Parties in International Arbitration

KluwerArbitration
Document information Chapter 8: Parties in International Arbitration: Consent v.

Commercial Reality
Publication Stavros Brekoulakis
The Evolution and Future of (*)
International Arbitration
I INTRODUCTION
Bibliographic 8.1 This chapter discusses legal issues associated with third parties in international
commercial arbitration, namely parties that have not signed an arbitration agreement
reference (non-signatories). In spite of the extensive case law and scholarly discourse, (1) the
Stavros Brekoulakis, debate on non-signatories remains largely unsettled, and has become one of the most
'Chapter 8: Parties in pervasive problems in international arbitration.
International Arbitration: 8.2 As is generally accepted, whether a party has the right to participate in an arbitration
Consent v. Commercial is exclusively determined on a contractual basis. (2) Any legal or financial interests that a
Reality', in Stavros party may have in the outcome of an arbitration is in principle irrelevant, unless that
Brekoulakis , Julian D.M. party has previously entered into an arbitration agreement.
Lew , et al. (eds), The
Evolution and Future of 8.3 Its contractual nature makes arbitration a very flexible and indeed popular dispute
International Arbitration, resolution mechanism. This approach is consonant with the historical role of arbitration
International Arbitration too from the Middle Ages and until the beginning of the 20th century, as an informal and
Law Library, Volume 37 P 120 bilateral dispute resolution process, particularly popular in linear bilateral
(© Kluwer Law transactions, such as sales of goods and transport contracts. But oftentimes the
International; Kluwer Law traditional role and bilateral nature of arbitration cannot accommodate modern
International 2016) pp. 119 - international transactions that have become significantly sophisticated requiring the
160 participation of several parties for the delivery of large-scale projects.
8.4 Development in international trade is prominently evident in areas such as
construction contracts, banking and financial transactions, reinsurance contracts, and
transactions with multinational corporations and states operating through state entities
or other emanations of state. How should we deal, for example, with a State which, while
it signs a memorandum of understanding, sets up a Trust to specifically sign the main
contract and the arbitration clause therein? What should happen if the State is clearly
implicated in the performance of the main contract, and the Trust conveniently ceases to
exist by the time a dispute arises? Can the claimant bring the non-signatory State before
a tribunal, or does it have to settle for the rather unappealing prospect of bringing a
claim against the State before the State's own courts? One may suggest that the claimant
in the above scenario should have expressly included the State in the contract, including
the arbitration clause, as a signatory party. But, while this may be a sensible suggestion,
it sounds awfully self-comforting when it is offered with the reassuring benefit of the
hindsight.
8.5 Similarly, multinational groups nowadays adopt new corporate structures, more
sophisticated than the linear parent-subsidiary type of organization. They may take the
form of groups based on contract, or equity-based corporate groups, joint ventures
between independent firms, informal alliances, publicly owned multinationals, and
supranational forms of international business. (3) How should we deal, thus, with a group
of multinational corporations which all play distinct but important roles in the
performance of a contract which only one company of the group has signed, including the
arbitration clause therein?
8.6 Adopting a multi-corporate structure, which divides labour within the group, so that
different companies get involved in different stages of a single contractual transaction
can be a commercially effective model of operation. But does this mean that if one only
member of the group signs a contract, which includes an arbitration clause, all other
members of the same group are excluded from the arbitration proceedings, even if they
are otherwise strongly implicated in that contract?
8.7 The unprecedented scale of sophistication of modern international trade presents
crucial challenges for international arbitration today and tests its traditional role and
bilateral nature to its limits.
8.8 Arbitration doctrine and practice has attempted to respond to these challenges
developing a wide range of theories and legal constructs to address issues of non-
signatory parties. Thus, non-signatories have been allowed or compelled to arbitrate with
signatories on the basis of estoppel, alter ego, apparent authority, transfer and
assignment, and not least on the controversial group of companies' doctrine.
8.9 As is generally accepted, the overarching idea behind all these theories is that a non-
signatory will be bound by an arbitration agreement, which it never signed, if it has
implicitly consented to it by conduct. This idea seems to have offered an ingenious way
for international arbitration to accommodate complex business transaction and keep the
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P 121 proverbially consummated cake (in this case 'consent for arbitration') intact.
8.10 This chapter challenges the prevailing view that non-signatory theories are firmly
based on consent for arbitration. After a detailed discussion of the most important non-
signatory theories in Section I, Section II demonstrates that, often, when a non-signatory
theory is employed to extend the arbitration agreement, we either rely on equitable (i.e.
non-consensual) considerations or we treat consent as a functional legal construct which
is markedly different from the concept of consent that we normally use to test whether
two signatories have agreed to arbitrate. By doing so, we effectively employ the non-
signatory theories as nothing more than legal fictions "so that our square spade can dig a
nice round hole" big enough to accommodate commercial reality and complex disputes
involving both signatory and third parties. (4)
8.11 While these legal fictions have been largely working well with tribunals routinely
accepting jurisdiction over non-signatories, they are associated with a number of issues.
8.12 First, while a number of jurisdictions have been keen to endorse the theory of
implied consent, and the underlying concept of functional consent, others, notably
common law jurisdictions, have consistently opposed to it. English courts for example
have had the opportunity to demonstrate their resounding disagreement with theories of
implied consent on at least two occasions in the recent past, namely in the cases of
Peterson Farms (at the High Court) and Dallah v Government of Pakistan (at the Supreme
Court). (5)
8.13 Second, most of the current non-signatory theories have not been organically
developed for arbitration; rather, they have been broadly borrowed from contract or
corporate law. Arbitration law, however, is not a version of contract or corporate law; it is
an autonomous legal field with a distinct jurisdictional nature and purpose. While the
main question for corporate and contract law is whether a party is substantively liable,
the main question for arbitration law is whether a tribunal has jurisdiction to resolve a
certain dispute. Borrowing legal theories developed to answer the former question, and
employing them to answer the latter question may lead to unintended practical
consequences.
8.14 Third, in a number of non-signatory theories tribunals tend to look for artificial
evidence of consent. Indeed, theories of implied consent or the group of companies'
doctrine have relied upon fact patterns, such as participation in the performance of the
main contract or corporate group structure and corporate control to ascertain consent for
arbitration. However, whether a non-signatory has been partly involved in the
performance of the main contract or whether a non-signatory parent controls a signatory
subsidiary may be relevant for the merits of the dispute, but it cannot be taken as proxy
for consent to arbitration.
8.15 Eventually, the current non-signatory theories have required courts and tribunals to
engage in a complex quest for elusive consent, through fact patterns and presumptions of
consent which compromise basic principles of contract law and have questionable
practical value.
8.16 Thus, one cannot help to wonder whether arbitration practice as well as arbitration
doctrine would not benefit from a more consistent, more inclusive and, eventually,
P 122 intellectually more honest approach to non-signatories.
8.17 Such an approach, which is discussed in Section III, would require us to focus not on
putative consent of non-signatories, but on the scope of the dispute submitted for
arbitration and the scope of the original arbitration clause.
8.18 If a dispute strongly implicates a non-signatory and is covered by a broad
arbitration clause, a tribunal will have jurisdiction to decide this dispute, even if that
means that it has to assume jurisdiction over a party that has not signed the arbitration
clause. The legal concept of "dispute" together with the scope of an arbitration agreement
provides the foundations for the jurisdiction of an arbitral tribunal. An arbitral tribunal
will have no jurisdiction, unless a dispute arises with regard to a contract containing an
arbitration agreement. Thus, without a dispute, an arbitration agreement and, therefore,
the jurisdiction of an arbitral tribunal will remain a "sleeping beauty".
8.19 Whether a certain dispute can ("kiss" and) awaken the jurisdiction of an arbitral
tribunal depends on the scope of an arbitration agreement. A widely drafted arbitration
agreement may allow "any" or "all disputes" "in connection with a contract" to be
determined by an arbitral tribunal. It follows that whether a tribunal has jurisdiction to
determine a dispute involving a non-signatory party will depend on whether the tribunal,
with the power of competence-competence, finds that such a dispute is "connected with
the contract". In many cases, and depending on the factual circumstances, a dispute
involving a non-signatory will not be sufficiently implicated with the dispute submitted
to arbitration. However, one would be hard pressed, for example, to conclude that the
dispute between the Government of Pakistan and Dallah was not "in connection with" the
contract between Dallah and the Trust.
II NON-SIGNATORY THEORIES IN INTERNATIONAL ARBITRATION

8.20 This Section provides an overview of the most popular theories on non-signatory
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parties in international arbitration, namely assignment, third-party beneficiary,
apparent or ostensible authority, equitable estoppel, group of companies' doctrine or
implied consent and alter ego and lifting the corporate veil. The discussion here is
detailed, albeit not exhaustive, and aims to lay the foundations for the analysis in
Section II and the main argument of this Chapter that although these legal theories are
supposedly employed to establish consent for arbitration, in fact they either rely on
equitable (i.e. non-consensual) considerations or employ a functional concept of consent
which different from the concept of consent that we normally use to test whether two
signatories have agreed to arbitrate.
A Assignment
8.21 Transfers of rights and obligations may occur under different legal theories, including
the cases of:
a. Assignment of a right or a contract;
b. Subrogation, typically occurring in insurance contracts, where the insurer
subrogates in the rights of the insured;
c. Universal succession, which includes inheritance, acquisition, merger, or any other
similar form of business combination;
d. Novation;
e. Transfer of promissory notes by way of endorsement;
f. Transfer of bills of lading by way of consignment;
P 123 g. Transfer of a debt.
8.22 The forms and particulars of the above legal theories may vary in different
jurisdictions; in some cases, the above forms of transfer may even overlap or be known
under different terms. Eventually though, in all these cases the transferee, i.e. the person
that was not originally a party to the transferred contract, assumes the substantive
claims, rights, and obligations of the transferor. The crucial arbitration question here is
whether an arbitration clause contained in the assigned contract will bind the non-
signatory assignee towards the original party in the contract (debtor). If yes, how do we
establish consent for arbitration? Is it necessary that the assignee consents specifically to
the arbitration clause contained in the assigned contract? Similarly, is it necessary that
the original debtor consents to the assignment of the arbitration clause? Here, most
jurisdictions accept the rule of automatic transfer of the arbitration clauses, according to
which general consent of the assignee to assume the main contract is sufficient for the
arbitration clause to be assigned too.
8.23 Thus the assignee can rely on the arbitration clause to bring a claim against the
original debtor even if the assignee never consented to the assignment of the arbitration
clause. For example, in Schiffahrtsgesellschaft Dedlev Von Appen v Voest Alpine
Intertrading (The 'Jay Bola'), the vessel Jay Bola was time-chartered by its owners to S who
subsequently chartered the vessel to V under a voyage charterparty, which contained a
London arbitration clause.
8.24 V insured the cargo with W, but the insurance policy contained no arbitration clause.
When the vessel suffered a fire and the cargo was damaged, the insurer (W) paid part of
the damages and consequently commenced litigation against the time-charterers S. The
question before English courts was whether the arbitration clause contained in the
voyage charterparty was binding upon the insurer, who had paid part of the money.
8.25 English courts held that W commenced proceedings as the assignee of V's rights
under the voyage charterparty, and therefore W was bound by the arbitration clause
contained in the voyage charterparty even though it had not specifically consented to it.
8.26 The court noted that:
[The insurer] is bound by the arbitration agreement [...] because the [voyage
charterer's] contractual rights under the sub-charterparty to the benefit of
which [the insurer] has become entitled by subrogation are subject to the
P 124 arbitration agreement which, too, is party of the sub-charterparty. (6)
8.27 The same was confirmed by English courts in the more recent decision of In CMA CGM
SA v Hyundai MIPO Dockyard Co Ltd, involving novation. (7)
8.28 In France, the automatic transfer of an arbitration clause is generally presumed. (8)
This has been confirmed by the Cour de Cassation on different occasions, more recently
in its 2000 decision in Soc Taurus Films v les Films du Jeudi. (9) Here the French Supreme
Court confirmed the Court of Appeal's decision that an arbitration clause contained in an
exclusive distribution agreement agreed by the transferor, Omnia Film, was transferred
alongside the main contract and it was binding upon the transferees, namely Taurus
Films and Beta Films. The Cour de Cassation noted characteristically that 'an
international arbitration clause binds any party that derives its rights from a party [to the
arbitration clause] '. (10)
8.29 A similar position has been taken by courts in Switzerland, (11) the US, (12) Austria,
(13) India, (14) Japan, (15) Germany, (16) Greece (17) and Sweden, (18) as well as by
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P 125 international tribunals. (19)
8.30 Most jurisdictions also do not require arbitral consent of the original debtor either.
The prevailing view here is that in the absence of any indication to the contrary the
transfer of an arbitration agreement is not dependent on the prior consent of the debtor.
(20) National courts have held that this would be the case particularly when the
arbitration clause has been originally drafted in broad terms.
8.31 For example, in Cedrela Transport Ltd v Banque Cantonale Vaudoise, (21) the charterer
of a vessel had entered into a charterparty with the owner of the vessel containing an
arbitration clause. The owner subsequently assigned the charterparty to a bank, which
brought an arbitration claim against the charterer (i.e. the debtor). The charterer argued
that is was not bound by the arbitration clause as it never agreed to arbitrate with the
assignee bank. The Southern District of New York rejected the argument of the charterer.
It noted that when the debtor has originally 'entered into a contract with a broad, "all
disputes" arbitration clause, [the debtor] can be compelled to arbitrate by an assignee of
that agreement.' (22)
8.32 French courts have taken the same approach. In Filmkunst v EDIF, for example, (23)
the Paris Court of Appeal rejected the argument of the debtor that it was not bound to
arbitrate with the assignee of an assigned agreement of film exploitation rights, which
contained an arbitration clause. The French court gave emphasis on the broad language
of the arbitration clause, noting that 'the arbitration clause appearing in [the main]
contract is general, and it covers disputes arising not only during the production of the
film but also during its exploitation.' (24)
B Third Party Beneficiary

8.33 Under general principles of contract law two parties may agree to grant the benefits
of their contract to a party not otherwise bound by the contract. (25) If this contract
contains an arbitration clause, can the third-party beneficiary rely on it and bring an
arbitration claim to enforce the substantive right provided for his benefit? If yes, under
which circumstances: is it enough for the third-party beneficiary to show that the parties
agreed to confer him a substantive benefit? Or must the third-party beneficiary provide
further evidence that the parties have specifically agreed to confer him the benefit of the
P 126 arbitration clause too?
8.34 In most jurisdictions, it is accepted that the third-party beneficiary can rely on the
arbitration clause even if there is no evidence that the original parties agreed to confer
the benefit of the arbitration clause too. It would be sufficient for the parties to have
agreed to provide the third party with a substantive benefit for the third party to be able
to rely on the arbitration clause too.
8.35 In England, this has been accepted for example in Nisshin Shipping Co Ltd v Cleaves &
Co Ltd. (26) Here a chartering broker brought an arbitration claim against the shipowners
asking for commission pursuant to charterparties which the broker had negotiated for the
shipowners and which contained an arbitration clause. The shipowners applied to English
courts for a declaration that the tribunal had no jurisdiction to determine the broker's
arbitration claim, on the basis that the broker was not a party to the charterparty
contained in the arbitration clause.
8.36 The English court first examined the issue of whether the broker was a third-party
beneficiary under the Contracts (Rights of Third Parties) Act 1999 section 1(1). The court
held that the parties in the contract had clearly intended to confer the substantive
benefit of 1 per cent commission on the broker, who was therefore entitled to enforce the
relevant substantive term in the charterparty.
8.37 But, was this enough for the third party to rely on the arbitration clause included in
the charterparty? Section 8 of the UK Contracts (Rights of Third Parties) Act 1999 provides
that where a right conferred to a third-party beneficiary is subject to a valid arbitration
clause, the third party shall be treated as a party to that arbitration clause as regards
disputes between the third party and the promisor.
8.38 The shipowners argued that section 8 of the UK Contracts Act 1999 should be
construed in light of the principle of party autonomy, which would require clear evidence
of parties' intent to arbitrate. Accordingly they argued that the question of whether a
third-party beneficiary can rely on the arbitration clause should be determined by the
proper construction of the contract as to whether the original parties intended the
arbitration clause to apply to all disputes relating to the third party's rights.
8.39 The court rejected their argument, holding that the third party is obliged to enforce
the substantive right conferred to it in the main contract by arbitration, 'even where the
[arbitration clause] does not on its proper construction provide for any participants in an
arbitration other than the parties to the main contract'. (27)
8.40 Colman J reasoned that the case of a third-party beneficiary is in effect analogous to
the case of an assignee, who necessarily obtains the substantive right subject to its
procedural burden, in this matter an arbitration agreement. (28) Thus, Colman J
concluded that it makes no difference to the broker's ability to enforce his right by
arbitration that no express provision was made for this in the arbitration clause by the
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parties:
The third party never was expressed to be a party to the arbitration
agreement but, in view of the fact that he has in effect become a statutory
assignee of the promisee's right of action against the promisor and because,
by reason of the underlying policy of the 1999 Act [...] he is confined to the
means of enforcement provided by the contract to the promisee, namely
P 127 arbitration. (29)
8.41 Nisshin has since been followed by other English cases. In Christina Mulchrone v Swiss
Life (UK), (30) it was held that if a third party establishes that the parties purported to
confer on the third party a substantive right under the contract containing the arbitration
agreement, 'not only may the Claimant seek to establish that cause of action in her own
right (and therefore exclusively in her own name) against [the promisor]; but also, if she
chooses to do so, she is obliged to have recourse to arbitration in accordance with the
arbitration agreement in that contract'. (31)
8.42 A similar approach has been taken by the French Cour de Cassation, (32) and the US
courts. For example, in Cargill v M/T Pavel Dybenko, the Second Circuit stated:
In order to enforce the agreement as a third party beneficiary, [the third
party] must show that the parties to that contract intended to confer a benefit
on [it] when contracting; ... [I]f [the third party] is found to be a third party
beneficiary to the [main], it may be proper for the District Court to enforce the
arbitration agreement against [one of the original parties]. (33)
8.43 The same approach was adopted by the Austrian Supreme Court in 2009. (34) C-
Corporation entered into a confidentiality agreement with V-Corporation in relation to a
procurement process providing that V-Corporation and/or its affiliated companies would
provide C-Corporation and its representatives with confidential information. The
confidentiality agreement contained an ICC arbitration clause. When a wholly owned
subsidiary of C brought a claim before the Austrian courts against a successor company of
V-Corporation the defendant argued, inter alia, that the claimant was bound by the
arbitration clause contained in the confidentiality agreement. The Austrian Supreme
Court indeed accepted the defendant's argument, holding that in accordance with the
confidentiality agreement the right to request information was not limited to C-
Corporation; it was further provided for the benefit of C-Corporation's affiliates and
representatives. Therefore, the claimant was bound by the arbitration clause as a third-
party beneficiary that sought to enforce the substantive benefit of the confidentiality
agreement, containing an arbitration clause.
C Apparent or Ostensible Authority

