Chapter 10 Parties To International Arbitration Agreements

KluwerArbitration
Document information Chapter 10: Parties to International Arbitration

Agreements
Publication (1)
International Commercial An issue which arises recurrently in connection with the recognition and enforcement of
Arbitration (Third Edition) 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 addresses these issues.
Bibliographic The Chapter first discusses the basic principle that international arbitration agreements
reference are, as consensual instruments, binding only on the parties to such agreements. Second,
the Chapter examines the various legal doctrines that have been used to give effect to
'Chapter 10: Parties to
International Arbitration arbitration agreements as regards entities that did not execute such agreements (“non-
Agreements', in Gary B. signatories”), including theories of agency, implied consent, alter ego status (or veil-
Born , International piercing), “group of companies,” estoppel, guarantor relations, third party beneficiary
Commercial Arbitration rights, succession, assignment, assumption and miscellaneous other doctrinal bases.
(Third Edition), 3rd edition Third, the Chapter examines the issues of formal validity that arise from application of
(© Kluwer Law non-signatory theories. Fourth, the Chapter addresses the choice-of-law rules governing
International; Kluwer Law the foregoing issues. Fifth, the Chapter discusses the allocation of competence, between
International 2021) pp. 1515 national courts and arbitral tribunals, to decide disputes regarding the identity of the
- 1642 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; again presumptively, it
will only be those signatories who have either rights or obligations under the arbitration
agreement.
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 benefited
by – an arbitration agreement. The extent to which non-signatories may be bound or
benefited 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 agreement’s parties is a straightforward application of the doctrine of privity of
contract, 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 benefited by that agreement is fundamental
to international arbitration. That principle is uniformly reflected in international
arbitration conventions, national arbitration legislation, institutional arbitration rules,
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
and effects 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 “parties” to that agreement, and not on other
persons. Equally, each of these instruments requires recognition of arbitration
agreements insofar as their “parties,” and not other entities, are concerned. (10)
National law also recognizes the limited subjective scope of arbitration agreements.
Article 7(1) of the UNCITRAL Model Law defines an arbitration agreement as “an
agreement by the parties to submit to arbitration all or certain disputes which have
arisen or which may arise between them.” (11) Other national arbitration legislation is
generally similar. (12)
1
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
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:
“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:
“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 bound by that agreement. Article 1(1) of the 2013 UNCITRAL Rules is representative,
providing that the Rules apply “[w]here parties have agreed that disputes between them
in respect of a defined legal relationship, whether contractual or not, shall be referred to
arbitration ….” (22) Other institutional rules are similar. (23)
[B] Signatories and Non-Signatories to Arbitration Agreement

In most cases, the parties to an arbitration agreement are – and are only – the entities
that formally executed, and expressly assumed the status of parties to, the underlying
contract containing the arbitration clause. In the vast majority of cases, the way to
determine the parties to the arbitration clause is simply to look at the signature page,
and/or the recitals of a contract, and see what entities are designated there. (24)
Simply, but correctly, put, it is the signature of an agreement that is the “customary
implementation of an agreement to arbitrate.” (25) It is these “signatories” of an
agreement that are the parties to the arbitration agreement, and that are therefore
bound by, and able to enforce, the provisions of that agreement; other entities, who are
“non-signatories,” are ordinarily not parties to the arbitration agreement and are
therefore typically not bound by, or able to enforce, its terms.
Despite the foregoing, the party that executes a contract is not necessarily a party to
either that agreement or the arbitration clause associated with it. Under most legal
systems, an agent or representative may execute an agreement on behalf of its principal,
producing the result that the principal is a party to the agreement (but the agent or
representative is typically 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)
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 otherwise formally
assented to an arbitration agreement may be both bound and benefited 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
2
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)
Or, in the words of a leading European commentator, “[p]ersons other than the formal
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 benefited, by an
international arbitration agreement typically requires application of generally-
applicable contract, agency and corporate law principles. (31) Additionally, in a few
instances, specialized rules, applicable only to international arbitration agreements, (32)
have been developed, but these are exceptional.
[C] Absence of Legislative Provisions Regarding Non-Signatory Issues

In virtually all instances, international arbitration conventions and national arbitration
legislation provide no express guidance in identifying the parties to an international
arbitration agreement. As discussed above, the New York Convention refers only to the
basic principle that international arbitration agreements bind their parties, without
addressing the question of how an arbitration agreement’s parties are determined. (33)
The UNCITRAL Model Law and most other national arbitration legislation is substantially
identical. (34)
There are a few national arbitration statutes that address the identities of the parties to
an arbitration agreement, but these are unusual. For example, the Peruvian arbitration
legislation supplements the UNCITRAL Model Law’s definition of an arbitration agreement
by adding that:
“[t]he arbitration agreement extends to those who consent to submit to
arbitration, in good faith, as determined 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 extends to those who seek to attain any rights or benefits from
the contract, according to its terms.” (35)
A few other national arbitration statutes, including the English Arbitration Act, 1996, refer
to both “parties” and other persons claiming “under” or “through” a party, either
providing or suggesting that such persons are bound by arbitration agreements and/or
arbitral awards. (36) These provisions offer only limited textual guidance, and their terms
have been subject to inconsistent judicial treatment. Some national courts have taken a
relatively restrictive approach to these provisions, limiting the terms to persons who
would be bound under generally-accepted concepts of contract and corporate law, such
as succession, assignment, subrogation, or equivalent statutory rights. (37) Other courts
have interpreted such terms more broadly, to encompass persons whose interest is
derived from the party to the agreement, including on the basis of the “group of
companies” doctrine. (38)
Nevertheless, in the absence of statutory guidance, 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 entities that have not executed an arbitration agreement. These legal theories are
in most cases based on generally-applicable rules of contract and commercial law,
including rules regarding agency (actual and apparent), alter ego, implied consent,
“group of companies,” estoppel, third party beneficiary, guarantor, subrogation, legal
succession and ratification or assumption theories. (39) 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. (40)
3
This application of generally-applicable legal rules to non-signatory issues parallels the
application of similar generally-applicable contract law rules to the validity and
interpretation of international arbitration agreements (discussed above). (41)
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.” (42)
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, (43) 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,
(44) but it is fundamental to resolution of non-signatory issues.
Judicial case law and commentary on international arbitration sometimes make
reference to the “extension” of an arbitration agreement to non-signatories, (45) or to
“third parties,” (46) 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, or otherwise bind it to the agreement, notwithstanding the lack of its
formal execution of the agreement. (47) 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 non-
signatory is bound by an agreement to arbitrate, but not a conclusion that any particular
non-signatory is in fact bound by a particular agreement. 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 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 basis, requiring a close analysis of the
circumstances in which the agreement was made, the corporate and practical
relationship existing on one side and known to those on the other side of the
bargain, the actual or presumed intention of the parties as regards rights of
non-signatories to participate in the arbitration agreement, and the extent to
which and the circumstances under which non-signatories subsequently
became involved in the performance of the agreement and in the dispute
arising from it.” (48)
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
establishing either 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. (49) 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. (50) 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. (51)
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. (52)
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 through formal execution by or on behalf of all parties. (53) Although other modes of
binding a non-signatory are possible, they are often characterized as exceptions that
must be established by the party relying on them. Courts, (54) arbitral tribunals (55) and
other authorities (56) have emphasized that non-signatories are only exceptionally
4
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. (57)
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.” (58)
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 little 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. Arbitration is a consensual means of dispute resolution, between
specified parties, and there is no justification for assuming that signatories to an
agreement to arbitrate with particular counter-parties intended to arbitrate with other,
nonparties, absent application of one of the legal grounds discussed below. As the U.S.
Supreme Court has emphasized, “courts must ‘rigorously enforce’ arbitration agreements
according to their terms, including terms that ‘specify with whom [the parties] choose to
arbitrate their disputes.’” (59)
It is true that the signatory of an arbitration agreement has consented to the arbitration
of some disputes, and waived the right to insist upon litigation of those disputes; in
contrast, a non-signatory will not typically have done so. Nonetheless, consent by a
signatory to arbitrate some disputes, with some parties, is not consent to arbitrate those
(or different) disputes with different parties. As a consequence, there is no persuasive
reason to treat signatories and non-signatories differently when identifying the parties to
an arbitration agreement.
Finally, different characterizations have been adopted of the question whether a non-
signatory is bound by an arbitration agreement. Some authorities, including the U.S.
Supreme Court, have characterized the issue as one concerning the scope of the
agreement to arbitrate (e.g., to what persons does the agreement extend?). (60) 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?). (61)
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 interpretation of the scope of the
arbitration agreement, on the other hand. (62) 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 than those applicable to whether any
agreement to arbitrate exists). (63)
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 at
all 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. (64)
This is particularly true because, in most instances, non-signatories have a substantial
and close relationship with one of the parties to the arbitration agreement (e.g., agency,
alter ego, guarantor, third party beneficiary). In these cases, determining whether that
relationship is sufficient to subject the non-signatory to the arbitration agreement is
principally a question of interpreting the parties’ underlying commercial relationship (as
distinguished from determining the validity of the agreement to arbitrate). It is
appropriate, in these circumstances, to treat the decision whether a non-signatory is
bound by the arbitration agreement as an issue of determining the scope of that
agreement, including for purposes of choice of law and allocation of competence.
[F] Distinction Between Jurisdiction and Substantive Liability

Finally, it is well-settled that there is a distinction between jurisdiction and substantive
liability. (65) 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
5
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) (66) and potentially differing standards
governing issues of jurisdiction and substantive liability under the applicable law or laws.
(67)
§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 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 benefited) 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. (68)
[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. (69) Among other things, an agent may execute contracts, including arbitration
agreements, which will be legally binding on its principal, (70) although not necessarily
on the agent. (71)
Consistent with these principles, a number of arbitral awards (72) and national court
decisions (73) 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.” (74) Other courts have
referred to “traditional principles of agency law” or “ordinary principles of contract and
agency law.” (75)
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. (76) 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 organization that the four states had founded. (77) The Swiss Federal
Tribunal annulled the award on the application of one of the states, reasoning that there
was insufficient evidence that the state had granted the international organization power
to bind the state to an arbitration agreement: (78)
“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.” (79)
It is generally essential, in order to bind a non-signatory party to an arbitration
agreement, that the non-signatory’s agency relationship with a signatory party pertain to
the specific contract, and arbitration agreement that is in dispute, and not involve only
other relationships between the parties or their affiliates. For example, one U.S. decision
rejected agency as a basis to bind a non-signatory to an arbitration agreement, reasoning
that “the requirements for … vicarious responsibility [under an agency theory] are
exacting,” and concluding:
“although InterGen [the non-signatory] may have had an agency relationship
with a Bechtel entity [the signatory] for certain (limited) purposes, the record
is bereft of any evidence suggesting that a Bechtel entity acted as InterGen’s
agent in committing to carry out [the arbitration agreement or underlying
contract].” (80)
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
6
the principal. (81) In practice, this result is unlikely in most settings, for reasons
explained by one English decision:
“In commercial terms the creation of a corporate structure is by definition
designed to create separate legal entities for entirely legitimate purposes
which would often if not usually be defeated by any general agency
relationship between them.” (82)
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. (83)
Despite the applicability of ordinary agency principles to international arbitration
agreements, (84) 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, (85) notwithstanding the fact that the agent would not be bound by
the substantive terms of the underlying contract (made on behalf of the principal). (86) As
one court observed, there is a “well-settled principle affording agents the benefits of
arbitration agreements made by their principal.” (87) 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.
(88)
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. (89)
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. (90) 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. (91)
Determining the relevant legal standards for establishing an agency relationship presents
choice-of-law questions (also discussed below). (92) Most authorities have applied
national law to the question of agency status (rather than international principles). (93)
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. (94) More recent U.S. authority looks to generally-applicable state law rules
of agency in domestic cases under Chapter 1 of the FAA; (95) 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. (96)
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 principal and agent) itself. (97) The better view, however, is that the law
governing a principal’s status as a party to an arbitration agreement should be either (a)
that of the place where the agent was either headquartered or acted, (98) or (b) that of
the arbitration agreement itself, insofar as other parties to the arbitration agreement are
concerned, as with other issues of formation. (99) 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. (100)
In principle, as with other choice-of-law issues in the context of arbitration agreements,
(101) 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 benefited) 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. (102)
[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. (103) This is referred to as the “principle of
appearance” or “mandat apparent” in some jurisdictions. (104)
7
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. (105) 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. (106) In the words of one U.S. decision, an “agent enjoys implied
authority to enter into a transaction when verbal or other acts by a principal reasonably
give the appearance of authority to the agent.” (107) 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.” (108)
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. (109) 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.”
(110)
As with agency, the apparent authority doctrine raises choice-of-law issues. Possibly
applicable national laws include the law governing the arbitration agreement, (111) 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. (112)
There are few principled grounds for choosing among the options presented by existing
choice-of-law rules, providing the basis for a substantial argument that a specialized rule
of international law governing apparent authority should apply to international
arbitration agreements. (113) 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. (114)
[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. (115)
In general, ordinary principles of contract law apply to issues of implied consent (as to
other issues) with respect to arbitration agreements. (116) 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 of the New York Convention. (117)
A few other national arbitration statutes expressly address the issue of implied consent
to an arbitration agreement, (118) but such provisions are exceptional.
The fundamental question in the context of implied consent is whether the parties’
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. (119) That
is, even if a non-signatory intended to be bound by the arbitration agreement, one must
also determine whether the signatory (and other) parties to the agreement accepted it as
such: for commercial or other reasons, signatories to an arbitration agreement may wish
to extend their obligations to arbitrate only to those entities that have signed the
agreement, and not to others.
Questions of implied consent arise in numerous factual settings. Some arbitral tribunals
have held that participation in the 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. (120) 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.” (121)
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. (122) In general, arbitral awards have also held that merely incidental
involvement in contract negotiation or contractual performance is insufficient to
constitute consent to the underlying contract, or its arbitration clause. (123)
8
National courts have adopted similar approaches to issues of implied consent to an
international arbitration agreement. (124) 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 contract, it may be held to have impliedly consented to be bound by
the contract. (125) In the words of the Swiss Federal Tribunal, “a third party that becomes
involved in the performance of a contract containing the arbitration agreement is
deemed to have adhered to it through its acts if from its involvement one may deduct the
intent to become a party to the arbitration agreement.” (126) Again, however, merely
incidental involvement in negotiations or performance is consistently held to be
insufficient to constitute implied consent to be bound by the contract, or its arbitration
clause. (127)
Implied consent to be bound by the arbitration clause in one contract can also be
inferred from a party’s conclusion of a related agreement. (128) This type of analysis has
close parallels to the incorporation of arbitration agreements by reference, which is
discussed above, (129) and which some courts have referred to as a basis for binding a
non-signatory to an arbitration agreement. (130)
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 or
undertake other commercial activities – that is decisive. (131)
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. (132) 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 (133) (with this factual scenario often also
being considered under principles of estoppel (134) ). It remains essential, however, that
all the relevant parties agree to a non-signatory’s inclusion as a party to the arbitration
agreement. (135)
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. (136) Given the contractual character of the implied consent doctrine, this
approach is in keeping with the expectations of reasonable commercial parties. (137)
U.S. courts are divided with regard to the choice of law governing implied consent. Some
courts have applied principles of federal common law, (138) while other courts have
applied state (or foreign) law, particularly when the parties’ agreement contains a
choice-of-law provision. (139) 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. (140)
[D] Alter Ego and Veil-Piercing (141)

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 legal rights and liabilities.’” (142)
Likewise, it departs from the general, and basic, principle that the arbitration
agreements of companies are agreements of those companies alone, and not their
corporate affiliates. (143)
The alter ego doctrine is referred to in German as “Durchgriff,” (144) in French as “levée du
voile social,” (145) in Spanish as “levantamiento del velo societario” (146) and in many
English language contexts as “piercing” or “lifting” the “corporate veil.” (147) 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
9
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.” (148)
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 thoroughly dominates the affairs of another
party, and has sufficiently misused such control, that it is appropriate to disregard the
two companies’ separate legal forms, and to treat them as a single entity. In the context
of arbitration agreements, demonstrating an “alter ego” relationship under most
developed legal systems requires convincing evidence that one entity dominated the
day-to-day actions of another and/or that it exercised this power to work fraud or other
injustice or inequity on a third party or to evade statutory or other legal obligations.
The “alter ego” doctrine differs from principles of agency or implied consent (149) in that
the parties’ intentions are not decisive; rather, the doctrine rests on overriding
considerations of equity and fairness, which mandate disregarding an entity’s separate
legal identity in specified circumstances. (150) 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.” (151) 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.’”
(152)
Many national courts have been circumspect in piercing the corporate veil or finding an
alter ego relationship. (153) In England, the corporate veil will be pierced only where the
corporate structure has been used to evade mandatory legal obligations or the
enforcement of existing and legitimate third party rights. (154) This standard generally
requires fraud or other misconduct calculated to avoid or conceal liability through the
use of company structure. (155) In a frequently-cited decision, an English 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.” (156)
Likewise, Swiss courts (157) and tribunals applying Swiss law (158) only disregard the
corporate form in exceptional circumstances, amounting to fraud or an abuse of right. In
the words of a leading Swiss commentator:
“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.” (159)
German courts are also cautious in applying veil-piercing (Durchgriff) theories, (160)
requiring fraud or other misconduct. (161) 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. (162)
While also relying on a potentially expansive “group of companies” theory (discussed
below), (163) French courts appear willing, often without clearly distinguishing the
doctrines, (164) to disregard corporate identities in cases amounting to fraud. (165) Courts
in Canada, (166) Ireland, (167) India, (168) Korea, (169) Hong Kong (170) and China (171) are
also prepared to pierce the corporate veil, at least in some circumstances.
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. (172) 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.” (173)
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. (174) In the memorable words of one
early authority:
10
“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.” (175)
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. (176) 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. (177) Similarly, undercapitalization of a company is ordinarily not sufficient,
independently, to justify piercing the corporate veil. (178)
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 that it has no separate identity or existence, (179) and (b) fraudulent or
collusive misuse of that control, or equivalent misconduct, to the injury of other parties.
(180) 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. (181)
U.S. judicial decisions have generally conducted fairly extensive factual inquiries in
deciding claims of domination or control. (182) Different U.S. authorities have identified a
variety of factors that are relevant to an inquiry into control for purposes of alter ego
status. (183) For example, in a decision arising from the attempted recognition of an
international arbitral award, the U.S. 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 parent finances the subsidiary;
(6) the parent caused the incorporation of the subsidiary; (7) the subsidiary
operated with grossly inadequate capital; (8) the parent pays salaries and
other expenses of the subsidiary; (9) the subsidiary receives no business
except that given by the parent; (10) the parent uses the subsidiary’s property
as its own; (11) the daily operations of the two corporations are not kept
separate; (12) the subsidiary does not observe corporate formalities … (13)
whether the directors of the ‘subsidiary’ act in the primary and independent
interest of the ‘parent’; (14) whether others pay or guarantee debts of the
dominated corporation; and (15) whether the alleged dominator deals with the
dominated corporations at arm’s length.” (184)
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.” (185) The court also noted that
“[u]ndercapitalization is often critical in alter ego analysis.” (186)
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. (187) As explained by one U.S. court: “‘[w]hile 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.’” (188)
Other courts have expressed the same view, (189) although a considerable body of
authority holds that, in some circumstances, sufficiently extensive day-to-day control or
domination is sufficient to pierce the corporate veil. (190)
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. (191)
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. (192) Use of a common logo, brand, or trademark is generally
not a decisive factor in alter ego analysis, (193) nor is the mere fact of overlapping
management or supervisory boards or shared employees. (194) On the other hand,
fraudulent or similarly abusive misconduct, (195) undercapitalization of a corporate
body, (196) deliberate tortious actions, (197) or siphoning off of assets (resulting in
undercapitalization) (198) 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 in finding alter ego status.
(199) As one tribunal explained, in the context of an effort to subject a controlling
shareholder to the arbitration agreement:
11
“[A]rbitration 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 dominant
position, are never sufficient, in and of themselves, to legally justify lifting the
corporate veil. … One would entertain this exception where confusion is fostered
by the group or by the majority shareholder. … An arbitrating body must be very
circumspect in matters of extending the effect of a clause to a director or
manager who has acted strictly in an official capacity. Any such extension
presupposes that the artificial person has been no more than the business
implement of the natural person, so that one can ascribe to the natural person
the contracts and undertakings signed by the artificial person.” (200)
Other awards have emphasized the importance of principles of good faith in conducting
an alter ego analysis. (201) This approach parallels that of most national courts
(summarized above) (202) and the expectations of parties engaged in international
commercial transactions, being to give effect to corporate forms, save in exceptional
cases, where considerations of equity and fairness will justify piercing the corporate veil.
Contrary to the suggestions of some authorities, (203) there should be no question that
veil-piercing or alter ego doctrines apply to international arbitration agreements. As
discussed above, that is the uniform conclusion of both national courts and arbitral
tribunals in all jurisdictions to address the issue. Likewise, as a matter of principle, there
is no reason that alter ego analysis should not apply fully to arbitration agreements – just
as it does to other types of contractual (and non-contractual) relationships. Indeed, given
the importance of considerations of good faith and equity in international arbitration,
there is a serious argument that alter ego status can be more readily established with
respect to international arbitration agreements than with respect to substantive
obligations and liability under other types of contracts. That conclusion is also consistent
with reduced (or neutral) standards of proof for international arbitration agreements
(204) and pro-arbitration rules of interpretation. (205)
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). (206) There may, for example, be
instances where one party’s domination of another party’s participation in a particular
transaction (or in an arbitration) results in it being bound by the associated agreement to
arbitrate, notwithstanding the absence of any such control or alter ego relationship more
generally. More frequently, however, an alter ego relationship will exist with regard to a
particular commercial contract or relationship, which will also be applied with regard to
the associated arbitration agreement. (207)
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, (208) or the
law governing the arbitration agreement, (209) or the law governing the underlying
contract, (210) to the question whether the company’s corporate veil may be pierced. The
weight of authority rejects these analyses, (211) instead applying either international
principles (212) or general principles of law. (213)
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). (214) The Court reasoned:
“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.” (215)
Accordingly, the Court applied veil-piercing principles “common to both international
law and federal common law,” (216) reflecting an approach bearing some similarities to
the “cumulative” choice-of-law analyses adopted in a number of contemporary arbitral
awards: (217)
“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.” (218)
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, (219) 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
12
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. (220)
[E] “Group of Companies” Doctrine (221)

