013) (Belgium), ¶46 (France),
¶109 (Austria), ¶163 (Denmark); UNIDROIT, Principles of International Commercial
Contracts Art. 2.1.1, comment 2 (2004).
111) See§10.01[D].
112) See§§5.02[A][2][d] & [g].
113) W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration ¶5.09
(3d ed. 2000). The requirement for both parties’ consent is implicit in the requirement
for “agreement” in both international conventions, national law and arbitral rules.
See, e.g., New York Convention, Art. II(3) (“parties have made an agreement”).
See§2.02[C][1][b][i].
114) See, e.g., FinalAward in ICC Case No. 9771, XXIX Y.B. Comm. Arb. 46 (2004) (party’s
continued involvement in performance of contract confirmed its position as a party,
despite assignment of contract to another company); Partial Award in ICC Case No.
6000, 2(2) ICC Ct. Bull. 31, 34 (1991) (company subject to arbitration clause because it
was “involved in the conclusion, the performance and the termination of the
contracts in dispute”); Ad Hoc Final Award of 24 August 2011, 29 ASA Bull. 884, 890 (“The
behaviour and role of the non-signatory in the negotiation phase of the agreement as
well as its performance must be looked at to determine the party’s actual or implied
intent.”).
115) Final Award in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34, 35 (1991).
116) See, e.g., Award in ICC Case No. 6769, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.),
Collection of ICC Arbitral Awards 1991-1995 456 (1997); Award in ICC Case No. 5721, 117
J.D.I. (Clunet) 1019, 1024 (1990) (finding no consent where the non-signatory was not
“focus of the contractual agreements”). But seeJudgment of 30 November 1988, Korsnas
Marma v. Durand-Auzias, 1989 Rev. arb. 691 (Paris Cour d’appel) (court apparently
presumed non-signatory’s intention to be bound from its awareness of arbitration
clause). See also J.-F. Poudret & S. Besson, Comparative Law of International
Arbitration ¶256 (2d ed. 2007).
47
Collection of ICC Arbitral Awards 1991-1995 429 (1997) (non-signatory parent of signatory
to license agreement is not party to that agreement, or its arbitration clause, by
virtue of ownership of licensed property); Final Award in ICC Case No. 6519, 2(2) ICC Ct.
Bull. 34 (1991) (one of three non-signatory affiliates bound by agreement, because of
involvement in negotiations and performance; two, less-involved affiliates, not
bound); Award in ICC Case No. 4972, in S. Jarvin, Y. Derains & J.-J. Arnaldez (eds.),
Collection of ICC Arbitral Awards 1986-1990 380 (1994); Interim Award in ICC Case No.
4504, 113 J.D.I. (Clunet) 1118 (1986) (role of non-signatories in negotiation and
performance of contract was insufficient to warrant conclusion they had assumed
contract); Award in ICC Case No. 2138, discussed in S. Jarvin & Y. Derains (eds.),
Collection of ICC Arbitral Awards 1974-1985 242 (1990); Award in Geneva Chamber of
Commerce of 24 March 2000, 21 ASA Bull. 781 (2003) (insufficient evidence that
conduct indicated consent to contract or arbitration clause); J.-F. Poudret & S.
Besson, Comparative Law of International Arbitration ¶254 (2d ed. 2007).
118) See, e.g., Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991)
(“agreement [to arbitrate] may be implied from the party’s conduct”); Town & Country
Salida, Inc. v. Dealer Computer Servs., Inc., 2012 WL 1964106, at *7 (E.D. Mich.) (party’s
conduct may imply its agreement to arbitrate); SB Liquidation Trust v. Au Optronics
Corp., 2011 WL 5325589 (N.D. Cal.) (requiring non-signatory to arbitrate when
agreements referenced to non-signatory and “expressly contemplate[d]” that it would
perform portions of contracts on behalf of signatory); Scone Invs., LP v. Am. Third Mkt
Corp., 992 F.Supp. 378, 381 (S.D.N.Y. 1998) (agreement to arbitrate can be implied from
parties’ conduct); Blashka v. Greenway Capital Corp., 1995 WL 608284, at *4-6 (S.D.N.Y.)
(even in absence of signed contract, agreement to arbitrate may be implied from
party’s conduct); Judgment of 6 October 2010, 2010 Rev. arb. 813 (French Cour de
cassation civ. 1e); Judgment of 17 February 2011, Gouv’t du Pakistan, min. Affaires
religieuses v. Sté Dallah Real Estate & Tourism Holding Co., XXXVI Y.B. Comm. Arb. 590,
¶¶592 et seq. (Paris Cour d’appel) (2011) (“claimant had been the defendant’s only
counterpart in all (pre-)contractual dealings, had terminated the contract and had
behaved at all times as if it, rather than a Trust which was the nominal contracting
party (and had ceased to exist before the contract’s termination), were the ‘true
party’ to the contract”); Judgment of 28 November 1989, 1990 Rev. arb. 675 (Paris Cour
d’appel) (party’s performance of contractual obligations of another entity constituted
consent to underlying agreement, including arbitration clause). See also Lamm &
Aqua, Defining the Party – Who Is A Proper Party in An International Arbitration Before
the American Arbitration Association?, 2002 Int’l Arb. L. Rev. 84, 88 (“A party may be
bound by an arbitration clause that it has not signed if its subsequent conduct
indicates that it has assumed the obligation to arbitrate.”).
119) Judgment of 5 December 2008, DFT 4A_128/2008, ¶8.6 (Swiss Federal Tribunal)
(“Considering the intense involvement of D, B and C Ltd in the preparation of the
Employment Contract and the role that they reserved for themselves in connection
with the performance of that contract, it must be concluded that they acted in a way
that binds them to the arbitration agreement contained in the contract, the contents
of which is incidentally identical to that which is in the Sales Contract.”). See also
Judgment of 19 April 2011, DFT 4A_44/2011 (Swiss Federal Tribunal); Judgment of 19
August 2008, DFT 134 III 565 (Swiss Federal Tribunal); Judgment of 16 October 2003, DFT
129 III 727 (Swiss Federal Tribunal); B. Berger & F. Kellerhals, International and
Domestic Arbitration in Switzerland ¶521 (2d ed. 2011); G. Kaufmann-Kohler & A.
Rigozzi, Arbitrage international ¶271i (2d ed. 2010); Naegeli & Schmitz, Switzerland:
Strict Test for the Extension of Arbitration Agreements to Non-Signatories, Note on An
Important Decision Rendered by the Swiss Federal Tribunal, 2009 SchiedsVZ 188; N.
Voser, Multi-Party Disputes and Joinder of Third Parties, in A. van den Berg (ed.), 50
Years of the New York Convention 371-72 (ICCA Congress Series No. 14 2009).
120) See, e.g., Air Line Pilots Ass’n Int’l v. US Airways Group Inc., 609 F.3d 338, 347 (4th Cir.
2010) (declining to imply agreement to arbitrate where party did not show “clear
intent” to do so by participating, or expressing willingness to participate, in
arbitration); Sec. Ins. Co. of Hartford v. TIG Ins. Co, 360 F.3d 322, 322 (2d Cir. 2004)
(“[Third] party’s participation in preliminary arbitration proceedings did not result in
waiver of its right to seek a stay of arbitration pending outcome of the related
litigation, particularly where [third] party notified arbitration panel early in
preliminary proceedings of possibility it would move to stay arbitration.”); Promotora
de Navegacion, SA v. Sea Containers, Ltd, 131 F.Supp.2d 412, 419-21 (S.D.N.Y. 2000)
(declining to imply agreement to arbitrate where record failed to demonstrate
“requisite clear and unambiguous intent” on part of non-signatory to arbitrate).
48
121) See, e.g., McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co. Inc., 741 F.2d 342, 344
(11th Cir. 1984) (non-signatory to contract containing arbitration clause was bound to
arbitrate dispute where claims were inextricably intertwined with duties created in
underlying contract and non-signatory signed related contract which contained
arbitration clause); Mannai Inv. Co. v. Eagle Star Life Assur. Co. [1997] AC 749, 771 (House
of Lords); Judgment of 5 December 2008, DFT 4A_376/2008 (Swiss Federal Tribunal)
(upholding jurisdiction over non-signatories based on conclusion that they were
parties to related contracts and were intended to be bound by arbitration clause in
agreement they did not sign); Int’l Research Corp. plc v. Lufthansa Sys. Asia Pac. Pte
Ltd, [2012] SGHC 226 (Singapore High Ct.) (primary agreement, containing arbitration
clause, and supplemental agreements were not “separate”; party to supplemental
agreements was aware of existence of arbitration clause in original agreement and
was bound by that clause); Astel-Peiniger Joint Venture v. Argos Eng’g Heavy Indus. Co.,
XX Y.B. Comm. Arb. 288 (H.K. Ct. First Inst. 1994) (1995) (“back-to-back” subcontract
sufficient to demonstrate parties’ intention to incorporate arbitration agreement
contained in original contract into subcontract); Judgment of 3 August 2006, Chaval v.
Liebherr, Recurso Especial No. 653.733-RJ 2004/0102276-0 (Brazilian Superior Tribunal
de Justiça) (arbitration clause binds non-signatory because of “intertwined
agreements”).
122) See§5.05[B][1].
123) See, e.g., Century Indem. Co. v. Certain Underwriters at Lloyd’s, 584 F.3d 513, 534 (3d Cir.
2009) (“we have recognized incorporation by reference as one theory for binding non-
signatories to arbitration agreements”); Allstate Settlement Corp. v. Rapid Settlement,
559 F.3d 164, 170 (3d Cir. 2009).
124) See§10.01[D].
125) See§5.04[A][5]; §5.04[D][7].
126) See§5.04[D][7][g]; Award in ICC Case Nos. 7604 and 7610, in J.-J. Arnaldez, Y. Derains & D.
Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 510 (2003) (reliance on
arbitration clause to resist jurisdiction of court in national court litigation signifies
party’s consent to clause); Final Award in ICC Case No. 7453, XXII Y.B. Comm. Arb. 107
(1997); Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991) (party’s
“voluntary and active participation in arbitration,” coupled with its lack of objection
to arbitration, “manifested a clear intent to arbitrate the dispute”).
127) See§10.02[K].
128) SeeFinal Award in ICC Case No. 7453, XXII Y.B. Comm. Arb. 107 (1997) (no arbitration
agreement because one signatory had not accepted non-signatory as party). See also
Lamm & Aqua, Defining the Party – Who Is A Proper Party in An International Arbitration
Before the American Arbitration Association?, 2002 Int’l Arb. L. Rev. 84, 85.
129) See§4.04.
130) See§4.04[B]. Where the New York Convention applies, application of implied consent
rules is also subject to the validation principle and to international limitations
against discriminatory national laws. See§4.04[A][1][b][i].
131) See, e.g., Sourcing Unlimited Inc. v. Asimco Int’l Inc., 526 F.3d 38, 46 (1st Cir. 2008) (“In
the absence of any contention from the parties to the contrary, we apply federal
common law to resolve the issues.”); Hernandez, S de RL de CV v. Smart & Final, Inc.,
2010 WL 2505683, at *5 (S.D. Cal.) (applying “ordinary principles of law and equity”);
Repub. of Ecuador v. ChevronTexaco Corp., 499 F.Supp.2d 452 (S.D.N.Y. 2007) (federal
common law applies to claims that non-signatory is bound by arbitration agreement
(but law chosen by parties’ choice-of-law clause applies to claims by non-signatory
that it may exercise rights under arbitration agreement)); BS Sun Shipping Monrovia v.
Citgo Petroleum Corp., 509 F.Supp.2d 334 (S.D.N.Y. 2007); Fyrnetics (H.K.) Ltd v.
Quantum Group, Inc., 2003 WL 164220, at *2 (N.D. Ill.); Shaw Group, Inc. v. Triplefine Int’l
Corp., 2001 WL 883076, at *1 (S.D.N.Y.).
132) See, e.g., Motorola Credit Corp. v. Uzan, 388 F.3d 39, 51-53 (2d Cir. 2004) (applying Swiss
law); Int’l Minerals & Res., SA v. Pappas, 96 F.3d 586, 592 (2d Cir. 1996) (applying English
law); FR8 Singapore Pte Ltd v. Albacore Maritime Inc., 754 F.Supp.2d 628 (S.D.N.Y. 2010)
(choice-of-law clause governs where non-signatory seeks to enforce arbitration
agreement against signatory); CCP Systems AG v. Samsung Elec. Corp. Ltd, 2010 WL
2546074, at *8 (D.N.J.) (“Swiss law governs the issue concerning whether a non-
signatory to the Software Agreement…is permitted to invoke the arbitration clause”).
133) See, e.g., Motorola Credit Corp. v. Uzan, 388 F.3d 39, 51 (2d Cir. 2004) (“if defendants
wish to invoke the arbitration clauses in the agreements at issue, they must also
accept the Swiss choice-of-law clauses that govern those agreements”); Repub. of
Ecuador v. ChevronTexaco Corp., 376 F.Supp.2d 334, 355 (S.D.N.Y. 2005) (“choice-of-law
clause will govern where a non-signatory to a particular arbitration agreement seeks
to enforce that agreement against a signatory, but not where a signatory seeks to
enforce the agreement against a non-signatory”). See also§4.02[A][2][d]; §4.04[A][2][j];
§4.04[B][6][c].
49
134) For commentary, see P. Blumberg et al., Blumberg on Corporate Groups §§10-14 (2d ed.
2005); Capuano, The Realist’s Guide to Piercing the Corporate Veil: Lessons From Hong
Kong and Singapore, 23 Australian J. Corp. L. 1 (2009); B. Hanotiau, Complex Arbitrations
¶¶98, 126 (2005); Hosking, Non-Signatories and International Arbitration in the United
States: The Quest for Consent, 20 Arb. Int’l 289 (2004); Kryvoi, Piercing the Corporate
Veil in International Arbitration, 1 Global Bus. L. Rev. 169 (2011); Note, Piercing the
Corporate Law Veil: The Alter Ego Doctrine Under Federal Common Law, 95 Harv. L. Rev.
853 (1982); Pimm, Jurisdiction Over Non-Signatories to the Arbitration Agreement – Can
Arbitrators Pierce the Corporate Veil?, 2003 Asian Disp. Res. 5; Ramsay & Noakes,
Piercing the Corporate Veil in Australia, 19 Comp. & Sec. L.J. 250 (2001); Savage & Leen,
Family Ties: When Arbitration Agreements Bind Non-Signatory Affiliate Companies, 2003
Asian Disp. Res. 16; Vidal, The Extension of Arbitration Agreements Within Groups of
Companies: The Alter Ego Doctrine in Arbitral and Court Decisions, 16(2) ICC Ct. Bull. 63
(2005).
135) Adams v. Cape Indus. plc [1990] Ch. 433, 532 (English Ct. App.).
136) Sandrock, Groups of Companies and Arbitration, 2 Tijdschrift voor Arbitrage 3 (2005); P.
Schlosser, Das Recht der internationalen privaten Schiedsgerichtsbarkeit ¶426 (2d ed.
1989).
137) Cohen, L’engagement des sociétés à l’arbitrage, 2006 Rev. arb. 35, 61.
138) Angell, Piercing the Corporate Veil: A Spanish Perspective, 15 Comp. L. Y.B. Int’l Bus. 343
(1993); Bouckaert & Dupeyré, La participación de terceros en el arbitraje internacional,
2010:9 Spain Arb. Rev. 83; Mullerat, Los segundos 50 años del Convenio de Nueva York:
reflexiones sobre la falta de interpretación uniforme de algunos de sus preceptos,
2009:5 Spain Arb. Rev. 111.
139) Cape Pac. Ltd v. Lubner Controlling Inv. Pty Ltd, [1995] (4) SA 790 (AD) (South African
S.Ct.) (“[C]ircumstances under which the Court will pierce the corporate veil…would
generally have to include an element of fraud or other improper conduct in the
establishment or use of the company or the conduct of its affairs. In this connection
the words ‘device,’ ‘stratagem,’ ‘cloak’ and ‘sham’ have been used.”).
140) Case Concerning the Barcelona Traction, Light & Power Co., [1970] I.C.J. Rep. 3, 38-39
(I.C.J.).
141) See Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.),
Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“The final question is to what
extent the juridical fiction which is the basis of legal entities must give way to the
reality of human behavior and cease to protect those who hide behind the corporate
veil in order to promote their own interests at the cost of those who dealt with the
company.”); Ad Hoc Award in Geneva of 1991, 10 ASA Bull. 202, 209 (1992) (“principle of
good faith in business matters requires that the legal independence of [the
subsidiary] be disregarded, because relying on it constitutes an abuse of rights on the
part of the respondent which clearly harms the legitimate interests of the claimant”).
See also First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611,
629 (U.S. S.Ct. 1983) (“our cases have long recognized ‘the broader equitable principle
that the doctrine of corporate entity, recognized generally and for most purposes, will
not be regarded when to do so would work fraud or injustice’”); Bridas SAPIC v. Gov’t of
Turkmenistan, 345 F.3d 347, 359 (5th Cir. 2003) (noting alter ego “doctrine’s strong links
to equity”; in contrast, “[t]he laws of agency…are not equitable in nature, but
contractual, and do not necessarily bend in favor of justice”); InterGen NV v. Grina, 344
F.3d 134, 149 (1st Cir. 2003) (“‘Federal common law emphasizes the equitable
character of the alter ego doctrine.…[I]t can be invoked only where equity requires
the action to assist a third party.’”) (quoting McCarthy v. Azure, 22 F.3d 351, 362-63 (1st
Cir.1994)).
142) Interim Award in ICC Case No. 3879, Westland Helicopters Ltd v. Arab Org. for Indus., XI
Y.B. Comm. Arb. 127, 131 (1986).
143) In re Cambridge Biotech Corp., 186 F.3d 1356, 1376 (Fed. Cir. 1999).
144) See, e.g., VTB Capital plc v. Nutritek Int’l Corp. [2013] UKSC 5 (U.K. S.Ct.) (questioning
existence of doctrine of piercing corporate veil).
145) VTB Capital plc v. Nutritek Int’l Corp. [2013] UKSC 5 (U.K. S.Ct.) (refusing to pierce
corporate veil); Nova (Jersey) Knit Ltd v. Kammgarn Spinnerei GmbH [1977] 2 All ER 463
(House of Lords); Iran Tehran Computer Consultants Group Ltd v. Fujitsu Serv. Ltd [2012]
EWCA Civ 871 (English Ct. App.); Kanoria v. Guinness [2006] EWCA Civ 222 (English Ct.
App.); Adams v. Cape Indus. plc [1990] Ch. 433, 539 (English Ct. App.); Excalibur Ventures
LLC v. Texas Keystone Inc. [2011] EWHC 1624 (Comm) (English High Ct.); Bay Hotel &
Resort Ltd v. Cavalier Constr. Co. [2001] 5 LRC 376 (Turks & Caicos Islands Privy Council).
Arbitral tribunals sitting in London and applying English law have generally reached
similar conclusions. See, e.g.,Final Award in ICC Case No. 7626, XXII Y.B. Comm. Arb. 132
(1997). See also§10.02[E].
146) VTB Capital plc v. Nutritek Int’l Corp. [2013] UKSC 5 (U.K. S.Ct.). See also Caterpillar Fin.
Servs. (U.K.) Ltd v. Saenz Corp. Ltd [2013] EWHC 2888 (Comm) (English High Ct.); Faizi
Ben Hashem v. Abdulhadi Ali Shayif [2008] EWHC 2380 (Fam) (English High Ct.).
50
147) Acatos & Hutcheson plc v. Watson [1995] 1 BCLC 218, 223 (Ch) (English High Ct.). See also
Woolfson v. Strathclyde Reg’l Council [1978] SLT 159, 161 (House of Lords) (“appropriate
to pierce the corporate veil only where special circumstances exist indicating that it
is a mere façade concealing the true facts”); Bank of Tokyo Ltd v. Karoon (Note) [1987]
AC 45, 64 (English Ct. App.) (“[Counsel] suggested beguilingly that it would be
technical for us to distinguish between parent and subsidiary company in this
context; economically, he said, they were one. But we are concerned not with
economics but with law. The distinction between the two is, in law, fundamental and
cannot here be bridged.”); Adams v. Cape Indus. plc [1990] Ch. 433 (English Ct. App.);
Dadourian Group Int’l Inc. v. Simms [2006] EWHC 2973, ¶682 (English High Ct.) (“In all of
the cases where the court has been willing to pierce the corporate veil, it has been
necessary or convenient to do so to provide the claimant with an effective remedy to
deal with the wrong which has been done to him and where the interposition of a
company would, if effective, deprive him of that remedy.”).
148) Adams v. Cape Indus. plc [1990] Ch. 433, 544 (English Ct. App.).
149) See, e.g., Judgment of 24 November 2006, DFT 4C.327/2005 (Swiss Federal Tribunal);
Judgment of 16 October 2003, 22 ASA Bull. 364 (Swiss Federal Tribunal) (2004)
(controlling shareholder of various companies used them as tools for personal
interests and it would be contrary to good faith to interpose corporate form);
Judgment of 29 January 1996, 14 ASA Bull. 496 (Swiss Federal Tribunal) (1996); Judgment
of 1 September 1993, 14 ASA Bull. 623 (Swiss Federal Tribunal) (1996).
150) See, e.g.,Ad Hoc Interim Award of 9 September 1983, XII Y.B. Comm. Arb. 63, 72 (1987)
(under Swiss law, piercing corporate veil is possible in cases of “inadmissible abuse
of the separation of legal entities,” “where a corporation is used inappropriately as a
shield against liability and is essentially under the influence of a natural or legal
person.…However, in view of certainty of justice, it is required to confine the doctrine
of piercing the corporate veil to gross and clear cases.”). CompareAd Hoc Award in
Geneva of 1991, 10 ASA Bull. 202 (1992) (piercing corporate veil based on total
domination of subsidiary and abuse of rights; domination being inferred from
undercapitalization, overlapping of administration and management and
overlapping of assets).
151) Poudret, L’extension de la clause d’arbitrage: approches française et suisse, 122 J.D.I.
(Clunet) 893, 913 (1995).
152) Sandrock, Groups of Companies and Arbitration, 2 Tijdschrift voor Arbitrage 3 (2005); P.
Schlosser, Das Recht der internationalen privaten Schiedsgerichtsbarkeit ¶426 (2d ed.
1989).
153) Judgment of 25 September 2003, 2004 NJW-RR 1504 (German Bundesgerichtshof);
Judgment of 17 September 2001, 2001 DStR 1853 (German Bundesgerichtshof). See also
Judgment of 10 December 2008, 2008 DNotZ 542 (German Bundesgerichtshof);
Judgment of 16 July 2007, 2008 DNotZ 213 (German Bundesgerichtshof); Judgment of 14
November 2005, 2006 DStR 808 (German Bundesgerichtshof); Judgment of 13 December
2004, 2005 DStR 340 (German Bundesgerichtshof); Judgment of 24 June 2003, 2002 NJW
302 (German Bundesgerichtshof); Judgment of 9 April 2008, 2008 DStR 1976
(Oberlandesgericht Düsseldorf); Gross, Zur Inanspruchnahme Dritter vor
Schiedsgerichten in Fällen der Durchgriffshaftung, 2006 SchiedsVZ 194, 195.
154) Gross, Zur Inanspruchnahme Dritter vor Schiedsgerichten in Fällen der
Durchgriffshaftung, 2006 SchiedsVZ 194, 195; Müller & Keilmann, Beteiligung am
Schiedsverfahren wider Willen?, 2007 SchiedsVZ 113, 116-17.
155) See§§10.02[E]et seq.
156) SeeE. Gaillard & J. Savage (eds.), Fouchard Gaillard Goldman on International
Commercial Arbitration ¶505 (1999); J.-F. Poudret & S. Besson, Comparative Law of
International Arbitration ¶¶255-56 (2d ed. 2007).
157) Judgment of 11 June 1991, Orri v. Société des Lubrifiants Elf Aquitaine, 1992 Rev. arb. 73
(French Cour de cassation civ. 1e).
158) See, e.g., Trans-Pac. Shipping Co. v. Atl. & Orient Trust Co., [2005] F.C. 311 (Canadian
Fed. Ct.) (permitting veil-piercing claims to proceed); TMR Energy Ltd v. State Prop.
Fund of Ukraine, [2003] FC 1517 (Canadian Fed. Ct.); Trans-Pac. Shipping Co. v. Atl. &
Orient Shipping Corp. (BVI) (F.C.), 2005 FC 566 (Canadian Fed. Ct.) (veil-piercing claims
not established on facts); Hi-Seas Marine Ltd v. Boelman, [2006] BCSC 488 (B.C. S.Ct.);
Abener Energia & Sunopta v. Sunopta & Abener Energia, CV-09-374167 & CV-09-380451
(Ontario Super. Ct. 2009); Judgment of 7 May 2007, Collavino Inc. v. Yemen (Tihama Dev.
Auth.), [2007] A.J. No. 531 (Alberta Q.B.).
159) See, e.g., N. Ireland Certification Officer for Trade Unions & Employers’ Ass’ns v.
Cunningham, [2008] NICA 2 (Northern Ireland Ct. App.); Fyffes plc v. DCC plc, [2005]
IEHC 477 (Irish High Ct.); Jones & Tarleton v. Gunn, E Type Props. Ltd & XJS Invs. Ltd,
[1997] 2 ILRM 245 (Irish High Ct.).
160) See, e.g., Judgment of 10 November 2006, Case No. LJN:AY4033 (Dutch Hoge Raad) (80%
shareholding and position on board of directors of non-signatory party subjects latter
to signatory’s arbitration agreement).
51
161) See, e.g., Judgment of 11 September 2008, 2007 Da 90982 (Korean Daebeobwon) (“If a
company takes the appearance of a corporate entity but is merely an individual
engaging in his personal business or is used by an individual as a means to evade
certain laws, the court held that the corporate veil must be pierced and the
individual behind the company shall be held responsible for the actions of the
company.”); Judgment of 12 November 2004, 2002 Da 66892 (Korean Daebeobwon)
(corporate veil can be pierced based on commingling of assets and “abuse of the
company system”); Judgment of 19 January 2001, 97 Da 21604 (Korean Daebeobwon).
162) See, e.g., China Ocean Shipping Co. v. Mitrans Shipping Co., [1995] 3 HKC 123, ¶17 (H.K.
Ct. App.) (“Using a corporate structure to evade legal obligation is objectionable. The
court’s power to lift the corporate veil may be exercised to overcome such evasion so
as to preserve legal obligations.”); Lee v. Kelly McKenzie Ltd, [2004] HKCA 218, ¶16 (H.K.
Ct. App.) (“The whole point of piercing the corporate veil is to look through the facade
to those who were exercising real and actual control behind it.”); Lee Thai Lai v. Wong
Chung Kai t/a Kai Hing Trading Co., [2003] HKCFI 263, ¶6 (H.K. Ct. First Inst.) (“Without
seeking to be exhaustive, the normal circumstances for lifting the corporate veil are
the prevention of the corporate form from being used for the purposes of fraud, or as
a device to evade a contractual or other legal obligation.”).
163) See, e.g., Lee & Blumental, Parent Company and Shareholder Liability: “Piercing the
Veil” of Chinese Corporate Subsidiaries, 5 Bus. L. Int’l 221 (2004); J. Tao, Arbitration Law
and Practice in China 51-53 (3d ed. 2012); Wu, Piercing China’ s Corporate Veil: Open
Questions From the New Company Law, 117 Yale L.J. 329 (2007).
164) See, e.g., Hicks v. Bank of Am., NA, 218 F.Appx. 739, 746 (10th Cir. 2007) (original
purchaser of promissory note properly compelled to arbitrate even though claims
arose from lawsuit initiated by subsequent purchaser because original and
subsequent purchaser were alter egos); Bridas SAPIC v. Gov’t of Turkmenistan, 447 F.3d
411, 416-20 (5th Cir. 2006) (applying alter ego theory to bind non-signatory to
arbitration agreement, because parent both committed fraud or injustice and used
subsidiary’s financial dependence to perpetuate such wrong); Cigna Prop. & Cas. Ins.
Co. v. Polaris Pictures Corp., 159 F.3d 412, 422 (9th Cir. 1998); Wm. Passalacqua Builders,
Inc. v. Resnick Dev. S., Inc., 933 F.2d 131, 138-39 (2d Cir. 1991); McAllister Bros., Inc. v. A &
S Transp. Co., 621 F.2d 519 (2d Cir. 1980). See also Hosking, Non-Signatories and
International Arbitration in the United States: The Quest for Consent, 20 Arb. Int’l 289
(2004); Lamm & Aqua, Defining the Party – Who Is A Proper Party in An International
Arbitration Before the American Arbitration Association?, 2002 Int’l Arb. L. Rev. 84.
165) Oriental Commercial & Shipping Co. (U.K.), Ltd v. Rosseel, NV, 609 F.Supp. 75, 78
(S.D.N.Y. 1985).
166) InterGen NV v. Grina, 344 F.3d 134, 148 (1st Cir. 2003) (“The overarching principle…is
that the corporate form may be disregarded only if considerations of fairness or
public necessity warrant such a step.”) (emphasis added); Freeman v. Complex
Computing Co.,119 F.3d 1044, 1052 (2d Cir. 1997); Gorill v. Icelandair/Flugleidir, 761 F.2d
847, 853 (2d Cir. 1985); Am. Renaissance Lines, Inc. v. Saxis SS Co., 502 F.2d 674, 677 (2d
Cir. 1974) (“absent findings of fraud or bad faith, a corporation…is entitled to a
presumption of separateness from a sister corporation…even if both are owned and
controlled by the same individuals”).
167) Anderson v. Abbott, 321 U.S. 349, 362 (U.S. S.Ct. 1944).
168) See, e.g., Bridas SAPIC v. Gov’t of Turkmenistan, 447 F.3d 411, 416 (5th Cir. 2003) (“alter
ego doctrine, like all variations of piercing the corporate veil doctrine, is reserved for
exceptional cases”); Consorcio Rive v. Briggs of Cancun, Inc., 82 F.Appx. 359 (5th Cir.
2003); United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd, 76 F.3d 393 (10th Cir. 1996);
ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995) (“Courts do not
lightly pierce the corporate veil, ‘even in deference to the strong policy favoring
arbitration.’”) (quoting Califano v. Shearson Lehman Bros. Inc.,690 F.Supp. 1354, 1355
(S.D.N.Y.1988)); In re Multiponics, Inc., 622 F.2d 709, 724-25 (5th Cir. 1980) (“we must
remember that the alter ego doctrine and piercing of the corporate veil are truly
exceptional doctrines, reserved for those cases where the officers, directors or
stockholders utilized the corporate entity as a sham to perpetuate a fraud, to shun
personal liability, or to encompass other truly unique situations”); Inter-Tel Tech., Inc.
v. Linn Station Prop., LLC, 360 S.W.3d 152, 168 (Ky. 2012) (“Courts should not pierce
corporate veils lightly but neither should they hesitate in those cases where the
circumstances are extreme enough to justify disregard of an allegedly separate
corporate entity.”).
169) See, e.g., United States v. Bestfoods, 524 U.S. 51, 69 (U.S. S.Ct. 1998) (“well-established
principle that directors and officers holding positions with a parent and its subsidiary
can and do ‘change hats’ to represent the two corporations separately, despite their
common ownership”); InterGen NV v. Grina, 344 F.3d 134, 149 (1st Cir. 2003) (“Common
ownership and common management, without more, are insufficient to override
corporate separateness and pave the way for alter ego liability.”); Hester Int’l Corp. v.
Fed. Repub. of Nigeria, 879 F.2d 170, 181 (5th Cir. 1989) (“factors of 100% ownership and
appointment of the Board of Directors cannot by themselves force a court to
disregard the separateness of the juridical entities”).
52
170) See, e.g., Ahcom, Ltd v. Smeding, 2011 WL 3443499 (N.D. Cal.) (undercapitalization
alone does not justify piercing corporate veil); Lisa McConnell, Inc. v. Idearc, Inc., 2010
WL 364172, at *8 (S.D. Cal.) (undercapitalization is one “factor” among many); Trevino v.
Merscorp, Inc., 583 F.Supp.2d 521, 530 (D. Del. 2008) (undercapitalization is not per se
reason to pierce corporate veil).
171) See, e.g., Restatement (Second) Conflict of Laws §52, comment b (1971) (parent must “so
control[] and dominate[] the subsidiary as in effect to disregard the latter’s
independent corporate existence”); United States v. Scophony Corp. of Am., 333 U.S.
795 (U.S. S.Ct. 1948); Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 359 (5th Cir.
2003) (“corporate veil may be pierced to hold an alter ego liable for the
commitments of its instrumentality only if (1) the owner exercised complete control
over the corporation with respect to the transaction at issue, and (2) such control was
used to commit a fraud or wrong that injured the party seeking to pierce the veil”);
InterGen NV v. Grina, 344 F.3d 134, 148-49 (1st Cir. 2003).
172) See, e.g., Anderson v. Abbott, 321 U.S. 349, 362 (U.S. S.Ct. 1944) (“[T]here are occasions
when the limited liability sought to be obtained through the corporation will be
qualified or denied.…The cases of fraud make up part of that exception. But they do
not exhaust it. An obvious inadequacy of capital, measured by the nature and
magnitude of the corporate undertaking, has frequently been an important factor in
cases denying stockholders their defense of limited liability.”); Taylor v. Standard Gas
& Elec. Co., 306 U.S. 307, 322 (U.S. S.Ct. 1939) (“doctrine of corporate entity…will not be
regarded when so to do would work fraud or injustice”). See also P. Blumberg et al.,
Blumberg on Corporate Groups§12.03 (2d ed. 2005).
173) See, e.g., First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611,
621-23 (U.S. S.Ct. 1983) (separate corporate status may be disregarded when
“corporate entity is so extensively controlled by its owner that a relationship of
principal and agent is created”); Alejandre v. Telefonica Larga Distancia, de Puerto
Rico, Inc., 183 F.3d 1277, 1284 (11th Cir. 1999); Servaas Inc. v. Repub. of Iraq, 686
F.Supp.2d 346, 354-55 (S.D.N.Y. 2010) (“Alter ego has a clearly defined meaning in law;
namely, where one entity exercises complete domination and control over the day-
to-day operations of another entity.”).
174) See Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 359 (5th Cir. 2003) (“Alter ego
determinations are highly fact-based, and require considering the totality of the
circumstances in which the instrumentality functions.”); Bhd of Locomotive Eng’rs v.
Springfield Terminal Railway Co., 210 F.3d 18, 26 (1st Cir. 2000) (“the federal standard
‘for when it is proper to pierce the corporate veil is notably imprecise and fact-
intensive”) (quoting Crane v. Green & Freedman Baking Co.,134 F.3d 17, 21 (1st Cir.1998));
Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 777-78 (2d Cir. 1995); Ahcom, Ltd
v. Smeding, 2011 WL 3443499, at *5 (N.D. Cal.) (“no litmus test to determine when the
corporate veil will be pierced”).
175) For a representative list, see Carte Blanche (Singapore) Pte Ltd v. Diners Club Int’l, Inc.,
2 F.3d 24 (2d Cir. 1993) (absence of corporate formalities; inadequate capitalization;
financial dealings between parent and subsidiary; overlap in ownership, officers,
directors, and personnel; common office space, address, and phone numbers;
business discretion of allegedly dominated company; whether companies deal with
each other at arms’ length; whether companies are separate profit centers; parent’s
payment or guarantee of subsidiary’s debts; subsidiary’s use of parent’s property);
Andrew Martin Marine Corp. v. Stork-Werkspoor Diesel BV, 480 F.Supp. 1270 (E.D. La.
1979) (common ownership, directors or officers, financing, capitalization, payment of
expenses, use of property, sources of business, observance of legal formalities,
integration of operations, control).
For comparable lists from non-U.S. contexts, seeSchlosser, Arbitration Clauses in
Maritime Contracts and Their Binding Effect on Groups of Companies, 11(4) J. Int’l Arb.
127, 129-32 (1994); Ad Hoc Award in Geneva of 1991, 10 ASA Bull. 202 (1992).
