BORN, Gary. Chapter 10 Parties To International Arbitration

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

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

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

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

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

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

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

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

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

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

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

In some legal systems, nonparties to a contract may, in certain circumstances, claim the
benefits of that contract as third party beneficiaries. (266) In such circumstances, the third
party may either be able to invoke or may be bound by an arbitration clause contained in the
contract. This analysis is well stated in a recent award:
P 1455
P 1456 “It is generally accepted that if a third party is bound by the same obligations stipulated by
a party to a contract and this contract contains an arbitration clause or, in relation to it, an
arbitration agreement exists, such a third party is also bound by the arbitration clause, or
arbitration agreement, even if it did not sign it.” (267)
Applying this analysis, a number of national courts and arbitral tribunals have held that a
party who invokes the provisions of a contract, claiming third party beneficiary rights, is bound
by the arbitration clause contained in the contract, (268) and also entitled to invoke that
clause. (269) In a few jurisdictions, issues of third party beneficiary status are governed
P 1456 generally by statutory provisions (and often include provisions that apply specifically to
P 1457 arbitration agreements). (270) Even in jurisdictions where neither statutory provisions nor
judicial decisions address the issue, commentary suggests that third party beneficiary status
will provide a basis for subjecting a non-signatory to an arbitration clause contained in the
contract that benefits it. (271)
Some courts or tribunals have parsed the language of arbitration clauses or other contractual
provisions carefully, holding in some circumstances that they were drafted so as not to extend
to third party beneficiaries. (272) As one court reasoned:
“In the circumstances presented here, the Court is compelled to follow the plain language of
the Banking Agreement that limits the right to demand arbitration to BNP and the United
Nations. Accordingly, even if the Republic were to be a third-party beneficiary entitled to sue
for breach of contract, the Banking Agreement does not grant the Republic a right to compel
arbitration.” (273)
The essential inquiry in third party beneficiary cases is the parties’ intentions: did they or did
they not intend to confer rights under the arbitration agreement on third parties? The goal of
P 1457 this analysis is to determine the parties’ objective, good faith intentions. (274) Some
P 1458 authorities have suggested that a particularly clear showing must be made of third party
beneficiary status sufficient to permit a party to invoke (or be bound by) an arbitration
agreement:
14
“Because third-party beneficiary status constitutes an exception to the general rule that a
contract does not grant enforceable rights to non-signatories, a person aspiring to such status
must show with special clarity that the contracting parties intended to confer a benefit on
him.” (275)
It is doubtful, however, that this analysis is well-considered; for the same reasons that “anti-
arbitration” standards of proof of the existence of an arbitration agreement are inappropriate,
(276) and that pro-arbitration rules of interpretation are appropriate, (277) third party
beneficiary status should require no special or elevated standard of proof in the context of
international arbitration agreements. On the contrary, considerations of efficiency and “one-
stop” dispute resolution argue for a reduced standard of proof. (278)
The parties’ intentions regarding a third party beneficiary must be analyzed with the
separability presumption in mind. (279) In determining whether a third party is benefitted by
an arbitration agreement, the decisive issue is whether the signatories intended to confer that
benefit on the third party (i.e., the right to invoke the arbitration agreement). In addition,
however, a third party may be bound by an arbitration agreement if it asserts rights that it
enjoys by virtue of its status as a third party beneficiary to a contract containing an arbitration
agreement; (280) in these instances, the relevant intentions of the signatories will focus on the
underlying contractual rights (as distinguished from the arbitration agreement). Some courts
have required that the third party be entitled to, and assert, contractual rights (as
distinguished from limitations of liability) under a contract in order to be subject to its
arbitration clause. (281)
P 1458 In some instances, the conclusion that a non-signatory party is bound by, or may invoke, an
P 1459 arbitration clause on third party beneficiary grounds may involve considerations akin to
estoppel, rather than exclusive consideration of issues of intent. (282) For example, one court
held that a company was “equitably estopped” from resisting arbitration against the
respondent because “the very basis of [its] claim [in the dispute was] that [the respondent]
breached the duties and responsibilities assigned and ascribed to [the respondent] under [an]
agreement,” which contained an arbitration clause. (283) Although ostensibly analyzed as an
issue of third party beneficiary rights, the true basis for such decisions is estoppel (discussed
below). (284)
Issues of third party beneficiary status should in principle be governed by the law applicable
to the arbitration agreement or (less likely) the law applicable to the underlying contract. That
is because the third party beneficiary’s status is a question related to interpretation and
formation of the arbitration agreement, which should be governed by the same law as other
issues of interpretation and formation. (285) Alternatively, a few authorities have reasoned that
the basis for subjecting a third party beneficiary to an arbitration clause is the grant of
substantive rights under the underlying contract, which carry with them the associated
arbitration clause; as such, the law applicable to the underlying third party beneficiary rights
would arguably govern the question whether the third party beneficiary is subject to the
arbitration clause. (286)
[G] Guarantors (287)

It is not uncommon in international commercial transactions for one party to guarantee the
P 1459 obligations of another party under a contract to which the guarantor is not party. (288) When
P 1460 this occurs, questions may arise as to the extent to which the guarantor is bound by
provisions of the underlying contract – including particularly its arbitration clause.
The starting point for analysis is that, because the guarantor is not party to the guaranteed
contract, the guarantor is also not party to the arbitration agreement contained in the
guaranteed contract. That is true under both common law (289) and civil law (290) regimes.
Despite this, a number of arbitral awards (291) and judicial decisions (292) have held, without
detailed analysis, that guarantors are bound by arbitration clauses in the guaranteed
contracts. There are a number of bases, not always clearly articulated, that permit such a
conclusion.
P 1460
P 1461 First, a guarantor may be benefitted by an assignment of the guaranteed party’s rights under
the underlying contract if the guarantor is required to pay under the guarantee. In these
circumstances, as discussed below, (293) the guarantor’s exercise of the assigned contractual
rights may be subject to an arbitration agreement contained in the underlying contract. (294)
Second, the guarantor may provide substitute performance under the guaranteed contract. As
discussed above, where a non-signatory performs a contract containing an arbitration
agreement, the non-signatory may be bound by the arbitration clause. (295) This analysis also
applies in cases where a guarantor performs the guaranteed party’s obligation under the
guaranteed contract. (296)
Third, the guarantee may incorporate the terms of the underlying contract, including the
arbitration agreement. This involves application of general principles relating to the
incorporation of arbitration clauses, (297) which can result in a conclusion that the guarantee
incorporates the arbitration provision of the guaranteed contract. (298)
Fourth, in some cases, the guarantor may qualify as a party to the underlying contract, on the
basis of an implied agreement granting it that status, and will therefore be liable under both
the guarantee (to the guaranteed party) and the underlying contract (to the party who is owed
P 1461
15
P 1461
P 1462 the obligation). (299) In determining whether the guarantor is impliedly a party to the
underlying contract, the nature of the guarantee and the guarantor’s contractual role is
important. (300) Typically, the more commercially-significant the role of the guarantor in
performance of the underlying contract or transaction, the more likely it will be that the
parties intended the guarantor to be a party to the arbitration agreement. (301)
As in other non-signatory contexts, the correct analysis requires consideration of the relations
between the parties and the contractual language that they have adopted. The language of the
guarantee agreement and the underlying arbitration clause will be significant in ascertaining
whether the parties intended that the guarantor be bound (and benefited) by the arbitration
clause in the underlying contract. (302) If the guarantee agreement is narrowly drafted (303) or
if the arbitration clause refers specifically and only to identified parties, (304) then the
guarantor will likely not be bound by the arbitration agreement.
P 1462
P 1463 Issues relating to the application of the guarantor doctrine to non-signatories have often
been held to be governed by the national law applicable to the underlying guarantee
relationship. That is the approach taken by most national courts and arbitral tribunals. (305)
The better view, however, is that a validation principle applies, providing that a guarantor is
subject to an arbitration agreement if either the law governing the underlying guarantee
agreement or the law governing the arbitration agreement provides for this result. (306)
[H] Succession (307)

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

P 1465
P 1466 In contemporary commerce, contracts are frequently transferred from one party to another
by way of assignment, novation, assumption, or other contractual transfer mechanisms. In
these circumstances, disputes sometimes arise as to whether the transferee or assignee of a
contract is bound by an arbitration clause contained in the transferred/assigned agreement.
(324)
Some early judicial decisions suggested that arbitration agreements were not capable of being
transferred, apparently on the theory that they were “personal” obligations, which were
specific to and binding upon only the original parties. (325) These decisions have been
superseded, and it is now almost universally accepted that parties have the contractual
autonomy to transfer or assign arbitration agreements, just as they have the power to assign or
transfer other types of contracts. (326) Again, the touchstone in such cases should be the
intention of the parties, both in the original agreement and in the assignment.
In principle, an assignment of a contract should have the effect of conveying the arbitration
clause associated with the contract, as one part of the parties’ agreement, to the assignee, at
P 1466 least absent some sort of contractual or legal prohibition that renders the assignment
P 1467
16
P 1467 ineffective. (327) Indeed, in most jurisdictions, it is presumed that assignment of the
underlying contract entails the assignment of the associated arbitration agreement. As one
arbitral award reasoned, “an arbitration clause must be considered an ancillary right
(Nebenrecht) to the assigned principal rights which…follows the assigned rights.” (328)
In the United States, most courts have held that, when a contract is transferred from one party
to another entity, the arbitration clause passes along with the underlying contract. (329) English
courts have reached similar conclusions. (330)
The same approach is adopted in civil law jurisdictions, (331) including in Switzerland, where
recent decisions of the Swiss Federal Tribunal have confirmed that a valid assignment of the
underlying contract “automatically” transfers the arbitration agreement (which is regarded as
P 1467 an ancillary or incidental right, accompanying the underlying commercial contract). (332)
P 1468 Likewise, under French law, there is a presumption of “automatic” assignment of the
arbitration clause together with the underlying contract. (333) A Russian decision similarly
concluded that:
“Unless otherwise provided for by law or agreement, rights of the initial creditor are
transferred to a new creditor in full and under the conditions which existed at the time of
transfer.…The right to protect interests…in a particular forum, initially chosen by the parties,
also is transferred to an assignee.” (334)
In a few jurisdictions, the effects of an assignment of a contract on the agreement to arbitrate
are prescribed by statute. (335)
The “automatic” transfer of the arbitration agreement is properly understood as only
presumptive, leaving the parties generally free to agree upon a different disposition of the
arbitration agreement. Particularly in common law jurisdictions, close attention is sometimes
paid to the wording and intention of the original arbitration clause and the subsequent
assignment contract, to determine whether the parties intended to provide for assignment of
the arbitration clause. (336) If the assignment agreement excluded the arbitration clause, then
this will ordinarily be sufficient to prevent the assignee from becoming a party to that clause.
(337) In most instances, however, assignment agreements will not specifically address the
transfer of the arbitration agreement, leaving that issue to the general presumption of
“automatic” transfer of the agreement to arbitrate together with the underlying contract.
A few decisions suggest that the autonomous nature of the agreement to arbitrate argues
against the arbitration clause’s automatic transfer together with the underlying contract. In the
words of one award:
P 1468
P 1469 “due to the legal autonomy of an arbitration agreement vis-à-vis the contract in which it is
included, a power of agency, whether implied or in writing, or an endorsement of rights and
obligations, with respect to that contract, shall not necessarily result in an agency or in an
endorsement of rights relating to the arbitration convention.” (338)
This reasoning is ill-considered. The fact that the arbitration agreement is presumptively
separable does not mean that it has no relationship or association with the underlying
contract; rather, the separability presumption means only that there are circumstances in
which the legal status and characterization of the arbitration agreement will differ from that of
the underlying contract. (339) As discussed above, the purpose of virtually all arbitration
agreements is to provide means of dispute resolution for a particular substantive contractual
(or other) relationship. (340) Thus, just as execution of the underlying contract will virtually
always automatically result in conclusion of the associated agreement to arbitrate, so the
assignment or transfer of the underlying contract (or its rights and obligations) will
presumptively result in the automatic transfer of the arbitration agreement; the separability of
the arbitration agreement does not alter that conclusion.
There are often contractual limits on assignment in commercial agreements that may forbid
one party from assigning the underlying contract, either absolutely or without its counter-
party’s consent. These contractual limits may render a purported assignment invalid or
ineffective. There may also be instances where a contract cannot legally be transferred or
assigned, at least not without regulatory approvals.
If the assignment of the underlying contract and the arbitration clause are in violation of a
contractual restriction, then the putative assignee arguably has no rights under the arbitration
clause (since the contract and arbitration clause were arguably never assigned). (341) This is
potentially a jurisdictional defect (as distinguished from a substantive defense or admissibility
objection) and, again potentially, an issue that is subject to interlocutory judicial decision.
(342)
In some legal systems, an assignment in breach of a contractual prohibition is presumptively
P 1469 not invalid, even if it is wrongful, but rather is effective while giving rise to a damages claim for
P 1470 breach of the anti-assignment provision. (343) In these legal systems, the breach of an anti-
assignment provision would arguably not affect the tribunal’s jurisdiction; on the other hand,
the basic requirement, in Article II(3) of the New York Convention and most contemporary
arbitration statutes, that arbitration agreements be specifically enforced, (344) argues strongly
for a contrary result.
The wrongful assignment of a contract also gives rise to issues under the separability
presumption. It is at least theoretically possible that an arbitration clause will have been
validly assigned even if the underlying contract has not been (and vice versa). (345)
17
There are circumstances in which the parties will have concluded a contract containing a
specific prohibition on the assignment of an arbitration agreement. In principle, these
prohibitions should be given effect. In addition, the circumstances of a particular contractual
relationship may give rise to implied prohibitions on assignment of the arbitration agreement,
which should also be given effect. For example, a U.S. company might agree to arbitrate under
CIETAC Rules in China with a German company, and then one of the parties might purportedly
assign the agreement to a Chinese state-owned entity. It is appropriate to take these
circumstances into account in considering whether the parties intended to permit the
assignment of the arbitration agreement.
If an assignment of an arbitration clause is validly effected, then the assignee will have rights
(and obligations) under the clause. In addition, the original assignor may also retain such rights
(either as to pre-assignment events or generally, depending on the terms of the assignment
and any restrictions on assignability). (346)
There are instances in which an arbitration agreement is purportedly assigned during the
pendency of an arbitration. While finding the validity of an assignment in such circumstances
“rather more difficult” than pre-arbitration assignments, some national courts have generally
permitted post-arbitration assignments. (347) This may be subject to the condition that the
arbitrator consent to the assignment. (348)
P 1470
P 1471 As with other non-signatory theories, questions of assignment give rise to choice-of-law
issues. (349) Commentators have noted the lack of uniform substantive rules concerning the
assignment of arbitration agreements. (350) In the absence of applicable international rules,
arbitrators and commentators have tended to look to domestic legal regimes for a solution.
There is also a lack of uniformity among national choice-of-law rules for selecting the law
governing the question whether an arbitration agreement has been validly assigned. In some
jurisdictions, the question whether an arbitration agreement has been validly assigned is
treated as a procedural matter to be determined by the law of the arbitral seat. (351) In other
jurisdictions, the substantive law that governs the underlying contract has been applied to
determine issues of assignability. (352) As in other contexts, the better view is that the
validation principle should apply to the assignability of the arbitration clause, upholding the
assignment if that is the result under either the law governing the assignment agreement or the
[J] Subrogation
Under many national legal systems, there are circumstances where one party may be
subrogated to the contractual rights of another party. This frequently occurs in the case of
P 1471 insurers, who are subrogated to the rights of insureds. In these circumstances, the insurer is
P 1472 typically entitled to invoke (and is bound by) the arbitration provisions of the insured’s
underlying contract (from which the subrogated rights arise). (354) In principle, the validation
principle should apply to the effects of subrogation on an arbitration agreement. (355) In some
jurisdictions, direct action statutes have also been applied to permit claims by non-
signatories. (356)
[K] Estoppel and Related Doctrines (357)