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 (222) (in
particular, as discussed below, France). In part for that reason, the doctrine has given rise
to substantial controversy. (223)
The weight of earlier (and more recent) authority adopting the group of companies
doctrine was French. (224) One of the seminal group of companies decisions is Interim
Award in ICC Case No. 4131 (“Dow Chemical”), between Dow Chemical Company (“Dow”),
together with various of its subsidiaries, and Isover Saint Gobain (“Isover”). (225) Several
of Dow’s 100% subsidiaries (but not Dow itself) and Isover were signatories of several
contracts containing ICC arbitration clauses. Various difficulties arose under the
contracts, leading Dow and three of its subsidiaries to commence an ICC arbitration
against Isover pursuant to the contractual arbitration clauses. In response, Isover
challenged the arbitral tribunal’s jurisdiction to hear claims asserted by Dow, as well as
one of its subsidiaries, on the grounds that they had not executed the contract in
question.
The arbitral tribunal issued an award which upheld the rights of Dow and its subsidiaries
to invoke the arbitration clause. The tribunal applied what it referred to as general
principles of international arbitration law, (226) reasoning:
“Dow Chemical France at the time of signature of the 1965 contracts as well as
the negotiations which led to the 1968 contract, appeared to be at the center
of the organization of the contractual relationship with the companies
succeeded by the present Defendant. Moreover, this relationship could not
have been formed without the approval of the American parent company,
which owned the trademarks under which the relevant products were to be
marketed in France. … [I]t is indisputable … that Dow Chemical Company has
and exercises absolute control over its subsidiaries having either signed the
relevant contracts or, like Dow Chemical France, effectively and individually
participated in their conclusion, their performance, and their termination.”
(227)
The tribunal referred to earlier awards, concluding, with some overstatement, (228) 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.” (229)
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.”
(230) The award was subsequently upheld by the Paris Cour d’Appel, rejecting Isover’s
application for annulment on jurisdictional grounds. (231) Later French judicial decisions
also approved awards based on the group of companies doctrine, albeit not always
relying expressly on that doctrine. (232)
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. (233)
A subsequent award summarized the theory as follows:
“When concluding, performing, nonperforming and renegotiating their
contractual relations with [defendants], the three claimant companies appear,
13
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.” (234)
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 benefited by) the agreement in
question: (235) Thus:
“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.” (236)
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, (237) and that the doctrine requires showing more than a non-
signatory’s membership in a group of affiliated companies. (238) Rather, the doctrine
provides that a non-signatory may be bound by an arbitration agreement where a group
of affiliated companies exists and the parties have engaged in conduct (such as
negotiation or performance of the relevant contract) or made statements (239) indicating
the intention, assessed objectively and in good faith, that the non-signatory be bound
and benefited by the relevant arbitration agreement. (240) 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.” (241)
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. (242) In contrast, a few
decisions appear to have focused entirely (and, as discussed below, incorrectly) on the
mere existence of a group of companies. (243)
As noted above, and as has been frequently observed, the group of companies doctrine
“depends on the intentions of the parties.” (244) This observation is generally correct, but
must be qualified. The statement underscores the fact that the affiliation of companies
(and/or individuals) or the membership of companies in a related corporate group does
not by itself suffice to bind them to one another’s arbitration agreements. As with other
consent-based legal doctrines in the non-signatory field, such as guarantee, implied
consent, assumption, assignment, or agency, the decisive question is whether the
circumstances of the parties’ relationship evidence an intention by the parties to bind a
non-signatory to a particular arbitration agreement. (245)
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. (246)
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
14
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. (247)
Commentators have observed the same distinctions between the group of companies
doctrine and veil-piercing principles. (248)
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. (249) 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; (250) this result is sometimes reached even without adopting the “group of
companies” label. (251) Nonetheless, the doctrine can also apply to subsequent conduct,
as an instance of a non-signatory’s assumption of pre-existing contractual obligations.
(252) This was foreseen by the Dow Chemical decision, (253) and has been confirmed in
subsequent awards (254) and judgments. (255)
Not many 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. (256) As one English court put it, in emphatic
terms, “the [group of companies] doctrine … forms no part of English law.” (257) English
commentary has also generally been skeptical of the group of companies doctrine. (258)
As another English court concluded, in rejecting a similar argument:
“[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.” (259)
Swiss courts have been more ambivalent. Some Swiss commentators have concluded that
“Swiss law ignores the notion of group of companies.” (260) Nonetheless, Swiss judicial
authority is mixed, with some decisions suggesting that the group of companies doctrine
would not be recognized under Swiss law (261) and other decisions implying the opposite.
(262) 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). (263)
Similarly, a number of published arbitral awards have declined to apply the group of
companies doctrine to non-signatory respondents. (264) That has been particularly true
in arbitrations seated in Switzerland and England. (265)
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. (266)
Properly understood, the group of companies doctrine rests on the presumption that
commercial parties within corporate groups engaged in a business transaction will
ordinarily desire – when entering into a contract – that their arbitration agreements
provide efficient, centralized dispute resolution mechanisms for all disputes relating to a
particular transaction. (267) 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 (268) 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 international business transactions, in order that the parties’ true
objectives and intentions can be ascertained. Whether denominated “group of
companies,” or something else, is less important than the effective interpretation and
enforcement of dispute resolution mechanisms among commercial parties in
international commercial settings.
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. (269) Giving effect to this principle serves in
particular to prevent the circumvention of an international 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,
15
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. (270)
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 agreement), while the counter-party may have been unaware of, or
misled as to, the affiliated company’s involvement. Accordingly, in some cases, the group
of companies doctrine operates precisely to correct mistaken subjective assumptions or
understandings at the time of contracting, by looking through ordinarily applicable legal
forms and contractual arrangements. (271) 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 concepts of good faith, equity and objective intent to supplement
subjective intentions of the parties to an arbitration agreement. (272)
Like other non-signatory theories, 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. (273)
Other awards adopt the same analysis. (274) 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 (275) ). 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). (276)
[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. (277) 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 one frequently-cited arbitral
award:
“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.” (278)
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, (279) and also entitled to
invoke that clause. (280) In a few jurisdictions, issues of third party beneficiary status are
governed generally by statutory provisions (and often include provisions that apply
specifically to arbitration agreements). (281) 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. (282)
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. (283) 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.”
(284)
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 this analysis is to determine the parties’ objective, good faith intentions. (285)
Some authorities have suggested that a particularly clear showing must be made of third
party beneficiary status sufficient to permit a party to invoke (or be bound by) an
arbitration agreement:
“Because third-party beneficiary status constitutes an exception to the
general rule that a contract does not grant enforceable rights to non-
signatories, a person aspiring to such status must show with special clarity
16
that the contracting parties intended to confer a benefit on him.” (286)
It is doubtful, however, that this analysis is well-considered; for the same reasons that
“anti-arbitration” standards of proof for the existence of an arbitration agreement are
inappropriate (287) and pro-arbitration rules of interpretation are appropriate, (288)
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,
particularly in international settings. (289)
The parties’ intentions regarding a third party beneficiary must be analyzed with the
separability presumption in mind. (290) In determining whether a third party is benefited
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; (291) 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. (292)
In some instances, the conclusion that a non-signatory party is bound by, or may invoke,
an arbitration clause on third party beneficiary grounds may involve considerations akin
to estoppel, rather than exclusive consideration of issues of intent. (293) 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. (294) Although
ostensibly analyzed as an issue of third party beneficiary rights, the more appropriate
and convincing basis for such decisions is estoppel (discussed below). (295)
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. (296)
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. (297)
[G] Guarantors (298)

It is not uncommon in international commercial transactions for one party to guarantee
the obligations of another party under a contract to which the guarantor is not party. (299)
When this occurs, questions may arise as to the extent to which the guarantor is bound by
provisions of the underlying contract – including particularly its arbitration clause.
The starting point for analysis is that, because the guarantor is not party to the
guaranteed contract, the guarantor is also not party to the arbitration agreement
contained in the guaranteed contract. That is true under both common law (300) and civil
law (301) regimes.
Despite this, a number of arbitral awards (302) and judicial decisions (303) 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.
First, a guarantor may be benefited 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, (304) the guarantor’s exercise of the assigned
contractual rights may be subject to an arbitration agreement contained in the
underlying contract. (305)
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. (306)
This analysis also applies in cases where a guarantor performs the guaranteed party’s
obligation under the guaranteed contract. (307)
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, (308) which can result in a conclusion that the
guarantee incorporates the arbitration provision of the guaranteed contract. (309)
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
17
party who is owed the obligation). (310) 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. (311) 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. (312)
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. (313) If the guarantee
agreement is narrowly drafted (314) or if the arbitration clause refers specifically and
only to identified parties, (315) then the guarantor will likely not be bound by the
arbitration agreement.
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.
(316) 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. (317)
[H] Succession (318)

It is well-settled that an entity that does not execute an arbitration agreement may
become a party thereto by way of legal succession. (319) 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.” (320) The most common means of such succession is by
a company’s merger or combination with the original party to an agreement. (321)
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 (including contract rights and obligations) of the previously-existing
entities. This is confirmed by national law, (322) arbitral tribunals (323) and commentary.
(324) 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. (325) There is no apparent
contrary authority and no reason to doubt this conclusion.
National courts (326) and arbitral awards (327) have held that the same result generally
applies in other instances of corporate succession, when one entity assumes the rights
and obligations of another entity as a matter of applicable national company law. (328)
As the French Cour de Cassation concluded: “[t]he international arbitration clause is
binding on any party that is a successor to one of the contractual partners.” (329)
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 (330) ). 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.” (331)
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. (332) 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. (333)
[I] Assignment and Other Transfers of Contractual Rights (334)

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. (335)
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. (336) 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
18
power to assign or transfer other types of contracts. (337) 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 aspect of the parties’ overall
agreement, to the assignee, at least absent some sort of contractual or legal prohibition
that renders the assignment ineffective. (338) 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.” (339)
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.
(340) English courts have reached similar conclusions. (341)
The same approach is adopted in civil law jurisdictions, (342) including in Switzerland,
where the Swiss Federal Tribunal has confirmed that a valid assignment of the underlying
contract “automatically” transfers the arbitration agreement (which is regarded as an
ancillary or incidental right, accompanying the underlying commercial contract). (343)
Likewise, under French law, there is a presumption of “automatic” assignment of the
arbitration clause together with the underlying contract. (344) A recent Russian judicial
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.” (345)
In a few jurisdictions, the effects of an assignment of a contract on the agreement to
arbitrate are prescribed by statute. (346)
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
that 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. (347) 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. (348) 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. In some cases, the assignor of a contract
may have continuous rights under the contract’s arbitration clause. (349)
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:
“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.” (350)
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. (351) 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; (352) as a consequence, the arbitration
clause is often said to be “parasitic” or “incidental” to the underlying contract. (353) 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 a 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
19
arbitration clause (since the contract and arbitration clause were arguably never
assigned). (354) 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. (355)
In some legal systems, an assignment in breach of a contractual prohibition is
presumptively not invalid, even if it is wrongful, but rather is effective while giving rise to
a damages claim for breach of the anti-assignment provision. (356) 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, (357) 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). (358)
There may be circumstances in which the parties 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). (359)
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. (360) This may be subject
to the condition that the arbitrator(s) in the pending arbitration consent to the
assignment. (361)
As with other non-signatory theories, questions of assignment give rise to choice-of-law
issues. (362) Commentators have noted the lack of uniform substantive rules concerning
the assignment of arbitration agreements. (363) 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. (364) In other jurisdictions, the substantive law that governs the underlying contract
has been applied to determine issues of assignability. (365) As in other contexts, the
better view is that the validation principle should apply to the assignability of the
arbitration clause, upholding the assignment if that is the result under either the law
governing the assignment agreement or the arbitration agreement. (366)
[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
insurers, who may be subrogated to the rights of insureds. In these circumstances, the
insurer is typically entitled to invoke (and is bound by) the arbitration provisions of the
insured’s underlying contract (from which the subrogated rights arise). (367) In principle,
the validation principle should apply to the effects of subrogation on an arbitration
agreement. (368) In some jurisdictions, direct action statutes have also been applied to
permit claims by non-signatories. (369)
[K] Estoppel and Related Doctrines (370)

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. (371) In these jurisdictions, “estoppel” is defined in various ways,
but generally means that a party is barred by considerations of good faith and equity
from acting inconsistently with its own statements or conduct. (372) 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.” (373)
20
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. (374) Nonetheless, similar conceptions exist under rubrics of good
faith, abuse of right, or venire contra factum proprium, (375) or in connection with the
group of companies doctrine. (376)
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. (377)
Similarly, where a party invokes an arbitration clause in national court proceedings,
claiming rights under that clause, it will ordinarily be estopped from subsequently
denying that it is bound by the arbitration agreement in other proceedings. (378) Some
U.S. courts have adopted a theory of “equitable estoppel” for application to questions of
arbitral jurisdiction. (379)
Estoppel principles have frequently been applied to hold that a party is bound by the
arbitration clause associated with the substantive contractual rights that it claims: that
is, if a party claims or exercises rights under a contract, then it is ordinarily bound by the
arbitration clause in that contract. As one U.S. court put it: “In short, [plaintiff] cannot
have it both ways. It cannot rely on the contract when it works to its advantage and ignore
it when it works to its disadvantage.” (380)
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,
(381) as have courts in a few other jurisdictions. (382) In contrast, if not entirely clearly, a
party that only receives an “indirect” benefit will not be estopped from resisting
arbitration on this theory. (383) 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 (384) 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. (385)
It is sometimes said that the proper application of the estoppel doctrine is as a “shield,”
and not as a “sword.” (386) 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.” (387)
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. (388)
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. (389)
As noted above, civil law jurisdictions do not necessarily recognize the estoppel doctrine
as such. (390) 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. (391) As a consequence, civil law authorities have reached comparable
results to those provided under most forms of estoppel by different avenues. (392)
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. (393) Similarly, the
Austrian Oberster Gerichtshof 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. (394)
Principles of estoppel and related doctrines have not frequently been the subject of
choice-of-law analysis. (395) It is difficult to formulate predictable conflicts rules
applicable to the subject, because of the diversity of connecting factors: for example, if a
21
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. (396)
[L] Ratification
A non-signatory (and nonparty) to an agreement may subsequently become a party to
that agreement by ratification. (397) Ratification can occur with regard to arbitration
agreements, as well as with other forms of commercial contracts. (398) 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. (399) The same choice-of-law rules that apply to
guarantee/guarantor relations (400) should also apply in the context of ratification.
[M] Corporate Officers and Directors

Some national courts have adopted what appear to be sui generis rules with regard to the
application of arbitration clauses to officers and directors of companies who have
executed the arbitration agreement. In virtually all such cases, the officers and directors
of the corporate party will not be parties to the relevant contract. Even in cases where a
company’s officers or directors execute a contract on behalf of the company, they do not
ordinarily thereby become parties, in their personal capacities, to the contract. (401)
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 sometimes 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. (402) 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. (403) 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.’” (404)
These decisions are not unanimously followed even in the United States. (405) 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.” (406)
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. (407) Nonetheless, it has been adopted in a few
other jurisdictions, including France, (408) Canada (409) and Germany. (410)
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. (411) 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 mutual 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.” (412)
22
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. (413) These results appear to rest on the notion that corporate officers and
directors are third party beneficiaries of arbitration agreements, who are entitled to
invoke, but are not bound by, those agreements.
[N] Shareholder Derivative Rights

In some legal systems, a shareholder of a company may in certain circumstances act for
the company itself; in general, these circumstances are narrowly circumscribed, involving
only cases where the company’s interests are damaged and the company’s management
refuses to take steps to protect those interests, despite demands that it do so, ordinarily
because of some sort of self-dealing. (414) 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 company’s 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. (415) 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.” (416) The law of the place of incorporation
governs the nature and extent of shareholder derivative rights. (417)
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. (418) The court held that the
plaintiff was compelled to arbitrate his claim because the agreement between the
corporation and the brokerage firm, which established the brokerage firm’s duties and
pursuant to which the plaintiff had brought suit, contained an arbitration clause, and the
plaintiff was bringing suit on behalf of the company. (419) 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. (420) Other U.S. lower courts have reached comparable conclusions
in holding that shareholder claimants in derivative actions were bound by the
corporation’s arbitration agreements. (421)
[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. (422) Similar results can be reached through
principles of “civil conspiracy,” as applied in some national legal systems. (423) In both
cases, considerations similar to those arising under the group of companies doctrine
apply, (424) often justifying application of an agreement to arbitrate to non-signatories.
[P] State Non-Signatories (425)

States and state entities are important actors in international commercial transactions
and the international arbitral process. Indeed, as discussed above, one of the reasons
that parties choose to arbitrate their international disputes is to ensure that states and
state entities can be required to participate in, and be bound by the results of, such
processes. (426)
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. (427) 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 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.” (428)
23
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.” (429)
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. (430) 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.” (431) 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. (432)
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. (433) 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. (434) Despite that (and
despite a French decision confirming the award (435) ), 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. (436)
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.
[Q] Third Party Funders (437)

The increasingly important role of third party funders in international arbitration also
raises non-signatory issues. By definition, a “third party” funder is a non-signatory to the
arbitration agreement and this is almost always true in practice. (438) In its typical
modern form, where the third party funder is often an independent private equity funder,
the funder is generally unrelated to the parties, the arbitration agreement, or the
underlying contract and only becomes involved after a dispute has arisen. Nonetheless,
third party funders have an economic interest in the outcome of the arbitral proceedings
and may exercise a measure of control over the arbitral procedure. (439)
Whether a third party funder should be treated as a party in arbitral proceedings, subject
to the arbitral tribunal’s jurisdiction, requires consideration of the grounds for binding
non-signatories to arbitration agreements. This issue most commonly arises in
considering whether an arbitral tribunal can render a costs award against a funder. (440)
This question raises several, largely-unexplored issues.
First, depending on the terms of the funding agreement, the funded party may be
substituted by the third party funder in the arbitration, such that the funder becomes the
claimant or respondent in the arbitration (and is no longer a “third party”). This will
generally depend on the application of general principles of assignment or subrogation.
In these cases, the “third party” funder ceases to be a third party and becomes both a
party and often a signatory to the arbitration agreement and the arbitration.
Second, a third party funder may be joined to the arbitral proceedings as an additional
party based on theories such as implied consent, group of companies, estoppel and other
doctrines. At least one tribunal has ordered security for costs against a funder on the
basis that the claimant would not comply with an adverse costs award, citing the
“uncertainty as to whether or not the unknown third party [funder] will be willing to
comply with a potential costs award in Respondent’s favor.” (441) This exercise of
jurisdiction raises more difficult issues because most non-signatory theories do not
comfortably apply to conventional third party funding arrangements where the funder
does not have corporate ties to the funded party or the subject matter of the underlying
contract. (442)
Some commentators have suggested that arbitral tribunals generally possess jurisdiction
over third party funders for reasons of fairness, efficiency, certainty and flexibility of the
24
arbitral process. (443) The rationale for these approaches appears to require a departure
from the consent-based conception of arbitral jurisdiction, which appears unwarranted.
There is also little justification for focusing only on third party funders as distinct from
others serving functionally similar roles, such as insurers or counsel acting on a
contingency fee basis. (444)
The better analysis is to avoid distorting basic principles of consent, (445) while
specifically addressing the issue of the arbitral tribunal’s jurisdiction to make orders
against third party funders in national arbitration laws or institutional arbitration rules.
(446) Even absent such provisions, however, there is a substantial argument that a third
party funder impliedly subjects itself to an arbitral tribunal’s jurisdiction, for limited
purposes of ensuring the procedural integrity and fairness of the arbitral proceeding and
bearing the costs of the arbitration, by agreeing to fund one party in the arbitration.
Alternatively, principles of estoppel arguably also subject a third party funder to the
(limited) jurisdiction of the arbitral tribunal. In neither case, however, does the third
party funder become a party generally to the arbitration agreement (much less the
underlying contract).
§10.03 FUTURE DIRECTIONS: LEGAL BASES FOR BINDING NON-SIGNATORIES