When alter ego is sought between a state and another entity, some decisions have
taken additional criteria into account. See Bridas SAPIC v. Gov’t of Turkmenistan, 447
F.3d 411, 418 (5th Cir. 2003) (listing additional “public law” factors); §10.02[D].
176) See Bridas SAPIC, 447 F.3d at 416, 418. The Court also listed six “public law” factors,
relevant in cases involving alter ego claims against state-related entities: “(1) whether
state statutes and case law view the entity as an arm of the state; (2) the source of the
entity’s funding; (3) the entity’s degree of local autonomy; (4) whether the entity is
concerned primarily with local, as opposed to statewide, problems; (5) whether the
entity has the authority to sue and be sued in its own name; and (6) whether the
entity has the right to hold and use property.” Ibid.
177) See Bridas SAPIC, 447 F.3d at 419-20 (undercapitalized state company, with equivalent
of U.S. $17,000, which was “paltry sum to finance oil and gas exploration and
production,” diverted company’s revenues to State Oil and Gas Developments Fund
(which also collected revenues from other state-owned entities), and immunized
Fund’s from seizure). See also§10.02[P].
53
178) Bridas SAPIC, 447 F.3d at 20. Compare InterGen NV, 344 F.3d at 148-49 (rejecting
defendant’s attempt to compel InterGen, a non-signatory to arbitration agreement, to
arbitrate despite fact that InterGen’s two subsidiaries were signatories to agreement
because “[c]ommon ownership and common management, without more, are
insufficient to override corporate separateness and pave the way for alter ego
liability”).
179) See§10.02[D], pp. 1437-38.
180) Freeman v. Complex Computing Co.,119 F.3d 1044, 1053 (2d Cir. 1997) (quoting Morris v.
New York State Dep’t of Taxation & Fin.,603 N.Y.S.2d 807, 811 (N.Y. Ct. App. 1993))
(emphasis added).
181) See Bridas SAPIC, 345 F.3d at 360 n.11 (“Once it has been determined that the
corporate form was used to effect fraud or another wrong upon a third-party, alter
ego determinations revolve around issues of control and use.”); Subway Equip. Leasing
Corp. v. Sims, 994 F.2d 210, 217-18 (5th Cir. 1993); Interocean Shipping Co. v. Nat’l
Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir. 1975) (even if company has “no mind
of its own,” showing of fraud or something akin to fraud is needed); Presbyterian
Church of Sudan v. Talisman Energy, Inc., 453 F.Supp.2d 633, 689 (S.D.N.Y. 2006)
(“corporation will only be found to be a facade when it was established as a device to
evade existing obligations to other parties”); In re Sunstates Corp. S’holder Litg., 788
A.2d 530, 534 (Del. Ch. 2001) (“to pierce the corporate veil based on an agency or ‘alter
ego’ theory, the corporation must be a sham and exist for no other purpose than as a
vehicle for fraud”) (quoting Wallace v. Wood, 752 A.2d 1175, 1184 (Del. Ch. 1999)).
182) See§10.02[D], pp. 1437-38.
183) See, e.g., Bhd of Locomotive Eng’rs v. Springfield Terminal Railway Co., 210 F.3d 18, 29
(1st Cir. 2000) (“While alter ego liability may be most common in an ordinary parent-
subsidiary context, ‘the equitable doctrine of piercing the corporate veil is not
limited to the parent-subsidiary relationship.’”) (quoting C.M. Corp. v. Oberer Dev. Co.,
631 F.2d 536, 538 (7th Cir. 1980)); Freeman v. Complex Computing Co., 119 F.3d 1044,
1051-52 (2d Cir. 1997) (shareholder who exercises sufficient control over corporation
may be held liable as “equitable owner” under alter ego theory); Minnesota Power v.
Armco, Inc., 937 F.2d 1363, 1364 (8th Cir. 1991).
Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“The piercing, or not, of the
corporate veil very much depends on the circumstances of each case. Some elements
are nearly always considered as necessary. They comprise a significant direct control
measure of the activities of the subsidiary by the parent company or the shareholder
and the insolvability of the former.…An illegitimate behavior of the subsidiary,
instigated by the parent company, towards the person seeking to pierce the
corporate veil is another element that can facilitate this piercing.…It is therefore the
facts of the case that impose the solution.”); Final Award in ICC Case No. 7626, XXII Y.B.
Comm. Arb. 132, 141 (1997) (“By making A-Europe party to Agreement no. 1, the
members of the Group did not attempt to escape any pre-existing liability.…There
was no facade involved.”); Partial Award in ICC Case No. 6000, 2(2) ICC Ct. Bull. 31 (1991);
Award in ICC Case No. 1434, 103 J.D.I. (Clunet) 978 (1976) (corporate identities were of
“secondary importance” and parties intended to bind affiliate); Ad Hoc Interim Award
of 9 September 1983, XII Y.B. Comm. Arb. 63 (1987); Ad Hoc Award of 24 August 2011, 29
ASA Bull. 884, 896 (2010) (“As for the doctrine of the piercing of the corporate veil, it
cannot be applied since the Third Respondent was not a majority shareholder and
did not control the First Respondent.”).
185) Award in ICC Case Nos. 7604 & 7610, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.),
Collection of ICC Arbitral Awards 1996-2000 510 (2003).
186) See, e.g., Award in ICC Case No. 14114, 138 J.D.I. (Clunet) 1188 (2011) (overlapping
management and fact that parent company was sole shareholder did not justify
piercing corporate veil without abuse of subsidiary’s corporate structure by parent
company); Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.),
Collection of ICC Arbitral Awards 1996-2000 474, 479 (2003) (“significant degree of
direct control over the activities of a subsidiary by a parent company or its
stakeholders and the insolvency of the subsidiary…in general…is not enough”); Award
in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990) (“fact that two companies
belong to the same group, or that a shareholder has a dominant position, are never
sufficient, in and of themselves, to legally justify lifting the corporate veil”).
54
187) See, e.g., Interim Award in ICC Case No. 9517, 16(2) ICC Ct. Bull. 80, 47 (2005) (“The only
exception is the hypothesis of fraud, for example when it is evident that the company
which is a party to the arbitration agreement was intentionally and, therefore,
fraudulently deprived of any substance or where a non-signatory owner of the group
has entertained a total confusion between its various companies in the eyes of third
parties and has used fraudulent manoeuvres to try to avoid being personally bound
by its undertakings.”); Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D.
Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“The cessation of
significant activities by the subsidiary and its directors is also a factor which
facilitates lifting the corporate veil. And if the control and effective management of
the subsidiary by the parent corporation contribute to making an action against the
subsidiary illusory, lifting the corporate veil is all the more imperative.”); Award in ICC
Case No. 8163, 16(2) ICC Ct. Bull. 77 (2005) (non-signatory not subject to arbitration
agreement under veil-piercing doctrine in absence of abuse of right or use of
company as sham).
188) Ad Hoc Award of 1991, 10 ASA Bull. 202 (1992) (undercapitalization of subsidiary
warrants piercing corporate veil); Joseph Charles Lemire v. Ukraine, Award in ICSID
Case No. ARB/06/18 of 28 March 2011, IIC 485 (2011); Int’l Triathlon Union v. Pac. Sports
Corp. Inc., Award of 4 August 1999 in CAS Case No. 1996/O/161, in M. Reeb (ed.), Digest of
CAS Awards II 1998-2000 4 (2002) (“To pierce the corporate veil a shareholder must
have abusively used the company to defraud the law in one of the following manner:
bad faith conduct evidencing an intention to evade contractual obligations,
commingling of corporate and shareholders assets, under capitalization, or
conducting business with lack of corporate formalities.”).
189) Award in ICC Case No. 10758, 16 ICC Ct. Bull. 87, 18 (2005) (“Accordingly, where a
corporate structure is being used in bad faith as an instrument of deliberate
concealment or confusion, or to defeat a possible award against the named party to
an arbitration agreement, then the Arbitral Tribunal might be justified in lifting the
corporate veil.”); Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“wrongful conduct by the
subsidiary at the direction of the party towards the person seeking to pierce the
corporate veil is a further element that facilitates piercing the veil”); Interim Award in
ICC Case No. 3879, XI Y.B. Comm. Arb. 127, 131 (1986) (“Equity, in common with the
principles of international law, allows the corporate veil to be lifted, in order to
protect third parties against an abuse which would be to their detriment.”); Ad Hoc
Award of 1991, Alpha SA v. Beta & Co. (Société d’Etat de droit ruritanien),10 ASA Bull. 202
(1992).
190) See, e.g., Final Award in ICC Case No. 9058, Bridas SAPIC v. Gov’t of Turkmenistan,447
F.3d 411, 414 (5th Cir. 2006) (“The alter ego doctrine, like all variations of piercing the
corporate veil doctrine, is reserved for exceptional cases.”); Ad Hoc Award in Geneva
of 1991, 10 ASA Bull. 202 (1992) (piercing corporate veil where subsidiary had been
wrongly dissolved and assets necessary for honoring obligations to creditors had
been transferred to parent company); In re Multiponics, Inc., 622 F.2d 709, 724-25 (5th
Cir. 1980) (“The doctrine applies only if (1) the owner exercised complete control over
the corporation with respect to the transaction at issue and (2) such control was used
to commit a fraud or wrong that injured the party seeking to pierce the veil.”).
191) See, e.g., Award in ICC Case No. 5730, 117 J.D.I. (Clunet) 1029 (1990) (individual who
deceived counter-party as to identity of companies that signed arbitration
agreement held subject to agreement on alter ego grounds); Award in ICC Case No.
5103, 115 J.D.I (Clunet) 1207 (1988) (“companies that form the unity, did all participate,
through an apparent and real [structure], in a complex international contractual
relationship, in which the interest of the group prevailed over the interest of each
company”).
192) Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990) (emphasis added). Some
legal systems would address this issue as one of mistake, to be addressed by
contractual interpretation or rectification. E. Peel (ed.), Treitel: The Law of Contracts
¶8-77 (13th ed. 2011).
193) See authorities cited §10.02[D], p. 1440 n. 187.
194) See§10.02[D], pp. 1437-39.
195) See also§10.01[F], p. 1418; §10.02[A], pp. 1423-24; §10.02[C], pp. 1430-32.
196) That is the case in virtually all of the authorities cited in this section.
197) See, e.g., Fletcher v. Atex Inc., 68 F.3d 1451, 1456 (2d Cir. 1995) (“The law of the state of
incorporation determines when the corporate form will be disregarded.”); Kalb,
Voorhis & Co. v. Am. Fin. Corp., 8 F.3d 130, 132 (2d Cir. 1993) (“The law of the state of
incorporation determines when the corporate form will be disregarded and liability
will be imposed on shareholders.”: “Because a corporation is a creature of state law
whose primary purpose is to insulate shareholders from legal liability, the state of
incorporation has the greater interest in determining when and if that insulation is to
be stripped away.”), quoting Soviet Pan Am Travel Effort v Travel Committee, Inc., 756 F.
Supp. 126, 131 (S.D.N.Y, 1991).
198) See, e.g., Derains, Comment on Award in ICC Case No. 8385, 124 J.D.I. (Clunet) 1061, 1072-
73 (1997) (“[T]he lex societatis plays no role. The question is to assess the scope of an
arbitration clause and not to rule on the operation of a legal entity.”).
55
199) See, e.g., FR8 Singapore Pte Ltd v. Albacore Maritime Inc., 54 F.Supp.2d 628 (S.D.N.Y.
2010) (applying choice-of-law clause in underlying contract to issues of alter ego
status in action to require non-signatories to arbitrate).
Collection of ICC Arbitral Awards 1996-2000 474, 479 (2003) (“[T]hird parties who deal
with the corporations cannot properly be regarded to have united themselves with
the corporation in a venture to be controlled by the law of the corporation’s creation.
This is especially true of third parties from other countries who are necessarily less
acquainted with the law of the state of incorporation.”); Restatement (Second) Conflict
of Laws §307, Reporters Note (1971) (“A state may impose liability upon a shareholder
of a foreign corporation for an act done by the corporation in the state, if the state’s
relationship to the shareholder is sufficient to make reasonable the imposition of
such liability upon him.”). See also§10.05[A].
201) See, e.g., First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611,
621-23, 629 (U.S. S.Ct. 1983) (“the process of lifting the veil, being an exceptional one
admitted by municipal law in respect of an institution of its own making, is equally
admissible to play a similar role in international law”) (quoting Case Concerning The
Barcelona Traction, Light & Power Co., [1970] I.C.J. Rep. 3, 38-39 (I.C.J.)); Judgment of 15
May 2003, Czech Repub. v. CME Czech Repub. BV, Case No. T8735-01 (Svea Ct. App.)
(where there is implied willingness to apply international law, “[w]ith respect to
piercing the corporate veil, no international cases have been presented in the case in
which, in an actual situation of lis pendens and res judicata, a controlling minority
shareholder has been equated with the company”).
202) See, e.g., Interim Award in ICC Case No. 9873, 16(2) ICC Ct. Bull. 85 (2005) (citing no
national law for veil piercing analysis); Award in ICC Case No. 8385, in J.-J. Arnaldez, Y.
Derains & D. Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 474 (2003)
(tribunal applied “law which best corresponds to the needs of the international
business community, which is not in conflict with the legitimate expectations of the
parties, which produces uniform results and offers a reasonable solution to the
dispute”); Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1023 (1990) (decision
based on lex mercatoria: “a non-national rule constructed from international
commercial usage alone”); Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131,
134 (1984) (citing “usages…of international commerce”); Dimolitsa, L’Extension de la
Clause Compromissoire à des Non-Signataires: Rien de Neuf, 30 ASA Bull. 516 (2012)
(“Arbitrators, in view of deciding on their jurisdiction over a non-signatory, may
directly apply certain specific legal concepts of a national law that imply consent,
but more often than not they turn to an analysis of parties’ conduct pragmatically
examining all the factual elements and the surrounding circumstances of a particular
case. By this process, they may conclude – on application of concepts akin to a règle
matérielle of French origin – that a non-signatory has actually consented to
arbitration or determine – on application of the theories of piercing the corporate
veil and alter ego or better, on direct application of general principles of law – that a
non-signatory should be considered as a real party to the arbitration.”); Jarvin, The
Group of Companies Doctrine, in The Arbitration Agreement – Its Multifold Critical
Aspects 181, 196 (ASA Spec. Series No. 8 1994) (“[T]he traditional approach to the
problem that the arbitrators take, is done without reference to any particular law.…
The existence of an intention to be bound to an arbitration agreement is
demonstrated without reference to a particular law; it is a matter of facts and of
evidence, not law.”); K. Youssef, Consent in Context: Fulfilling the Promise of
International Arbitration ¶¶5:1 et seq. (2012).
Some authorities have also adopted a cumulative approach, although this is of
limited value in cases of “true conflicts.” See, e.g., Award in ICC Case No. 8385, in J.-J.
Arnaldez, Y. Derains & D. Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000
474 (2003) (“all three systems [international, New York and Belgian] recognize that, at
least in some instances, the corporate veil may be pierced”).
203) First Nat’l City Bank, 462 U.S. at 621-22 (law of state of incorporation applies to
internal affairs of corporation, but “[d]ifferent conflicts principles apply…where the
rights of third parties external to the corporation are at issue”). See also§10.05[A].
204) First Nat’l City Bank, 462 U.S. at 621-22.
205) First Nat’l City Bank, 462 U.S. at 623.
206) See§4.04[A][2][g].
207) First Nat’l City Bank, 462 U.S. at 621-22.
208) See§10.02[B] (apparent authority); §10.02[K] (estoppel).
209) See§10.05[A].
56
210) For commentary, see J.-M. Ahrens, Die subjektive Reichweite internationaler
Schiedsvereinbarungen und ihre Erstreckung in der Unternehmensgruppe 128 et seq.
(2001); Derains, L’extension de la clause d’arbitrage aux non-signataires – La doctrine
des groupes de sociétés, 241 (ASA Spec. Series No. 8 1994); Ferrario, The Group of
Companies Doctrine in International Commercial Arbitration: Is There Any Reason for
This Doctrine to Exist?, 26 J. Int’l Arb. 647 (2009); Gaffney, The Group of Companies
Doctrine and the Law Applicable to the Arbitration, 19(6) Mealey’s Int’l Arb. Rep. 47
(2004); Habegger, Arbitration and Groups of Companies, 2002 Euro. Bus. Org. L. Rev. 516;
Jarvin, The Group of Companies Doctrine, in The Arbitration Agreement – Its Multifold
Critical Aspects 181 (ASA Spec. Series No. 8 1994); Leadley & Williams, Peterson Farms:
There Is No Group of Companies Doctrine in English Law, 2004 Int’l Arb. L. Rev. 111;
Poudret, Trois remarques à propos de la théorie des groupes de sociétés, 13 ASA Bull.
145 (1995); Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their
Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423 (2002); Sandrock,
Arbitration Agreements and Groups of Companies, 27 Int’l Law. 941 (1993); Sandrock,
Groups of Companies and Arbitration, 2 Tijdschrift voor Arbitrage 3 (2005); Sandrock,
Die Aufweichung einer Formvorschrift und anderes mehr – Das Schweizer Bundesgericht
erlässt ein befremdliches Urteil, 2005 SchiedsVZ 1; Savage & Leen, Family Ties: When
Arbitration Agreements Bind Non-Signatory Affiliate Companies, 2003 Asian Disp. Res.
16; Schwartz, Multiparty Arbitration and the ICC: In the Wake of Dutco, 10(3) J. Int’l Arb.
5 (1993); Shore & Wilske, The Rise and Fall of the “Group of Companies” Doctrine, 4 J.
Int’l Disp. Res. 157 (2005); Vidal, The Extension of Arbitration Agreements Within Groups
of Companies: The Alter Ego Doctrine in Arbitral and Court Decisions, 16(2) ICC Ct. Bull.
63 (2005); Wilske, Shore & Ahrens, The “Group of Companies Doctrine” – Where Is It
Headed?, 17 Am. Rev. Int’l Arb. 73 (2006); Woolhouse, Group of Companies Doctrine and
English Arbitration Law, 20 Arb. Int’l 435 (2004).
211) A recent overview indicated that only a small number of jurisdictions surveyed had
expressly recognized the group of companies doctrine. G. Wegen & S. Wilske (eds.),
Getting the Deal Through: Arbitration in 55 Jurisdictions Worldwide (2013).
212) For criticisms of the group of companies doctrine, seeHabegger, Extension of
Arbitration Agreements to Non-Signatories and Requirements of Form, 22 ASA Bull. 398,
398-404 (2004); Poudret, Un statut privilégié pour l’extension de l’arbitrage aux tiers?,
22 ASA Bull. 390, 390-97 (2004); Sandrock, Groups of Companies and Arbitration, 2
Tijdschrift voor Arbitrage 3, 6 (2005) (“doctrine must be rejected for several reasons”;
“not clear-cut and definite”; “confusingly blurred”); Wilske, Shore & Ahrens, The “Group
of Companies Doctrine” – Where Is It Headed?, 17 Am. Rev. Int’l Arb. 73, 77 et seq. (2006)
(“no serious theoretical groundwork was done to justify its application”).
213) There were, however, decisions that adopted essentially identical analysis in other
jurisdictions. See, e.g.,Map Tankers, Inc. v. MOBIL Ltd, Partial Final Award of 28
November 1980 in SMA Case No. 1510, VII Y.B. Comm. Arb. 151, 153 (1982) (“It is neither
sensible nor practical to exclude the claims of companies who have an interest in the
venture and who are members of the same corporate family.”).
214) Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131 (1984). The arbitral tribunal
was comprised of distinguished academics; it was chaired by Professor Pieter
Sanders (one of the principal negotiators and drafters of the New York Convention),
and the co-arbitrators were Professor Berthold Goldman and Professor Michel
Vasseur.
215) Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 135 (1984).
217) It is doubtful that earlier awards had adopted reasoning that could fairly be
characterized as the group of companies theory. See, e.g., Award in ICC Case No. 2375,
103 J.D.I. (Clunet) 973 (1976); Award in ICC Case No. 1434, 103 J.D.I. (Clunet) 978 (1976).
219) Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 136 (1984). The tribunal
reiterated elsewhere that “the circumstances and the documents analyzed above
show that such application conforms to the mutual intent of the parties.” Id. at 136-37.
220) Judgment of 21 October 1983, Société Isover-Saint-Gobain v. Société Dow Chem. France,
1984 Rev. arb. 98 (Paris Cour d’appel) (group of companies doctrine is “not seriously
contested…as a usage of international commerce”).
221) See, e.g.,Judgment of 11 June 1991, Orri v. Société des Lubrifiants Elf Aquitaine, 1992 Rev.
arb. 73 (French Cour de cassation civ. le); Judgment of 7 October 1999, Société
Russanglia v. Société Delom, 2000 Rev. arb. 288 (Paris Cour d’appel); Judgment of 26
November 1986, Société Sponsor AB v. Lestrade, 1988 Rev. arb. 153, 155 (Pau Cour
d’appel) (group of companies doctrine “accepted in law”).
222) See, e.g.,Interim Award in ICC Case No. 6610, XIX Y.B. Comm. Arb. 162 (1994); Final Award
in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34 (1991); Partial Award in ICC Case No. 5894, 2(2)
ICC Ct. Bull. 25 (1991); Award in ICC Case No. 5103, 115 J.D.I. (Clunet) 1206 (1988); Jarvin,
The Group of Companies Doctrine, in The Arbitration Agreement – Its Multifold Critical
Aspects 181 (ASA Spec. Series No. 8 1994).
223) Award in ICC Case No. 5103, 115 J.D.I. (Clunet) 1206, 1207, 1212 (1988).
57
224) See, e.g., Partial Award in ICC Case No. 6000, 2(2) ICC Ct. Bull. 31, 34 (1991) (“it is largely
admitted that by virtue of a usage of the international trade, where a contract,
including an arbitration clause, is signed by a company which is a party to a group of
companies, the other company or companies of the group which are involved in the
execution, the performance and/or the termination of the contract are bound by the
arbitration clause, provided the common will of the parties does not exclude such an
extension, and even more so where the common will of the parties was to include a
company of the group in the contractual relationship, even if such company did not
formally sign the contract”). See alsoE. Gaillard & J. Savage (eds.), Fouchard Gaillard
Goldman on International Commercial Arbitration ¶501 (1999) (“The existence of the
parties’ consent is thus clearly the key issue.”). Nonetheless, as discussed below,
there are some cases, involving considerations of estoppel, abuse of right, or good
faith principles, where members of a corporate group would be bound by an
arbitration agreement notwithstanding the parties’ intentions. See§10.02[K].
225) Award in ICC Case Nos. 7604 and 7610, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.),
Collection of ICC Arbitral Awards 1996-2000 510 (2003). See also Ferrario, The Group of
Companies Doctrine in International Commercial Arbitration: Is There Any Reason for
This Doctrine to Exist?, 26 J. Int’l Arb. 647, 648 (2009) (group of companies doctrine
requires showing “(1) the intention of all the parties involved to consider the whole
group as the contracting party without giving importance to which company would
conclude or perform the contract; (2) the active participation of the non-signatories
in the negotiation, performance or termination of the contract, showing the will of
those companies to be party to the contract and, as a consequence, to the arbitration
agreement even though they did not sign it”).
226) See, e.g., Final Award in ICC Case No. 10758, 128 J.D.I. (Clunet) 1171, 1173 (2001) (group of
companies must “be treated with caution”); Award in ICC Case No. 5721, 117 J.D.I.
(Clunet) 1019, 1024 (1990) (“where a company or individual appears to be the pivot of
the contractual relations in a particular matter, one should carefully examine
whether the parties’ legal independence ought not, exceptionally, be disregarded in
the interests of making a global decision”); Interim Award in ICC Case No. 4504, 113
J.D.I. (Clunet) 1118 (1986) (expressing doubt regarding group of companies doctrine).
227) See, e.g., Final Award in ICC Case No. 10758, 128 J.D.I. (Clunet) 1171, 1172-73 (2001) (“The
extension of an arbitration agreement to a non-signatory is not a mere question of
corporate structure or control, but rather one of the non-signatory’s participation in
the negotiations, conclusion or performance of the contract, or its conduct towards
the other party that the Arbitral Tribunal can infer.”); Derains, Note on ICC Case No.
4131, 110 J.D.I. (Clunet) 899, 906 (1983) (“Only these companies of the group that played
a part in the negotiation, conclusion or termination of the contract may thus find
themselves bound by the arbitration clause, which, at the time of the signature of the
contract, virtually bound the economic entity constituted by the group. Beyond the
general principle, the arbitrators should thus appreciate on a case-by-case basis not
only the existence of an intention of the members of the group to bind it as a whole,
but also and especially, if such an intent is established, its practical effects vis-à-vis
each of the companies of the group considered separately.”).
228) See, e.g., Final Award in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34 (1991) (effects of
arbitration clause can be extended only to non-signatory companies which have
distinct legal status if they were effectively or implicitly represented or if they played
active role during preceding negotiations, or if they are directly concerned by
agreement which contains arbitration clause); Award in ICC Case No. 5721, 117 J.D.I.
(Clunet) 1019, 1024 (1990) (“The membership of two companies in the same group or
the domination by one shareholder are never, in themselves, sufficient reasons to
justify the automatic lifting of the corporate veil. However, when one company or one
individual appears to be the linchpin of the contractual relationship in a particular
matter, it should be carefully examined whether the legal independence of the
parties should exceptionally be dismissed in favor of an overall assessment. One will
accept such an exception when confusion maintained by the group or the majority
shareholder is apparent.”); Award in ICC Case No. 5103, 115 J.D.I. (Clunet) 1206 (1988)
(all members of group participated without distinction in performance of contract;
upholding application of clause to non-signatories).
58
229) See, e.g., Final Award in ICC Case No. 11160, 16(2) ICC Ct. Bull. 99 (2005) (“active
participation of [non-signatory] in the negotiation, preparation and conclusion of the
Contract, and in some respects in the performance under it, determines that the
intention of the parties can be reasonably inferred as to the extension of said
Contract and the arbitration clause to [the non-signatory]”); Award in ICC Case Nos.
7604 and 7610, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection of ICC Arbitral
Awards 1996-2000 510, 511 (2003) (authorities “recognize the extension of the legal
effects of an arbitration agreement to a non-signatory third party when the
circumstances of the operation under analysis show the existence of a common
intention of the parties to the proceedings to consider this third party to be
concerned directly by this operation or to be an actual party to the agreement
containing the arbitration clause, or when the circumstances allow the presumption
that this third party accepted to be subject to such agreement”); Award in ICC Case
No. 7155, 123 J.D.I. (Clunet) 1037 (1996) (no evidence of common intention to bind non-
signatories); Award in ICC Case No. 5103, 115 J.D.I. (Clunet) 1206 (1988) (“common
intention of all parties”); Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 135
(1984) (“in accordance with the mutual intention of all parties”).
230) Interim Award in ICC Case No. 11405, quoted in B. Hanotiau, Complex Arbitrations ¶105
n.142 (2005).
231) See, e.g.,Interim Award in ICC Case No. 6610, XIX Y.B. Comm. Arb. 162 (1991); Award in ICC
Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990) (“[W]here a company or an individual
appears to be the pivot of the contractual relations in a particular matter, one should
carefully examine whether the parties’ legal independence ought not, exceptionally,
be disregarded in the interests of making a global decision. This exception is
acceptable in the case of confusion deliberately maintained by the group or by the
majority shareholder.”); Unpublished Ad Hoc Award of 3 March 1999, excerpted in de
Boisséson, Joinder of Parties to Arbitral Proceedings: Two Contrasting Decisions, in
Complex Arbitrations 19, 21 (ICC Ct. Bull. Spec. Supp. 2003). See also Fyffes plc v. DCC
plc, [2005] IEHC 477 (Irish High Ct.) (“In the case of a group of companies, the court
may sometimes treat the group as one entity, particularly where to do otherwise
would have unjust consequences for outsiders dealing with companies in the group.”);
B. Hanotiau, Complex Arbitrations ¶¶104-213 (2005); Vidal, The Extension of Arbitration
Agreements Within Groups of Companies: The Alter Ego Doctrine in Arbitral and Court
Decisions, 16(2) ICC Ct. Bull. 63 (2005).
232) Award in ICC Case No. 2375, 103 J.D.I. (Clunet) 973 (1976).
233) E. Gaillard & J. Savage (eds.), Fouchard Gaillard Goldman on International Commercial
Arbitration ¶504 (1999). See also§10.02[E].
234) See Hanotiau, L’arbitrage et les groupes de sociétés, II Cahiers de l’arbitrage 11, 113
(2004) (“existence of a group of companies gives a special dimension to the question
of behavior as an expression of consent”).
235) See§10.02[D].
236) See§10.02[E], pp. 1430-31; Final Award in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34, 35 (1991)
(“[W]ithout denying the economic reality of a ‘group of companies,’ the scope of an
arbitration clause may be extended to non-signatory companies with separate legal
significance only if they played an active role in the negotiations leading to the
agreement containing the clause, or if they are directly implicated in the
agreement.”); Partial Award in ICC Case No. 6000, 2(2) ICC Ct. Bull. 31, 34 (1991) (“it is
largely admitted that…where a contract, including an arbitration clause, is signed by
a company which is a party to a group of companies, the other company or
companies of the group which are involved in the execution, the performance and/or
the termination of the contract are bound by the arbitration clause, provided the
common will of the parties does not exclude such an extension, and even more so where
the common will of the parties was to include a company of the group in the
contractual relationship, even if such a company did not formally sign the contract”)
(emphasis added); Judgment of 31 October 1989, Kis France SA & KIS Photo Indus. SA v.
Société Générale, XVI Y.B. Comm. Arb. 145, 146 (Paris Cour d’appel) (1991) (arbitrator
had correctly “inferred from the contractual relationships between the two groups of
companies that there was a common intention of the parties” to be jointly bound)
(emphasis added).
59
237) See, e.g., Besson, Piercing the Corporate Veil: Back on the Right Track, in B. Hanotiau &
E. Schwartz (eds.), Multiparty Arbitration 149 (2010) (“Piercing the corporate veil
focuses on the fraud or the abuse of right resulting from the use or abuse of a
corporate form in order to limit the liability of the real party. The group of companies
doctrine focuses on the determination of the intention – or the presumed intention to
arbitrate.…The doctrine of piercing the corporate veil therefore pertains to company
law, whereas the group of companies doctrine is predominantly a contract law
theory.”); S. Brekoulakis, Third Parties in International Commercial Arbitration ¶5.79
(2010) (“Overall, thus, the theory of lifting the corporate veil has distinguishable
characteristics and a different focus from that of the group of companies doctrine:
the former focuses on an excessive element of domination and fraud, rather than
consent, which is the epicentre of the discussion under the latter. In fact, the theory
of lifting the corporate veil was originally developed and is currently used mainly to
hold a company liable for the substantive debts of another, rather than to bind a
parent company on the arbitration agreement signed by its subsidiary.”) (emphasis in
original); K. Youssef, Consent in Context: Fulfilling the Promise of International
Arbitration ¶¶6:3 to 6:18 (2012).
238) See§10.02[E], pp. 1447-52; Partial Award in ICC Case No. 8910, 127 J.D.I. (Clunet) 1085,
1094 (2000) (group of companies participated in negotiation of contract and common
intent was for companies to be bound by arbitration clause); Partial Award in ICC Case