Particularly in common law jurisdictions, “estoppel” is a well-recognized legal doctrine, which
can be invoked to preclude parties from denying that they are party to arbitration (or other)
agreements. (358) In these jurisdictions, “estoppel” is defined in various ways, but generally
P 1472 means that a party is barred by considerations of good faith and equity from acting
P 1473 inconsistently with its own statements or conduct. (359) As one commentator summarized the
doctrine:
“The doctrine of equitable estoppel exists to prevent fraud or injustice; to the extent that a
party has made a statement or acted in a particular way, it is unjust and tantamount to fraud
to permit that party thereafter to allege and prove facts contrary to its previous statements.”
(360)
It is sometimes said that the doctrine of estoppel is not, as such, extant in civil law
jurisdictions. According to one commentator, estoppel is “rarely applied” in Continental
European arbitrations. (361) Nonetheless, similar conceptions exist under rubrics of good faith,
abuse of right, or venire contra factum proprium, (362) or in connection with the group of
companies doctrine. (363)
A number of authorities, particularly in common law jurisdictions, have recognized estoppel or
related doctrines as a basis for either permitting a non-signatory to invoke an arbitration
agreement or holding that a non-signatory is bound by an arbitration agreement. These
authorities have held that, where a non-signatory claims or exercises rights as a party under a
contract, which contains an arbitration clause, the non-signatory will typically be estopped
from denying that it is a party to the arbitration clause. (364) Similarly, where a party invokes
P 1473 an arbitration clause in national court proceedings, claiming rights under that clause, it will
P 1474 ordinarily be estopped from subsequently denying that it is bound by the arbitration
agreement in other proceedings. (365)
Some U.S. courts have adopted a theory of “equitable estoppel” for application to questions of
arbitral jurisdiction. (366) Estoppel principles have frequently been applied to hold that a
party is bound by the arbitration clause associated with the substantive contractual rights that
18
it claims: that is, if a party claims or exercises rights under a contract, then it is ordinarily
bound by the arbitration clause in that contract. As one U.S. court put it: “In short, [plaintiff]
cannot have it both ways. It cannot rely on the contract when it works to its advantage and
ignore it when it works to its disadvantage.” (367)
Other U.S. lower courts have held that a party that receives a “direct benefit” under a contract
is estopped from denying that it is a party to the contract’s arbitration clause. (368) In contrast,
if not entirely clearly, a party that only receives an “indirect” benefit will not be estopped from
resisting arbitration on this theory. (369)
P 1474
P 1475 Some U.S. lower courts have gone further, either holding that signatories to arbitration
agreements are estopped from resisting arbitration with non-signatories of disputes that are
“intertwined” with arbitrable disputes (370) or relying on a theory of concerted misconduct
between one signatory and a non-signatory to compel arbitration between that non-signatory
and a different signatory. (371)
It is sometimes said that the proper application of the estoppel doctrine is as a “shield,” and
not as a “sword.” In particular, some courts have held that estoppel is most (or only)
appropriate where a non-signatory claimant seeks to invoke an arbitration agreement against
a signatory to the arbitration agreement, but less frequently (or not at all) in the reverse
posture, where a signatory seeks to bind a non-signatory to an arbitration clause:
“[Courts] have been willing to estop a signatory from avoiding arbitration with a non-signatory
when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the
agreement that that estopped party has signed.” (372)
P 1475
P 1476 Conversely, other courts have suggested the reverse, indicating that a signatory may more
readily pursue claims that a non-signatory is estopped from challenging an arbitration clause.
(373)
In principle, it is difficult to see why estoppel should not be equally available to both
signatories and non-signatories, albeit under different analyses. For example, when a non-
signatory to a contract claims rights under that contract on third party beneficiary,
subrogation, or similar grounds, the signatories to that contract should be entitled to invoke
the contract’s arbitration clause against the non-signatory claimant, just as the non-signatory
claimant itself invokes the contract. Consistent with this reasoning, some U.S. courts have
allowed estoppel to be used as a “sword,” permitting a signatory to demand that a non-
signatory arbitrate its claims. (374)
As noted above, civil law jurisdictions do not necessarily recognize the estoppel doctrine as
such. (375) Nonetheless, the principles of good faith and equity or fairness that underlie the
doctrine are universal, and are recognized, among other things, in the New York Convention.
P 1476 (376) As a consequence, civil law authorities have reached comparable results to those
P 1477 provided under most forms of estoppel by different avenues. (377)
For example, in one decision, the Swiss Federal Tribunal disregarded the requirement for a
“signed” arbitration agreement where the clause was included in a bill of lading that was
exchanged by the parties. The Tribunal relied on the parties’ ongoing business relations within
the legal framework of the same general contractual conditions, including an arbitration
clause, and reasoned that obligations of good faith precluded one of the parties from invoking
a formal signature requirement. (378) Similarly, the Austrian Oberster Gerichtshof recently
relied on concepts of venire contra factum proprium and abuse of right to bind a party to an
arbitration agreement notwithstanding formal defects in the agreement. (379)
Principles of estoppel and related doctrines have not frequently been the subject of choice-of-
law analysis. It is difficult to formulate predictable conflicts rules applicable to the subject,
because of the diversity of connecting factors: for example, if a party based in State A asserts
the existence of an arbitration clause, providing for arbitration in State B, during litigation in
State C, against a party based in State D, in connection with disputes under a contract
governed by the law of State E, what state’s law should apply? As in other nonconsensual
contexts, the better approach in these circumstances is to apply international principles of
estoppel and good faith, together with a validation principle, rather than engaging in an
unpredictable, potentially arbitrary choice-of-law analysis. (380)
[L] Ratification
P 1477
P 1478 A non-signatory (and non-party) to an agreement may subsequently become a party to that
agreement by ratification. (381) Ratification can occur with regard to arbitration agreements,
as well as with other forms of commercial contracts. (382) For example, Party A to an
arbitration agreement may ratify Party B’s assignment of Party B’s rights and duties under the
arbitration agreement to a third party. Likewise, in the case of novation, a new contract
generally replaces a previous contract and one of the original parties is substituted by a new
party. (383) The same choice-of-law rules that apply to guarantee/guarantor relations (384)
should also apply in the context of ratification.
[M] Corporate Officers and Directors

Some national courts have adopted what appear to be sui generis rules with regard to the
application of arbitration clauses to officers and directors of companies who have executed
the arbitration agreement. In virtually all such cases, the officers and directors of the
19
corporate party will not be parties to the relevant contract. Even in cases where a company’s
officers or directors execute a contract on behalf of the company, they do not ordinarily
thereby become parties, in their personal capacities, to the contract. (385)
P 1478
P 1479 Occasionally, however, litigation relating to the underlying dispute will include the officers
and directors (or other agents) of one or both parties, with claims being asserted personally
against individual officers and directors. In these cases, the officers and directors frequently
seek to invoke the arbitration agreement (or, conversely, may have the arbitration agreement
invoked against them).
As noted above, some U.S. courts have permitted the officers and directors of a corporate
party to invoke the arbitration clause in that party’s underlying commercial contracts,
notwithstanding the fact that the individual officers, directors and employees are not parties
to the underlying contract under ordinary contractual principles. (386) In these circumstances,
a number of U.S. decisions have held that corporate employees, sued for actions taken in the
course of their employment, may invoke arbitration clauses contained in their employer’s
contracts with the adverse third party. (387) As one U.S. court reasoned, with a degree of
overstatement, a company can only act through employees and officers, and “an arbitration
agreement would be of little value if it did not extend to them.’” (388)
These decisions are not unanimously followed even in the United States. (389) One U.S. court
rejected them on the following grounds:
“courts must not offer contracts to arbitrate to parties who failed to negotiate them before
trouble arrives. To do so frustrates the ability of persons to settle their affairs against a
predictable backdrop of legal rules – the cardinal prerequisite to all dispute resolution.” (390)
Outside the United States and a few other jurisdictions, this approach of permitting corporate
employees or agents to invoke arbitration agreements, to which they are not parties, has not
been widely considered. (391) Nonetheless, it has been adopted in a few other jurisdictions,
including France, (392) Canada (393) and Germany. (394)
P 1479
P 1480 The treatment of corporate officers by some U.S. and other courts does not rest on a
conventional analysis of the contractual consequences of the principal-agency relationship,
which would instead usually provide that the agent and/or employee is not a party to the
underlying contract. (395) The separability doctrine might provide an explanation for this
approach if one reasoned that the officers and directors of a corporate signatory were
intended to enjoy the benefits of the arbitration agreement, even if they are not parties to the
underlying contract. These results would be exceptional ones, which appear to be primarily
attributable to the parties’ presumed intentions to provide procedural protections for their
respective agents and/or employees against joinder in oppressive litigation and to avoid the
circumvention of agreements to arbitrate through the medium of satellite litigation against
related parties and individuals. As one court explained:
“When contracting parties agree to arbitrate all disputes…they generally intend to include
disputes about their agents’ actions because ‘as a general rule, the actions of a corporate
agent on behalf of the corporation are deemed the corporation’s acts.’ If arbitration clauses
only apply to contractual signatories, then this intent can only be accomplished by having
every officer and agent (and every affiliate and its officers and agents) either sign the contract
or be listed as a third party beneficiary.” (396)
On the other hand, in reverse circumstances (i.e., when an adverse party sought, over the
agent’s objections to assert claims against it in arbitral proceedings), courts and tribunals have
been reluctant to hold that the agent or employee is subject to arbitral jurisdiction. (397)
[N] Shareholder Derivative Rights

P 1480 In some legal systems, a shareholder of a company may in certain circumstances act for the
P 1481 company itself; in general, these circumstances are narrowly circumscribed, involving only
cases where the company’s interests are damaged and the company’s management refuses to
take steps to protect those interests, despite demands that it do so, ordinarily because of
some sort of self-dealing. (398) When a shareholder is permitted by applicable substantive law
to act on behalf of a company to enforce a contract, questions may arise whether the
shareholder may invoke (and is bound by) an arbitration clause in the contract.
Historically, there was judicial aversion to the arbitration of shareholder derivative claims.
Objections to arbitrability were based on a perceived lack of the shareholders’ assent to an
arbitration agreement. (399) More recently, some courts have shifted the focus of consent away
from the assent of individual shareholders, towards an inquiry into the corporation’s consent to
arbitrate. These courts have reasoned that, in a derivative suit, shareholders stand in the shoes
of the corporation, asserting its rights and privileges, and “those they choose to sue [may not]
be deprived of defenses they could assert against the corporation’s claims.” (400)
In principle, there is no reason that a minority (or other) shareholder should not be permitted
to invoke an arbitration clause of one of the signatories to that agreement, provided that
applicable national corporate law permits the shareholder to act on behalf of the signatory.
This conclusion was adopted in Frederick v. First Union Securities, Inc., a U.S. case in which a
plaintiff-shareholder brought a derivative suit against a brokerage firm for allegedly
participating in a scheme with company officials to manipulate the market and engage in
insider trading. (401) The court held that the plaintiff was compelled to arbitrate his claim
20
because the agreement between the corporation and the brokerage firm, which established
P 1481 the brokerage firm’s duties and pursuant to which the plaintiff had brought suit, contained an
P 1482 arbitration clause, and the plaintiff was bringing suit on behalf of the company. (402) The
court also held that the broad language of the arbitration clause, which provided that it
applied to “all claims or controversies” between the corporation and the brokerage firm,
argued for arbitration of the plaintiff’s claims. (403) Other courts have reached comparable
conclusions in holding that shareholder claimants in derivative actions were bound by the
corporation’s arbitration agreements. (404)
[O] Joint Venture Relations

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

States and state entities are important actors in international commercial transactions and
P 1482 the international arbitral process. Indeed, as discussed above, one of the reasons that parties
P 1483 choose to arbitrate their international disputes is to ensure that states and state entities
can be required to participate in, and be bound by the results of, such processes. (409)
Disputes sometimes arise as to whether a state or state entity is party to an international
arbitration agreement. The same legal rules that apply to private parties in such disputes
should in principle also apply to state entities. (410) Nevertheless, some national court
decisions have demonstrated a deep-seated, but misconceived, reluctance to hold that non-
signatory states (or state entities) are bound by international arbitration agreements.
One leading example was the frequently-debated Pyramids case, where agreements (that
included an ICC clause, providing for arbitration seated in Paris) to construct a complex tourist
resort were entered into between foreign investors and an Egyptian state entity. The
agreements were negotiated with the participation of the Egyptian Ministry of Tourism, whose
involvement in the contractual performance was both necessary and expressly contemplated.
Following the signature page of the agreement, the Minister for Tourism executed the contract,
with a declaration that the agreement was “approved, agreed and ratified by the Ministry of
Tourism.” (411)
After disputes arose, and the foreign investor commenced an ICC arbitration in Paris, the
Egyptian Ministry of Tourism resisted on jurisdictional grounds. The arbitral tribunal rejected
the objection, reasoning, inter alia, that:
“it does not seem in any way unlikely or improbable that the government would have wished
that all disputes concerning the same project would go to the same tribunal. In this connection
one should remember that…the transaction as a whole is to be viewed as a unified contractual
scheme…[T]he Claimant in future disputes might well have been either the Egyptian
government or [its state-owned entity] or both.” (412)
P 1483
P 1484 Despite the tribunal’s analysis, and the Ministry of Tourism’s signed declaration, the Paris
Cour d’appel annulled the award, holding that the signed declaration did not evidence an
intention to become a party to the agreement. (413) That conclusion is inconsistent with the
weight of international authority, and difficult to reconcile with the plain language and obvious
intentions of the signed statement that the Ministry of Tourism “approved, agreed and ratified”
the contractual terms.
An equally misconceived decision was reached by an ICC arbitral tribunal in a dispute between
Libya and a foreign investor. The Libyan state-owned oil company and the investor had
negotiated a “suspension agreement,” dealing with a period of force majeure, which a
representative of the Libyan state had executed with the declaration “Approved and
Endorsed.” (414) Nonetheless, the tribunal held that Libya was not a party to the agreement, or
the arbitration clause, on the ground that it had only signed in its capacity as a regulatory
authority. (415)
Likewise, the U.K. Supreme Court refused to recognize an award, rendered in Paris by a
distinguished arbitral tribunal (chaired by Lord Mustill, formerly of the House of Lords) against
a Ministry of the Pakistan government. (416) The tribunal made a carefully-reasoned award,
concluding that, although not a signatory, the Ministry had negotiated and performed the
underlying contract and then permitted the formal signatory to be dissolved; in these
circumstances, the arbitrators held, applying French law, that the Ministry was bound by the
contract and its arbitration clause. (417) Despite that (and despite a French decision
confirming the award (418) ), the U.K. Supreme Court held that the tribunal had misapplied
French law and that, under Article V(1)(a) of the New York Convention, the award would not be
recognized in England. (419)
These decisions reflect an unsatisfactory view of the manner in which regulatory authorities
exercise their powers. They also risk producing unfair fact-finding and legal decisions, by
absenting a potentially important party from the dispute resolution process.
21
§ 10.03 FUTURE DIRECTIONS: LEGAL BASES FOR BINDING NON-SIGNATORIES
TO ARBITRATION AGREEMENTS
P 1484 For the most part, authorities are agreed that consent is the essential foundation for
P 1485 ascertaining whether a particular entity has the status of a party to an arbitration
agreement. Whatever legal construct is utilized, the beginning and ending question is
ordinarily whether the parties, with their words and actions considered objectively and on the
basis of good faith in commercial relations, intended that a particular entity be a party to the
arbitration clause. This question arises in numerous contexts – ranging from implied assent, to
guarantee, to incorporation and assumption, to subrogation, to agency, to group of companies
analysis, to ratification – but the fundamental inquiry remains the same in each case. (420)
And, again in each instance, the resolution of this question requires careful analysis of the
language used in the parties’ agreements and communications, the parties’ actions and the
commercial background of the parties’ dealings.
There are instances in which national courts lose sight of this principle. In one decision, the
Paris Cour d’appel declared:
“in the law of international arbitration, the effects of the arbitration clause extend to parties
which are directly implicated in the performance of the contract as long as their situation and
their activities give rise to the presumption that they were aware of the existence and of the
scope of the arbitration clause in order for the arbitrator to be seized of all economical and
legal aspects of the dispute.” (421)
Similarly, one U.S. appellate decision held that a non-signatory was bound by an arbitral
award because it had “related and congruent interests” with the parties, (422) while another
decision relied on a “nexus between” the parties’ claims and the “integral relationship”
between the parties. (423) Commentators have argued persuasively that these types of
decisions rest on general considerations of equity and efficiency, rather than a contractual
analysis, to support broad extensions of arbitration clauses. (424)
P 1485
P 1486 There are substantial grounds for criticizing these various decisions and for accepting the
foregoing assessment of their analyses. The fact that a party is “directly implicated” in
contractual performance and “aware of” an arbitration clause, or had “congruent interests,”
should generally be insufficient, without more, to subject that party to an arbitration
agreement. Rather, save in exceptional cases where alter ego, estoppel, or similar
nonconsensual theories are involved, it remains essential to root the application of arbitration
agreements to non-signatories in the parties’ intentions and in generally-applicable
contractual and legal principles. This is required by the bedrock principle that arbitration
agreements are consensual instruments, (425) and is necessary for reasons of commercial
predictability.
The touchstone should be whether the parties intended that a non-signatory be bound and
benefitted by the arbitration clause. Answering that question cannot be achieved through
abstract generalizations, but requires consideration of the arbitration clause’s language and
the relations and dealings among the parties in a specific factual setting.
On the other hand, some courts have erred in the opposite direction, declining to extend
arbitration clauses to non-signatories, on the basis of formalistic analyses that ignore the
parties’ objective, good faith expectations. For example, in one recent decision, a U.S.
appellate court considered a dispute in which certain subsidiaries of one company (“Company
A”) entered into contracts (containing arbitration clauses) with certain subsidiaries of a second
company (“Company B”). (426) After disputes arose, Company A initiated U.S. litigation against
Company B, carefully structuring its claims to avoid inclusion of either party’s subsidiaries, or
any contractual claims, in the litigation. Although the claims were a fairly transparent device to
circumvent the underlying arbitration clause, the U.S. court rejected the argument that the
parent companies were obligated to arbitrate with one another. Among other things, it
P 1486 reasoned (427) that both companies were “sophisticated commercial actors” that were “quite
P 1487 deliberate in constructing and deploying an elaborate web of affiliates” to negotiate the
transaction, and there was “no compelling policy objective” that would be furthered by a
finding of alter ego. (428)
Although formally plausible, and consistent with rhetoric about the parties’ freedom to
structure their corporate and commercial relations, this analysis overlooks the separability of
the arbitration agreement and the fundamental objectives of parties that conclude
international arbitration agreements. As discussed above, it is precisely to avoid expensive,
time-consuming litigation in multiple, potentially-partisan forums, with potentially
inconsistent and uncertain results, that parties agree to arbitrate. (429)
Permitting non-signatory corporate affiliates and other related parties to assert claims based
on the parties’ underlying transactions and agreements, while avoiding the express terms of
the arbitration agreement, frustrates these objectives and the parties’ agreement to arbitrate
in a very fundamental way. This reflects the most powerful rationale for the group of companies
doctrine, being that corporate affiliates of the signatory to an international arbitration
agreement should not be permitted to circumvent or frustrate that agreement through the
device of satellite litigation. This is not a question of extending the arbitration agreement on
the basis of a priori formulae, but of identifying which parties – acting in good faith – should be
regarded as having consented to arbitrate.
22
In this regard, it is important to apply the various legal bases for binding non-signatories
specifically to the separable agreement to arbitrate (as distinguished from the underlying
contract). It bears emphasis that the parties’ intentions – both actual and presumed – will
often be different with regard to their arbitration agreement, and its dispute resolution
mechanism, than with regard to their underlying commercial contracts. That is, there will
readily be cases where the parties desire a unified, “one-stop” dispute resolution mechanism,
particularly one extending to all the members of a corporate group involved in a particular
transaction, without altering the allocations of substantive contractual rights contained in the
underlying contracts.
The foregoing considerations suggest that most criticisms of the group of companies doctrine
(430) are unjustified. The doctrine is virtually unique, in that it was developed specifically with
P 1487 application to the agreement to arbitrate, rather than to other types of contracts. (431) The
P 1488 fundamental rationale for the group of companies doctrine, not always well-articulated by
its proponents, is to preserve the efficacy of the signatories’ agreement to arbitrate. An
agreement to arbitrate has the objective of centralizing the parties’ disputes in a single,
neutral, expert forum: as already noted, satellite litigation by or against corporate affiliates,
officers, or other related parties frustrates this objective entirely, returning the parties to the
very jockeying for local court advantage that their agreement to arbitrate was meant to
prevent.
The group of companies doctrine serves – sensibly – to prevent this sort of circumvention and
frustration of arbitration agreements. It permits corporate affiliates who have become
materially involved in the signatories’ negotiation and performance to be subjected to (and
benefited by) the signatories’ agreement to arbitrate: the critical consideration in determining
whether the doctrine binds a non-signatory is whether the signatories to the arbitration
agreement would, considered objectively and in good faith, have intended to bind (and
benefit) their affiliates to their agreement to arbitrate. In many instances, while the signatories
may very well have had no intention at all to bind corporate affiliates to the underlying
contract, they will have intended to bind those affiliates to their dispute resolution
mechanisms – for the simple reason that this is necessary in order to make those mechanisms
work.
The foregoing rationale is typically limited to the group of companies doctrine, involving
corporate affiliates, and does not extend generally to other mechanisms for binding non-
signatories that are not corporate affiliates. Nonetheless, this rationale is also reflected in a
few other contexts, including the treatment of corporate officers and directors, shareholder
derivative rights and some versions of estoppel. In each of these settings, courts and tribunals
have correctly relied on fairly attenuated conceptions of consent and party intent, to conclude,
absent express language, that the parties’ desire for an effective, centralized dispute
resolution mechanism implied an agreement to subject corporate affiliates, directors, officers,
shareholders and other related parties to arbitration.
As discussed above, national courts in a number of jurisdictions apply a presumption in favor
of arbitrability in interpreting the scope of an admittedly valid arbitration agreement. (432) A
few lower courts have also applied this presumption to the question whether a particular party
is bound by an arbitration agreement. The same analysis may explain some of the more
expansive decisions of some courts identifying the parties that are bound by international
arbitration agreements. (433)
For the reasons already explained, however, it is inappropriate to adopt the same approach to
issues of interpretation as to the question of a non-signatory’s status: the strong “pro-
arbitration” presumptions that apply in the context of interpreting a valid arbitration
P 1488 agreement are relevant, but not fully applicable, in the context of determining whether an
P 1489 arbitration agreement binds a party. (434) It is one thing to determine whether a party which
concededly concluded a valid agreement to arbitrate some disputes, also intended to
arbitrate other disputes; it is another thing to determine whether a party agreed to arbitrate
anything at all.
Nonetheless, as also discussed above, it is appropriate to apply a liberal standard of proof of
consent that takes into account the pro-arbitration policies of the New York Convention and
national arbitration legislation. (435) For the reasons already discussed, this approach makes
particular sense in the context of corporate affiliates, officers and directors, groups of
companies, and other related parties, where there are strong reasons to conclude that parties
who have entered into an arbitration agreement do not intend or desire for it to be
circumvented by corporate affiliates or other related parties, but rather that it will centralize
all of the disputes related to the parties’ transactions in a single, neutral forum. Moreover,
even in other contexts, there is also substantial force to the notion that commercial parties
would presumptively desire that all related disputes be resolved efficiently, in a unified, “one-
stop” forum, rather than in multiple, potentially inconsistent proceedings in different forums.
Finally, in limited circumstances, entities may be bound by arbitration agreements by
operation of law, without regard to questions of intent. Cases of succession (through merger or
similar doctrines) are the most obvious examples. (436) The same is true with regard to
doctrines of veil-piercing and estoppel, where a party’s actions subject it to an arbitration
agreement, signed by another entity, regardless of questions of assent or intent. (437) It is
critical to distinguish such cases, which do not involve traditional contractual analysis,
conceptually from other non-signatory theories, which do. Although these doctrines are only
23
exceptionally applicable, they play an essential role in ensuring the fairness of the
international arbitral process.
§ 10.04 FORMAL VALIDITY AND NON-SIGNATORIES