8.44 Often, theories of agency and representation are relied upon to bring an arbitration
claim against a non-signatory party. A typical example is the case where a state-owned
entity appears to act on behalf of a State, or a subsidiary appears to act on behalf of a
parent company. Here, unless the claimant is in a position to prove that the state-owned
entity or the subsidiary possessed actual authority and power to sign an arbitration
P 128 clause as an agent in the name and on behalf of the State or the parent company, the
latter will not be bound by the arbitration clause. This is by no means an easy task for
claimants, not least because States or parent companies often rely on obscure or
idiosyncratic formalities of their national laws to claim that actual authority is invalid or
lacking.
8.45 To prevent inequitable results, tribunals have occasionally relied on principles of
apparent or ostensible authority to find that the State or the parent corporation is in fact
bound by an arbitration clause signed by a state-entity or a subsidiary which was acting
as an agent, even if actual authority was lacking. To accept jurisdiction over a non-
signatory party on the basis of apparent or ostensible authority, a tribunal must be
satisfied first, that the apparent principal has induced by false representations the
claimant to believe that the apparent agent had authority to enter into an arbitration
clause; second, that the claimant actually relied on the misrepresentations of the
apparent principal, and that such reliance was reasonable and in good faith in the
circumstances. (35)
8.46 The theory of apparent or ostensible authority is premised on general principles of
abuse or right, estoppel or venire contra factum proprium and has clear equitable
justifications. (36)
8.47 To give an example of how tribunals have applied principles of apparent or
ostensible authority to assume jurisdiction over non-signatory parties: In Partial Award
ICC on jurisdiction and admissibility in case 6474 of 1992, (37) the tribunal held that the
lack of actual authority of state officials could not be relied upon by the respondent
State to deny jurisdiction of the tribunal. More specifically, a European supplier entered
into several contracts, namely an Agreement of Cooperation and Purchases, and a
Purchase Contract, to supply agricultural products to the Republic of X (referred to in the
award as 'the territory'). When a dispute arose, the European supplier brought an
arbitration claim against the government of Republic X.
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8.48 The respondent contended that the tribunal had no jurisdiction over the State,
because first, the State officials who signed the contract did not have the capacity to
bind the state, and second, they had no authority to represent the state in contracts with
financial implications.
8.49 The claimant sought to rely on a number of legal opinions, the Cabinet's resolutions,
and various letters to show that the state officials who acted for the defendant did in fact
possess the necessary actual authority to bind the State. However, the claimant argued
that, if those officials had not actually had authority to bind the State, the claimant was
not aware of such lack of authority and could not be expected to be aware of it, as it had
acted in good faith when it considered the persons acting for the defendant to be
P 129 authorized to act as they did (apparent authority).
8.50 The tribunal noted that there were three issues at stake here: first whether the
officials had capacity to bind the State; second and in the alternative, whether the
officials had the actual authority to represent the State in this case; third, in a case where
the answer to the first two questions was in the negative, whether the lack of authority
could be relied upon by the State against the claimants.
8.51 The tribunal noted that the first two issues would be largely determined on a factual
basis. The tribunal found that the evidence produced was inconclusive as to whether the
officials had capacity or authority to bind the State on the particular contracts
containing an arbitration clause. However, the tribunal held that even if the
representatives lacked the capacity and did not posses actual authority to represent the
State, this lack of authority could not be relied upon against the claimants in this case.
8.52 This decision of the tribunal was at first based on a provision found in the Swiss
Private International Law Act which the tribunal held would apply to the case, as the law
of the seat. The tribunal noted that it applied the law of the seat, as it had wide
discretion on the law applicable to matters of jurisdiction and notwithstanding the 'wide-
spread practice, which regards questions of capacity as relating to status and the
personal law'.
8.53 According to Article 177(2) PILA, "If a party to the arbitration agreement is a State or
an enterprise held, or an organisation controlled by it, it cannot rely on its own law in
order to contest its capacity to be a party to an arbitration or the arbitrability of a dispute
covered by the arbitration agreement" (emphasis added). However, the tribunal,
cognizant of the distinction between capacity and authority, noted that the above
provision applies to issues of capacity and might not extend to issues of authority too.
8.54 Thus, and more importantly the tribunal went further to note that its decision is
firmly supported by general principles of arbitration law and international practice:
it is advisable not to limit [the decision] to an application of Art. 177(2) PILA,
for two reasons: the first is that general principles of arbitration law and of
international practice would in any case lead to the same result, and the
second is that it is not clear that the provision would apply beyond the
domain of capacity proper and also to the regularity of the powers of the
signatories of the contracts.
8.55 The tribunal, after referring to previous relevant case law (38) and scholar writing,
held that 'the defendant has not explained, nor attempted to explain, how the claimant
could in practice be expected to see to it that the territory's regulations were complied
with by Government officials, while the territory's Government itself appeared to have
been unable to do so' (39) and concluded that 'if some territory regulations, formalities or
procedures were not followed, at the time of execution of the contracts, the defendant
government was in a much better position than the claimant to remedy the situation, and
had a much greater duty to prevent such irregularities.' (40)
D Equitable Estoppel in Arbitration

8.56 In common law jurisdictions and the US in particular the doctrine of equitable
estoppel is often relied upon to preclude a signatory to an arbitration agreement from
arbitrating a dispute against a non-signatory party. In its traditional meaning, the
doctrine of equitable estoppel reflects the general legal principle of non-venire contra
P 130 factum proprium, found in Roman Law as well as in many contemporary civil law
jurisdictions. (41) According to the doctrine, a party is prevented from asserting rights
against another party when the latter has justifiably relied on the conduct of the former
and changed his position to his detriment as a result of such reliance. (42) The principle,
as its name indicates, is based on fair and equity considerations, (43) which makes it
difficult to delineate. (44)
8.57 In arbitration the doctrine of equitable estopped has developed a specific meaning
whereby US courts may allow or refer a non-signatory to arbiter a dispute with a signatory
party. Hence the term 'arbitral estoppel' is sometimes used to describe the particular
use of the doctrine in the context of arbitration and non-signatories. (45)
8.58 As a number of US courts have held, if a non-signatory party seeks to exercise
substantive rights under a contract, which contains an arbitration clause, then this party
has to be bound by the arbitration clause too. As the courts have pointed out: ‘To allow [a
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plaintiff] to claim the benefit of the contract and simultaneously avoid its burdens would
both disregard equity and contravene the purposes underlying enactment of the
Arbitration Act.' (46)
8.59 The US Courts have applied the equitable estoppel to oblige both signatories and
P 131 non-signatories to arbitrate.
8.60 For an example of the former case, we can look into the decision in Avila Group, Inc v
Norma J of California, (47) where the buyer commenced court proceedings seeking
damages against the seller for breach of sale of textile contract that contained an
arbitration agreement. The buyer contended that the arbitration agreement was not
binding upon the seller who, according to the buyer, never accepted the arbitration
agreement in the purchase orders. The court referred the buyer to arbitration holding
that the buyer could not 'be allowed to assert the existence of a valid contract ... to
recover damages from the [seller] and at the same time contradictorily assert that no
contract exists in order to avoid arbitration of its claims and those of the [seller]'. (48)
8.61 More frequently the courts will apply the equitable estoppel to compel a non-
signatory to arbitrate with a signatory, when the former attempts to enforce a substantive
term of a contract that contains an arbitration clause. For example, in Deloitte Noraudit
A/S v Deloitte Haskins & Sells, (49) a Norwegian accounting firm was estopped from
denying its obligation to arbitrate under an arbitration clause incorporated in a
memorandum agreement, which the firm had not signed, when the firm had already
accepted the benefits of the memorandum agreement through its continuing use of
intellectual rights (i.e. the name of the firm) agreed in the memorandum agreement.
Likewise, in American Bureau of Shipping v Tencara Shipyard (50) the non-signatory yacht
owner was estopped from refusing to arbitrate under an arbitration clause in a contract
between the yacht's builder and a ship classification society (the signatories), when the
yacht owner had received a direct benefit from the agreement between the signatories.
(51)
E The Intertwined Version of Equitable Estoppel in Arbitration

8.62 On many occasions, the US courts have given the doctrine of arbitration estoppel a
dynamic meaning, which diverges from its traditional origins of equity. Here, courts
attach less importance on whether the party avoiding the arbitration agreement has
gained a substantive and direct benefit from a contract including the arbitration clause.
(52) Instead, courts will enjoin a signatory to arbitrate its claim against a non-signatory
(and vice versa) if they are satisfied that a 'tight relatedness of the parties, contracts and
P 132 controversies' exists. (53)
As the Second Circuit has noted, (54) there has been no occasion so far for the US courts
to specify the minimum quantum of tight relatedness or 'intertwined-ness'. Nevertheless,
a review of the relevant jurisprudence shows that courts will usually focus on the
following two conditions:
8.63 First, the dispute between the signatory and the non-signatory must be intertwined
with the contract containing the arbitration clause. For example, in Choctaw Generation v
American Home Assurance, a construction company had entered into a contract with the
owner, under which the contractor had to provide engineering and construction services,
the performance of which were secured by a letter of credit provided by a surety
company. An arbitration agreement was included in the construction contract between
the owner and the contractor, whereas the letter of credit (the security contract)
contained no arbitration agreement. The Second Circuit held that the owner had to refer
his claim against the surety to arbitration, as his claim was strongly intertwined with the
underlying construction contract, containing an arbitration clause. In particular, the court
noted that the claim of the owner 'concerns the duty to replenish a letter of credit
maintained under the Construction Contract, and requires a ruling as to whether that
duty is independent of certain others in the context of the Construction Contract as a
whole.' (55) The court also held that:
The underlying dispute between [the contractor] and [the owner], concerning
[the owner's] entitlement to liquidated damages, is now in the early stages of
arbitration, and entails the construing of a dozen provisions of the
Construction Contract. The immediate dispute in this action between [the
owner] and [the surety], concerning whether [the owner] can compel
immediate replenishment of the letter of credit to fund the liquidated
damages, turns upon many of the same provisions. (56)
8.64 The court, therefore, concluded that: ‘The controversy presented on this appeal
[between the owner and the surety] is linked textually to the Construction Contract, and
its merits are bound up with the dispute now being arbitrated between [the owner] and
P 133 [the contractor].' (57)
8.65 Second, the non-signatory has contractual or close corporate links with one of the
signatories. In addition to the intertwined factual issues, the courts must be satisfied that
the non-signatory party is in a relationship with one of the signatories which would justify
the "conclusion that the party which agreed to arbitrate with another entity should be
estopped from denying an obligation to arbitrate a similar dispute with the adversary
7
which is not a party to the arbitration agreement." (58)
8.66 For example, in JLM Industries v Stolt-Nielsen, (59) JLM, shippers of freight, had
entered into carriage of cargo contracts, containing arbitration clauses, with subsidiary
companies of the Stolt-Nielsen group, carriers, but not with the parent company. JLM
brought a claim against both the Stolt-Nielsen subsidiary companies, signatories, and the
Stolt-Nielsen parent, non-signatories, alleging that all defendants had abused their
market power, in violation of the Sherman Act, by conspiring to fix prices in their non-
negotiable standard-form contracts. The parent company relied on the arbitration clause
in the standard-form contracts of carriage and moved to arbitrate the dispute. The court
held that the arbitration clause in the carriage contract was binding upon the parent
company too, because of the close corporate links between the non-signatory parent
company and the signatory subsidiary, and because JLM would not distinguish between
the subsidiary and the parent when purchasing shipping services. The court also noted
that JLM in their action had repeatedly alleged in relation to the merits of the dispute
that 'whatever corporate entities happened to sign the [charter contracts], [JLM] was
purchasing shipping services directly from the parents and was harmed by the allegedly
inflated prices charged by those parents
F The "Group of Companies" Doctrine or Implied Consent