TO INTERNATIONAL ARBITRATION AGREEMENTS
For the most part, authorities are agreed that consent is the essential foundation for
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. (447) 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.” (448)
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, (449) while
another decision relied on a “nexus between” the parties’ claims and the “integral
relationship” between the parties. (450) Commentators have argued persuasively that
these types of decisions rest (improperly) on general considerations of equity and
efficiency, rather than a contractual analysis, to support broad extensions of arbitration
clauses. (451)
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,
apparent authority, or similar nonconsensual theories are at issue, 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 international arbitration agreements are consensual
instruments, (452) and is necessary for reasons of commercial predictability.
The touchstone should be whether the parties intended that a non-signatory be bound
and benefited 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 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”). (453) 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
25
another. Among other things, it reasoned (454) that both companies were “sophisticated
commercial actors” that were “quite 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. (455)
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. (456)
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 fundamental manner. This reflects the most powerful
rationale for the group of companies doctrine, being that corporate affiliates of the
signatory to an international arbitration agreement should not be permitted to
circumvent or frustrate that agreement through the device of satellite litigation. This is
not a question of extending the arbitration agreement on the basis of a priori formulae,
but of identifying which parties – acting in good faith – should be regarded as having
consented to arbitrate.
In this regard, it is important to apply the various legal bases for binding non-signatories
specifically to the separable agreement to arbitrate (as distinguished from the underlying
contract). It bears emphasis that the parties’ intentions – both actual and presumed –
will often be different with regard to their arbitration agreement, and its dispute
resolution mechanism, than with regard to their underlying commercial contracts. That is,
there will readily be cases where the parties desire a unified, “one-stop” dispute
resolution mechanism, particularly one extending to all the members of a corporate
group involved in a particular transaction, without altering the allocations of substantive
contractual rights contained in the underlying contracts.
The foregoing considerations suggest that most criticisms of the group of companies
doctrine (457) and rules regarding the treatment of corporate officers and directors (458)
are unjustified. These doctrines are virtually unique, in that they were developed
specifically with application to the agreement to arbitrate, rather than to other types of
contracts. The fundamental rationale for the group of companies doctrine, not always
well-articulated by its proponents, is to preserve the efficacy of the signatories’
agreement to arbitrate. An agreement to arbitrate has the objective of centralizing the
parties’ disputes in a single, neutral, expert forum; (459) similar logic justifies rules
permitting corporate officers and directors to invoke arbitration provisions in contracts
to which they are not parties. (460) As already noted, in both cases, 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 and specialized rules regarding corporate officers and
directors serve – sensibly – to prevent this sort of circumvention and frustration of
arbitration agreements. The group of companies doctrine 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. Similar analysis applies to
specialized rules governing the rights of corporate officers and directors to invoke
arbitration agreements to avoid satellite litigations.
The foregoing rationale is typically limited to the group of companies doctrine, involving
corporate affiliates, and to the treatment of corporate officers and directors; it does not
extend generally to other mechanisms for binding non-signatories that are not corporate
affiliates, officers, or directors. Nonetheless, this rationale is also reflected in a few other
contexts, including shareholder derivative rights, some versions of estoppel, and
treatment of third party funders. 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. (461) 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
26
are bound by international arbitration agreements. (462)
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 agreement are relevant, but not fully applicable, in the context of
determining whether an arbitration agreement binds a party. (463) It is one thing to
determine whether a party which concededly concluded a valid agreement to arbitrate
some disputes also intended to arbitrate other, related disputes; it is another thing to
determine whether a party agreed to arbitrate anything at all.
Nonetheless, as also discussed above, it is appropriate in international settings 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. (464) 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 international
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. (465) The same is true,
albeit less obviously, 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. (466) It is critical to distinguish such cases,
which do not involve traditional contractual analysis, conceptually from other non-
signatory theories, which do. Although these doctrines are only exceptionally applicable,
they play an essential role in ensuring the fairness and efficiency of the international
arbitral process.
§10.04 FORMAL VALIDITY AND NON-SIGNATORIES

Application of the theories discussed above to bind a non-signatory to an arbitration
clause raises questions of compliance with applicable formal requirements, under many
legal regimes, for a “written” arbitration agreement. (467) There has been surprisingly
little attention to issues of form in non-signatory cases, with the issue apparently not
frequently being raised or decided.
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 satisfy the form requirements of the Convention (or national arbitration
legislation). In principle, this conclusion is difficult to accept. Although form
requirements are archaic, for the reasons discussed above, (468) 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 generally 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). (469)
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). (470)
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. (471) 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
27
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.” (472)
The U.S. Supreme Court has apparently adopted similar analysis. (473) 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,” (474) or have
relied on principles of estoppel (to excuse compliance with form requirements). (475)
The lack of attention to form requirements in non-signatory contexts is further indication
of the extent to which these requirements fail to reflect contemporary commercial
practice and substantial justice. 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 (476) – 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. (477)
§10.05 CHOICE OF LAW GOVERNING PARTIES TO INTERNATIONAL

ARBITRATION AGREEMENT
Choice-of-law issues frequently arise in disputes over the identities of the parties to
international arbitration agreements. (478) Nonetheless, there is little considered
analysis focusing on the law applicable to determining the parties to an arbitration
agreement or the status of non-signatories. (479)
As discussed above, some authorities have applied international principles (particularly
to the group of companies, estoppel and alter ego doctrines), (480) while other
authorities have applied national law rules (particularly to issues of agency, assignment,
merger and guarantee/ratification). (481) Generally speaking, as discussed below, the
application of these various international and national law standards to different non-
signatory theories, depending on the nature of the relevant theory, is appropriate:
properly analyzed, the law applicable to determine whether a non-signatory is bound by
an arbitration agreement depends on the particular theory that is invoked. (482) Also
preliminarily, where national law is applicable, the better analysis is to apply a
validation principle, which 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. (483) 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 the company’s confidence in its distinct legal
status and the protection of entities which may fall victim to the
manipulations of a company controlling its subsidiary to deprive a creditor of
the benefits to which it is entitled.” (484)
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. (485) A few awards have characterized
these rules of international law as lex mercatoria or general principles of international
law. (486) 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
28
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.” (487)
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 agreements are “autonomous” from national legal systems and
subject to international law. (488) This analysis was well-articulated in the Dow Chemical
decision (discussed above), applying the group of companies doctrine as a “usage of
international commerce.” (489)
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. (490) 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 apparently 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.” (491) 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.’” (492) The Court’s
generic references to “background principles of state contract law” and “traditional
principles” of state contract law are equivocal: although apparently suggesting that state
law would apply to domestic non-signatory issues, the references to “background” and
“traditional” principles, rather than “rules” of state law applicable under the Erie
doctrine, arguably contemplates federal common law rules based in traditional state
contract law. In any event, the decision of the Court in Arthur Andersen did not address
the application of the New York Convention or Chapter 2 of the FAA, where the better
view, generally adopted by U.S. lower courts, remains that federal common law should
govern issues of alter ego, agency, estoppel and the like. (493) That conclusion is
underscored by the pro-enforcement policies and federal interests under the Convention.
(494)
[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 one frequently-cited 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].” (495)
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. (496) Thus, some courts and tribunals have applied
the law selected by the choice-of-law clause in the underlying contract to non-signatory
issues (497) (although other authorities, set out above, have rejected these analyses);
other courts have applied the law of the arbitration agreement, (498) or the law of the
arbitral seat, (499) to non-signatory issues.
In contrast, some national courts (500) and arbitral tribunals (501) 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 2005 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. (502) 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.” (503)
29
To arguably the same effect, other U.S. courts have applied national law to a variety of
non-signatory issues, such as alter ego status (504) and estoppel, (505) 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. (506)
[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. (507) The better approach to the choice of law
applicable to non-signatory issues requires considering the specific 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, apparent authority 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. (508)
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. (509) Conversely, there is no reason
not to apply the law governing the arbitration agreement to these issues. (510)
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. (511) 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). (512)
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. (513) For the reasons discussed above, it makes
particular sense for the law governing the arbitration agreement to extend to application
of the group of companies doctrine (which was developed for specific application only to
agreements to arbitrate). (514)
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
national law. In particular, the effects of succession are properly governed by the law of
the state under which the relevant corporate entities (or other persons) are organized
(e.g., a merger between Dutch companies is governed by Dutch law). At the same time, the
validation principle should also apply, to ensure that corporate reorganizations or
similar events under a foreign law do not have the effect of circumventing the arbitration
agreement.
[2] Future Directions: Application of International Principles to Non-Signatory Issues
More difficult choice-of-law considerations arise with regard to issues of alter ego status,
apparent authority and estoppel. In each of these cases, the better approach in
international matters is to apply international principles. (515) 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,
international 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.
30
[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. (516)
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. (517) As already noted, one U.S. decision –
Sarhank Group v. Oracle Corp. (518) – departs from this approach, instead holding that
“[a]n 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.” (519)
This analysis is impossible to reconcile with either the New York Convention or generally-
accepted choice-of-law principles. There is generally 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. (520) 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. 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 the award upheld jurisdiction over a party in violation of local
public policy. (521) 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. (522) The Sarhank court (arguably) could have properly
invoked Article V(2)(b)’s public policy exception, given the breadth of the arbitral
tribunal’s conception of consent, but this was not the analysis the court’s opinion appears
to have adopted.
§10.06 ALLOCATION OF COMPETENCE TO DETERMINE PARTIES TO

ARBITRATION AGREEMENT
As with other disputes over the validity 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. (523) Consistent with more general approaches to the
competence-competence doctrine, (524) arbitral tribunals have almost uniformly
concluded that they have the authority to consider whether the parties’ arbitration
agreement was binding on particular entities. (525) 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. (526)
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, (527) applies to
disputes over the parties to an arbitration agreement. Consistent with that regime, most
courts applying the Model Law have affirmed the power of arbitral tribunals to consider
disputes over the identities of the parties to arbitration agreements. (528) At the same
time, courts have also entertained interlocutory litigation concerning jurisdiction over
non-signatories (529) and reviewed awards addressing the subject (while taking differing
views on the level of deference to be afforded to the arbitral tribunal’s jurisdictional
findings). (530)
French courts have also concluded (consistent with general French principles of
competence-competence) (531) that arbitral tribunals have the competence to decide
initially what parties are bound by an arbitration agreement; (532) the arbitrator’s
jurisdictional award is subject to subsequent de novo judicial review by French courts.
(533) Once arbitral proceedings have been commenced, no interlocutory judicial
consideration of jurisdictional issues is available in French courts; even before an
31
arbitration is commenced, no judicial consideration is permitted, save for a manifest
nullity of the arbitration clause towards the non-signatories. (534) Other national courts
have also recognized the arbitral tribunal’s competence to decide on whether non-
signatory parties are bound by an arbitration agreement. (535)
In contrast, U.S. courts have reached divergent results with regard to the allocation of
competence to decide non-signatory issues. Some U.S. courts have upheld the arbitral
tribunal’s authority to decide what parties are bound by an arbitration agreement, (536)
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.” (537)
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. (538) Those determinations will generally be subject to
de novo judicial review, (539) except where the parties have agreed to submit
jurisdictional issues for arbitral determination. (540) 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. (541) Additionally, the Court held that an agreement to arbitrate
“arbitrability” issues must be established by “clear and unmistakable” evidence. (542)
These requirements were formulated by the First Options Court in the specific context of a
dispute over the identity of parties to an arbitration agreement, and they clearly apply
to disputes over the status of non-signatories.
In general, however, it is difficult to see how a non-signatory can be shown to have clearly
and unmistakably agreed to arbitrate the question whether it ever agreed to the
arbitration clause (save in after-the-fact submission agreements). (543) 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.” (544) As
discussed above, it is difficult to reconcile these decisions with the consensual nature of
arbitration. (545)
§10.07 ARBITRATION IN CORPORATE AND PARTNERSHIP CONTEXTS (546)

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 charters) of a company or the deed of a partnership. (547)
Parties include such provisions in corporate/partnership documents for obvious
commercial and business reasons: the members of a corporate body or partnership wish
to have their disputes resolved in a private, commercially-oriented manner, over which
they have a substantial degree of control. (548) 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. (549) 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. (550) 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 its specific
acceptance thereof. Instead, 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. (551) As one authority explains,
with reference to German law:
“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).” (552)
The same analysis applies to transfers of corporate shares. (553) 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. (554)
32
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. (555)
In the United States, the Securities and Exchange Commission has an informal policy of
discouraging the registration of securities whose documentation includes mandatory
arbitration provisions. (556) Nonetheless, there are exceptions to this general approach
and there are, in principle, no reasons that an arbitration clause could not validly be
included in the constitutive instruments of a public company, binding all shareholders in
the company with respect to defined categories of claims. (557)
As discussed above, national courts have generally rejected arguments that shareholders’
disputes and the “internal affairs” of corporate governance are nonarbitrable. (558) 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 typically involving the rights of third
parties (such as the validity of shareholder resolutions). (559) Additionally, questions also
arise as to the scope of the claims covered by arbitration provisions in corporate
constitutive instruments. (560)
§10.08 CLASS ARBITRATIONS (561)