No. 5894, 2(2) ICC Ct. Bull. 25, 26 (1991) (parent companies party to several contracts
because “these agreements create a tight network of obligations to be discharged by
or for the companies concerned”); Interim Award in ICC Case No. 4131, IX Y.B. Comm.
Arb. 131 (1984) (parent company either signed contracts for subsidiaries or
participated in their conclusion, performance and termination); Award in ICC Case No.
2375, 103 J.D.I. (Clunet) 973 (1976) (contract between two parent companies bound
subsidiaries of each); Award in ICC Case No. 1434, 103 J.D.I. (Clunet) 978 (1976)
(agreement stated that it was entered into on behalf of corporate group). See alsoE.
Gaillard & J. Savage (eds.), Fouchard Gaillard Goldman on International Commercial
Arbitration ¶500 (1999) (“it is not so much the existence of a group that results in the
various companies of the group being bound by the agreement signed by only one of
them, but rather the fact that such was the true intention of the parties”).
239) See, e.g., Final Award in ICC Case No. 11160, 16(2) ICC Ct. Bull. 99 (2005) (non-signatory
special purpose vehicle, which was involved during contract formation, subject to
arbitration clause); Final Award in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34 (1991) (non-
signatory joint venture bound by arbitration clause, because of central involvement
in negotiations; two parent company non-signatories not bound by arbitration
clause). Compare Award in ICC Case No. 7155, 123 J.D.I. (Clunet) 1037 (1996) (two non-
signatories not bound because they were not part of corporate group when contract
was concluded); Interim Award in ICC Case No. 4504, 113 J.D.I. (Clunet) 1118 (1986) (non-
signatory not bound by arbitration clause, despite involvement of its representatives
in negotiation and execution of contract).
240) See, e.g., Astra Oil Co. v. Rover Navigation, Ltd, 344 F.3d 276, 277 (2d Cir. 2003) (on
estoppel theory, non-signatory oil company affiliated with shipper could compel
arbitration against charter-vessel owner, pursuant to arbitration clause contained in
charter party between shipper and charter-vessel owner, because of close connection
between oil company’s claims and contract, close corporate and operational
relationship between oil company and shipper, and fact that charter-vessel owner
treated oil company as if it were party to contract); Smith/Enron Cogeneration LP, Inc.
v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 97-98 (2d Cir. 1999) (where defendant
treated affiliated companies, only some of whom were signatories to arbitration
agreement, as single entity in filing claims against them in related lawsuit, defendant
was estopped from resisting arbitration against affiliated companies); Choctaw
Generation Ltd v. Am. Home Assur. Co., 271 F.3d 403, 406-07 (2d Cir. 2001) (signatory
estopped from objecting to arbitration because issues non-signatory was seeking to
resolve were intertwined with agreement that estopped party had signed).
241) See§10.02[E], pp. 1430-31; Judgment of 19 August 2008, DFT 4A_128/2008 (Swiss Federal
Tribunal); Judgment of 18 December 2001, LUKoil-Permnefteorgsintez, LLC v. MIR, 20
ASA Bull. 482 (Swiss Federal Tribunal) (2002) (upholding award finding non-signatory
bound by arbitration clause because it assumed payment and other obligations
under underlying contract).
242) Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 134 (1984) (referring to
“conclusion, execution or performance” of contract) (emphasis added).
243) See, e.g., Final Award in ICC Case No. 11160, 16(2) ICC Ct. Bull. 99 (2005) (piercing
corporate veil after assessing, inter alia, entities involved in performance of contract);
Award in ICC Case No. 7155, 123 J.D.I. (Clunet) 1037 (1996) (applying group of companies
doctrine to related companies that were created after contract was completed).
60
244) See, e.g.,Judgment of 30 November 1988, Korsnas Marma v. Durand-Auzias, 1989 Rev.
arb. 691, 694 (Paris Cour d’appel) (“arbitration clause in an international contract has
a validity and an effectiveness of its own, such that the clause must be extended to
parties directly implicated in the performance of the contract and in any disputes
arising out of the contract, provided that it has been established that their respective
situations and activities raise the presumption that they were aware of the existence
and scope of the arbitration clause, and irrespective of the fact that they did not sign
the contract containing the arbitration agreement”), quoted in E. Gaillard & J. Savage
(eds.), Fouchard Gaillard Goldman on International Commercial Arbitration ¶505 (1999).
245) See, e.g., Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶93 (Comm)
(English High Ct.) (court rejects award, concluding that “one company in the group can
bind the other members to an agreement if such a result conforms to the mutual
intentions of all of the parties and reflects the good usage of international
commerce”: “the Group of Companies doctrine…forms no part of English law”); Caparo
Group Ltd v. Fagor Arrasate Sociedad Coop. [2000] Arb. & Disp. Res. L.J. 254 (QB)
(English High Ct.).
Ct.). See also In re Scaplake [1978] 2 Lloyd’s Rep. 380 (QB) (English High Ct.).
247) See, e.g., Gaffney, The Group of Companies Doctrine and the Law Applicable to the
Arbitration, 19(6) Mealey’s Int’l Arb. Rep. 47 (2004); Leadley & Williams, Peterson
Farms: There Is No Group of Companies Doctrine in English Law, 2004 Int’l Arb. L. Rev.
111; Wilske, Shore & Ahrens, The “Group of Companies Doctrine” – Where Is It Headed?,
17 Am. Rev. Int’l Arb. 73, 81-82 (2006); Woolhouse, Group of Companies Doctrine and
English Arbitration Law, 20 Arb. Int’l 435 (2004).
248) Bank of Tokyo Ltd v. Karoon [1987] AC 45, 64 (English Ct. App.). See also Adams v. Cape
Indus. [1990] Ch. 433, 538 (“In our judgment, we have no discretion to reject the
distinction between the members of the group as a technical point.”) (English Ct.
App.).
249) Poudret, L’extension de la clause d’arbitrage: approches française et suisse, 122 J.D.I.
(Clunet) 893, 913 (1995).
250) Judgment of 29 January 1996, 14 ASA Bull. 496 (Swiss Federal Tribunal) (1996) (rejecting
arguments that non-signatory parent company was subject to arbitration clause,
principally on veil-piercing/alter ego grounds).
251) Judgment of 16 October 2003, 22 ASA Bull. 364, 382 (Swiss Federal Tribunal) (2004)
(refusing to annul award where arbitral tribunal, seated in Switzerland, applied
Lebanese law and group of companies doctrine, to bind non-signatory shareholder).
252) See Judgment of 20 January 2006, Case No. LJN:AU4523, ¶4.5 (Dutch Hoge Raad).
253) See, e.g., Partial Award in ICC Case No. 10818, 16(2) ICC Ct. Bull. 94 (2005) (non-signatory
not subject to arbitration agreement because it was not interchangeable in
performance of contract); Final Award in ICC Case No. 9839, XXIX Y.B. Comm. Arb. 66
(2004) (non-signatory not subject to arbitration agreement under group of companies
doctrine); Interim Award in ICC Case No. 6610, XIX Y.B. Comm. Arb. 162 (1994) (same);
Award in ICC Case No. 5281, 7 ASA Bull. 313 (1989) (same); Interim Award in ICC Case No.
4504, 113 J.D.I. (Clunet) 1118 (1986) (non-signatory not subject to arbitration agreement
under group of companies doctrine in Swiss-seated arbitration); Partial Award in ICC
Case No. 4402, IX Y.B. Comm. Arb. 138 (1984); Award in ICC Case No. 3742, 111 J.D.I.
(Clunet) 910 (1984); Award in ICC Case No. 2138, in S. Jarvin & Y. Derains (eds.),
Collection of ICC Arbitral Awards 1974-1985 242 (1990) (refusing to subject non-signatory
to arbitration clause under group of companies doctrine: “it was not demonstrated
that [respondent] would have accepted the arbitration clause if it had signed the
contract”).
Collection of ICC Arbitral Awards 1996-2000 474 (2003); Interim Award in ICC Case No.
4504, 113 J.D.I. (Clunet) 1118 (1986); Award in Geneva Chamber of Commerce of 24 March
2000, 21 ASA Bull. 781 (2003) (“principle according to which a company may be
considered a party to a contractual undertaking made by another company as a
consequence of the fact that both companies belong to a group which constitutes one
economic reality, does not exist in Switzerland de lege lata”); Ad Hoc Award in Geneva
of 1991, 10 ASA Bull. 202 (1992) (no group of companies doctrine in Swiss law).
255) See generally§5.04[A][1]; §10.01[D]; §10.02[C]. See also Ferrario, The Group of Companies
Doctrine in International Commercial Arbitration: Is There Any Reason for This Doctrine
to Exist?, 26 J. Int’l Arb. 647, 673 (2009) (group of companies doctrine “aims to prevent
the parties from commencing different proceedings in relation to the same dispute” ).
256) See§1.02.
257) See§10.02[E], pp. 1452-53.
258) Compare the analogous treatment of corporate officers and directors under some
national legal systems. See§10.02[M]; Ferrario, The Group of Companies Doctrine in
International Commercial Arbitration: Is There Any Reason for This Doctrine to Exist?, 26
J. Int’l Arb. 647, 670 (2009).
61
259) See, e.g., Award in ICC Case No. 9138, discussed in Grigera Naón, Choice-of-Law
Problems in International Commercial Arbitration, 289 Recueil des Cours 9, 132-33
(2001) (group of companies doctrine designed to “avoid manipulations which are
contrary to the principle that in performing their contractual obligations the parties
have to act in good faith”); Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024
(1990) (“[W]here a company or an individual appears to be the pivot of the
contractual relations in a particular matter, one should carefully examine whether
the parties’ legal independence ought not, exceptionally, be disregarded in the
interests of making a global decision. This exception is acceptable in the case of
confusion deliberately maintained by the group or by the majority shareholder.”).
260) An application of alter ego analysis in these circumstances may sometimes be more
appropriate than application of a group of companies analysis. As noted above, the
former is directed towards disregarding separate corporate forms in cases of fraud
and similar conduct. See§10.02[D].
261) See, e.g.,Ad Hoc Interim Award of 9 September 1983, XII Y.B. Comm. Arb. 63 (1987)
(treating abuse of right as basis for “group of companies” analysis); Vidal, The
Extension of Arbitration Agreements Within Groups of Companies: The Alter Ego Doctrine
in Arbitral and Court Decisions, 16(2) ICC Ct. Bull. 63 (2005).
262) Interim Award of 23 September 1982 in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 132-33
(1984) (“[T]he tribunal shall…determine the scope and effects of the arbitration
clauses in question, and thereby reach its decision regarding jurisdiction, by
reference to the common intent of the parties to these proceedings.…In doing so, the
tribunal, following, in particular, French case law relating to international arbitration
should also take into account, usages conforming to the needs of international
commerce, in particular, in the presence of a group of companies.”).
263) Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection
of ICC Arbitral Awards 1996-2000 474 (2003) (applying lex mercatoria).
264) See§4.04[B] (especially 4.04[B][2][b][ii]). See also§10.05[C][3].
265) See§10.05[A] for a discussion of these principles.
266) See Restatement (Second) of Contracts §304 (1981); Principles of European Contract
Law, Art. 6:110 (1999); Contracts (Rights of Third Parties) Act (England); Contracts
(Rights of Third Parties) Act (Singapore); J. Herbots (ed.), International Encyclopaedia
of Laws: Contracts ¶138 (1993 & Update 2013) (Australia), ¶239 (Ireland), ¶240
(Austria), ¶253 (Romania), ¶280 (Denmark), ¶285 (France), ¶609 (India); UNIDROIT,
Principles of International Commercial Contracts Art. 5.2.1 (2004).
267) Final Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26, 40 (2004).
268) See, e.g., Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d 160, 166
(5th Cir. 1998) (confirming award against non-signatory third party beneficiaries where
their interests were “identified and adequately represented” by party to arbitral
proceedings); Spear, Leeds & Kellogg v. Cent. Life Assur. Co., 85 F.3d 21, 27 (2d Cir. 1997);
Fink v. Carlson, 856 F.2d 44, 46 n.3 (8th Cir. 1988) (“Of course, if the third party
beneficiary seeks to enforce the contract, he will be bound by the contract’s
limitations.”); Riek v. Xplore-Tech Servs. Private Ltd, 2009 U.S. Dist. LEXIS 28567 (M.D.
N.C.); Black & Veatch Int’l Co. v. Wartsila NSD N. Am., Inc., 1998 U.S. Dist. LEXIS 20732 (D.
Kan.) (third party beneficiary of underlying contract bound by arbitration clause
contained in contract); Bevere v. Oppenheimer & Co., 862 F.Supp. 1243 (D.N.J. 1994)
(party asserting claims under agreement is bound by arbitration clause contained in
agreement); Benton v. Vanderbilt Univ., 137 S.W.3d 614 (Tenn. 2004); Tractor-Trailer
Supply Co. v. NCR Corp., 873 S.W.2d 627 (Mo. Ct. App. 1994) (third party beneficiary that
invokes contract is bound by arbitration clause contained therein); Judgment of 9
September 1999, 1999 BayobLGZ 255, 267 (Bayerisches Oberstes Landesgericht)
(arbitration agreement can be concluded with effect for third party beneficiaries).
269) See, e.g., Newby v. Enron Corp., 391 F.Supp.2d 541, 561 (S.D. Tex. 2005) (“non-signatories
may enforce arbitration clauses if they were intended third-party beneficiaries”).
62
270) See, e.g., Contracts (Rights of Third Parties) Act (England), §8(1) (“Where (a) a right
under section 1 to enforce a term (‘the substantive term’) is subject to a term
providing for the submission of disputes to arbitration (‘the arbitration agreement’),
and (b) the arbitration agreement is an agreement in writing…the third party shall be
treated for the purposes of that Act as a party to the arbitration agreement as regards
disputes between himself and the promisor relating to the enforcement of the
substantive term by the third party), §8(2) (“Where (a) a third party has a right under
section 1 to enforce a term providing for one or more descriptions of dispute between
the third party and the promisor to be submitted to arbitration (‘the arbitration
agreement’), (b) the arbitration agreement is an agreement in writing…and (c) the
third party does not fall to be treated under subsection (1) as a party to the
arbitration agreement, the third party shall, if he exercises the right, be treated for
the purposes of that Act as a party to the arbitration agreement in relation to the
matter with respect to which the right is exercised, and be treated as having been so
immediately before the exercise of the right.”); Singaporean Contracts (Rights of Third
Parties) Act, §9(1) (“Where (a) a right under section 2 to enforce a term (referred to in
this section as the substantive term) is subject to a term providing for the submission
of disputes to arbitration (referred to in this section as the arbitration agreement);
and (b) the arbitration agreement is an agreement in writing…the third party shall be
treated for the purposes of the Arbitration Act or the International Arbitration Act, as
the case may be, as a party to the arbitration agreement as regards disputes between
himself and the promisor relating to the enforcement of the substantive term by the
third party”), §9(2) (“Where (a) a third party has a right under section 2 to enforce a
term providing for one or more descriptions of dispute between the third party and
the promisor to be submitted to arbitration (referred to in this section as the
arbitration agreement); (b) the arbitration agreement is an agreement in writing…;
and (c) the third party does not fall to be treated under subsection (1) as a party to
the arbitration agreement, the third party shall, if he exercises the right, be treated
for the purposes of the Arbitration Act (Cap. 10) or the International Arbitration Act
(Cap. 143A), as the case may be, as a party to the arbitration agreement in relation to
the matter with respect to which the right is exercised, and be treated as having been
so immediately before the exercise of the right.”).
271) The Swiss Federal Tribunal has not considered whether a third party beneficiary is
bound by an obligation to arbitrate at the request of another contracting party.
Judgment of 19 April 2011, DFT 4A_44/2011 (Swiss Federal Tribunal). Nonetheless, Swiss
commentators conclude that a third party beneficiary is bound, ipso jure, by the
arbitration agreement, particularly if it has accepted substantial benefits under and
intervened in performance of the relevant agreement. J.-F. Poudret & S. Besson,
Comparative Law of International Arbitration ¶289 (2d ed. 2007); K.-H. Schwab & G.
Walter, Schiedsgerichtsbarkeit ¶7-36 (7th ed. 2005). Compare B. Berger & F. Kellerhals,
International and Domestic Arbitration in Switzerland ¶¶455, 514 (2d ed. 2011) (parties
can agree that third party beneficiary only acquires rights under contract if it accepts
arbitration agreement).
272) See, e.g.,Final Award in ICC Case No. 9839, XXIX Y.B. Comm. Arb. 66 (2004) (payment
provisions of contract contradicted third party beneficiary argument); Brantley v.
Repub. Mortg. Ins. Co., 424 F.3d 392, 396 (4th Cir. 2005) (non-signatory could not
enforce arbitration agreement as third party beneficiary because agreement “does
not clearly indicate that, at the time of contracting, the parties intended to provide
[the non-signatory] with a direct benefit”); Zurich Am. Ins. Co. v. Watts Indus., Inc., 417
F.3d 682 (7th Cir. 2005) (declining to extend arbitration clause to defendant who
neither sought nor received benefits under contract); Tamayo v. Brainstorm USA, 93
F.Appx. 126, 128 (9th Cir. 2004) (denying defendant’s motion to compel arbitration
because, had the parties intended defendant to be third party beneficiary, “such
intent easily could have been expressed in the [arbitration] agreement”); MediVas,
LLC v. Marubeni Corp., 2011 WL 768083 (S.D. Cal.) (denying motion to compel non-
signatories to arbitrate on third party beneficiary theory); In re Infocure Sec. Litg., 210
F.Supp.2d 1372, 1372 (N.D. Ga. 2002) (“third parties may sue on the contract only if the
contract was intended for their direct rather than merely their incidental benefit”);
Hugh Collins v. Int’l Dairy Queen, Inc., 2 F.Supp.2d 1465 (N.D. Ga. 1998) (where
arbitration clause applied to “parties hereto” third party beneficiary could invoke it,
but where arbitration clause referred specifically to defined parties, not including
third party beneficiary, latter could not invoke it).
273) The Repub. of Iraq v. ABB AG, 769 F.Supp.2d 605, 614-15 (S.D.N.Y. 2011).
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274) See, e.g., E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates,
269 F.3d 187, 200 n.7 (3d Cir. 2001) (“Under the third party beneficiary theory, a court
must look to the intentions of the parties at the time the contract was executed.
Under the equitable estoppel theory, a court looks to the parties’ conduct after the
contract was executed.”); McCarthy v. Azure, 22 F.3d 351, 362 (1st Cir. 1994) (“the crux in
third-party beneficiary analysis…is the intent of the parties”).
More than merely incidental benefits must ordinarily be involved to confer third
party beneficiary status. See, e.g., McCarthy, 22 F.3d at 362 n.16 (requirements to
establish third party beneficiary status “are not satisfied merely because a third
party will benefit from performance of the contract”); Cargill Int’l, SA v. M/T Pavel
Dybenko, 991 F.2d 1012, 1019 (2d Cir. 1993) (“it is not enough that some benefit
incidental to the performance of the contract may accrue to [i]t”).
275) McCarthy,22 F.3d at 362 n.16.
276) See§5.04[C][1].
277) See§5.04[C][2].
278) See§9.02[A].
279) See§10.01[D].
280) See, e.g., Am. Bureau of Shipping v. Tencara Shipyard SpA, 170 F.3d 349, 352 (2d Cir.
1999) (ordering non-signatory to arbitrate because it received direct benefits of lower
insurance rate and ability to sail under French flag as result of contract containing
arbitration clause); Fink v. Carlson, 856 F.2d 44, 46 n.3 (8th Cir. 1988) (“Of course, if the
third party beneficiary seeks to enforce the contract, he will be bound by the
contract’s limitations.”); Black & Veatch Int’l Co. v. Wartsila NSD N. Am., Inc., 1998 U.S.
Dist. LEXIS 20732 (D. Kan.) (third party beneficiary of underlying contract bound by
arbitration clause contained in contract); Bevere v. Oppenheimer & Co., 862 F.Supp.
1243 (D.N.J. 1994) (party asserting claims under contract is bound by arbitration clause
contained in contract).
281) Fortress Value v. Blue Skye [2012] EWHC 1486 (Comm) (English High Ct.) (non-signatory
defendants could not claim benefit of arbitration agreement because they did not
assert claims arising out of substantive provisions of contract but only sought to rely
on limitations as contractual defense); Judgment of 8 March 2012, DFT 4A_627/2011
(Swiss Federal Tribunal) (no third party beneficiary status where alleged third party
beneficiary was not granted direct rights).
282) See§10.02[K].
283) See Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 779 (2d Cir. 1995) (if party
“directly benefited” from underlying contract, “it would be estopped from avoiding
arbitration” pursuant to arbitration clause in contract); Hughes Masonry Co. v. Greater
Clark County Sch. Blg Corp., 659 F.2d 836, 838 (7th Cir. 1981).
284) See§10.02[K].
285) See§4.04.
286) See, e.g., Am. Patriot Ins. Agency, Inc. v. Mut. Risk Mgt, Ltd, 364 F.3d 884, 890 (7th Cir.
2004) (remanding to district court to determine whether, under law governing
underlying contract, plaintiff is third party beneficiary and therefore subject to
contract’s arbitration agreement). Also applicable are the validation principle
(discussed above in §4.04[A][1][b][i]; §4.04[A][3]) and international principles
prohibiting discriminatory and idiosyncratic national law rules (discussed above in
§4.04[B] (especially §4.04[B][2][b][ii])). Compare S. Brekoulakis, Third Parties in
International Commercial Arbitration ¶2.178 (2010) (“There is no reason why tribunals
should not seek to apply transnational substantive rules to determine the matter.
This is more especially the case here than for example in the case of agency and
representation, as issues of third-party beneficiary do not touch on public policy or
international public law.”).
287) For commentary, see Hanotiau, Arbitration and Bank Guarantees – An Illustration of the
Issue of Consent to Arbitration in Multicontract-Multiparty Disputes, 16(2) J. Int’l Arb. 15
(1999); Leurent, Guaranties bancaires et arbitrage, 1990 Rev. de droit affaires int’l 414;
Scherer, Bank and Parent Company Guarantees in International Arbitration, 22 Revista
de Arbitragem e Mediação 148 (2009); Smit, When Does An Arbitration Clause Extend to
A Guarantee That Does Not Contain It?, 2003:1 Stockholm Arb. Rep. 273.
288) R. Bertrams, Bank Guarantees in International Trade ¶1-1 (3d ed. 2004); Hanotiau,
Arbitration and Bank Guarantees – An Illustration of the Issue of Consent to Arbitration
in Multicontract-Multiparty Disputes, 16(2) J. Int’l Arb. 15 (1999); Ruiz Del Rio, Arbitration
Clauses in International Loans, 4(3) J. Int’l Arb. 45, 51 (1987) (describing “practically
unavoidable presence of guarantors” in context of international arbitrations); P.
Wood, Comparative Law of Security and Guarantees 334 et seq. (1995) (describing
various forms of guarantees in international business).
64
289) See, e.g., Bridas SAPIC, 345 F.3d at 357 (“typically a guarantor cannot be compelled to
arbitrate on the basis of an arbitration clause in a contract to which it is not a party”);
Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 595 (6th Cir. 1995) (“as a general rule, a
guarantor who is not a signatory to a contract containing an arbitration clause is not
bound by the arbitration clause”); Proshred Holdings Ltd v. Conestoga Document, 2002
WL 1067328, at *3 (N.D. Ill.) (“guarantors for the performance of a contract are bound
by the arbitration clause in that contract only when they expressly agree to the
obligation to arbitrate”) (quoting Grundstad v. Ritt, 106 F.3d 201, 204 (7th Cir. 1997)); SN
Prasad v. Monnet Fin., [2010] INSC 895 (Indian S.Ct.) (guarantor of loan agreement not
bound by arbitration clauses in subsequent loan agreements).
290) See, e.g.,Judgment of 16 July 1992, 1993 Rev. arb. 611 (French Cour de cassation civ. 1e)
(guarantor not bound by arbitration clause in guaranteed contract); Judgment of 22
November 1977, 1978 Rev. arb. 461 (French Cour de cassation com.); Judgment of 7 July
1994, Uzinexport-Imp. Romanian Co. v. Attock Cement Co., 1995 Rev. arb. 107 (Paris Cour
d’appel) (corporate guarantor of turnkey contract not party to arbitration clause in
contract); Judgment of 19 August 2008, DFT 4A_128/2008 (Swiss Federal Tribunal)
(guarantor of contract did not become party to arbitration clause in underlying
contract); Decision of 23 December 2011, Case No. A40-56769/07-23-401 6 (Russian S.
Arbitrazh Ct.) (“[A]rbitration agreement in the supply contract is binding only on the
parties of the said contract…. [It] cannot bind the [surety] who is not a party of the
supply contract.”).
291) See, e.g., Partial Award in ICC Case No. 3896, 110 J.D.I. (Clunet) 914 (1983); Hanotiau,
Arbitration and Bank Guarantees – An Illustration of the Issue of Consent to Arbitration
in Multicontract-Multiparty Disputes, 16(2) J. Int’l Arb. 15 (1999).
292) See, e.g., Maxum Found., Inc. v. Salus Corp., 779 F.2d 974 (4th Cir. 1985); Exchange Mut.
Ins. Co. v. Haskell Co., 742 F.2d 274 (6th Cir. 1984); Son Shipping Co. v. De Fosse &
Tanghe, 199 F.2d 687, 688 (2d Cir. 1952); Dev. Bank of Philippines v. Chemtex Fibers Inc.,
617 F.Supp. 55 (S.D.N.Y. 1985) (guarantor of loan agreement, that also signed loan
agreement, bound by arbitration clause in that agreement); Banque de Paris et des
Pays-Bas v. Amoco Oil Co., 573 F.Supp. 1464 (S.D.N.Y. 1983); Hidrocarburos y Derivados,
CA v. Lemos, 453 F.Supp. 160 (S.D.N.Y. 1977); Midland Tar Distilleries, Inc. v. M/T Lotus,
362 F.Supp. 1311, 1313 (S.D.N.Y. 1973); Lowry & Co. v. SS Le Moyne D’Iberville, 253 F.Supp.
396, 398 (S.D.N.Y. 1966); Judgment of 16 March 1978, Inex Film & Inter-Exp. v. Universal
Pictures, 1978 Rev. arb. 501 (Paris Cour d’appel); Judgment of 21 August 2008, 26 ASA
Bull. 793 (Swiss Federal Tribunal) (party signed contract as guarantor and was
therefore bound by contract’s arbitration agreement); Judgment of 26 May 2005,
Interactive Television, SA v. Satcom Nederland BV y Banco de Bilbao Vizcaya, SA, STS
3403/2005 (Spanish Tribunal Supremo) (arbitration clause binding on those
companies “directly implicated in the execution of the contract”; claimant permitted
to pursue arbitration against non-signatory guarantor); Judgment of 16 May 2002, Case
No. T4496-01 (Svea Ct. App.), in S. Jarvin & A. Magnusson (eds.), International
Arbitration Court Decisions 643 (2006) (upholding award declaring that guarantor (by
state entity) was bound by arbitration clause in guaranteed contract).
293) See§10.02[I].
294) See, e.g., Kvaerner ASA & J.A. Jones, Inc. v. Bank of Tokyo-Mitsubishi, 210 F.3d 262 (4th
Cir. 2000) (guarantor compelled to arbitrate under construction contract); Eres, NV v.
Citgo Asphalt Refining, 2010 U.S. Dist. LEXIS 47691 (S.D. Tex.) (assignees assumed all
obligations under contract, including arbitration clause); Judgment of 19 August 2008,
DFT 134 III 565, 568 (Swiss Federal Tribunal) (where guarantor assumes contractual
debt, arbitration clause in loan also binds guarantor, unless it explicitly objects: “The
external takeover of debt entails the transfer of additional rights from the debtor to
the person taking over. The arbitration agreement constitutes such an accessory. It
therefore ensues that it binds the person taking over, unless exceptions exist to the
contrary.”).
295) See§10.02[C].
296) See, e.g., Stellar Shipping Co. LLC v. Hudson Shipping Lines [2010] EWHC 2985 (Comm)
(English High Ct.) (guarantor who endorses contract is generally bound by arbitration
clause in contract); Judgment of 21 August 2008, 26 ASA Bull. 793 (Swiss Federal
Tribunal) (party signed contract as guarantor and was therefore bound by contract’s
arbitration agreement).
297) See§5.02[A][2][g][viii].
65
298) See, e.g., Choctaw Generation Ltd v. Am. Home Assur. Co., 271 F.3d 403, 405 (2d Cir. 2001)
(bond did not contain arbitration clause, but construction contract, which did, was
“referred to” in bond “and made a part” of bond “as if fully set forth therein”);
Kvaerner v. Bank of Tokyo-Mitsubishi, 210 F.3d 262, 265 (4th Cir. 2000) (requiring
guarantor to arbitrate dispute because guaranty agreement mandated that “the
same ‘rights and remedies’” be available to parties as under contract); Grundstad v.
Ritt, 106 F.3d 201, 205 (7th Cir. 1997); United States Fid. & Guar. Co. v. Westpoint Constr.
Co., 837 F.2d 1507, 1508 (11th Cir. 1988) (“incorporation of the subcontract into the
bond expresses an intention of the parties, including USF & G, to arbitrate disputes”);
Judgment of 19 August 2008, DFT 4A_128/2008, ¶3.2 (Swiss Federal Tribunal) (“In order
that its jurisdiction can be recognised, the guarantee agreement must include an
arbitration clause specifically stipulating it, or alternatively containing sufficient
referral to the arbitration clause featuring in the principal agreement (arbitration
agreement by reference).”). See also Stellar Shipping Co. LLC v. Hudson Shipping Lines
[2010] EWHC 2985 (Comm) (English High Ct.) (company which had endorsed contract of
affreightment as guarantor had thereby agreed to arbitration of disputes arising out
of guarantee in accordance with arbitration clause in affreightment contract).
299) As discussed above, a non-signatory may qualify as a party to an arbitration
agreement on the basis of implied consent not reflected in the express terms of the
underlying contract. See§10.02[C]. See also Judgment of 19 August 2008, DFT
4A_128/2008, ¶3.2 (Swiss Federal Tribunal) (“In order that its jurisdiction can be
recognised,…the guarantor [must have] manifested, expressly or implicitly, a wish
that the creditor interpret in good faith, according to the principle of trust, as being a
wish to submit to the arbitration agreement in the principal agreement.”).
300) A bank that provides a guarantee of contractual payments, or similar performance by
a third party, should ordinarily not be considered to have been accepted as (nor to
have consented to status as) a party to the underlying contract, much less the
arbitration clause in that contract. On the other hand, where a corporate parent or
affiliate, or a related state entity, guarantees the performance of an affiliated
company under a contract, then the guarantee relationship will often evidence the
parties’ intention that the guarantor be bound by the arbitration clause in the
guaranteed contract. See, e.g.,Award of 1 October 1980 in Bulgarian Chamber of
Commerce & Industry, XII Y.B. Comm. Arb. 84 (1987) (guarantor subject to arbitration
clause in underlying contract); Judgment of 16 March 1978, Inex Film & Inter-Exp. v.
Universal Pictures, 1978 Rev. arb. 501, 515 (Paris Cour d’appel) (same); Judgment of 21
August 2008, DFT 4A_194/2008 (Swiss Federal Tribunal) (company that formally acted
as guarantor was in fact a partner); Judgment of 16 May 2002, Case No. T4496-01 (Svea
Ct. App.), cited in B. Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-
Issue and Class Actions 130 (2006).
301) See, e.g., Astra Oil Co. v. Rover Navigation Ltd, 344 F.3d 276, 281 (2d Cir. 2003)
(signatory’s non-signatory affiliate permitted to compel arbitration under charter
party based on (1) undisputed evidence of close corporate and operational
relationship between two entities; (2) fact that non-signatory’s claims are under
charter party; and (3) fact that non-signatory was treated as if it were party to charter
party); Compania Espanola de Petroleos SA v. Nereus Shipping, SA, 527 F.2d 966, 973-74
(2d Cir. 1975) (guarantors bound by arbitration clause in original contract, but agreed
to perform balance of original contract, and to assume rights and obligations under
original contract); Judgment of 16 May 2002, Case No. T4496-01 (Svea Ct. App.) (buyer’s
and guarantor’s respective obligations were identical, and guarantor was aware of
arbitration clause in main agreement).
302) See W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration
¶5.10 (3d ed. 2000) (“The answer depends to a considerable extent on the wording of
the guarantee.”).
303) See, e.g., Compania Espanola de Petroleos SA, 527 F.2d at 973 (distinguishing broader
language in guaranty and arbitration clauses at issue from narrower language of such
clauses in other cases: “determination of whether a guarantor is bound by an
arbitration clause contained in the original contract necessarily turns on the
language chosen by the parties in the guaranty”); Minera Alumbrera Ltd v. Fluor Daniel,
Inc., 1999 WL 269915, at *5 (S.D.N.Y.) (denying non-signatory guarantor right to compel
arbitration when arbitration clause at issue “applies only to disputes ‘arising from’
and/or ‘arising under,’ in contrast with clauses that state that they apply to ‘[a]ll
disputes arising in connection with the present contract’”).