8.67 The idea that multinational groups, operating through several subsidiaries, affiliates,
or holding companies, should be taken as a whole rather than as several independent
legal entities is not new in law. It was originally developed in tax and company law, (60)
and under the law of many countries, groups of companies are treated as a unit for tax
and accounting purposes. (61)
8.68 The 'group of companies' doctrine, however, has acquired particular relevance in
international arbitration: it has been employed mainly by international tribunals to
extend arbitration agreements signed by one or more companies of a group to non-
signatory members of the same group. The doctrine was introduced into arbitration in the
beginning of the 1980s with the seminal Dow Chemical v Isover-Saint-Gobain award (62)
and it has subsequently developed as one of the most intriguing theories in international
P 134 arbitration. For more than two decades it has been the subject matter of extensive
literature, and it has been repeatedly referred to and discussed by arbitral tribunals and
national courts in different jurisdictions.
1 . Legal Basis of the Doctrine
8.69 The practice whereby a corporation carries out business through a number of
subsidiaries in several countries has increasingly become the typical form of corporate
structure and organization, mainly because of its clear advantages in terms of taxation
and efficient business management. (63) In a typical multinational group, the several
companies usually have a wide range of close corporate and business ties. However, each
company remains a distinct legal entity, pursuant to the principle of 'limited liability'
and 'separate corporate personality', (64) which allows the group to "achieve layers of
insulation for the parent corporations from liability for the obligations of its numerous
subsidiaries". (65)
8.70 Since every company of the group is a distinct legal entity, a contract concluded by
one of the companies will not be binding on other companies of the same group. (66) This
equally applies to arbitration agreements: only the company that enters into an
arbitration agreement will be bound by it. There is no arbitration rule or law providing
that arbitration agreements are exempted from the fundamental principle of separate
P 135 corporate personality in relation to transactions involving a group of companies. (67)
8.71 Therefore, consent has a key role in the discussion of the group of companies'
doctrine in arbitration. (68) As the analysis of the relevant case law shows, courts and
tribunals will extend an arbitration clause to a non-signatory member of a group, only if
they are satisfied that the non-signatory company was by reference to the 'common
intention of the parties' a genuine party to the contract including the arbitration clause.
(69)
8.72 Within this consensual context, two divergent views on the group of companies'
doctrine can be identified. The first view questions the need for a 'group of companies
doctrine' at all. According to this view, if arbitration is premised on consent, the already
known and well-established principles of contract law will suffice to determine whether a
non-signatory party is bound by an arbitration agreement. (70) The tribunals instead of
relying on the group of companies theory should refer to general rules of formation and
interpretation of contracts provided in all national laws, such as:
P 136 a. representation or agency; (71)
b. ratification of contracts; (72)
c. third-party beneficiary theories; (73)
d. alter ego and corporate veil theories; (74)
e. incorporation by reference or implied consent. (75)
8.73 According to this view, the group of companies doctrine is redundant, if not
8
ambiguous and confusing. (76)
8.74 By contrast, the second view upholds the doctrine as an important theoretical
construct in international arbitration. According to this view, the group of companies'
doctrine is notably important as it draws attention to specific patterns demonstrating
assent for arbitration. For example, the existence of strong corporate links between the
P 137 several members of a group and the active involvement of a non-signatory company of
the group in the negotiation, performance, and termination of the contract including an
arbitration clause are strong indications that the non-signatory company has consented
to arbitrate. (77) Accordingly, tribunals can and should rely upon the group of companies'
doctrine as a means that facilitates proof of implied consent of the non-signatory. (78)
8.75 Gradually, certain indicators of consent have developed as conditions for the
application of the doctrine, which tribunals will examine to determine whether to
assume jurisdiction over a non-signatory member of a group. These conditions may be
summarized as follows:
a The Existence of a Close Group Structure
8.76 Typically, tribunals will first examine the corporate structure of the group. Here, it is
not enough for two companies to be members of the same group. The tribunals will
require that several companies have a close group structure, operating on a control basis
and strong organizational and financial links. (79) For example, such a close group
structure can be evidenced if the group has adopted a divisional or hierarchical structure
of operation, where a parent company holds the commanding role in the business
strategy of the group and several other subsidiaries, sub-subsidiaries, or even companies
have been set up merely to execute an one-off business project.
8.77 In the ICC case 5894 of 1989, (80) the parent Company ZFrance signed an agreement
with the parent company XBanque of a banking group for the financing of equipment by
leasing, which contained an arbitration clause. This was in effect a framework agreement
followed by several other agreements between the subsidiaries of both groups. XBanque
and other subsidiaries of the banking group brought an arbitration action against ZFrance
and other subsidiaries of the Z group. The tribunal accepted jurisdiction over the non-
signatory subsidiaries of both the claimant and the respondent noting that:
the subsidiaries though they were not sham companies set up solely for the
purpose of the said agreements, were operating to carry them out under the
close control and following the instructions of the parent companies which
made all the important decisions commercial as well as financial either
unilaterally or jointly. (81) (emphasis added)
8.78 Tribunals put particular emphasis on whether the parent company is in a position to
exercise a significant degree of control over the subsidiary, although control will not be
P 138 proved by reference to the percentage of ownership alone. For example, in ICC case
8910 of 1998 the tribunal found that a subsidiary was bound by the arbitration clause
signed by its parent company, which owned 51 per cent of the non-signatory subsidiary;
(82) whereas, in ICC case 7155 of 1993 the tribunal refused to extend the arbitration clause
to the non-signatory subsidiary, although the signatory parent company owned 90.99 per
cent of the subsidiary. (83)
8.79 Tribunals have found that a parent company controls a subsidiary when certain
actions or decisions of the parent company have significantly affected the financial or
legal position of the subsidiary. For example, in ICC case 8385 of 1995 (84) the tribunal
assumed jurisdiction over the non-signatory parent company, finding that it had 'a
significant degree of control of the activities of the subsidiary' as evidenced by the fact
that 'particular actions [of the parent company had] resulted in the insolvency of the
subsidiary'. (85)
8.80 Close group structure is also evidenced when several companies share intellectual
property rights, assets, and financial or human resources including, for example,
ownership titles, corporate name, offices and premises, officers, bank accounts, and
trademarks. In the Dow Chemical case, for example, the tribunal found that the several
signatory and non-signatory companies of the Dow Chemical group were sharing the use
of the same trademarks. (86)
8.81 Also, in ICC case 6000 of 1988 (87) the tribunal assumed jurisdiction over the non-
signatory affiliate of the signatory company, as it was satisfied that the two affiliate
companies had close business and corporate links as it was evidenced by the fact that
both companies were owned by the same shareholders at an equal proportion.
Furthermore, the subject matter and business place of their activities were the same,
while the same persons had been acting as representatives for both of companies. The
tribunal noted:
[N]obody could deny that even distinct and different, [the two affiliates] form
a group of companies. It is so, not even because, as in the situations generally
met, one of the companies is owner for the majority of the shares of the other
or has by other means the control of the same; in the instant case the
substantial identity of the ownership of the share capital in the two
9
companies results in a group of companies that could not be stronger welded
than they are. (88)
8.82 Finally, often parties will request the tribunal to extend an arbitration clause to a
non-signatory natural person, rather than a legal entity, who holds a significant
managerial role in the signatory company. But tribunals will be usually reluctant to
assume jurisdiction over a natural person, on the basis of the group of companies theory,
P 139 unless there is evidecne of fraud on the part of the natural person involved, or the
natural person agreed to be personally bound by the contract, including the arbitration
clause. (89)
8.83 In ICC case 4972 of 1989, (90) Z entered into an exclusive distribution agreement,
which contained an ICC clause, with X and its subsidiary Y to distribute perfume products
of Z in France. X and Y commenced arbitration proceedings both against Z and the non-
signatory W, managing director of Z, relying on the group of companies' theory. The
tribunal, which decided as amiable compositeur, held that W was not bound by the
arbitration clause, although he had physically signed the contract on behalf of Z, as W's
role in the negotiation and performance of the contract was not such as to make him
bound by the contract otherwise concluded between X, Y, and Z. Similarly, in ICC case no
5721 of 1990, (91) the tribunal refused to assume jurisdiction over the non-signatory person
controlling the Respondent signatory company. The tribunal noted that the claimant
failed to establish that the claimant 'intended to deal with' that person, or indeed that
such person 'intended personally to be a party to the arbitration agreement'.
b The Active Role of the Non-signatory Company in the Negotiations, Performance, or
Termination of the Contract
8.84 Tribunals have repeatedly noted that for the group of companies' doctrine to apply,
it is not enough that the several companies constitute a group. (92) It is additionally
required that the non-signatory company has had an active role in the negotiations, the
performance, or the termination of the contract in which the arbitration agreement in
P 140 question is included. (93)
8.85 It is not unusual for multinationals with a multifaceted divisional structure to
designate one member of the group to signing a contract and another member or
members to actually perform the contract. (94) In such a case, tribunals will review the
acts and statements of the non-signatory members to determine whether they are
actively implicated in the contract and therefore whether they are bound by the
arbitration clause therein.
8.86 For example, in ICC case 6000 of 1988, (95) in a dispute that arose out of an exclusive
distribution contract, the tribunal found correspondence between the non-signatory
party and the claimant dating back to a period before the conclusion of the contract,
which the tribunal accepted as evidence for the involvement of the non-signatory at the
stage of negotiation of the contract. The tribunal was also satisfied that it was the non-
signatory party parent, rather than the signatory subsidiary, that was acting as the
exclusive distributor of the claimant's products (performance stage). Finally, the tribunal
pointed out that when a dispute arose and during the negotiations for an amicable
solution, it was the non-signatory that communicated important documents (termination
stage). Thus, the tribunal concluded that 'the actual performance of the contracts by all
the parties during the whole period until the notice of termination and even after such
notice was given [...] brings persuasive evidence of the factual identity [between the
several companies]'.
8.87 In all cases, it is crucial that the involvement of the non-signatory must be active, i.e.
significant. For example, in ICC cases 7604 and 7610 of 1998, (96) 6 the claimant
commenced arbitration proceedings against the signatory subsidiary and the non-
signatory parent company over a dispute arising out of a service contract in relation to
electronic software. The claimant argued that the non-signatory parent company was
bound by the arbitration clause in the service contract because, first, the subsidiary had
suggested that the claimant had several contacts with the parent company to fix some of
the problems of the electronic software; secondly, the subsidiary had invited the
claimant's personnel to take part in seminars organized by the parent company in
relation to the operation of the electronic software.
8.88 The tribunal found that the above facts were insufficient to infer consent of the
parent company to arbitration. The tribunal emphasized the active role of the subsidiary
in the performance of the contract, as opposed to that of the non-signatory parent, noting
in particular that it was the subsidiary that the claimant paid the money to, and it was
the subsidiary that had the know-how required by the contract. It was never established
that the parent company had a particular interest in the realization of the operation of
the contract or the resolution of the disputes arising out of it. The mere fact that the
parent company had some interests and stakes in the subsidiary was not enough for the
parent company to be bound by the arbitration clause. As regards the stage of the
termination of the contract, the tribunal noted that after the dispute had arisen the
claimant invited the subsidiary alone rather than the parent company to amicably
resolve the dispute and it subsequently conducted the subsidiary alone to notify that the
contract was terminated and to request damages. Therefore, the tribunal concluded that
P 141
10
P 141
neither at the stage of execution nor at the stage of termination of the contract did the
non-signatory company have an active involvement.
C . Common Intention of the Parties to Arbitrate
8.89 The group structure and the active involvement of the non-signatories in the
negotiation and execution of the particular contract must be such as to suggest that the
non-signatory and the signatory have consented to arbitrate. (97) Here, tribunals typically
examine whether the group has led its co-contractor to genuinely believe that the non-
signatory member of the group had implicitly consented to the contract containinng the
arbitration agreement.
8.90 Specifically, the tribunals will usually examine first, whether the conduct and
behaviour of the whole group led the other party to legitimately believe that the non-
signatory member of the group was a genuine party to the contract.
8.91 For example, in ICC Interim Award no 6000 of 1988 the tribunal found that the
behaviour of the non-signatory parent company had confused the claimant as to the
distinctive role of the parent and its signatory subsidiary in an exclusive distribution
agreement. In particular, the tribunal found that the signatory subsidiary had written
letters to the claimant on paper under the letterhead of the non-signatory parent
admitting that the non-signatory party was actually the exclusive distributor. The
tribunal also found that: 'An authorised representative of both companies clearly stated
that in respect of the contracts in dispute, both companies were "the same", and more
precisely, that the [parent company] was the exclusive distributor, in the United States,
of the good manufactured and sold by the Claimants.' (98)
8.92 Similarly, in ICC no 4504 of 1985/86, (99) where the contract was signed by the
president of two affiliates on behalf of one of these affiliates only, the tribunal found that
the president's references to 'our company', 'our contract', 'our claims', although
confusing, were not enough to justify the extension of the arbitration clause to the non-
P 142 signatory affiliate.
G Alter Ego and Lifting the Corporate Veil

8.93 The theory of lifting the corporate veil was developed in company law and mainly in
common law countries (100) to address some unwarranted situations that may result from
the principle of limited liability which provides that shareholders or companies in the
same group cannot be held liable for obligations assumed by other companies of the
group beyond the amount of their capital investment. (101) Thus, under exceptional
circumstances, the "corporate veil" of a subsidary can be "lifted" to hold the parent
company or the main shareholder of the subsidiary acccountable for acts of the
subsidiary, whether in contract or in tort claims. (102)
8.94 In the context of arbitration and the discussion on non-signatories, claimants have
often requested the tribunals to assume jurisdiction on a non-signatory parent company
on the basis that it is the alter ego of the signatory subsidiary. This is particularly the case
when the subsidiary is insolvent at the time the dispute arises or does not have sufficient
funds to cover the damages requested by the claimant.
8.95 Although the two theories, alter ego and lifting the corporate veil, are often referred
to interchangeably, alter ego is a variant of the lifting the corporate veil theory, the other
two variants being the instrumentality doctrine and the identity doctrine. (103)
8.96 A detailed analysis of the principle of lifting the corporate veil would go beyond the
scope of this Chapter; however it should be noted that under all three variants of the
principle, and alter ego in particular, courts will require to look into several factors to
decide whether to pierce the corporate veil. These factors may include: (104)
a. gross undercapitalization;
b. non-payment or overpayment of dividends;
c. withdrawal of funds by the dominant shareholders, sometimes for personal
purposes;
d. absence of corporate formalities, in terms of behaviour and documentation;
e. guarantee of corporate liabilities by majority shareholders in their individual
capacity;
f. non-functioning of corporate officers and directors;
g. concealment or misrepresentation of members; h. absence or inaccuracy of
corporate records.
8.97 Overall, emphasis is given on two things: first, excessive corporate and financial
control by the parent company. Here courts have required control of the subsidary by the
P 143 parent that is not limited to majority stock control, but control that amounts to
complete domination not only of finance but of policy and business practices that show
that the subsidiary has no separate mind, will, or existence of its own. (105)
8.98 Second, fraudulent use of the corporate structure to transfer and allocate resources
between companies with the purpose of avoiding liability and defeating the interests of their
contractual counterparties. (106) Here the mere manipulation of the subsidiary by the
11
parent company would not be enough to for the corporate veil to be lifted. It is required
that the parent company intended to evade an obligation or statute, to commit fraud or
a crime. (107)
8.99 Thus, for example, the decision of a tribunal sitting in Switzerland in ALPHA SA v BETA
& Co., State Company of Ruritanian Law: (108) the tribunal lifted the corporate veil of a
subsidiary and assumed jurisdiction over the non-signatory parent. The tribunal
discussed case law and doctrine developed in connection with Swiss company law, in
particular the so-called 'one-man companies', and summarized that lifting the corporate
veil was warranted where (i) a shareholder had total control over an entity, evinced by
insufficient capitalization, confusion in the administration and management, and
confusion of assets, and (ii) the totality of circumstances constituted an abuse of rights.
8.100 In its analysis, the tribunal found that ZETA was a wholly owned subsidiary of ETA
established for the sole purpose of one transaction; ZETA's capitalization was inadequate
in view of the nature and value of the transactions; ZETA never had any business premises
or adequate staffing, but was established and managed (also financially) by A, the legal
counsel of ETA, and D, another person mandated by ETA. Moreover, ETA took all decisions
in running and dissolving ZETA in disregard of the applicable corporate law, utilizing ZETA
as a mere 'internal department', without any formal and legal independence; ZETA,
further, had no assets of its own other than a claim against ETA from a sale of machinery;
and ZETA's assets were channelled to ETA when it was dissolved. Finally, the overall abuse
of rights was established by the fact that the main creditor, ALPHA, was never even
contacted when ZETA was dissolved, let alone was a call for creditors made.
III ARBITRAL CONSENT AND NON-SIGNATORY THEORIES

8.101 Part I provided a brief overview of the main legal theories that have been typically
relied upon by courts and tribunals to compel or allow a non-signatory to arbitrate.
8.102 This Section aims to demonstrate that arbitral consent is often absent in each one
of these legal theories. We can broadly distinguish between two groups of non-signatory
P 144 theories. In the first group, non-signatories are allowed or compelled to arbitrate on
the basis of equitable considerations. In the second group, non-signatories are allowed or
compelled to arbitrate on the basis of a functional concept of consent that concerns the
underlying substantive contract rather than the arbitration agreement.
8.103 The first group includes the theories of apparent or ostensible authority, alter ego
or lifting the corporate veil, and equitable estoppel. All these theories, which are
essentially corporate or contract law (rather than arbitration law) theories, are based on
clear equitable considerations. Here, the non-signatory party is compelled to arbitrate
not because it has actually consented to arbitrate, but because it would be unfair not to
arbitrate. It would be unfair, for example, for a State to escape arbitration, when the
State reasonably lead a party to wrongly believe that a state-owned entity was acting
with authority to conclude a contract and an arbitration clause on behalf of the State.
Similarly, it would be unfair for an individual to escape arbitration, when he fraudulently
used a corporation, which he totally controls, to frustrate the interests of a claimant in
arbitration. Finally, it would be unfair for a party that seeks to enforce a right under a
contract, which contains an arbitration clause, to be able to cherry-pick and receive the
substantive benefit of a contract but ignore the arbitration clause therein.
8.104 Arbitrators and arbitration practitioners are typically apprehended with horror
whenever the question of equity arises in arbitrations. Equity tends to conflict with our
hard-wired positivistic instincts, and arbitrators are habitually reluctant to consider
equitable arguments lest they are perceived to act as amiable compositeurs or engaging
in administration of justice.
8.105 However, with regard to non-signatories in arbitration, equity has been seemingly
transposed into positive legal rules and legal principles, with transnational resonance:
from the common law developed doctrine of equitable estoppel in the US, to the legal
principle of abus de droit, including faute and apparance in France, and the Roman legal
principles of bonne foi and non venire contra factum proprium accepted by a number of
civil law jurisdictions. (109)
8.106 Having been transposed into legal rules, equitable considerations do not seem to
offend arbitrators who are often applying them to compel a non-signatory to arbitrate.
(110) Nonetheless, they are clearly equitable rather than consensual rules.
8.107 As the Tribunal in the Westland case acknowledged when deciding to accept
jurisdiction over the non-signatory States:
[f]inally, mention must be made of the practical reasons and considerations of
equity which have motivated the arbitrators in this matter, quite apart from
the legal ground. Westland is justified in bringing the four States themselves
before the arbitrators. Were this not the case, there would be a real denial of
justice. In other words, Westland would not recover anything (111) .
8.108 Indeed, courts and tribunal have accepted such equitable considerations on a
number of occasions. For example, the US Fifth Circuit in the well-known case of Bridas v
12
Government of Turkmenistan decided to lift the corporate veil and compel the non-
signatory Government of Turkmenistan to arbitrate on the basis that it had fraudulently
P 145 used the non-signatory Turkmeneft to harm Bridas:
As it happens, there is ample evidence that .... the Government [of