[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 more named plaintiffs represent a large, sometimes indeterminate, number
of similarly-situated individuals in pursuing related claims against one or more
defendants. (562) 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. (563) 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, a 1975
state court decision denied the claimants’ request to order a class arbitration of claims
by multiple claimants and instead ordered individual arbitrations. (564) 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.”
(565)
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. (566) 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. (567)
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.” (568) 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
33
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.” (569)
After the California Supreme Court’s decision in Keating, authorizing class arbitration,
California state courts ordered class arbitration in a wide variety of circumstances. (570)
A few other state courts adopted conclusions similar to that in Keating, (571) while courts
in a number of other U.S. states rejected the possibility of class arbitration. (572) At the
same time, federal courts generally refused to order class arbitration unless the
arbitration agreement contained express provisions to that effect. (573) A representative
decision was Champ v. Siegel Trading Co., which refused to order class arbitration absent
a specific agreement between the parties authorizing it. (574) Given that the vast majority
of arbitration agreements did not provide expressly for class arbitration, these decisions
appeared to render class arbitration, at least outside of California, extremely unusual.
(575)
[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 substantially retrenched, producing a resolution
that remains unclear but that generally 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. (576) 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.” (577) The U.S. Supreme Court reviewed the South Carolina decision
and, in a fragmented set of opinions, reversed and remanded to the arbitral tribunal. The
Supreme Court held that class action arbitrations are not inconsistent with the FAA and
that the availability of class arbitration depends on the terms of the parties’ arbitration
agreement; the Court’s 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. (578)
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. (579) 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. (580) 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.” (581) 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. (582)
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. (583) 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.”
(584) Justice Stevens reasoned:
“The Supreme Court of South Carolina had held as a matter of state law that
class-action arbitrations are permissible if not prohibited by the applicable
agreement, and that the 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.” (585)
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 the wake
of the decision. The AAA alone administered over 500 class arbitrations, collectively
involving billions of dollars in claims, which were filed over the space of several years,
34
(586) while JAMS administered a smaller, but substantial, number of additional class
arbitrations. (587) Both the AAA and JAMS also adopted institutional rules designed
specifically for class arbitrations. (588)
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. (589) 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. (590)
[3] Class Action Waivers 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). Some 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 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.” (591)
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.
(592)
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.
(593) The Discover Bank court announced a generally-applicable rule of unconscionability
with regard to class action waivers:
“when the waiver is found in a consumer contract of adhesion in a setting in
which disputes between the contracting parties predictably involve small
amounts of damages, and when it is alleged that the party with the superior
bargaining power has carried out a scheme to deliberately cheat large
numbers of consumers out of individually small sums of money, then, 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.’” (594)
The Discover Bank court also held that the FAA did not preempt this unconscionability
rule. The court’s analysis focused on Perry v. Thomas, (595) 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.” (596) 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].” (597) 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.” (598)
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). (599) In cases where courts found a waiver of class actions
unconscionable, they sometimes overturned the waiver and allowed arbitration to
proceed as a class action, (600) and in other cases held that the class action waiver
rendered the entire arbitration agreement unenforceable. (601) Some courts and
arbitrators reasoned that interpreting a silent arbitration agreement to allow class
35
arbitration was necessary to give effect to the parties’ agreement to arbitrate, even if the
parties did not necessarily contemplate a class proceeding. (602)
At the same time, other U.S. courts rejected arguments that class action waivers in the
context of arbitration agreement are unconscionable. (603) 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.” (604)
[4] Post-Bazzle U.S. Supreme Court Decisions
The U.S. Supreme Court revisited the issue of class arbitration in a series of later
decisions – Stolt-Nielsen SA v. AnimalFeeds International Corp., (605) AT&T Mobility LLC v.
Concepcion, (606) American Express Co. v. Italian Colors Restaurant, (607) Oxford Health
Plans LLC v. Sutter, (608) DIRECTV, Inc. v. Imburgia, (609) and Lamps Plus Inc. v. Varela.
(610) 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 it appears that class
arbitration is permitted only where both parties have affirmatively and expressly
consented to it.
[a] Stolt-Nielsen SA v. AnimalFeeds International Corp.
The Supreme Court again considered issues concerning class arbitration in Stolt-Nielsen
SA v. AnimalFeeds International Corp., which arose in unusual procedural circumstances
(including an ambiguous stipulation concerning the meaning of the parties’ arbitration
agreement). In Stolt-Nielsen, the claimant, AnimalFeeds, had brought a class arbitration
against Stolt-Nielsen, a major ocean shipping company, asserting antitrust claims (based
on allegedly illegal price fixing by shipping companies). (611) 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. (612) 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.’”
(613) The Court’s decision noted, in particular, that the parties had stipulated that “no
agreement” had been reached as to class arbitration (which resulted in the arbitrator, in
ordering class arbitration, to look outside the parties’ agreement). (614)
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.” (615) The Court concluded:
“the panel regarded the agreement’s silence on the question of class
arbitration as dispositive. The panel’s conclusion is fundamentally at war with
the foundational FAA principle that arbitration is a matter of consent. … An
implicit agreement to authorize class-action arbitration … is not a term that
the arbitrator may infer solely from the fact of the parties’ 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.” (616)
As a consequence, the Court held that the arbitrators’ decision to proceed with class
arbitration exceeded their authority, requiring that their award be vacated. (617) 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.” (618)
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. (619) More generally, 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. (620)
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
36
whether a contract permits class arbitration.” (621) 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.” (622) In sum, the
Court’s Stolt-Nielsen decision placed substantial limits on class arbitration, in the form of
judicial review of arbitrators’ determinations 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, (623) 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 charging sales tax (about $30) on mobile telephones that were
advertised as free. AT&T sought dismissal of the claims, moving to compel individual
arbitrations pursuant to an arbitration clause contained in AT&T’s contracts with its
customers. The relevant clause contained a detailed class action waiver providing that
all claims be brought in the parties’ “individual capacity, and not as a plaintiff or class
member in any purported class or representative proceeding.” (624)
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. (625) In a 5-4 decision, which
was only slightly less fragmented than that in Bazzle, (626) 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.” (627) 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 than final judgment.” (628) The Court also
found it significant that class arbitration did not exist in 1925, when the FAA was enacted
– apparently suggesting that class arbitration was thus inconsistent with “arbitration as
envisioned by the FAA.” (629)
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.” (630) The Court therefore held that California’s
unconscionability rule (formulated in Discover Bank) “stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress” and is
preempted by the FAA. (631)
Although its ultimate holding was likely correct, as a matter of interpreting the FAA, the
Supreme Court’s apparent analysis in Concepcion was, in important respects,
misconceived. Justice Scalia’s opinion suggested 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.” (632)
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 impossible to accept. Taken at face value, this reasoning suggests
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 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.” (633) 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.
(634)
Moreover, the Court’s suggestion that arbitration is somehow limited to what Congress
supposedly envisioned in 1925 is also incorrect. 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
37
consequence, contemporary arbitration now routinely addresses statutory claims (under
legislation enacted decades after 1925), (635) using telecommunications, online and other
technologies (developed decades after 1925), (636) dealing with new commercial
businesses and industries (again, developed decades after the FAA was enacted). (637)
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 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.” (638) 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.
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 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 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 action 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; (639) 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). (640) Because the California rule automatically applied only to this
fairly narrow subset of contractual provisions, it was not, as demanded by §2, an
unconscionability rule generally-applicable to all contracts. It was, instead, a specially-
tailored rule applicable only to class action waivers. As such, the Discover Bank rule was
not rescued by §2’s savings clause and is instead preempted by the requirement of §§2
and 4 that arbitration agreements be enforced in accordance with their terms.
Contrary to Justice Breyer’s dissent, the fact that the Discover Bank rule applied to both
forum selection clauses and arbitration agreements does not bring it within §2’s savings
clause. That conclusion is clear from a few examples.
A state law that invalidated all agreements to resolve disputes in either out-of-state
courts or out-of-state arbitrations would be preempted by §2 no less than §2 would
preempt a law that invalidated only agreements to arbitrate in an out-of-state location.
Similarly, a state law that required all forum selection and arbitration clauses to be
signed separately, or to be reaffirmed by both parties after a dispute arose, would
violate §2 no less than a law that imposed these 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. (641)
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,
38
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. (642)
[c] American Express Co. v. Italian Colors Restaurant and DIRECTV, Inc. v. Imburgia
Following Concepcion, claimants sought other ways to circumvent class waivers in
arbitration agreements. In American Express Co. v. Italian Colors Restaurant, (643) a group
of restaurant owners alleged that their antitrust claims against American Express were
too small to bring individually given the cost of obtaining the necessary expert
testimony, alleging that an individual claimant would be required to spend several
hundred thousand dollars to pursue a claim worth less than forty thousand dollars. (644)
Given that it was not cost-effective to bring these claims in individual arbitrations, the
restaurant owners argued that the arbitration agreement was invalid because its class
action waiver prevented the “effective vindication” of a federal statutory regime and the
associated statutory right. (645)
In Italian Colors, the Supreme Court held that the asserted “effective vindication”
exception did not apply because “the fact that it is not worth the expense involved in
proving a statutory right remedy does not constitute the elimination of the right to pursue
that remedy.” (646) The Court reasoned that Concepcion dictated this result:
“Truth to tell, our decision in [Concepcion] all but resolves this case. There we
invalidated a law conditioning enforcement of arbitration on the availability
of class procedure because that law ‘interfere[d] with fundamental attributes
of arbitration.’ ‘[T]he switch from bilateral to class arbitration,’ we said,
‘sacrifices the principal advantage of arbitration—its informality—and makes
the process slower, more costly, and more likely to generate procedural
morass than final judgment.’ We specifically rejected the argument that class
arbitration was necessary to prosecute claims ‘that might otherwise slip
through the legal system.’” (647)
Thus, the Court’s decision in Italian Colors further narrowed the grounds on which the
validity or enforceability of a class action waiver or prohibition in arbitration agreements
could be challenged: only in unusual cases involving prohibitively expensive filing fees or
similar financial burdens, likely in cases involving federal statutory claims, can class
action waivers be challenged. (648)
In DIRECTV Inc. v. Imburgia, (649) the Supreme Court foreclosed a different argument
aimed at circumventing a class action waiver. That case began as a putative class action
in state court claiming that DIRECTV’s early-termination fees violated California’s
consumer protection laws. DIRECTV’s arbitration agreement with the plaintiffs included a
class action waiver, and then provided that “if the ‘law of your state’ makes the waiver of
class arbitration unenforceable, then the entire [arbitration] provision ‘is
unenforceable.’” (650) At the time of the agreement, California’s Discover Bank rule
prohibited class action waivers. By the time DIRECTV sought to compel individual
arbitration, however, the Court’s decision in Concepcion had preempted the Discover
Bank rule. Nevertheless, the state trial court denied DIRECTV’s request for arbitration,
holding that the class action waiver was invalid and, as a result, the entire arbitration
clause was (in accordance with its terms) unenforceable. On appeal, the California Court
of Appeal affirmed.
On appeal, the court interpreted the phrase “law of your state” to mean the law in
California as it would have been, had the Discover Bank rule not been preempted, thus
invalidating the class action waiver. The California Court of Appeal went on to hold the
entire arbitration agreement unenforceable, relying on its text. (651)
The U.S. Supreme Court reversed. The Court first questioned whether the phrase “law of
your state” referred to law that was no longer valid, but accepted the California Court of
Appeal’s finding since “California courts are the ultimate authority on [California] law.”
(652) The U.S. Supreme Court then analyzed whether the California court’s interpretation
of the arbitration agreement was preempted by the FAA. The Court concluded that it was
because the interpretation disfavored arbitration agreements as compared to other
types of contracts. Among other things, the Court found that “nothing in the Court of
Appeal’s reasoning suggests that a California court would reach the same interpretation
of ‘law of your state’ in any context other than arbitration.” (653) Accordingly, the Court
held that this interpretation was preempted by the FAA because it did not “place
arbitration contracts ‘on equal footing with all other contracts.’” (654)
[d] Oxford Health Plans LLC v. Sutter and Lamps Plus Inc. v. Varela
Finally, in Oxford Health Plans LLC v. Sutter and Lamps Plus Inc. v. Varela, the U.S.
Supreme Court considered whether an arbitration agreement could provide for class
arbitration if it is ambiguous. That question was closely related to the issues addressed
in the Court’s prior decisions in Green Tree Financial Corp. v. Bazzle and Stolt-Nielsen SA v.
AnimalFeeds, both of which considered whether and when parties had consented to class
arbitration. In Oxford Health, the arbitration agreement provided that “no civil action
39
concerning any dispute arising under this Agreement shall be instituted before any court,
and all such disputes shall be submitted to final and binding arbitration.” (655) The
parties agreed that the arbitrator should decide whether their arbitration agreement
permitted class arbitration, and he determined that it did, reasoning that that the
“intent of the clause” was “to vest in the arbitration process everything that is prohibited
from the court process.” (656) Among other things, the arbitrator found that a “class
action” was one of the civil actions that “could be brought in a court absent the
agreement” and therefore could be brought in arbitration. (657)
The Supreme Court held that, in challenging the arbitrator’s ruling, 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. (658) The Supreme Court
emphasized the unusual circumstances of its decision in Stolt-Nielsen, effectively
confining the decision to its facts:
“In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did
not identify any agreement authorizing class proceedi ngs. 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.’” (659)
Underscoring this point, the Court in Oxford Health refused to vacate the 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 arbi
trator 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.” (660)
Thus, 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.” (661)
More recently, in Lamps Plus Inc. v. Varela, the arbitration agreement provided that
“arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings
relating to my employment.” (662) As a textual matter, this agreement could be
interpreted in the same manner that the arbitrator had interpreted the agreement in
Oxford Health, namely, that “any and all lawsuits” that could be brought in court absent
the agreement could be brought in arbitration, including a class action. On appeal, the
Ninth Circuit considered whether this was the correct interpretation of the arbitration
agreement, concluding that the agreement was ambiguous and that it could be
interpreted as permitting class arbitration. The Court of Appeals then held that in the
case of an ambiguous contract, the general contra proferentem rule applied, and that the
ambiguity should be interpreted against the drafter, Lamps Plus, to permit class
arbitration. (663)
The Supreme Court granted review (making Lamps Plus the eighth class arbitration case
that the Court considered in the space of barely a decade). Because the arbitral tribunal
had not made any jurisdictional ruling, Lamps Plus did not concern a claim of excess of
authority under §10(a)(4) of the FAA. Instead, the question was “whether, consistent with
the FAA, an ambiguous agreement can provide the necessary ‘contractual basis’ for
compelling class arbitration.” (664) The Supreme Court held that it could not:
“Class arbitration is not only markedly different from the ‘traditional
individualized arbitration’ contemplated by the FAA, it also undermines the
most important benefits of that familiar form of arbitration. The statute
therefore requires more than ambiguity to ensure that the parties actually
agreed to arbitrate on a classwide basis.” (665)
The Court reasoned that the contra proferentem rule could not be applied to resolve the
ambiguity. Because that rule does not seek to interpret the intent of the parties, its use
was “flatly inconsistent with ‘the foundational FAA principle that arbitration is a matter of
consent.’” (666) Therefore, even though the contra proferentem rule is of general
application, it is preempted by the FAA when applied to permit class arbitration without
40
the parties’ consent, as this “interferes with fundamental attributes of arbitration.” (667)
Two factors explain the differences in result in Oxford Health and Lamp Plus. First, the
arbitrator in Oxford Health did not find that the arbitration agreement at issue was
ambiguous while the Court of Appeals in Lamps Plus did. Second, and more importantly,
the Court accorded greater deference to the interpretation of an arbitration agreement
of an arbitrator than that of a lower court. The different results in Oxford Health and
Lamps Plus thus highlight the importance of who decides whether an arbitration
agreement permits class arbitration.
Nonetheless, in Oxford Health, the Court again suggested pointedly that its earlier
(plurality) decision in Bazzle – holding 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.” (668) Lower courts have reached divergent
conclusions on the question whether an arbitration agreement authorizes class
arbitration is for interlocutory judicial determination (as Justices Alito and Kagan
suggested in Stolt-Nielsen and Oxford Health) or initial arbitral determination (as the
plurality opinion in Bazzle held). Nonetheless, recent cases have generally adopted the
former position. (669) It appears likely, given the Supreme Court’s enduring interest in
the issue, that it will revisit the question.
Despite the Supreme Court’s attention, the future of class arbitration in the United States
remains unsettled. It appears likely, however, that the Supreme Court will reverse its
prior (plurality) decision in Bazzle, and instead hold, as intimated by the Court in both
Stolt-Nielsen and Oxford Health, that the question whether an arbitration agreement
authorizes class arbitration is a jurisdictional (or gateway) issue, for resolution by courts,
rather than arbitrators. Additionally, as decided in Lamps Plus, the Court will require a
clear affirmative basis for concluding that an arbitration agreement authorizes class
arbitration (while also upholding waivers of class action arbitration, as the Court did in
Concepcion, Italian Colors and DIRECTV). If these predictions are correct, class
arbitrations will become a relatively unusual creature in the United States, theoretically
possible where parties have clearly consented, but rare as a practical matter.
[B] Other Jurisdictions