304) See, e.g., Imp. Exp. Steel Corp. v. Mississippi Valley Barge Line Co., 351 F.2d 503, 506 (2d
Cir. 1965) (arbitration clause only applied to specifically identified parties); The Rice
Co. (Suisse) v. M/V Nalinee Naree, 2007 WL 26794, at *1 (S.D. Tex.) (“Where the
restrictive ‘owner/charterer’ language is used in the arbitration clause, it is indeed
difficult to bind to that clause one who is not a signatory to the charter party.”).
66
305) See, e.g., Minera Alumbrera Ltd v. Fluor Daniel, Inc., 1999 WL 269915, at *1, 3 (S.D.N.Y.)
(applying law governing guarantee to determine whether guarantee incorporated
arbitration clause by reference); Stellar Shipping Co. LLC v. Hudson Shipping Lines
[2010] EWHC 2985 (Comm) (English High Ct.) (“It would be surprising to find that the
parties actively agreed that the [underlying agreement] was to be subject to English
law and arbitration but that they wished to have any dispute under the linked
guarantee determined by some unspecified court in some unspecified jurisdiction
according to some unspecified governing law.”).
306) See§4.04[A][1][b][i]; §4.04[A][3].
307) For commentary, see P. Blumberg et al., Blumberg on Corporate Groups §§32.04, 32-10
et seq. (2d ed. 2005); Cremades, Problems That Arise From Changes Affecting One of the
Signatories to the Arbitration Clause, 7(2) ICC Ct. Bull. 29 (1996).
308) See, e.g., Int’l Bhd Elec. Workers, Local No. 234 v. Witcher Elec., Inc., 1990 WL 89315, at *4
(9th Cir.) (“party not a signatory to an arbitration agreement cannot be forced to
arbitration until and unless the court has found that it is bound by the agreement as…
successor of the signatory company”); SEB Trygg Holding AB v. Manches [2005] EWCA
Civ 1237 (English Ct. App.); Judgment of 8 February 2000, 2000 RTD Com. 596, 596
(French Cour de cassation civ. 1e) (“international arbitration clause is binding on any
party that is a successor to one of the contractual partners”); Judgment of 30 April
2013, Case No. 18/16 (Kyiv Comm. Ct.) (upholding validity of arbitration agreement
between claimant and respondent’s successor company); Judgment of 21 March 2013,
Case No. 6-42691CB12 (Ukrainian Higher Specialized Court for Civil and Criminal
Cases) (enforcing arbitral award against successor company).
309) Judgment of 19 May 2003, 22 ASA Bull. 344, 348 (Swiss Federal Tribunal) (2004).
310) The same principle applies to natural persons. See, e.g., Reply of Supreme People’s
Court Concerning the Request of Yu Yingru Withdrawing the Arbitral Award, Min Si Ta Zi
No.25 (2007) (if party died after signing arbitration agreement, agreement continues
to be binding on party’s heir).
311) French Civil Code, Art. 1844(4) (“A company…may be absorbed by another company or
may participate in the formation of a new company by way of merger.”); Swiss Federal
Law on Mergers, Demergers, Transformation and Transfer of Assets; German
Umwandlungsgesetz, §20(1)1; 19 Am.Jur.2d Corporations §2254 (2007) (“unless there is
some provision to the contrary, either in the statute or agreement of consolidation or
merger, the consolidated or resulting corporation succeeds to the powers, privileges,
and property of the constituents or merged corporation”); Ukrainian Civil Code, Art.
104(1) (“A legal entity is wound up by transfer of all of its assets, rights and liabilities
to other legal entities – the successors (merger, accession, division, transformation) or
by liquidation.”).
Collection of ICC Arbitral Awards 1991-1995 600 (1997) (restructuring of state companies,
resulting in transfer of all assets and liabilities, including contractual rights and
obligations, of company B to company C); Award in ICC Case No. 2626, 105 J.D.I. (Clunet)
980 (1978) (conversion of limited liability company into joint stock corporation had
effect of transferring obligations of limited liability company to joint stock
corporation).
313) See, e.g., 15 Fletcher Cyclopedia Corporations §7041 (2007) (“Strictly speaking, a merger
means the absorption of one corporation by another; the latter retains its name and
corporate identity with the added capital, franchises and powers of the merged
corporation.”); A. Bonnasse, JurisClasseur Sociétés, Traité, Fasc. 161-10, ¶11 (2001) (“The
universal transmission of assets, arising out of successoral rules, means that the
entire rights and obligations of the absorbed company are automatically transferred
to the absorbing company.”); J.-F. Poudret & S. Besson, Comparative Law of
International Arbitration ¶290 (2d ed. 2007).
3281, 109 J.D.I. (Clunet) 990 (1982) (“it results from the terms of the minutes of the
Shareholders meeting [approving the merger between Z and X] that Z is subrogated in
all the rights and obligations of X, notably on those resulting from [the arbitration
agreement]”); Fyrnetics (H.K.) Ltd v. Quantum Group, Inc., 293 F.3d 1023, 1029 (7th Cir.
2002) (successor company bound by arbitration agreement signed by entity that was
merged into successor company); Nat’l Bank of Greece & Athens SA v. Metliss [1957] 2
QB 33 (English Ct. App.) (effect of universal succession is that new entity continues
personality of old entity and all rights and liabilities are automatically transferred
and vested in new entity); Judgment of 13 June 1963, 1964 Rev. arb. 125 (Paris Cour
d’appel); Judgment of 9 June 1998, 16 ASA Bull. 653 (Swiss Federal Tribunal) (1998);
Interpretation of the Supreme People’s Court Concerning Some Issues on Application of
the Arbitration Law of the People’s Republic of China, Fa Shi No.7 (2006) (“Where a party
concerned is merged or divided after concluding an agreement for arbitration, the
agreement for arbitration shall be binding upon the successor of its rights and
obligations.”).
67
315) See, e.g., AT&S Transp., LLC v. Odyssey Logistics & Tech. Corp., 803 N.Y.S.2d 118 (N.Y.
App. Div. 2005) (sale of substantially all assets of predecessor company constituted
de facto merger and bound successor company to arbitration agreement signed by
predecessor); Judgment of 15 October 1997, MS “EMJA” Braack Schiffahrts KG v. Wartsila
Diesel Aktiebolag, XXIV Y.B. Comm. Arb. 317, 318 (Swedish S.Ct.) (1999) (“It must
generally be accepted that where a change in parties has taken place by a universal
assignment, the universal successor is bound by the arbitration clause.”).
316) See, e.g.,Final Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26 (2004) (one state
ministry held to be successor to earlier ministry and therefore bound by contract and
arbitration clause); Interim Award in ICC Case No. 7337, XXIVa Y.B. Comm. Arb. 149, 154
(1999) (“It is a general principle of law that a contract can bind only the parties that
have entered into it. There are, however, exceptions. A party may be substituted by
universal succession or singular succession. An agreement to arbitrate is therefore
valid between the parties and their legal successors.”); Award in ICC Case No. 6223,
discussed in Grigera Naón, Choice-of-Law Problems in International Commercial
Arbitration, 289 Recueil des Cours 9, 142 (2001) (signatory to arbitration agreement
had been merged into another entity, and ceased to exist, meaning that only latter
entity was party to arbitration agreement); Interim Award in ICC Case No. 3879, XI Y.B.
Comm. Arb. 127 (1986) (noting possibility of transfer of rights/duties under arbitration
agreement by “universal succession”); Award in ICC Case No. 2626, 105 J.D.I. (Clunet)
980 (1978); Interpretation of the Supreme People’s Court Concerning Some Issues on
Application of the Arbitration Law of the People’s Republic of China, Fa Shi No.7 (2006).
317) See, e.g., Award in ICC Case No. 2626, 105 J.D.I. (Clunet) 980 (1978) (“The dominant trend
in case law holds that an arbitration agreement is not only valid between the parties,
but can also be relied upon against their heirs, their legatees, their assignees and all
those acquiring obligations.”); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548-51
(U.S. S.Ct. 1964) (holding that employer, who was successor to merged entity that had
entered into arbitration agreement with employees, was bound by arbitration
agreement because there was “substantial continuity of identity,” and public policy
argues in favor of binding successor entities to arbitration agreements in federal
labor disputes).
318) Judgment of 8 February 2000, 2000 RTD Com. 596, 596 (French Cour de cassation civ.
1e).
319) See§10.02[I].
320) Award in ICC Case No. 2626, 105 J.D.I. (Clunet) 980, 981 (1978). See also Interpretation of
the Supreme People’s Court Concerning Some Issues on Application of the Arbitration
Law of the People’s Republic of China, Fa Shi No.7, Art. 8 (2006) (rule of succession
subject to contrary agreement).
321) Courts usually apply the same law to determine succession to an arbitration
agreement without analysis. See, e.g., Fyrnetics (H.K.) Ltd v. Quantum Group, Inc., 293
F.3d 1023 (7th Cir. 2002); AT&S Transp., LLC v. Odyssey Logistics & Tech. Corp., 803
N.Y.S.2d 118, 120-21 (N.Y. App. Div. 2005) (sale of substantially all assets of
predecessor company constituted de facto merger and bound successor company to
arbitration agreement signed by predecessor).
322) Further, where the New York Convention applies, national law rules of succession
would be subject to international prohibitions against discriminatory and
idiosyncratic legislation. See§4.04[B] (especially §4.04[B][2][b][ii]). Thus, if local law
provided that all obligations of a locally incorporated company were transferred in a
merger or other reorganization, with the exception of agreements to arbitrate (either
generally or with foreign companies), that limitation would be ineffective under the
Convention’s neutrality and non-discrimination principles. In principle, this appears
to be the correct conclusion.
323) For commentary, see Girsberger, The Law Applicable to the Assignment of Claims
Subject to An Arbitration Agreement, in F. Ferrari & S. Kröll (eds.), Conflict of Laws in
International Arbitration 379 (2011); Girsberger & Hausmaninger, Assignment of Rights
and Agreement to Arbitrate, 8 Arb. Int’l 121 (1992); Jagusch & Sinclair, The Impact of
Third Parties on International Arbitration – Issues of Assignment, in L. Mistelis & J. Lew
(eds.), Pervasive Problems in International Arbitration 291 (2006); Mantilla-Serrano,
International Arbitration and Insolvency Proceedings, 11 Arb. Int’l 67 (1995); Scherer,
Bank and Parent Company Guarantees in International Arbitration, 22 Revista de
Arbitragem e Mediação 148 (2009); Werner, Jurisdiction of Arbitrators in Case of
Assignment of An Arbitration Clause: On A Recent Decision by the Swiss Supreme Court,
8(2) J. Int’l Arb. 13 (1991); Yang, Who Is A Party? The Case of the Non-Signatory
(Assignment), 2005 Asian Disp. Res. 43.
324) Similar issues may arise in cases of transfer or assumption of some (but not all)
contractual rights and duties. See, e.g., Trippe Mfg Co. v. Niles Audio Corp., 401 F.3d 529,
532 (3d Cir. 2005) (“Under New York law, the assignee of rights under a bilateral
contract is not bound to perform the assignor’s duties under the contract unless he
expressly assumes that obligation.…That said, when an assignee assumes the
liabilities of an assignor, it is bound by an arbitration clause in the underlying
contract.”).
325) See, e.g., Cotton Club Estates Ltd v. Woodside Estates Co. [1928] 2 KB 463 (KB) (English
High Ct.) (assignment did not transfer to assignee any right in arbitration clause
because arbitration clause was a separate “personal covenant”).
68
326) See Girsberger & Hausmaninger, Assignment of Rights and Agreement to Arbitrate, 8
Arb. Int’l 121 (1992).
327) See, e.g., Partial Award in ICC Case No. 6000, discussed in Grigera Naón, Choice-of-Law
Problems in International Commercial Arbitration, 289 Recueil des Cours 9, 127 (2001)
(“It could not be denied by Respondent that, under US and French Law, it is a well-
settled principle that the assignment of a contract containing an arbitration clause
carries with it the obligation, on the part of the assignee, to submit its claim to
arbitration to the same extent as assignor”); HT of Highlands Ranch, Inc. v. Hollywood
Tanning Sys., Inc., 590 F.Supp.2d 677, 684 (D.N.J. 2008) (“when an assignee assumes the
liabilities of an assignor, it is bound by an arbitration clause in the underlying
contract”); Donel Corp. v. Kosher Overseers Ass’n of Am., 2001 WL 228364, at *3 (S.D.N.Y.)
(assignee of contract may invoke arbitration clause in contract); Cedrela Transp. Ltd v.
Banque Cantonale Vaudoise, 67 F.Supp.2d 353, 355 (S.D.N.Y. 1999) (assignee of contract
may invoke arbitration clause in contract); Schiffahrtsgesellschaft Detlev von Appen
GmbH v. Voest Alpine Intertrading GmbH [1997] 2 Lloyd’s Rep. 279 (English Ct. App.);
Shayler v. Woolf [1946] Ch. 320 (English Ct. App.); Judgment of 5 May 2011, SARL Kosa
France Holding v. SAS Rhodia Opérations, 2011 Rev. arb. 580 (Paris Cour d’appel)
(assignee bound by arbitration clause that was known about at time of assignment);
Judgment of 15 October 1997, MS “EMJA” Braack Schiffahrts KG v. Wartsila Diesel
Aktiebolag, XXIV Y.B. Comm. Arb. 317, 318 (Swedish S.Ct.) (1999) (assignee bound by
arbitration clause provided it “knew or should have known of the arbitral clause”).
International Commercial Arbitration, 289 Recueil des Cours 9, 147 (2001).
329) See, e.g., Asset Allocation & Mgt Co. v. W. Employers Ins. Co., 892 F.2d 566, 574 (7th Cir.
1989) (arbitration agreement may be invoked against assignee); S.E. Pa. Transp. Auth.
v. AWS Remediation, Inc., 2003 WL 21994811, at *2-3 (E.D. Pa.) (when party obtains
certain rights under contract which contains arbitration clause, but is not specifically
assigned right to arbitrate, assignee may compel arbitration); Star-Kist Foods, Inc. v.
Diakan Hope, SA, 423 F.Supp. 1220, 1222-23 (C.D. Cal. 1976); S & L Vending Corp. v. 52
Thompkins Ave. Rest., Inc., 274 N.Y.S.2d 697 (N.Y. App. Div. 1966). See also Eres, NV v.
Citgo Asphalt Refining, 2010 U.S. Dist. LEXIS 47691 (S.D. Tex.) (assignees had assumed
assignor’s obligations under contract and were therefore bound by its arbitration
clause); Annotation, Arbitration Provisions of Contract as Available to or Against
Assignees, 142 A.L.R. 1092 (1943); A. Corbin, Corbin on Contracts §892 (1951 & Supp.
1991); L. Edmonson (ed.), Domke on Commercial Arbitration §13.13 (3d ed. & Update
2013).
330) See, e.g., W. Tankers Inc. v. Ras Riunione Adriatica Di Sicurta SpA [2005] EWHC 454
(Comm) (English High Ct.) (assignee bound because duty to arbitrate is inseparable
component of transferred rights); Shayler v. Woolf [1946] Ch. 320 (English Ct. App.)
(arbitration clause is transferred automatically and thus binds assignee); R. Merkin,
Arbitration Law ¶¶3.37 to 3.46 (1991 & Update August 2013).
The drafters of the English Arbitration Act, 1996, deliberately did not address the
question of assignment because of the complexities to which it was perceived as
giving rise. See U.K. Departmental Advisory Committee on Arbitration Law, Report on
the Arbitration Bill ¶¶44-7 (1996) (“A number of those responding to our drafts
expressed the wish for the Bill to lay down rules relating to assignment.…However, on
further consideration, we concluded that it would not be appropriate to seek to lay
down any such rules.”).
331) See, e.g.,Judgment of 2 October 1997, 1998 NJW 371 (German Bundesgerichtshof)
(assignment of contractual right presumptively implies assignment of related
arbitration clause); Judgment of 11 September 1979, VI Y.B. Comm. Arb. 230 (Italian
Corte di Cassazione) (1981) (bill of lading, containing arbitration clauses, assigned to
goods purchaser, who may invoke arbitration clauses); XL v. YL, Confidential CIETAC
Award, cited in Jingzhou Tao, Arbitration Law and Practice in China 51 (2d ed. 2008)
(partial assignment transfers arbitration agreement of original contract to
transferee); Interpretation of the Supreme People’s Court Concerning Some Issues on
Application of the Arbitration Law of the People’s Republic of China, Fa Shi No.7, Art. 9
(2006) (“Where the creditors or debts are entirely or partially assigned, the
agreement for arbitration shall be binding upon the assignee, unless the parties
concerned have otherwise agreed, or the assignee explicitly objects to the
assignment of the credits or debts or does not know there is a separate agreement for
arbitration.”). See also Girsberger & Hausmaninger, Assignment of Rights and
Agreement to Arbitrate, 8 Arb. Int’l 121 (1992).
332) SeeJudgment of 9 May 2001, 20 ASA Bull. 80 (Swiss Federal Tribunal) (2002). See also
Judgment of 19 April 2011, DFT 4A_44/2011 (Swiss Federal Tribunal); Judgment of 19
August 2008, DFT 134 III 565 (Swiss Federal Tribunal); Judgment of 18 December 2001,
LUKoil-Permnefteorgsintez, LLC v. MIR, 20 ASA Bull. 482 (Swiss Federal Tribunal) (2002)
(transferee assumed obligations and indebtedness of contracting party, which carried
with it obligation to arbitrate); Judgment of 7 August 2001, 20 ASA Bull. 88 (Swiss
Federal Tribunal) (2002).
69
333) E. Gaillard & J. Savage (eds.), Fouchard Gaillard Goldman on International Commercial
Arbitration ¶716 (1999). See also Award in ICC Case No. 7154, 121 J.D.I. (Clunet) 1059
(1994); Judgment of 8 February 2000, 2000 Rev. arb. 280 (French Cour de cassation civ.
1e) (assignee of contract bound by arbitration clause contained in contract).
334) Judgment of 20 April 2010, Case No. A56-29770/2009, 5 (Russian S. Arbitrazh Ct.).
335) See, e.g., Norwegian Arbitration Act, §10 (assignment or transfer of contract also
assigns or transfers arbitration clause).
336) See, e.g., Britton v. Co-op Banking Group, 4 F.3d 742 (9th Cir. 1993); Cedrela Transp. Ltd
v. Banque Cantonale Vaudoise, 67 F.Supp.2d 353, 354-55 (S.D.N.Y. 1999) (assignee of “a
contract with a broad, ‘all disputes’ arbitration clause…may be entitled to compel
signatories to those agreements to submit to arbitration”); R. Merkin, Arbitration Law
¶¶3.37 to 3.45 (1991 & Update August 2013).
337) See, e.g., Lachmar v. Trunkline LNG Co., 753 F.2d 8 (2d Cir. 1988) (assignee not bound by
arbitration clause because assignment agreement excluded it); Solar & Env. Tech.
Corp. v. Zelinger, 726 F.Supp.2d 135, 148 (D. Conn. 2009) (assignment agreement did not
transfer rights under arbitration clause); United States v. Panhandle E. Corp., 672
F.Supp. 149 (D. Del. 1987) (same). See also Award in ICC Case No. 2626, 105 J.D.I. (Clunet)
980 (1978) (restrictions on arbitration clause’s assignability, contained in clause itself,
are exceptions to transfer of clause in cases of assignment or universal succession).
There might be circumstances in which the effort to exclude the arbitration clause
from the assigned contract would vitiate the assignment altogether, as an
impermissible effort to abrogate the arbitration clause or alter a material term of the
underlying contract.
338) See Award in ICC Case No. 7050, discussed in Grigera Naón, Choice-of-Law Problems in
International Commercial Arbitration, 289 Recueil des Cours 9, 144 (2001).
339) See§3.03[D].
340) See§1.04[E][2].
341) SeeJudgment of 16 October 2001, 2002 Rev. arb. 753 (Swiss Federal Tribunal)
(agreement prohibited assignment of arbitration clause); Judgment of 9 April 1991, DFT
117 II 94, 98 et seq. (Swiss Federal Tribunal) (same). SeeScherer, Three Recent Decisions
of the Swiss Federal Tribunal Regarding Assignments and Transfer of Arbitration
Agreements, 20 ASA Bull. 109 (2002). See alsoFinal Award in ICC Case No. 6363, XVII Y.B.
Comm. Arb. 186 (1992).
342) See§7.03[A][2][a].
343) See, e.g., Restatement (Second) Contracts §322(2)(b) (1981) (“A contract term
prohibiting assignment of rights under a contract, unless a different intention is
manifest…gives the obligor a right to damages for breach of the terms forbidding
assignment but does not render the assignment ineffective.”); Bel-Ray Co. v. Chemrite
Ltd, 181 F.3d 435, 442 (3d Cir. 1999) (following “general rule that contractual provisions
limiting or prohibiting assignment operate only to limit a parties’ right to assign the
contract, but not their power to do so, unless the parties manifest an intent to the
contrary with specificity”; assignment in violation of contractual provision ordinarily
“remains valid and enforceable against both the assignor and the assignee”); Cedar
Point Apts, Ltd v. Cedar Point Inv. Corp., 693 F.2d 748, 754, n.4 (8th Cir. 1982).
344) See§5.01[B][2]; §8.02[C]; §8.03.
345) See, e.g.,Judgment of 28 May 2002, 2003 Rev. arb. 397, 398 (French Cour de cassation
civ. 1e) (“[I]n international matters, the arbitration clause, which is judicially
independent from the principal contract, is assigned with it, whatever the validity of
the assignment of [the contract’s] substantial rights.”). CompareJudgment of 16
October 2001, 2002 Rev. arb. 753 (Swiss Federal Tribunal) (assignment of arbitration
clause depends on validity of assignment of principal contract).
346) See, e.g., Award in ICC Case No. 2626, 105 J.D.I. (Clunet) 980 (1978) (arbitration clause
generally binds assignees and successors, except where agreement forbids
assignment); Bel-Ray Co. v. Chemrite Ltd, 181 F.3d 435 (3d Cir. 1999) (compelling
arbitration against both assignor and assignee); Affymax, Inc. v. Johnson & Johnson,
420 F.Supp.2d 876, 879 (N.D. Ill. 2006) (while absolute assignment “ordinarily
extinguishes the right to compel arbitration,” here assignor retained certain rights
and obligations, including “correlative right” to arbitration).
347) Repub. of Kazakhstan v. Istil Group Inc. [2006] EWHC 448 (Comm) (English High Ct.);
Montedipe SpA v. JTP-RO Jugotanker [1990] 2 Lloyd’s Rep. 11, 16 (QB) (English High Ct.)
(“The rights under a contract may be assigned at any stage, whether before, during, or
after performance.…In principle the assignee should be able to rely upon the
arbitration already commenced.”); R. Merkin, Arbitration Law ¶¶3.38 to 3.42 (1991 &
Update August 2013) (notice of assignment shall be sent to arbitrator and other
party).
348) NPB Dev. v. Buildco & Sons (1992) 66 BLR 120 (QB) (English High Ct.); R. Merkin,
Arbitration Law ¶3.41 (1991 & Update August 2013).
349) Bel-Ray Co. v. Chemrite Ltd, 181 F.3d 435, 440 (3d Cir. 1999) (issue of validity of
assignment “require[s] a conflict of laws analysis to determine which state had the
weightier interest in having its law apply in resolving the relevant issue”); L. Collins et
al. (eds.), Dicey, Morris and Collins on The Conflict of Laws ¶¶16-011 et seq., ¶¶24-067
et seq. (15th ed. 2012); Girsberger, The Law Applicable to the Assignment of Claims
Subject to An Arbitration Agreement, in F. Ferrari & S. Kröll (eds.), Conflict of Laws in
International Arbitration 379 (2011).
70
350) See Mantilla-Serrano, International Arbitration and Insolvency Proceedings, 11 Arb. Int’l
67 (1995). As with other non-signatory issues, international arbitration conventions
(including the New York Convention and the European Convention) do not expressly
address the issue of the transfer of the arbitration agreement. The rules of most
arbitral institutions do not expressly address issues of assignment. Some
commentators have nonetheless sought to infer from Articles 7 and 8 of the 1998 ICC
Rules a general principle that an arbitration clause cannot bind the assignee without
its express consent. See Girsberger & Hausmaninger, Assignment of Rights and
Agreement to Arbitrate, 8 Arb. Int’l 121 (1992). This is unconvincing and the issue is
better left to generally-applicable contract law principles.
351) See Judgment of 30 January 1957, 23 BGHZ 198, 200 (German Bundesgerichtshof)
(characterizing arbitration agreement as “a contract of substantive law governing
procedural relations”).
352) See, e.g., Award in ICC Case No. 2626, 105 J.D.I. (Clunet) 980 (1978) (assignee bound by
arbitration agreement concluded between parties under governing German law);
Final Award in ICC Case No. 1704, 105 J.D.I (Clunet) 981 (1978) (assignment of arbitration
agreement valid under French law); Apollo Computer v. Berg, 886 F.2d 469, 472 (1st Cir.
1989).
353) For a decision erroneously taking the opposite approach, seeHarris Adacom Corp. v.
Perkom Sdn Bhd [1994] 3MLJ 504, 507 (Kuala Lumpur High Ct.), discussed in S.
Greenberg, C. Kee & J. Weeramantry (eds.), International Commercial Arbitration: An
Asia-Pacific Perspective ¶4.82 (2011) (assignment agreement must be valid under both
applicable law of assignment (Florida law) and place of enforcement (Malaysia)).
See§4.04[A][3].
354) See, e.g., Holiday Inns SA/Occidental Petroleum Corp. v. Morocco, Award in ICSID Case
No. ARB/72/1 of 1 July 1973, commented on in Lalive, The First World Bank Arbitration
(Holiday Inns v. Morocco) – Some Legal Problems, 51 Brit. Y.B. Int’l L. 123 (1980); Partial
Award in NAI Case of 17 May 2005, XXXI Y.B. Comm. Arb. 174, 180 (2006) (“subrogation
also extends to an agreement to arbitrate”; “subrogation gives the third party the
same rights as the original creditor which also includes accessory rights [such as]
arbitral clause”); Allianz Global Risk U.S. Ins. Co. v. Gen. Elec. Co., 2012 WL 689957, at *1
(9th Cir.) (“The subrogated [non-signatory] insurer stands in the shoes of its insured,
and is entitled to its contractual rights and remedies” including right to compel
arbitration against signatory.); W. Tankers Inc. v. Ras Riunione Adriatica di Sicurta, “The
Front Comor” [2005] 2 Lloyd’s Rep. 257, 264 (QB) (English High Ct.) (insurer bound by
insured’s arbitration agreement); Judgment of 13 November 1992, 1993 Rev. arb. 632,
636 (Paris Cour d’appel) (“as a consequence of the subrogation of an insurance
company in the rights and duties of its insured, the arbitration clause is transferred
to the insurer with the claim and the rights of the insured, as it is an accessory
thereof”); H. Beale (ed.), Chitty on Contracts ¶32-057 (31st ed. 2011) (“A person
subrogated to the rights of an assured under a policy of insurance by virtue of the
Third Parties (Rights against Insurers) Act 2010 or otherwise is bound by an arbitration
clause contained in the policy.”); B. Hanotiau, Complex Arbitrations ¶¶38-40 (2005)
(subrogation of arbitration agreements benefits both indemnifier of insured victim
and “liability insurer who has indemnified the victim for the account of its insured”).
Compare Beijing Branch of the China Pac. Prop. Ins. Corp. v. Beijing COSCO Logistics Co.,
[2009] Min Si Ta Zi No. 11 (Chinese Zuigao Fayuan) (arbitration agreement in contract
not binding on insurer because insurer not party to contract and arbitration
agreement not expression of its will).
355) See§4.04[A][3].
356) Simmons v. Sabine River Auth. of La., 2011 WL 4703053 (W.D. La.) (non-signatory
plaintiffs may enforce terms of insurance policy by virtue of Louisiana Direct Action
Statute, and consequently invoke or be bound by policy’s arbitration provision).
357) For commentary, seeAdeline, L’édification de la notion d’estoppel par la Cour de
cassation (France) – Société Merial c. Société Klocke Verpackungs – Service GmbH, 28
ASA Bull. 406 (2010); Gaillard, L’interdiction de se contredire au détriment d’autrui
comme principe général du droit du commerce international (le principe de l’estoppel
dans quelques sentences arbitrales récentes), 1985 Rev. arb. 241; Hui, Equitable
Estoppel and the Compulsion of Arbitration, 60 Vand. L. Rev. 711 (2007); Pinsolle, Note –
Cour de cassation (1re Ch. civ.), 6 July, 2005 Rev. arb. 994; Pinsolle, Distinction entre le
principe de l’estoppel et le principe de bonne foi dans le droit du commerce
international, 125 J.D.I. (Clunet) 905 (1998); Uloth & Rial, Equitable Estoppel as A Basis
for Compelling Nonsignatories to Arbitrate – A Bridge Too Far?, 21 Rev. Litg. 493 (2002).
358) See, e.g., P. Feltham, D. Hochberg & T. Leech (eds.), Spencer Bower, Estoppel by
Representation (4th ed. 2004); J. Herbots (ed.), International Encyclopaedia of Laws:
Contracts ¶209 (1993 & Update 1999) (in France, equity “allows the courts to include in
a contract obligations which have not been provided for by the parties, but may be
implied on the basis of an equitable view of the parties’ relations”).
359) E. Cooke, The Modern Law of Estoppel 2 (1st ed. 2000) (“Estoppel…is a principle of
justice and equity. It comes to this: when a man, by his words or conduct, has led
another to believe in a particular state of affairs, he will not be allowed to go back on
it when it would be unjust or inequitable for him to do so.”).
360) 4 Williston on Contracts §8.3 (4th ed. 1990 & Update 2013).
361) B. Hanotiau, Complex Arbitrations ¶¶41, 55-56 (2005).
71
362) See, e.g.,Judgment of 6 July 2005, Golshani v. Gouv’t de la République islamique d’Iran,
2005 Rev. arb. 993 (French Cour de cassation civ. 1e); Judgment of 16 January 1995,
Compagnie de Navigation et Transp. SA v. Mediterranean Shipping Co. SA, XXI Y.B.
Comm. Arb. 690, 698 (Swiss Federal Tribunal) (1996). See also Budylin, A Comparative
Study in the Law of the Ostensible: Apparent Agency in the U.S. and Russia, 16 Currents
Int’l Trade L.J. 63, 67 (2007-2008) (“estoppel as such does not exist in Russia, but
certain equitable ideas are present in law, which sometimes may effectively result in
‘power by estoppel’”); Gaillard, L’interdiction de se contredire au détriment d’autrui
comme principe général du droit du commerce international (le principe de l’estoppel
dans quelques sentences arbitrales récentes), 1985 Rev. arb. 241; Pinsolle, Distinction
entre le principe de l’estoppel et le principe de bonne foi dans le droit du commerce
international, 125 J.D.I. (Clunet) 905 (1998).
For the reverse situation, see Judgment of 20 May 1968, 55 BGHZ 191, 196 (German
Bundesgerichtshof) (respondent estopped from claiming valid arbitration agreement
in proceedings before national court after denying existence of such agreement in
arbitral proceedings).
363) See§5.02[A][2][i]; §5.02[A][9]; §10.02[E].
364) See, e.g., Sourcing Unlimited Inc. v. Asimco Int’l Inc., 526 F.3d 38, 48 (1st Cir. 2008) (“All
of Jumpsource’s claims against Asimco ultimately derive from benefits it alleges are
due it under the partnership Agreement. Jumpsource must seek redress through
arbitration in accordance with the terms of the arbitral clause in the Agreement.”);
JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir 2004) (“under principles of
estoppel, a non-signatory to an arbitration agreement may compel a signatory to that
agreement to arbitrate a dispute where…the issues the signatory is seeking to resolve
in arbitration are intertwined with the agreement that the estopped party has
signed”); Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 778-80 (2d Cir. 1995);
Riek v. Xplore-Tech Servs. Private Ltd, 2009 WL 891914, at *5 (M.D.N.C.) (“facts in this
case meet the test for equitable estoppel because Riek’s Second Claim against
Xplore-Tech arises out of the Purchase agreement and because Riek, in pursuing his
claim, seeks a direct benefit from the Purchase Agreement.”).
365) See, e.g., Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993);
Hughes Masonry Co. v. Greater Clark County Sch. Blg Corp., 659 F.2d 836, 838 (7th Cir.
1981) (party that brought suit in court against signatory and non-signatory equitably
estopped from later arguing that non-signatory could not seek to compel arbitration
pursuant to underlying contract); In re Oil Spill by Amoco Cadiz, 659 F.2d 789, 796 (7th
Cir. 1981) (party estopped from denying agency status after acknowledging such status
in litigation); Life Techs. Corp. v. AB Sciex Pte Ltd, 803 F.Supp.2d 270 (S.D.N.Y. 2011)
(licensee equitably estopped from avoiding arbitration); Rapture Shipping, Ltd v.
Allround Fuel Trading BV, 350 F.Supp.2d 369, 373-75 (S.D.N.Y. 2004) (party cannot argue
in court that contract was never formed to avoid arbitration provision in contract
when party previously argued in foreign court that implied contract had been formed
and that other party had breached contract); Alvarado v. Apex Partitions, Inc., 2004
U.S. Dist. LEXIS 18185 (N.D. Cal.); Dunlap v. Wild, 591 P.2d 834 (Wash. App. 1979) (having
invoked arbitration clause, plaintiff was estopped from denying its validity); Robinson
v. Hamed, 813 P.2d 171 (Wash. App. 1991). See also§10.02[A].
366) See, e.g., Choctaw Generation LP v. Am. Home Assur. Co., 271 F.3d 403, 404 (2d Cir. 2001);
Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GmbH, 206 F.3d 411, 417-18 (4th
Cir. 2000); Grigson v. Creative Artists Agency, 210 F.3d 524, 527 (5th Cir. 2000); Am.
Bureau of Shipping v. Tencara Shipyard SpA, 170 F.3d 349, 353 (2d Cir. 1999) (non-
signatory bound to arbitrate under estoppel theory based upon exercise of
contractual rights under agreement containing arbitration clause); Deloitte Noraudit
A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1064 (2d Cir. 1993); Hughes Masonry
Co. v. Greater Clark County Sch. Blg Corp., 659 F.2d 836, 838 (7th Cir. 1981); Life Techs.
Corp. v. AB Sciex Pte Ltd, 803 F.Supp.2d 270 (S.D.N.Y. 2011) (applying estoppel theory to
non-signatories who failed to object to arbitration clause despite having actual or
constructive knowledge of contents of contract containing arbitration clause and
knowingly exploiting benefits of contract); Metalclad Corp. v. Ventana Env. Org. P’ship,
1 Cal.Rptr.3d 328, 335 (Cal. Ct. App. 2003) (equitable estoppel “prevents a party from