Turkmenistan] misused Turkmenneft to harm Bridas by destroying the value of
the Joint Venture Agreement. [W]hen the Government dissolved the
Turkmenian Party and replaced it with Turkmenneft, Turkmenneft was initially
capitalized with the equivalent of only $17,000 U.S. and was funded by a State
Oil and Gas Development Fund expressly rendered immune from seizure
under newly enacted Turkmenian law. Yet Turkmenneft became the party
bound to arbitrate under the JVA and liable for any adverse award. At the
same time, the Government issued a number of decrees distancing itself from
the joint venture and attempting to limit its potential exposure to liability.
The Government's manipulation of Turkmenneft to prevent Bridas from
recovering any substantial damage award satisfies the "fraud or injustice"
prong.
8.109 Equitable considerations underpinned the decision of the US Fourth Circuit in the
International Paper v Schwabedissen Maschinen & Anlagen Gmbh to compel a non-
signatory to arbitrate on the basis of the equitable estoppel doctrine. (112) Here an
arbitration clause was contained in a sale contract between the manufacturer and the
distributor. When the non-signatory buyer brought a claim directly against the
manufacturer on the basis of an implied warrant in the contract between the
manufacturer and the distributor, the Court referred the buyer to arbitration on the basis
of the arbitration clause in the sale contract. The Court reasoned:
[T]he buyer alleges that the [manufacturer] failed to honour the warranties in
the [manufacturer and distributor] contract, and it seeks damages, revocation,
and rejection 'in accordance with' that contract. [The buyer's] entire case
hinges on its asserted rights under the [manufacturer and distributor]
contract; it cannot seek to enforce those contractual rights and avoid the
contract's requirement that 'any dispute arising out of’ the contract be
arbitrated. (113)
8.110 The second group includes the theories of assignment or transfer of rights, the third-
party beneficiary, and theories of implied consent including the group of companies'
doctrine. While these theories have consensual premises, they adopt a functional
concept of consent that concerns the underlying substantive contract not the arbitration
agreement which is included in the substantive contract.
8.111 As discussed in Section I, in most jurisdictions it is accepted that the third-party
beneficiary can rely on an arbitration clause even if there is no evidence that the original
parties agreed to confer the benefit of the arbitration clause too. Proof that the parties
agreed to provide the third party with a substantive benefit will suffice. Similarly, the
rule of automatic transfer of an arbitration agreement alongside the main contract does
not require proof that the assignee has specifically consented to the assignment of the
arbitration clause; consent for the assignment of the substantive right will be sufficient.
8.112 More importantly, theories of implied consent have unwarrantedly relied on certain
fact-patterns to infer consent for arbitration. As was discussed in Section I in detail, a
number of tribunals have ascertained consent for arbitration on the basis that a non-
signatory has been actively involved in the performance of a substantive contract, which
P 146 contains an arbitration clause, and it has close corporate, including organizational
and financial, links with a signatory. (114) However, it is questionable whether a corporate
group structure and active involvement of non-signatories in the main contract should be
taken to suggest that there is common intention of both the signatories and the non-
signatory to arbitrate.
8.113 For example, it is difficult to see why the close corporate links between a signatory
and a non-signatory should weigh more in terms of evidence of arbitration assent than
the fact that the non-signatory failed to sign the main contract or the arbitration clause
therein. At face value, the decision of a party not to be included as a signatory to a
contract should be accepted as a conscious decision not to be bound by that contract.
(115) At least, it should set a strong presumption that both the signatory and the non-
signatory did not intend to arbitrate. In ICC case no 10758 of 2000, the tribunal rightly
held that:
By not signing the Contract, [the non-signatory] intended to respect the legal
independence of [its affiliate signatory] 's legal personality and to be in
harmony with the privity of contract principle, that is to say precisely not to
become a party to the Contract nor to its arbitration clause. (116)
8.114 Similarly, it is questionable why the fact that a non-signatory company is involved
in the negotiation or the performance of a contract should suggest that the non-signatory
has accepted to be bound by that contract. In contemporary business, multinational
groups often adopt complex corporate structures that allow for maximum operational
13
flexibility. This requires division of labour within the group, so that different companies
become involved in different stages of a single contractual transaction. A non-signatory
company of a group may well participate in the performance of a contract as a mere
executing branch of the group to carry out a specific task. This is not at all evidence that
this company agrees to be bound by the contract. As has rightly been noted, where a non-
signatory parent company assists the subsidiary in the completion of the project 'implied
consent would not be the only conclusion. The parent might well be performing the
services on a fee basis, as any unrelated party could do. In such event, arguments would
be weak that involvement in the project indicated implied consent.' (117)
8.115 Moreover, and most crucially, the conduct of non-signatories, which has allowed
tribunals to ascertain arbitral intention, typically concerns the substantive part of the
contract, including for example involvement of the non-signatory in the negotiations of a
contract, or the performance of the contract. (118) Why should conduct concerning the
underlying substantive contract be taken as evidence of consent to arbitration?
P 147
8.116 As has rightly been noted by Gary Born 'it is important to apply the various legal
bases for binding non-signatories specifically to the 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.' (119) Born further notes, 'It is a party's implied consent
to arbitrate— not to deliver or purchase goods—that is decisive'. (120)
8.117 Occasionally, the non-signatory may not even be aware of the existence of an
arbitration clause. (121) But even if the non-signatory party is aware of the existence of an
arbitration clause in the contract is mere awareness sufficient to lead to consent?
8.118 French courts seem to think that this is possible. As the Cour d'Appel of Paris in
Korsnas Marma v Durand-Auzias first noted:
an arbitration clause included in an international contract has an autonomous
validity and effectiveness, which calls for the clause to be extended to parties
directly involved in the performance of the contract and in the disputes
arising out of the contract, provided that it is established that their activities
raise the presumption that they were aware of the existence and the scope of
the arbitration clause, irrespective of the fact that they did not sign the
contract including the arbitration agreement. (122) (emphasis added)
8.119 Since then, the argument of the 'autonomous validity and effectiveness of
arbitration agreements' has been reiterated by the Paris Cour d'Appel in a number of
P 148 cases, (123) and was more recently approved by the Cour de Cassation in the ABS v
Amkor case. (124) Here, Alcatel Micro Electronics (AME), a Belgian company entered into a
sale of electrical components contract, containing an arbitration clause with Amkor
Technology, an American company. Subsequently, AME and its business partner Alcatel
Business Systems (ABS), a French company, brought a court action against Amkor
Technology and its two French subsidiaries. Amkor Technology and the two subsidiaries
relied on the arbitration clause in the contract between the parent company Amkor and
AME to challenge the jurisdiction of French courts. The Cour de Cassation accepted that
the arbitration agreement was binding upon the non-signatories ABS and the two
subsidiaries of Amkor on the basis that they had actively involved in the performance of
the sale contract between AME and the parent Amkor. The Cour de Cassation particularly
noted that 'the effect of an international arbitration clause extends to parties that are
directly involved in the performance of the contract and the disputes that may arise out
of it', (125) which arguably goes even further than the Paris Cour d'Appel.
8.120 Such a functional concept of broad consent rests upon two assumptions: first, that
an arbitration clause is ancillary to the main contract. This is why we are willing to accept
that an arbitration clause can automatically be assigned: because it is a procedural
remedy attached to the underlying substantive right, which is transferred altogether,
including the arbitration clause, to the assignee without the need for separate
agreement. (126) This is also why we are willing to accept that conduct of a non-signatory
concerning the main underlying contract is sufficient to suggest consent to the arbitration
clause, contained in the main contract. While this a sensible approach, which enhances
the commercial effectiveness of arbitration agreements, it is nevertheless an approach
that conflicts with the generally accepted principle of separability, which calls for
arbitration clauses to be treated as autonomous and independent of the main contract.
Of course, we are happy to treat the principle of separability as a legal fiction to give
effect to arbitration agreements rather than as an inflexible legal construct, which might
unnecessarily hinder the extension of arbitration clauses to non-signatories. (127) This is
P 149 again a sound approach, but we must acknowledge that in order to give effect to
arbitration agreements and allow them to bind non-signatories, the important legal
principles of separability and autonomy of arbitration agreements have to give way. (128)
8.121 The second assumption upon which a functional concept of broad consent rests is
that an arbitration agreement which already exists requires "less consent" or at least
"less evidence of consent" to bind a non-signatory party than the original parties. This is
14
why we generally accept that, while evidence of an arbitration agreement in writing is
necessary when the original signatories enter into an arbitration agreement, the formal
requirement of writing is not needed for non-signatories that are subsequently added to
an existing arbitration agreement. (129)
8.122 This is also why we employ language to the effect that an arbitration agreement is
"extended to non-signatories".
8.123 The underlying idea here is that the issue of whether a non-signatory can be added
to an arbitration agreement which already exists is a matter of scope rather than validity
of the arbitration agreement. This is especially the case when tribunals and courts are
examining whether to compel a signatory to arbitrate with a non-signatory. As is argued,
once a party has effectively made itself a party to an arbitration agreement, the question
is more a matter of how broad its consent to arbitrate is (i.e. a question of scope) than a
matter of whether it wanted to arbitrate at all (i.e. a question of validity). (130)
8.124 While this approach may enhance the efficiency of arbitration clauses in complex
P 150 factual circumstances involving non-signatories, it is very difficult to reconcile with
fundamental principles of consent. An arbitration agreement cannot bind a third party
merely because it exists between two others. The only way to determine whether a non-
signatory is bound by an arbitration agreement is to examine whether the non-signatory
and the signatories have agreed to arbitrate—and this question must be answered
independently of whether the arbitration agreement already exists. (131) The same
amount of consent and evidence of consent is required for a non-signatory party to be
bound by an arbitration clause as by any ordinary contract. (132) There is no exceptional
rule found in arbitration law or arbitration treaty providing that arbitration clauses
require less amount of consent or evidence of consent. In fact, arbitration laws and
treaties deal only with formal validity, (133) exactly because the requirements of
substantive validity of arbitration agreements are left to general principles of contract
law. (134)
IV A DIFFERENT APPROACH TO NON-SIGNATORIES IN INTERNATIONAL