In principle, class arbitrations should be possible in jurisdictions outside the United
States. (670) Nonetheless, with the exception of Canada, there are few reported judicial
decisions or arbitral awards addressing the question. (671) Some Canadian courts have
invalidated contractual provisions including waivers of class action rights and requiring
individual arbitration of consumer claims. (672) In one court’s words:
“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.” (673)
Other Canadian courts, however, have upheld waivers of class action in contexts where
such result was not prohibited by legislation. (674) Because Canadian claimants have
thus far been permitted to proceed in court class actions or have been referred to
individual arbitrations (not class arbitrations), there is no reported experience with class
arbitration in Canada. (675)
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. (676)
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. (677) In
many jurisdictions, class action claims cannot presently be pursued in national courts,
including with regard to such claims. Properly administered, permitting arbitration of
such class claims could enhance, not detract from, the rights of consumers, employees
and others in international disputes. (678)
References
1) For commentary, see Abolafia, Implied Choice of Law Applicable to the Arbitration
Agreement: The Effect on Non-Signatories in International Arbitration, 37 ASA Bull. 64
(2019); J.-M. Ahrens, Die Subjektive Reichweite Internationaler Schiedsvereinbarungen
41
und Ihre Erstreckung in der Unternehmensgruppe (2001); Alford, Binding Sovereign
Non-Signatories, 19(3) Mealey’s Int’l Arb. Rep. 27 (2004); A. Badia & J. Lew, Piercing
the Veil of State Enterprises in International Arbitration (2014); Bagot & Henderson,
Not Party, Not Bound? Not Necessarily: Binding Third Parties to Maritime Arbitration,
26 Tul. Mar. L.J. 413 (2002); Bharucha, Jaisingh & Gupta, The Extension of Arbitration
Agreements to Non-Signatories: A Global Perspective, 5(1) Indian J. Arb. L. 35 (2016);
Bravo Abolafia, Implied Choice of the Law Applicable to the Arbitration Agreement:
The Effect on Non-Signatories in International Arbitration, 37 ASA Bull. 64 (2019);
Brekoulakis, Rethinking Consent in International Commercial Arbitration: A General
Theory for Non-Signatories, 8 J. Int’l Disp. Sett. 610 (2017); Brekoulakis, Parties in
International Arbitration: Consent v. Commercial Reality, in S. Brekoulakis et al.
(eds.), The Evolution and Future of International Arbitration 119 (2016); 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 (2009); S. Brekoulakis, Third
Parties in International Commercial Arbitration (2010); Busse, Privity to An Arbitration
Agreement, 2005 Int’l Arb. L. Rev. 95; Byrnes & Pollman, Arbitration, Consent and
Contractual Theory: The Implications of EEOC v. Waffle House, 8 Harv. Neg. L. Rev. 289
(2003); Caivano, Arbitraje y Grupos Sociedades: Extensión de los Efectos de un Acuerdo
Arbitral a Quien no ha Sido Signatario, 1 Lima Arb. Rev. 121 (2006); Courtney, Binding
Non-Signatories to International Arbitration Agreements: Raising Fundamental
Concerns in the United States and Abroad, 8 Rich. J. Global L. & Bus. 581 (2009);
Darwazeh & Zeman, Joint Nominations in Multiparty Arbitration: The Exercise of the
ICC Court’s Discretionary Power to Appoint the Entire Arbitral Tribunal Post-Dutco,
23(1) ICC Bull. 29 (2013); de Boisséson & Duprey, L’Arbitrabilité Subjective en Matière
de Droit des Sociétés, 2004 Paris J. Int’l Arb. 121; Delvolvé, Final Report on Multi-Party
Arbitrations of the ICC Commission on International Arbitration, 6(1) ICC Ct. Bull. 26
(1995); Delvolvé, Multipartism: The Dutco Decision of the French Cour de Cassation, 9
Arb. Int’l 197 (1993); Derains, L’Extension de la Clause d’Arbitrage aux Non-Signataires:
La Doctrine des Groupes de Sociétés 241 (1994); Dileo, The Enforceability of Arbitration
Agreements by and Against Nonsignatories, 2 J. Am. Arb. 31 (2003); Dunin-Wasowicz,
Collective Redress in International Arbitration: An American Idea, A European
Concept?, 22 Am. Rev. Int’l Arb. 285 (2011); Gaffney, The Group of Companies Doctrine
and the Law Applicable to the Arbitration, 19(6) Mealey’s Int’l Arb. Rep. 47 (2004);
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); Gordillo, Dealing with Non-Existing Claimants:
Challenges and Solutions, in C. Gonzalez-Bueno (ed.), 40 Under 40 International
Arbitration 199 (2018); Habegger, Arbitration and Groups of Companies, 3 Euro. Bus.
Org. L. Rev. 516 (2002); Habegger, Note – Federal Tribunal (1st Civil Court), 16 October
2003 (4P.115/2003): Extension of Arbitration Agreements to Non-Signatories and
Requirements of Form, 22 ASA Bull. 398 (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); B. Hanotiau, Complex Arbitrations
¶¶1-213 (2005); Hanotiau, Consent to Arbitration: Do We Share A Common Vision?, 27
Arb. Int’l 4 (2011); Hanotiau, Multiple Parties and Multiple Contracts in International
Arbitration, in PCA, Multiple Party Actions in International Arbitration 35 (2009);
Hanotiau, Non-Signatories, Groups of Companies and Groups of Contracts in Selected
Asian Countries: A Case Law Analysis, 32(6) J. Int’l Arb. 571 (2015); Hanotiau, Non-
Signatories in International Arbitration: Lessons from Thirty Years of Case Law, in A.
van den Berg (ed.), International Arbitration 2006: Back to Basics? 341 (2006);
Hanotiau, Problems Raised by Complex Arbitrations Involving Multiple Contracts-
Parties-Issues: An Analysis, 18 J. Int’l Arb. 253 (2001); Hosking, Non-Signatories and
International Arbitration in the United States: The Quest for Consent, 20 Arb. Int’l 289
(2004); Hosking, The Third Party Non-Signatory’s Ability to Compel International
Commercial Arbitration: Doing Justice Without Destroying Consent, 4 Pepp. Disp.
Resol. L.J. 469 (2004); ICC, Complex Arbitrations: Perspectives on Their Procedural
Implications (2003); ICC, Guide on Multiparty Arbitration (1982); ICC, Multi-Party
Arbitration: Views from International Arbitration Specialists (1991); 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);
Jarvin, The Group of Companies Doctrine, in M. Blessing (ed.), The Arbitration
Agreement: Its Multifold Critical Aspects 181 (1994); Koch, Judicial Activism and the
Limits of Institutional Arbitration in Multiparty Disputes, 28 ASA Bull. 380 (2010);
Lamm & Aqua, Defining the Party: Who Is A Proper Party in An International
Arbitration Before the American Arbitration Association?, 34 Geo. Wash. Int’l L. Rev. 711
(2002); Landbrecht & Wehowsky, Determining the Law Applicable to the Personal
Scope of Arbitration Agreements and Its “Extension”, 35 ASA Bull. 837 (2017); Leadley &
Williams, Peterson Farms: There Is No Group of Companies Doctrine in English Law,
2004 Int’l Arb. L. Rev. 111; Leboulanger, Multi-Contract Arbitration, 13(4) J. Int’l Arb. 43
(1996); Lévy & Stucki, Switzerland: The Extension of the Scope of An Arbitration Clause
to Non-Signatories, 2005 Int’l Arb. L. Rev. N-5; Lin, Parties to Arbitration, in Y. Lin
(ed.), Judicial Review of Arbitration: Law and Practice in China 121 (2018); Mourre,
L’Impact de la Réforme de la Clause Compromissoire sur les Litiges Relatifs aux
Sociétés, 2004 Paris J. Int’l Arb. 125; Mráz, Extension of An Arbitration Agreement to
42
Non-Signatories: Some Reflections on Swiss Judicial Practice, 3 Annals FBL Belgrade L.
Rev. 54 (2009); Nicklisch, Multi-Party Arbitration and Dispute Resolution in Major
Industrial Projects, 11(4) J. Int’l Arb. 57 (1994); Orellana-Ubidia, El Área Gris Entre la
Relatividad de los Contratos y la Inclusión de Terceros No Signatarios en el Arbitraje,
1(2) Universidad San Francisco de Quito L. Rev. 26 (2014); Park, Non-Signatories and
International Arbitration: An Arbitrator’s Dilemma, in PCA, Multiple Party Actions in
International Arbitration 3 (2009); Pavić, “Non-Signatories” and the Long-Arm of
Arbitral Jurisdiction, in P. Hay, L. Vekas & N. Dimitrijevic (eds.), Resolving
International Conflicts 213 (2009); PCA, Multiple Party Actions in International
Arbitration (2009); Pengelley, Pyramids and Pilgrimages: An Arbitration Agreement
with A State-Created Entity Is Not An Arbitration Agreement with A State, 13
Vindobona J. Int’l Comm. L. & Arb. 293 (2009); Pimm, Jurisdiction over Non-Signatories
to the Arbitration Agreement: Can Arbitrators Pierce the Corporate Veil?, 2003 Asian
Disp. Rev. 5; Pinsolle, A French View on the Application of the Arbitration Agreement to
Non-Signatories, in S. Brekoulakis et al. (eds.), The Evolution and Future of
International Arbitration 209 (2016); 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); Poudret, Arbitrage Multipartite et Droit Suisse, 9 ASA Bull. 8
(1991); Poudret, L’Extension de la Clause d’Arbitrage: Approches Française et Suisse,
122 J.D.I. (Clunet) 893 (1995); Poudret, Note – Tribunal Fédéral, 1re Cour Civile, 16
Octobre 2003, (4P.115/2003); Un Statut Privilégié pour l’Extension de l’Arbitrage aux
Tiers?, 22 ASA Bull. 390 (2004); Rau, “Consent” to Arbitral Jurisdiction: Disputes with
Non-Signatories, in PCA, Multiple Party Actions in International Arbitration 69 (2009);
Romero & Saffer, The Extension of the Arbitral Agreement to Non-Signatories in
Europe: A Uniform Approach, 5 Am. U. Bus. L. Rev. 371 (2015); Sandrock, Arbitration
Agreements and Groups of Companies, 27 Int’l Law. 941 (1993); Sandrock, Die
Aufweichung Einer Formvorschrift und Anderes Mehr: Das Schweizer Bundesgericht
Erlässt ein Befremdliches Urteil, 2005 SchiedsVZ 1; Sandrock, Extending the Scope of
Arbitration Agreements to Non-Signatories, in M. Blessing (ed.), The Arbitration
Agreement: Its Multifold Critical Aspects 165 (1994); 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, Groups of Companies and Arbitration, 2
Tijdschrift voor Arbitrage 3 (2005); Savage & Leen, Family Ties: When Arbitration
Agreements Bind Non-Signatory Affiliate Companies, 2003 Asian Disp. Rev. 16;
Schwartz, Multiparty Arbitration and the ICC: In the Wake of Dutco, 10(3) J. Int’l Arb. 5
(1993); Sentner, Who Is Bound by Arbitration Agreements? Enforcement by and Against
Non-Signatories, 6 Bus. L. Int’l 55 (2005); Sesin-Tabare, Extension of the Arbitration
Agreement to Non-Signatories: Landscape of Legal Theories and Jurisdictional
Approaches, 2017 ICC Disp. Resol. Bull. 17; Shell, Arbitration and Corporate
Governance, 67 N.C. L. Rev. 517 (1989); Sheppard, Third Party Non-Signatories in
English Arbitration Law, in S. Brekoulakis et al. (eds.), The Evolution and Future of
International Arbitration 183 (2016); Silva-Romero & Velarde-Saffer, The Extension of
the Arbitral Agreement to Non-Signatories in Europe: A Uniform Approach?, 5 Am. U.
Bus. L. Rev. 317 (2016); 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); Smit, When Does
An Arbitration Clause Extend to A Guarantee That Does Not Contain It?, 2003:1
Stockholm Arb. Rep. 273; Spence, Crossing Troubled Waters: Joining Non-Signatories
in Maritime Arbitration: The Co-optation and Containment of Consent in United States
and British Law, 23 Roger Williams U. Rev. 54 (2018); Stauffer, L’Extension de la Portée
de la Clause Arbitrale à des Non-Signataires, in M. Blessing (ed.), The Arbitration
Agreement: Its Multifold Critical Aspects 229 (1994); Stipanowich, Arbitration and the
Multiparty Dispute: The Search for Workable Solutions, 72 Iowa L. Rev. 473 (1987);
Stoehr, A Question of Sovereignty, Development, and Natural Resources: A New
Standard for Binding Third Party Nonsignatory Governments to Arbitration, 66 Wash.
& Lee L. Rev. 1409 (2009); Thomas, Nonsignatories in Arbitration: A Good-Faith
Analysis, 14 Lewis & Clark L. Rev. 953 (2010); Townsend, Non-Signatories and
Arbitration, 3 ADR Currents 19 (1998); Uloth & Rial, Equitable Estoppel as A Basis for
Compelling Nonsignatories to Arbitrate: A Bridge Too Far?, 21 Rev. Litg. 493 (2002);
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); Voser, Multi-
Party Disputes and Joinder of Third Parties, in A. van den Berg (ed.), 50 Years of the
New York Convention 343 (2009); Voser, The Swiss Perspective on Parties in Arbitration:
“Traditional Approach with A Twist Regarding Abuse of Rights” or “Consent Theory
Plus”, in S. Brekoulakis et al. (eds.), The Evolution and Future of International
Arbitration 161 (2016); Voser & Groselj, Switzerland: Extension of Arbitration
Agreement to Non-Signatory Upheld Under New York Convention, Mondaq (28 June
2019); Wahab, Extension of Arbitration Agreements to Third Parties, in F. Ferrari & S.
Kröll (eds.), Conflict of Laws in International Arbitration 137 (2011); 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); Wetter, A Multiparty Arbitration
Scheme for International Joint Ventures, 3 Arb. Int’l 2 (1987); Whitesell & Silva-
Romero, Multiparty and Multicontract Arbitration: Recent ICC Experience, in ICC,
Complex Arbitrations: Perspectives on Their Procedural Implications 7 (2003); Wilske,
Shore & Ahrens, The “Group of Companies Doctrine”: Where Is It Heading?, 17 Am. Rev.
Int’l Arb. 73 (2006); Woolhouse, Group of Companies Doctrine and English Arbitration
43
Law, 20 Arb. Int’l 435 (2004); Yang, Who Is A Party? The Case of the Non-Signatory
(Assignment), 2005 Asian Disp. Rev. 43; Zuberbühler, Non-Signatories and the
2) Consensus to Arbitrate, 26 ASA
See §1.02; §2.02[C][1][b][i]; 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, Pakistan
[2010] UKSC 46, ¶105 (U.K. S.Ct.) (Lord Collins) (“One of the most controversial issues
in international commercial arbitration is the effect of arbitration agreements on
non-signatories”).
5) See, e.g., Dunlop Pneumatic Tyre Co. Ltd v. Selfridge & Co. Ltd [1915] AC 847 (House of
Lords); Judgment of 11 May 1993, 1997 Rev. Arb. 599 (French Cour de Cassation Com.);
2002 Principles of European Contract Law, Art. 2:101(1) (“A contract is concluded if:
(a) the parties intend to be legally bound”) (emphasis added); 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); UNIDROIT, Principles of International
Commercial Contracts Art. 1.3 (2016) (“A contract validly entered into is binding upon
the parties”) (emphasis added); Müller & Keilmann, Beteiligung am Schiedsverfahren
Wider Willen?, 2007 SchiedsVZ 113, 114.
6) See Judgment of 19 August 2008, DFT 4A_128/2008, ¶4.1.1 (Swiss Fed. Trib.) (“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 Fed. Trib.) (2004); Chloro
Controls India Pte Ltd v. Severn Trent Water Purification Inc., (2013) 1 SCC 641, ¶103
(Indian S.Ct.) (“Once it is determined that a valid arbitration agreement exists, it is
a different step to establish which parties are bound by it. Third parties, who are
not explicitly mentioned in an arbitration agreement made in writing, may enter
into its ratione personae scope.”). See also Habegger, Note – Federal Tribunal (1st
Civil Court), 16 October 2003 (4P.115/2003): 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, [2006] SGHC 78, ¶69
(Singapore High Ct.) (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 “the 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 id. at 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 designated to the Centre by
that 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).
44
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 (“The term ‘arbitration agreement’ means agreement between the parties to
settle, by arbitration, all or some disputes …”) (emphasis added); 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 see English Arbitration Act, 1996, §6
(omitting term “parties”); Scottish Arbitration Act, §4 (same).
13) See, e.g., EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (U.S. S.Ct. 2002) (“nothing in the
[FAA] authorizes a court to compel arbitration … by any parties … that are not
already covered in the agreement”); A.D. v. Credit One Bank NA, 885 F.3d 1054, 1060
(7th Cir. 2018) (“An arbitration agreement generally cannot bind a non-signatory”);
Waymo LLC v. Uber Techs., Inc., 870 F.3d 1342, 1345 (Fed. Cir. 2017) (“Contract law
principles hold that non-parties to a contract are generally not bound by the
contract. A contract to arbitrate is not an exception.”); 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. 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. Arb. 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, Pakistan [2010] UKSC 46, ¶24 (U.K.
S.Ct.) (“Arbitration is consensual – the manifestation of parties’ choice to submit
present or future issues between them to arbitration”).
14) United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (U.S.
S.Ct. 1960). See also Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233 (U.S. S.Ct.
2013) (“courts must ‘rigorously enforce’ arbitration agreements according to their
terms, including terms that ‘specify with whom [the parties] choose to arbitrate
their disputes’”) (emphasis in original); Granite Rock Co. v. Int’l Bhd of Teamsters, 561
U.S. 287, 298 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 Judgment 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 Internationale d’Investissement v. Inter-Arab Inv. Guar. Corp., Ad Hoc
Award of 17 November 1994, XXI Y.B. Comm. Arb. 13, 18 (1996). See Interim Award in ICC
Case No. 7337, XXIV 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 (2003).
45
21) See N. Blackaby et al. (eds.), Redfern and Hunter on International Arbitration ¶2.42
(6th ed. 2015) (“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 that an
arbitration agreement concluded in proper form between two or more parties might
also bind 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.”); Orellana-Ubidia, El Área Gris Entre la Relatividad de los Contratos y la
Inclusión de Terceros No Signatarios en el Arbitraje, 1(2) Universidad San Francisco
de Quito L. Rev. 26, 27 (2014) (“Consent is considered the cornerstone of
arbitration”); 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) 2013 UNCITRAL Rules, Art. 1(1) (emphasis added). Compare 1976 UNCITRAL Rules, Art.
1(1) (“Where the parties to a contract have agreed in writing that disputes in relation
to that contract shall be referred to arbitration …”).
23) 2017 ICC Rules, Art. 6(1) (“Where the parties have agreed to submit to arbitration
under the Rules”); 2016 SIAC Rules, Art. 1(1) (“SIAC Rules apply [w]here the parties
have agreed to refer their disputes to SIAC for arbitration or to arbitration in
accordance with the SIAC Rules …”); 2014 ICDR Rules, Art. 1(1) (ICDR Rules apply
“[w]here parties have agreed to arbitrate disputes under [these rules]”); 2020 LCIA
Rules, Preamble (“Where any agreement, submission or reference howsoever made
or evidenced in writing (whether signed or not) provides in whatsoever manner for
arbitration under the rules of or by the LCIA, … the parties thereto shall be taken to
have agreed in writing [to these Rules]”); 2018 HKIAC Rules, Art. 1(2); 2018 AIAC Rules,
Rule 1(1); 2015 BAC Rules, Art. 2(1); 2000 BCICAC Rules, Art. 1(2)(a); 2015 CIETAC Rules,
Art. 2(6); 2013 DIA Rules, Art. 2(1); 2016 DIFC-LCIA Rules, Preamble; 2016 JAMS Rules,
Art. 1(1); 2016 KCAB Rules, Art. 3(1); 2015 SHIAC Rules, Art. 3(1).
24) See, e.g., Final Award in ICC Case No. 10758, 128 J.D.I. (Clunet) 1171, 1176 (2001) (“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.
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) Sarhank Group v. Oracle Corp., 404 F.3d 657, 665 (2d Cir. 2005).
26) See §10.01[D].
27) See §10.01_[D]; §10.02[A]. 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]. See also Restatement of the U.S. Law of International
Commercial and Investor-State Arbitration §2.3 (2019) (non-signatories may be bound
by arbitration agreement).
46
28) Thomson-CSF, SA v. Am. Arb. Ass’n, 64 F.3d 773, 776 (2d Cir. 1995). See also A.D. v. Credit
One Bank NA, 885 F.3d 1054, 1059-60 (7th Cir. 2018) (“Arbitration agreements are
generally enforceable against non-signatories only in a handful of limited
circumstances. … These limited exceptions are: (1) assumption, (2) agency, (3)
estoppel, (4) veil piercing, and (5) incorporation by reference.”); Waymo LLC v. Uber
Techs., Inc., 870 F.3d 1342, 1345 (Fed. Cir. 2017) (“A nonsignatory may compel
arbitration where the ‘relevant state contract law allows him to enforce the
agreement’”) (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632 (U.S. S.Ct.
2009)); Hamilton Park Health Care Ctr Ltd v. SEIU United Healthcare Workers, 817 F.3d
857, 864 (3d Cir. 2016) (“Where a party has not executed an express agreement to
arbitrate, we must therefore discern whether any ‘traditional principles of contract
and agency law’ can make it nonetheless bound by an arbitration provision”)
(quoting E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates,
269 F.3d 187, 194 (3d Cir. 2001)); 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); Ecuador v. ChevronTexaco Corp., 376 F.Supp.2d 334, 356 (S.D.N.Y. 2005),
rev’d on other grounds, 638 F.3d 384 (2d Cir. 2011); W. Tankers Inc. v. Ras Riunione
Adriatica di Sicurta SpA [2005] EWHC 454, ¶33 (Comm) (English High Ct.) (subrogated
insurer compelled to arbitrate: “the 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 Fed. Trib.) (2004). See also
Judgment of 19 August 2008, DFT 4A_128/2008, ¶3.3 (Swiss Fed. Trib.) (“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: Perspectives on Their Procedural
Implications 7 (2003). See also GE Energy Power Conversion France SAS, Corp. v.
Outokumpu Stainless USA, LLC, 590 U.S. – (U.S. S.Ct. 2020) (“The courts of numerous
contracting states permit the enforcement of arbitration agreements by entities
who did not sign an agreement.”) (quoting G. Born, International Commercial
Arbitration 1418-84 (2d ed. 2014)).
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 id.
35) Peruvian Arbitration Law, Art. 14.
36) English Arbitration Act, 1996, §82(2) (“References in this Part to a party to an
arbitration agreement include any person claiming under or through a party to the
agreement”). See also Singapore International Arbitration Act, §6(5)(a) (“a reference
to a party shall include a reference to any person claiming through or under such
party”); Hong Kong Arbitration Ordinance, §73(1) (“Unless otherwise agreed by the
parties, an award made by an arbitral tribunal pursuant to an arbitration
agreement is final and binding both on – (a) the parties; and (b) any person claiming
through or under any of the parties”); Australian International Arbitration Act, §7(4)
(“a reference to a party includes a reference to a person claiming through or under a
party”); Indian Arbitration and Conciliation Act, §8 (“A judicial authority … shall, if a
party to the arbitration agreement or any person claiming through or under him, so
applies …, refer the parties to arbitration …”), §35 (“an arbitral award shall be final
and binding on the parties and persons claiming under them respectively”), §45 (“a
judicial authority, … shall, at the request of one of the parties or any person
claiming through or under him, refer the parties to arbitration”); Scottish Arbitration
Act, §11(1) (“A tribunal’s award is final and binding on the parties and any person
claiming through or under them (but does not of itself bind any third party)”). See
also Priskich, Binding Non-Signatories to Arbitration Agreements: Who Are Persons
“Claiming Through or Under” A Party?, 35 Arb. Int’l 375 (2019).
47
37) See, e.g., London Steamship Owners’ Mut. Ins. Ass’n Ltd v. Spain [2015] EWCA Civ 333,
¶¶68-70 (English Ct. App.) (non-signatory invoking statutory right of action against
insurer was claiming “under or through” party); City of London v. Sancheti [2008]
EWCA 1283, ¶¶28-34 (English Ct. App.) (“a mere legal or commercial connection is
not sufficient”), overruling Roussel-Uclaf v. G.D. Searle & Co. Ltd [1978] 1 Lloyd’s Rep.
225 (English High Ct.); Through Transp. Mut. Ins. Ass’n (Eurasia) Ltd v. New India Assur.
Co. Ltd [2005] EWHC 455, ¶¶24-28 (English High Ct.) (statutory transferee under
Finnish statute was in similar position to assignee claiming “under or through”
assignor party); Cassa di Risparmio di Parma e Piacenza SpA v. Rals Int’l Pte Ltd,
[2016] 1 SLR 79, ¶70 (Singapore High Ct.) (“Whatever the true scope of the statutory
phrase ‘through or under’ might be, the core of that phrase must lie in the law of
obligations”), aff’d, [2016] SGCA 53 (Singapore Ct. App.). See also D. Sutton, J. Gill & M.
Gearing, Russell on Arbitration ¶3-029 (24th ed. 2015) (discussing §82(2) of English
Arbitration Act, 1996 in context of substituted parties).
38) See, e.g., Cheran Props. Ltd v. Kasturi & Sons Ltd, Civ. App. No. 10025-26/2017, ¶20
(Indian S.Ct. 2018) (“The expression ‘persons claiming under them’ is a legislative
recognition of the doctrine that besides the parties, an arbitral award binds every
person whose capacity or position is derived from and is the same as a party to the
proceedings”); Chloro Controls India Pte Ltd v. Severn Trent Water Purification Inc.,
(2013) 1 SCC 641, ¶¶113, 167 (Indian S.Ct.) (phrase “claiming through or under” “is
incapable of being construed narrowly and must be given expanded meaning” and
“would mean and take within its ambit multiple and multi-party agreements,
though in exceptional case[s]”); Rinehart v. Hancock Prospecting Pty Ltd, [2019] HCA
13 (Australian High Ct.) (third party assignees were claiming “through or under”
assignor parties as their defence was reliant on whether assignors had committed
breach of trust which was to be decided in arbitration); Tanning Research Lab. Inc. v.
O’Brien, (1990) 169 CLR 332, ¶11 (Australian High Ct.) (“the prepositions ‘through’ and