playing fast and loose with its commitment to arbitrate, honoring it when
advantageous and circumventing it to gain undue advantage”).
367) Tepper Realty Co. v. Mosaic Tile Co., 259 F.Supp. 688, 692 (S.D.N.Y. 1966). See also
InterGen NV v. Grina, 344 F.3d 134, 145 (1st Cir. 2003) (equitable estoppel “precludes a
party from enjoying rights and benefits under a contract while at the same time
avoiding its burdens and obligations”).
72
368) See, e.g., Blaustein v. Huete, 2011 WL 5103759, at *2 (5th Cir.) (under “direct benefits
estoppel,” non-signatory was bound to arbitrate because it had “embraced” contract
containing arbitration clause and knowingly sought and obtained “direct benefits”
from contract); Astra Oil Co. v. Rover Navigation Ltd, 344 F.3d 276 (2d Cir. 2003)
(binding non-signatory on estoppel grounds, where it was closely-related corporate
affiliate of signatory, was party to related contract and was treated as if it was party
to underlying contract); Javitch v. First Union Sec., Inc., 315 F.3d 619, 629 (6th Cir. 2003)
(remanding for determination whether, under equitable estoppel doctrine, a non-
signatory resisting arbitration had sought to benefit directly from contracts that
contained arbitration clause); MAG Portfolio Consultant, GmbH v. Merlin Biomed Group
LLC, 268 F.3d 58, 61 (2d Cir. 2001) (“benefit derived from an agreement is indirect
where the non-signatory exploits the contractual relation of parties to an agreement,
but does not exploit (and thereby assume) the agreement itself”); E.I. DuPont de
Nemours & Co. v. Rhone Poulenc, 269 F.3d 187, 199 (3d Cir. 2001) (direct benefits
estoppel applies when non-signatory “knowingly exploits the agreement containing
the arbitration clause”); Am. Bureau of Shipping v. Tencara Shipyard SpA, 170 F.3d 349,
353 (2d Cir. 1999) (“A party is estopped from denying its obligation to arbitrate when it
receives a ‘direct benefit’ from a contract containing an arbitration clause.”).
369) See, e.g., Life Techs. Corp. v. AB Sciex Prop. Ltd, 803 F.Supp.2d 270, 273-74 (S.D.N.Y. 2011)
(“A nonsignatory may be estopped from avoiding arbitration where it knowingly
accepted the benefits of an agreement with an arbitration clause. The benefits must
be direct – which is to say, flowing directly from the agreement. In contrast, benefit
derived from an agreement is indirect, and is therefore insufficient to support
estoppel, where the nonsignatory exploits the contractual relation of parties to an
agreement, but does not exploit (and thereby assume) the agreement itself.”);
Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773, 779 (2d Cir. 1995) (finding only
indirect benefit insufficient to invoke equitable estoppel against a non-signatory);
Lucy v. Bay Area Credit SVC LLC, 2011 U.S. Dist. LEXIS 55088 (D. Conn.) (refusing to
permit debt collection company to invoke arbitration agreements in contracts
between company and customers on equitable estoppel grounds); QPro, Inc. v. RTD
Quality Servs. USA, Inc., 2011 U.S. Dist. LEXIS 438 (S.D. Tex.) (refusing to compel
arbitration by non-signatory under equitable estoppel theory; claims had no
relationship to contract with arbitration clause); MediVas, LLC v. Marubeni Corp., 2011
WL 768083 (S.D. Cal.).
370) See, e.g., Sourcing Unlimited Inc. v. Asimco Int’l Inc., 526 F.3d 38, 38 (1st Cir. 2008)
(signatory was equitably estopped from avoiding arbitration of dispute with non-
signatory that involved issues intertwined with contract between signatories);
Choctaw Generation LP v. Am. Home Assur. Co., 271 F.3d 403, 404 (2d Cir. 2001)
(“Choctaw, as signatory, is estopped from avoiding arbitration with a non-signatory
‘when the issues the nonsignatory is seeking to resolve in arbitration are intertwined
with the agreement that the estopped party has signed.’”) (quoting Smith/Enron
Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 98 (2d. Cir.
1999); Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 779 (2d. Cir. 1995)).
371) See, e.g., PRM Energy Sys. Inc. v. Primenergy, LLC, 592 F.3d 830, 836 (8th Cir. 2010)
(compelling arbitration based on “collusive conduct” between non-signatory and
signatory that was “intimately founded in and intertwined with” signatory’s
contractual obligations); Donaldson Co. Inc. v. Burroughs Diesel Inc., 581 F.3d 726, 733-
35 (8th Cir. 2009); CD Partners, LLC v. Grizzle, 424 F.3d 795, 798-99 (8th Cir. 2005). See
also Driskill, A Dangerous Doctrine: The Case Against Using Concerted Conduct Estoppel
to Compel Arbitration, 60 Ala. L. Rev. 443 (2009).
372) Grigson v. Creative Artists Agency, 210 F.3d 524, 530-31 (5th Cir. 2000) (estopping
signatory plaintiff from relying on non-signatory’s status as such to resist arbitration).
See also Choctaw Generation Ltd v. Am. Home Assur. Co., 271 F.3d 403, 406-07 (2d Cir.
2001) (estopping signatory where merits of dispute non-signatory seeks to arbitrate
are “bound up with” and “linked textually to” terms of contract containing arbitration
clause); Thai-lao Lignite (Thailand) Co. v. Gov’t of the Lao PDR, 2011 WL 3516154, at *20-
21 (S.D.N.Y.) (“[A] signatory has indicated its expectation and intent to be bound by
that agreement and can anticipate submitting disputes concerning that agreement to
arbitration. Thus, when a non-signatory seeks to enforce an arbitration agreement
against a signatory, the arbitrability question is left to the arbitrator.”).
373) See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 51-53 (2d Cir. 2004) (applying Swiss law,
“non-signatory may be required to arbitrate in certain circumstances where it acts in
bad faith,” but not where “non-signatory…attempt[s] to invoke an arbitration clause”).
73
374) See, e.g., Todd v. S.S. Mut. Underwriting Ass’n, 601 F.3d 329 (5th Cir. 2010); Int’l Paper Co.
v. Schwabedissen Maschinen & Anlagen GmbH, 206 F.3d 411 (4th Cir. 2000) (non-
signatory purchaser required to arbitrate against signatory seller because purchaser
alleged breach of agreement containing arbitration clause); Am. Bureau of Shipping,
170 F.3d at 349 (non-signatory that received direct benefits of lower insurance and the
ability to sail under French flag bound to arbitrate against signatory); Deloitte
Noraudit A/S v. Deloitte Haskins & Sells, 9 F.3d 1060 (2d Cir. 1993) (non-signatory
compelled to arbitrate under equitable estoppel principles, because it received
copy of contract, did not object to it, offered no persuasive reason for its inaction and
knowingly accepted benefits of contract); Life Techs. Corp. v. AB Sciex Pte Ltd, 803
F.Supp.2d 270 (S.D.N.Y. 2011) (licensee equitably estopped from avoiding arbitration);
Gersten v. Intrinsic Techs., LLP, 442 F.Supp.2d 573 (N.D. Ill. 2006) (granting defendant’s
motion to stay proceedings and refer parties to arbitration; court held that plaintiff
non-signatory was bound by arbitration agreement because it made claims rooted in
contract in question); Larson v. Speetjens, 2006 WL 2567873 (N.D. Cal.) (although
plaintiff signed contract as trustee, and not in individual capacity, she was equitably
estopped from denying obligation to arbitrate malpractice claim).
375) See§10.02[K]; B. Hanotiau, Complex Arbitrations ¶41 (2005). French courts have
recognized the doctrine of estoppel as a defense against the claim, by a party who
has used an arbitration agreement to its advantage in the first place, that this
agreement is void. Judgment of 6 July 2005, Golshani v. Gouv’t de la République
islamique d’Iran, 2005 Rev. arb. 993 (French Cour de cassation civ. 1e); Pinsolle,
L’admission directe de l’estoppel en droit français, 2005 Rev. arb. 993 (commenting on
Judgment of 6 July 2005).
376) See§5.02[A][2][i]; Judgment of 23 September 2004, XXX Y.B. Comm. Arb. 568, 572
(Bayerisches Oberstes Landesgericht) (2005) (“It appears from the interpretation of
Art. II [of the New York] Convention that the prohibition of contradictory behavior is a
legal principle implied in the Convention.”); Judgment of 30 March 2000, XXXI Y.B.
Comm. Arb. 652, 653 (Schleswig-Holsteinisches Oberlandesgericht) (2006)
(“prohibition of contradictory behavior is a legal principle that must be deemed
included in the Convention and that must be taken into account when applying Art.
II”); China Nanhai Oil Joint Serv. Corp. Shenzhen Branch v. Gee Tai Holdings Co., XX Y.B.
Comm. Arb. 671, 677 (H.K. Ct. First Inst. 1994) (1995) (“on a true construction of the
Convention there is indeed a duty of good faith” requiring award debtor to raise
jurisdictional objection). See also A. van den Berg, The New York Arbitration
Convention of 1958 185 (1981) (“principle of good faith may be deemed enshrined in
the Convention’s provisions”).
International Commercial Arbitration, 289 Recueil des Cours 9, 105 n.94 (2001) (relying
on “venire contra factum proprium” and “abuse of rights” to hold that party could not
challenge its own capacity to conclude arbitration agreement).
2375, 103 J.D.I. (Clunet) 973 (1976); Judgment of 16 January 1995, Compagnie de
Navigation et Transp. SA v. Mediterranean Shipping Co., XXI Y.B. Comm. Arb. 690, 698
(Swiss Federal Tribunal) (1996) (“in particular situations, a certain behavior can
replace compliance with a formal requirement according to the rules of good faith”).
379) Judgment of 26 April 2006, 7 Ob 236/05 (Austrian Oberster Gerichtshof) (2007). Austria’s
revised arbitration legislation expressly recognizes the principle of estoppel.
Austrian ZPO, §584(4) (“If an action is rejected by a court due to the jurisdiction of an
arbitral tribunal, or by an arbitral tribunal due to the jurisdiction of a court or of
another arbitral tribunal, or when an arbitral award is set aside in setting aside
proceedings due to lack of jurisdiction of the arbitral tribunal, the proceedings are
deemed to have been properly continued if the action is immediately brought before
the court or arbitral tribunal.”). See Fremuth-Wolf, in S. Riegler et al. (eds.), Arbitration
Law of Austria: Practice and Procedure §584, ¶¶41 et seq. (2007); G. Zeiler,
Schiedsverfahren §§ 577-618 ZPO idF des SchiedsRÄG 2006 §110, ¶9 (2006).
380) See§§4.04[A][2] & [3]; §10.02[E], p. 1455 (group of companies); §10.02[G], p. 1463 -
(guarantors); §10.02[H], p. 1465 (succession); §10.02[K], p. 1477 (estoppel); §10.02[J], p.
1472 (subrogation).
381) This would ordinarily require the consent of the parties to the original agreement and
would be akin to assignment or novation. See§10.02[L].
382) See, e.g., Interim Award in ICC Case No. 4504, 113 J.D.I. (Clunet) 1118 (1986); Award in ICC
Case No. 3493, IX Y.B. Comm. Arb. 111 (1984); Deloitte Noraudit A/S v. Deloitte Haskins &
Sells, U.S., 9 F.3d 1060, 1064 (2d Cir. 1993) (non-signatory who failed to object to
settlement agreement and derived direct benefits from it effectively ratified
agreement); Day v. Fortune Hi-Tech Mktg, 2012 WL 588768, at *3 (E.D. Ky.) (non-
signatories assented to arbitration clause in contract by ratifying contract through
their conduct and accepting benefits thereunder); Lemus v. CMH Homes, Inc., 798
F.Supp.2d 853, 862 (S.D. Tex. 2011) (non-signatories ratified terms of contract by
performance, thus waiving right to object to arbitration pursuant to arbitration clause
in contract); Asia N. Am. Eastbound Rate Agreement v. BJI Indus., Inc., XXI Y.B. Comm.
Arb. 815 (D.D.C. 1995) (1996) (award debtor ratified agreement including arbitration
clause); Judgment of 19 May 2003, 22 ASA Bull. 344, 348 (Swiss Federal Tribunal) (2004)
(“retroactive approval”).
74
383) See, e.g., CMA CGM v. Hyundai Mipo Dockyard Co. [2008] EWHC 2791 (Comm) (English
High Ct.); Judgment of 11 June 1998, Société Ferring AB v. Société Debiopharm, 2002 Rev.
arb. 149 (Paris Cour d’appel) (upholding arbitrator’s finding that arbitration
agreement had disappeared with novation); Judgment of 5 October 1994, Société Van
Hopplynus v. Société Coherent Inc., XXII Y.B. Comm. Arb. 637 (Brussels Tribunal de
Commerce) (1997) (rejecting argument that arbitration agreement could not be tacitly
novated by conduct, and instead required a writing; applying law governing
arbitration agreement); NNPC v. Clifco Nigeria Ltd, LPELR-SC.233/2003 (Nigerian S.Ct.
2011). See also Final Award in ICC Case No. 8587, 12(1) ICC Ct. Bull. 102 (2001); Final
Award in ICC Case No. 7421, 21(2) ICC Ct. Bull. 64 (2010); Final Award in ICC Case No. 7331,
6(2) ICC Ct. Bull. 73 (1995).
384) See§10.02[G].
385) See, e.g., Interim Award in ICC Case No. 11405, described in B. Hanotiau, Complex
Arbitrations ¶157 (2005) (signatures by chief executive and general manager on behalf
of company, with notation that company is “acting in its own name as well as in the
name and on behalf of all its shareholders,” did not bind individuals); Award in ICC
Case No. 5721, 117 J.D.I. (Clunet) 1019 (1990) (individual who executed contracts for
account of corporate party not bound by contracts); Award in ICC Case No. 5730, 117
J.D.I. (Clunet) 1029 (1990); Interim Award in ICC Case No. 4504, 113 J.D.I. (Clunet) 1118
(1986) (corporate entity not bound by contract or arbitration clause because,
although individual that executed contract was president of corporate party, he
executed contract in different capacity); Mason Tenders Dist. Council Welfare Fund v.
Thomsen Constr. Co., 301 F.3d 50, 52, 54 (2d Cir. 2002) (finding owner of corporation not
bound as individual by contract when owner signed in his capacity as president);
Judgment of 23 October 2003, Société Kocak Ilac Fabrikasi AS v. SA Labs. Besins Int’l,
2006 Rev. arb. 149, 152 (Paris Cour d’appel) (setting aside award against officer of
corporate party; officer’s “will to be bound by the arbitration agreement could not be
inferred only from his signature of the contract”).
386) See§10.02[A].
387) See, e.g., Nesslage v. York Sec., Inc., 823 F.2d 231, 233 (8th Cir. 1987) (employees of
company that entered into arbitration agreement are third party beneficiaries of
agreement); Letizia v. Prudential-Bache Sec., Inc., 802 F.2d 1185, 1187-89 (9th Cir. 1986);
Hirschfeld Prod. Inc. v. Mirvich, 88 N.Y.2d 1054 (N.Y. 1996).
388) Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1012 (3d Cir. 1993).
389) See, e.g., DK Joint Venture 1 v. Weyand, 649 F.3d 310, 314-15 (5th Cir. 2011) (“Under
ordinary principles of contract and agency law, non-signatories’ status as corporate
officers and agents of the corporation is insufficient to personally bind them to
arbitration agreements entered into on behalf of the corporation.”); Covington v. Aban
Offshore Ltd, 650 F.3d 556, 559-60 (5th Cir. 2011); Bel-Ray Co. v. Chemrite Ltd, 181 F.3d
435 (3d Cir. 1999) (refusing to extend arbitration clause to officers and directors);
McCarthy v. Azure, 22 F.3d 351 (1st Cir. 1994).
390) Westmoreland v. Sadoux, 299 F.3d 462, 467 (5th Cir. 2002).
391) B. Hanotiau, Complex Arbitrations ¶153 (2005). See Award in ICC Case No. 4972, in S.
Jarvin, Y. Derains & J.-J. Arnaldez (eds.), Collection of ICC Arbitral Awards 1986-1990 380
(1994).
392) Judgment of 22 October 2008, Société Système U centrale régionale sud v. M. Jacques
Médard, JurisData No. 2008-045519 (French Cour de cassation civ. 1e).
393) See, e.g., Rodrigue v. Loisel, [2004] CarswellQue 11694 (Québec S.Ct.); Re/max Royal
Jordan v. Maragoudakis, [2004] CarswellQue 10903 (Québec Ct. App.); Decarel Inc. v.
Concordia Project Mgt Ltd, [1996] R.D.J. 484 (Québec Ct. App.) (principal shareholders
and officers of company that executed contract with arbitration agreement could
invoke agreement).
394) See, e.g., Judgment of 13 February 1997, 1998 NJW-RR 198 (Oberlandesgericht München)
(officers and directors did not sign arbitration agreement entered into by company
but were bound as “organs” of company). This decision is criticized in Sandrock,
Signatories Under German Law, 19 J. Int’l Arb. 423, 440-41 (2002).
395) See§10.02[A].
396) In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006). See also Roby v. Corp. of
Lloyd’s, 996 F.2d 1353, 1360 (2d Cir. 1993) (“Courts in this and other circuits consistently
have held that employees or disclosed agents of an entity that is a party to an
arbitration agreement are protected by that agreement.…If it were otherwise, it
would be too easy to circumvent the agreements by naming individuals as
defendants.”). Compare Toledano v. O’Connor, 501 F.Supp.2d 127, 152 (D.D.C. 2007)
(refusing to permit “troubling asymmetry” of allowing agent to compel third party to
arbitrate, but not the reverse).
75
397) See, e.g., Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990) (“A tribunal
should be reluctant to extend the arbitration clause to a director who has acted as
such. The extension requires that the legal person is nothing but a business
instrument of the natural person in such a way that one can transfer the contract and
obligations entered into by the former to the latter.”). But see Award in ICC Case No.
5730, 117 J.D.I. (Clunet) 1029 (1990) (owner/director of corporate group personally
subject to arbitration clause); Ripmaster v. Toyoda Gosei, Co., 824 F.Supp. 116 (E.D.
Mich. 1993) (employee bound by arbitration agreement entered into by his corporate
employer).
398) See generally Model Business Corporation Act, §§7.40 to 7.47 (3d ed. 2002) (“Derivative
Proceedings”); Foss v. Harbottle [1843] 67 ER 189 (English Vice-Ch. Ct.); ALI, Principles of
Corporate Governance: Analysis and Recommendations§§7.01 to 7.17 (1994); W. Fletcher
(ed.), 13 Fletcher Cyclopedia Corporations §5940 (2007) (“The derivative proceeding
developed as an equitable device to enable shareholders to enforce a corporate
right against faithless officers and directors, or abusive majority shareholders, that
the corporation had either failed or refused to assert on its own behalf.”); Mojuy,
French Corporate Governance in the New Millenium: Who Watches the Board in
Corporate France?, 6 Colum. J. Eur. L. 73 (2000) (discussing derivative litigation in
France); Utsumi, The Business Judgment Rule and Shareholder Derivative Suits in Japan:
A Comparison With Those in the United States, 14 N.Y. Int’l L. Rev. 129, 160-61 (2001)
(discussing derivative litigation in Japan).
399) See, e.g., Lane v. Abel-Bey, 418 N.Y.S.2d 25, 26 (N.Y. App. Div. 1979) (rejecting, with
respect to close corporation, “petitioner’s argument that, because the…claims are in
the nature of derivative suits, public policy precludes arbitration of such claims”).
400) In re Salomon Inc. S’holders’ Derivative Litg., 1994 WL 533595, at *4 (S.D.N.Y. 1994). See
also, May v. Coffey, 291 Conn. 106, 114 (Conn. 2009) (shareholder’s derivative action is
“an equitable action by the corporation as the real party in interest with a
stockholder as a nominal plaintiff representing the corporation”); Pierce v. GlobeOp
Fin. Serv. LLC, 2009 WL 3813775 (N.Y. Sup. Ct.). See Sanborn, The Rise of “Shareholder
Derivative Arbitration” in Public Corporations: In Re Salomon Inc. Shareholders’
Derivative Litigation, 31 Wake Forest L. Rev. 337 (1996); Shell, Arbitration and Corporate
Governance, 67 N.C. L. Rev. 517 (1989); Sockol, A Natural Evolution: Compulsory
Arbitration of Shareholder Derivative Suits in Publicly Traded Corporations, 77 Tul. L.
Rev. 1095 (2003).
401) Frederick v. First Union Sec., Inc., 122 Cal.Rptr.2d 774, 775-76 (Cal. Ct. App. 2002)
(corporation bound by client agreement containing arbitration clause with brokerage,
executed by corporate officer; shareholder bringing derivative lawsuit was bound by
same agreement, including its arbitration clause).
402) Frederick, 122 Cal.Rptr.2d at 776.
403) Frederick, 122 Cal.Rptr.2d at 776-78.
404) Ernst & Young Ltd Bermuda v. Quinn, 2009 WL 3571573, at *3 (D. Conn.) (requiring
arbitration because shareholder’s derivative action is “an equitable action by the
corporation as the real party in interest with a stockholder as a nominal plaintiff
representing the corporation”; “Because the arbitration agreement between SCAF and
Ernst & Young Bermuda governs ‘any dispute or claim arising out of or relating to the
Audit Services,’ that agreement would extend to any claim that actually belongs to
SCAF, including any derivative claim brought by a SCAF investor on behalf of the
Fund.”); Tooley v. Donaldson, Lufkin & Jenrette, 845 A.2d 1031, 1036 (Del. Sup. Ct. 2004)
(describing derivative suit as enabling “a stockholder to bring suit on behalf of the
corporation for harm done to the corporation”).
405) See, e.g., Sasportes v. M/V Sol de Copacabana, 581 F.2d 1204, 1208 (5th Cir. 1978);
Hellenic Lines, Ltd v. Commodities Bagging & Shipping, Process Supply Co.,611 F.Supp.
665 (D.N.J. 1985); Margate Indus., Inc. v. Samincorp., Inc., 582 F.Supp. 611 (S.D.N.Y. 1984).
406) See G. Born & P. Rutledge, International Civil Litigation in United States Courts 202-03
(5th ed. 2011); R. Casad & W. Richman, Jurisdiction in Civil Actions §4-3[1] (3d ed. 1998 &
Supp. 2012). Compare In re Merrill Lynch Trust Co., FSB, 2007 WL 2404845, at *3 (Tex.
S.Ct.) (“while conspirators consent to accomplish an unlawful act, that does not mean
that they impliedly consent to each other’s arbitration agreements”).
407) See§10.02[E].
408) For commentary, see Alford, Binding Sovereign Non-Signatories, 19(3) Mealey’s Int’l
Arb. Rep. 27 (2004); B. Audit, Transnational Arbitration and State Contracts (1987); K.-H.
Böckstiegel, Arbitration and State Enterprises (1984); Fox, States and the Undertaking
to Arbitrate, 37 Int’l & Comp. L.Q. 1 (1988); E. Gaillard, State Entities in International
Arbitration (2008); Leboulanger, Some Issues in ICC Awards Relating to State Contracts,
15(2) ICC Ct. Bull. 93 (2004); Rosenberg, State as Party to Arbitration, 20 Arb. Int’l 387
(2004); Silva Romero, ICC Arbitration and State Contracts, 13(1) ICC Ct. Bull. 34 (2002);
Smit, When Is A Government Bound by A Contract, Including An Arbitration Clause, It Did
Not Sign?, 16 Am. Rev. Int’l Arb. 323 (2005).
409) See§1.02[B][10], p. 92; Fox, States and the Undertaking to Arbitrate, 37 Int’l & Comp. L.Q.
1 (1988); von Mehren, Arbitration Between States and Foreign Enterprises: The
Significance of the Institute of International Law’s Santiago de Compostela Resolution,
5 ICSID Rev. 54 (1990). In 2012, 9.9% of new ICC cases involved a state or a state-
related entity. ICC, 2012 Statistical Report, 24(1) ICC. Ct. Bull. 10 (2013). See§1.02[B][10]
n.632.
76
410) See, e.g., Amoco Int’l Fin. Corp. v. Islamic Repub. of Iran, Award in IUSCT Case No. 310-
56-3 of 14 July 1987, 15 Iran-US C.T.R. 189, 238-41 (1987) (“[I]n certain circumstances, the
separate personality of an entity fully controlled by a State can be discarded and the
State considered bound by the terms of a contract entered into by such an entity.…
Such a conclusion, however, can only be drawn if this entity acted as an instrument of
the State.”); Dole Food Co. v. Patrickson, 538 U.S. 468, 475 (U.S. S.Ct. 2003) (“The fact
that the shareholder is a foreign state does not change the [alter ego] analysis.”); First
Nat’l City Bank v. Banco Para El Commercio Exterior de Cuba, 462 U.S. 611, 629-34 (U.S.
S.Ct. 1983); Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003)
(“Ordinary principles of contract and agency law may be called upon to bind a [state-
owned] nonsignatory to an agreement whose terms have not clearly done so.”); Sevaas
Inc. v. Repub. of Iraq, 686 F.Supp.2d 346, 357-58 (S.D.N.Y. 2010); K.-H. Böckstiegel,
Arbitration and State Enterprises 34-48 (1984). See also Hanotiau, Consent to
Arbitration: Do We Share A Common Vision?, 27 Arb. Int’l 4, 547 (2011) (“It is on this
basis, as we have seen, that French courts may include, within the scope of an
arbitration clause, a non-signatory, which is not necessarily a company but may also
be an individual or a State. And this, on the basis of an entity’s conduct – as an
expression of consent – in the conclusion, performance or termination of the
agreement contained in the arbitration clause.”).
411) Award in ICC Case No. 3493, IX Y.B. Comm. Arb. 111, 112 (1984).
412) Award in ICC Case No. 3493, IX Y.B. Comm. Arb. 111, 115 (1984).
413) Judgment of 12 July 1984, X Y.B. Comm. Arb. 113 (Paris Cour d’appel) (1985), aff’d,
Judgment of 6 January 1987, So. Pac. Prop. Ltd v. République Arabe d’Egypte, 26 Int’l
Legal Mat. 1004 (1987) (French Cour de cassation civ. le).
416) Dallah Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Gov’t of Pakistan
[2010] UKSC 46 (U.K. S.Ct.). See also§26.05[C][1][f][ii].
417) FinalAward in ICC Case No. 9987, discussed in J. El Ahdab (ed.), 2(4) Int’l J. Arab Arb. 420
(2010).
418) Judgment of 17 February 2011, Gouv’t du Pakistan, min. Affaires religieuses v. Sté Dallah
Real Estate & Tourism Holding Co., XXXVI Y.B. Comm. Arb. 590 (Paris Cour d’appel)
(2011).
Pakistan [2010] UKSC 46, ¶105 (UK S.Ct.). See also§26.05[C][1][f][ii].
420) As noted elsewhere, there are limited exceptions to this, where entities may be
bound to an arbitration agreement by operation of law – such as by alter ego status,
estoppel, or succession – regardless of their intent. See§10.02[A] (agency); §10.02[C]
(implied consent); §10.02[D] (alter ego and veil piercing) §10.02[E] (group of
companies); §10.02[G] (guarantors); §10.02[H] (succession); §10.02[J] (subrogation);
§10.02[K] (estoppel); §10.02[L] (ratification).
421) Judgment of 7 December 1994, V2000 v. Project XJ 220 ITD, 1996 Rev. arb. 245 (Paris Cour
d’appel); Alford, Binding Sovereign Non-Signatories, 19(3) Mealey’s Int’l Arb. Rep. 27,
29-31 (2004).
422) Isidor Paiewonsky Assoc., Inc. v. Sharp Prop., Inc., 998 F.2d 145, 155 (3d Cir. 1993). See
also Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 938-39 (9th Cir. 1985) (party
who has not executed arbitration agreement may nevertheless be bound by it when
its claims arise from contract containing agreement).
423) Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 758 (11th Cir. 1993). See
also Sourcing Unlimited, Inc. v. Asimco Int’l, Inc., 526 F.3d 38 (1st Cir. 2008) (signatory
to contract equitably estopped from resisting arbitration of dispute with non-
signatory that involved issues intertwined with contract between signatories);
Choctaw Generation LP v. Am. Home Assur. Co., 271 F.3d 403, 404 (2d Cir. 2001) (“[T]his
controversy is arbitrable because Choctaw agreed that controversies that are unable
to be resolved pursuant to the construction contract ‘shall be settled by arbitration,’
and because (under our case law) Choctaw, as signatory, is estopped from avoiding
arbitration with a non-signatory ‘when the issues the nonsignatory is seeking to
resolve in arbitration are intertwined with the agreement that the estopped party has
signed.’”).
424) B. Hanotiau, Complex Arbitrations ¶48 (2005); Townsend, Non-Signatories and
Arbitration, 3 ADR Currents 19, 21 (1998). See also Blessing, Extension of the Arbitration
Clause to Non-Signatories, in The Arbitration Agreement: Its Multifold Critical Aspects
151, 162 (ASA Spec. Series No. 8 1994) (“Most of the situations discussed in
international arbitral practice where one or more parties had not themselves
formally signed or counter-signed the arbitration clause have one element in
common: namely the element that justice would not seem to be done if the only
criterion applied and considered was the criterion that a particular third party did
not itself sign or countersign the arbitration clause.”).
425) See§1.02[A].
426) InterGen NV v. Grina, 344 F.3d 134 (1st Cir. 2003).
77
427) InterGen NV, 344 F.3d at 142. Most U.S. decisions have correctly reached different
results on similar facts. See Hernandez v. Smart & Final, Inc., 2010 WL 2505683, at *6
(S.D. Cal.) (“Although Smart-Mex is not a signatory to the Agreement (which contains
the arbitration clause), the Agreement identifies Smart-Mex as a wholly-owned
subsidiary of SFI, formed for the purpose of creating SFDN with Tre-Her.…Subsequent
provisions of the Agreement set forth various rights and duties of both SFI and Smart-
Mex.…Tre-Her was a signatory to the Agreement and, therefore, knew of and
consented to the formation and participation of Smart-Mex for this purpose.”);
Thixomat, Inc. v. Takata Physics Int’l Co., 2001 WL 863566, at *4 (S.D.N.Y.) (staying
litigation against subsidiary of signatory of arbitration agreement on grounds that
“[the parent] would be deprived of the benefit of the arbitration clause for which it
explicitly bargained and the federal policy in favor of arbitration, especially of
international commercial contracts would be thwarted.”); Fluor Daniel Intercont’l Inc.
v. Gen. Elec. Co., 1999 WL 637236, at *6 (S.D.N.Y.) (rejecting plaintiff’s claim that three
related entities cannot be bound to arbitration agreement where, inter alia, there was
“close relationship” between signatory and non-signatories, one non-signatory owned
50 % of signatory and wrongs alleged by non-signatories were “intimately founded in
and intertwined with” contract).
428) InterGen NV, 344 F.3d at 150. The court also formulated a distinction between a third
party that benefitted from a contract and a third party beneficiary that would be
bound by a contract, finding the status of the parent company to be the former. Id. at
147. See also MAG Portfolio Consultant, GmbH v. Merlin Biomed Group LLC, 268 F.3d 58
(2d Cir. 2001) (non-signatory’s benefit derived from agreement containing arbitration
clause is indirect, and thus non-signatory cannot be bound by clause, where it
exploits contractual relationship of parties to agreement, but does not exploit
agreement itself); McCarthy v. Azure, 22 F.3d 351, 362 n.16 (1st Cir. 1994) (requirements
of third party beneficiary theory “are not satisfied merely because a third party will
benefit from performance of the contract”).
429) See§§1.02[B][1]-[2].
430) See§10.02[E], pp. 1452-53.
431) The only other legal theory for binding non-signatories to an arbitration agreement
that is also arguably arbitration-specific is the treatment of corporate officers and
employees. As discussed above, some U.S. and other national courts have permitted
corporate officers and employees to invoke arbitration agreements in order to
centralize the parties’ disputes in a single forum, notwithstanding the fact that,
applying traditional contract analysis, the corporate officers and employees would
not be parties to the relevant contracts. See§10.02[M].
432) See§9.02[D][1].
433) See§10.02[E], pp. 1446-48; §10.02[K], pp. 1473-74§10.02[M], p. 1480.
434) See§§5.04[C][1], [4] & [5]; Granite Rock Co. v. Int’l Bhd of Teamsters, 130 S.Ct. 2847,
2857-58 (U.S. S.Ct. 2010) (presumption favoring arbitration applies “only where it
reflects, and derives its legitimacy from a judicial conclusion that arbitration of a
particular dispute is what the parties intended”); E.I. Dupont de Nemours & Co., 269
F.3d at 194 (“The liberal policy favoring arbitration agreements…is at bottom a policy
guaranteeing the enforcement of private contractual arrangements, and under the
FAA, a court may only compel a party to arbitrate where that party has entered into a
written agreement to arbitrate that covers the dispute.”); Different Drummer LLC v.
Nat’l Urban League, Inc., 2012 WL 406907, at *3 (S.D.N.Y.).
435) See§5.04[C][5].
436) See§10.02[H].
437) See§10.02[D] (alter ego); §10.02[K] (estoppel).
438) See§5.02. A formal “writing” requirement is imposed by the New York Convention, the
UNCITRAL Model Law and most other national arbitration regimes. See§5.02[A][6]. See
generallyHabegger, Extension of Arbitration Agreements to Non-Signatories and
Requirements of Form, 22 ASA Bull. 398 (2004); Sandrock, Die Aufweichung einer
Formvorschrift und anderes mehr – Das Schweizer Bundesgericht erlässt ein
befremdliches Urteil, 2005 SchiedsVZ 1.
439) See§5.02[A][10].
440) This is most clearly the case where agency, alter ego, guarantor and third party
beneficiary theories are involved. See, e.g., Washington Mut. Fin. Group, LLC v. Bailey,
364 F.3d 260 (5th Cir. 2004); E.I. DuPont de Nemours & Co., 269 F.3d 187; Thomson-
CSF,64 F.3d at 776; Judgment of 16 October 2003, 22 ASA Bull. 364, 383 (Swiss Federal
Tribunal) (2004) (concluding that underlying agreement between signatories satisfied
written form requirements).
78
441) See Interocean Shipping Co. v. Nat’l Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir.
1975); Fisser v. Int’l Bank, 282 F.2d 231, 233 (2d Cir. 1960); Judgment of 6 November 1984,
DFT 110 II 342 ¶1.b (Swiss Federal Tribunal); Judgment of 2 February 1978, 71 BGHZ 162,
166 (German Bundesgerichtshof); Girsberger & Hausmaninger, Assignment of Rights
and Agreement to Arbitrate, 8 Arb. Int’l 121, 142 (1992). See also E.I. DuPont de Nemours,
269 F.3d at 194 (validity of arbitration agreement and determination of parties to
agreement are separate inquiries: “There is no dispute that the Agreement contained
a valid and enforceable arbitration clause which required all disputes arising out of
the Agreement between the parties be submitted to binding arbitration in Singapore.
The only question is whether DuPont, a non-signatory to that Agreement, is bound by
that arbitration clause.”).
442) Judgment of 16 October 2003, 22 ASA Bull. 364, 386 (Swiss Federal Tribunal) (2004). See
also Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (U.S. S.Ct. 2009) (“If a written
arbitration provision is made enforceable against…a third party under state contract
law, the [FAA’s writing requirement is] fulfilled.”).