ARBITRATION
8.125 From the discussion and analysis in the first two Parts, it becomes clear that when
we employ one of the existing non-signatory theories, we either rely on equitable (i.e.
non-consensual) considerations or we treat consent as a functional legal construct which
is markedly different from the concept of consent that we normally use to test whether
two signatories have agreed to arbitrate. By doing so, we effectively employ these
theories as legal fictions "so that our square spade can dig a nice round hole" big enough
to accommodate commercial reality and complex disputes both involving signatory and
P 151 third parties. (135)
8.126 These legal fictions have been largely working well in arbitration, and tribunals
have been routinely accepting jurisdiction over non-signatories. Yet, there are a number
of issues associated with these non-signatory theories.
8.127 First, while a number of jurisdictions have been keen to endorse the theory of
implied consent, and the underlying concept of functional consent, others, notably
common law jurisdictions, have consistently opposed to it. The English Supreme Court in
Dallah, for example, was rather unimpressed by the proposition that the non-signatory
Government of Pakistan had implicitly consented to arbitration on the basis that first, the
Government of Pakistan was a party to the Memorandum of Understanding, which
preceded the main contract; second, it agreed to act as a guarantor of the signatory Trust;
and third, the Trust used stationary of the Government of the Pakistan to communicate
with Dallah.
8.128 As Lord Collins noted:
There was no material sufficient to justify the tribunal's conclusion that the
Government's behaviour showed and proved that the Government had always
been [..] a true party to the Agreement and therefore to the arbitration
agreement. On the contrary, [...] on the face of the Agreement the parties and
the signatories were Dallah and the Trust. The arbitration clause related to
disputes between the Trust and Dallah. (136)
8.129 These are exactly the same facts which the arbitral tribunal in Dallah (endorsed by
the French Cour d'appel) found to be a "comprehensive set of evidence that may be
relied upon to conclude that the Defendant is a true party to the Agreement".
8.130 It is reassuring to think that the English Supreme Court had merely a different take
on the facts of the case here. However, the truth of the matter is that the difference
between French law and English law on the issue of proof for arbitral consent is
fundamental. Indeed, for English Courts the notion that consent to arbitration can be
evidenced by means other than in writing is improbable, if not altogether inexpedient.
8.131 This is why English courts refused to accept in Peterson Farms that common
intention of the parties can be determined on the basis of transnational rules. This is also
why the English Court of Appeal in Dardana v Yukos refused to accept that a non-signatory
15
P 152 which failed to provide consent in writing was bound by arbitration. (137)
8.132 Similarly, the US Court of Appeal in Bridas v Turkmeneft (138) questioned the
proposition that a non-signatory party can be compelled to arbitrate on the basis of a
functional concept of consent evidenced by conduct. It noted:
Had Bridas truly felt that Turkmenneft was signing the agreement not for itself
but on behalf of the Government, it had the obligation to make that fact clear
on the face of the agreement. This could have been accomplished in a myriad
of ways. Bridas could have requested that the Government sign the agreement,
or inserted a prominent and direct statement as to Turkmenneft's status.
Bridas has not presented any evidence that would permit us to excuse such an
oversight. Bridas was doubtlessly well aware of the risks inherent in investing
in countries of the former Soviet Union in 1993, and the possibility that its
investment would be swept away in political turmoil. We will not bind the
Government to the agreement, simply because Bridas lost a gamble that it
was willing to take. To do otherwise would vitiate the predictability of the
legal backdrop against which the parties voluntarily agreed to do business.
8.133 The second issue with the existing non-signatory theories is that most of them have
been broadly borrowed from contract or corporate law; they have not been organically
developed for arbitration law. Arbitration law, however, is not a version of contract or
corporate law; it is an autonomous field of law with a distinct jurisdictional nature and
purpose. While the main question for corporate and contract law is whether a party is
substantively liable, the main question for arbitration law is whether a tribunal has
jurisdiction to resolve a certain dispute.
8.134 Employing legal theories, which have been originally developed to answer
questions of liability, in order to answer questions of jurisdiction may lead to unintended
practical consequences. Take, for example, the theory of lifting the corporate veil which
was originally developed and mainly used to hold a company liable for the substantive
debts of an affiliate company, (139) rather than to bind a parent company to an
arbitration agreement signed by its subsidiary. While the former question is a matter of
substance, the latter is a matter of jurisdiction. It is unwarranted to determine the
jurisdictional question of whether a tribunal can assume jurisdiction over the non-
signatory parent company on the basis of a legal theory whose main purpose is to
determine whether the controlling parent company can be held liable for acts and
omissions of the affiliate signatory. Naturally, therefore, national courts and tribunals
have been extremely reluctant to extend an arbitration agreement to a parent company
on the basis of alter ego or piercing the corporate veil theories. While this is a sensible
approach in terms of corporate law, it is mostly inefficient for the purposes of arbitration
law. It cannot be right that a tribunal will assume jurisdiction over a non-signatory parent
only if it is found substantively liable too.
8.135 Third, and possibly interrelated, in a number of non-signatory theories tribunals
tend to look for artificial evidence of consent. Whether a signatory and a non-signatory
form part of a corporate group structure, for example, or whether a non-signatory parent
controls a signatory subsidiary may be relevant for the merits of the dispute, but it
P 153 cannot be taken as proxy of consent for arbitration.
8.136 As Hanotiau has rightly observed, this type of analysis is wrongly used as a "shortcut
to avoid legal reasoning and as such has contributed to a distorted approach by courts
and arbitrators in a number of complex arbitrations". (140)
8.137 Eventually, the current non-signatory theories have required courts and tribunals to
engage in a complex quest for elusive consent, through fact patterns and presumptions of
consent which compromise basic principles of contract law and have questionable
practical value.
8.138 Thus, one cannot help wondering whether arbitration practice as well as arbitration
doctrine would not benefit from a more consistent, more inclusive and, eventually,
intellectually more honest approach to non-signatories.
8.139 Such an approach would require us to focus not on putative consent of non-
signatories, but on the scope of the dispute submitted for arbitration and the scope of the
original arbitration clause.
8.140 If a dispute strongly implicates a non-signatory and is covered by a broad
arbitration clause, a tribunal should have jurisdiction to decide this dispute, even if that
means that it has to assume jurisdiction over a party that has not signed the arbitration
clause.
8.141 Such an approach does not require a legal theory or construct to justify jurisdiction
of an arbitral tribunal over a non-signatory. As was seen above, the currently prevailing
approach to non-signatories relies on a wide range of legal theories and constructs, often
borrowed from contract and corporate law, to ascertain putative consent of non-
signatories. In the approach suggested here, no theory of putative consent is required.
The legal concept of "dispute" together with the scope of an arbitration agreement
provides the foundations for the jurisdiction of an arbitral tribunal. It is generally
accepted that an arbitral tribunals derives its jurisdiction from an arbitration agreement.
16
This is only partially correct. An arbitral tribunal will have no jurisdiction, unless a dispute
arises with regard to a contract containing an arbitration agreement. In their arbitration
agreements, the parties typically employ wording whereby arbitration is predicated
upon the eventuality that a dispute arises ("If any dispute arises between the parties in
connection with this contract, the dispute shall be referred to arbitration"). Thus, without
a dispute, an arbitration agreement and, therefore, the jurisdiction of an arbitral tribunal
will remain a "sleeping beauty".
8.142 Whether a certain dispute can ("kiss" and) awaken the jurisdiction of an arbitral
tribunal depends on the scope of an arbitration agreement. A widely drafted arbitration
agreement may allow "any" or "all disputes" "in connection with a contract" to be
determined by an arbitral tribunal. It follows that whether a tribunal has jurisdiction to
determine a dispute involving a non-signatory party will depend on whether the tribunal,
with the power of competence-competence, finds that such a dispute is "connected with
the contract". In many cases, and depending on the factual circumstances, a dispute
involving a non-signatory will not be sufficiently implicated with the dispute submitted
to arbitration. However, one would be hard pressed, for example, to conclude that the
dispute between the Government of Pakistan and Dallah was not "in connection with" the
contract between Dallah and the Trust.
8.143 The crucial role of the concept of "dispute" in the question of non-signatories in
P 154 arbitration has been acknowledged by several courts and tribunals.
8.144 For example, in Choctaw Generation v American Home Assurance, a construction
company entered into a contract with the owner under which the contractor had to
provide engineering and construction services, the performance of which was secured by
a letter of credit provided by a surety company. The construction contract between the
owner and the contractor contained an arbitration clause, whereas the letter of credit
(the security contract) contained no arbitration agreement.
8.145 When the owner commenced court proceedings against the surety, the latter relied
on the arbitration agreement contained in the construction contract between the owner
and the contractor requesting the court to order arbitration. The US Second Circuit held
that the claim of the owner against the non-signatory surety was for a tribunal to
determine, not a national court. The Court considered that the claim against the non-
signatory surety was effectively part of the dispute which was the main subject matter of
arbitration proceedings between the owner and the contractor. The Court noted that the
claim of the owner against the non-signatory surety "concerns the duty to replenish a
letter of credit maintained under the Construction Contract, and requires a ruling as to
whether that duty is independent of certain others in the context of the Construction
Contract as a whole" (141) and also that:
The underlying dispute between [the contractor] and [the owner], concerning
[the owner's] entitlement to liquidated damages, is now in the early stages of
arbitration, and entails the construing of a dozen provisions of the Construction
Contract. The immediate dispute in this action between [the owner] and [the
surety], concerning whether [the owner] can compel immediate replenishment
of the letter of credit to fund the liquidated damages, turns upon many of the
same provisions .1 (142) (emphasis added)
8.146 Thus, the Court held that: ‘The controversy presented on this appeal [between the
owner and the surety] is linked textually to the Construction Contract, and its merits are
bound up with the dispute now being arbitrated between [the owner] and [the
contractor].' (emphasis added) (143)
8.147 A similar approach was taken in McBro Planning Development v Triangle Electrical
Construction. (144) Here, an electrical engineer brought a lawsuit against a construction
manager on the basis that the construction manager had intentionally interfered with the
contract between the electrical engineer and the owner and had harassed and hampered
its electrical work. The construction manager relied on the arbitration clause contained
in the construction contract with the owner requesting the court to compel the non-
signatory electrical engineer to arbitrate. The US Eleventh Circuit held that the claim of
the non-signatory electrical engineer against the construction manager was for the
arbitral tribunal to determine, not a national court. The Court found that the claim of the
P 155 non-signatory electrical engineer was effectively part of the dispute which was the
main subject matter of arbitration proceedings between the owner and the construction
manager. The Court held:
Although the [construction] contract between [the owner and the electrical
engineer] disclaims any contractual relationship between the [construction
manager] and [the electrical engineer], the general conditions of that contract
are replete with references to the [construction manager's] duties as
construction manager, on behalf of the owner, as regards supervision of the
project, for which [the electrical engineer] was a contractor. [..] The electrical
engineer's claims are 'intimately founded in and intertwined with the underlying
contract obligations.’ (emphasis added) (145)
8.148 In the French case Kis France and other v Société Générale and other, (146) KIS France
17
entered into a contract with Société Générale (the Basic Agreement) containing an ICC
clause, for the sale of the mini-laboratories in different states by means of leasing
through local subsidiaries. Local Agreements executing the Basic Agreement were
subsequently concluded by the local subsidiaries of Société Générale and KIS France,
among which a Local Agreement was singed between Sogelease Corporation (subsidiary
of Société Générale) and KIS Corporation (US subsidiary of KIS France) for the sale of the
mini-laboratories in the USA.
8.149 Two further agreements followed: first, an Addendum to the Basic Agreement,
signed between Société Générale and KIS France; second, the 'Grenoble Agreement'
between Société Générale, acting on its own behalf and on behalf of its subsidiary
Sogelease Corporation, and KIS Photo (another company of the Kis group) acting on its
own behalf and on behalf of its subsidiary KIS US. The local agreements and the
addendum made reference to the arbitration agreement contained in the Basic
Agreement.
8.150 When a dispute arose in relation to unpaid lease rent, Société Générale and the two
non-signatory subsidiaries Sogelease Pacifique and Sogelease, brought a claim against
the signatory KIS France and the non-signatory KIS Photo and KIS Corporation, on the
basis that the co-respondents were jointly and severally liable for the amounts which KIS
Corporation allegedly owed Sogelease Corporation under the Basic Agreement, the Local
Agreement, and the Grenoble Agreement of 1 July 1985.
8.151 The ICC tribunal held that it had jurisdiction to hear the claims of Société Générale
and its non-signatory subsidiaries against KIS France and non-signatory KIS Photo and KIS
Corporation. The crucial point for the tribunal was that the main dispute strongly
implicated both signatory and non-signatory parties. The tribunal found that in several
different but interrelated contracts the two co-respondents had jointly and severally
assumed obligations towards all the co-claimants, signatories and non-signatories.
8.152 The award was confirmed by the Court of Appeal of Paris. The French appellate
Court noted that the Local Agreements referred to the arbitration clause in the Basic
Agreement. However, the Court also focused on the dispute and its implications to non-
signatories, examining the wider substantive network of rights and duties which were
implicating both parties and third parties. The Court held:
In granting the claim filed by Société Générale and its subsidiaries against KIS
France and KIS Photo, the arbitrators examined the agreements between the
parties and held that the parties' mutual obligations were inexorably linked
P 156 and that the parent companies played a dominant role vis-à-vis their
subsidiaries, which were bound to abide by the former's commercial and
financial decisions. KIS France agreed in the Basic Agreement (Art. VII) that it
would 'take all necessary measures to ensure that its foreign subsidiaries
fulfill their obligations with respect to the local leasing subsidiaries of Société
Générale under the present agreement and the Local Agreements to follow'.
8.153 And further:
The arbitrators inferred from the contractual relationships between the two
groups of companies that there was a common intention of the parties to
consider KIS France and KIS Photo liable for any amounts owed by them or
their subsidiary KIS Corporation.
8.154 Eventually, the non-signatory claims submitted to arbitration were inseparable
from the dispute between KIS France and Société Générale, which was the main subject
of the arbitration.
8.155 In ICC case no 9762 of 2001, (147) a contractor brought a claim against, among others,
the Ministry of Agriculture and Food of State Z that was a party to the contract containing
an ICC arbitration agreement, and a claim against the non-signatory State Z. The tribunal
assumed jurisdiction over both the claim against the signatory Ministry of Agriculture and
Food and the non-signatory State Z, on the basis that both respondents were potentially
responsible and liable vis-à-vis the claimant. The tribunal noted that: ‘The right of a
claimant to act against all possible responsible subjects cannot be denied' (148) and that
'no distinction can be made between the liability of first respondent [the Ministry] and
third respondent [State Z] (if any).' (149) The tribunal recognized that the scope of the
tribunal's jurisdiction must be determined in light of the substantive background of the
dispute submitted to the tribunal, and that the substantive commitments of the several
parties are relevant for a tribunal to assume jurisdiction over a third-party claim:
[..] the mandatory force of the arbitration clause (or arbitration agreement)
cannot be dissociated from that of the substantive contractual commitments.
This may be the case of companies belonging to the same 'group of
companies', whenever there is a sufficient evidence of the global liability of
the 'group'. This may be the case of an individual partner being bound by an
arbitration clause signed by a general partnership. This may also be the case
of States when engaging in transactions of an economic nature through one of
their administrative bodies, or even through a separate legal entity provided,
18
in this last case, that the State has full control over it and is bound by the acts
of it. (150)
8.156 In the ICC case 8910 of 1998, (151) a French company (claimant) and a United
Emirates of Arab company (first respondent) entered into an agreement for the exclusive
distribution of the products of the claimant in the Emirates market. The contract
provided for French substantive law and contained an ICC arbitration clause. On the
P 157 same day, the claimant signed two further agreements:
a. First, a tripartite agreement with the first respondent and one of its subsidiaries
(second respondent). The agreement provided that the second respondent would at
some point take over the execution and performance of the exclusive distribution
agreement. This agreement did not contain an arbitration clause and made no
reference to the arbitration agreement in the exclusive distribution agreement.
b. Second, a guarantee agreement with the owner of the first respondent (third
respondent) providing guarantee for the performance of the two companies. The
guarantee contained no arbitration clause either.
8.157 The French company brought an arbitration claim against the signatory parent and
the non-signatory subsidiary and the guarantor. The tribunal focused on the network of
substantive rights and obligations arising out of the exclusive distribution agreement and
the tripartite agreement. The tribunal found that this network of substantive rights
strongly implicated the signatories and the non-signatories, and held that it had
jurisdiction over them.
8.158 It noted:
The unique operation provided by the parties in the exclusive distribution
agreement and the tripartite contract, namely the distribution of the
claimant's products in the Emirate's market, and the purposes of each
contract were interdependent' (152) and 'The tripartite convention was