‘under’ convey the notion of a derivative cause of action or ground of defence … an
essential element of the cause of action or defence must be or must have been
vested in or exercisable by the party before the person before the person claiming
through or under the party can rely on the cause of action or ground of defence,”
giving as examples liquidator or trustee in bankruptcy); Flint Ink NZ Ltd v.
Huhtamaki Australia Pty Ltd, [2014] VSCA 166, ¶¶15-29, 57-82, 135-150 (Victoria Ct.
App.) (staying proceedings brought by non-signatory in same corporate group as
party to arbitration agreement on basis its claim was “through or under” party).
39) See, e.g., GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA,
LLC, 590 U.S. – (U.S. S.Ct. 2020) (“arbitration agreements may be enforced by
nonsignatories through ‘assumption, piercing the corporate veil, alter ego,
incorporation by reference, third-party beneficiary theories, waiver and estoppel’”)
(quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (U.S. S.Ct. 2009) (quoting
21 R. Lord, Williston on Contracts §57.19, 183 (4th ed. 2001)); Arthur Andersen LLP, 556
U.S. at 631; A.D. v. Credit One Bank NA, 885 F.3d 1054, 1059-60 (7th Cir. 2018)
(“arbitration agreements generally are enforceable against non-signatories only in a
handful of limited circumstances. … These limited exceptions are: (1) assumption,
(2) agency, (3) estoppel, (4) veil-piercing, and (5) incorporation by reference.”);
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, Inc. v.
Smith Cogeneration Int’l, Inc., 198 F.3d 88 (2d Cir. 1999); Thomson-CSF, SA v. Am. Arb.
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, Pakistan [2010] UKSC 46, ¶106 (U.K. S.Ct.) (whether non-
signatory is bound “depend[s] on a combination of (a) the applicable law; (b) the
legal principle which that law uses to supply the answer (which may include agency,
alter ego, estoppel, third party beneficiary); and (c) the facts of the individual
case”).
48
40) See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (U.S. S.Ct. 2009) (FAA did
not “alter background principles of state contract law regarding the scope of
agreements (including the question of who is bound by them)”); Bridas SAPIC v.
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 Fed. Trib.) (1996) (citing principle of reliance
(“vertrauenbegründendes Verhalten”)); Int’l Research Corp. plc v. Lufthansa Sys. Asia
Pac. Pte Ltd, [2013] SGCA 55, ¶34 (Singapore Ct. App.) (“It is ultimately a matter of
contractual interpretation …”).
41) See §1.04[A][c][i]; §2.01_[A][1]; §4.04; §9.02[C].
42) See §10.02[E] (group of companies); §10.02[M] (corporate employees).
43) See §§5.02-5.04.
44) See §3.03[A].
45) 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 M. Blessing (ed.), The Arbitration Agreement: Its Multifold
Critical Aspects 165 (1994); Stauffer, L’Extension de la Portée de la Clause Arbitrale à
des Non-Signataires, in M. Blessing (ed.), The Arbitration Agreement: Its Multifold
Critical Aspects 229 (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).
46) Bridas SAPIC v. 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”).
47) 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 ¶¶1.05-06
(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 (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”).
48) Interim Award in ICC Case No. 9517, quoted in B. Hanotiau, Complex Arbitrations ¶203
(2005).
49) 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. 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_376/2008, ¶8.4 (Swiss Fed. Trib.) (“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: Perspectives on Their Procedural Implications 7, 8-9 (2003). See also GE
Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 590 U.S.
– (U.S. S.Ct. 2020) (Sotomayor, J., concurring).
50) See §1.02[B]. Some commentators have suggested that the concept of consent be
abandoned or modified in the context of non-signatories, and that the focus be on
whether a non-signatory claim is “inextricably implicated in a dispute submitted
for arbitration.” See Brekoulakis, Parties in International Arbitration: Consent v.
Commercial Reality, in S. Brekoulakis et al. (eds.), The Evolution and Future of
International Arbitration 119 (2016); Brekoulakis, Rethinking Consent in International
Commercial Arbitration: A General Theory for Non-Signatories, 8 J. Int’l Disp. Sett. 610
(2017). That proposal has elicited skepticism. See, e.g., Fellas, Comments on Parties
in International Arbitration: Consent v. Commercial Reality by Professor Stavros
Brekoulakis, in S. Brekoulakis et al. (eds.), The Evolution and Future of International
Arbitration 199 (2016).
49
51) Blessing, Extension of the Arbitration Clause to Non-Signatories, in M. Blessing (ed.),
The Arbitration Agreement: Its Multifold Critical Aspects 151, 162 (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”). See also Peruvian Arbitration Law, Art. 14
(“The arbitration agreement extends to those who consent to submit to arbitration,
in good faith, as determined 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 extends to
those who seek to attain any rights or benefits from the contract, according to its
terms.”).
52) See §§10.02[B], [D], [K] & [H]. Compare Restatement of the U.S. Law of International
Commercial and Investor-State Arbitration §2.3 comment a (2019) (“Despite the
multiplicity of theories for finding that a nonsignatory is bound or may invoke an
arbitration agreement, the primary purpose of each inquiry is to discern the intent
of the parties”). That observation is erroneous in cases of alter ego, estoppel,
apparent authority, and succession.
53) See §5.04[A][5]. Alternatively, parties may exchange orders, invoices, or other
communications. See §5.02[A][2][g][v].
54) 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
(Netherlands 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.”).
55) 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).
56) Blessing, Extension of the Arbitration Clause to Non-Signatories, in M. Blessing (ed.),
The Arbitration Agreement: Its Multifold Critical Aspects 151, 160 (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”).
57) 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”) (emphasis in original); 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”).
58) 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] the common acceptance of non-mutual defensive collateral estoppel”).
59) Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233 (U.S. S.Ct. 2013) (emphasis in
original). See also Yang v. Majestic Blue Fisheries, LLC, 876 F.3d 996, 1000 (9th Cir.
2017) (Article II(2) requires both contracts containing arbitration agreements and
arbitration agreements contained in exchange of letters to be signed).
50
LLC, 590 U.S. – (U.S. S.Ct. 2020) (apparently treating existence of arbitration
agreement under Article II(1) as distinct question from right of entity to enforce that
agreement under Article II(3): Articles II(1) and II(2) “address the recognition of
arbitration agreements, not who is bound by a recognized agreement”); Judgment of
16 October 2003, 22 ASA Bull. 364 (Swiss Fed. Trib.) (2004) (question whether non-
signatory is bound by arbitration agreement is issue of determining scope of
agreement); Judgment of 7 December 1994, V 2000 v. Project XJ220ITD, 1996 Rev. Arb.
245, 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”); Chloro Controls India Pte Ltd v. Severn Trent Water
Purification Inc., (2013) 1 SCC 641, ¶112 (Indian S.Ct.) (“Once it is determined that a
valid arbitration agreement exists, it is a different step to establish which parties
are bound by it”; “third parties, who are not explicitly mentioned in an arbitration
agreement made in writing, may enter into its ratione personae scope”). Compare
Egiazaryan v. OJSC OEK Fin. [2015] EWHC 3532, ¶¶17-21 (Comm) (English High Ct.)
(characterizing question as “whether there is jurisdiction over a non-signatory to the
arbitration agreement,” and not “who is or was party to the arbitration agreement”
to determine whether non-signatory could be joined to arbitration under Russian
law as law of incorporation of signatory).
61) 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”); Waymo LLC v.
Uber Techs., Inc., 870 F.3d 1342, 1345 (Fed. Cir. 2017) (“A nonsignatory may compel
arbitration where the ‘relevant state contract law allows him to enforce the
agreement’”) (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632 (U.S. S.Ct.
2009)); Hamilton Park Health Care Ctr Ltd v. SEIU United Healthcare Workers, 817 F.3d
857, 864 (3d Cir. 2016) (“Where a party has not executed an express agreement to
arbitrate, we must therefore discern whether any ‘traditional principles of contract
and agency law’ can make it nonetheless bound by an arbitration provision”)
(quoting E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates,
269 F.3d 187, 194 (3d Cir. 2001)); Aloe Vera of Am., Inc. v. Asianic Food (S) Pte Ltd,
[2006] SGHC 78, ¶¶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).
62) See §5.04_[A][4]; §5.04_[D]; §9.02.
63) See §7.03.
64) See §1.02[B][2].
65) See P. Blumberg et al., Blumberg on Corporate Groups §25.05 (2d ed. 2005 & Update
2017); G. Born & P. Rutledge, International Civil Litigation in United States Courts 168,
174 (6th ed. 2018).
66) See §§3.03 et seq..
67) Judgment of 19 August 2008, DFT 4A_128/2008 (Swiss Fed. Trib.); P. Blumberg et al.,
Blumberg on Corporate Groups §25.05 (2d ed. 2005 & Update 2017); Scherer,
Introduction to the Case Law Section, 26 ASA Bull. 721, 729 (2008) (“liability 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.”).
68) See §25.04_[A]; §26.05[C][1].
69) See Final 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 Fed. Trib.); Restatement (Third) of Agency §2.01 (2006); 2002
Principles of European Contract Law, Chp. 3 (“Authority of Agents”); UNIDROIT,
Principles of International Commercial Contracts Art. 2.2 (2016) (“Authority of
Agents”); J. Herbots (ed.), International Encyclopaedia of Laws: Contracts ¶223 (H.K.),
¶258 (N.Z.), ¶331 (Romania), ¶344 (Spain), ¶460 (Sweden), ¶425 (Austria), ¶472
(France), ¶609 (India) (1993 & Update 2019); P. Watts (ed.), Bowstead & Reynold on
Agency ¶1-013 (21st ed. 2017) (“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.”).
51
70) 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 ¶441 (Denmark),
¶438 (Belgium), ¶445 (Austria), ¶488 (France) (1993 & Update 2019). See also Trina
Solar US, Inc. v. Jasmin Solar Pty Ltd, 2020 WL 1592487 (2d Cir.) (“‘Unless the contract
explicitly excludes the principal as a party,’ a court may consider extrinsic
evidence to identify an unnamed principal to the contract, or to determine, more
specifically, whether a nonsignatory is bound by the contract as a principal”)
(quoting Restatement (Third) of Agency §6.01 (2006)).
71) 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); 2002 Principles of European Contract Law, Art. 3:202; UNIDROIT, Principles of
International Commercial Contracts Art. 2.2.3(1) (2016). 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”); Filatona Trading Ltd v. Navigator Equities Ltd [2020] EWCA Civ 109, ¶¶101,
126 (English Ct. App.) (“there is a heavy burden of persuasion on a party who seeks to
argue that a known and identified principal is to be excluded from a contract, and
that any such intention must appear clearly and unequivocally from the terms of
the parties’ contract”); 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. AVC Shipping,
2006 Rev. Arb. 143 (Paris Cour d’Appel).
72) See, e.g., Award in CRCICA Case No. 2/1994 of 25 July 1995, discussed in M. Alam-Eldin
(ed.), Arbitral Awards of the Cairo Regional Centre for International Commercial
Arbitration 141-44 (2000); Biloune v. Ghana Inv. Ctr, Ad Hoc Awards of 27 October 1989
& 30 June 1990, XIX Y.B. Comm. Arb. 11 (1994). See also Final 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?, 34 Geo. Wash. Int’l L. Rev. 711, 724 (2002).
73) See, e.g., Gross v. GGNSC Southaven LLC, 817 F.3d 169 (5th Cir. 2016); Andermann v.
Sprint Spectrum LP, 785 F.3d 1157 (7th Cir. 2015); Grand Wireless, Inc. v. Verizon
Wireless, Inc., 748 F.3d 1, 9-10 (1st Cir. 2014) (binding non-signatories to arbitration
agreement based on agency); 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. 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 AS v. Ministry of Supply, 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. 2); Judgment of 8 December 1999, 18 ASA Bull.
546 (Swiss Fed. Trib.) (2000); Judgment of 22 December 1992, 14 ASA Bull. 646, 649
(Swiss Fed. Trib.) (1996). See also Restatement of the U.S. Law of International
Commercial and Investor-State Arbitration §2.3 comment b (2019) (“When an agent
executes a contract containing an arbitration agreement, under the actual or
apparent authority of a principal, the agent’s assent generally binds the principal
to the arbitration agreement”).
74) Thomson-CSF, SA v. Am. Arb. Ass’n, 64 F.3d 773, 776 (2d Cir. 1995).
52
75) See, e.g., Hamilton Park Health Care Ctr Ltd v. SEIU United Healthcare Workers, 817
F.3d 857, 864 (3d Cir. 2016); Flintkote Co. v. Aviva plc, 769 F.3d 215, 220 (3d Cir. 2014);
DK Joint Venture 1 v. Weyand, 649 F.3d 310, 312, 314 (5th Cir. 2011); Bridas SAPIC v.
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”); Merrill Lynch Inv. Managers v. Optibase, Ltd, 337 F.3d 125, 130 (2d Cir. 2003)
(“Traditional principles of agency law may bind a non-signatory to an arbitration
agreement”); Bel-Ray Co., Inc. v. Chemrite (Pty) Ltd, 181 F.3d 435, 445 (3d Cir. 1999)
(“traditional principles of contract and 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 Fed. Trib.) (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
¶¶17.39-41 (1991 & Update March 2020) (“general agency principles”).
76) Bridas SAPIC v. 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 (Ireland), ¶261
(N.Z.), ¶460 (Sweden), ¶427 (Austria), ¶474 (France), ¶621 (India) (1993 & Update
2019).
77) Westland Helicopters Ltd v. Arab Org. for Indus., Interim Award in ICC Case No. 3879 of
5 March 1984, 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.
78) 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 Fed. Trib.); Judgment of 19 July 1988, XVI Y.B. Comm. Arb. 180, 181 (Swiss
Fed. Trib.) (1991).
79) Judgment of 19 July 1988, XVI Y.B. Comm. Arb. 180, 181 (Swiss Fed. Trib.) (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.
80) InterGen NV v. Grina, 344 F.3d 134, 148 (1st Cir. 2003). See also Ouadani v. TF Final Mile
LLC, 876 F.3d 31, 37 (1st Cir. 2017) (non-signatory plaintiff was not bringing claims as
agent of signatory); 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]”); Stern v. Charles Schwab & Co., 2009 U.S. Dist.
LEXIS 96697, at *9 (D. Ariz.) (“For a principal to be bound by an arbitration provision,
the agent must have acted on behalf of the principal”); Cohen v. TNP 2008
Participating Notes Program, LLC, 31 Cal.App.5th 840, 864 (Cal. Ct. App. 2019) (“The
requirements for imposing arbitration on a nonsignatory principal, as opposed to
allowing a nonsignatory agent to compel arbitration, however, must be ‘exacting’”)
(quoting InterGen NV v. Grina, 344 F.3d 134, 148 (1st Cir. 2003)).
81) 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 (6th ed.
2018); P. Watts (ed.), Bowstead & Reynolds on Agency ¶¶1-045, 3-028 (21st ed. 2017).
82) Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶65 (Comm) (English High
Ct.).
53
83) 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. Turkmenistan, 345 F.3d 347, 358-59 (5th Cir. 2003)
(“the alter ego doctrine is equitable in nature, agency principles are contractual”;
“Courts 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), superseded on other
grounds, Texas Business Corporation Act, 2005; House of Koscot Dev. Corp. v. Am. Line
Cosmetics, Inc., 468 F.2d 64 (5th Cir. 1972).
84) See §10.01_[D]; §10.02.
85) 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).
86) See, e.g., Lerner v. Amalgamated Clothing & Textile Workers Union, 938 F.2d 2 (2d Cir.
1991).
87) Arnold v. Arnold Corp., 920 F.2d 1269, 1282 (6th Cir. 1990).
88) See §10.02[M].
89) See id.
90) See §5.03[F][4].
91) See §10.05[B]. In many instances, such laws would conflict with the New York
Convention. See §10.05[C][3].
92) See §10.05.
93) 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 y
Hermano v. Mildred, Goyeneche & Co. [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 & Supp. 2019).
94) 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., Inc. v. Chemrite
(Pty) 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);
Ecuador v. ChevronTexaco Corp., 376 F.Supp.2d 334, 353-56 (S.D.N.Y. 2005), rev’d on
other grounds, 638 F.3d 384 (2d Cir. 2011); Hidrocarburos y Derivados, CA v. Lemos, 453
F.Supp. 160, 167 (S.D.N.Y. 1977).
95) 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 Gross v. GGNSC
Southaven LLC, 817 F.3d 169 (5th Cir. 2016) (“the ‘federal policy favoring arbitration
does not apply to the determination of whether there is a valid agreement to
arbitrate between the parties.’ … Instead, we ‘apply ordinary state-law principles
that govern the formation of contracts.’”) (quoting Am. Heritage Life Ins. Co. v. Lang,
321 F.3d 533, 537-38 (5th Cir. 2003); Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir.
1996)); 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) (“we 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).
96) 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”).
97) See, e.g., Interim Award in ICC Case No. 14617, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 2012-2015 119, 123 (2019) (“Whether or not
there is a valid agency with respect to the representative is not to be determined
by reference to the proper law of the contract between the two principals, but by
reference to the law that determines the relationship between the alleged
representative and the principal sought to be bound”).
54
98) 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); Pfeifer, 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).
99) 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 Judgment
of 18 February 2016, DFT 4A_84/2015, ¶3.3.1 (Swiss Fed. Trib.) (whether putative
principal is party to arbitration agreement in Swiss-seated arbitration is issue of
formal validity subject to Swiss private international law); 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 & Supp. 2019) (“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).
100) The same concern applies to application of the law governing the arbitration
agreement to determine whether a non-signatory principal is bound. See Final
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”).
101) See §4.04 (especially §4.04[B]); §§4.05-4.07).
102) See §1.02[B][2].
103) 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”); 2002 Principles of European Contract Law, Art. 3:201 (“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”); UNIDROIT, Principles of International Commercial Contracts Art. 2.2.5(2) (2016)
(“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”); H. Beale (ed.), Chitty on Contracts ¶31-056 (33d ed. 2018).
104) See, e.g., Judgment of 4 May 2017, 2018 Rev. Arb. 765, 767 (French Cour de Cassation
Civ. 1) (putative agent’s behavior can create appearance of acting on behalf of
principal who may be bound to arbitration agreement as a result); Judgment of 16
February 2017, DFT 4A_473/2016, ¶3.1.2 (Swiss Fed. Trib.) (principle of appearance
recognized under Swiss law to determine ratione personae effects of arbitration
agreement); Judgment of 7 October 1999, Russanglia v. 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 (France) (1993 & Update 1999) (doctrine of apparent agency under
French law, “mandat apparent”).
105) See, e.g., 2002 Principles of European Contract Law, Art. 3:201(3); UNIDROIT, Principles
of International Commercial Contracts Art. 2.2.5 (2016); J. Herbots (ed.), International
Encyclopaedia of Laws: Contracts ¶242 (France) (1993 & Update 1999) (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”); P. Watts (ed.), Bowstead &
Reynold on Agency ¶8-011 (21st ed. 2017) (“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”).
55
106) 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 in Zurich Chamber of Commerce Case No. 188/1991 of
11 February 1993, cited in Judgment of 1 September 1993, 14 ASA Bull. 623 (Swiss Fed.
Trib.) (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); Bookman v.
Britthaven, 233 N.C.App. 454, 458 (N.C. Ct. App. 2014) (“Apparent authority is that
authority which the principal has held the agent out as possessing or which he has
permitted the agent to represent that he possesses”); Munn v. Haymount Rehab. &
Nursing Ctr, 208 N.C.App. 632, 639, 704 (2010); 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 actual 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, Russanglia v. Delom,
2000 Rev. Arb. 288 (Paris Cour d’Appel).
107) 99 Commercial St., Inc. v. Goldberg, 811 F.Supp. 900, 906 (S.D.N.Y. 1993).
108) 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, SOERNI 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”).
109) 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.App’x 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”). See also 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”); P. Watts (ed.), Bowstead & Reynolds on Agency ¶8-028 (21st ed. 2017)
(in English law, doctrine based on “weak form” of estoppel).
110) Kett v. Shannon, [1987] ILRM 364, ¶8 (Irish S.Ct.).
111) See L. Collins et al. (eds.), Dicey, Morris and Collins on The Conflict of Laws ¶33R-432
(15th ed. 2012 & Supp. 2019).
112) 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 (1999); P. Schlosser, Das Recht der Internationalen Privaten Schiedsgerichtsbarkeit
¶352 (2d ed. 1989); B. von Hoffmann & K. Thorn, Internationales Privatrecht 302 (9th
ed. 2007).
113) See §10.05[C][2].
114) See §10.02[K].
56
115) See §5.04_[E][6]; 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”); Final Ad Hoc Award of 24 August 2010, 29 ASA
Bull. 890 (2011) (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”); Judgment of 15 January 2019,
Case No. 28/14.3TBOHP (Portuguese Supremo Tribunal de Justiça) (binding non-
signatories (affiliated with signatories) to arbitration agreement based on implied
consent); Judgment of 16 December 2014, No. 68/2014 (Madrid Tribunal Superior de
Justicia) (binding non-signatories to arbitration agreement based on implied
consent); 2002 Principles of European Contract Law, Art. 2:102 (“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”);
UNIDROIT, Principles of International Commercial Contracts Art. 2.1.1 comment 2
(2016); J. Herbots (ed.), International Encyclopaedia of Laws: Contracts ¶40 (Belgium),
¶46 (France), ¶109 (Austria), ¶154 (Denmark) (1993 & Update 2019). See also
Bharucha et al., The Extension of Arbitration Agreements to Non-Signatories: A Global
Perspective, 5(1) Indian J. Arb. L. 35, 62 (2016) (“general trend” is to uphold
“arbitration agreement [that] was concluded by the parties either expressly or
impliedly”).
116) See §10.01[D].
117) See §§5.02[A][2][d] & [g].
118) See, e.g., Peruvian Arbitration Law, Art. 14 (“the arbitration agreement extends to
those who consent to submit to arbitration, in good faith, as determined 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 extends to those who seek to attain any rights or
benefits from the contract, according to its terms”).
119) 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].
120) See, e.g., Partial Award in ICC Case No. 13774, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 2012-2015 287, 293-94 (2019) (doctrine of
assumption “arises when the subsequent conduct of the non-signatory indicates
that it is assuming the obligation to arbitrate”); Final Award 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”); Final Award in Ad
Hoc Case of 24 August 2011, 29 ASA Bull. 884, 890 (2011) (“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”).
See also Restatement of the U.S. Law of International Commercial and Investor-State
Arbitration §2.3 comment c (2019) (“[A] party may impliedly consent to an arbitration
agreement. … It may, for instance, perform obligations established by the
underlying contract, affirmatively invoke the arbitration agreement to commence
an arbitration, or fail to object to arbitral jurisdiction …”).
121) Final Award in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34, 35 (1991).
122) 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 see Judgment 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).
57
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, in S. Jarvin & Y. Derains (eds.),
Collection of ICC Arbitral Awards 1974-1985 242 (1990); Award in Geneva Chamber of
Commerce Case 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).
124) There are differences in the standards of proof and factors relevant to finding an
implied contract in different jurisdictions. Silva-Romero & Velarde-Saffer, The
Extension of the Arbitral Agreement to Non-Signatories in Europe: A Uniform
Approach?, 5 Am. U. Bus. L. Rev. 317 (2016).
125) 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); In re TFT-LCD (Flat Panel)
Antitrust Litg., 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); SEA2011 Inc. v. ICT Ltd [2018] EWHC 520 (Comm)
(English High Ct.) (parties impliedly agreed to be in contractual relationship on
same terms as previous contract); Judgment of 7 April 2014, DFT 4A_450/2013,
¶3.5.6.1 (Swiss Fed. Trib.) (“a third party involving itself in the performance of the
