JOINDER OF NON-SIGNATORIES IN ARBITRATION

PROCEEDINGS: ANALYSING THE ‘GROUP OF

COMPANIES’ DOCTRINE
PERSPECTIVES FROM SINGAPORE

Presented by

Chong Yee Leong

Co-Head, International Arbitration Practice

Head, Restructuring & Insolvency Practice

8 March 2024
CONTENTS

1. BACKGROUND
Non-signatories
Development of the ‘Group of Companies’ doctrine

2. ‘GROUP OF COMPANIES’ DOCTRINE

Singapore position

3. PRACTICAL TIPS
Navigating multi-party situations in international arbitration

ANALYSING THE ‘GROUP OF COMPANIES’ DOCTRINE: PERSPECTIVES FROM SINGAPORE 2

BACKGROUND

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 INTRODUCTION

• Increasing complexity of commercial transactions between national and international group of companies

• For financial, anti-trust, accounting, tax, and other business-related considerations, often the identity of
the company(ies) that sign the agreement are different from those performing it

• International arbitration tribunals are increasingly being confronted with scenarios where they have to
decide if an arbitration agreement concluded by a company should be extended to another non-signatory

• This in turn gives rise of complex issues of fact and law

ANALYSING THE ‘GROUP OF COMPANIES’ DOCTRINE: PERSPECTIVES FROM SINGAPORE 4

INTRODUCTION (CONT.)

• As a general rule, parties must consent to arbitration in writing to give jurisdiction to an arbitral tribunal

• However, commentators agree that non-signatories may be “both bound and benefitted” by an arbitration
agreement1

• National courts and international arbitral tribunals have used various legal theories to bind non-signatories
to an arbitration agreement. Such legal theories include:2
– Assignment
– Agency relationships
– Implied consent
– Alter ego status (or piercing corporate veil)
– “Group of Companies”

1
See for e.g. Chapter 10: Parties to International Arbitration Agreements, in Gary B. Born, International Commercial Arbitration (Third
Edition), Kluwer Law International 2021 (“Born”) at 10.01
2
See Born at 10.01

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INTRODUCTION (CONT.)

• The import of the “group of companies” doctrine

• According to Prof. Born:1

“Under this principle, non-signatories of a contract may be deemed parties to the associated arbitration
clause … where a company is part of a corporate group, is subject to the control of (or controls) a
corporate affiliate that has executed a contract and is involved in the negotiation or performance
of that contract, then that company may in some circumstances invoke or be subjected to an
arbitration clause contained in that contract, notwithstanding the fact that it has not executed the contract
itself.”

1
See Born at Section [E] “Group of Companies” Doctrine

ANALYSING THE ‘GROUP OF COMPANIES’ DOCTRINE: PERSPECTIVES FROM SINGAPORE 6

INTRODUCTION (CONT.)
• According to Prof. Hanotiau, the principles “intrinsic” and “fundamental” to the “group of companies”
doctrine include the following: 1

“[T]he issue of consent to arbitration may take a special dimension when one (or more) company(ies) to
a complex international transaction is (are) member(s) of a group of companies, given the nature of
the relationships which exist between companies of such group”

“[C]onsent to arbitrate may sometimes be implied from the conduct of a company of the group –
although it did not sign the relevant arbitration agreement – by reason of its ‘implication’ in the
negotiation and/or the performance and/or the termination of the agreement containing the
arbitration clause and to which one or more members of its group are a party”

1
See Chapter 2: May an Arbitration Clause Be Extended to Non-signatories: Individuals, States or Other Companies of the Group?',
in Bernard Hanotiau, Complex Arbitrations: Multi-party, Multi-contract, Multi-issue – A comparative Study (Second Edition),
International Arbitration Law Library, Volume 14 (Kluwer Law International; Kluwer Law International 2020) (“Hanotiau”), at pp. 95 -
196
ANALYSING THE ‘GROUP OF COMPANIES’ DOCTRINE: PERSPECTIVES FROM SINGAPORE 7
INTRODUCTION (CONT.)