dependent upon the exclusive distribution agreement [...] and the both
constituted a contractual unit'. (153)
8.159 In effect, the claim against the non-signatory subsidiary was strongly interrelated
with the exclusive distribution agreement that was the main subject of the tribunal's
jurisdiction. (154) At the same time, the tribunal rightly refused to hear the claim against
the non-signatory guarantor. The tribunal found that as opposed to the tripartite
agreement that provided for interwoven rights and obligations, necessarily implicating
signatories and non-signatories in the dispute before the tribunal, the guarantee contract
provided for unilateral duties of the guarantor and 'constituted an extrinsic element' to
the distribution agreement. (155) Thus, the claim against the third-party guarantor was
clearly distinguishable from the main contract and the tripartite agreement, and was
P 158 outside the scope of the tribunal's jurisdiction. (156)
8.160 Finally, an Investment Treaty Tribunal in the recent award on jurisdiction and
admissibility in Alemanni v Argentine Republic, (157) employed the concept of dispute to
determine whether it had jurisdiction over a large number of claimants. As is well-known,
Alemanni involved claims asserted by 74 Italian bondholders following Argentina's
default on certain sovereign bonds. One important question considered by the
jurisdictional award was whether the Respondent State has consented to multiparty
arbitration. While the Respondent argued that multi-party arbitration is possible only if
the Respondent has given a "second, special consent to that effect", the Claimant argued
that the Respondent's specific consent is of no relevance for multiparty arbitration. The
tribunal noted that it was "not impressed by either of the two opposing arguments". (158)
Instead, the tribunal framed the question of the Respondent's consent as effectively a
question of whether the large number of claims in this particular matter could be
considered to constitute "a dispute" (159)
8.161 In this respect, the Tribunal considered the key question to be whether "the words
'dispute arising directly out of an investment between a Contracting State... and a
national of another Contracting State' [found in the relevant BIT]'." As the Tribunal noted
it is perfectly possibly that a dispute implicates many parties on either side (in this case
on the Claimant's), in which case it would be proper for the Tribunal to assume
jurisdiction over the multiple parties.
8.162 Turning to the importance of the scope of an arbitration agreement in the question
of jurisdiction over non-signatories. A number of court decisions and arbitral awards have
focused their analysis on whether an arbitration clause is sufficiently broad to cover a
dispute implicating non-signatories.
8.163 For example, in JLM v Stolt-Nielsen the Second Circuit focused on the scope of the
arbitration agreement in the charterparty to accept jurisdiction over a non-signatory,
noting:
[R]ecognizing there is some range in the breadth of arbitration clauses, a court
should classify the particular clause as either broad or narrow. [...] Where the
arbitration clause is narrow, a collateral matter will generally be ruled beyond
its purview. Where the arbitration clause is broad, there arises a presumption
19
of arbitrability and arbitration of even a collateral matter will be ordered if
the claim alleged implicates issues of contract construction or the parties'
rights and obligations under it. (160)
8.164 Accordingly, the Court concluded: 'Because the [present] arbitration clause is
broad, its coverage extends to "collateral matters”' (161) (i.e. the claim of the non-
P 159 signatory against the signatory).
8.165 Similarly in MS Dealer (162) the 11th Circuit compelled the signatory buyer to
arbitrate her claim against the non-signatory car service company alleging fraud. The
court took account of the broad wording of the arbitration clause in the sale of car
contract between the buyer and the car dealer, noting:
We acknowledge that Franklin has cast all of her claims against MS Dealer as
tort claims rather than contract claims. 'However, it is well established that a
party may not avoid broad language in an arbitration clause by attempting to
cast its complaint in tort rather than contract'. In addition, we note that the
arbitration clause specifically requires arbitration of' [a] ll disputes and
controversies of every kind and nature ... arising out of or in connection with
this contract, its subject matter or its negotiation, as to ... any claim alleging
fraud in fact [or] fraud in the inducement.’. (163)
8.166 Finally, in Fluehmann v Associates Financial Services, (164) it was held:
In the instant case, the subject arbitration provision is ostensibly broad, covering any
dispute that may 'arise under' or 'relate to' the Loan Agreement. When confronted with
such broad language, courts presume the validity of an agree ment to arbitrate [...] and
generally find that similarly broad arbitration clauses governing 'all disputes' arising
under the agreement apply even to a nonsigna-tory. The baseline assumption here,
therefore, is that the Arbitration Agreement casts a wide net. (165) (emphasis added)
V CONCLUSIONS
8.167 Due to the increasing complexity of international business transactions that often
implicate several parties, non-signatories will continue to test the bilateral nature of
international arbitration. The existing theories for non-signatories are based on the idea
that non-signatories can be voluntarily bound by an arbitration clause by conduct.
8.168 This Chapter challenged the prevailing view that non-signatory theories are firmly
based on consent for arbitration. More specifically, it demonstrated that, often, when a
non-signatory theory is employed to extend the arbitration agreement, we either rely on
equitable (i.e. non-consensual) considerations or we treat consent as a functional legal
construct which is markedly different from the concept of consent that we normally use to
test whether two signatories have agreed to arbitrate. By doing so, we effectively employ
the non-signatory theories as nothing more than legal fictions that purport to
accommodate commercial reality and complex disputes, and preserve the sanctity of the
principle of consent.
8.169 While these legal fictions have been largely working well in arbitration, and
tribunals have been routinely accepting jurisdiction over non-signatories, the Chapter
demonstrated that these legal fictions are associated with a number of practical as well
as conceptual issues. Eventually, the current non-signatory theories have required courts
and tribunals to engage in a complex quest for elusive consent, through fact patterns and
P 160 presumptions of consent which compromise basic principles of contract law and have
questionable practical value.
8.170 Departing from this last observation, this Chapter put forward a new approach for
non-signatories in international arbitration. As was argued, it is difficult to provide a
coherent and effective solution to the inherent difficulties of multiparty disputes in
arbitration, unless we focus on the concept of dispute and its potential repercussions on
non-signatories. As was suggested, to determine the boundaries of its jurisdiction, a
tribunal should take account of the full implications of the pending dispute, and assume
jurisdiction over non-signatories, provided that they are strongly implicated in the
dispute that is the main subject of the arbitration.
8.171 Overall, the traditional non-signatory theories have arguably the same objective as
the jurisdictional approach suggested here. Both approaches allow tribunals to extend
their jurisdiction over non-signatories.
8.172 However, he jurisdictional approach suggested here exhibits a crucial advantage
over the traditional contractual approach and the non-signatory theories. While the
latter focus on peripheral issues such as 'signature' and 'evidence of putative consent',
the jurisdictional approach focuses on what really matters in an arbitration, namely the
dispute. It therefore allows the tribunal to determine its jurisdiction on a basis closer to
commercial reality.
8.173 Eventually, the jurisdictional approach enhances the commercial relevance of
arbitration and increases its effectiveness in complex multiparty disputes in particular.
International commerce becomes increasingly complicated and companies are
20
organized on the basis of previously unknown forms. In order to remain commercially
relevant and effective, arbitration must be able to take the new developments in
international commerce into account, especially for jurisdictional purposes. Otherwise,
parties with an important role in the commercial aspect of the dispute might be left
outside the scope of arbitration for lack of sufficient evidence of consent.
P 160
References
*) Professor in International Arbitration and Commercial Law, Centre for Commercial
Law Studies, Queen Mary University of London.
1) See B Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-issue, and
Class Actions (Kluwer, 2003); Permanent Court of Arbitration (ed), Multiple Party
Actions in International Arbitration (Oxford University Press, 2009); Complex
Arbitrations, Perspectives on their Procedural Implications, ICC International Court of
Arbitration Bulletin Special Supplement (2003); M Blessing, 'Extension of the
Arbitration Clause to Non-Signatories', in Arbitration Agreement: Its Multifold Critical
Aspects (1999) 8 ASA Special Series 161; Y Derains, 'L'Extension de la clause
d'arbitrage aux non-signatories: la doctrine des groupes de sociétés', in Arbitration
Agreement Ibid 242; A Dileo, 'The Enforceability of Arbitration Agreements by and
against Nonsignatories' (2003) 2 Journal of American Arbitration 31; J Hosking, 'Non-
Signatories and International Arbitration in the United States: The Quest for
Consent', (2004) 20(3) Arbitration International (2004) 292; E Loquin, 'Arbitrage et
Cautionnement' (1994) Rev Arb 236; I Fadlallah, 'Clause d'arbitrage et groupes de
sociétés' (1987) Travaux du Comité Français de Droit International Privé 1984–1985 105
; P Martines-Fraga 'The Dilemma of Extending International Commercial Arbitration
Clauses to Third Parties: Is Protecting Federal Policy While Accommodating
Economic Globalization a Bridge to Nowhere?', Cornell Int'l L.J. (2013) 291 ;F Nicklisch,
'Multi-Party Arbitration and Dispute Resolution in Major Industrial Projects' (1994) 11
(4) J Int'l Arb 69 et seq; O Sandrock, 'Extending the Scope of Arbitration Agreements
to Non-Signatories', in Arbitration Agreement Ibid 165; C Stippl, 'International Multi-
Party Arbitration: The Role of Party Autonomy' (1994) 7(1) Am Rev Int Arb 49–50; J M
Townsend, 'Non-Signatories in International Arbitration: An American Perspective',
in ICCA International Arbitration Congress, International Arbitration 2006: Back to
Basics? (Kluwer Law International, 2007); N Voser, 'Multi-party Disputes and Joinder
of Third Parties', in A-J van den Berg (ed), Years of the New York Convention: ICCA
International Arbitration Conference, ICCA Congress Series, 14 (2009) 345; T
Zuberbühler, 'Non-Signatories and the Consensus to Arbitrate' (2008) 26 ASA Bulletin
21; I Schwenzer and F Mohs, 'Arbitration Clauses in Chains of Contracts', (2009) 27(2)
ASA Bulletin) 230–1.
2) See J Lew, L Mistelis, and S Kröll, Comparative International Commercial Arbitration
(Kluwer Law International 2003), para 7–3 et seq; P Fouchard, E Gaillard, and B
Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage (1999),
para 498.
3) P Muchlinski, Multinational Enterprises and the Law (Blackwell, 1999) 62.
4) I am grateful to Audley Sheppard for this wonderful metaphor.
5) See also the In Dardana Ltd v Yukos Oil Co [2002] EWCA Civ 543, decision of the
English Court of Appeal, which has too been reluctant to accept the idea that a non-
signatory can be bound by an arbitration agreement by acts or statements.
6) Schiffahrtsgesellschaft Dedlev Von Appen v Voest Alpine Intertrading (The 'Jay Bola')
[1997] 2 Lloyd's Rep 279 at 291. The principle was later applied in Through Transport
Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co Ltd [2005]
EWHC455 (Comm) and West Tankers Inc v RAS Riunione Adriatica Sicurta Spa [2007]
EWHC 2184 (Comm); a similar position had been taken in Montedipe v JTP-Ro
Jugotanker (The Jordan Nicolov) [1990] 2 Lloyd's Rep 11, where it was held that the
assignee 'is bound by the arbitration clause in the sense that he cannot assert the
assigned right without also accepting the obligation to arbitrate', at p 15. Same in
The Padre Island [1990] 2 Lloyd's Rep 191 at 200, where it was held that: 'The
agreement to arbitrate is one which regulates the means by which the transferred
right is to be enforced against the Club. As such, it is inevitable that such an
agreement must be treated as transferred to the statutory transferee as part of, or
as inseparably connected with, the member's right against the Club under the rules
in respect of the relevant liability.' However, see The London Steamship Owners v
Bombay Trading (The Felicie) [1990] 2 Lloyd's Rep 21, where Phillips J expressed
doubts about the assignability of arbitration agreements: 'I am driven to the
conclusion that there is no wholly satisfactory explanation for the basis upon which
[...] by assignment inter partes the transferee acquires the right and obligation to
arbitrate in his own name.' Note that under English law (s 82(2) Arbitration Act) the
assignee is considered to be a person 'claiming under or through a party to the
[arbitration] agreement' (although in essence the assignee claims instead (in place
of) rather than under or through the assignor).
21
7) CMA CGM SA v Hyundai MIPO Dockyard Co Ltd [2008] EWHC 2791 (Comm); [2008] 2 CLC
687.
8) In France (presumption of automatic transfer: see P Fouchard, E Gaillard, and B
Goldman, on International Commercial Arbitration, ed E Gaillard and J Savage
(Kluwer, 1999) para 716.
9) Cour de Cassation, 8 February 2000, (2000) Rev Arb 280, with note Gautier.
10) At 281, 'la clause d'arbitrage international s'impose toute partie venant aux droits
de l'un des contractants).' Similarly Cour de Cassation, 5 January 1999, Banque
Worms v Bellot (2000) Rev Arb 85, with note Mayer; and Cour d'Appel de Paris, 25
November 1999, SA Burkinabe des ciments et mat.riaux v Soc des ciments d'Abidjan
(2001) Rev Arb 165.
11) Switzerland Swiss Federal Tribunal, 9 May 2001, (2002) 20 ASA Bull 80. See also Swiss
Federal Tribunal, 7 August 2001, (2002) 20 ASA Bull 88, and Swiss Federal Tribunal, 16
October 2001, (2002) 20 ASA Bull 97. See also M Scherer, 'Th ree Recent Decisions of
the Swiss Federal Tribunal Regarding Assignments and Transfer of Arbitration
Agreements: Note—Decisions of 9 May 2001, 7 August 2001 and 16 October 2001',
(2002) 20(1) ASA Bull 109–20.
12) Star-Kist Foods v Diakian Hope 423 F Supp 1220 (CD Ca 1976); Asset Allocation and
Management v Western Employer 892 F 2d 566 (7th Cir 1989) holding that an
arbitration clause is transferred to and binding upon the assignee.
13) See OGH 13 June 1995, 4 Ob 533/95, SZ 68/112, in S Riegler and C Koller, 'National
Report on Austrian Arbitration Law', in L Mistelis and L Shore (eds), World Arbitration
Report (Juris, 2010), held that when a business or assets are transferred, the buyer is
bound by the arbitration agreement the seller had concluded.
14) In India, Hindustan Steel Works Construction Ltd v Bharat Spun Pipe Co,
MANU/WB/0003/1975 (except the case where the contract is a personal covenant,
which would depend upon the language of the contract and the arbitration clause).
15) In Japan the same, except in the case of endorsement (assignment) of an arbitration
agreement contained in a promissory note, which has been held by Japanese courts
to be of a particular nature that does not allow for automatic assignment
(endorsement) of the contained arbitration clause, which would require a specific
consent of the assignee, see Hiroyuki Tezuka, 'Who is a Party: Case for the Non-
signatory', in Collection of Papers at ICC International Court of Arbitration &
Singapore International Arbitration Center Symposium on Institutional Arbitration
in Asia (2005) 63–5.
16) 12 November 1990—Bundesgerichtshof (Federal Supreme Court), in A-J van den Berg
(ed), Yearbook of Commercial Arbitration xvii (Kluwer Law International, 1992) 510–
12.
17) In Greece Areios Pagos (Supreme Court) 176/1976, (1976) Nomiko Vima 706; Athens
Court of Appeal 4830/1977, (1978) Elliniki Dikaiosini 720; Athens Court of Appeal
343/1995, (1998) Diki 473, and A Mantakou, Arbitration Agreement in International
Transactions [in Greek] (Athens, 1998) 260.
18) The same is accepted in Sweden, see eg Supreme Court of Sweden, 15 October 1997,
MS Emja Braack Shiff ahrts v W.rtsil. Diesel Aktiebolag (1998) Rev Arb 431, with note
Jarvin
19) See award on Jurisdiction by 5 March 1997 (under the United Nations Economic
Commission for Europe Arbitration Rules) in AI Trade Finance, Inc v Bulgarian
Foreign Trade Bank Ltd 13(2) Mealy's Int'l Arb Rep (1998) B-11.
20) Fouchard, Gaillard, and Goldman, On International Commercial Arbitration, para 717;
J Werner, 'Jurisdiction of Arbitrators in Case of Assignment of an Arbitration Clause:
On a Recent Decision by the Swiss Supreme Court' (1991) 8(2) Journal of International
Arbitration at 15.
21) Cedrela Transport Ltd v Banque Cantonale Vaudoise 67 F Supp 353 (SDNY 1999).
22) At 354. Similarly in Certain Underwriters at Lloyd's London v Colonial Penn Insurance
Co (1997) 97 Civ 767, WL 316459 at 2 (SDNY 11 June 1997).
23) CA Paris, 28 January 1988, CCC Filmkunst v EDIF (1988) Rev Arb 565.
24) 'Que la clause arbitrale insure dans ce contrat est generale, qu'elle vise les
differends pouvant survenir aussi bien en ce qui concerne l'exploitation du fi lm
que sa realisation.'
25) UNIDROIT Principles of International Commercial Contracts Art 5.2.1 (2004);
Restatement (Second) Contracts para 304 (1981); in France the term is stipulation
pour autrui. In England, the Contracts (Rights of Third Parties) Act 1999 provides in
para 8 that, where a substantive term of a contract is subject to an arbitration
agreement, that term cannot be conferred on a third-party beneficiary without also
subjecting that party to the arbitration agreement.
26) Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 (Comm); [2003] 2 CLC
1097.
27) At 1104.
28) The same is provided in the Explanatory report of UK Contracts (Rights of Third
Parties) Act 1999, s 8, para 34.
29) At 1110.
30) Christina Mulchrone v Swiss Life (UK) [2005] EWHC 1808 (Comm).
31) Para 14.
32) See Cour de Cassation 11 July 2006, (2006) Rev Arb 969, with note C Larroumet.
22
33) Cargill vM/T Pavel Dybenko 991 F 2d 1012,1994 AMC 225 at 1020; but cf Dannewitz v
Equicredit Corp of Am 333 Ill App 3d 370, 373 (Ill App 2002) holding that 'Where it is
shown that the signatories to the agreement intended that the non-signatories were
to derive benefits from the agreement and where the arbitration clause itself is
susceptible to this interpretation, then arbitration is proper' (emphasis added).
34) OGH, 30 March 2009, docket no 7 Ob 266/08f (Austria). Discussed in M Schifferl, 'The
Award and the Courts: Chronicle of a Death Foretold? Decisions of the Austrian
Supreme Court on Arbitration in 2008 and 2009', ch 3 in C Klausegger and P Klein et
al (eds), Austrian Arbitration Yearbook 2010 (CH Beck, Stampfli & Manz, 2010) 219–33.
35) See Saudi Butec Ltd et al Fouzan Trading v Saudi Arabian Saipem Ltd, unpublished
ICC interim awards of 25 October 1994, confirmed by DFT of 29 January 1996, (1996) 3
ASA Bull 507 discussed in T Zuberbühler, n 131 above, 21, where the Swiss Federal
Court confirmed the tribunal's award and refused to apply the doctrine of apparent
authority to hold an Italian parent company bound by an arbitration clause signed
by its Lebanese subsidiary, although the latter was held out as the representative of
the former in brochures and contracts.
36) Cf G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009) 1148: '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.'
37) A-J van den Berg (ed), Yearbook of Commercial Arbitration, xxv (Kluwer Law
International, 2000) 279–311.
38) It referred to ICC case no 1939 of 1971, ICC case no 3896 of 1982, and ICC case no 4381
of 1986.
39) Para 113 of the award.
40) Para 114 of the award.
41) E Gaillard, 'L'Interdiction de se contredire au détriment d'autrui comme principe
général au droit du commerce international' (1985) Rev Arb 241; Cf also B Hanotiau,
Complex Arbitrations: Multiparty, Multi-contract, Multi-issue and Class Actions (Kluwer
International, 2005) para 41, who notes that the equitable estoppel doctrine is
primarily an Anglo-American concept which will rarely apply per se in a commercial
arbitration in a truly international context, let alone in continental Europe. See also
G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009) at 1193: 'Similar
[to equitable estoppel] conceptions exist [in Continental Europe] under rubrics of