contract containing the arbitration agreement is deemed to have adhered to the
clause by conclusive acts if it is possible to infer from its involvement its willingness
to be bound by the arbitration clause”); Judgment of 6 October 2010, 2010 Rev. Arb.
813 (French Cour de Cassation Civ. 1); 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); Judgment of 26 August 2015, Case No.
0035404-55.2013.8.26.0100, 8 (São Paulo Tribunais Regionais Federais) (“the
plaintiffs’ consent [to arbitration] can be implied from the circumstances, that is,
the plaintiffs’ conduct in negotiations …”); Judgment of 27 May 2015, Violeta SA v.
Food Source SA, Case No. 868-13, 4 (Panamanian Corte Suprema de Justicia) (“It
appears that [non-signatory] had actively intervened in the negotiation and
execution of the lease agreement signed by [signatory] and [signatory]; therefore, it
is party to the disputes that arise from the contract that includes the arbitration
agreement”). See also Lamm & Aqua, Defining the Party: Who Is A Proper Party in An
International Arbitration Before the American Arbitration Association?, 34 Geo. Wash.
Int’l L. Rev. 711, 725 (2002) (“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”).
58
126) Judgment of 19 August 2008, DFT 4A_128/2008, ¶3.2 (Swiss Fed. Trib.). See also
Judgment of 17 April 2019, DFT 4A_646/2018 (Swiss Fed. Trib.) (non-signatory
performed distribution relationship for many years and impliedly expressed
intention to be party to agreement and arbitration agreement within); Judgment of
19 April 2011, DFT 4A_44/2011 (Swiss Fed. Trib.); Judgment of 5 December 2008, DFT
4A_376/2008, ¶8.6 (Swiss Fed. Trib.) (“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”); Judgment of 16 October 2003, 22 ASA Bull. 364
(Swiss Fed. Trib.) (2004); B. Berger & F. Kellerhals, International and Domestic
Arbitration in Switzerland ¶567 (3d ed. 2015); G. Kaufmann-Kohler & A. Rigozzi,
International Arbitration: Law and Practice in Switzerland ¶3.179 (2015); 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 185; 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 (2009).
127) 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).
128) 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); Judgment of 5 December 2008, DFT 4A_376/2008 (Swiss Fed. Trib.)
(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); Astel-Peiniger Joint Venture v. Argos Eng’g Heavy Indus.
Co., [1994] 3 HKC 328 (H.K. Ct. First Inst.) (“back-to-back” subcontract sufficient to
demonstrate parties’ intention to incorporate arbitration agreement contained in
original contract into subcontract); Chloro Controls India Pte Ltd v. Severn Trent
Water Purification Inc., (2013) 1 SCC 641, ¶¶68-69 (Indian S.Ct.) (“where the parties
execute different agreements but all with one primary object in mind, the Court
would normally hold the parties to the bargain of arbitration and not encourage its
avoidance”); 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”). See also Chinese
Supreme Court, Reply to the Request of the Higher People’s Court of Shanghai
Municipality for Instructions on the Case of the Revocation of the Arbitral Award No.
415 (2013) of the Shanghai International Economic and Trade Arbitration Commission
(Shanghai International Arbitration Center), [2015] Min Si Ta Zi No. 8 (newly-formed
non-signatory company designated as purchaser in sale and purchase agreement
bound by arbitration clause in agreement).
129) See §5.05.
130) See, e.g., Century Indem. Co. v. Certain Underwriters at Lloyd’s, London, 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); Habaş Sinai ve Tibbi Gazlar Istihsal
Endustri AS v. Sometal SAL [2010] EWHC 29 (Comm) (English High Ct.).
131) See §10.01[D].
132) See §5.04_[A][5]; §5.04[E][6].
133) See §5.04[E][6][g]; Thomson-CSF, SA v. Am. Arb. Ass’n, 64 F.3d 773, 776-77 (2d Cir. 1995)
(“In the absence of a signature, a party may be bound by an arbitration clause if its
subsequent conduct indicates that it is assuming the obligation to arbitrate”);
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”); Clarke
v. Upwork Global, Inc., 2017 WL 1957489 (S.D.N.Y.); 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) (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).
134) See §10.02[K].
59
135) See Final 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?, 34 Geo. Wash. Int’l L. Rev.
711, 727 (2002).
136) See §4.04.
137) 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].
138) 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”); Christopher Assocs. v. Koh Young Tech., Inc., 2011
U.S. Dist. LEXIS 164436, at *5 n.3 (C.D. Cal.) (applying “federal common law”);
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”); 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.).
139) See, e.g., Motorola Credit Corp. v. Uzan, 388 F.3d 39, 51-53 (2d Cir. 2004) (“applying the
parties’ choice of law is the only way to ensure uniform application of arbitration
clauses within the numerous countries that have signed the New York Convention”
and “is fully consistent with the purposes of the [FAA]”); Int’l Minerals & Res., SA v.
Pappas, 96 F.3d 586, 592 (2d Cir. 1996) (applying English law); Int’l Chartering Servs. v.
Eagle Bulk Shipping Inc., 138 F.Supp.3d 629, 638 (S.D.N.Y. 2015) (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 Sys. AG v. Samsung Elecs. 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”).
140) 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”); Ecuador v.
ChevronTexaco Corp., 376 F.Supp.2d 334, 355 (S.D.N.Y. 2005), rev’d on other grounds,
638 F.3d 384 (2d Cir. 2011) (“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][v]; §4.04[A][2][j][v](5).
141) For commentary, see P. Blumberg et al., Blumberg on Corporate Groups §§10-14 (2d
ed. 2005 & Update 2019); 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
(2010); 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.
Rev. 5; Otazu, The Law Applicable to Veil Piercing in International Arbitration, 5 McGill
J. Disp. Resol. 30 (2018-2019); 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. Rev.
16; Tan, Wang & Hofmann, Piercing the Corporate Veil: Historical, Theoretical and
Comparative Perspectives, 26 Berkeley Bus. L.J. 140 (2019); 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).
142) Adams v. Cape Indus. plc [1990] Ch 433, 532 (English Ct. App.).
143) See Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1297 (3d Cir. 1996) (parent company
cannot “by reason of their corporate relationship” invoke subsidiary’s arbitration
clause).
144) Sandrock, Groups of Companies and Arbitration, 2 Tijdschrift voor Arbitrage 3 (2005);
Gross, Zur Inanspruchnahme Dritter vor Schiedsgerichten in Fällen der
Durchgriffshaftung, 2006 SchiedsVZ 194. See also P. Schlosser, Das Recht der
Internationalen Privaten Schiedsgerichtsbarkeit ¶426 (2d ed. 1989).
145) Cohen, L’Engagement des Sociétés à l’Arbitrage, 2006 Rev. Arb. 35, 61.
146) 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.
60
147) Prest v. Petrodel Res. Ltd [2013] UKSC 34, ¶27 (U.K. S.Ct.) (“the principle that the court
may be justified in piercing the corporate veil if a company’s separate legal
personality is being abused for the purpose of some relevant wrongdoing is well
established in the authorities”). See also Cape Pac. Ltd v. Lubner Controlling Inv. Pty
Ltd, [1995] (4) SA 790 (AD) (S. African S.Ct.) (“circumstances 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.”) (quoting Shipping Corp. of India Ltd v. Evdomon Corp., [1994] (1) SA
550, 556 (A) (S. African S.Ct.)).
148) Case Concerning the Barcelona Traction, Light & Power Co., [1970] I.C.J. Rep. 3, 38-39
(I.C.J.).
149) Some courts (mistakenly) confuse of conflate alter ego and agency analysis. See,
e.g., CBF Industria de Gusa SA v. AMCI Holdings, Inc., 850 F.3d 58, 75 (2d Cir. 2017)
(applying contract and agency law to determine “whether a third party not named
in an arbitral award may have that award enforced against it under a theory of
alter-ego liability, or any other legal principle concerning the enforcement of
awards”); Round Rock Research LLC v. ASUSTEK Computer Inc., 967 F.Supp.2d 969 (D.
Del. 2013) (implying agency relationship under “alter ego theory”). The two doctrines
are separate and should be analyzed separately, although there may be
circumstances where the facts relevant to one doctrine are also (highly) relevant to
the other.
150) See 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) (“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”); Award in Ad Hoc Case 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’”) (quoting Taylor v. Standard Gas & Elec. Co., 306 U.S. 307, 322 (U.S.
S.Ct. 1939)); Bridas SAPIC v. 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)); Town of Brookline v. Gorsuch, 667 F.2d 215,
221 (1st Cir. 1981) (“The general rule adopted in the federal cases is that a corporate
entity may be disregarded in the interests of public convenience, fairness and
equity”).
151) Westland Helicopters Ltd v. Arab Org. for Indus., Interim Award in ICC Case No. 3879 of
5 March 1984, XI Y.B. Comm. Arb. 127, 131 (1986).
152) In re Cambridge Biotech Corp., 186 F.3d 1356, 1376 (Fed. Cir. 1999) (quoting Fletcher
Cyclopedia Corporations §41.20, at 598-601, 603 (1999)).
153) See, e.g., Prest v. Petrodel Res. Ltd [2013] UKSC 34, ¶35 (U.K. S.Ct.).
154) Id. (“there is a limited principle of English law which applies when a person is under
an existing legal obligation or liability or subject to an existing legal restriction
which he deliberately evades or whose enforcement he deliberately frustrates by
interposing a company under his control. The court may … pierce the corporate veil
for the purpose, and only for the purpose, of depriving the company or its controller
of the advantage that they would otherwise have obtained by the company’s
separate legal personality.”). See also VTB Capital plc v. Nutritek Int’l Corp. [2013]
UKSC 5 (U.K. S.Ct.) (refusing to pierce corporate veil); Adams v. Cape Indus. plc [1990]
Ch 433, 539 (English Ct. App.).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].
155) Prest v. Petrodel Res. Ltd [2013] UKSC 34 (U.K. S.Ct.); VTB Capital plc v. Nutritek Int’l
Corp. [2013] UKSC 5 (U.K. S.Ct.). See also Ben Hashem v. Ali Shayif [2008] EWHC 2380
(Fam) (English High Ct.).
156) Adams v. Cape Indus. plc [1990] Ch 433, 544 (English Ct. App.).
157) See, e.g., Judgment of 24 November 2006, DFT 4C.327/2005 (Swiss Fed. Trib.);
Judgment of 16 October 2003, 22 ASA Bull. 364 (Swiss Fed. Trib.) (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 Fed. Trib.) (1996); Judgment of 1 September 1993,
14 ASA Bull. 623 (Swiss Fed. Trib.) (1996).
61
158) 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.”). Compare Award in
Ad Hoc Case 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).
159) Poudret, L’Extension de la Clause d’Arbitrage: Approches Française et Suisse, 122 J.D.I.
(Clunet) 893, 913 (1995).
160) Sandrock, Groups of Companies and Arbitration, 2 Tijdschrift voor Arbitrage 3 (2005);
P. Schlosser, Das Recht der Internationalen Privaten Schiedsgerichtsbarkeit ¶426 (2d
ed. 1989).
161) 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 25
September 2003, 2004 NJW-RR 1504 (German Bundesgerichtshof); Judgment of 24 June
2003, 2002 NJW 302 (German Bundesgerichtshof); Judgment of 9 April 2008, 2008 DStR
1976 (Oberlandesgericht Naumburg); Gross, Zur Inanspruchnahme Dritter vor
Schiedsgerichten in Fällen der Durchgriffshaftung, 2006 SchiedsVZ 194, 195.
162) Müller & Keilmann, Beteiligung am Schiedsverfahren Wider Willen?, 2007 SchiedsVZ
113, 116-17.
163) See §§10.02[E] et seq.
164) See E. 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).
165) Judgment of 11 June 1991, Orri v. des Lubrifiants Elf Aquitaine, 1992 Rev. Arb. 73 (French
Cour de Cassation Civ. 1).
166) See, e.g., Delizia Ltd v. Nevsun Res. Ltd, [2017] FCA 187 (Canadian Fed. Ct. App.)
(control alone is insufficient to pierce corporate veil); Trans-Pac. Shipping Co. v. Atl.
& Orient Trust Co., [2005] FC 311 (Canadian Fed. Ct.) (permitting veil-piercing claims
to proceed); Abener Energia v. Sunopta, Case Nos. CV-09-374167 & CV-09-380451
(Ontario Super. Ct. 2009); Collavino Inc. v. Yemen (Tihama Dev. Auth.), [2007] ABQB 212
(Alberta Q.B.); Hi-Seas Marine Ltd v. Boelman, [2006] BCSC 488 (B.C. Sup. Ct.), aff’d,
[2007] BCCA 137 (B.C. Ct. App.).
167) See, e.g., Fyffes plc v. DCC plc, [2005] IEHC 477 (Dublin High Ct.), rev’d on other
grounds, [2007] IESC 36 (Irish S.Ct.); Jones v. Gunn, [1997] 2 ILRM 245 (Dublin High Ct.).
168) See, e.g., GMR Energy Ltd v. Doosan Power Sys. India Pvt Ltd, [2017] CS(COMM)
447/2017, ¶24.3 (Delhi High Ct.) (in some circumstances “this Court recognized that
though limited, corporate veil could be lifted”); Pan Liberty Nav. Co. Ltd v. World
Link (H.K.) Res. Ltd, [2005] BCCA 206 (B.C. Ct. App.) (binding non-signatory to
arbitration agreement based on alter ego relationship).
169) See, e.g., Judgment of 11 September 2008, 2007 Da 90982 (Korean S.Ct.) (“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 S.Ct.) (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 S.Ct.).
170) See, e.g., 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”); China Ocean Shipping Co. v. Mitrans
Shipping Co., [1995] 3 HKC 123, ¶17 (H.K. Ct. App.) (“Using a corporate structure to
evade legal obligations 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 Thai Lai v. Wong Chung Kai, [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”).
171) 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).
62
172) See, e.g., Hicks v. Bank of Am., NA, 218 F.App’x 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. 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?, 34 Geo. Wash. Int’l L. Rev. 711
(2002); A. Steingruber, Consent in International Arbitration 160 (2012) (“in the United
States the threshold for lifting the corporate veil has traditionally been, as a result
of the paramount policy in favour of arbitration, much less strict than that adopted
in European jurisdictions”).
173) Oriental Commercial & Shipping Co., Ltd v. Rosseel, NV, 609 F.Supp. 75, 78 (S.D.N.Y.
1985). See also Mass. Carpenters Cent. Collection Agency v. A.A. Bldg Erectors, Inc., 343
F.3d 18, 21-22 (1st Cir. 2003) (“the [alter ego] doctrine is a tool to be employed when
the corporate shield, if respected, would inequitably prevent a party from receiving
what is otherwise due and owing from the person or persons who have created the
shield”); C.F. Trust, Inc. v. First Flight Ltd P’ship, 111 F.Supp.2d 734, 742 (E.D. Va. 2000)
(considering “(1) whether the entities engaged in separate operations or were
interdependent; (2) whether the defendant used the multiplicity of entities as part
of a plan to defraud; and (3) whether not piercing the veil would lead to substantial
injustice or inequity”).
174) 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 S.S. 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”).
175) Anderson v. Abbott, 321 U.S. 349, 362 (U.S. S.Ct. 1944).
176) See, e.g., Bridas SAPIC v. Turkmenistan, 447 F.3d 411, 416 (5th Cir. 2006) (“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.App’x 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”); Patz v. Sureway
Supermarket, 2018 U.S. Dist. LEXIS 215988, at *20 (E.D. La.) (alter ego doctrine
reserved for exceptional cases); Cohen v. Schroeder, 248 F.Supp.3d 511, 518 (S.D.N.Y.
2017) (court will disregard corporate form only in exceptional case); Inter-Tel Tech.,
Inc. v. Linn Station Props., 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”).
177) See, e.g., U.S. 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. 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”).
63
178) See, e.g., Cent. Parking Sys. v. Tucker Parking Equities LLC, 2018 U.S. Dist. LEXIS
182862, at *8 (E.D. Mo.) (undercapitalization is not per se reason to pierce corporate
veil but is factor to consider); 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). But see Bridas
SAPIC v. Turkmenistan, 447 F.3d 411, 420 (5th Cir. 2006) (“Undercapitalization is often
critical in alter ego analysis. … The fact that a subsidiary maintains what amounts to
a ‘zero balance,’ and relies exclusively upon another entity to service its debts, is
strong evidence that the subsidiary lacks an independent identity.”); Lumpkin v.
Envirodyne Indus., Inc., 159 B.R. 814, 820 (N.D. Ill. 1993) (“Undercapitalization has
been a significant factor in many veil-piercing cases. It lends itself to analysis as
disrespect for the corporate form, as fraudulent intent and as resulting in
injustice.”).
179) See, e.g., U.S. v. Scophony Corp. of Am., 333 U.S. 795 (U.S. S.Ct. 1948); Bridas SAPIC v.
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); Material Supply Int’l, Inc. v. Sunmatch Indus. Co., 62 F.Supp.2d 13, 21
(D.C. Cir. 1999) (“In short, once unity of interest and ownership is shown, equity
counsels piercing the veil whenever adherence to the fiction of the separate
existence of the corporation would sanction a fraud or promote injustice”); LiquidX
Inc. v. Brooklawn Capital, LLC, 254 F.Supp.3d 609, 616 (S.D.N.Y. 2017) (“In this case
there is no actual conflict among the law of the states at issue, because each
employs substantially the same analysis to determine whether a corporation is the
alter ego of an owner or of another corporation. Each state requires a showing that
one corporation is wholly under the domination and control of another.”); Lakah v.
UBS AG, 996 F.Supp.2d 250, 260 (S.D.N.Y. 2014) (“a court may pierce the corporate
veil where ‘(1) the owner exercised complete domination over the corporation with
respect to the transaction at issue, and (2) such domination was used to commit a
fraud or wrong that injured the party seeking to pierce the veil’”) (quoting MAG
Portfolio Consult, GmbH v. Merlin Biomed Group LLC, 268 F.3d 58, 63 (2d Cir. 2001));
Oriental Commercial & Shipping Co., Ltd v. Rosseel, NV, 609 F.Supp. 75, 78 (S.D.N.Y.
1985) (“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”); 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”).
180) See, e.g., Anderson v. Abbott, 321 U.S. 349, 362 (U.S. S.Ct. 1944) (“there 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 & Update 2019).
181) 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”); Crystallex Int’l Corp. v. Venezuela, 932 F.3d 126, 140
(3d Cir. 2019); Corporación Mexicana De Mantenimiento Integral, S. de RL de CV v.
Pemex-Exploración y Producción, 832 F.3d 92, 103 (2d Cir. 2016); Alejandre v.
Telefonica Larga Distancia, de Puerto Rico, Inc., 183 F.3d 1277, 1284 (11th Cir. 1999);
Wye Oak Tech., Inc. v. Iraq, 2018 U.S. Dist. LEXIS 194225, at *56 (D.D.C.); DRC, Inc. v.
Honduras, 71 F.Supp.3d 201, 208 (D.D.C. 2014); Servaas Inc. v. 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”); Dighello v. Busconi, 673 F.Supp. 85, 89 (D. Conn. 1987)
(piercing corporate veil of “clearly intertwined” corporate entities).
64
182) See Bridas SAPIC v. 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”); InterGen NV v. Grina, 344
F.3d 134, 148-49 (1st Cir. 2003) (“there is no precise litmus test for determining when
the corporate form should be ignored. The overarching principle, however, is that
the corporate form may be disregarded only if considerations of fairness or public
necessity warrant such a step. … courts must apply such tests flexibly and with due
regard for the demands of the federal statute at issue.”); 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. Arb. Ass’n, 64 F.3d 773, 777-78 (2d Cir. 1995); Garcia v.
Vasilia, 2019 U.S. Dist. LEXIS 147243, at *30 (S.D. Tex.) (“Delaware courts consider
numerous factors in the alter ego analysis, and no single factor is determinative”);
Clipper Wonsild Tankers Holding, Biodiesel Ventures, LLC, 851 F.Supp.2d 504 (S.D.N.Y.
2012) (“Veil piercing determinations are fact specific and different with the
circumstances of each case; thus, the alter ego determination must be made in view
of the totality of the facts”); In re Adler, 467 B.R. 279, 286 (Bankr. E.D.N.Y. 2012)
(“courts must conduct a broad-based inquiry into the totality of the facts to
determine whether the party seeking to pierce the corporate veil has established
the domination prong of the test”); Ahcom, Ltd v. Smeding, 2011 WL 3443499, at *5
(N.D. Cal.) (“no litmus test to determine when the corporate veil will be pierced”).
183) 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). See, e.g., McKay
v. Longman, 211 A.3d 20, 61-62 (Conn. 2019) (applying same factors as Carte Blanche
(Singapore) Pte Ltd).For comparable lists from non-U.S. contexts, see Award in Ad Hoc
Case in Geneva of 1991, 10 ASA Bull. 202 (1992); Schlosser, Arbitration Clauses in
Maritime Contracts and Their Binding Effect on Groups of Companies, 11(4) J. Int’l Arb.
127, 129-32 (1994).When alter ego is sought between a state and another entity, some
decisions have taken additional criteria into account. See Bridas SAPIC v.
Turkmenistan, 447 F.3d 411, 418 (5th Cir. 2006) (listing additional “public law”
factors); §10.02[D].
184) 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.” Id.
185) See id. 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].
186) Bridas SAPIC, 447 F.3d at 420. 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”).
187) See §10.02[D].
188) Freeman v. Complex Computing Co., 119 F.3d 1044, 1053 (2d Cir. 1997) (emphasis
added) (quoting Morris v. N.Y. State Dep’t of Taxation & Fin., 82 N.Y.2d 135, 142 (N.Y.
1993)). See also LiquidX Inc. v. Brooklawn Capital, LLC, 254 F.Supp.3d 609, 619 (S.D.N.Y.
2017) (“‘Generally … piercing the corporate veil requires a showing that: (1) the
owners exercised complete domination of the corporation … (2) that such
domination was used to commit a fraud or wrong against the plaintiff which
resulted in plaintiff’s injury’”) (quoting Morris, 82 N.Y.2d at 141).
65
189) 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)).
190) See §10.02[D].
191) 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); Minn.
Power v. Armco, Inc., 937 F.2d 1363, 1364 (8th Cir. 1991).
192) See, e.g., Final Award in ICC Case No. 11160, 16(2) ICC Ct. Bull. 99 (2005) (“The active
participation of [the parent company] in the negotiation, preparation and
execution of the Contract, and in some respects 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 parent company]. …
[T]he evidence supports a conclusion that [the parent company] was and still is the
mind and soul, and partly the body, of the project contract. The beneficiary of the
project contract is in substance [the parent company]. [The subsidiary] is an
instrumentality functional to a specific and legitimate purpose. It is therefore
concluded that with respect to the present arbitration both [the parent company]
and [the subsidiary] are the proper Respondents.”); 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) (“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); Interim Award in Ad Hoc Case of
9 September 1983, XII Y.B. Comm. Arb. 63 (1987); Award in Ad Hoc Case 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”).
193) 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).
194) 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”).
66
195) 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, 479
(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).
196) Partial Award in ICC Case No. 14208/14236, 24(2) ICC Ct. Bull. 62, 69 (2013); Lemire v.
Ukraine, Award in ICSID Case No. ARB/06/18 of 28 March 2011; Int’l Triathlon Union v.
Pac. Sports Corp. Inc., Award in CAS Case No. 1996/O/161 of 4 August 1999, 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”); Award in
Ad Hoc Case in Geneva of 1991, 10 ASA Bull. 202 (1992) (undercapitalization of
subsidiary warrants piercing corporate veil).
197) Award in ICC Case No. 10758, 16(2) ICC Ct. Bull. 87, 18 (2005) (“Accordingly, where a
corporate structure is being used in bad faith as an instrument of deliberate
concealment or confusion, or to defeat a possible award against the named party to
an arbitration agreement, then the Arbitral Tribunal might be justified in lifting the
corporate veil”); Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 1996-2000 474, 479 (2003) (“illegitimate
conduct by the subsidiary at the instigation of the parent company towards the
person seeking to lift the corporate veil is another element that facilitates this
lifting”); Westland Helicopters Ltd v. Arab Org. for Indus., Interim Award in ICC Case
No. 3879 of 5 March 1984, 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”); Award in
Ad Hoc Case of 1991, 10 ASA Bull. 202 (1992).
198) See, e.g., Bridas SAPIC v. 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”); 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”); Award in
Ad Hoc Case 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).
199) 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) 1206, 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”).
200) 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
¶8-65 (15th ed. 2020).
201) See authorities cited §10.02[D].
202) See §10.02[D].
203) Müller & Keilmann, Beteiligung am Schiedsverfahren Wider Willen?, 2007 SchiedsVZ
113, 116-17. See §10.02[D].
204) See §5.04[D][1].
205) See §5.04[D][2].
206) See also §10.01_[F]; §10.02_[A]; §10.02[C].
207) That is the case in virtually all of the authorities cited in this section.
67
208) 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 Comm., Inc., 756
F.Supp. 126, 131 (S.D.N.Y. 1991)); Restatement of the U.S. Law of International