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

P 1491 Choice-of-law issues frequently arise in disputes over the identities of the parties to
P 1492 international arbitration agreements. (448) Nonetheless, there is little considered analysis
focusing on the law applicable to determining the parties to an arbitration agreement. (449)
As discussed above, some authorities have applied international principles (particularly to the
group of companies, estoppel and alter ego doctrines), (450) while other authorities have
applied national law rules (particularly to issues of agency, assignment, merger and
guarantee/ratification). (451) Generally speaking, as discussed below, the application of these
various international and national law standards to different non-signatory theories,
depending on the nature of the relevant theory, is appropriate: properly analyzed, the law
24
applicable to determine whether a non-signatory is bound by an arbitration agreement
depends on the particular theory that is invoked. (452) Also preliminarily, where national law is
applicable, the better analysis is to apply a validation principle, that gives effect to an
arbitration agreement vis-à-vis a non-signatory if that is the result provided for under either
the law applicable to the underlying legal event (e.g., third party beneficiary rights, assignment
agreement) or the law applicable to the arbitration agreement.
[A] Application of International Principles to Non-Signatory Issues

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

Despite these approaches, other courts and arbitral tribunals have rejected the notion that
international law rules apply to the determination of the parties to an international arbitration
agreement, and have instead applied various choice-of-law rules calling for the selection of a
national law. Thus, in a recent decision, an English court declared:
“The identification of the parties to an agreement is a question of substantive not procedural
law.…There [is] no basis for the tribunal to apply any other law [than that selected by the
parties].” (464)
This analysis went on to reject the application of an international “group of companies”
doctrine and to affirm the primacy of national law in structuring contemporary commercial
transactions. Other courts and arbitral tribunals have reached similar conclusions, holding that
national law, selected through the application of choice-of-law rules, applies to non-signatory
issues. Thus, some courts and tribunals have applied the law selected by the choice-of-law
clause in the underlying contract to non-signatory issues (465) (although other authorities, set
25
out above, have rejected these analyses); other courts have applied the law of the arbitral
seat. (466)
P 1495
P 1496 In contrast, some national courts and arbitral tribunals (467) have (wrongly) applied the
local law of the judicial enforcement forum to issues of non-signatory status. The clearest
example of this approach was a recent U.S. appellate decision which reversed a trial court’s
recognition of a foreign (Egyptian) arbitral award, where the arbitral tribunal had applied a
variant of the group of companies doctrine to bind a non-signatory parent corporation. (468)
Among other things, the U.S. court held that “American” law was mandatorily applicable to
determine whether a non-signatory U.S. company was a party to an arbitration agreement:
“It is American federal arbitration law that controls. An American nonsignatory cannot be
bound to arbitrate in the absence of a full showing of facts supporting an articulable theory
based on American contract law or American agency law.” (469)
P 1496 To arguably the same effect, other U.S. courts have applied national law to a variety of non-
P 1497 signatory issues, such as alter ego status (470) and estoppel, (471) but have done so based
upon more generally-applicable choice-of-law rules, rather than (wrongly and reflexively)
applying the law of the judicial enforcement forum. (472)
[C] Future Directions: Choice of Law Applicable to Non-Signatory Issues

As discussed above, a number of different legal theories are invoked to subject non-signatories
to an arbitration agreement. (473) The better approach to the choice of law applicable to non-
signatory issues requires considering the particular legal theory that is relied upon to subject a
party to the arbitration agreement. In particular, the same law will not necessarily govern
purely consensual non-signatory theories (such as agency, third party beneficiary, guarantor
relations, assumption, or assignment), on the one hand, and nonconsensual doctrines (such as
estoppel and alter ego), on the other.
[1] Future Directions: Application of National Law to Non-Signatory Issues
In principle, issues of implied consent, assumption, ratification, third party beneficiary status,
joint venture relations and the group of companies doctrine should be subject to the same
choice-of-law rules and analysis as the underlying arbitration agreement. (474) Issues of
ratification and assumption are questions directly concerning either the interpretation or
formation of an arbitration agreement under generally-applicable contract law mechanisms,
and would therefore be governed by the law applicable to the arbitration agreement under
most conflicts systems. (475) Conversely, there is no reason not to apply the law governing the
arbitration agreement to these issues. (476)
P 1497
P 1498 The application of national law in this manner entails application of a validation principle
(for the reasons discussed above), which is mandated by the New York Convention and many
national arbitration regimes. (477) That principle provides for the validity of the arbitration
agreement, including as to the status of non-signatories as parties to the agreement, whenever
provided for by any of the laws potentially applicable to the agreement (in particular, the law
of the underlying contract and the law of the arbitral seat). (478)
Questions of implied consent to an arbitration agreement, as well as application of the group
of companies doctrine, should also in principle be subject to the law governing the arbitration
agreement. This is consistent with general choice-of-law analysis with regard to implied
consent to other contracts. (479) For the reasons discussed above, it makes particular sense to
apply the law governing the arbitration agreement to application of the group of companies
doctrine (which was developed for specific application only to agreements to arbitrate). (480)
The effects of agency, assignment, guarantee and subrogation agreements on the parties to
international arbitration agreements are more complex, but should be treated similarly, by
applying the law governing the original agreement to arbitrate. It is appropriate to apply the
rules prescribed by the law governing the original arbitration agreement because, where
actions by third parties (e.g., assignees, guarantors) purportedly impact the substantive rights
of the original parties to the arbitration agreement, those original parties’ ability to arbitrate
disputes concerning those rights should not be altered by a “foreign law” (e.g., the law of an
agency, assignment, or subrogation agreement which they had no role in selecting). Rather, the
law governing the arbitration agreement should be available to preserve the original parties’
ability to arbitrate concerning their substantive rights. Conversely, a “foreign” law, selected in
a new agreement (of assignment, guarantee, or the like), should not be permitted to intrude
and affect the rights and obligations of the original parties to the arbitration agreement, who
did not agree to application of the new law.
In principle, the effect of a merger (or other legal succession) should also be governed by
P 1498 national law. In particular, the effects of succession are properly governed by the law of the
P 1499 state under which the relevant corporate entities (or other persons) are organized (e.g., a
merger between Dutch companies is governed by Dutch law). At the same time, the validation
principle should also apply, to ensure that corporate reorganizations or similar events under a
foreign law do not have the effect of circumventing the arbitration agreement.
[2] Future Directions: Application of International Principles to Non-Signatory Issues
More difficult choice-of-law considerations arise with regard to issues of alter ego status,
apparent authority and estoppel. In each of these cases, the better approach in international
26
matters is to apply international principles. (481) Each of these doctrines rests on
noncontractual theories, and doctrines based on general principles of equity and justice, as to
which there is ordinarily little principled basis in an international setting for choosing a
particular national law and where international principles of good faith have particular
applicability. In the context of international arbitration agreements, principles of apparent
authority, veil-piercing and estoppel, which are formulated to take into account the
transnational character of the parties and their international dealings, are more appropriate
than application of one state’s domestic law.
[3] Future Directions: International Limitations on National Law Applicable to Non-Signatory
Issues
As discussed elsewhere, national laws in the context of non-signatory issues should be subject
to international limitations, forbidding discriminatory or idiosyncratic rules. (482) For
example, the New York Convention would not permit a Contracting State to prohibit the
assignability, subrogation, or ratification of any arbitration agreement or to forbid parties from
entering into an arbitration agreement through an agent. Similarly, the Convention would not
permit giving effect to a Contracting State’s rule that a merger transferred all substantive
obligations, but not arbitration agreements. In each case, such rules would both discriminate
against arbitration agreements and be out-of-step with the treatment of arbitration
agreements in most developed jurisdictions.
Finally, as discussed above, it is generally inappropriate for a national court to apply the law
of the judicial forum in which an award might be, or is, enforced to non-signatory issues in
judicial enforcement proceedings. (483) As already noted, one recent U.S. decision – Sarhank
P 1499 Group v. Oracle Corp. (484) – departs from this approach, instead holding that “[a]n American
P 1500 nonsignatory cannot be bound to arbitrate in the absence of a full showing of facts
supporting an articulable theory based on American contract law or American agency law.”
(485)
This analysis is impossible to reconcile with either the New York Convention or generally-
accepted choice-of-law principles. There is no justification for a Contracting State to apply its
own substantive law to all claims that one of its nationals is bound by an arbitration
agreement. On the contrary, as discussed above, Article V(1)(a) of the New York Convention
prescribes a choice-of-law rule for the existence and validity of the arbitration agreement –
being the law selected by the parties or (absent such choice) the law of the arbitral seat. (486)
The Sarhank analysis flatly contradicts this rule, instead adopting a parochial preference for
local law, applied to protect local businesses. The Sarhank analysis also contradicts
contemporary international conflicts rules – none of which would permit application of local
law to protect local residents in such circumstances. (487)
§ 10.06 ALLOCATION OF COMPETENCE TO DETERMINE PARTIES TO

ARBITRATION AGREEMENT
As with other disputes over the enforceability and interpretation of international arbitration
agreements, determining the identities of the parties to such an agreement gives rise to
questions concerning the allocation of jurisdictional competence between national courts and
arbitrators. (488) Consistent with more general approaches to the competence-competence
doctrine, (489) arbitral tribunals have almost uniformly concluded that they have the authority
P 1500 to consider whether the parties’ arbitration agreement was binding on particular entities. (490)
P 1501 Indeed, there are virtually no instances in which a tribunal has refused on jurisdictional
grounds to consider arguments that an arbitration agreement binds particular non-signatories.
National courts have reached less consistent results in addressing the competence of
arbitrators to resolve disputes over the parties to an international arbitration agreement. As
discussed above, many national arbitration statutes (and/or judicial authorities) address the
allocation of competence between national courts and arbitrators to decide disputes over the
enforceability and interpretation of arbitration agreements. (491) These general principles of
competence-competence are applicable, with few peculiarities, in the specific context of
determining the parties to arbitration agreements.
The Model Law’s regime for competence-competence, in Articles 8 and 16, (492) applies to
disputes over the parties to an arbitration agreement. Consistent with that regime, courts
applying the Model Law have affirmed the power of arbitral tribunals to consider disputes over
the identities of the parties to arbitration agreements, (493) while also entertaining
interlocutory litigation concerning this issue (494) and reviewing awards addressing the
subject. (495)
French courts have concluded (consistent with general French principles of competence-
competence) (496) that arbitral tribunals have the competence to decide initially what parties
are bound by an arbitration agreement; (497) the arbitrator’s jurisdictional award is subject to
subsequent de novo judicial review by French courts. (498) Once arbitral proceedings have
P 1501 been commenced, no interlocutory judicial consideration of jurisdictional issues is available in
P 1502 French courts; even before an arbitration is commenced, no judicial consideration is
permitted, save for a manifest nullity of the arbitration clause towards the non-signatories.
(499)
In contrast, U.S. courts have reached divergent results with regard to the allocation of
27
competence to decide non-signatory issues. Some courts have upheld the arbitral tribunal’s
authority to decide what parties are bound by an arbitration agreement, (500) while others
have reached the opposite result, reasoning that an “arbitration proceeding [is] not the proper
forum for deciding whether an arbitrator may afford relief against a non-signatory who is not
covered by an arbitration agreement.” (501)
The former position is clearly correct: as discussed above, it is well-settled under the FAA that
an arbitral tribunal has the inherent power to consider jurisdictional disputes and make
awards or orders on them. (502) Those determinations will generally be subject to de novo
judicial review, (503) except where the parties have agreed to submit jurisdictional issues for
arbitral determination. (504)
As discussed above, the U.S. Supreme Court held in First Options that so-called “arbitrability
questions” could be finally resolved by the arbitral tribunal, provided that the parties agreed
to grant the arbitrators such power. (505) Additionally, the Court held that an agreement to
arbitrate “arbitrability” issues must be established by “clear and unmistakable” evidence.
P 1502 (506) These requirements were formulated by the First Options Court in the specific context of a
P 1503 dispute over the identity of parties to an arbitration agreement, and they clearly apply to
disputes over the status of non-signatories.
In general, however, it is difficult to see how a non-signatory can be shown to have clearly and
unmistakably agreed to arbitrate the question whether it ever agreed to the arbitration clause
(save in after-the-fact submission agreements). (507) Nevertheless, some recent U.S. decisions
applying First Options have found this standard satisfied, typically by arbitration agreements
incorporating institutional arbitration rules: these decisions have held that “a non-signatory
can compel a signatory to arbitrate under an agreement where the question of arbitrability is
itself subject to arbitration.” (508)
§ 10.07 ARBITRATION IN CORPORATE AND PARTNERSHIP CONTEXTS (509)