443) Habegger, Extension of Arbitration Agreements to Non-Signatories and Requirements of
Form, 22 ASA Bull. 398, 410 (2004).
444) See, e.g.,Judgment of 5 December 2008, DFT 4A_376/2008, ¶8.4 (Swiss Federal Tribunal)
(“Swiss case law – the law applicable in this case – already recognized the possibility
to extend the arbitration clause to persons which did not sign it, although written
form is one of the requirements for the validity of the clause stated at Art. 178 [of the
SLPIL]. This may be the case when a claim is assigned, taken over or when a
contractual relationship is transferred. It has already been admitted that in specific
circumstances, a certain behavior may substitute compliance with a formal
requirement on the basis of the rules of good faith. For instance, when a third party
becomes involved in the performance of the contract which contains the arbitration
clause in such a way that an intent to submit to the arbitration agreement, expressed
by its behavior, may be deducted from its behaviour.”).
445) See§5.02[A][10].
446) See§5.02[A][1].
447) Nonetheless, a few national court decisions are to the contrary. See, e.g., Indowind
Energy Ltd v. Wescare (India) Ltd, AIR 2010 SC 1793 (Indian S.Ct. 2010) (rejecting claim
that non-signatory may be bound by arbitration clause by virtue of its conduct,
holding that written form requirement was mandatory).
448) See§10.02[A] (agency); §10.02[B] (apparent authority); §10.02[C] (implied consent);
§10.02[D] (alter-ego); §10.02[E] (group of companies); §10.02[F] (third party
beneficiary); §10.02[G] (guarantor); §10.02[H] (succession); §10.02[I] (assignment);
§10.02[K] (estoppel). Of course, as discussed above, the separability doctrine permits
the application of one law to the parties’ underlying contract and another law to the
arbitration clause. See§3.03; §4.02.
449) See Restatement (Second) Conflict of Laws §218 (1971) (conflict of laws rules apply to
“the validity of an arbitration agreement, and the rights created thereby”); L. Collins
(ed.), Dicey, Morris and Collins on The Conflict of Laws ¶¶16-001 et seq. (15th ed. 2012).
450) See§10.02[D] (alter ego); §10.02[E] (group of companies); §10.02[K] (estoppel).
451) See§10.02[A] (agency); §10.02[H] (succession); §10.02[G] (guarantor).
452) See§10.05[A].
453) See, e.g., Ocean-Air Cargo Claims, Inc. v. Islamic Repub. of Iran, Award in IUSCT Case No.
11429 of 15 December 1989, 23 Iran-US C.T.R 296 (1989); Interim Award in ICC Case No.
9873, 16(2) ICC Ct. Bull. 85 (2005) (not applying any national law to determine status of
non-signatory; no explanation or analysis); Final Award in ICC Case No. 9797, 18 ASA
Bull. 514 (2000) (applying UNIDROIT Principles); Award in ICC Case No. 5721, 117 J.D.I.
(Clunet) 1019 (1990); Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 135
(1984); Final Award of 1 December 1996 in Chamber of Nat’l & Int’l Arbitration of Milan
Case No. 1795, XXIVa Y.B. Comm. Arb. 196 (1999) (applying UNIDROIT Principles); Sea-
Land Serv., Inc. v. Islamic Repub. of Iran, Award No. 135-33-1 of 22 June 1984, X Y.B.
Comm. Arb. 245 (1985). See also Hosking, Non-Signatories and International Arbitration
in the United-States: The Quest for Consent, 20 Arb. Int’l 289, 296 (2004); Park,
Arbitrators and Accuracy, 1 J. Int’l Disp. Sett. 25, 47 (2010) (“[A]rbitrators often seek
guidance in transnational norms articulated by scholars and in published awards.
Such norms address the circumstances under which an arbitration clause might be
extended to a non-signatory, for example, by virtue of the parent company’s behavior
in negotiations and contract formation, or performance of related contracts which
form part of a single contract scheme constituted by multiple agreements.”).
454) Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection
of ICC Arbitral Awards 1996-2000 474 (2003).
79
Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“[T]he tribunal considers that in
the case of a neutral forum such as this one, the automatic application of the rules of
conflict of the seat of the arbitration must be rejected and the tribunal must apply
the law, and if necessary private international law, which is the most appropriate in
the circumstances. This is the law which best corresponds to the needs of the
international business community, which is not in conflict with the legitimate
expectations of the parties, which produces uniform results and offers a reasonable
solution to the dispute.”); Jarvin, The Group of Companies Doctrine, in The Arbitration
Agreement – Its Multifold Critical Aspects 181, 196-97 (ASA Spec. Series No. 8 1994)
(“[T]he traditional approach to the problem that the arbitrators take, is done without
reference to any particular law.…The existence of an intention to be bound to an
arbitration agreement is demonstrated without reference to a particular law; it is a
matter of facts and of evidence, not of law.…[T]he choice of a national law as source
seems to be in the defensive.”).
Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“The application of
international principles offers many advantages. They apply in a uniform fashion and
are independent from the peculiarities of each national law. They take into
consideration the needs of international relations and allow for a fruitful exchange
between systems which are sometimes excessively attached to conceptual
distinctions, and systems which seek a just and pragmatic solution to particular
situations. This is therefore an ideal opportunity to apply what is increasingly
referred to as the lex mercatoria.”); Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019
(1990).
457) CompareHabegger, Extension of Arbitration Agreements to Non-Signatories and
Requirements of Form, 22 ASA Bull. 398, 399 (2004).
458) See§4.04[A][4][a]; §4.04[B][3][e].
459) Judgment of 21 October 1983, Isover-Saint-Gobain v. Dow Chem. France, 1984 Rev. arb.
98 (Paris Cour d’appel) (noting that group of companies doctrine is ‘not seriously
contested…as a usage of international commerce’); §10.02[E]. See alsoJudgment of 26
November 1986, Société Sponsor AB v. Lestrade, 1988 Rev. arb. 153 (Pau Cour d’appel)
(group of companies doctrine “accepted in law”).
460) See, e.g., E.I. Dupont de Nemours, 269 F.3d at 187; McPheeters v. McGinn, Smith & Co.,
953 F.2d 771 (2d Cir. 1992); Genesco, Inc., 815 F.2d at 845 (question whether party is
“bound by the arbitration clause…is determined under federal law, which comprises
generally accepted principles of contract law”); Valero Refining, Inc. v. M/T
Lauberhorn, 813 F.2d 60, 64 (5th Cir. 1987); McAllister Bros., Inc. v. A & S Transp. Co., 621
F.2d 519, 524 (2d Cir. 1980); Fisser, 282 F.2d at 233; Toledano v. O’Connor, 501 F.Supp.2d
127, 152 (D.D.C. 2007) (applying “the federal substantive law of arbitrability, which in
turn incorporates general principles of contract and agency law”); Repub. of Ecuador,
376 F.Supp.2d at 334 (“apply federal common law to the question of whether [a non-
signatory] is bound by the arbitration clause”); Legacy Wireless Serv., Inc. v. Human
Capital, LLC, 314 F.Supp.2d 1045 (D. Or. 2004); Creative Sec. Corp. v. Bear Stearns & Co.,
671 F.Supp. 961, 965 (S.D.N.Y. 1987), aff’d, 847 F.2d 834 (2d Cir. 1988); Oriental
Commercial & Shipping Co. (U.K.), Ltd v. Rosseel, NV, 609 F.Supp. 75 (S.D.N.Y. 1985);
Banque de Paris et des Pays-Bas v. Amoco Oil Co., 573 F.Supp. 1464 (S.D.N.Y. 1983);
Hidrocarburos y Derivados CA v. Lemos, 453 F.Supp. 160, 167-68 (S.D.N.Y. 1977); Hester
Int’l Corp., 879 F.2d at 177 (“The Court specifically declined to apply the law of the
chartering state to determine the separate juridical status of its instrumentality.”).
461) Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (U.S. S.Ct. 2009).
462) Arthur Andersen LLP, 556 U.S. 624, 631 (quoting 21 Williston on Contracts §57:19 (4th ed.
2001)). See also First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (U.S. S.Ct.
1995) (“When deciding whether the parties agreed to arbitrate a certain matter
(including arbitrability), courts generally…should apply ordinary state-law principles
that govern the formation of contracts.”); Century Indem. Co. v. Certain Underwriters at
Lloyd’s, London, 584 F.3d 513, 524 (3d Cir. 2009) (“ordinary state-law principles that
govern the formation of contracts” determine threshold question of whether a party
has agreed to arbitrate); §10.01[D].
463) U.S. lower courts have generally continued to apply federal common law to non-
signatory issues in cases arising under the Convention. See, e.g., Todd v. S.S. Mut.
Underwriting Ass’n, 601 F.3d 329, 334 (5th Cir. 2010) (“in both FAA and [New York]
Convention cases, courts have largely relied on the same common law contract and
agency principles to determine whether nonsignatories must arbitrate, and not law
derived from statute or treaty”); Meena Enter., Inc. v. Mail Boxes Etc., 2012 WL 4863695,
at *4 n.6 (D. Md.) (“Federal common law, rather than state law, applies to MBE’s
equitable estoppel argument.”). Compare Motorola Credit Corp. v. Uzan, 388 F.3d 39, 51
(2d Cir. 2004) (“if defendants wish to invoke the arbitration clauses in the agreements
at issue, they must also accept the Swiss choice-of-law clauses that govern those
agreements”); FR8 Singapore Pte Ltd v. Albacore Maritime Inc., 754 F.Supp.2d 628
(S.D.N.Y. 2010) (applying English law to determination of piercing corporate veil).
Ct.).
80
465) See, e.g.,Ad Hoc Award in Zurich of 15 September 1989, 8 ASA Bull. 270, 273-74 (1990)
(Italian law applied to determine whether partner in Italian partnership is bound by
arbitration agreement entered into by partnership); Motorola Credit Corp. v. Uzan, 388
F.3d 39, 51-53 (2d Cir. 2004) (applying Swiss law selected by choice-of-law clause);
Sphere Drake Ins. Ltd v. Clarendon Nat’l Ins. Co., 263 F.3d 26, 32 n.3 (2d Cir. 2001)
(applying New York and New Jersey choice-of-law clauses); FR8 Singapore Pte Ltd v.
Albacore Maritime Inc., 794 F.Supp.2d 449, 458 (S.D.N.Y. 2011) (applying English law,
selected by choice-of-law clause, rather than federal common law, to determine
whether to pierce corporate veil); CCP Sys. AG v. Samsung Elecs. Corp. Ltd, 2010 WL
2546074, at *7-8 (D. N.J.) (“[T]he Software Agreement contains a choice of law provision
requiring the application of Swiss law.…Swiss law governs the issue concerning
whether a non-signatory to the Software Agreement, Defendant Samsung America, is
permitted to invoke the arbitration clause.”).
466) See, e.g., Judgment of 19 August 2008, DFT 4A_128/2008, ¶4.1.1 (Swiss Federal Tribunal)
(“The question as to the subjective bearing of an arbitration agreement – at issue is
which parties are bound by the agreement and to determine to what extent one or
several third parties not mentioned there nonetheless fall within its scope ratione
personae – relates to the merits and accordingly falls within Art. 178(2) [of the SLPIL].
This question falls under Swiss law as it is not established that the parties to the
Contract would have submitted the arbitration agreement to another law and the two
other possibilities anticipated by that provision (i.e. the lex causae and the lex fori)
also lead to the application of that law.”).
467) See, e.g., Final Award in ICC Case No. 10758, 128 J.D.I. (Clunet) 1171 (2001) (applying law
of arbitral seat to determine status of non-signatory on grounds that this was parties’
implied choice); Award in ICC Case Nos. 7604 and 7610, in J.-J. Arnaldez, Y. Derains & D.
Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 510 (2003); Award in ICC Case
No. 5730, 117 J.D.I. (Clunet) 1029 (1990) (applying law of arbitral seat to determine
status of non-signatory on grounds that this was law governing arbitral proceedings).
Compare Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.),
Collection of ICC Arbitral Awards 1996-2000 474 (2003) (refusing to apply law of arbitral
seat to determine status of non-signatory).
Some awards apply the conflicts rules of the arbitral seat to non-signatory issues. See,
e.g., Partial Award in ICC Case No. 10818, 16(2) ICC Ct. Bull. 94 (2005); Interim Award in
ICC Case No. 9719, 16(2) ICC Ct. Bull. 83 (2005) (applying conflicts rules of arbitral seat
to determine non-signatory’s status); Interim Award in ICC Case No. 4504, 113 J.D.I.
(Clunet) 1118 (1986) (same); Partial Award in ICC Case No. 4402, IX Y.B. Comm. Arb. 138
(1984).
468) Sarhank Group v. Oracle Corp., 404 F.3d 657 (2d Cir. 2005) (applying “American” law to
alter ego inquiry in recognition action).
469) Sarhank Group, 404 F.3d at 662. The U.S. appellate court was concerned by the lack of
reasoning and factual analysis reflected in the arbitral award. Among other things,
the court quoted the following passage from the arbitral award: “despite…their
having separate juristic personalities, subsidiary companies to one group of
companies are deemed subject to the arbitration clause incorporated in any deal
either is a party thereto provided that this is brought about by the contract because
contractual relations cannot take place without the consent of the parent company
owning the trademark by and upon which transactions proceed.” Ibid. Other
commentators have termed this a “rather simplified, even crude version” of the group
of companies doctrine, which explains in part the U.S. court’s treatment of the award.
Wilske, Shore & Ahrens, The “Group of Companies Doctrine” – Where Is It Headed?, 17
Am. Rev. Int’l Arb. 73, 83 (2006).
For additional criticism of the Sarhank decision, see Garfinkel & Iherlihy, Looking for
Law in All the Wrong Places: The Second Circuit’s Decision in Sarhank Group v. Oracle
Corporation, 20(6) Mealey’s Int’l Arb. Rep. 18 (2005) (U.S. court embarked on “a
mistaken application of Article V(2)(a)” and took “the wrong route to get to its
ultimate conclusion”); Rau, “Consent” to Arbitral Jurisdiction: Disputes With Non-
Signatories, in PCA, Multiple Party Actions in International Arbitration 69, ¶3.67 n.143
(2009).
470) See§10.02[D], pp. 1436-40.
471) See§10.02[K], pp. 1474-76.
472) As discussed elsewhere, the Sarhank approach is a clear violation of the uniform
choice-of-law rules prescribed by Article V(1)(a) of the New York Convention.
See§4.04[A][2][j][v]; §10.05[C][3]; §26.05[C][1][e][i]. As also discussed elsewhere, the
most credible defense of results such as Sarhank is that they rest on an application of
local public policy considerations. See§4.04[A][2][j][v] n.360; §10.05[C][3]; §26.05[C][1]
[e][i].
473) See§10.02.
474) See§10.02[A] (agency); §10.02[E] (group of companies); §10.02[F] (third party
beneficiaries); §10.02[L] (ratification); §10.02[O] (joint venture relations).
81
475) See§§4.04et seq. (especially §4.04[7]); Restatement (Second) Conflict of Laws §218
(1971); L. Collins (ed.), Dicey, Morris and Collins on The Conflict of Laws ¶16-0228 (15th
ed. 2012) (“All questions relating to the formation of an arbitration agreement are
governed by the law which would govern if it were validly concluded, i.e. by its
putative applicable law. The law governing the arbitration agreement will determine
its validity, effect and interpretation.…That law will normally determine whether the
clause remains binding on the parties although one of them alleges that the contract
is void, voidable or illegal, or that it has been discharged by breach or frustration.
The governing law will also determine whether an arbitration agreement can be
imported by implication into a different contract between the same parties, or
between one of them and a third party.”); E. Gaillard & J. Savage (eds.), Fouchard
Gaillard Goldman on International Commercial Arbitration ¶475 (1999); Münch, in G.
Lüke & P. Wax (eds.), Münchener Kommentar zur Zivilprozessordnung §1029, ¶18 (2d
ed. 2001).
476) As discussed above, consistent with generally-applicable choice-of-law rules, the law
that would govern the putative arbitration agreement would apply to the formation
of that agreement. See§4.04[B][7]. This applies to the question whether a non-
signatory became party to the agreement pursuant to doctrines such as implied
consent, assumption, ratification, third party beneficiary status and group of
companies doctrine. In each instance, the issue is whether or not an arbitration
agreement was formed insofar as the relevant non-signatory is concerned.
Similarly, the law governing the arbitration agreement would also be applicable to
its interpretation. See§9.05[B].
477) See§4.04[A][1][b][i]; §4.04[A][3].
478) See§4.04[A][1][b][i]; §4.04[A][3].
479) See, e.g., Restatement (Second) of Conflict of Laws §§218, 187, 188 (1971); L. Collins (ed.),
Dicey, Morris and Collins on The Conflict of Laws ¶¶16-022, 32R-106 (15th ed. 2012) (“All
questions relating to the formation of an arbitration agreement are governed by the
law which would govern if it were validly concluded, i.e. by its putative applicable
law.”; “Rule 225 – (1) Subject to clause (2) of this Rule, the existence and validity of a
contract, or of any term of a contract, are determined by the law which would govern
it under the Rome I Regulation if the contract or term were valid. (2) A party, in order
to establish that he did not consent, may rely upon the law of the country in which he
has his habitual residence if it appears from the circumstances that it would not be
reasonable to determine the effect of his conduct in accordance with the law
specified in clause (1).”).
480) See§10.02[E], p. 1445.
481) See§10.02[B], pp. 1426-27 (apparent authority); §10.02[D], p. 1444 (alter ego); §10.02[K],
p. 1477 (estoppel).
482) See§4.04[A][4]; §4.05[C][5]; §4.07[B][3]; §5.02[C].
483) See§4.04[A][2][j][v]; §10.05[C][1]. See also Partial Award in ICC Case No. 8910, 127 J.D.I.
(Clunet) 1085, 1091 (2000) (“The arbitral tribunal is fully aware that its decision may
not be recognized in the United Arab Emirates. However, if it is true that a tribunal
must not act in such a way that its award may be legally sanctioned (cf. [1998] ICC
Rules, Article 26), it may not be bound by the rules of the country or countries where
its award may be enforced.”).
484) Sarhank Group, 404 F.3d 657.
485) Sarhank Group, 404 F.3d at 661-62.
486) See§§4.04et seq. (especially §4.04[A][1]; §4.04[B][2]).
487) There would not be an objection in principle to a Contracting State applying public
policy, under Article V(2)(b) of the Convention, to deny recognition of an award on the
basis that it upheld jurisdiction over a party in violation of local public policy.
See§26.05[C][9]. Any such result could not, however, merely reassess choice of law or
factual matters decided by the arbitrators and could only rely upon clearly
articulated, fundamental public policies. See§26.05[C][9].
488) The same issues may arise before an arbitral institution, which may be required (like
the ICC and ICSID) to make a determination regarding prima facie jurisdiction
(see§15.08[K]) or to decide whether a particular entity may be served or permitted to
participate in constituting a tribunal. See J. Fry, S. Greenberg & F. Mazza, The
Secretariat’s Guide to ICC Arbitration 78 (2012); Werner, Jurisdiction of Arbitrators in
Case of Assignment of An Arbitration Clause: On A Recent Decision by the Swiss Supreme
Court, 8(2) J. Int’l Arb. 13 (1991); Whitesell & Silva-Romero, Multiparty and
Multicontract Arbitration: Recent ICC Experience, in ICC, Complex Arbitrations 7, 8-10
(ICC Ct. Bull. Spec. Supp. 2003).
489) See§7.02.
82
490) See, e.g., Award in ICC Case Nos. 7604 and 7610, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 1996-2000 510 (2003); Final Award in ICC Case
No. 6519, 2(2) ICC Ct. Bull. 34, 35 (1991); Partial Award in ICC Case No. 6000, 2(2) ICC Ct.
Bull. 31, 32 (1991); Interim Award in ICC Case No. 5920, 2(2) ICC Ct. Bull. 27, 28 (1991);
Partial Award in ICC Case No. 4402, IX Y.B. Comm. Arb. 138 (1984); Interim Award in ICC
Case No. 4131, IX Y.B. Comm. Arb. 131, 138 (1984). See also authorities cited §10.02[B], p.
1425 n. 101; §10.02[C], . p. 1428 nn. 116-117; §10.02[D], pp. 1433-35 n. 141-155, pp. 1440-41
nn. 184-189; §10.02[E], p. 1448 n. 227; §10.02[H], p. 1465 n. 317; §10.02[M], p. 1479 n. 386;
Pimm, Jurisdiction Over Non-Signatories to the Arbitration Agreement – Can Arbitrators
Pierce the Corporate Veil?, 2003 Asian Disp. Res. 5.
491) See§7.03.
492) See§7.03[A].
493) Pan Liberty Navigation v. World Link (H.K.) Res. Ltd, [2005] BCCA 206 (B.C. Ct. App.)
(staying litigation under Article 8 of Model Law; holding that question whether non-
signatory was bound by arbitration agreement was for arbitral tribunal to resolve);
Gulf Canada Res. Ltd v. Arochem Int’l Ltd, (1992) 66 B.C.L.R.2d 113 (B.C. Ct. App.) (“But it
is not for the court, on a stay application, to reach any final determination as to the
scope of the arbitration agreement or whether a particular party to the legal
proceedings is a party to the agreement. Those are matters within the jurisdiction of
the arbitral tribunal. Only where it is clear that the dispute falls outside the
agreement, or that a party is not a party to it, or that the application is out of time,
should the court make a final determination.”); NetSys Tech. Group AB v. Open Text
Corp., (1999) 1 B.L.R.3d 307 (Ontario Super. Ct.). See also P. Sanders, The Work of
UNCITRAL on Arbitration and Conciliation 98 (2d ed. 2004).
494) See, e.g., Fibreco Pulp Inc. v. Star Shipping A/S, [1998] 145 F.T.R. 125 (Canadian Fed. Ct.),
aff’d, [1998] 156 F.T.R. 127 (Canadian Fed. Ct.); Decarel Inc. v. Concordia Project Mgt Ltd,
[1996] R.D.J. 484 (Québec Ct. App.); World LLC v. Parenteau & Parenteau Int’l Inc., [1998]
A.Q. No. 736 (Québec Super. Ct.); ABN Amro Bank Canada v. Krupp Mak Maschinenbau
GmbH, (1996) 135 D.L.R.4th 130 (Ontario Super. Ct.); Rio Algom Ltd v. Sammi Steel Co.,
XVIII Y.B. Comm. Arb. 166 (Ontario Super. Ct. 1991) (1993); §7.03[A][2][b].
495) D. Frampton & Co. v. Thibeault, [1988] F.C.J. No. 305, 381 (Canadian Fed. Ct.); §7.03[A][5].
496) See§7.03[B][1]; Judgment of 26 June 2001, Société Am. Bureau of Shipping v. Copropriété
Maritime Jules Verne, 2001 Rev. arb. 529 (French Cour de cassation civ. 1e).
497) See, e.g.,Judgment of 9 June 2010, Soc. Evekas v. Soc. Macifilia, 2010 Rev. arb. 396
(French Cour de cassation civ. 1e) (applying general rules of French competence-
competence to hold that arbitral tribunal should initially consider jurisdictional
objection of non-signatory); Judgment of 6 October 2010, Société Blonde génétique v.
SCEA Plante Moulet, 2010 Rev. arb. 971, 971-72 (French Cour de cassation civ. 1e);
Strickler, Chronique de jurisprudence française, 2011 Rev. arb. 191.
498) See§7.03[B][3].
499) See§7.03[B][2]; Judgment of 4 December 2002, 2003 Rev. arb. 1291 (Paris Cour d’appel);
Judgment of 4 December 2002, 2003 Rev. arb. 1291 (Paris Cour d’appel), Note, Gaillard.
500) See, e.g., Contec Corp. v. Remote Solution Co., 398 F.3d 205 (2d Cir. 2005); Builders Fed.
(H.K.) Ltd v. Turner Constr., 655 F.Supp. 1400 (S.D.N.Y. 1987).
501) Fiat SpA v. Ministry of Fin. & Planning of the Repub. of Suriname, 1989 WL 122891, at *5
(S.D.N.Y.). See also Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir.
2004) (court must determine whether non-signatory is successor corporation before
compelling arbitration); Orion Shipping & Trading Co. v. E. States Petroleum Corp., 312
F.2d 299, 301 (2d Cir. 1963); Oriental Commercial & Shipping Co. (U.K.) Ltd v. Rosseel, NV,
609 F.Supp. 75 (S.D.N.Y. 1985).
502) See§7.03[E][4].
503) See§7.03[E][7]; Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006) (“A
determination of the arbitrability of a dispute, like the interpretation of any
contractual provision, is subject to de novo review.”); Local Union No. 38, Sheet Metal
Workers’ Int’l Ass’n v. Custom Air Sys., Inc., 357 F.3d 266, 268 (2d Cir. 2004)
(“arbitrability vis a vis a non-signatory is for the district court to decide”); Bridas
SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 347 (5th Cir. 2003); Nazar v. Wolpoff &
Abramson, LLP, 2007 U.S. Dist. LEXIS 11027 (D. Kan.) (granting non-signatory’s motion to
compel arbitration against signatory of contract that clearly contemplated
arbitration of jurisdictional issues).
504) See§7.03[E][7][c]; Thai-Lao Lignite (Thailand) Co. v. Gov’t of the Lao PDR, 2011 WL
3516154, at *21 (S.D.N.Y.) (“Respondent does not point to any authority mandating
independent judicial review of arbitrability issues at the enforcement stage for a
foreign arbitral award because a non-signatory was granted standing as a claimant in
the arbitration. Here, Respondent is indisputably a signatory to a valid arbitration
agreement that incorporates UNCITRAL rules. There is thus no dispute that
Respondent has agreed to arbitrate disputes arising out of the PDA, including
disputes about the scope of the Panel’s jurisdiction.”).
505) See§7.03[E][2][a]; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44 (U.S. S.Ct.
1995).
83
506) See§7.03[E][2][a]. See also Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed.
Cir. 2004); In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices &
Prod. Liability Litg., 838 F.Supp.2d 967, 981 (C.D. Cal. 2012) (“Generally, the issue of
whether a particular dispute is subject to arbitration is an issue decided by the
courts.”); Awuah v. Coverall N. Am., Inc., 843 F.Supp.2d 172, 177 (D. Mass. 2012) (“the
question of whether the parties agreed to arbitrate is to be decided by the court, not
the arbitrator”).
507) See, e.g., Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006); Sarhank
Group v. Oracle Corp., 404 F.3d 657, 661-62 (2d Cir. 2005) (“An agreement between
Sarhanks and Systems which does not mention Oracle does not evidence a ‘clear and
unmistakable’ intent by Oracle to arbitrate or permit the arbitrator to decide the
issue of arbitrability.”); Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 354 n.4 (5th
Cir. 2003).
For U.S. interlocutory judicial decisions determining the parties to international
arbitration agreements, see MJR Int’l, Inc. v. Am. Arbitration Ass’n, 596 F.Supp.2d 1990
(S.D. Ohio 2009) (denying non-signatory principal’s injunction to stay arbitration
because it had been bound to the arbitration agreement through its agent);
Jakubowski v. Nova Bev. Inc., unreported decision (N.Y. Sup. Ct. 1995) (issuing
injunction against arbitration of claims against individual officer of corporate
signatory).
508) Repub. of Ecuador v. Chevron Corp., 2011 U.S. App. LEXIS 5351 (2d Cir.) (arbitration
agreement in BIT incorporated UNCITRAL Rules, demonstrating parties’ intention for
arbitrability issues to be decided by arbitral tribunal). See Alliance Bernstein Inv.
Research & Mgt, Inc. v. Schaffran, 445 F.3d 121, 125 (2d Cir. 2006) (jurisdictional issues
properly addressed by arbitral tribunal when contract incorporated reference to
code unequivocally providing for arbitration of dispute at issue); Contec Corp. v.
Remote Solution Co., 398 F.3d 205, 209-11 (2d Cir. 2005) (dispute between signatory
and non-signatory so intertwined with signatory’s contract that included arbitration
clause, signatory estopped from denying obligation to arbitrate all disputes,
including jurisdictional issue).
509) For commentary, see de Boisséson & Duprey, L’arbitrabilité subjective en matière de
droit des sociétés, 2004 Paris J. Int’l Arb. 121; Hornstein, Stockholders’ Agreements in
the Closely Held Corporation, 59 Yale L.J. 1040 (1950); Kessler, Arbitration of Intra-
Corporate Disputes Under New York Law, 19 Arb. J. 1 (1964); Mourre, L’impact de la
réforme de la clause compromissoire sur les litiges relatifs aux sociétés, 2004 Paris J.
Int’l Arb. 125; Müller & Keilmann, Beteiligung am Schiedsverfahren wider Willen?, 2007
SchiedsVZ 113; Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their
Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423 (2002); Shell,
Arbitration and Corporate Governance, 67 N.C. L. Rev. 517 (1989).
510) See, e.g., U.S. Small Bus. Admin. v. Chimicles, 447 F.3d 207, 210 (3d Cir. 2006)
(arbitration clause in partnership agreement); U.S. v. Am. Soc’y of Composers, Authors
& Publishers, 32 F.3d 727, 732 (2d Cir. 1994) (arbitration clause in articles of
association); Armoudlian v. Zadeh, 323 N.W.2d 502, 506 (Mich. Ct. App. 1982)
(arbitration clause in partnership agreement); 21 Williston on Contracts §57.44 (4th ed.
1990 & Update 2013) (arbitration clauses in partnership agreements); 8 Fletcher
Cyclopedia of the Law of Corporations §4187 (September 2012) (arbitration provisions
for resolution of disputes between members and corporation frequently included in
bylaws).
511) W. Callison & M. Sullivan, Partnership Law and Practice: General and Limited
Partnerships §13:5 (2006) (“a partnership agreement can contain an arbitration clause
through which a partner can compel his or her co-partners to submit disputes arising
from the partnership relation to arbitration”); 19 Fletcher Cyclopedia Corporations
§§3:20, 5:16 (2007).
512) See§6.04[K]; Revised Uniform Arbitration Act, §6, comment 1 (2000); German ZPO,
§1066 (arbitration statute applies mutatis mutandi to arbitral tribunals “lawfully
established on the basis of…other dispositions than an agreement”); Nova (Jersey) Knit
Ltd v. Kammgam Spinnerei GmbH [1976] 2 Lloyd’s Rep. 155 (English Ct. App.), rev’d,
[1977] 1 Lloyd’s Rep. 463 (House of Lords) (accepting validity of arbitration clause in
German partnership agreement); L. Edmonson (ed.), Domke on Commercial Arbitration
§16.17 (3d ed. & Update 2013) (U.S. courts generally enforce arbitration provisions in
partnership agreements); Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate
and Their Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423 (2002); 8
Fletcher Cyclopedia Corporations §4187 (2007) (corporate bylaws containing
arbitration provisions generally upheld by U.S. courts). See also Powell Duffryn plc v.
Wolfgang Petereit, [1992] Case No. C-214/89 (E.C.J.) (jurisdiction clause in company’s
articles of association is binding on shareholders). Compare Russian Commercial
Arbitrazh Procedure Code, Arts. 33(1)(2), 225(1); C. Liebscher & A. Fremuth-Wolf,
Arbitration Law and Practice in Central and Eastern Europe RUS-63 (2011).
513) See§2.01[A]; §5.01[B].
84
514) Final Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26 (2004); Nova (Jersey) Knit Ltd
v. Kamgarn Spinnerei GmbH [1977] 1 Lloyd’s Rep. 463 (House of Lords) (arbitration
clause in partnership agreement applies to new partner); Hanotiau, Problems Raised
by Complex Arbitrations Involving Multiple Contracts-Parties-Issues – An Analysis, 18 J.
Int’l Arb. 253, 257 (2001) (“Persons other than the formal signatories may be parties to
the arbitration agreement…because they are…members with the signatories of a
general partnership or a community of rights and duties”); Müller & Keilmann,
Beteiligung am Schiedsverfahren wider Willen?, 2007 SchiedsVZ 113, 115; Sandrock,
Signatories Under German Law, 19 J. Int’l Arb. 423, 428 (2002) (“[T]he arbitration
agreement automatically travels with the partnership contract. It is regarded as an
accessory and incidental right of the general partner and therefore binds all new
general partners, irrespective of whether they have attached their signature to the
arbitration agreement or not.”).
515) Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their Extension to
Non-Signatories Under German Law, 19 J. Int’l Arb. 423 (2002). German courts have
recognized the application of an arbitration clause to the (general) partners of the
partnership that signed it. See Judgment of 12 November 1990, 1991 NJW-RR 423, 424
(German Bundesgerichtshof).
516) Judgment of 28 May 1979, 1979 NJW 2567 (German Bundesgerichtshof); Judgment of 2
March 1978, 1978 NJW 1585 (German Bundesgerichtshof); Judgment of 25 October 1962,
1963 NJW 203, 204 (German Bundesgerichtshof); Geimer, in R. Zöller (ed.),
Zivilprozessordnung §1066, ¶9 (30th ed. 2013); Sandrock, “Intra” and “Extra-Entity”
Agreements to Arbitrate and Their Extension to Non-Signatories Under German Law, 19 J.
Int’l Arb. 423, 432-34 (2002).
517) Judgment of 2 October 1997, 1998 NJW 371 (German Bundesgerichtshof); Diwan v. EMP
Global LLC, 2012 WL 252430 (D.D.C.) (under Delaware law, which governed LLC
agreement, members of an LLC are bound by terms of LLC agreement and its
arbitration clause); Judgment of 8 December 2009, Benladen v. SARL Mohammed
Benladen, 2(2) Int’l J. Arab Arb. 235 (Paris Cour d’appel) (2010) (arbitration agreement
was not manifestly void because, although respondent did not sign arbitration
agreement, she arguably became shareholder in company whose by-laws contained
arbitration agreement); Judgment of 3 May 2007, 2007 DStR 1880 (Oberlandesgericht
Koblenz) (arbitration agreements also apply to shareholders that have sold shares;
dispute between new and old shareholder subject to arbitration agreement);
Judgment of 25 October 2001, 2002 DStR 557 (Bayerisches Oberstes Landgericht). See
alsoSandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their Extension to
Non-Signatories Under German Law, 19 J. Int’l Arb. 423, 436 (2002).
518) See§6.04[K].
519) See Sockol, A Natural Evolution: Compulsory Arbitration of Shareholder Derivative Suits
in Publicly Traded Corporations, 77 Tul. L. Rev. 1095, 1111 (2003).
520) See§6.04[K].
521) See§6.04[K]. See also JSC Surgutneftegaz v. Pres. & Fellows of Harvard College, 2005 WL