• The development of the doctrine is widely attributed to the Interim Award in Dow Chemical v. Isover Saint
Gobain, (ICC Interim Award in case no. 4131) (“Dow Chemical”) 1

• The matter concerned Dow Chemical Company (“Dow Chemical Company”), together with its various
100% subsidiaries commencing an ICC arbitration against Isover Saint Gobain (“Isover”)

• While several subsidiaries of Dow Chemical Company had executed the contracts with Isover, Dow
Chemical Company itself was not party to the contracts containing the arbitration agreements

• Isover challenged the jurisdiction of the tribunal on the basis that Dow Chemical Company had not
executed the contracts

1
Hanotiau at pp. 95 - 196

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INTRODUCTION (CONT.)

• The tribunal in Dow Chemical dismissed the jurisdiction challenge and upheld Dow’s right (and its
subsidiaries’ right) to invoke the arbitration clause.

• The Tribunal found that:1

“…irrespective of the distinct juridical identity of each of its members, a group of companies
constitutes one and the same economic reality of which the Arbitral Tribunal should take account when it
rules on its own jurisdiction”.

• The Tribunal concluded that the arbitration clause bound all the Dow entities “by virtue of their role in the
conclusion, performance, or termination of the contracts containing said clauses, and in accordance
with the mutual intention of all parties to the proceedings, appear to have been veritable parties to these
contracts or to have been principally concerned by them and the disputes to which they may give rise.”

1
See Dow Chemical under the discussion titled “The Group of Companies”

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POSITION IN SINGAPORE

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POSITION IN SINGAPORE
• Singapore law recognises several situations in which non-signatories may be considered parties to an
arbitration agreement

• Such situations include:

– Assumption of rights or liabilities to a contract with an arbitration clause (such as assignment, novation) 1
– Where the agreement was entered into by an agent 2
– Corporate veil-piercing on the basis of alter ego principle; 3
– By the operation of the doctrine of estoppel4

• An exception to the principle of privity of contract has also been recognised under the (Singapore)
Contracts (Rights of Third Parties) Act 2001 for third-party beneficiaries to pursue claims against a
promisor in arbitration (See Section 9)
1
See Halsbury’s Laws of Singapore - Arbitration (see Volume 1(2) (“Halsbury’s Laws of Singapore”) at [20.020]
2
Halsbury’s Laws of Singapore at [20.020]
3
Aloe Vera America, Inc v Asianic Food (S) Pte Ltd [2006] 3 SLR(R) 174,
4
Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd [2009] 2 SLR(R) 532
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 POSITION IN SINGAPORE

• Singapore Courts have not accepted the “group of companies” doctrine

• The doctrine was considered by the Singapore High Court in Manuchar Steel Hong Kong Ltd v Star Pacific Line
Pte Ltd [2014] 4 SLR 832 (“Manuchar Steel”)

Facts

• Having prevailed in the arbitration, the Claimant commenced enforcement proceedings against the Respondent
in Singapore, England and British Virgin Islands

• The Claimant’s enforcement proceedings were ineffectual, and it did not receive any payment from the
Respondent

• The Claimant then sought enforcement of the award against a non-signatory third party in Singapore on the
basis that the non-signatory third party and the Respondent debtor operated as a “single economic entity”

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POSITION IN SINGAPORE
Court’s Decision:

• The High Court rejected the enforcement application.

• Citing the decision of the English High Court in Peterson Farms Inc v C&M Farming Ltd ([2004] 1 Lloyd’s
Rep 603) (“Peterson Farms”) with approval, the Court observed that the “import of Peterson Farms was
that as a matter of arbitration principle, a tribunal has no jurisdiction to bind strangers to the
arbitration agreement on the basis that these strangers are part of a larger group under the “group
of companies” doctrine” (Manuchar Steel at [75])

• The Court was “not persuaded by the case law that the single economic entity concept was
recognised under the common law, or at any rate under Singapore law” (Manuchar Steel at [101].