It is common in some legal systems to include arbitration clauses in the constitutive document
for a legal entity. Examples include arbitration clauses in articles of association (or corporate
P 1503 charters) of a company or the deed of a partnership. (510) Parties include such provisions in
P 1504 corporate/partnership documents for obvious commercial and business reasons: the
members of a corporate body or partnership wish to have their disputes resolved in a private,
commercially-oriented manner, over which they have a substantial degree of control. (511) The
ongoing, cooperative nature of corporate or partnership relations makes arbitration
particularly well-suited for resolving shareholder or partnership disputes.
In most legal systems, arbitration clauses in corporate or partnership documents are valid and
enforceable. (512) This is merely a straightforward and commercially-sensible application of
the general rule under leading international arbitration conventions and national legislation
that arbitration agreements are presumptively valid. (513) This rule applies with particular
force in corporate or partnership contexts, where parties have special reasons for desiring a
commercially-experienced tribunal and the privacy and informality of the arbitral process.
Questions sometimes arise as to the effect of arbitration agreements in the case of transfers of
shares or partnership interests to new shareholders or partners. It is relatively clear that any
new partner or shareholder will be subject to the arbitration provision in a company’s charter
or a partnership’s deed, regardless of specific acceptance thereof. Exercising rights and
deriving benefits as a shareholder or partner within a corporate or partnership agreement,
which itself contains an arbitration clause, suffices to subject the new party to that clause. (514)
As one authority explains, with reference to German law:
P 1504
P 1505 “when a person becomes the holder of a general or a limited share in a partnership which
had already been organized before he joined it, he will be bound by an ‘intra-partnership’
agreement which had been attached to the original partnership contract before he joined the
partnership. It is wholly irrelevant whether he acquired a general or a limited share. It also
does not matter on which legal basis his entry into the partnership rests: on a statutory
succession (for example, as an heir, a receiver or a liquidator), or upon a corporate transaction
(for example, as a purchaser or a donee).” (515)
The same analysis applies to transfers of corporate shares. (516) New shareholders are
automatically bound by the arbitration clause contained in a company’s constitutive
documents, simply by virtue of their status as shareholders, without the need for a separate
agreement. (517)
Equally, a party’s purported acquisition of corporate shares or partnership interests – even if
invalid – also generally subjects it to the corporate charter’s or partnership deed’s arbitration
clause with regard to disputes over the validity of that acquisition. The act of exercising rights
attached to corporate shares or partnership interests is sufficient to subject the party claiming
such rights to the arbitration clause associated with them.
It would be theoretically possible to include arbitration agreements in the constitutive
documents of publicly-held companies, requiring public shareholders to arbitrate claims
against the company and its management. As discussed above, such provisions are not widely
used in practice. (518)
In the United States, the Securities and Exchange Commission has an informal policy of
discouraging the registration of securities whose documentation includes mandatory
28
P 1505 arbitration provisions. (519) Nonetheless, there are exceptions to this general approach and
P 1506 there are, in principle, no reasons that an arbitration clause could not validly be included in
the constitutive instruments of a public company, binding all shareholders in the company
with respect to defined categories of claims. (520)
As discussed above, national courts have generally rejected arguments that shareholders’
disputes and the “internal affairs” of corporate governance are nonarbitrable. (521) There is no
reason that arbitral tribunals cannot satisfactorily resolve issues of corporate law, just as they
resolve other legal issues. Nonetheless, in some jurisdictions, questions have arisen as to the
arbitrability of particular matters (such as the validity of shareholder resolutions). (522)
Additionally, questions also arise as to the scope of the claims covered by arbitration
provisions in corporate constitutive instruments. (523)
§ 10.08 CLASS ARBITRATIONS (524)