1863676, at *4 (S.D.N.Y.) (“The FAA does not carve out disputes relating to the internal
affairs of corporations as an exception to the general enforceability of arbitration
agreements.”).
522) See§6.04[K].
523) See Judgment of 8 December 2009, DFT 136 III 107 (Swiss Federal Tribunal) (refusing to
apply arbitration agreement in company’s articles of association to statutory claim
by creditor against board members of insolvent company; although any amounts
awarded against board members would be paid to company, claim was that of
creditors, who were not bound by arbitration agreement).
85
524) For commentary, see Baker, Class Arbitration in the United States: What Foreign
Counsel Should Know, 1 Disp. Res. Int’l 4 (2007); Buckner, Due Process in Class
Arbitration, 58 Fla. L. Rev. 185 (2006); Dunin-Wasowicz, Collective Redress in
International Arbitration: An American Idea, A European Concept?, 22 Am. Rev. Int’l Arb.
285 (2011); L. Edmonson (ed.), Domke on Commercial Arbitration §32.3 (3d ed. &
Update 2013); Glover, Beyond Unconscionability: Class Action Waivers and Mandatory
Arbitration Agreements, 59 Vand. L. Rev. 1735 (2006); Hagans & J. Rustay, Class Actions
in Arbitration, 25 Rev. Litg. 293 (2006); B. Hanotiau, Complex Arbitrations ¶557 (2005);
Hanotiau, A New Development in Complex Multiparty-Multicontract Proceedings:
Classwide Arbitration, 20 Arb. Int’l 39 (2004); Kaplinsky, Arbitrations and Class Actions: A
Contradiction in Terms 7 1302 PLI/Corp. (2002); Lacovara, Class Action Arbitrations – The
Challenge for the Business Community, 24 Arb. Int’l 541 (2008); Nater-Bass, Class Action
Arbitration: A New Challenge?, 27(4) ASA Bull. 671 (2009); T. Oehmke, Commercial
Arbitration Chp. 16 (2003 & Update 2013); Smit, Class Actions in Arbitration, 14 Am. Rev.
Int’l Arb. 175 (2003); Smit, Class Actions and Their Waiver in Arbitration, 15 Am. Rev. Int’l
Arb. 199 (2004); Stipanowich, The Third Arbitration Trilogy: Stolt-Nielsen, Rent-A-
Center, Concepcion and the Future of American Arbitration, 22 Am. Rev. Int’l Arb. 323
(2011); Strong, From Class to Collective: The De-Americanization of Class Arbitration, 26
Arb. Int’l 493 (2010); Strong, Class Arbitration Outside the United States: Reading the Tea
Leaves, in ICC, Arbitration and Multiparty Contracts 183 (2010); Strong, Enforcing Class
Arbitration in the International Sphere: Due Process and Public Policy Concerns, 30 U.
Pa. J. Int’l L. 1, 36-37 (2008); Strong, The Sounds of Silence: Are U.S. Arbitrator Creating
Internationally Enforceable Awards in Cases of Contractual Silence or Ambiguity, 30
Mich. J. Int’l L. 1017 (2009); Tuchmann, The Administration of Class Action Arbitrations, in
PCA, Multiple Party Actions in International Arbitration 337 (2009).
525) See generally Bourdeau et al., Class Actions, 32B Am. Jur. 2d Fed. Cts. §§1578 et seq.
(2013) (“The Federal Rules of Civil Procedure governing class actions lists four
prerequisites to the certification of a class and the maintenance of a class action.
Under Rule 23, the listed prerequisites are: (1) that the members of the class are so
numerous that the joinder of all class members is impractical, (2) that there are
questions of law or fact common to the class, (3) that the claims or defenses of the
representative parties are typical of the claims or defenses of the class, and (4) that
the representative parties will fairly and adequately protect the interests of the
class. In addition to the four listed prerequisites, it is generally accepted that Rule 23
includes two additional requirements by implication, namely that a class must exist
and that the representative parties must be members of such class.”); H. Newberg &
A. Conte, Newberg on Class Actions §§1:1, 1:5 (5th ed. 2012); Pinna, Multinational
Corporations and U.S. Class Action Procedures (Les Groupes Internationaux de Sociétés
Face aux Class Actions Américaines), in X. Boucobza & G. Mecarelli (eds.), Groupes
internationaux de sociétés: nouveaux défis, nouveaux dangers (2007).
526) See, e.g., Robertson v. Thomson Corp., [2006] CarswellOnt 6182 (Canadian S.Ct.);
Garland v. Consumers’ Gas Co., [2004] CarswellOnt 1558 (Canadian S.Ct.) (class action
on behalf of more than 500,000 customers of gas company); Andersen v. St. Jude Med.,
Inc., [2012] ONSC 3660 (Ontario Super. Ct.). See also Murphy v. Amway Canada Corp.,
[2013] FCA 38 (Canadian Fed. Ct. App.); Young v. Dollar Fin. Group Inc., [2012] ABQB 601
(Alberta Q.B.); Crooks v. CIBC World Mkts Inc., [2011] NSSC 181 (Nova Scotia S.Ct.)
(granting certification); Winterford v. Pfizer Australia Pty Ltd, [2012] FCA 1199 (Australian
Fed. Ct.). See also Andrews, Multi-Party Proceedings in England: Representative and
Group Actions, 11 Duke J. Comp & Int’l L. 249 (2001).
527) Vernon v. Drexel Burnham & Co. Inc., 52 Cal.App.3d 706, 716 (Cal. Ct. App. 1975).
528) Vernon, 52 Cal.App.3d at 716. At the same time, Georgia state courts first allowed and
then rejected class arbitration of taxpayers’ claims against a board of tax assessors.
See Boynton v. Carswell, 238 Ga. 417 (1977); Callaway v. Carswell, 240 Ga. 579, 582 (1978);
N.W. Civic Ass’n, Inc. v. Cates, 241 Ga. 39 (1978).
529) Keating v. Super. Ct., 167 Cal.Rptr. 481, 490 (Cal. Ct. App. 1980), aff’d, 31 Cal.3d 584, 610-
12 (Cal. S.Ct. 1982). The franchisees’ argument that their state law statutory claims
against the franchisor were nonarbitrable was rejected by the U.S. Supreme Court in a
classic decision regarding nonarbitrability under the domestic FAA. See Southland
Corp. v. Keating, 465 U.S. 1, 10 (U.S. S.Ct. 1984); §6.04[P].
530) Keating, 167 Cal.Rptr. at 490.
531) Keating, 31 Cal.3d 584, 610. The California Court of Appeals had reached the same
conclusion. Southland Corp., 167 Cal.Rptr. at 490 (“[T]here is no insurmountable
obstacle to conducting an arbitration on a class-wide basis. In an appropriate case, it
would undoubtedly be the fairest and most efficient way of resolving the parties’
dispute.”).
532) Keating, 31 Cal.3d at 610.
86
533) See, e.g., Garcia v. Directv, 2002 WL 31769224, at *4 (Cal. Ct. App.); Sanders v. Kinko’s,
Inc., 99 Cal.App.4th 1106, 1113-14 (Cal. Ct. App. 2002); Lewis v. Prudential-Bache Sec.,
Inc., 179 Cal.App.3d 935, 946 (Cal. Ct. App. 1986); Izzi v. Mesquite Country Club, 86
Cal.App.3d 1309, 1323 (Cal. Ct. App. 1986); Anesthesia Care Assocs. Med. Group, Inc. v.
Blue Cross of Cal., 2002 WL 484662, at *7 (Cal. Sup.).
State courts in Pennsylvania and South Carolina followed the California state courts’
approach. See Green Tree Fin. Corp. v. Bazzle, 569 S.E.2d 349 (S.C. 2002); Dickler v.
Hearson Lehman Hutton, Inc., 408 Pa.Super. 286 (Pa. Sup. Ct. 1986).
534) See Med Ctr Cars, Inc. v. Smith, 727 So.2d 9 (Ala. 1998); Stein v. Geonerco, Inc., 105
Wash.App. 41 (Wash. Ct. App. 2001); Steinberg v. Prudential-Bache Sec., Inc., 12 Del. J.
Corp. 371, 380 (Del. Ch. 1986) (ordering class arbitration was impermissibly “rewriting
the contract”).
535) See, e.g., Gammaro v. Thorp Consumer Discount Co., 828 F.Supp. 673, 674 (D. Minn. 1993)
(court had no authority to order class arbitration because it had to “give effect to the
agreement of the parties, and this arbitration agreement makes no provision for class
treatment of disputes”).
536) Champ v. Siegel Trading Co.,55 F.3d 269, 275 (7th Cir. 1995). See also McCarthy v.
Providential Corp., 122 F.3d 1242, 1246 (9th Cir. 1997); Bischoff v. Directv, Inc., 180
F.Supp.2d 1097, 1109 (C.D. Cal. 2002); Gray v. Conseco, Inc., 2001 WL 1081347, at *3 (C.D.
Cal.).
537) Mogilnicki & Thompson, Current Issues in Consumer Arbitration, 60 Bus. Law. 785, 791
(2005) (“mythical beast: half litigation, half arbitration and rarely seen”).
538) Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (U.S. S.Ct. 2003). See also T. Oehmke,
Commercial Arbitration §16:4 (2003 & Update 2013); Pierce, Down the Rabbit Hole: Who
Decides What’s Arbitrable?, 21 J. Int’l Arb. 289 (2004).
539) Bazzle v. Green Tree Fin. Corp., 351 S.C. 244, 266 (S.C. 2002). See also Ibid. (“If we
enforced a mandatory, adhesive arbitration clause, but prohibited class actions in
arbitration where the agreement is silent, the drafting party could effectively prevent
class actions against it without having to say it was doing so in the agreement.…Under
those circumstances, parties with nominal claims, but significant collective claims,
would be left with no avenue for relief and the drafting party with no check on its
abuses of the law. Further, hearing such claims (involving identical issues against one
defendant) individually, in court or before an arbitrator, does not serve the interest
of judicial economy.”).
540) Green Tree, 539 U.S. at 447.
541) Green Tree, 539 U.S. at 447.
542) Green Tree, 539 U.S. at 453. The allocation of jurisdictional competence between
arbitral tribunals and courts under the FAA is discussed above. See§7.03.
543) Green Tree, 539 U.S. at 453.
544) Technically, the Bazzle plurality did not reach the question of whether the FAA
permits class arbitration where an arbitration agreement is silent. Conceivably, on
remand, an arbitrator could have found the arbitration agreement silent on the issue
and ordered class arbitration, only for a court, in a subsequent action to vacate, to
hold that class arbitration was impermissible under the FAA. Under the plurality’s
analysis, however, that result appeared very unlikely: having categorized the question
of class arbitration as a matter of contract interpretation and arbitration procedures,
not a gateway issue of arbitrability, the plurality strongly suggested that decisions on
these questions by arbitral tribunals would be subject only to the very limited
judicial review generally available for such issues. That is also the result mandated
by prior (and later) U.S. decisions regarding the allocation of jurisdictional
competence. See§7.03[E][2]; First Options, 514 U.S. at 942-43; Burlington N. & Santa Fe
Railway. Co. v. Pub. Serv. Co. of Okla., 636 F.3d 562, 567-68 (10th Cir. 2010); Nat’l Postal
Mail Handlers Union v. Am. Postal Workers Union, 589 F.3d 437, 441-42 (D.C. Cir. 2009).
545) Green Tree, 539 U.S. at 455 (Stevens, J. concurring in the judgment and dissenting in
part).
546) Green Tree, 539 U.S. at 455.
547) Green Tree, 539 U.S. at 454-55. Chief Justice Rehnquist’s dissent disagreed with the
plurality as to who should decide whether the parties’ arbitration clause permitted
class arbitration, opining that “the determination is one for the courts, not [the]
arbitrator.” Green Tree, 539 U.S. at 455 (Rehnquist, C.J., dissenting). Justice Rehnquist
also disagreed with Justice Steven’s concurrence, going on to conclude that “the
holding of the Supreme Court of South Carolina contravenes the terms of the
contracts and is therefore pre-empted by the FAA.” Ibid. On his reading, the
arbitration agreements at issue permitted parties to choose an arbitrator for each
individual contract and set of claims, a requirement that would be contravened by a
single arbitrator hearing all claims by all class members in a single arbitration.
548) As of December 2011, the AAA reported over 300 pending class arbitrations and had
administered 344 class action arbitrations as of December 2009. Seewww.adr.org.
549) JAMS reported over 20 consumer arbitrations that have proceeded on a class-wide
basis. Seewww.jamsadr.com.
87
550) In its policy on class arbitrations, the AAA explained its reasons for adopting class
arbitration rules as follows: “On October 8, 2003, in response to the ruling of the
United States Supreme Court in Green Tree Financial Corp. v. Bazzle, the American
Arbitration Association issued its Supplementary Rules for Class Arbitrations to
govern proceedings brought as class arbitrations. In Bazzle, the Court held that, where
an arbitration agreement was silent regarding the availability of class-wide relief, an
arbitrator, and not a court, must decide whether class relief is permitted.
Accordingly, the American Arbitration Association will administer demands for class
arbitration pursuant to its Supplementary Rules for Class Arbitrations if (1) the
underlying agreement specifies that disputes arising out of the parties’ agreement
shall be resolved in accordance with the Association’s rules, and (2) the agreement is
silent with respect to class claims, consolidation or joinder of claims.” See AAA, Policy
On Class Arbitrations, available at www.adr.org. See also Mogilnicki & Thompson,
Current Issues in Consumer Arbitration, 60 Bus. Law. 785, 792 (2005); Strong, Enforcing
Class Arbitration in the International Sphere: Due Process and Public Policy Concerns, 30
U. Pa. J. Int’l L. 1, 36-37 (2008).
551) See, e.g., Johnson v. Morton’s Rest. Group, Inc., Clause Constr. Award 2006 in AAA Case
No. 11 160 01513; Molfetas v. Stainsafe Inc., Clause Constr. Award 2006 in AAA Case No. 11
181 00300 06, AAA Clause Construction Awards available at www.adr.org/sp.asp?
id=25562. See also Jones v. Chubb Inst., 2007 U.S. Dist. LEXIS 72606, at *9-11 (D.N.J.);
Cheng v. Oxford Health Plans, Inc., 45 A.D.3d 356, 357 (N.Y. App. Div. 2007).
552) See, e.g., Tomeldon Co. v. Medco Health Solutions Inc., Clause Construction Award in
AAA Case No. 11 193 00546 06; Jost v. Sizzler USA Rests., Inc., Clause Construction Award
2006 in AAA Case No. 11 160 01721 05; Anderson v. Check ‘N Go of Cal., Inc., Clause
Construction Award 2005 in AAA Case No. 11 160 03021 04. AAA Clause Construction
Awards available at www.adr.org/sp.asp?id=25562. See also Oxford Health Plans LLC v.
Sutter, 133 S. Ct. 2064 (U.S. S.Ct. 2013).
553) Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir. 2007).
554) Discover Bank v. Super. Ct. of Los Angeles, 36 Cal.4th 148, 163-64 (Cal. Ct. App. 2005).
555) Discover Bank, 36 Cal.4th at 156. The court also reasoned that contractual waivers of
class actions allow wrongdoers to retain the benefits of their misdeeds. Id. at 157.
556) Discover Bank, 36 Cal.4th at 162-63.
557) Perry v. Thomas, 482 U.S. 483 (U.S. S.Ct. 1987).
558) Perry, 482 U.S. at 484, 491.
559) Discover Bank, 36 Cal.4th at 165 (quoting Perry, 482 U.S. at 493 n.9).
561) See, e.g., Omstead v. Dell, Inc., 594 F.3d 1081, 1086 (9th Cir. 2010); Lowden v. T-Mobile
USA Inc., 512 F.3d 1213, 1215 (9th Cir. 2008) (holding class action waiver unconscionable
under Washington law); Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 981
(9th Cir. 2007); Dale, 498 F.3d 1216 (class action waiver unconscionable because cost of
bringing individual claim was excessive when measured against potential recovery);
Luna v. Household Fin. Corp., III, 236 F.Supp.2d 1166, 1178-83 (W.D. Wash. 2002) (class-
action prohibition in arbitration clause “is likely to bar actions involving practices
applicable to all potential class members, but for which an individual consumer has
so little at stake that she is unlikely to pursue her claim” and finding prohibition on
class action was “used as a sword to strike down access to justice instead of a shield
against prohibitive costs”); Leonard v. Terminix Int’l Co., 854 So.2d 529, 539 (Ala. 2002)
(arbitration agreement substantively “unconscionable because it is a contract of
adhesion that restricts the [plaintiffs] to a forum wherein the expense of pursuing
their claim far exceeds the amount in controversy…by foreclosing the [plaintiffs] from
an attempt to seek practical redress through a class action and restricting them to a
disproportionately expensive individual arbitration”); Dunlap v. Berger, 567 S.E.2d 265
(W. Va. 2002); Eagle v. Fred Martin Motor Co., 809 N.E.2d 1161 (Ohio Ct. App. 2004);
Powertel, Inc. v. Bexley, 743 So.2d 570, 575-76 (Fla. Ct. App. 1999). For commentary, see
Aksen, Class Actions in Arbitration and Enforcement Issues: An Arbitrator’s Point of View,
in B. Hanotiau & E. Schwartz (eds.), Multiparty Arbitration 215 (2010); Carbonneau,
Liberal Rules of Arbitrability and the Autonomy of Labor Arbitration in the United States,
in L. Mistelis & S. Brekoulakis (eds.), Arbitrability: International and Comparative
Perspectives 151 (2009); Glover, Beyond Unconscionability: Class Action Waivers and
Mandatory Arbitration Agreements, 59 Vand. L. Rev. 1735 (2006).
562) See, e.g., Kristian v. Comcast Corp., 446 F.3d 25, 63-64 (1st Cir. 2006) (permitting class
arbitration of antitrust claims to proceed by severing class arbitration waivers from
arbitration agreements); Skirchak v. Dynamics Research Corp., Inc., 432 F.Supp.2d 175
(D. Mass. 2006); Discover Bank v. Super. Ct., 113 P.3d 1100, 1115 (Cal. S.Ct. 2005); Szetela
v. Discover Bank, 97 Cal.App.4th 1094 (Cal. Ct. App. 2002).
563) See, e.g., Omstead v. Dell, Inc., 594 F.3d 1081, 1086 (9th Cir. 2010) (unconscionable class
action waiver cannot be severed because it is “central” to arbitration provision);
Shroyer, 498 F.3d 976; Dale, 498 F.3d 1216; D’Antuono v. Serv. Road Corp., 789 F.Supp.2d
308 (D. Conn. 2011) (if class action wavier were found unenforceable, it would require
invalidating entire arbitration agreement, whereas other unenforceable provisions
may simply be severed, leaving arbitration agreement intact); Creighton v.
Blockbuster Inc., 2007 WL 1560626 (D. Or.); Murphy v. Check ‘N Go of Cal., Inc., 2007 WL
3016414 (Cal. Ct. App.).
88
564) See, e.g., Green Tree, 539 U.S. at 447; Pedcor Mgt Co., Welfare Benefit Plan v. Nations
Personnel of Texas, Inc., 343 F.3d 355, 357 (5th Cir. 2003); Sprague v. Quality Rests. N.W.,
Inc., 162 P.3d 331 (Or. App. 2007).
565) See, e.g., Jenkins v. First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 877 (11th Cir. 2005)
(arbitration agreements precluding class action relief are valid and enforceable);
Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir. 2003) (“The Arbitration
Agreement at issue here explicitly precludes the [borrowers] from bringing class
claims or pursuing ‘class action arbitration,’ so we are therefore ‘obliged to enforce
the type of arbitration to which these parties agreed, which does not include
arbitration on a class basis.’”); Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 638
(4th Cir. 2002) (rejecting borrower’s argument “that the Arbitration Agreement is
unenforceable as unconscionable because without the class action vehicle, she will
be unable to maintain her legal representation given the small amount of her
individual damages”); Randolph v. Green Tree Fin. Corp.-Alabama, 244 F.3d 814, 819
(11th Cir. 2001); Johnson v. W. Suburban Bank, 225 F.3d 366, 369 (3d Cir. 2000)
(arbitration “clauses are effective even though they may render class actions to
pursue statutory claims under the TILA or the EFTA unavailable”); Clerk v. ACE Cash
Express Inc., 2010 WL 364450, at *15 (E.D. Pa.) (opt-out provision).
566) Lloyd v. MBNA Am. Bank, NA, 27 F.Appx. 82, 84 (3d Cir. 2002).
567) Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (U.S. S.Ct. 2010).
568) AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (U.S. S.Ct. 2011).
569) Oxford Health Plans, 133 S.Ct. at 2069-70.
570) Stolt-Nielsen, 130 S.Ct. at 1765.
574) Stolt-Nielsen, 130 S.Ct. at 1769. Justice Alito’s passing suggestion that an arbitral
tribunal does not have the authority of a “common law court” to develop “the best
rule” applicable to interpretation of the parties’ arbitration agreement or to “make
public policy” is ill-considered. Arbitral tribunals in the United States and elsewhere
do, of course, function with at least the authority of “common law courts” to interpret
agreements, identify both the applicable and “best rule” and “public policy” and
then apply that rule or public policy to the evidence. That is illustrated most clearly
by the extensive U.S. authority recognizing the capacity of U.S. courts to apply
antitrust, securities and other statutory claims, as well as other mandatory laws and
public policies. See§6.04[A][1] (antitrust); §6.04[B][1] (securities); §6.04[D]
(intellectual property rights). The suggestion that arbitrators cannot either identify or
apply the “best rule” of law or contractual interpretation is retrograde and contrary
to well-established authority from U.S. and other courts.
577) Stolt-Nielsen, 130 S.Ct. at 1776 (emphasis in original). The Court, arguably, left the door
open for arbitrators to find implicit consent to class arbitration if an applicable rule
of law “contains a ‘default rule’ under which an arbitration clause is construed as
allowing class arbitration in the absence of express consent.” Id. at 1768-69.
578) See Stolt-Nielsen, 130 S.Ct. at 1776 n.10. The Court left open the question of what
contractual basis might support a finding that the parties did agree to authorize
class-action arbitration.
579) See§25.04[F][3][j].
582) Concepcion, 131 S.Ct. 1740.
583) Concepcion, 131 S.Ct. at 1744. In addition, the arbitration clause provided (if any
doubt remained) that “the arbitrator may not consolidate more than one person’s
claims, and may not otherwise preside over any form of a representative or class
proceeding.” Id. at 1744 n.2.
584) Concepcion, 131 S.Ct. at 1745. The lower courts were unmoved by the relatively
“consumer-friendly” aspects of the arbitration agreement at issue in AT&T’s cell
phone contracts. Among other things, the agreement provided for arbitration in a
convenient situs (where the consumer is billed); arbitration in person, by telephone
or online, at the consumer’s choice, for amounts less than $10,000; the availability of
injunctive relief and punitive damages; no right by AT&T to claim attorneys’ fees; and
an option to choose small claims court (rather than arbitration).
585) The Concepcion opinion was joined by five Justices. The fifth vote was provided,
however, by Justice Thomas, who also concurred. Justice Thomas would have reversed
the Ninth Circuit not because class wide arbitration is contrary to the “fundamental”
character of arbitration, but rather because under his reading of the FAA, an
agreement to arbitrate must be enforced “unless a party successfully challenges the
formation of the arbitration agreement.” Concepcion, 131 S.Ct. at 1753 (Thomas, J.
concurring).
586) Concepcion, 131 S.Ct. at 1749.
89
587) Concepcion, 131 S.Ct. at 1751 (emphasis in original). The Court said that ordering an
arbitration to proceed on a class basis would be as antithetical to arbitration as
ordering parties in an arbitration to incorporate “judicially monitored discovery,” the
Federal Rules of Evidence, or “ultimate disposition by a jury.” Id. at 1747. The Court
also thought that arbitration, because it does not provide for appellate review, is
“poorly suited to the higher stakes of class litigation.” Concepcion, 131 S.Ct. at 1752.
The Court reasoned that “class arbitration greatly increases risk to defendants” by
aggregating claims without providing for appellate review.
588) Concepcion, 131 S.Ct. at 1753. The Court also suggested that the California rule could
result in fewer companies choosing to arbitrate, although the factual support for that
premise is obscure.
590) Concepcion, 131 S.Ct. at 1748 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (U.S. S.Ct.
1941)). Writing for the dissent, Justice Breyer declared that the FAA’s purpose is not “to
guarantee these particular procedural advantages,” but to treat arbitration on equal
footing as other contracts. Id. at 1758 (Breyer, J., dissenting) (citing §2 of FAA). The
dissent reasoned that “California is free to define unconscionability as it sees fit,” and
as long as it “applies the same legal principles to address the unconscionability of
class arbitration waivers as it does to address the unconscionability of any other
contractual provision, the merits of class proceedings should not factor into our
decision.” Id. at 1760.
592) Volt Info. Sciences, Inc. v. Bd of Trustees of Stanford Univ., 489 U.S. 468, 478 (U.S. S.Ct.
1989).
593) Where parties agree to class arbitration, Justice Scalia’s suggestion that this “is not
arbitration” – because class arbitration is not informal, not bipartite and involves
large stakes – is simply wrong. In fact, contrary to the Court’s supposed archetype of
the arbitral process, arbitration has historically taken widely varying forms, in widely
varying settings – as discussed above, ranging from institutional to ad hoc arbitration;
from trade, commercial, religious, community, and international to investor-state
arbitration; and from documents only, online, or quality arbitrations to arbitrations
resembling trial court litigations. See§1.01[B][1] (religious arbitration in antiquity);
§1.01[B][7][b] (community arbitration); §1.04[A][6] (investor-state arbitration); §1.04[C]
[2] (ad hoc arbitration); §2.02[C][2][g] (trade group arbitration); §2.02[C][2][d] (quality
arbitration); §2.02[C][2][i] (arbitrations resembling trials). Likewise, again contrary to
Justice Scalia’s analysis, arbitration has historically encompassed a vast range of
different procedures, depending on the parties’ particular objectives and interests –
very often including formal, multi-party and high stakes dispute resolution
proceedings.
594) See§6.04[D].
595) See, e.g., 2010 IBA Rules on the Taking of Evidence, Art. 8 (witness may appear at
evidentiary hearing by videoconference).
596) Indeed, the bipartite arbitration agreement at issue in Concepcion, which Justice
Scalia sought to protect as an archetypal arbitration clause, contained an elaborate,
very formal procedural regime that provided for online or telephonic consumer
arbitration of cell phone disputes involving multiple statutory claims. Concepcion, 131
S.Ct. at 1744 (“The revised agreement provides that customers may initiate dispute
proceedings by completing a one-page Notice of Dispute form available on AT&T’s
Web site. AT&T may then offer to settle the claim; if it does not, or if the dispute is not
resolved within 30 days, the customer may invoke arbitration by filing a separate
Demand for Arbitration, also available on AT&T’s Web site. In the event the parties
proceed to arbitration, the agreement specifies that AT&T must pay all costs for
nonfrivolous claims; that arbitration must take place in the county in which the
customer is billed; that, for claims of $10,000 or less, the customer may choose
whether the arbitration proceeds in person, by telephone, or based only on
submissions; that either party may bring a claim in small claims court in lieu of
arbitration; and that the arbitrator may award any form of individual relief, including
injunctions and presumably punitive damages. The agreement, moreover, denies
AT&T any ability to seek reimbursement of its attorney’s fees, and, in the event that a
customer receives an arbitration award greater than AT&T’s last written settlement
offer, requires AT&T to pay a $7,500 minimum recovery and twice the amount of the
claimant’s attorney’s fees.”).
597) U.S. FAA, 9 U.S.C. §2 (emphasis added).
598) Discover Bank v. Super. Ct. of Los Angeles, 36 Cal.4th 148, 162-63 (Cal. Ct. App. 2005).
90
600) Concepcion, 131 S.Ct. at 1756-57. Justice Breyer’s dissent was also wrong to rely on the
fact that the Discover Bank rule applied to only some class action waivers. The
essential point is that the Discover Bank rule invalidated the provisions of arbitration
agreements that are plainly subject to the FAA. The fact that the rule might have
invalidated a broader range of class action waivers does nothing to alter its effects on
those waivers to which it applies. A state law rule providing for the invalidity of any
agreement to arbitrate state securities law claims in excess of $50,000 would be
preempted no less than a rule invalidating all such arbitration agreements. A state
law rule requiring that arbitration clauses in all real estate or all distribution
agreements be in capital letters or be reaffirmed after a dispute arises would be
preempted no less than a rule imposing such requirements on all arbitration
agreements.
601) As discussed above, Stolt-Nielsen required an affirmative, and likely express,
agreement providing for class arbitration before permitting class arbitration to be
compelled. See§7.03[E][2][d]. It is clear that provisions like the AT&T arbitration
agreement do not – even after invalidating their class action waivers – provide
affirmatively for class arbitration. Thus, after Stolt-Nielsen, when a class action waiver
was invalidated under the Discover Bank rule, the only available remedy would be to
order class litigation. See, e.g., Fensterstock v. Educ. Fin. Partners, 611 F.3d 124, 140-41
(2d Cir. 2010); Ruhl v. Lee’s Summit Honda, 322 S.W.3d 136 (Mo. 2010); Rau, Power and
the Limits of Contract: The New Trilogy, 22 Am. Rev. Int’l Arb. 435 (2011).
602) Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064, 2069-70 (U.S. S.Ct. 2013).
603) Oxford Health Plans, 133 S.Ct. at 2068 (“A party seeking relief under that provision
[§10(a)(4)] bears a heavy burden.”; “Under the FAA, courts may vacate an arbitrator’s
decision ‘only in very unusual circumstances.’”) (quoting First Options of Chicago, Inc.
v. Kaplan, 514 U.S. 938, 942 (U.S. S.Ct. 1995)).
604) Oxford Health Plans, 133 S.Ct. at 2070.
608) Compare Cent. W. Virginia Energy, Inc. v. Bayer Cropscience LP, 645 F.3d 267, 275 n.7 (4th
Cir. 2011) (question whether parties had decided to arbitrate “at all” is for courts to
decide) with Mork v. Loram Maintenance of Way, Inc., 2012 WL 38628, at *2 (D. Minn.)
(“Without clear guidance from the Supreme Court, the Court is left with Eighth Circuit
precedent which indicates that it is appropriate for the Court, not an arbitrator, to
resolve [the class arbitration] question.”) and Guida v. Home Sav. of Am., Inc., 793
F.Supp.2d 611, 616 (E.D.N.Y. 2011) (following plurality in Bazzle: “ability of a class to
arbitrate a dispute where the parties contest whether the agreement to arbitrate is
silent or ambiguous on the issue is a procedural question that is for the arbitrator to
decide”) and Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir. 2011) (no excess of
authority where award permitted class arbitration) and S. Commc’ns Servs., Inc. v.
Thomas, 829 F.Supp.2d 1324 (N.D. Ga. 2011) (no excess of authority where award
permitted class arbitration).
609) B. Hanotiau, Complex Arbitrations ¶¶557-613 (2005); Marseille, Arbitration and Class
Actions in Canada: Where Do We Stand?, 28(2) Class Action Rep. 5 (April 2007); Strong,
Resolving Mass Legal Disputes Through Class Arbitration: The United States and Canada
Compared, 37 N.C. J. Int’l L. & Comm. Reg. 921, 972-75.
610) See, e.g., Seidel v. Telus Commc’ns, Inc., [2011] SCC 15, 33-42 (Canadian S.Ct.) (class
action legislation barred arbitration of claims arising under British Columbian
statute); Dell Computer Corp. v. Union des consommateurs, [2007] SCC 34, 87 (Canadian
S.Ct.); Griffin v. Dell Canada Inc., [2010] ONCA 29 (Ontario Ct. App.) (applying Ontario
Consumer Protection Act, 2002, to deny enforcement of arbitration clauses (which
included class action waivers) in consumer contracts). See also Strong, Resolving Mass
Legal Disputes Through Class Arbitration: The United States and Canada Compared, 37
N.C. J. Int’l L. & Comm. Reg. 921 (2012); Murphy v. Amway Canada Corp. [2013] FCA 38
(Canadian Fed. Ct. App.) (dismissing appeal and referring, parties to arbitration
holding as follows: “The Supreme Court has made it clear that express legislative
language in a statute is required before the courts will refuse to give effect to the
terms of an arbitration agreement. In that regard, the Competition Act does not
contain language which would indicate that Parliament intended that arbitration
clauses be restricted or prohibited. More particularly, there is no language in the
Competition Act that would prohibit class action waivers so as to prevent the
determination of a claim by way of arbitration.”); Young v. Dollar Fin. Group Inc., [2012]
ABQB 601 (Alberta Q.B.) (dismissing application for stay based on arbitration clause
that joinder or consolidation of claims was prohibited).
611) Griffin v. Dell Canada Inc., [2010] ONCA 29, ¶30 (Ontario Ct. App.).
91
612) It is difficult to see what public policy or nonarbitrability objections could be raised
to class arbitrations. The fact that class actions are not recognized or available in
many national litigation systems should not preclude the use of class action
arbitrations (just as the unavailability of documents only, fast-track, or similar
dispute resolution mechanisms in litigation does not invalidate arbitration
agreements requiring such procedures). There may be requirements regarding
procedural regularity and an opportunity to be heard, imposed by national law, but
these would involve the implementation of the class action arbitration, not its basic
enforceability.
613) Sherwyn, Tracey & Eigent, In Defense of Mandatory Arbitration of Employment Disputes:
Saving the Baby, Tossing Out the Bath Water, and Constructing A New Sink in the
Process, 2 U. Pa. J. Lab. & Emp. L. 73 (1999); Craver, The Use of Non-Judicial Procedures
to Resolve Employment Discrimination Claims, 11 Kan. J. L. & Pub. Pol’y 141 (2001) (“Fair
arbitral procedures can provide a more expeditious and less expensive alternative
that may benefit workers more than judicial proceedings”); Ware, Paying the Price of
Process: Judicial Regulation of Consumer Arbitration Agreements, 2001 J. Disp. Res. 89.
92
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[B] Signatories and Non-Signatories to Arbitration Agreement