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POSITION IN SINGAPORE
The underlying principles rejected by the Court (Manuchar Steel at [96] – [99])

• Important to note the underlying principles forming part of the doctrine with which the Court did not agree

• The High Court considered the “group of companies” doctrine in a manner understood by the arbitral
tribunal in Peterson Farms at [41]:

“The group of companies doctrine provides that an arbitration agreement signed by one company in a
group of companies entitles (or obligates) affiliate non-signatory companies, if the circumstances
surrounding negotiation, execution, and termination of the agreement show that the mutual intention of all
the parties was to bind the non-signatories. Following the Dow Chemical decision and ICC case numbers
2375 and 5103, the Tribunal recognised that because a group of companies constitute the same
‘economic reality’ one company in the group can bind the other members to an agreement if such a
result conforms to the mutual intentions of all the parties and reflects the good usage of international
commerce.” (emphasis original)
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POSITION IN SINGAPORE

The underlying principles rejected by the Court (Manuchar Steel at [96] – [99])

• The Court found that the argument on “single economic entity” was fundamentally difficult to reconcile
with the well-established doctrine of separate corporate personality and the narrow exceptions at law for
the piecing of the corporate veil

• As a matter of principle, the Court was not convinced that law should recognise “an overarching indivisible
group corporate legal personality that transcends and supersedes all individual members’ separate
corporate legal personalities, and upon which rights and liabilities of each member of the group can be
attached … because of the shared group corporate legal personality.”

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POSITION IN SINGAPORE
The underlying principles rejected by the Court (Manuchar Steel at [96] – [99])

• In the Court’s view, if “single economic entity” argument were to be accepted, the movement of liability
would be “multidirectional in that all members of the group share in the same group corporate
personality […] may be made liable for the liabilities of its sister and parent companies, not because of
control, but simply because all these companies belong to the same corporate group. One for all
and all for one”

• In contrast, the Court noted that “the movement of liability under the [recognised and accepted] piercing of
the corporate veil doctrine is unidirectional (in the direction of the ultimate controller, usually the parent)”

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POSITION IN SINGAPORE
The underlying principles rejected by the Court (Manuchar Steel at [133])

• In substance, the Court found that accepting the “single economic entity” theory would unreasonably
broaden liability, disturb corporate structures and industry practices, and further render piercing the
corporate veil for abusive conduct “irrelevant”:

“If the single economic entity concept were accepted, all such one-ship companies would be
considered as part of the same single economic entity with the corollary that the liability of a one-
ship company may be visited on several (or all) of its other one-ship sister companies. The
existence of abusive conduct becomes irrelevant because liability can be established by the mere fact of
the existence of a group structure; the piercing of the corporate veil exception would not even be
needed”

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CHOICE-OF-LAW ISSUES

• The ‘group of companies’ doctrine raises choice-of-law issues

• The issue concerning the applicable law can become contentious in international arbitrations, particularly
as different national laws approach the matter differently

• It has been suggested that where the doctrine is invoked to ascertain the existence of consent or
assumption, the law governing the arbitration agreement should be applied1

1
See Born at Section [E] “Group of Companies” Doctrine

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PRACTIAL TIPS

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PRACTIAL TIPS
• Important to bear in mind the “group of companies” doctrine is not widely accepted or recognised internationally

• Many jurisdictions do not expressly recognise the “group of companies” doctrine 1

• Commentators and court decisions have termed this doctrine as “controversial” 1

and “open to a number of substantial
criticisms”2

• Care and caution are needed when seeking to join a non-signatory based on the doctrine. It is advisable for the parties to
review both the applicable laws of the arbitration and the laws of the potential place(s) of enforcement

• If joined as a party to an arbitration under the “group of companies” doctrine, such party may wish to consider raising a
jurisdictional objection or apply for setting aside an award, if appropriate

• All modern institutional rules (such as SIAC Rules (Rule7), ICC Rules (Article 7)) contain provisions for joinder of third
parties. It is essential to carefully consider and select the appropriate legal theory in support of a joinder application, taking
into account the applicable laws and the laws of the place(s) of enforcement
1
See Born at Section [E] “Group of Companies” Doctrine
2
Ibid
3
Peterson Farms at [42]
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QUESTIONS?

PRESENTATION TITLE GOES HERE 21

Chong Yee Leong
Tel: +65 6890 7188
chong.yeeleong@agasia.law

Notes
This presentation does not necessarily deal with every important topic nor cover every aspect of the topics with
which it deals. This presentation is intended to provide general information only and does not contain or convey any
legal or other advice. Although we endeavour to ensure that the information contained herein is accurate, we do not
warrant its accuracy or completeness or accept any liability for any loss or damage arising from any reliance thereon.

ANALYSING THE ‘GROUP OF COMPANIES’ DOCTRINE: PERSPECTIVES FROM SINGAPORE 22

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