[A] United States
Under some legal systems, “class actions” are an important part of the domestic litigation
system. A class action is a civil suit, often a mass torts or consumer litigation, in which one or
P 1506 more named plaintiffs represent a large, sometimes indeterminate, number of similarly-
P 1507 situated individuals in pursuing related claims against one or more defendants. (525) The
logic of class actions is to permit large numbers of comparatively small claims that would not
otherwise readily be pursued to be heard efficiently in a single proceeding.
Class actions are frequently used in the United States, and broadly similar devices are
available in some other common law systems. (526) The historical development of so-called
“class arbitration” in the United States illustrates, however, the complexities and difficulties
that arise from efforts to implement such a system of dispute resolution.
[1] Historical Background
Historically, courts in the United States held that only the parties to a particular contract (or
set of contracts) could participate in an arbitral proceeding and, thus, that class action
arbitrations were impermissible, because they involved nonparties to the particular contract
in question. In Vernon v. Drexel Burnham & Co., for example, the court denied the claimants’
request to order a class arbitration of claims by multiple claimants and instead ordered
individual arbitrations. (527) The court rejected the argument that a consolidated arbitration
could be ordered because all of the claimants were party to contracts, each one with the
defendant and each one containing an arbitration clause, relying instead on traditional
notions of privity of contract:
“A class action cannot be used to subvert an otherwise enforceable agreement to arbitrate
contained in a valid contract merely because other individuals, who might qualify as members
of a class, were subject to the same provision.” (528)
P 1507
P 1508 Despite this, other U.S. courts held that class actions could, in principle, be asserted in
arbitral proceedings. In Keating v. Superior Court, franchisees of a grocery chain argued that
their claims against the grocery chain franchisor under state law were nonarbitrable and that,
if this objection were rejected, arbitration should proceed as a class action, rather than in
multiple individual arbitrations. (529) The franchisor responded that class procedures in
arbitration were impermissible, insisting that its various bilateral agreements to arbitrate with
individual franchisees contemplated only individual arbitrations. (530)
On appeal, the California Supreme Court ordered arbitration on a class basis, describing class
arbitration as “giv[ing] expression to the basic arbitration commitment of the parties.” (531)
The Court’s analysis began from the premise that a class action is an important means of
vindicating the rights of large groups of persons and that adhesion contracts involving
consumers, franchisees and similar parties present an ideal setting for class actions (and class
arbitrations). The Court reasoned:
“An adhesion contract is not a normal arbitration setting, however, and what is at stake is not
some abstract institutional interest but the interests of the affected parties. Classwide
arbitration, as Sir Winston Churchill said about democracy, must be evaluated, not in relation
to some ideal but in relation to its alternatives. If the alternatives in a case of this sort is to
force hundreds of individual franchisees each to litigate its cause with Southland in [a]
separate arbitral forum, then the prospect of classwide arbitration, for all its difficulties, may
offer a better, more efficient, and fairer solution. Where that is so, and gross unfairness would
result from the denial of opportunity to proceed on a classwide basis, then an order structuring
arbitration on that basis would be justified.” (532)
After the California Supreme Court’s decision in Keating, authorizing class arbitration,
California state courts ordered class arbitration in a wide variety of circumstances. (533)
P 1508
P 1509 Nonetheless, courts in a number of other U.S. states rejected the possibility of class
arbitration. (534) At the same time, federal courts generally refused to order class arbitration
unless the arbitration agreement contained express provisions to that effect. (535) A
representative decision was Champ v. Siegel Trading Co., which refused to order class
arbitration absent a specific agreement between the parties authorizing it. (536) Given that the
vast majority of arbitration agreements did not provide expressly for class arbitration, these
decisions appeared to render class arbitration, at least outside of California, extremely
29
unusual. (537)
[2] Green Tree Financial Corp. v. Bazzle and Its Progeny
Beginning in 2003, the U.S. Supreme Court issued a series of decisions on the subject of class
arbitration which initially appeared to authorize (and encourage) class arbitration. It was only
subsequently that the Court (appears to have) substantially retrenched, producing a resolution
that remains unclear but that appears inhospitable to class arbitration absent a clear
agreement providing for class procedures.
The Supreme Court’s first consideration of class arbitration was in Green Tree Financial Corp. v.
Bazzle. (538) There, the South Carolina Supreme Court had adopted the reasoning of the
California courts, holding that “class-wide arbitration may be ordered when the arbitration
agreement is silent if it would serve efficiency and equity, and would not result in prejudice.”
(539) The U.S. Supreme Court reviewed the South Carolina decision and, in a badly-fragmented
set of opinions, reversed and remanded to the arbitral tribunal. The Supreme Court held that
class action arbitrations are not inconsistent with the FAA and that the availability of class
P 1509 arbitration depends on the terms of the parties’ arbitration agreement; the Court’s badly-
P 1510 divided plurality decision also appeared to leave resolution of the question whether an
arbitration agreement authorized class arbitration largely to the arbitrators, subject only to
minimal judicial review. (540)
Justice Breyer’s plurality opinion in Bazzle initially considered whether the South Carolina
court had correctly decided that the parties’ arbitration agreement was silent on the issue of
class arbitration or whether the agreement in fact, as Green Tree contended, affirmatively
forbade class arbitration. (541) The plurality opinion concluded that this question was for the
arbitrators, not the courts, to decide: according to the plurality, the question whether an
arbitration agreement authorized class arbitration did not fall within the category of “gateway
matters” (such as the validity or scope of an arbitration agreement) that are for courts
presumptively to decide on an interlocutory basis. (542) Rather, the plurality thought the
question whether an arbitration agreement permits class arbitration “concerns contract
interpretation and arbitration procedures. Arbitrators are well situated to answer that
question.” (543) The plurality therefore remanded the case to the arbitral tribunal to
determine whether the parties’ arbitration agreement authorized class arbitration; moreover,
the almost inevitable corollary of Justice Breyer’s plurality analysis was that an arbitral
tribunal’s interpretation whether an arbitration agreement authorized class arbitration would
be subject to de minimis judicial review in a vacatur action. (544)
This conclusion was bolstered by Justice Stevens’ opinion, concurring in the judgment. Justice
Stevens wrote that the plurality’s opinion was “close to [his] own” and that he concurred so that
there would be a controlling opinion. (545) Nonetheless, Justice Stevens would have affirmed
the South Carolina court on other grounds – in particular, because he thought that its decision
compelling class arbitration was “correct as matter of law.” (546) Justice Stevens reasoned:
“The Supreme Court of South Carolina had held as a matter of state law that class-action
P 1510 arbitrations are permissible if not prohibited by the applicable agreement, and that the
P 1511 agreement between these parties is silent on the issue.…There is nothing in the [FAA] that
precludes either of these determinations by the Supreme Court of South Carolina.” (547)
The Court’s decision in Bazzle ushered in a very substantial increase in class arbitrations in the
United States, with numerous requests for class arbitration being filed in wake of the decision.
The AAA alone administered nearly 300 class arbitrations, collectively involving billions of
dollars in claims, which were filed over the space of several years, (548) while JAMS
administered a smaller, but substantial, number of additional class arbitrations. (549) Both the
AAA and JAMS also adopted institutional rules designed specifically for class arbitrations. (550)
Some of these class arbitrations proceeded pursuant to arbitration agreements that expressly
provided for class arbitration or pursuant to the parties’ stipulation that an arbitration clause
allows class arbitration. (551) A large number of class arbitrations proceeded, however, under
arbitration provisions that were silent as to class arbitration, where the arbitral tribunals –
exercising their authority under Bazzle to interpret the parties’ arbitration agreement –
construed silence in the parties’ agreement to allow class arbitration. (552)
P 1511
P 1512 [3] Class Actions Waiver and Unconscionability: Discover Bank Rule
Following Bazzle, a number of corporations began to include so-called “class arbitration
waivers” in their standard form arbitration agreements (precisely to avoid the possibility of
being subjected to class arbitrations brought by large numbers of customers or employees). A
number of courts held, however, that these provisions were unenforceable (on
unconscionability, public policy, or other grounds), ordering or permitting arbitrations to
proceed on a class-wide basis notwithstanding the putative waiver. One U.S. court adopting
this position explained:
“Corporations should not be permitted to use class action waivers as a means to exculpate
themselves from liability for small-value claims. We thus conclude that the enforceability of a
particular class action waiver in an arbitration agreement must be determined on a case-by-
case basis, considering the totality of the facts and circumstances. Relevant circumstances
may include, but are not limited to, the fairness of the provisions, the cost to an individual
plaintiff of vindicating the claim when compared to the plaintiff’s potential recovery, the
ability to recover attorneys’ fees and other costs and thus obtain legal representation to
30
prosecute the underlying claim, the practical affect [sic] the waiver will have on a company’s
ability to engage in unchecked market behavior, and related public policy concerns.” (553)
In turn, the application of state unconscionability (or other) rules to invalidate class action
waivers presented the question whether the FAA preempted this application of state law (and
instead required enforcement of the parties’ bilateral or individual arbitration agreements in
accordance with their terms). The California Supreme Court addressed this issue in a decision
titled Discover Bank v. Superior Court of Los Angeles. (554)
The California Supreme Court emphasized the importance of class action proceedings in
protecting consumers by deterring fraudulent business practices and reducing the burden of
duplicative litigation involving identical claims and small amounts in dispute. (555) The
Discover Bank court announced a generally-applicable rule of unconscionability with regard to
class action waivers:
“when the waiver is found in a consumer contract of adhesion in a setting in which disputes
between the contracting parties predictably involve small amounts of damages, and when it is
alleged that the party with the superior bargaining power has carried out a scheme to
P 1512 deliberately cheat large numbers of consumers out of individually small sums of money, then,
P 1513 at least to the extent the obligation at issue is governed by California law, the waiver
becomes in practice the exemption of the party ‘from responsibility for [its] own fraud, or
willful injury to the person or property of another.’” (556)
The Discover Bank court also held that the FAA did not preempt this unconscionability rule. The
court’s analysis focused on Perry v. Thomas, (557) where the U.S. Supreme Court held that the
FAA preempted a California statutory provision that authorized claims for the collection of
wages “without regard to the existence of any private agreement to arbitrate.” (558) According
to the California Supreme Court, Perry rested on a “critical distinction…between ‘a state-law
principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue,’
which is preempted by the FAA, and a state law that ‘govern[s] issues concerning the validity,
revocability, and enforceability of contracts generally,’ which is not [preempted by the FAA].”
(559) Applying this distinction, the court held in Discover Bank that California’s
unconscionability rule prohibiting class action waivers was not preempted because “it
applie[d] equally to class action litigation waivers in contracts without arbitration agreements
as it does to class arbitration waivers in contracts with such agreements.” (560)
Adopting this or similar analysis, a number of U.S. lower courts held that arbitration
agreements excluding class actions were unconscionable (typically applying state law
unconscionability doctrines). (561) In cases where courts found a waiver of class actions
P 1513 unconscionable, they sometimes overturned the waiver and allowed arbitration to proceed as
P 1514 a class action, (562) and in other cases held that the class action waiver rendered the entire
arbitration agreement unenforceable. (563) Some courts and arbitrators reasoned that
interpreting a silent arbitration agreement to allow class arbitration was necessary to give
effect to the parties’ agreement to arbitrate, even if the parties did not necessarily
contemplate a class proceeding. (564)
At the same time, other U.S. courts rejected arguments that class action waivers in the context
of arbitration agreement are unconscionable. (565) According to one such decision, the “right to
a class action…is ‘merely procedural’ and ‘may be waived,’” and therefore that “an arbitration
agreement barring class wide relief for claims…is not unconscionable.” (566)
[4] Post- Bazzle U.S. Supreme Court Decisions
The U.S. Supreme Court revisited the issue of class arbitration in three more recent decisions –
Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., (567) AT&T Mobility LLC v. Concepcion (568) and
Oxford Health Plans LLC v. Sutter. (569) Considered together, these decisions substantially
retrenched from the Court’s apparent treatment of class arbitration in Bazzle. The Court’s
decisions leave the status of class arbitration in the United States uncertain, although the
outlines of a legal framework appear to be emerging.
P 1514
P 1515 [a] Stolt-Nielsen SA v. AnimalFeeds Int’l Corp.
In Stolt-Nielsen, the claimant, AnimalFeeds, brought a class arbitration against Stolt-Nielsen, a
major ocean shipping company, asserting antitrust claims (based on allegedly illegal price
fixing by shipping companies). (570) The arbitration agreement in the AnimalFeeds-Stolt-
Nielsen contract was silent on whether class arbitration was permitted; indeed, pursuant to the
parties’ stipulation, there was “no agreement” on the subject of class arbitration. (571) In the
arbitral proceedings, the tribunal considered whether class arbitration was nonetheless
permissible, given the concededly silent arbitration agreement, and concluded that it was,
issuing an award requiring class arbitration between Stolt-Nielsen and its various customers
(who had similar arbitration clauses in their shipping contracts). Stolt-Nielsen then applied to
vacate the arbitrators’ award, construing the parties’ arbitration agreements.
The U.S. Supreme Court vacated the arbitrators’ award requiring class action arbitration.
Applying the “excess of authority” provision of §10(a)(4) of the FAA, the Court held that the
arbitral tribunal had not actually interpreted the parties’ various arbitration agreements in
making its determination and had instead “simply imposed its own conception of sound
policy” and view “that class arbitration is beneficial in ‘a wide variety of settings.’” (572) The
Court’s decision noted, in particular, that the parties had stipulated that “no agreement” had
been reached as to class arbitration (which resulted in the arbitrator, in ordering class
31
arbitration, to look outside the parties’ agreement). (573)
In Justice Alito’s view, writing for the Court, “the panel proceeded as if it had the authority of a
common-law court to develop what it viewed as the best rule to be applied in such a
situation,” ignoring the supposed fact that “the task of an arbitrator is to interpret and enforce
a contract, not to make public policy.” (574) The Court concluded:
“the panel regarded the agreement’s silence on the question of class arbitration as dispositive.
The panel’s conclusion is fundamentally at war with the foundational FAA principle that
arbitration is a matter of consent.…An implicit agreement to authorize class-action
P 1515 arbitration…is not a term that the arbitrator may infer solely from the fact of the parties’
P 1516 agreement to arbitrate. This is so because class-action arbitration changes the nature of
arbitration to such a degree that it cannot be presumed the parties consented to it by simply
agreeing to submit their disputes to an arbitrator.” (575)
As a consequence, the Court held that the arbitrators’ decision to proceed with class
arbitration exceeded their authority, requiring that their award be vacated. (576) The Court
also held that an arbitration agreement could not be interpreted to permit class arbitration
unless it was clear that “the parties agreed to authorize class arbitration.” (577)
The Supreme Court’s Stolt-Nielsen decision appeared to undo, in substantial part, the results in
Bazzle, which had left to arbitrators the largely unreviewable authority of determining whether
particular arbitration agreements permitted class arbitration. In its place, Stolt-Nielsen
suggested that the availability of class arbitration was a matter for de novo judicial
determination in a vacatur action; at the same time, the Court also suggested that silent
arbitration clauses did not provide the basis for class arbitrations under the FAA. (578) More
generally, and more worryingly, the relatively discursive text of the Stolt-Nielsen opinion also
suggested that the scope of judicial review under §10(a)(4)’s “excess of authority” basis for
vacatur was expansive, permitting courts to review the substantive correctness of arbitrators’
contract interpretations. (579)
Finally, Justice Alito went out of his way in Stolt-Nielsen to note that, in Bazzle, a plurality,
rather than a majority, of the Court had said that “an arbitrator, not a court, [must] decide
whether a contract permits class arbitration.” (580) While evidently skeptical of this notion,
Justice Alito stated that the Court did not need to revisit the question because the parties had
“expressly assigned this issue to the arbitration panel.” (581) In sum, the Court’s Stolt Nielsen
decision placed substantial limits on class arbitration, in the form of judicial review of
arbitrators’ determination that class arbitration was appropriate, while raising the possibility
of further obstacles to class arbitrations.
[b] AT&T Mobility LLC v. Concepcion
In AT&T Mobility LLC v. Concepcion, (582) some eight years after its decision in Bazzle opened
the door to class arbitration in the United States, the Supreme Court further closed what was
left of that door after Stolt-Nielsen. Concepcion arose from a class action filed in U.S. courts by
customers of AT&T, a U.S. telephone company, alleging that AT&T had defrauded them by
P 1516 charging sales tax (about $30) on mobile telephones that were advertised as free. AT&T sought
P 1517 dismissal of the claims, moving to compel individual arbitrations pursuant to an arbitration
clause contained in AT&T’s contracts with its customers. The relevant clause contained a
detailed class action waiver providing that all claims be brought in the parties’ “individual
capacity, and not as a plaintiff or class member in any purported class or representative
proceeding.” (583)
Despite these provisions, the customers argued that they were free to pursue a class action, on
the grounds that their class action waiver was unconscionable. The lower federal courts agreed,
rejecting AT&T’s motion to compel individual arbitrations and holding that the class action
waiver was unconscionable; instead, the lower courts permitted the customers’ class action
litigation to proceed. (584)
In a 5-4 decision, which was only slightly less fragmented than that in Bazzle, (585) the Supreme
Court reversed. Writing for the Court, Justice Scalia concluded that California’s Discover Bank
rule of unconscionability (discussed above) was preempted by the FAA because it permits
consumers to demand class arbitration, which, in his view, is a procedure that is incompatible
with the character of arbitration under the FAA.
In concluding that class arbitration was contrary to the “fundamental” character of arbitration,
Justice Scalia reasoned that “the point of affording parties discretion in designing arbitration
processes is to allow for efficient, streamlined procedures tailored to the type of dispute.”
(586) In contrast, he said, “class arbitration requires procedural formality” and “the switch from
bilateral to class arbitration sacrifices the principal advantage of arbitration – its informality –
and makes the process slower, more costly, and more likely to generate procedural morass
P 1517 than final judgment.” (587) The Court also found it significant that class arbitration did not exist
P 1518 in 1925, when the FAA was enacted – apparently suggesting that class arbitration was thus
inconsistent with “arbitration as envisioned by the FAA.” (588)
Justice Scalia concluded that state law may not require procedures that are “not arbitration as
envisioned by the FAA,” and that “[r]equiring the availability of classwide arbitration interferes
with fundamental attributes of arbitration and thus creates a scheme inconsistent with the
FAA.” (589) The Court therefore held that California’s unconscionability rule (formulated in
Discover Bank) “stands as an obstacle to the accomplishment and execution of the full
32
purposes and objectives of Congress” and is preempted by the FAA. (590)
Although its ultimate holding may be correct, as a matter of interpreting the FAA, the Supreme
Court’s apparent analysis in Concepcion is, in important respects, misconceived. Justice
Scalia’s opinion suggests that the FAA only contemplates, and protects, a particular type of
arbitration – the archetype of arbitration supposedly envisioned by the U.S. Congress in 1925.
On this view, class arbitration is simply “not arbitration as envisioned by the FAA,” and class
arbitration “interferes with fundamental attributes of arbitration and thus creates a scheme
inconsistent with the FAA.” (591)
Justice Scalia’s reasoning – which, if given effect on its own terms, would apparently withhold
the statutory protections of the FAA from any type of arbitration not envisioned by Congress in
1925 – is manifestly wrong. Taken at face value, this reasoning would mean that class
arbitration agreements – including express class arbitration agreements – would be denied the
protections of §§2 and 4 of the FAA, because class arbitration is supposedly not arbitration
within the meaning of the FAA at all. In Justice Scalia’s view, those arbitration agreements
would be “inconsistent with the FAA.”
It is very difficult to imagine that this result is what the Court intended or would hold in future
cases; both this result and the reasoning underlying it plainly contradict the language of §2,
which requires that “agreements to arbitrate” be enforced, and the Court’s repeated
pronouncements that the FAA “ensur[es] that private arbitration agreements are enforced
according to their terms.” (592) Likewise, that conclusion contradicts the fundamental purpose
of the FAA, which is to give effect to parties’ agreements to submit their disputes for final
resolution by an arbitrator – which is plainly what a class arbitration clause does. (593)
P 1518
P 1519 Moreover, the Court’s suggestion that arbitration is somehow limited to what Congress
supposedly envisioned in 1925 is also impossible to accept. Arbitration in the 21st century has
no necessary resemblance to that in 1925 – nor should it. Arbitration has historically evolved
and been tailored to respond to economic, social and technological developments. As a
consequence, contemporary arbitration now routinely addresses statutory claims (under
legislation enacted decades after 1925), (594) using telecommunications, online and other
technologies (developed decades after 1925), (595) dealing with new commercial businesses
and industries (again, developed decades after the FAA was enacted). (596)
Ironically, the result reached in Concepcion could have been arrived at in a sensible manner,
without threatening to limit the protections of the FAA. Concepcion could very readily, and
correctly, have been decided on the basis that the California Supreme Court’s Discover Bank
rule is preempted because it does not comply with §2 of the FAA – providing that arbitration
agreements “shall be valid, irrevocable and enforceable,” subject only to a “saving clause” for
generally-applicable contract law defenses that apply to “the revocation of any contract.” (597)
Contrary to §2’s requirements, the “unconscionability” rule announced in Discover Bank does
not treat arbitration agreements as valid and enforceable, but instead invalidates them – on
the basis of a rule not designed for or applicable to contracts generally.
P 1519
P 1520 The Discover Bank rule clearly did not accord with §2’s basic requirement that arbitration
agreements are “valid, irrevocable and enforceable.” Instead of treating AT&T’s arbitration
agreements – which provided expressly and only for bipartite arbitration – as valid and
enforceable, the Discover Bank rule did the opposite. It expressly invalidated a central
provision of those agreements (the class action waiver) and required either litigation or a form
of arbitration not provided for, and indeed expressly excluded, by the parties’ agreement. That
plainly violated the basic requirements in §§2 and 4 of the FAA: namely, that arbitration
agreements be enforced in accordance with their terms.
The disputed issue in Concepcion was instead whether, as Justice Breyer’s dissent concluded,
the Discover Bank rule was nonetheless permitted by the FAA because it was a generally-
applicable rule of contract law, applicable to all contracts within the meaning of §2’s “savings
clause.” On this question, the proper interpretation of the savings clause is that it does not
rescue the asserted rule of “unconscionability” adopted by the California courts in Discover
Bank.
The Discover Bank rule was tailored for, and specifically directed, only to class action waivers,
in both arbitration and forum selection (choice-of-court) agreements. Under that rule, class
actions waivers in both arbitration and forum selection clauses are invalid whenever they
involve adhesion contracts, multiple small claims and an alleged scheme to defraud
consumers; (598) no further inquiry into the generally-applicable criteria of unconscionability
is required to invalidate a class action waiver under Discover Bank.
As such, the Discover Bank rule was not a generally-applicable rule of contract law, applicable
to “any contract,” as required by §2’s savings clause. Rather, the rule created a unique standard
of invalidity, not requiring any showing of most traditional unconscionability factors, that was
necessarily applicable to only class action waivers and not to other contractual provisions (i.e.,
the price, delivery, warranty and other provisions of consumer contracts, which were not, and
never could be, affected by the Discover Bank rule). (599) Because the California rule
automatically applied only to this fairly narrow subset of contractual provisions, it was not, as
demanded by §2, an unconscionability rule generally-applicable to all contracts. It was,
instead, a specially-tailored rule applicable only to class action waivers. As such, the Discover
Bank rule was not rescued by §2’s savings clause and is instead preempted by the requirement
of §§2 and 4 that arbitration agreements be enforced in accordance with their terms.
33
Contrary to Justice Breyer’s dissent, the fact that the Discover Bank rule applied to both forum
selection clauses and arbitration agreements does not bring it within §2’s savings clause. That
conclusion is clear from a few examples.
A state law that invalidated all agreements to resolve disputes in either out-of-state courts or
out-of-state arbitrations would be preempted by §2 no less than a law that invalidated only
agreements to arbitrate in an out-of-state location. Similarly, a state law that required all
forum selection and arbitration clauses to be signed separately, or to be reaffirmed by both
P 1520 parties after a dispute arose, would violate §2 no less than a law that imposed these
P 1521 requirements only on arbitration agreements. Likewise, a state law that invalidated any
forum selection clause or arbitration agreement as applied to disputes below (or above) a
specified monetary sum would again plainly violate §2, once more, no less than a provision
applying only to arbitration agreements. The fact that the Discover Bank rule also invalidates
class action waivers in forum selection agreements does nothing to save it, as applied to
arbitration agreements, under §2. (600)
Moreover, as already noted, the Discover Bank rule applied a flat rule of unenforceability to a
substantial subset of all class action waivers – invalidating all class action waivers in adhesion
contracts in cases involving claims of fraud seeking small amounts of damages, without any
further requirement for proof of traditional indicia of unconscionability. Although denominated
“unconscionability,” the California rule was in fact an automatic rule of invalidity directed at a
defined, and fairly substantial, set of arbitration and forum selection agreements.
Thus, the Discover Bank rule is precisely the type of state law invalidation of arbitration
agreements that the FAA has repeatedly been held to prohibit. As applied in Concepcion, the
Discover Bank rule required resolution of a defined category of disputes (involving specified
types of fraud claims arising from particular types of contract) in a different forum from the
bipartite arbitral forum agreed to by the parties. In particular, following Stolt-Nielsen, the
Discover Bank rule required that disputes which are subject to bipartite arbitration
agreements nonetheless be brought in class action litigation. (601)
[c] Oxford Health Plans LLC v. Sutter
The U.S. Supreme Court returned again to the subject of class arbitration, and its prior decision
in Stolt-Nielsen SA v. AnimalFeeds, in Oxford Health Plans LLC v. Sutter. (602) The Court held in
Oxford Health that the award-debtor bore the burden of proving an excess of authority under
§10(a)(4), that this was a very significant burden and that it had not been satisfied in a case
P 1521 where the arbitral tribunal ordered a class arbitration. (603) The Supreme Court emphasized
P 1522 the unusual circumstances of its decision in Stolt-Nielsen, effectively confining the decision to
its facts:
“In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any
agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we
found not that they had misinterpreted the contract, but that they had abandoned their
interpretive role.…Nor, we continued, did the panel attempt to ascertain whether federal or
state law established a ‘default rule’ to take effect absent an agreement. Instead, ‘the panel
simply imposed its own conception of sound policy’ when it ordered class proceedings. But
‘the task of an arbitrator,’ we stated, ‘is to interpret and enforce a contract, not to make public
policy.’ In ‘impos[ing] its own policy choice,’ the panel ‘thus exceeded its powers.’” (604)
Underscoring this point, the Court in Oxford Health refused to vacate an arbitral tribunal’s
award requiring class arbitration on excess of authority grounds. Reaching the opposite result
from that in Stolt-Nielsen, the Oxford Health Court reasoned:
“Here, [in contrast to Stolt Nielsen,] the arbitrator did construe the contract (focusing, per
usual, on its language), and did find an agreement to permit class arbitration. So to overturn
his decision, we would have to rely on a finding that he misapprehended the parties’ intent.
But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the
arbitrator strayed from his delegated task of interpreting a contract, not when he performed
that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4)
draws to delimit judicial review of arbitral decisions.” (605)
Simply put, the Court reemphasized the very narrow scope of the FAA’s “excess of authority”
ground for vacatur in Oxford Health, underscoring that the function of judicial review is not to
determine whether the arbitrator committed “error” – or even “grave error” – but solely to
consider whether the arbitrator refused to perform his “delegated task of interpreting a
contract.” (606)
Finally, the Court again suggested pointedly that its earlier (plurality) decision in Bazzle – that
the question whether an arbitration agreement provides for class arbitration is not a
jurisdictional or “gateway” issue – may have been wrongly decided. In particular, the Oxford
Health Court noted that: “Stolt-Nielsen made clear that this Court has not yet decided whether
the availability of class arbitration is a question of arbitrability.” (607) Lower courts have
reached divergent conclusions on the question whether an arbitration agreement authorizes
P 1522 class arbitration is for interlocutory judicial determination (as Justices Alito and Kagan
P 1523 suggested in Stolt-Nielsen and Oxford Health) or initial arbitral determination (as the
plurality opinion in Bazzle held). (608)
The future of class arbitration in the United States remains unsettled. It appears likely that the
Supreme Court will reverse its prior (plurality) decision in Bazzle, and instead hold, as
34
intimated by the Court in both Stolt-Nielsen and Oxford Health, that the question whether an
arbitration agreement authorizes class arbitration is a jurisdictional (or gateway) issue, for
resolution by courts, rather than arbitrators. It also appears likely, as intimated in Stolt-
Nielsen, that the Court will require some affirmative basis for concluding that an arbitration
agreement authorizes class arbitration (while also upholding, as the Court concluded in
Concepcion, waivers of class action arbitration). If these predictions are correct, class
arbitrations will become a relatively unusual creature in the United States, theoretically
possible, but rare as a practical matter.
[B] Other Jurisdictions