[C] Absence of Legislative Provisions Regarding Non-Signatory Issues

[D] Generally-Applicable Rules of Contract Law

[E] Application of Legal Bases for Subjecting Non-Signatories to Arbitration

[F] Distinction Between Jurisdiction and Substantive Liability

§ 10.02 LEGAL BASES FOR BINDING NON-SIGNATORIES TO INTERNATIONAL

[B] Apparent or Ostensible Authority

[C] Implied Consent

[D] Alter Ego and Veil-Piercing (134)

[E] ”Group of Companies” Doctrine (210)

[G] Guarantors (287)

[H] Succession (307)

[I] Assignment and Other Transfers of Contractual Rights (323)

[K] Estoppel and Related Doctrines (357)

[M] Corporate Officers and Directors

[N] Shareholder Derivative Rights

[O] Joint Venture Relations

[P] State Non-Signatories (408)

§ 10.03 FUTURE DIRECTIONS: LEGAL BASES FOR BINDING NON-

§ 10.04 FORMAL VALIDITY AND NON-SIGNATORIES

§ 10.05 CHOICE OF LAW GOVERNING PARTIES TO ARBITRATION

[A] Application of International Principles to Non-Signatory Issues

[B] Application of National Law to Non-Signatory Issues

[C] Future Directions: Choice of Law Applicable to Non-Signatory Issues

§ 10.06 ALLOCATION OF COMPETENCE TO DETERMINE PARTIES TO

§ 10.07 ARBITRATION IN CORPORATE AND PARTNERSHIP CONTEXTS (509)

§ 10.08 CLASS ARBITRATIONS (524)

[B] Other Jurisdictions

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