good faith, abuse of right, or venire contra factum proprium, or in connection with
the group of companies doctrine.' In Switzerland see T Zuberbühler, 'Non-
Signatories and the Consensus to Arbitrate' (2008) 26(1) ASA Bull 30 noting that
'While so far no Swiss non-signatory cases have been decided on a general notion of
a prohibition of contradictory behaviour as this is the case under the American
concept of estoppel, the prohibition of "abuse of rights" is omnipresent and
permeates the Swiss legal tradition.'
42) See First Union Commercial v Nelson, Mullins, Riley & Scarborough (InreVarat) 81 F3d
1310 (4th Cir 1996) at 1317; and Lowery v Stovall 92 F 3d 219 (4th Cir 1996) at 223.
43) The principle underlying the theory of equitable estoppel 'rests on a simple
proposition: it is unfair for a party to rely on a contract when it works to its
advantage, and repudiate it when it works to its disadvantage.' Am Bankers Ins
Group, Inc, 453 F 3d at 627 quoting Wachovia Bank, NatAss'n v Schmidt, 445 F 3d 762,
769 (4th Cir 2006).
44) Grigson v Creative Artists Agency 210 F 3d 524, 527 (5th Cir 2000), per J Dennis
(dissenting): '[N] early anything can be called estoppel. When a lawyer or a judge
does not know what other name to give for his decision to decide a case in a certain
way, he says there is an estoppel.'
45) See W Park, 'Non-signatories and International Contracts: An Arbitrator's Dilemma',
in Permanent Court of Arbitration (ed), Multiple Party Actions in International
Arbitration (Oxford University Press 2009), para 1.51, who also rightly suggests caution
in relation to the use of the term estoppel in different contexts, which might result
in confusion. Thus, arbitral estoppel should be distinguished from equitable
estoppel (preclusion from asserting substantive rights against one who justifiably
relied on conduct) and collateral estoppel (issue preclusion whereby a matter
decided in one action cannot be relitigated again in another suit).
46) Avila Group, IncvNormaJ of California, 426 F Supp 537,542 (SDNY1977) (also cited in
International Paper v Schwabedissen Maschinen & Anlagen Gmbh 206 F 3d 411 (4th Cir
2000) < thin >); Cf Tepper Realty v Mosaic Tile 259 F Supp 688 (SDNY 1966) at 692: 'In
short, [plaintiff] cannot have it both ways. [It] cannot rely on the contract when it
works to its advantage, and repudiate it when it works to [its] disadvantage.'
47) Avila Group, Inc v Norma J of California 426 F Supp 537, 542 (SDNY 1977).
48) Ibid at 542.
49) Deloitte Noraudit A/S v Deloitte Haskins & Sells 9F 3d 1060 (2d Cir 1993).
50) American Bureau of Shipping v Tencara Shipyard 170 F 3d 349 (2d Cir 1999).
51) More specifically the yacht owner had enjoyed lower insurance rates and has
acquired the ability to sail the yacht under the French flag.
23
52) In some cases, the courts have not even referred to the term 'equitable', when
enjoining a signatory and non-signatory to arbitrate their dispute. No reference to
the term 'equitable' is found in Choctaw Generation v American Home Assurance 271
F 3d 403 (2d Cir 2001); McBro Planning & Development Co v Triangle Electronic
Construction 741 F 2d 342, 343 (11th Cir 1984); Ex Parte Napier, 659 F 2d 836 (7th Cir
1981); Denney v BDO Seidman, 412 F 3d 58 (2d Cir 2005).
53) Choctaw Generation v American Home Assurance, ibid at 406. It seems that the key
phrase 'intertwined with the underlying contract obligations' was first added to the
traditional equitable estoppel doctrine by the Seventh Circuit in Hughes. The court
in this case basically applied equitable considerations, and it is not clear whether it
was in its intention to expand the doctrine (J Douglas Uloth & J Hamilton Rial argue
in the negative, 'Equitable Estoppel as a Basis for Compelling Nonsignatories to
Arbitrate: A Bridge Too Far?' (2002) 21 Rev Litig 593, at 609). In any event, this phrase
was used in McBro Planning Development v Triangle Electrical Construc tion, applied
in JJRyan & Sons v Rhone Poulenc Textile, 863 F 2d 315 (4th Cir 1988); and Smith/
Enron Cogeneration v Smith Cogeneration International, 198 F 3d 88 (2nd Cir 1999) and
finally achieved full recognition in Choctaw Generation v American Home Assurance.
The existence of a different kind of estoppel theory than the traditional equitable
one is also recognized in Thomson-CFS v American Arbitration Association 64 F 3d,
where after referring to the equitable estoppel, the court referred to the theory of
intertwined contracts noting that 'Several courts of appeal have recognized an
alternative estoppel theory requiring arbitration between a signatory and
nonsignatory', at 779. It continues: 'As these cases indicate, the circuits have been
willing to estop a signatory from avoiding arbitration with a nonsignatory when the
issues the non-signatory is seeking to resolve in arbitration are intertwined with the
agreement that the estopped party has signed' (emphasis added). However, at the
end, the court in Thomson rejected that theory "close relationship" and "intimate
[...]" factual connection provide no independent basis to require a nonsignatory of
an arbitration agreement to arbitrate with a signatory, and therefore that a
nonsignatory cannot be bound without receiving a "direct benefit" from or pursuing
a "claim [...] integrally related to the contract containing the arbitration clause." '
Thomson-CSF 64 F 3d at 778–80. The same approach can be found in Fluor Daniel
Intercontinental v General Electric WL 637236 (SDNY 1999), at 5–6. Cf J Douglas Uloth
and J Hamilton Rial, 'Equitable Estoppel as a Basis for Compelling Nonsignatories to
Arbitrate: A Bridge Too Far?', 611: 'as courts later began to focus on the Seventh
Circuit's use of the phrase "intertwined with the underlying contract obligations", a
new "intertwined claims" equitable estoppel theory was born.'
54) JLM Industries v Stolt-Nielsen 387 F 3d 163, 2004 (2d Cir 2004) at 178.
55) Choctaw Generation v American Home Assurance at 406.
56) Ibid.
57) Ibid at 407.
58) (Emphasis added) Ross v American Express F 3d (2d Cir 2008) at 144.
59) JLMIndustries v Stolt-Nielsen, 387 F 3d 163, 2004 (2d Cir 2004).
60) The accounting profession has developed techniques and practices of consolidated
group accounting since the 1930s, see T Hadden, The Control of Corporate Groups
(Institute of Advanced Legal Studies, University of London, 1983) 2. For a detailed
account on the development and regulation of group of companies or multinational
enterprises see P Muchlinski, Multinational Enterprises and the Law (Blackwell, 1999).
61) In England e.g. see s 258 of the Companies Act 1985.
62) ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-Gobain (1984) 9 YBCA 131. It
should be mentioned, however, that even before the Dow Chemical award, arbitral
awards had been making tentative references to the 'group of companies' notion
and its important role for the jurisdiction of the tribunals in the context of
international arbitration. See e.g. ICC case no 2138 of 1974, in Y Derains and S Jarvin
(eds), ICC Arbitral Awards 1974–85 (Kluwer, 1990), 934; ICC case no 1434 of 1975, ibid
263 (extending the arbitration agreement based on consent, manifested by
inconsistent designation of the party contracting on behalf of the non-signatory in a
series of contracts); ICC case no 2375 of 1975, ibid 257 and (1985) Rev Arb 583.
63) See, in general, T Hadden, The Control of Corporate Groups (Institute of Advanced
Legal Studies, University of London, 1983); P Muchlinski, Multinational Enterprises and
the Law (Blackwell, 1999); P Blumberg, The Law of Corporate Groups, Procedural Law
(Little Brown & Co, 1983); P Blumberg, Tort, Contract, and Other Common Law
Problems in the Substantive Law of Parent and Subsidiary Corporations: Substantive
Law of Corporate Groups (Little Brown & Co, 1987); P Blumberg, On Corporate Groups
(Aspen, 2004); J Dine, Governance of Corporate Groups (Cambridge University Press,
2000); J H Dunning, Multinational Enterprises and the Global Economy (Addison
Wesley, 1992).
64) See OECD, Report on International Investment and Multinational Enterprise-
Responsibility of Parent Companies for their Subsidiaries (1980); see also F
Easterbrook and D Fischel, 'Limited Liability and the Corporation' (1985) 52 U Chi L
Rev 103 et seq. See also in England Salomon v Salomon & Co Ltd [1897] AC 22, HL. See
more recent cases in Adams & Ors v Cape Industries plc & Anor [1990] BCC 786 (CA)
and Ringway Roadmarking v Adbruf [1998] 2 BCLC 625.
65) P Muchlinski, Multinational Enterprises and the Law (Blackwell, 2007) at 318.
24
66) See Albacruz (Cargo Owners) v Albazero ('The Albazero') [1977] AC 774, 'each company
in a group of companies [..] is a separate legal entity possessed of separate legal
rights and liabilities so that the rights of one company in a group cannot be
exercised by another company in that group even though the ultimate benefit of the
exercise of those rights would ensure beneficially to the same person or corporate
body irrespective of the person of body in whom those rights were vested in law. It is
perhaps permissible under modern commercial conditions to regret the existence
of these principles. But it is impossible to deny, ignore or disobey them.'
67) See ICC case no 11405 of 2001, Interim Award of 29 November 2001, found in B
Hanotiau, Complex Arbitrations, Multiparty, Multi-contract, Multi-issue and Class
Actions (Kluwer International, 2005) at para 158: '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 indented 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 the
arbitration clause.'
68) G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009) at 1169: '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 benefited by the agreement in question).'
69) See e.g the arbitral awards ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-
Gobain (1984) 9 YBCA131; ICC case no 6000 of 1988, (1991) 2(2) ICC Bull 34; partial
award ICC case no 5894 of 1989, (1991) 2(2) ICC Bull 25; ICC case no 4131 (Interim
Award) of 1982, (1983) 110 JDI (Clunet) 899, with note Y Derains; and in ICC case no
5721 of 1990, (1990) 117 JDI (Clunet) 1019, with note Y Derains; and in ICC award, on 10
March 2003, C&M Farming Ltd v Peterson Farms Inc (unpublished). Arbitration
discourse agrees almost unanimously too that the application of the 'group of
companies' doctrine depends on 'consent' of the non-signatory: see e.g. P Fouchard,
E Gaillard, and B Goldman, On International Commercial Arbitration, ed E Gaillard
and J Savage (Kluwer, 1999) para 500; J Lew, L Mistelis, and S Kröll, Comparative
International Commercial Arbitration (Kluwer Law International, 2003) para 7–51; C.
Jarrosson, 'Conventions d'arbitrage et groups de sociétés', in Arbitration Agreement:
Its Multifold Critical Aspects (1999) 8 ASA Special Series 220; Y Derains, 'L'Extension
de la clause d'arbitrage aux non-signatories: la doctrine des groupes de sociétés', in
Arbitration Agreement ibid 242.
70) This is the approach taken by I Fadlallah, 'Clause d'arbitrage et groupes de sociétés'
(1987) Travaux du Comité Français de Droit International Privé 1984–1985 105 et seq;
also, O Sandrock, 'Extending the Scope of Arbitration Agreements to Non-
signatories', in Arbitration Agreement: Its Multifold Critical Aspects (1999) 8 ASA
Special Series 165. Cf A Redfern, M Hunter, N Blackaby, and N Partasides, Law and
Practice of International Commercial Arbitration (Kluwer Law International, 2004)
para 3–33: 'More established principles of private law—such as assignment, agency
and succession—thus remain the surest way in which to bind a third party to an
arbitration agreement.' Cf the US decision in Sarhank Group v Oracle Corp 404 F 3d
657 (2d Cir 2005) at 662: 'While this Court has recognized instances in which non-
signatories can be bound to the arbitration agreements of others, such cases are
limited to instances of incorporation by reference, assumption, veil piercing/alter
ego and estoppel and the like.' See Monegasque De Reassurances SAM (Monde Re) v
Nak Naftogaz of Ukr 311 F 3d 488, 495 (2d Cir 2002). In all such situations a court has
found an agreement to arbitrate, under general principles of contract law, that is to
say that the totality of the evidence supports an objective intention to agree to
arbitrate. A similar approach was taken by the English High Court in the recent
Peterson Farms Inc v C&M Farming Ltd [2004] 1 Lloyd's Rep 603.
25
71) Which can take the form of the 'apparent or ostensible representation' or 'agency' in
English law; the 'apparent authority' or 'authority by estoppel' or 'agency' in US law;
the 'mandat apparent' in French law or the 'Duldungsvollmacht und
Anscheinsvollmacht' in German and Swiss Law, see M Blessing, 'Extension of the
Arbitration Clause to Non-signatories', in Arbitration Agreement: Its Multifold Critical
Aspects (1999) 8 ASA Special Series 161 and O Sandrock, 'Extending the Scope of
Arbitration Agreements to Non-Signatories', Arbitration Agreement ibid 170. The
Partial award in ICC case no 4402 of 1983, P Sanders (ed), Yearbook of Commercial
Arbitration ix (1984) 138 (seat in Geneva), examined whether an arbitration
agreement, signed by the chairman of a subsidiary, could be extended to the parent
company, on the basis of rep resentation. The tribunal finally refused to extend the
arbitration agreement on the grounds that the chairman 'could not act on behalf of
the concern and had no power to sign an arbitration clause on behalf of the mother
company', ibid 140; the same view on similar facts was taken in Interim Award ICC
case 4504 of 1985–6 (seat also in Geneva), (1986) 113 JDI (Clunet) 1118. For a case of
'apparent authority' see Swiss Tribunal Fédéral, 29 January 1996, (1996) 14 ASA Bull
496, noting that an arbitration agreement will be extended only in very particular
circumstances which justify a bona fide reliance of a party to an appearance caused
by the non-signatory. Cf also the US case Pritzker v Merrill Lynch, Pierce, Fenner &
Smith 7 F 3d 1110 (3rd Cir 1993), where the extension to the sister company non-
signatory was mainly premissed on traditional principles of agency law.
72) See e.g. ICC case no 4504 of 1985–6, (1986) 113 JDI (Clunet) 1118; cf also Y Derains,
'L'Extension de la clause d'arbitrage aux non-signatories: la doctrine des groupes de
sociétés', in Arbitration Agreement: Its Multifold Critical Aspects (1999) 8 ASA Special
Series 242.
73) See eg award in ICC case no 2375 of 1975, in Y Derains and S Jarvin (eds), ICC Arbitral
Awards 1974–85 (Kluwer, 1990), 259; or award in ICC case no 6519 of 1991, (1991) 118 JDI
(Clunet) 1065. It is not clear however whether an arbitration agreement should be
considered as a beneficial clause, since arbitration agreements establish not only
rights but also duties vis-à-vis the parties.
74) See e.g. ICC case no 6000, (1988) 2(2) ICC Bull 31; cf the Orri case, Paris Cour d'Appel,
11 January 1990, Orri v Lubrifiants Elf Aquitaine (1992) Rev Arb 95, with note D Cohen;
(1991) 118 JDI 141, with note B Audit and the decision of Cour de Cassation Cass 1e civ,
11 June 1991, Orri v Lubrifiants Elf Aquitaine (1992) Rev Arb 73, with note D Cohen.
75) For example, ICC case no 1434 of 1975, S Jarvin and Y Derains (eds), ICC Arbitral
Awards 1974–1985 (Kluwer, 1990) 264, where the tribunal accepted the extension of
the arbitration agreement to a non-signatory company of a group, on the grounds of
implied consent, ascertained by reasonable interpretation of the contract.
76) See B Hanotiau, Consent to Arbitration: Do We Share a Common Vision? (The SIA-
Freshfields Lecture) 27(4) Arb. Int'l 539 (2011). "The so-called doctrine is merely an
awkward, inappropriate, expression for the fact that conduct can be an expression
of consent and that among all the factual elements and surrounding circumstances
to be taken into consideration to determine whether conduct amounts to consent in
a particular case, the existence of a group of companies may be relevant,
particularly because it generates certain dynamics in terms of organization, control,
common participation in projects, the interchangeability of the members within the
group, etc. Reference to a group of companies doctrine is therefore unnecessary, it
cannot have any standing of its own."
O Sandrock, 'Group of Companies and Arbitration', (2005) Tijdschrift voor Arbitrage 6:
'The doctrine must however, be rejected for several reasons [...] First, the rules
developed under this doctrine are not clear-cut and defined enough to permit their
unambiguous application [...] Secondly, the basic principle of privity of contract is
confusingly blurred [...] Thirdly, there is no reason whatsoever to deviate from the
traditional approach which guarantees a much higher degree of certainty of law and
foresee ability. [...] Fourthly, this theory often also runs counter to the clear intention
of the parties.'
77) Y Derains and S Schaf, 'Clauses d'arbitrages et groupes de sociétés' (1985) Rev Dr
AffInter'l 231; A Chappelle, 'Groupes de sociétés: interventions d'état', Rapport
général sur Varbitrage et les tiers: le droit des personnes morales (1988) Rev Arb 475.
78) C Jarrosson, 'Convention d'arbitrage et groups de sociétés: contrats et
responsibilities' (1994) LGDJ 53 noting that the existence of a group of companies is
an indication that permits to ascertain more easily the extension of the arbitration
agreement.
79) See some very interesting case studies for the complicated group structure in
multinational groups in T Hadden, The Control of Corporate Groups (Institute of
Advanced Legal Studies, University of London, 1983) 2.
80) ICC case no 5894, (1991) 2(2) ICC Bull 25.
81) Cf ICC case no 1434 of 1975, (1976) 103 Clunet at 978: 'The group organises the
performance of its task in the most efficient manner, using those entities in the
group that are best adapted to carry out the job.' The same in Paris Cour d'Appel, Kis
France and other v Général and other (1991) 16 YBCA 145; (1992) Rev Arb 90, where the
court found that the parent company had a dominant role vis-à-vis its subsidiaries.
26
82) ICC case no 8910 of 1998, in J Arnaldez, Y Derains, and D Hascher (eds), ICC Collection
of Arbitral Awards 1996–2000 (Kluwer, 2003) 569.
83) ICC case no 7155 of 1993, ICC Collection of Arbitral Awards 1996–2000, ibid 454.
84) Ibid 474.
85) Ibid 477.
86) ICC case no 4131 of 1982, (1983) 110 Clunet 899.
87) (1991) 2(2) ICC Bull 31.
88) Ibid 33. By contrast in ICC case no 5891 of 1988, (1991) 2(2) ICC Bull 23, the tribunal
underlined the lack of structural connection between the companies (different
headquarters, different places of registry) and accordingly refused to accept
jurisdiction on the basis of the group of companies doctrine.
89) See e.g. the case in ICC final award (unpublished) of 22 April 2003, confirmed by
Swiss Federal Tribunal, X SAL, Y SAL and A v Z Sad 129 III 727 (4P. 115/2003), (2004) 2
ASA Bull 364–89, with note by J F Poudret and P Habegger. Here, the non-signatory
individual was found to have been heavily involved in the construction contract
performed by two other signatory entities. In particular, the tribunal found that the
individual personally owned the land, held the construction permit for some time
after the conclusion of the contract, and provided the funds for both of the signatory
construction companies. More crucially, the tribunal found that the individual had
personally agreed to by bound by the arbitration clause.
90) ICC case no 4972, S Jarvin, Y Derains, and J Arnaldez (eds), ICC Collection of Arbitral
Awards 1986–1990 (Kluwer, 1994) 380.
91) (1990) 117 JDI (Clunet) 1023, ICC Arbitral Awards 1986–1990 ibid 400.
92) ICC 8910 of 1998 in ICC Collection of Arbitral Awards 1996–2000 ibid 659, or ICC nos
7604–10 ibid 510.
93) '[...] par le rôle qu'elle on joué dans la conclusion, l'exécution ou la résiliation de
contrats contenant les dites clauses', see Société Sponsor AB v Lestrade (Cour
d'Appel Paris (1988) Rev Arb 154, with note A Chapelle). See also the Dow Chemical
award, Dow Chemical v Isover-Saint-Gobain (1984) Rev Arb 137, (1984) 9 YBCA 131:
'DOW FRANCE, therefore, played in the execution of the contracts an equally
preponderant role as it did in the establishment of the contractual relations' and
'played an essential role in the termination of the contract', at 134. In ICC case no
6000 of 1988, (1991) 2(2) ICC Bull 32, the tribunal noted that 'the actual performance
of the contracts by all the parties during the whole period until the notice of
termination and even after such notice was given [...] brings persuasive evidence of
the factual identity' between the several companies. The same was held in ICC case
no 5103 of 1988, Three European companies v Four Tunisian companies (1988) 115 JDI
(Clunet) 1206; (1991) 2(2) ICC Bull 22. See also ICC 11160 of 2002 joining a non-
signatory that played a significant role at the time of contract formation. P Mayer
notes that this factor has lately become the key factor for French courts to accept
the group of companies doctrine, see P Mayer, 'Extension of the Arbitration Clause to
Non-signatories under French Law', in Permanent Court of Arbitration (ed), Multiple