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

478) See§4.04[A][1][b][i]; §4.04[A][3].
479) See, e.g., Restatement (Second) of Conflict of Laws §§218, 187, 188 (1971); L. Collins (ed.),
Dicey, Morris and Collins on The Conflict of Laws ¶¶16-022, 32R-106 (15th ed. 2012) (“All
questions relating to the formation of an arbitration agreement are governed by the law
which would govern if it were validly concluded, i.e. by its putative applicable law.”; “Rule
225 – (1) Subject to clause (2) of this Rule, the existence and validity of a contract, or of
any term of a contract, are determined by the law which would govern it under the Rome I
Regulation if the contract or term were valid. (2) A party, in order to establish that he did
not consent, may rely upon the law of the country in which he has his habitual residence if
it appears from the circumstances that it would not be reasonable to determine the
effect of his conduct in accordance with the law specified in clause (1).”).
480) See§10.02[E], p. 1445.
481) See§10.02[B], pp. 1426-27 (apparent authority); §10.02[D], p. 1444 (alter ego); §10.02[K], p.
1477 (estoppel).
482) See§4.04[A][4]; §4.05[C][5]; §4.07[B][3]; §5.02[C].
483) See§4.04[A][2][j][v]; §10.05[C][1]. See also Partial Award in ICC Case No. 8910, 127 J.D.I.
(Clunet) 1085, 1091 (2000) (“The arbitral tribunal is fully aware that its decision may not be
recognized in the United Arab Emirates. However, if it is true that a tribunal must not act
in such a way that its award may be legally sanctioned (cf. [1998] ICC Rules, Article 26), it
may not be bound by the rules of the country or countries where its award may be
enforced.”).
484) Sarhank Group, 404 F.3d 657.
485) Sarhank Group, 404 F.3d at 661-62.
486) See§§4.04et seq. (especially §4.04[A][1]; §4.04[B][2]).
487) There would not be an objection in principle to a Contracting State applying public
policy, under Article V(2)(b) of the Convention, to deny recognition of an award on the
basis that it upheld jurisdiction over a party in violation of local public policy.
See§26.05[C][9]. Any such result could not, however, merely reassess choice of law or
factual matters decided by the arbitrators and could only rely upon clearly articulated,
fundamental public policies. See§26.05[C][9].
488) The same issues may arise before an arbitral institution, which may be required (like the
ICC and ICSID) to make a determination regarding prima facie jurisdiction (see§15.08[K]) or
to decide whether a particular entity may be served or permitted to participate in
constituting a tribunal. See J. Fry, S. Greenberg & F. Mazza, The Secretariat’s Guide to ICC
Arbitration 78 (2012); Werner, Jurisdiction of Arbitrators in Case of Assignment of An
Arbitration Clause: On A Recent Decision by the Swiss Supreme Court, 8(2) J. Int’l Arb. 13
(1991); Whitesell & Silva-Romero, Multiparty and Multicontract Arbitration: Recent ICC
Experience, in ICC, Complex Arbitrations 7, 8-10 (ICC Ct. Bull. Spec. Supp. 2003).
489) See§7.02.
490) See, e.g., Award in ICC Case Nos. 7604 and 7610, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 1996-2000 510 (2003); Final Award in ICC Case No.
6519, 2(2) ICC Ct. Bull. 34, 35 (1991); Partial Award in ICC Case No. 6000, 2(2) ICC Ct. Bull. 31,
32 (1991); Interim Award in ICC Case No. 5920, 2(2) ICC Ct. Bull. 27, 28 (1991); Partial Award in
ICC Case No. 4402, IX Y.B. Comm. Arb. 138 (1984); Interim Award in ICC Case No. 4131, IX Y.B.
Comm. Arb. 131, 138 (1984). See also authorities cited §10.02[B], p. 1425 n. 101; §10.02[C], . p.
1428 nn. 116-117; §10.02[D], pp. 1433-35 n. 141-155, pp. 1440-41 nn. 184-189; §10.02[E], p.
1448 n. 227; §10.02[H], p. 1465 n. 317; §10.02[M], p. 1479 n. 386; Pimm, Jurisdiction Over Non-
Signatories to the Arbitration Agreement – Can Arbitrators Pierce the Corporate Veil?, 2003
Asian Disp. Res. 5.
491) See§7.03.
492) See§7.03[A].
493) Pan Liberty Navigation v. World Link (H.K.) Res. Ltd, [2005] BCCA 206 (B.C. Ct. App.) (staying
litigation under Article 8 of Model Law; holding that question whether non-signatory was
bound by arbitration agreement was for arbitral tribunal to resolve); Gulf Canada Res. Ltd
v. Arochem Int’l Ltd, (1992) 66 B.C.L.R.2d 113 (B.C. Ct. App.) (“But it is not for the court, on a
stay application, to reach any final determination as to the scope of the arbitration
agreement or whether a particular party to the legal proceedings is a party to the
agreement. Those are matters within the jurisdiction of the arbitral tribunal. Only where it
is clear that the dispute falls outside the agreement, or that a party is not a party to it, or
that the application is out of time, should the court make a final determination.”); NetSys
Tech. Group AB v. Open Text Corp., (1999) 1 B.L.R.3d 307 (Ontario Super. Ct.). See also P.
Sanders, The Work of UNCITRAL on Arbitration and Conciliation 98 (2d ed. 2004).
78
494) See, e.g., Fibreco Pulp Inc. v. Star Shipping A/S, [1998] 145 F.T.R. 125 (Canadian Fed. Ct.),
aff’d, [1998] 156 F.T.R. 127 (Canadian Fed. Ct.); Decarel Inc. v. Concordia Project Mgt Ltd,
[1996] R.D.J. 484 (Québec Ct. App.); World LLC v. Parenteau & Parenteau Int’l Inc., [1998] A.Q.
No. 736 (Québec Super. Ct.); ABN Amro Bank Canada v. Krupp Mak Maschinenbau GmbH,
(1996) 135 D.L.R.4th 130 (Ontario Super. Ct.); Rio Algom Ltd v. Sammi Steel Co., XVIII Y.B.
Comm. Arb. 166 (Ontario Super. Ct. 1991) (1993); §7.03[A][2][b].
495) D. Frampton & Co. v. Thibeault, [1988] F.C.J. No. 305, 381 (Canadian Fed. Ct.); §7.03[A][5].
496) See§7.03[B][1]; Judgment of 26 June 2001, Société Am. Bureau of Shipping v. Copropriété
Maritime Jules Verne, 2001 Rev. arb. 529 (French Cour de cassation civ. 1e).
497) See, e.g.,Judgment of 9 June 2010, Soc. Evekas v. Soc. Macifilia, 2010 Rev. arb. 396 (French
Cour de cassation civ. 1e) (applying general rules of French competence-competence to
hold that arbitral tribunal should initially consider jurisdictional objection of non-
signatory); Judgment of 6 October 2010, Société Blonde génétique v. SCEA Plante Moulet,
2010 Rev. arb. 971, 971-72 (French Cour de cassation civ. 1e); Strickler, Chronique de
jurisprudence française, 2011 Rev. arb. 191.
498) See§7.03[B][3].
499) See§7.03[B][2]; Judgment of 4 December 2002, 2003 Rev. arb. 1291 (Paris Cour d’appel);
Judgment of 4 December 2002, 2003 Rev. arb. 1291 (Paris Cour d’appel), Note, Gaillard.
500) See, e.g., Contec Corp. v. Remote Solution Co., 398 F.3d 205 (2d Cir. 2005); Builders Fed. (H.K.)
Ltd v. Turner Constr., 655 F.Supp. 1400 (S.D.N.Y. 1987).
501) Fiat SpA v. Ministry of Fin. & Planning of the Repub. of Suriname, 1989 WL 122891, at *5
(S.D.N.Y.). See also Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir. 2004)
(court must determine whether non-signatory is successor corporation before compelling
arbitration); Orion Shipping & Trading Co. v. E. States Petroleum Corp., 312 F.2d 299, 301 (2d
Cir. 1963); Oriental Commercial & Shipping Co. (U.K.) Ltd v. Rosseel, NV, 609 F.Supp. 75
(S.D.N.Y. 1985).
502) See§7.03[E][4].
503) See§7.03[E][7]; Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006) (“A
determination of the arbitrability of a dispute, like the interpretation of any contractual
provision, is subject to de novo review.”); Local Union No. 38, Sheet Metal Workers’ Int’l
Ass’n v. Custom Air Sys., Inc., 357 F.3d 266, 268 (2d Cir. 2004) (“arbitrability vis a vis a non-
signatory is for the district court to decide”); Bridas SAPIC v. Gov’t of Turkmenistan, 345
F.3d 347, 347 (5th Cir. 2003); Nazar v. Wolpoff & Abramson, LLP, 2007 U.S. Dist. LEXIS 11027
(D. Kan.) (granting non-signatory’s motion to compel arbitration against signatory of
contract that clearly contemplated arbitration of jurisdictional issues).
504) See§7.03[E][7][c]; Thai-Lao Lignite (Thailand) Co. v. Gov’t of the Lao PDR, 2011 WL 3516154, at
*21 (S.D.N.Y.) (“Respondent does not point to any authority mandating independent
judicial review of arbitrability issues at the enforcement stage for a foreign arbitral award
because a non-signatory was granted standing as a claimant in the arbitration. Here,
Respondent is indisputably a signatory to a valid arbitration agreement that incorporates
UNCITRAL rules. There is thus no dispute that Respondent has agreed to arbitrate
disputes arising out of the PDA, including disputes about the scope of the Panel’s
jurisdiction.”).
505) See§7.03[E][2][a]; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44 (U.S. S.Ct.
1995).
506) See§7.03[E][2][a]. See also Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir.
2004); In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices & Prod.
Liability Litg., 838 F.Supp.2d 967, 981 (C.D. Cal. 2012) (“Generally, the issue of whether a
particular dispute is subject to arbitration is an issue decided by the courts.”); Awuah v.
Coverall N. Am., Inc., 843 F.Supp.2d 172, 177 (D. Mass. 2012) (“the question of whether the
parties agreed to arbitrate is to be decided by the court, not the arbitrator”).
507) See, e.g., Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006); Sarhank Group
v. Oracle Corp., 404 F.3d 657, 661-62 (2d Cir. 2005) (“An agreement between Sarhanks and
Systems which does not mention Oracle does not evidence a ‘clear and unmistakable’
intent by Oracle to arbitrate or permit the arbitrator to decide the issue of
arbitrability.”); Bridas SAPIC v. Gov’t of Turkmenistan, 345 F.3d 347, 354 n.4 (5th Cir. 2003).
For U.S. interlocutory judicial decisions determining the parties to international
arbitration agreements, see MJR Int’l, Inc. v. Am. Arbitration Ass’n, 596 F.Supp.2d 1990 (S.D.
Ohio 2009) (denying non-signatory principal’s injunction to stay arbitration because it had
been bound to the arbitration agreement through its agent); Jakubowski v. Nova Bev. Inc.,
unreported decision (N.Y. Sup. Ct. 1995) (issuing injunction against arbitration of claims
against individual officer of corporate signatory).
508) Repub. of Ecuador v. Chevron Corp., 2011 U.S. App. LEXIS 5351 (2d Cir.) (arbitration
agreement in BIT incorporated UNCITRAL Rules, demonstrating parties’ intention for
arbitrability issues to be decided by arbitral tribunal). See Alliance Bernstein Inv.
Research & Mgt, Inc. v. Schaffran, 445 F.3d 121, 125 (2d Cir. 2006) (jurisdictional issues
properly addressed by arbitral tribunal when contract incorporated reference to code
unequivocally providing for arbitration of dispute at issue); Contec Corp. v. Remote
Solution Co., 398 F.3d 205, 209-11 (2d Cir. 2005) (dispute between signatory and non-
signatory so intertwined with signatory’s contract that included arbitration clause,
signatory estopped from denying obligation to arbitrate all disputes, including
jurisdictional issue).
79
509) For commentary, see de Boisséson & Duprey, L’arbitrabilité subjective en matière de droit
des sociétés, 2004 Paris J. Int’l Arb. 121; Hornstein, Stockholders’ Agreements in the Closely
Held Corporation, 59 Yale L.J. 1040 (1950); Kessler, Arbitration of Intra-Corporate Disputes
Under New York Law, 19 Arb. J. 1 (1964); Mourre, L’impact de la réforme de la clause
compromissoire sur les litiges relatifs aux sociétés, 2004 Paris J. Int’l Arb. 125; Müller &
Keilmann, Beteiligung am Schiedsverfahren wider Willen?, 2007 SchiedsVZ 113; Sandrock,
“Intra” and “Extra-Entity” Agreements to Arbitrate and Their Extension to Non-Signatories
Under German Law, 19 J. Int’l Arb. 423 (2002); Shell, Arbitration and Corporate Governance,
67 N.C. L. Rev. 517 (1989).
510) See, e.g., U.S. Small Bus. Admin. v. Chimicles, 447 F.3d 207, 210 (3d Cir. 2006) (arbitration
clause in partnership agreement); U.S. v. Am. Soc’y of Composers, Authors & Publishers, 32
F.3d 727, 732 (2d Cir. 1994) (arbitration clause in articles of association); Armoudlian v.
Zadeh, 323 N.W.2d 502, 506 (Mich. Ct. App. 1982) (arbitration clause in partnership
agreement); 21 Williston on Contracts §57.44 (4th ed. 1990 & Update 2013) (arbitration
clauses in partnership agreements); 8 Fletcher Cyclopedia of the Law of Corporations §4187
(September 2012) (arbitration provisions for resolution of disputes between members and
corporation frequently included in bylaws).
511) W. Callison & M. Sullivan, Partnership Law and Practice: General and Limited Partnerships
§13:5 (2006) (“a partnership agreement can contain an arbitration clause through which a
partner can compel his or her co-partners to submit disputes arising from the partnership
relation to arbitration”); 19 Fletcher Cyclopedia Corporations §§3:20, 5:16 (2007).
512) See§6.04[K]; Revised Uniform Arbitration Act, §6, comment 1 (2000); German ZPO, §1066
(arbitration statute applies mutatis mutandi to arbitral tribunals “lawfully established on
the basis of…other dispositions than an agreement”); Nova (Jersey) Knit Ltd v. Kammgam
Spinnerei GmbH [1976] 2 Lloyd’s Rep. 155 (English Ct. App.), rev’d, [1977] 1 Lloyd’s Rep. 463
(House of Lords) (accepting validity of arbitration clause in German partnership
agreement); L. Edmonson (ed.), Domke on Commercial Arbitration §16.17 (3d ed. & Update
2013) (U.S. courts generally enforce arbitration provisions in partnership agreements);
Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their Extension to Non-
Signatories Under German Law, 19 J. Int’l Arb. 423 (2002); 8 Fletcher Cyclopedia Corporations
§4187 (2007) (corporate bylaws containing arbitration provisions generally upheld by U.S.
courts). See also Powell Duffryn plc v. Wolfgang Petereit, [1992] Case No. C-214/89 (E.C.J.)
(jurisdiction clause in company’s articles of association is binding on shareholders).
Compare Russian Commercial Arbitrazh Procedure Code, Arts. 33(1)(2), 225(1); C. Liebscher
& A. Fremuth-Wolf, Arbitration Law and Practice in Central and Eastern Europe RUS-63
(2011).
513) See§2.01[A]; §5.01[B].
514) Final Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26 (2004); Nova (Jersey) Knit Ltd v.
Kamgarn Spinnerei GmbH [1977] 1 Lloyd’s Rep. 463 (House of Lords) (arbitration clause in
partnership agreement applies to new partner); Hanotiau, Problems Raised by Complex
Arbitrations Involving Multiple Contracts-Parties-Issues – An Analysis, 18 J. Int’l Arb. 253, 257
(2001) (“Persons other than the formal signatories may be parties to the arbitration
agreement…because they are…members with the signatories of a general partnership or a
community of rights and duties”); Müller & Keilmann, Beteiligung am Schiedsverfahren
wider Willen?, 2007 SchiedsVZ 113, 115; Sandrock, “Intra” and “Extra-Entity” Agreements to
Arbitrate and Their Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423, 428
(2002) (“[T]he arbitration agreement automatically travels with the partnership contract.
It is regarded as an accessory and incidental right of the general partner and therefore
binds all new general partners, irrespective of whether they have attached their signature
to the arbitration agreement or not.”).
515) Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their Extension to Non-
Signatories Under German Law, 19 J. Int’l Arb. 423 (2002). German courts have recognized
the application of an arbitration clause to the (general) partners of the partnership that
signed it. See Judgment of 12 November 1990, 1991 NJW-RR 423, 424 (German
Bundesgerichtshof).
516) Judgment of 28 May 1979, 1979 NJW 2567 (German Bundesgerichtshof); Judgment of 2 March
1978, 1978 NJW 1585 (German Bundesgerichtshof); Judgment of 25 October 1962, 1963 NJW
203, 204 (German Bundesgerichtshof); Geimer, in R. Zöller (ed.), Zivilprozessordnung §1066,
¶9 (30th ed. 2013); Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their
Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423, 432-34 (2002).
517) Judgment of 2 October 1997, 1998 NJW 371 (German Bundesgerichtshof); Diwan v. EMP Global
LLC, 2012 WL 252430 (D.D.C.) (under Delaware law, which governed LLC agreement,
members of an LLC are bound by terms of LLC agreement and its arbitration clause);
Judgment of 8 December 2009, Benladen v. SARL Mohammed Benladen, 2(2) Int’l J. Arab Arb.
235 (Paris Cour d’appel) (2010) (arbitration agreement was not manifestly void because,
although respondent did not sign arbitration agreement, she arguably became
shareholder in company whose by-laws contained arbitration agreement); Judgment of 3
May 2007, 2007 DStR 1880 (Oberlandesgericht Koblenz) (arbitration agreements also apply
to shareholders that have sold shares; dispute between new and old shareholder subject
to arbitration agreement); Judgment of 25 October 2001, 2002 DStR 557 (Bayerisches
Oberstes Landgericht). See alsoSandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate
and Their Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423, 436 (2002).
518) See§6.04[K].
519) See Sockol, A Natural Evolution: Compulsory Arbitration of Shareholder Derivative Suits in
Publicly Traded Corporations, 77 Tul. L. Rev. 1095, 1111 (2003).
80
520) See§6.04[K].
521) See§6.04[K]. See also JSC Surgutneftegaz v. Pres. & Fellows of Harvard College, 2005 WL
1863676, at *4 (S.D.N.Y.) (“The FAA does not carve out disputes relating to the internal
affairs of corporations as an exception to the general enforceability of arbitration
agreements.”).
522) See§6.04[K].
523) See Judgment of 8 December 2009, DFT 136 III 107 (Swiss Federal Tribunal) (refusing to
apply arbitration agreement in company’s articles of association to statutory claim by
creditor against board members of insolvent company; although any amounts awarded
against board members would be paid to company, claim was that of creditors, who were
not bound by arbitration agreement).
524) For commentary, see Baker, Class Arbitration in the United States: What Foreign Counsel
Should Know, 1 Disp. Res. Int’l 4 (2007); Buckner, Due Process in Class Arbitration, 58 Fla. L.
Rev. 185 (2006); Dunin-Wasowicz, Collective Redress in International Arbitration: An
American Idea, A European Concept?, 22 Am. Rev. Int’l Arb. 285 (2011); L. Edmonson (ed.),
Domke on Commercial Arbitration §32.3 (3d ed. & Update 2013); Glover, Beyond
Unconscionability: Class Action Waivers and Mandatory Arbitration Agreements, 59 Vand. L.
Rev. 1735 (2006); Hagans & J. Rustay, Class Actions in Arbitration, 25 Rev. Litg. 293 (2006); B.
Hanotiau, Complex Arbitrations ¶557 (2005); Hanotiau, A New Development in Complex
Multiparty-Multicontract Proceedings: Classwide Arbitration, 20 Arb. Int’l 39 (2004);
Kaplinsky, Arbitrations and Class Actions: A Contradiction in Terms 7 1302 PLI/Corp. (2002);
Lacovara, Class Action Arbitrations – The Challenge for the Business Community, 24 Arb.
Int’l 541 (2008); Nater-Bass, Class Action Arbitration: A New Challenge?, 27(4) ASA Bull. 671
(2009); T. Oehmke, Commercial Arbitration Chp. 16 (2003 & Update 2013); Smit, Class
Actions in Arbitration, 14 Am. Rev. Int’l Arb. 175 (2003); Smit, Class Actions and Their Waiver
in Arbitration, 15 Am. Rev. Int’l Arb. 199 (2004); Stipanowich, The Third Arbitration Trilogy:
Stolt-Nielsen, Rent-A-Center, Concepcion and the Future of American Arbitration, 22 Am.
Rev. Int’l Arb. 323 (2011); Strong, From Class to Collective: The De-Americanization of Class
Arbitration, 26 Arb. Int’l 493 (2010); Strong, Class Arbitration Outside the United States:
Reading the Tea Leaves, in ICC, Arbitration and Multiparty Contracts 183 (2010); Strong,
Enforcing Class Arbitration in the International Sphere: Due Process and Public Policy
Concerns, 30 U. Pa. J. Int’l L. 1, 36-37 (2008); Strong, The Sounds of Silence: Are U.S.
Arbitrator Creating Internationally Enforceable Awards in Cases of Contractual Silence or
Ambiguity, 30 Mich. J. Int’l L. 1017 (2009); Tuchmann, The Administration of Class Action
Arbitrations, in PCA, Multiple Party Actions in International Arbitration 337 (2009).
525) See generally Bourdeau et al., Class Actions, 32B Am. Jur. 2d Fed. Cts. §§1578 et seq. (2013)
(“The Federal Rules of Civil Procedure governing class actions lists four prerequisites to
the certification of a class and the maintenance of a class action. Under Rule 23, the
listed prerequisites are: (1) that the members of the class are so numerous that the
joinder of all class members is impractical, (2) that there are questions of law or fact
common to the class, (3) that the claims or defenses of the representative parties are
typical of the claims or defenses of the class, and (4) that the representative parties will
fairly and adequately protect the interests of the class. In addition to the four listed
prerequisites, it is generally accepted that Rule 23 includes two additional requirements
by implication, namely that a class must exist and that the representative parties must
be members of such class.”); H. Newberg & A. Conte, Newberg on Class Actions §§1:1, 1:5
(5th ed. 2012); Pinna, Multinational Corporations and U.S. Class Action Procedures (Les
Groupes Internationaux de Sociétés Face aux Class Actions Américaines), in X. Boucobza &
G. Mecarelli (eds.), Groupes internationaux de sociétés: nouveaux défis, nouveaux dangers
(2007).
526) See, e.g., Robertson v. Thomson Corp., [2006] CarswellOnt 6182 (Canadian S.Ct.); Garland v.
Consumers’ Gas Co., [2004] CarswellOnt 1558 (Canadian S.Ct.) (class action on behalf of
more than 500,000 customers of gas company); Andersen v. St. Jude Med., Inc., [2012] ONSC
3660 (Ontario Super. Ct.). See also Murphy v. Amway Canada Corp., [2013] FCA 38 (Canadian
Fed. Ct. App.); Young v. Dollar Fin. Group Inc., [2012] ABQB 601 (Alberta Q.B.); Crooks v. CIBC
World Mkts Inc., [2011] NSSC 181 (Nova Scotia S.Ct.) (granting certification); Winterford v.
Pfizer Australia Pty Ltd, [2012] FCA 1199 (Australian Fed. Ct.). See also Andrews, Multi-Party
Proceedings in England: Representative and Group Actions, 11 Duke J. Comp & Int’l L. 249
(2001).
527) Vernon v. Drexel Burnham & Co. Inc., 52 Cal.App.3d 706, 716 (Cal. Ct. App. 1975).
528) Vernon, 52 Cal.App.3d at 716. At the same time, Georgia state courts first allowed and then
rejected class arbitration of taxpayers’ claims against a board of tax assessors. See
Boynton v. Carswell, 238 Ga. 417 (1977); Callaway v. Carswell, 240 Ga. 579, 582 (1978); N.W.
Civic Ass’n, Inc. v. Cates, 241 Ga. 39 (1978).
529) Keating v. Super. Ct., 167 Cal.Rptr. 481, 490 (Cal. Ct. App. 1980), aff’d, 31 Cal.3d 584, 610-12
(Cal. S.Ct. 1982). The franchisees’ argument that their state law statutory claims against
the franchisor were nonarbitrable was rejected by the U.S. Supreme Court in a classic
decision regarding nonarbitrability under the domestic FAA. See Southland Corp. v.
Keating, 465 U.S. 1, 10 (U.S. S.Ct. 1984); §6.04[P].
530) Keating, 167 Cal.Rptr. at 490.
531) Keating, 31 Cal.3d 584, 610. The California Court of Appeals had reached the same
conclusion. Southland Corp., 167 Cal.Rptr. at 490 (“[T]here is no insurmountable obstacle
to conducting an arbitration on a class-wide basis. In an appropriate case, it would
undoubtedly be the fairest and most efficient way of resolving the parties’ dispute.”).
81
532) Keating, 31 Cal.3d at 610.
533) See, e.g., Garcia v. Directv, 2002 WL 31769224, at *4 (Cal. Ct. App.); Sanders v. Kinko’s, Inc., 99
Cal.App.4th 1106, 1113-14 (Cal. Ct. App. 2002); Lewis v. Prudential-Bache Sec., Inc., 179
Cal.App.3d 935, 946 (Cal. Ct. App. 1986); Izzi v. Mesquite Country Club, 86 Cal.App.3d 1309,
1323 (Cal. Ct. App. 1986); Anesthesia Care Assocs. Med. Group, Inc. v. Blue Cross of Cal., 2002
WL 484662, at *7 (Cal. Sup.).
State courts in Pennsylvania and South Carolina followed the California state courts’
approach. See Green Tree Fin. Corp. v. Bazzle, 569 S.E.2d 349 (S.C. 2002); Dickler v. Hearson
Lehman Hutton, Inc., 408 Pa.Super. 286 (Pa. Sup. Ct. 1986).
534) See Med Ctr Cars, Inc. v. Smith, 727 So.2d 9 (Ala. 1998); Stein v. Geonerco, Inc., 105 Wash.App.
41 (Wash. Ct. App. 2001); Steinberg v. Prudential-Bache Sec., Inc., 12 Del. J. Corp. 371, 380
(Del. Ch. 1986) (ordering class arbitration was impermissibly “rewriting the contract”).
535) See, e.g., Gammaro v. Thorp Consumer Discount Co., 828 F.Supp. 673, 674 (D. Minn. 1993)
(court had no authority to order class arbitration because it had to “give effect to the
agreement of the parties, and this arbitration agreement makes no provision for class
treatment of disputes”).
536) Champ v. Siegel Trading Co.,55 F.3d 269, 275 (7th Cir. 1995). See also McCarthy v. Providential
Corp., 122 F.3d 1242, 1246 (9th Cir. 1997); Bischoff v. Directv, Inc., 180 F.Supp.2d 1097, 1109
(C.D. Cal. 2002); Gray v. Conseco, Inc., 2001 WL 1081347, at *3 (C.D. Cal.).
537) Mogilnicki & Thompson, Current Issues in Consumer Arbitration, 60 Bus. Law. 785, 791 (2005)
(“mythical beast: half litigation, half arbitration and rarely seen”).
538) Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (U.S. S.Ct. 2003). See also T. Oehmke,
Commercial Arbitration §16:4 (2003 & Update 2013); Pierce, Down the Rabbit Hole: Who
Decides What’s Arbitrable?, 21 J. Int’l Arb. 289 (2004).
539) Bazzle v. Green Tree Fin. Corp., 351 S.C. 244, 266 (S.C. 2002). See also Ibid. (“If we enforced a
mandatory, adhesive arbitration clause, but prohibited class actions in arbitration where
the agreement is silent, the drafting party could effectively prevent class actions against
it without having to say it was doing so in the agreement.…Under those circumstances,
parties with nominal claims, but significant collective claims, would be left with no
avenue for relief and the drafting party with no check on its abuses of the law. Further,
hearing such claims (involving identical issues against one defendant) individually, in
court or before an arbitrator, does not serve the interest of judicial economy.”).
540) Green Tree, 539 U.S. at 447.
541) Green Tree, 539 U.S. at 447.
542) Green Tree, 539 U.S. at 453. The allocation of jurisdictional competence between arbitral
tribunals and courts under the FAA is discussed above. See§7.03.
543) Green Tree, 539 U.S. at 453.
544) Technically, the Bazzle plurality did not reach the question of whether the FAA permits
class arbitration where an arbitration agreement is silent. Conceivably, on remand, an
arbitrator could have found the arbitration agreement silent on the issue and ordered
class arbitration, only for a court, in a subsequent action to vacate, to hold that class
arbitration was impermissible under the FAA. Under the plurality’s analysis, however, that
result appeared very unlikely: having categorized the question of class arbitration as a
matter of contract interpretation and arbitration procedures, not a gateway issue of
arbitrability, the plurality strongly suggested that decisions on these questions by
arbitral tribunals would be subject only to the very limited judicial review generally
available for such issues. That is also the result mandated by prior (and later) U.S.
decisions regarding the allocation of jurisdictional competence. See§7.03[E][2]; First
Options, 514 U.S. at 942-43; Burlington N. & Santa Fe Railway. Co. v. Pub. Serv. Co. of Okla.,
636 F.3d 562, 567-68 (10th Cir. 2010); Nat’l Postal Mail Handlers Union v. Am. Postal Workers
Union, 589 F.3d 437, 441-42 (D.C. Cir. 2009).
545) Green Tree, 539 U.S. at 455 (Stevens, J. concurring in the judgment and dissenting in part).
546) Green Tree, 539 U.S. at 455.
547) Green Tree, 539 U.S. at 454-55. Chief Justice Rehnquist’s dissent disagreed with the
plurality as to who should decide whether the parties’ arbitration clause permitted class
arbitration, opining that “the determination is one for the courts, not [the] arbitrator.”
Green Tree, 539 U.S. at 455 (Rehnquist, C.J., dissenting). Justice Rehnquist also disagreed
with Justice Steven’s concurrence, going on to conclude that “the holding of the Supreme
Court of South Carolina contravenes the terms of the contracts and is therefore pre-
empted by the FAA.” Ibid. On his reading, the arbitration agreements at issue permitted
parties to choose an arbitrator for each individual contract and set of claims, a
requirement that would be contravened by a single arbitrator hearing all claims by all
class members in a single arbitration.
548) As of December 2011, the AAA reported over 300 pending class arbitrations and had
administered 344 class action arbitrations as of December 2009. Seewww.adr.org.
549) JAMS reported over 20 consumer arbitrations that have proceeded on a class-wide basis.
Seewww.jamsadr.com.
82
550) In its policy on class arbitrations, the AAA explained its reasons for adopting class
arbitration rules as follows: “On October 8, 2003, in response to the ruling of the United
States Supreme Court in Green Tree Financial Corp. v. Bazzle, the American Arbitration
Association issued its Supplementary Rules for Class Arbitrations to govern proceedings
brought as class arbitrations. In Bazzle, the Court held that, where an arbitration
agreement was silent regarding the availability of class-wide relief, an arbitrator, and not
a court, must decide whether class relief is permitted. Accordingly, the American
Arbitration Association will administer demands for class arbitration pursuant to its
Supplementary Rules for Class Arbitrations if (1) the underlying agreement specifies that
disputes arising out of the parties’ agreement shall be resolved in accordance with the
Association’s rules, and (2) the agreement is silent with respect to class claims,
consolidation or joinder of claims.” See AAA, Policy On Class Arbitrations, available at
www.adr.org. See also Mogilnicki & Thompson, Current Issues in Consumer Arbitration, 60
Bus. Law. 785, 792 (2005); Strong, Enforcing Class Arbitration in the International Sphere: Due
Process and Public Policy Concerns, 30 U. Pa. J. Int’l L. 1, 36-37 (2008).
551) See, e.g., Johnson v. Morton’s Rest. Group, Inc., Clause Constr. Award 2006 in AAA Case No. 11
160 01513; Molfetas v. Stainsafe Inc., Clause Constr. Award 2006 in AAA Case No. 11 181 00300
06, AAA Clause Construction Awards available at www.adr.org/sp.asp?id=25562. See also
Jones v. Chubb Inst., 2007 U.S. Dist. LEXIS 72606, at *9-11 (D.N.J.); Cheng v. Oxford Health
Plans, Inc., 45 A.D.3d 356, 357 (N.Y. App. Div. 2007).
552) See, e.g., Tomeldon Co. v. Medco Health Solutions Inc., Clause Construction Award in AAA
Case No. 11 193 00546 06; Jost v. Sizzler USA Rests., Inc., Clause Construction Award 2006 in
AAA Case No. 11 160 01721 05; Anderson v. Check ‘N Go of Cal., Inc., Clause Construction
Award 2005 in AAA Case No. 11 160 03021 04. AAA Clause Construction Awards available at
www.adr.org/sp.asp?id=25562. See also Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064
(U.S. S.Ct. 2013).
553) Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir. 2007).
554) Discover Bank v. Super. Ct. of Los Angeles, 36 Cal.4th 148, 163-64 (Cal. Ct. App. 2005).
555) Discover Bank, 36 Cal.4th at 156. The court also reasoned that contractual waivers of class
actions allow wrongdoers to retain the benefits of their misdeeds. Id. at 157.
556) Discover Bank, 36 Cal.4th at 162-63.
557) Perry v. Thomas, 482 U.S. 483 (U.S. S.Ct. 1987).
558) Perry, 482 U.S. at 484, 491.
559) Discover Bank, 36 Cal.4th at 165 (quoting Perry, 482 U.S. at 493 n.9).
561) See, e.g., Omstead v. Dell, Inc., 594 F.3d 1081, 1086 (9th Cir. 2010); Lowden v. T-Mobile USA
Inc., 512 F.3d 1213, 1215 (9th Cir. 2008) (holding class action waiver unconscionable under
Washington law); Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 981 (9th Cir.
2007); Dale, 498 F.3d 1216 (class action waiver unconscionable because cost of bringing
individual claim was excessive when measured against potential recovery); Luna v.
Household Fin. Corp., III, 236 F.Supp.2d 1166, 1178-83 (W.D. Wash. 2002) (class-action
prohibition in arbitration clause “is likely to bar actions involving practices applicable to
all potential class members, but for which an individual consumer has so little at stake
that she is unlikely to pursue her claim” and finding prohibition on class action was “used
as a sword to strike down access to justice instead of a shield against prohibitive costs”);
Leonard v. Terminix Int’l Co., 854 So.2d 529, 539 (Ala. 2002) (arbitration agreement
substantively “unconscionable because it is a contract of adhesion that restricts the
[plaintiffs] to a forum wherein the expense of pursuing their claim far exceeds the amount
in controversy…by foreclosing the [plaintiffs] from an attempt to seek practical redress
through a class action and restricting them to a disproportionately expensive individual
arbitration”); Dunlap v. Berger, 567 S.E.2d 265 (W. Va. 2002); Eagle v. Fred Martin Motor Co.,
809 N.E.2d 1161 (Ohio Ct. App. 2004); Powertel, Inc. v. Bexley, 743 So.2d 570, 575-76 (Fla. Ct.
App. 1999). For commentary, see Aksen, Class Actions in Arbitration and Enforcement Issues:
An Arbitrator’s Point of View, in B. Hanotiau & E. Schwartz (eds.), Multiparty Arbitration 215
(2010); Carbonneau, Liberal Rules of Arbitrability and the Autonomy of Labor Arbitration in
the United States, in L. Mistelis & S. Brekoulakis (eds.), Arbitrability: International and
Comparative Perspectives 151 (2009); Glover, Beyond Unconscionability: Class Action
Waivers and Mandatory Arbitration Agreements, 59 Vand. L. Rev. 1735 (2006).
562) See, e.g., Kristian v. Comcast Corp., 446 F.3d 25, 63-64 (1st Cir. 2006) (permitting class
arbitration of antitrust claims to proceed by severing class arbitration waivers from
arbitration agreements); Skirchak v. Dynamics Research Corp., Inc., 432 F.Supp.2d 175 (D.
Mass. 2006); Discover Bank v. Super. Ct., 113 P.3d 1100, 1115 (Cal. S.Ct. 2005); Szetela v.
Discover Bank, 97 Cal.App.4th 1094 (Cal. Ct. App. 2002).
563) See, e.g., Omstead v. Dell, Inc., 594 F.3d 1081, 1086 (9th Cir. 2010) (unconscionable class
action waiver cannot be severed because it is “central” to arbitration provision); Shroyer,
498 F.3d 976; Dale, 498 F.3d 1216; D’Antuono v. Serv. Road Corp., 789 F.Supp.2d 308 (D. Conn.
2011) (if class action wavier were found unenforceable, it would require invalidating entire
arbitration agreement, whereas other unenforceable provisions may simply be severed,
leaving arbitration agreement intact); Creighton v. Blockbuster Inc., 2007 WL 1560626 (D.
Or.); Murphy v. Check ‘N Go of Cal., Inc., 2007 WL 3016414 (Cal. Ct. App.).
564) See, e.g., Green Tree, 539 U.S. at 447; Pedcor Mgt Co., Welfare Benefit Plan v. Nations
Personnel of Texas, Inc., 343 F.3d 355, 357 (5th Cir. 2003); Sprague v. Quality Rests. N.W., Inc.,
162 P.3d 331 (Or. App. 2007).
83
565) See, e.g., Jenkins v. First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 877 (11th Cir. 2005)