Party Actions in International Arbitration (Oxford University Press, 2009) para 5.07.
94) See e.g. ICC case no 5103 of 1988, (1991) 2(2) ICC Bull 20, where the tribunal found that
one of the companies of the group had the commanding role, whereas another
would be the 'technical instrument of the Group for the payment of debts' owed by
other companies of the group.
95) (1991) 2(2) ICC Bull 32.
96) J Arnaldez, Y Derains, and D Hascher (eds), ICC Collection of Arbitral Awards 1996–
2000 (Kluwer, 2003) 511, with note D Hascher.
97) See e.g. the arbitral awards ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-
Gobain (1984) 9 YBCA131; ICC case no 6000 of 1988, (1991) 2(2) ICC Bull 34; partial
March 2003, C&M Farming Ltd v Peterson Farms Inc (unpublished).
98) See also ICC case no 4505 in 1985 and 1986, (1986) 113 JDI (Clunet) 1118; Y Derains, S
Jarvin, and JJ Arnaldez (eds), ICC Arbitral Awards 1986–1990 (Kluwer, 1994), 279, the
same person would give the impression that he represented all the several
companies of the group. Similarly in the ICC Award no 1434 of 1975, in S Jarvin and Y
Derains (eds), ICC Arbitral Awards 1974–1985 (Kluwer, 1990) 264, (1976) 103 JDI (Clunet)
978, with note Y Derains: the tribunal held that the person who signed the several
agreements was representing the whole group, since 'throughout the conclusion of
the agreements requiems by the transaction behaved in conformity with what he
was in essence, the manager in charge the leader of this large industrial group.' The
same in ICC case no 2375 of 1975, French company v Two Spanish companies (1976) 103
JDI (Clunet) 973.
99) S Jarvin, Y Derains, and J Arnaldez (eds), ICC Collection of Arbitral Awards 1986–1990
(Kluwer, 1994) 291 with note Y Derains. The seat of arbitration was in Geneva.
100) And in the US and UK in particular; however, analogous concepts can also be found
in civil law countries in Europe, such as Germany (Durchgriff) and France (abus de
droit). See S Miller, 'Piercing the Corporate Veil among Affiliated Companies in the
European Community and in the US' (1998) 36 American Business Law Journal 76 et
seq.
27
101) See the seminal decision in Salomon v Salomon & Co [1897] AC 22. See also P
Blumberg, The Law of Corporate Groups: Tort, Contract, and Other Common Law
Problems in the Substantive Law of Parent and Subsidiary Corporations (Little, Brown,
1987) 7.
102) Blumberg, ibid 105–6.
103) See in general Blumberg, ibid 11; see also P Ferrario, 'The Group of Companies
Doctrine in International Commercial Arbitration: Is there any Reason for the
Doctrine to Exist?' (2009) 26(5) J Int'l Arb 647 et seq and in particular 670–1 for a
comparative analysis between the group of companies doctrine and the principle of
lifting the corporate veil.
104) See in general P Blumberg, K Strasser, N Georgakopoulos, and E Gouvin, Blumberg on
Corporate Groups (Aspen, 2005) ch 6 and cf Carte Blanche (Singapore) Pte Ltd v Diners
Club Int'l 2 F 2d24(2dCir 1993).
105) See Lowendahl v Baltimore & Ohio Railroad 287 NYS 62 (1936). See also United States
v Jon-T Chemicals, Inc 768 F 2d 686, 691 (5th Cir 1985) noting that the control required
would amount to total domination of the subservient corporation, to the extent that
the subsidiary would have no separate interests of its own.
106) See Service Iron Foundry, Inc v MA Bell Co 588 P 2d 463, 473 (Kan Ct App 1978), 'While
the power to pierce the corporate veil is to be exercised reluctantly and cautiously,
the corporate entity can be disregarded if it is used to cloak or cover fraud or to
work injustice, or if necessary to achieve equity'.
107) Cf the classic treatise F Powell, Parent and Subsidiaries Corporations (Callaghan, 1931)
para 3. See also Blumberg, n 91 above, 112–14. See also Van Dorn v Future Chemical &
Oil, 753 F 2d 569 (7th Cir 1985).
108) Ad hoc award of 1991, (1992) 2 ASA Bull 202 (discussed in T Zuberbühler, 'Non-
signatories and the Consensus to Arbitrate' (2008) 26(1) ASA Bull 30).
109) BGE 129 III 727 (2003) (Decisions by the Swiss Federal Supreme Court vol. 129 III pp.
727 et seq.) and 22 ASA Bulletin 364 (2004). See Oto Sandrock.
110) e.g. in paparent authority.
111) ICC interim award of 5 March 1984 in case n° 3879, 11 Y.B. Com. Arb. 127 (1986).
112) International Paper v Schwabedissen Maschinen & Anlagen Gmbh 206 F 3d 411 (4th Cir
2000). Cf also Ex parte Isbell, 708 So 2d 571 (Ala 1997).
113) Ibid at 418: 'A non-signatory is equitably estopped from refusing to comply with an
arbitration clause when it receives a direct benefit from a contract containing an
arbitration clause.'
114) See e.g. the arbitral awards ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-
Gobain (1984) 9 YBCA 131; ICC case no 6000 of 1988, (1991) 2(2) ICC Bull 34; partial
March 2003, C&M Farming Ltd v Peterson Farms Inc (unpublished).
115) See Y. Derains, 'L'Extension de la clause d'arbitrage aux non signatories: la doctrine
des groupes de sociétés', in Arbitration Agreement: Its Multifold Critical Aspects (1999)
8 ASA Special Series at 242.
116) ICC case no 10758 of 2000, (2005) 16(2) ICC Bull 92, para 25. The same in Partial Award
in ICC case no 10818 of 2001, (2005) 16(2) ICC Bull 94.
117) W Park, 'Non-signatories and International Contracts: An Arbitrator's Dilemma', in
Permanent Court of Arbitration (ed), Multiple Party Actions in International
Arbitration (Oxford University Press, 2009) para 1.23.
118) ICC No. 6000 of 1988 (1991) 2(2) ICC Bull 32: where the tribunal concluded that 'the
actual performance of the contracts by all the parties during the whole period until
the notice of termination and even after such notice was given [...] brings persuasive
evidence of the factual identity [between the several companies]'."
119) Gary Born Ibid at p 1207.
120) Ibid 1151.
121) ICC 7604 and 7610 of 1998The tribunal in ICC case no 2138 of 1974 succinctly
observed, 'it is not at all certain that if the non-signatory had signed itself the
contract [...] it would have accepted the arbitration clause', in Y Derains and S Jarvin
(eds), ICC Awards 1974–1985 (Deventer, 1990) at 934.
122) (Translation of the author) '[...] la clause compromissoire insérée dans un contrat
international a une validité et une efficacite propres qui commandent d'en étendre
l'application aux parties directement impliquées dans l'exécution du contrat et
dans les litiges qui peuvent en résulter, dès lors qu'il est établi que leur situation et
leurs activités font présumer qu' elles ont eu connaissance de l' existence et de la
portée de la clause d'arbitrage, bien qu'elles n'aient pas été signataires du contrat
la stipulant': Cour d'Appel, Paris, 30 November 1988, Korsnas Marma v Durand-
Auzias, (1989) Rev Arb 691, at 694 with note P-Y Tschanz.
28
123) Cour d'Appel, Paris, 14 February 1989, Ofer Bros v Tokyo Marine and Fire Insurance
(1989) Rev Arb 691, with note P-Y Tschanz; Cour d'Appel, Paris, 11 January 1990, Orri v
Lubrifiants Elf Aquitaine, (1992) Rev Arb 95, with note D Cohen; (1991) 118 JDI 141, with
note B Audit. It should be noted though that the Cour de Cassation distanced itself
from the argument for the autonomous validity and effectiveness of the arbitration
agreement, adopted by the Cour d'Appel. Instead, the Cour de Cassation referred to
'fraud aimed at concealing the identity of the real contractor' ('fraude, destiné à
dissimuler le veritable contractant') in order to uphold the extension of the
arbitration agreement to the non-signatory (Cass 1e civ, 11 June 1991, Orri v
Lubrifiants Elf Aquitaine (1992) Rev Arb 73, with note D Cohen). See also Cour d'Appel,
Paris, 7 December 1994, V 2000 v Project XJ 220ITD et autre (1996) Rev Arb 67, with
note C Jarrosson (but not in the context of the group of companies doctrine); Paris
Cour d'Appel, 22 March 1995, SMABTP et autre v Stationor et autre (1997) Rev Arb 550.
Also more recently, Paris Cour d'Appel, 7 May 2009, in Petites Affiches 2009, nos 159–
60, pp 10–22, with note B Jerome.
124) Cour de Cassation, 27 March 2007, Alcatel Business Systems, Alcatel Micro Electronics
and AGF v Amkor Technology et al, Cass 1e civ, [2007] 11 JCP I168, with note C
Seraglini.
125) 'Mais attendu que l'effet de la clause d'arbitrage international s'étend aux parties
directement impliquées dans l'exécution du contrat et les litiges qui peuvent en
résulter.'
126) D Girsberger, 'The Law Applicable to the Assignment of Claims Subject to an
Arbitration Agreement', 8.
127) P Fouchard, E Gaillard, and B Goldman, On International Commercial Arbitration, ed
E Gaillard and J Savage (Kluwer, 1999) para 426 et seq and para 492 et seq. It should
be noted, that Fouchard et al express this view in relation to the assignment and
incorporation of arbitration agreements by reference in particular. However, there
is a fundamental difference between the case of assignment and the case of
extension of arbitration agreements to non-signatory parties as in our case. In the
former case, the assignee consents to assume all the rights and obligations of the
assignor vis-à-vis its co-contractor. In essence, the assignee consents to take the
place of the assignor. There is no need to distinguish between consent to assume the
substantive obligations and consent to arbitrate. The general consent of the
assignee to replace the assignor covers every right and obligation vis-à-vis the co-
contractor. On the other hand, a non-signatory party is added to the arbitration
agreement. It is a new party in its own right, rather than a party that replaces one of
the original ones. Therefore, all validity requirements, and above all intention to
arbitrate, must be examined autonomously with regard to the third party. Fouchard,
Gaillard, and Goldman rightly argue for the automatic assignment of the obligation
to arbitrate from the assignor to the assignee. This is correct since 'if it was
otherwise, the assignee could unilaterally alter the position of the remaining party,
who had initially agreed with the assignor to arbitration' (by reference to the
judgment of the Supreme Court of Sweden, 15 October 1997, MS Emja Braack
Shiffahrts KG v Wärtsilä Diesel Aktiebolag (1998) Rev Arb 431, with note A-C Hansson
Lecoanet and S Jarvin). However, this argument does not apply to the case of the
extension of the arbitration agreement to third parties. As has just been noticed, a
third party does not substitute one of the original parties to the arbitration
agreement. It does not interfere with the arbitration agreement between the
original parties. The third party assumes in its own right vis-à-vis the original parties
the obligation to arbitrate. Therefore, the obligation of the original parties to
arbitrate cannot be altered by the third party unilaterally.
128) 'An agreement implied in fact is founded upon a meeting of minds, which, although
not embodied in an express contract, is inferred, as a fact, from conduct of the
parties showing, in the light of the surrounding circumstances, their tacit
understanding.' Hercules, Inc v United States 516 US 417, 424 (1996) (quoting
Baltimore & Ohio RR Co v United States 261 US 592, 597 (1923)).
129) See the passage often cited in US cases in Fisser v International Bank 282 F 2d 231,
233 (2d Cir 1960): 'It does not follow, however, that under the [Federal Arbitration]
Act an obligation to arbitrate attaches only to one who has personally signed the
written arbitration provision.'
See also X SAL, Y SAL and A v Z, SARL and ICC Arbitral Tribunal, 16 October 2003, CCI,
BGE 129 III 727; cf also P Habegger, Extension of Arbitration Agreements to Non-
signatories and Requirements of Form, 22 ASA Bull 398 (2004) at 410 arguing 'no
overly strict requirements should apply to the formal validity of an extension of the
arbitration clause to a third party'. See however criticism against this approach by J
F Poudret, 'Note: Tribunal Fédéral, Ire Cour Civile, 16 octobre 2003, (4P.115/2003); un
statut privilégié pour l'arbitrage aux tiers?' (2004) 2(2) ASA Bull 390. In fact this
theory also presumes that for a non-signatory party to be added to an arbitration
agreement already existing between two signatories fewer requirements of validity,
this time formal, are necessary.
29
130) See Rau: "The argument is that "it is more foreseeable, and thus more reasonable,
that a party who has actually agreed in writing to arbitrate claims with someone
might be compelled to broaden the scope of his agreement to include others.". see
also cases Redmon v. Society and Corp. of Lloyd's, 434 F.Supp.2d 1211 (M.D. Ala.
2006), Ex Parte Stamey, 776 So.2d 85 (Ala. 2000).
Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993).
131) See D Cohen, note in Cour de Cassation, 5 January 1999, and Cour de Cassation, 19
October 1999, (2000) Rev Arb 92, rightly noting that 'the validity of a contract does
not entail the extension of this contract, and, thus, arbitration agreements cannot
contravene the general principles of contract law in this regard' ('la validité d'une
convention n'entraîne pas sa transmission et on voit mal comment, de ce point de
vue, la clause d'arbitrage pourrait defter à ce point la théorie générale des
obligations'). Cf also Thomson-CSF v American Arbitration Ass'n 64 F 3d 773 (2d Cir
1995) 779, at 780: 'A non-signatory may not be bound to arbitrate except as dictated
by some accepted theory under agency or contract law.'
132) See Williston on Contracts, 4th edn, ed. R Lord (WestGroup, 2001) para 57:1; cf the US
Supreme Court in Doctor's Associates v Casarotto 116 S Ct 1652, 517 US 681 (1996) that
refused to apply the special limits on the validity of arbitration agreements
imposed by Montana statute, which limits were not applicable to ordinary contracts
in general.
133) See e.g. New York Convention Art II(2).
134) See McCarthy v Azure 22 F 3d 351 (1st Cir 1994) at 355 noting that the federal policy
favoring arbitration applies to issues concerning the scope of an arbitration
agreement entered into consensually by contracting parties; it does not serve to
extend the reach of an arbitration provision to parties who never agreed to
arbitrate in the first place. Thus, requiring that arbitration rest on a consensual
foundation is wholly consistent with federal policy. Theories that lower the
threshold of required consent have been criticized, G Born, International
Commercial Arbitration, 2nd edn (Kluwer, 2009) at 1205; P Fouchard, E Gaillard, and B
Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage
(Kluwer, 1999), paras 481 and 505; see also D Cohen, note in Cass 1e civ, 11 June 1991,
Orri vLubrifiants ElfAquitaine (1992) Rev Arb 73. Also, especially after 2000, when
International Paper v Schwabedissen Maschinen & Anlagen Gmbh 206 F 3d 411 (4th Cir
2000) was decided, there are signs that the US courts are becoming increasingly
cautious in applying the intertwined version of equitable estoppel, whose analysis
is also based on fact patterns and presumptions of consent, see J M Townsend, 'Non-
signatories in International Arbitration: An American Perspective', paper in
Conference of the International Council for Commercial Arbitration, Montreal 31
May-3 June 2006, 10.
135) I am grateful to Audley Sheppard for this wonderful metaphor.
136) Lord Collins para 147.
137) In Dardana v Yukos [2001] EWCA Civ 1077, a Swedish award had held that Yukos, a
non-signatory, was bound by an arbitration clause and awarded damages for
Dardana. The award had found that Yukos with certain acts and statements had
effectively taken over a contract signed between YNG and Dardara. More
specifically, the award had found that Yukos had signed a framework agreement to
take over the contract, and agreed to take over work which was to be performed by
YNG, and that there was a confusion between YNG and Yukos in that YNG had no
independent administration and was heavily dependant on Yukos for funds. The
Court of Appeal reviewed in detail the facts which the tribunal had relied upon and
found that there was nothing that Yukos had done or stated that would justify the
view that it was a signatory party to the contract containing the arbitration clause.
The fact that YNG were dependant on Yukos for funds at the time or that works
relating to the contract were paid out of a mutual account sums (of Yukos and YNG)
does not show that Yukos thought that it was a party to the contract. In fact the Court
of Appeal relied on a letter sent by Dardana's officers and addressed to YNG, not
Yukos, to find that Dardana too thought YNG and not Yukos as a party to the contract
containing the arbitration agreement.
138) Bridas I (Cir. 5th 2003).
139) See P Blumberg, K Strasser, N Georgakopoulos, and E Gouvin, Blumberg on Corporate
Groups (Aspen, 2005) ch 6.
140) B. Hanotiau "Consent to Arbitration: Do we Share a Common Vision?" 27(4) Arb. Int'l
539 (2011).
141) Choctaw Generation v American Home Assurance 271 F 3d 403 (2d Cir 2001) at 406.
142) Ibid.
143) Ibid at 407.
144) 741 F 2d 342 (11th Cir 1984). The same in almost identical facts in Hughes Masonry v
Greater Clark County School Bldg 659 F 2d 836 (7th Cir 1981). The court noted at 838–
9, 'In substance [the masonry company] is attempting to hold the [the construction
manager], to the terms of the [masonry contract]' and that the masonry company's
'complaint is fundamentally grounded in the [the construction manager's] alleged
breach of the obligations assigned to it in the [masonry contract].'
145) McBro Planning Development, ibid at 344.
146) Cour d'Appel, Paris, (1991) 16 YBCA 145; (1992) Rev Arb 90.
30
147) ICC case no 9762 of 2001, (2004) 29 YBCA 26.
148) Ibid, para 55 of the award.
149) Ibid, para 58 of the award.
150) Ibid, at paras 49–55.
151) J Arnaldez, Y Derains, and D Hascher (eds), ICC Collection of Arbitral Awards 1996–
2000 (Kluwer, 2003) 569, with note D Hascher.
152) Ibid at 573.
153) Ibid at 574.
154) Again, the tribunal made the questionable reference to common intention of the
parties to be bound by the arbitration clause holding that 'the interwoven
contractual links between the tripartite agreement and the exclusive distribution
agreement allows the tribunal to ascertain a common intention of all the parties to
be bound by the arbitration clause contained in the exclusive distribution
agreement.' Still, the crucial point for the tribunal to examine the third-party claim
was the fact that the third-party claim was effectively an integral part of the main
dispute before the tribunal.
155) Ibid at 575.
156) Cf also ICC case 2375 of 1975, (1976) Clunet 973: claim of X against Y and the parent
company Z, but the claim was based on a protocol signed between W (the parent
company of X at the time) and Z engaged both the parent companies and the
affiliates in the performance of the contract. It was for this reason that the tribunal
accepted jurisdiction over the non-signatory Z.
Partial award ICC case 5894 of 1989, (1991) 2(2) ICC Bull 25: the case is complicated in
facts, but the crux of it is that two parent companies of two different groups signed a
framework agreement setting out certain obligations for the subsidiaries to execute.
The framework agreement contained an arbitration clause, and the issue before the
tribunal was whether to assume jurisdiction over the non-signatory subsidiaries. The
tribunal focused on the tight contractual relationships created by the framework
agreement and held that the claims by and against the subsidiaries were
admissible as they are interwoven with the dispute between the parent companies.
157) Giovanni Alemanni and Others v. The Argentine Republic, ICSID Case No. ARB/07/8
(Award on Jurisdiction 17 November 2014).
158) See para 268 of the award.
159) See para 273 and 286; see also S I Strong's note on Consent in Multiparty Investment
Arbitration, in Kluwerarbitration.com (10 December 2014).
160) JLM Industries v Stolt-Nielsen, 387 F 3d 163, 2004 (2d Cir 2004) at 172, citing Louis
Dreyfus Negoce SA v Blystad Shipping & TradingInc 252 F 3d 218, 224 (2d Cir 2001).
161) Ibid.
162) MS Dealer Serv Corp v Franklin 177 F 3d 942, 947 (11th Cir 1999).
163) Citing Sunkist Soft Drinks v BMB Munai, 10 F 3d 753 (11th Cir 1981) at 758.
164) Fluehmann v Associates Financial Services 2002 WL 500564 (D Mass).
165) Citing Kiefer Specialty Flooring, Inc v Tarkett, Inc 174 F 3d 907, 910 (7th Cir 1999) and
Thyssen, Inc v M/VMarkos N, 1999 WL 619634, 4 (SDNY 1999).
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Parties in International Arbitration

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Document information Chapter 8: Parties in International Arbitration: Consent v.

II NON-SIGNATORY THEORIES IN INTERNATIONAL ARBITRATION

B Third Party Beneficiary

C Apparent or Ostensible Authority

D Equitable Estoppel in Arbitration

E The Intertwined Version of Equitable Estoppel in Arbitration

F The "Group of Companies" Doctrine or Implied Consent

G Alter Ego and Lifting the Corporate Veil

III ARBITRAL CONSENT AND NON-SIGNATORY THEORIES

As it happens, there is ample evidence that .... the Government [of

IV A DIFFERENT APPROACH TO NON-SIGNATORIES IN INTERNATIONAL

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