(arbitration agreements precluding class action relief are valid and enforceable);
Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir. 2003) (“The Arbitration Agreement
at issue here explicitly precludes the [borrowers] from bringing class claims or pursuing
‘class action arbitration,’ so we are therefore ‘obliged to enforce the type of arbitration to
which these parties agreed, which does not include arbitration on a class basis.’”);
Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 638 (4th Cir. 2002) (rejecting
borrower’s argument “that the Arbitration Agreement is unenforceable as unconscionable
because without the class action vehicle, she will be unable to maintain her legal
representation given the small amount of her individual damages”); Randolph v. Green
Tree Fin. Corp.-Alabama, 244 F.3d 814, 819 (11th Cir. 2001); Johnson v. W. Suburban Bank, 225
F.3d 366, 369 (3d Cir. 2000) (arbitration “clauses are effective even though they may
render class actions to pursue statutory claims under the TILA or the EFTA unavailable”);
Clerk v. ACE Cash Express Inc., 2010 WL 364450, at *15 (E.D. Pa.) (opt-out provision).
566) Lloyd v. MBNA Am. Bank, NA, 27 F.Appx. 82, 84 (3d Cir. 2002).
567) Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (U.S. S.Ct. 2010).
568) AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (U.S. S.Ct. 2011).
569) Oxford Health Plans, 133 S.Ct. at 2069-70.
570) Stolt-Nielsen, 130 S.Ct. at 1765.
574) Stolt-Nielsen, 130 S.Ct. at 1769. Justice Alito’s passing suggestion that an arbitral tribunal
does not have the authority of a “common law court” to develop “the best rule”
applicable to interpretation of the parties’ arbitration agreement or to “make public
policy” is ill-considered. Arbitral tribunals in the United States and elsewhere do, of
course, function with at least the authority of “common law courts” to interpret
agreements, identify both the applicable and “best rule” and “public policy” and then
apply that rule or public policy to the evidence. That is illustrated most clearly by the
extensive U.S. authority recognizing the capacity of U.S. courts to apply antitrust,
securities and other statutory claims, as well as other mandatory laws and public
policies. See§6.04[A][1] (antitrust); §6.04[B][1] (securities); §6.04[D] (intellectual property
rights). The suggestion that arbitrators cannot either identify or apply the “best rule” of
law or contractual interpretation is retrograde and contrary to well-established authority
from U.S. and other courts.
577) Stolt-Nielsen, 130 S.Ct. at 1776 (emphasis in original). The Court, arguably, left the door
open for arbitrators to find implicit consent to class arbitration if an applicable rule of
law “contains a ‘default rule’ under which an arbitration clause is construed as allowing
class arbitration in the absence of express consent.” Id. at 1768-69.
578) See Stolt-Nielsen, 130 S.Ct. at 1776 n.10. The Court left open the question of what
contractual basis might support a finding that the parties did agree to authorize class-
action arbitration.
579) See§25.04[F][3][j].
582) Concepcion, 131 S.Ct. 1740.
583) Concepcion, 131 S.Ct. at 1744. In addition, the arbitration clause provided (if any doubt
remained) that “the arbitrator may not consolidate more than one person’s claims, and
may not otherwise preside over any form of a representative or class proceeding.” Id. at
1744 n.2.
584) Concepcion, 131 S.Ct. at 1745. The lower courts were unmoved by the relatively “consumer-
friendly” aspects of the arbitration agreement at issue in AT&T’s cell phone contracts.
Among other things, the agreement provided for arbitration in a convenient situs (where
the consumer is billed); arbitration in person, by telephone or online, at the consumer’s
choice, for amounts less than $10,000; the availability of injunctive relief and punitive
damages; no right by AT&T to claim attorneys’ fees; and an option to choose small claims
court (rather than arbitration).
585) The Concepcion opinion was joined by five Justices. The fifth vote was provided, however,
by Justice Thomas, who also concurred. Justice Thomas would have reversed the Ninth
Circuit not because class wide arbitration is contrary to the “fundamental” character of
arbitration, but rather because under his reading of the FAA, an agreement to arbitrate
must be enforced “unless a party successfully challenges the formation of the arbitration
agreement.” Concepcion, 131 S.Ct. at 1753 (Thomas, J. concurring).
586) Concepcion, 131 S.Ct. at 1749.
587) Concepcion, 131 S.Ct. at 1751 (emphasis in original). The Court said that ordering an
arbitration to proceed on a class basis would be as antithetical to arbitration as ordering
parties in an arbitration to incorporate “judicially monitored discovery,” the Federal
Rules of Evidence, or “ultimate disposition by a jury.” Id. at 1747. The Court also thought
that arbitration, because it does not provide for appellate review, is “poorly suited to the
higher stakes of class litigation.” Concepcion, 131 S.Ct. at 1752. The Court reasoned that
“class arbitration greatly increases risk to defendants” by aggregating claims without
providing for appellate review.
84
588) Concepcion, 131 S.Ct. at 1753. The Court also suggested that the California rule could result
in fewer companies choosing to arbitrate, although the factual support for that premise is
obscure.
590) Concepcion, 131 S.Ct. at 1748 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (U.S. S.Ct. 1941)).
Writing for the dissent, Justice Breyer declared that the FAA’s purpose is not “to guarantee
these particular procedural advantages,” but to treat arbitration on equal footing as
other contracts. Id. at 1758 (Breyer, J., dissenting) (citing §2 of FAA). The dissent reasoned
that “California is free to define unconscionability as it sees fit,” and as long as it “applies
the same legal principles to address the unconscionability of class arbitration waivers as
it does to address the unconscionability of any other contractual provision, the merits of
class proceedings should not factor into our decision.” Id. at 1760.
592) Volt Info. Sciences, Inc. v. Bd of Trustees of Stanford Univ., 489 U.S. 468, 478 (U.S. S.Ct. 1989).
593) Where parties agree to class arbitration, Justice Scalia’s suggestion that this “is not
arbitration” – because class arbitration is not informal, not bipartite and involves large
stakes – is simply wrong. In fact, contrary to the Court’s supposed archetype of the
arbitral process, arbitration has historically taken widely varying forms, in widely varying
settings – as discussed above, ranging from institutional to ad hoc arbitration; from trade,
commercial, religious, community, and international to investor-state arbitration; and
from documents only, online, or quality arbitrations to arbitrations resembling trial court
litigations. See§1.01[B][1] (religious arbitration in antiquity); §1.01[B][7][b] (community
arbitration); §1.04[A][6] (investor-state arbitration); §1.04[C][2] (ad hoc arbitration);
§2.02[C][2][g] (trade group arbitration); §2.02[C][2][d] (quality arbitration); §2.02[C][2][i]
(arbitrations resembling trials). Likewise, again contrary to Justice Scalia’s analysis,
arbitration has historically encompassed a vast range of different procedures, depending
on the parties’ particular objectives and interests – very often including formal, multi-
party and high stakes dispute resolution proceedings.
594) See§6.04[D].
595) See, e.g., 2010 IBA Rules on the Taking of Evidence, Art. 8 (witness may appear at
evidentiary hearing by videoconference).
596) Indeed, the bipartite arbitration agreement at issue in Concepcion, which Justice Scalia
sought to protect as an archetypal arbitration clause, contained an elaborate, very formal
procedural regime that provided for online or telephonic consumer arbitration of cell
phone disputes involving multiple statutory claims. Concepcion, 131 S.Ct. at 1744 (“The
revised agreement provides that customers may initiate dispute proceedings by
completing a one-page Notice of Dispute form available on AT&T’s Web site. AT&T may
then offer to settle the claim; if it does not, or if the dispute is not resolved within 30
days, the customer may invoke arbitration by filing a separate Demand for Arbitration,
also available on AT&T’s Web site. In the event the parties proceed to arbitration, the
agreement specifies that AT&T must pay all costs for nonfrivolous claims; that arbitration
must take place in the county in which the customer is billed; that, for claims of $10,000
or less, the customer may choose whether the arbitration proceeds in person, by
telephone, or based only on submissions; that either party may bring a claim in small
claims court in lieu of arbitration; and that the arbitrator may award any form of
individual relief, including injunctions and presumably punitive damages. The
agreement, moreover, denies AT&T any ability to seek reimbursement of its attorney’s
fees, and, in the event that a customer receives an arbitration award greater than AT&T’s
last written settlement offer, requires AT&T to pay a $7,500 minimum recovery and twice
the amount of the claimant’s attorney’s fees.”).
597) U.S. FAA, 9 U.S.C. §2 (emphasis added).
598) Discover Bank v. Super. Ct. of Los Angeles, 36 Cal.4th 148, 162-63 (Cal. Ct. App. 2005).
600) Concepcion, 131 S.Ct. at 1756-57. Justice Breyer’s dissent was also wrong to rely on the fact
that the Discover Bank rule applied to only some class action waivers. The essential point
is that the Discover Bank rule invalidated the provisions of arbitration agreements that
are plainly subject to the FAA. The fact that the rule might have invalidated a broader
range of class action waivers does nothing to alter its effects on those waivers to which it
applies. A state law rule providing for the invalidity of any agreement to arbitrate state
securities law claims in excess of $50,000 would be preempted no less than a rule
invalidating all such arbitration agreements. A state law rule requiring that arbitration
clauses in all real estate or all distribution agreements be in capital letters or be
reaffirmed after a dispute arises would be preempted no less than a rule imposing such
requirements on all arbitration agreements.
601) As discussed above, Stolt-Nielsen required an affirmative, and likely express, agreement
providing for class arbitration before permitting class arbitration to be compelled.
See§7.03[E][2][d]. It is clear that provisions like the AT&T arbitration agreement do not –
even after invalidating their class action waivers – provide affirmatively for class
arbitration. Thus, after Stolt-Nielsen, when a class action waiver was invalidated under
the Discover Bank rule, the only available remedy would be to order class litigation. See,
e.g., Fensterstock v. Educ. Fin. Partners, 611 F.3d 124, 140-41 (2d Cir. 2010); Ruhl v. Lee’s
Summit Honda, 322 S.W.3d 136 (Mo. 2010); Rau, Power and the Limits of Contract: The New
Trilogy, 22 Am. Rev. Int’l Arb. 435 (2011).
602) Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064, 2069-70 (U.S. S.Ct. 2013).
85
603) Oxford Health Plans, 133 S.Ct. at 2068 (“A party seeking relief under that provision [§10(a)
(4)] bears a heavy burden.”; “Under the FAA, courts may vacate an arbitrator’s decision
‘only in very unusual circumstances.’”) (quoting First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938, 942 (U.S. S.Ct. 1995)).
604) Oxford Health Plans, 133 S.Ct. at 2070.
608) Compare Cent. W. Virginia Energy, Inc. v. Bayer Cropscience LP, 645 F.3d 267, 275 n.7 (4th Cir.
2011) (question whether parties had decided to arbitrate “at all” is for courts to decide)
with Mork v. Loram Maintenance of Way, Inc., 2012 WL 38628, at *2 (D. Minn.) (“Without
clear guidance from the Supreme Court, the Court is left with Eighth Circuit precedent
which indicates that it is appropriate for the Court, not an arbitrator, to resolve [the class
arbitration] question.”) and Guida v. Home Sav. of Am., Inc., 793 F.Supp.2d 611, 616 (E.D.N.Y.
2011) (following plurality in Bazzle: “ability of a class to arbitrate a dispute where the
parties contest whether the agreement to arbitrate is silent or ambiguous on the issue is
a procedural question that is for the arbitrator to decide”) and Jock v. Sterling Jewelers
Inc., 646 F.3d 113 (2d Cir. 2011) (no excess of authority where award permitted class
arbitration) and S. Commc’ns Servs., Inc. v. Thomas, 829 F.Supp.2d 1324 (N.D. Ga. 2011) (no
excess of authority where award permitted class arbitration).
609) B. Hanotiau, Complex Arbitrations ¶¶557-613 (2005); Marseille, Arbitration and Class
Actions in Canada: Where Do We Stand?, 28(2) Class Action Rep. 5 (April 2007); Strong,
Resolving Mass Legal Disputes Through Class Arbitration: The United States and Canada
Compared, 37 N.C. J. Int’l L. & Comm. Reg. 921, 972-75.
610) See, e.g., Seidel v. Telus Commc’ns, Inc., [2011] SCC 15, 33-42 (Canadian S.Ct.) (class action
legislation barred arbitration of claims arising under British Columbian statute); Dell
Computer Corp. v. Union des consommateurs, [2007] SCC 34, 87 (Canadian S.Ct.); Griffin v.
Dell Canada Inc., [2010] ONCA 29 (Ontario Ct. App.) (applying Ontario Consumer Protection
Act, 2002, to deny enforcement of arbitration clauses (which included class action
waivers) in consumer contracts). See also Strong, Resolving Mass Legal Disputes Through
Class Arbitration: The United States and Canada Compared, 37 N.C. J. Int’l L. & Comm. Reg.
921 (2012); Murphy v. Amway Canada Corp. [2013] FCA 38 (Canadian Fed. Ct. App.)
(dismissing appeal and referring, parties to arbitration holding as follows: “The Supreme
Court has made it clear that express legislative language in a statute is required before
the courts will refuse to give effect to the terms of an arbitration agreement. In that
regard, the Competition Act does not contain language which would indicate that
Parliament intended that arbitration clauses be restricted or prohibited. More
particularly, there is no language in the Competition Act that would prohibit class action
waivers so as to prevent the determination of a claim by way of arbitration.”); Young v.
Dollar Fin. Group Inc., [2012] ABQB 601 (Alberta Q.B.) (dismissing application for stay based
on arbitration clause that joinder or consolidation of claims was prohibited).
611) Griffin v. Dell Canada Inc., [2010] ONCA 29, ¶30 (Ontario Ct. App.).
612) It is difficult to see what public policy or nonarbitrability objections could be raised to
class arbitrations. The fact that class actions are not recognized or available in many
national litigation systems should not preclude the use of class action arbitrations (just as
the unavailability of documents only, fast-track, or similar dispute resolution
mechanisms in litigation does not invalidate arbitration agreements requiring such
procedures). There may be requirements regarding procedural regularity and an
opportunity to be heard, imposed by national law, but these would involve the
implementation of the class action arbitration, not its basic enforceability.
613) Sherwyn, Tracey & Eigent, In Defense of Mandatory Arbitration of Employment Disputes:
Saving the Baby, Tossing Out the Bath Water, and Constructing A New Sink in the Process, 2
U. Pa. J. Lab. & Emp. L. 73 (1999); Craver, The Use of Non-Judicial Procedures to Resolve
Employment Discrimination Claims, 11 Kan. J. L. & Pub. Pol’y 141 (2001) (“Fair arbitral
procedures can provide a more expeditious and less expensive alternative that may
benefit workers more than judicial proceedings”); Ware, Paying the Price of Process:
Judicial Regulation of Consumer Arbitration Agreements, 2001 J. Disp. Res. 89.
86
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BORN, Gary. Chapter 10 Parties To International Arbitration

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[B] Signatories and Non-Signatories to Arbitration Agreement

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

[D] Generally-Applicable Rules of Contract Law

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

[F] Distinction Between Jurisdiction and Substantive Liability

§ 10.02 LEGAL BASES FOR BINDING NON-SIGNATORIES TO INTERNATIONAL

[B] Apparent or Ostensible Authority

[C] Implied Consent

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

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

[F] Third Party Beneficiaries

[G] Guarantors (287)

[H] Succession (307)

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

[K] Estoppel and Related Doctrines (357)

[M] Corporate Officers and Directors

[N] Shareholder Derivative Rights

[O] Joint Venture Relations

[P] State Non-Signatories (408)

§ 10.04 FORMAL VALIDITY AND NON-SIGNATORIES

§ 10.05 CHOICE OF LAW GOVERNING PARTIES TO ARBITRATION AGREEMENT

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

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

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

§ 10.06 ALLOCATION OF COMPETENCE TO DETERMINE PARTIES TO

§ 10.07 ARBITRATION IN CORPORATE AND PARTNERSHIP CONTEXTS (509)

§ 10.08 CLASS ARBITRATIONS (524)

[B] Other Jurisdictions

477) See§4.04[A][1][b][i]; §4.04[A][3].

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