Commercial and Investor-State Arbitration §2.3 comment d (2019) (“Forum choice-of-
law rules generally point courts to the law of the place where the company is
incorporated in order to identify corporate law theories that determine whether
non-signatories are bound by or may invoke an arbitration agreement”). See also
Restatement (Second) Conflict of Laws §307 (1971) (“The local law of the state of
incorporation will be applied to determine the existence and extent of a
shareholder’s liability to the corporation for assessments or contributions and to its
creditors for corporate debts”).
209) See, e.g., Smith/Enron Cogeneration LP, Inc. v. Smith Cogeneration Int’l, Inc., 198 F.3d
88, 96 (2d. Cir. 1999) (applying federal common law as law governing arbitration
agreement, rather than law of seat (New York) or law governing contract (Texas)).
210) See, e.g., FR8 Singapore Pte Ltd v. Albacore Maritime Inc., 754 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) (“third 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.”); Award in ICC
Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection of ICC
Arbitral Awards 1996-2000 474, 484-85 (2003), Note, Derains (“the lex societatis has no
role to play. It is a question of assessing the scope of an arbitration clause and not
about deciding on the operational functions of a legal entity whose very existence is
questionable vis-à-vis a contracting party. The law of the place of arbitration must
also be rejected, as the arbitral tribunal has no lex fori. That leaves the law
applicable to the arbitration clause. But … the choice that the signatories could
have made in this respect cannot be held against a party that has not signed the
arbitration clause and against whom it is sought to be extended, at least as long as
the question of extension has not been decided.”); 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]. Compare Otazu, The Law Applicable to
Veil Piercing in International Arbitration, 5 McGill J. Disp. Resol. 30, 59 (2018-2019)
(concluding law of place of incorporation of signatory is best rule, with transnational
standards only applicable in rare cases where veil-piercing not permitted by law of
place of incorporation).
212) See, e.g., Partial Award in ICC Case No. 14208/14236, 24(2) ICC Ct. Bull. 62, 65 (2013)
(recognizing “the general principle that transnational norms should be applied to
determine the issue of extension of the arbitration clause to a non-signatory, even
when piercing the corporate veil is at issue”); 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, Czechia 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”).
68
213) 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, 478
(2003) (tribunal applied lex mercatoria as “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”); Dow Chem. France v. ISOVER St. Gobain,
Interim Award in ICC Case No. 4131 of 23 September 1982, 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 M. Blessing (ed.), The
Arbitration Agreement: Its Multifold Critical Aspects 181, 196 (1994) (“the 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”).
214) 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].
215) First Nat’l City Bank, 462 U.S. at 621-22.
216) Id. at 623.
217) See §4.04[A][2][g].
218) First Nat’l City Bank, 462 U.S. at 621-22.
219) See §10.02[B] (apparent authority); §10.02[K] (estoppel).
220) See §10.05[A].
221) 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 (1994); Ferrario, The Group of Companies Doctrine in
International Commercial Arbitration: Is There Any Reason for This Doctrine to Exist?,
26(5) 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, 3 Euro. Bus. Org. L. Rev. 516 (2002); Hanotiau,
Non-Signatories, Groups of Companies and Groups of Contracts in Selected Asian
Countries: A Case Law Analysis, 32(6) J. Int’l Arb. 571 (2015); Jarvin, The Group of
Companies Doctrine, in M. Blessing (ed.), The Arbitration Agreement: Its Multifold
Critical Aspects 181 (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. Rev.
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. Resol. 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 Heading?, 17 Am. Rev. Int’l Arb. 73 (2006); Woolhouse, Group of Companies
Doctrine and English Arbitration Law, 20 Arb. Int’l 435 (2004).
69
222) 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). In addition
to French courts, Indian courts also appear to have applied the group of companies
doctrine in the context of international arbitration. See, e.g., Cheran Props. Ltd v.
Kasturi & Sons Ltd, Civ. App. No. 10025-26/2017, ¶¶14-20 (Indian S.Ct. 2018); Chloro
Controls India Pte Ltd v. Severn Trent Water Purification Inc., (2013) 1 SCC 641, ¶¶67-
71, 102 (Indian S.Ct.).
223) For criticisms of the group of companies doctrine, see Habegger, Note – Federal
Tribunal (1st Civil Court), 16 October 2003 (4P.115/2003): Extension of Arbitration
Agreements to Non-Signatories and Requirements of Form, 22 ASA Bull. 398, 398-404
(2004); Poudret, Note – Tribunal Federal, 1re Cour Civile, 16 Octobre 2003,
(4P.115/2003) – 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 Heading?, 17 Am. Rev. Int’l Arb. 73, 77 et seq. (2006)
(“no serious theoretical groundwork was done to justify its application”).
224) There were, however, decisions that adopted essentially identical analysis in other
jurisdictions. See, e.g., Map Tankers, Inc. v. MOBIL Ltd, Partial Final Award in SMA Case
No. 1510 of 28 November 1980, 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”).
225) Dow Chem. France v. ISOVER St. Gobain, Interim Award in ICC Case No. 4131 of 23
September 1982, 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.
226) Id. at 135.
227) Id.
228) 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).
September 1982, IX Y.B. Comm. Arb. 131, 136 (1984).
230) Id. 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.
231) Judgment of 21 October 1983, Isover-Saint-Gobain v. 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”).
232) See, e.g., Judgment of 11 June 1991, Orri v. des Lubrifiants Elf Aquitaine, 1992 Rev. Arb.
73 (French Cour de Cassation Civ. 1); Judgment of 7 October 1999, Russanglia v. Delom,
2000 Rev. Arb. 288 (Paris Cour d’Appel); Judgment of 26 November 1986, Sponsor AB v.
Lestrade, 1988 Rev. Arb. 153, 155 (Pau Cour d’Appel), Note, Chappelle (group of
companies doctrine “accepted in law”).
233) 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 M. Blessing (ed.), The Arbitration
Agreement: Its Multifold Critical Aspects 181 (1994).
234) Award in ICC Case No. 5103, 115 J.D.I. (Clunet) 1206, 1207, 1212 (1988).
235) See, e.g., Interim Award in ICC Case No. 15116, in J.-J. Arnaldez, Y. Derains & D. Hascher
(eds.), Collection of ICC Arbitral Awards 2012-2015 303 (2019) (“It seems that the
mutual intention of the parties, such as evidenced by the third party’s close/direct
involvement in the performance of the contract, is becoming the decisive criterion
in order to ascertain whether or not an arbitration agreement should be extended
to that third party. One may even wonder whether the existence of a group of
companies is really relevant.”). 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 also E.
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].
70
236) 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). 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”).
237) 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).
238) 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.”).
239) 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).
240) 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 & 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”); Dow Chem. France v. ISOVER St. Gobain, Interim Award in ICC
Case No. 4131 of 23 September 1982, IX Y.B. Comm. Arb. 131, 135 (1984) (“in accordance
with the mutual intention of all parties”).
241) Interim Award in ICC Case No. 11405, quoted in B. Hanotiau, Complex Arbitrations
¶105 n.142 (2005).
71
242) See, e.g., Interim Award in ICC Case No. 6610, XIX Y.B. Comm. Arb. 162 (1994); Award in
ICC Case No. 5721, 117 J.D.I. (Clunet) 1019, 1024 (1990) (“where 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 ICC, Complex Arbitrations 19, 21 (2003). See
also Fyffes plc v. DCC plc, [2005] IEHC 477 (Dublin High Ct.), rev’d on other grounds,
[2007] IESC 36 (Irish S.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”)
(quoting R. Keane, Company Law ¶11.64 (3d ed. 2000)); 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).
243) Award in ICC Case No. 2375, 103 J.D.I. (Clunet) 973 (1976).
244) E. Gaillard & J. Savage (eds.), Fouchard Gaillard Goldman on International
Commercial Arbitration ¶504 (1999). See also §10.02[E].
245) 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”).
246) See §10.02[D].
247) See §10.02_[E]; Final Award in ICC Case No. 6519, 2(2) ICC Ct. Bull. 34, 35 (1991)
(“without 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).
248) 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 ¶¶6:3-18 (2012).
249) See §10.02_[E]; 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”); Dow Chem. France v. ISOVER St. Gobain, Interim Award in
ICC Case No. 4131 of 23 September 1982, 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 also E. 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”).
72
250) 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).
251) 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); Choctaw
Generation LP 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);
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).
252) See §10.02_[E]; Judgment of 19 August 2008, DFT 4A_128/2008 (Swiss Fed. Trib.);
Judgment of 18 December 2001, LUKoil-Permnefteorgsintez, LLC v. MIR Müteahhitlik ve
Ticaret A.S., 20 ASA Bull. 482 (Swiss Fed. Trib.) (2002) (upholding award finding non-
signatory bound by arbitration clause because it assumed payment and other
obligations under underlying contract).
September 1982, IX Y.B. Comm. Arb. 131, 134 (1984) (referring to “conclusion,
execution or performance” of contract) (emphasis added).
254) 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).
255) 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).
256) See, e.g., Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶¶43, 65 (Comm)
(English High Ct.) (court rejected 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” and stating: “English law treats the issue as one subject to the chosen
proper law of the Agreement and that excludes the [group of companies doctrine]
which forms no part of English law”); Caparo Group Ltd v. Fagor Arrasate Sociedad
Coop. [2000] Arb. & Disp. Resol. L.J. 254 (QB) (English High Ct.). See also Manuchar
Steel H.K. Ltd v. Star Pac. Line Pte Ltd, [2014] SGHC 181, ¶¶73-76, 100, 136 (Singapore
High Ct.) (rejecting argument that “single economic entity” concept exists in
Singapore law) (citing G. Born, International Commercial Arbitration 1449-54 (2d ed.
2014)).
257) Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶62 (Comm) (English High
Ct.). See also Pyxis Special Shipping Co. Ltd v. Dritsas & Kaglis Bros. Ltd [1978] 2
Lloyd’s Rep. 380 (QB) (English High Ct.).
258) 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 Heading?,
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).
259) Bank of Tokyo Ltd v. Karoon [1987] AC 45, 64 (English Ct. App.). See also Adams v. Cape
Indus. plc [1990] Ch 433, 538 (English Ct. App.) (“In our judgment, we have no
discretion to reject the distinction between the members of the group as a
technical point”).
73
260) Poudret, L’Extension de la Clause d’Arbitrage: Approches Française et Suisse, 122 J.D.I.
(Clunet) 893, 913 (1995).
261) Judgment of 29 January 1996, 14 ASA Bull. 496 (Swiss Fed. Trib.) (1996) (rejecting
arguments that non-signatory parent company was subject to arbitration clause,
principally on veil-piercing/alter ego grounds).
262) Judgment of 16 October 2003, 22 ASA Bull. 364, 382 (Swiss Fed. Trib.) (2004) (refusing
to annul award where arbitral tribunal, seated in Switzerland, applied Lebanese
law and group of companies doctrine, to bind non-signatory shareholder).
263) See Judgment of 20 January 2006, Case No. LJN:AU4523, ¶4.5 (Netherlands Hoge
Raad). See also Judgment of 8 May 2014, III ZR 371/12 (German Bundesgerichtshof)
(remanding decision relying on group of companies doctrine for consideration of
other grounds for binding non-signatory to arbitration agreement).
264) 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 Case 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”); Award in Ad Hoc
Case in Geneva of 1991, 10 ASA Bull. 202 (1992) (no group of companies doctrine in
Swiss law).
266) 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”).
267) See §1.02.
268) See §10.02[E].
269) 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).
270) 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) (“where 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.”).
271) 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].
272) 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).
September 1982, 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.”).
274) 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).
74
275) See §4.04[B] (especially 4.04[B][2][b][ii]). See also §10.05[C][3].
276) See §10.05[A] for a discussion of these principles.
277) See Restatement of the U.S. Law of International Commercial and Investor-State
Arbitration §2.3 comment f (2019) (“In some instances, a third-party beneficiary of a
contract may invoke or be bound by an arbitration agreement contained in that
contract”); English Contracts (Rights of Third Parties) Act; Singapore Contracts
(Rights of Third Parties) Act; 2002 Principles of European Contract Law, Art. 6:110;
UNIDROIT, Principles of International Commercial Contracts Art. 5.2.1 (2016); J.
Herbots (ed.), International Encyclopaedia of Laws: Contracts ¶256 (Australia), ¶239
(Ireland), ¶240 (Austria), ¶253 (Romania), ¶358 (Denmark), ¶285 (France), ¶365
(India) (1993 & Update 2019).
278) Final Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26, 40 (2004).
279) 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); Flink 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); Interim Award in ICC Case No. 17669, XLI Y.B. Comm. Arb. 41, ¶61 (2016)
(third party beneficiary must be bound by arbitration clause if agreement does not
provide for exemption from arbitration of the third party beneficiary) (citing G.
Born, International Commercial Arbitration 1178 (2009)).
280) See, e.g., Geier v. m-Qube Inc., 824 F.3d 797, 800-01 (9th Cir. 2016) (terms of contract
“create a direct obligation from the subscriber to the Company’s suppliers,” which
“are intended third-party beneficiaries of the Terms” who could enforce arbitration
clause); 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”).
281) See, e.g., English Contracts (Rights of Third Parties) Act, §8(1) (“Where (a) a right
under §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
§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.”); Singapore Contracts (Rights of
Third Parties) Act, §9(1) (“Where (a) a right under § 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 §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.”).
75
282) 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 Fed. Trib.). 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 ¶¶474, 558 (3d ed.
2015) (parties can agree that third party beneficiary only acquires rights under
contract if it accepts arbitration agreement).
283) 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); Weckesser v.
Knight Enters. SE, LLC, 735 F.App’x 816, 822 (4th Cir. 2018) (“South Carolina law
requires that a contract make clear on its face the parties’ intent that the
agreement benefit another” and nothing in arbitration clause evinced intent to
create right enforceable by third party); 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.App’x 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
1331, 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).
284) Iraq v. ABB AG, 769 F.Supp.2d 605, 614-15 (S.D.N.Y. 2011).
285) See, e.g., Hogan v. SPAR Group, Inc., 914 F.3d 34, 39 (1st Cir. 2019) (“As is generally the
case in matters of contract interpretation, ‘[t]he crux in third-party beneficiary
analysis … is the intent of the parties’”) (quoting McCarthy v. Azure, 22 F.3d 351, 362
(1st Cir. 1994)); Ouadani v. TF Final Mile LLC, 876 F.3d 31, 39 (1st Cir. 2017) (“The ‘critical
fact’ that determines whether a nonsignatory is a third-party beneficiary is whether
the underlying agreement ‘manifest[s] an intent to confer specific legal rights upon
[the nonsignatory]’”) (quoting InterGen NV v. Grina, 344 F.3d 134, 147 (1st Cir. 2003));
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”).
286) McCarthy, 22 F.3d at 362 n.16.
287) See §5.04[D][1].
288) See §5.04[D][2].
289) See §9.02[A].
290) See §10.01[D].
291) 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); Flink 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).
292) Judgment of 8 March 2012, DFT 4A_627/2011 (Swiss Fed. Trib.) (no third party
beneficiary status where alleged third party beneficiary was not granted direct
rights). See also Fortress Value Recovery Fund I LLC v. Blue Skye Special Opportunities
Fund LP [2013] EWCA Civ 367 (English Ct. App.) (non-signatory defendants could not
claim benefit of arbitration agreement where non-signatories relied on contractual
exclusions).
76
293) See §10.02[K].
294) See Thomson-CSF, SA v. Am. Arb. 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. Bldg Corp., 659 F.2d 836, 838 (7th Cir. 1981).
295) See §10.02[K].
296) See §4.04.
297) 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.”).
298) 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.
299) R. Bertrams, Bank Guarantees in International Trade ¶1-1 (4th ed. 2013); 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).
300) 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)); S.N. Prasad v. Monnet Fin. Ltd, (2010) 1 SCC 320 (Indian S.Ct.)
(guarantor of loan agreement not bound by arbitration clauses in subsequent loan
agreements).
301) See, e.g., Judgment of 16 July 1992, 1993 Rev. Arb. 611 (French Cour de Cassation Civ. 1)
(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
Fed. Trib.) (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.”).
302) 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).
77
303) 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, DFT 4A_194/2008 (Swiss Fed. Trib.) (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, Case No. 404/2005 (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).
304) See §10.02[I].
305) See, e.g., Kvaerner ASA 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 4A_128/2008, ¶3.2 (Swiss Fed. Trib.) (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.”).
306) See §10.02[C].
307) 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, DFT 4A_194/2008 (Swiss
Fed. Trib.) (party signed contract as guarantor and was therefore bound by
contract’s arbitration agreement).
308) See §5.02[A][2][g][viii].
309) See, e.g., Choctaw Generation LP 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 ASA 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); U.S. 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 Fed. Trib.) (“In order that
its jurisdiction can be recognized, 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).
310) 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 Fed. Trib.) (“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”);
Judgment of 19 March 2014, Constitutionality Challenge to Article 37 of Law 1563 of
2012, C-170/14. Ref. No. D-9777 (Colombia Corte Constitucional) (upholding
constitutionality of Article 37 of Law 1536, which provides that guarantor is bound by
arbitration agreement in guaranteed contract, on basis that it implicitly agrees to
be bound).
78
311) 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 in Bulgarian Chamber of Commerce & Industry
Case of 1 October 1980, 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 Fed. Trib.) (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 130 (2005).
312) 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).
313) 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”).
314) 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’”).
315) See, e.g., Imp. Exp. Steel Corp. v. Miss. Valley Barge Line Co., 351 F.2d 503, 506 (2d Cir.
1965) (arbitration clause only applied to specifically identified parties); 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”).
316) 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”).
317) See §4.04[A][1][b][i]; §4.04[A][3].
318) For commentary, see P. Blumberg et al., Blumberg on Corporate Groups §32.04 (2d
ed. 2005 & Update 2014); Cremades, Problems that Arise from Changes Affecting One
of the Signatories to the Arbitration Clause, 7(2) ICC Ct. Bull. 29 (1996).
319) 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”); Jenks v. DLA Piper Rudnick Gray Cary U.S.,
243 Cal.App.4th 1, 13 (Cal. Ct. App. 2015) (“both states’ laws support the conclusion
that successor partnerships acquire the right to enforce the contractual rights of the
prior entity”); SEB Trygg Liv Holding AB v. Manches [2005] EWCA Civ 1237 (English Ct.
App.); A v. B [2016] EWHC 3003 (Comm) (English High Ct.) (non-signatory successor
company under Indian law validly substituted for signatory in arbitration);
Judgment of 8 February 2000, 2000 RTD Com. 596, 596 (French Cour de Cassation Civ.
1) (“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 Civ. & Crim. Ct.) (enforcing arbitral award against
successor company).
320) Judgment of 19 May 2003, 22 ASA Bull. 344, 348 (Swiss Fed. Trib.) (2004).
79
321) The same principle applies to natural persons. See, e.g., English Arbitration Act,
1996, §8(1) (“Unless otherwise agreed by the parties, an arbitration agreement is not
discharged by the death of a party and may be enforced by or against the personal
representatives of that party”); Chinese Supreme Court, Reply Concerning the
Request of Yu Yingru Withdrawing the Arbitral Award, [2007] Min Si Ta Zi No. 25 (if
party died after signing arbitration agreement, agreement continues to be binding
on party’s heir).
322) 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 Law
on Mergers, Demergers, Transformation and Transfer of Assets, Arts. 3, 22; 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).
324) 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).
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
[1958] AC 509 (English Ct. App.) (effect of universal succession under Greek law 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
Fed. Trib.) (1998); Chinese Supreme Court, Interpretation Concerning Some Issues on
Application of the Arbitration Law, [2006] Fa Shi No. 7, Art. 8 (“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”).
326) 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 Schifffahrts 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”);
Chinese Supreme Court, Interpretation Concerning Some Issues on Application of the
Arbitration Law, [2006] Fa Shi No. 7, Art. 8.
327) 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, XXIV 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); Westland
Helicopters Ltd v. Arab Org. for Indus., Interim Award in ICC Case No. 3879 of 5 March
1984, 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).
80
328) 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).
329) Judgment of 8 February 2000, 2000 RTD Com. 596, 596 (French Cour de Cassation Civ.
1).
330) See §10.02[I].
331) Award in ICC Case No. 2626, 105 J.D.I. (Clunet) 980, 981 (1978). See also Chinese
Supreme Court, Interpretation Concerning Some Issues on Application of the
Arbitration Law, [2006] Fa Shi No. 7, Art. 8 (rule of succession subject to contrary
agreement).
332) 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).
333) 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.
334) 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); Oommen & Yap,
Assignee’s Right and Obligation to Arbitrate Under Singapore Law: A Missed
Opportunity by the Court of Appeal?, 5(2) Indian J. Arb. L. 177 (2016); 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. Rev. 43.
335) See, e.g., Rals Int’l Pte Ltd v. Cassa di Risparmio di Parma e Piacenza SpA, [2016] SGCA
53, ¶¶52-56 (Singapore Ct. App.) (suggesting that assignee’s right to arbitrate is
more easily reconcilable with consensual nature of arbitration than its obligation to
arbitrate). 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.”).
336) See, e.g., Cottage Club Estates Ltd v. Woodside Estates Co. (Amersham) Ltd [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”).
337) See Girsberger & Hausmaninger, Assignment of Rights and Agreement to Arbitrate, 8
Arb. Int’l 121 (1992). See also Restatement of the U.S. Law of International Commercial
and Investor-State Arbitration §2.3 comment e (2019) (“In general, when rights in the
underlying contract are legally transferred to another party, by whatever means, the
obligation to arbitrate under an arbitration agreement in the underlying contract is
similarly transferred”).
81
338) 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);
Schifffahrtsgesellschaft 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 Schifffahrts 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).
340) See, e.g., Andermann v. Sprint Spectrum LP, 785 F.3d 1157 (7th Cir. 2015) (arbitration
agreement invoked by agent of assignee); Asset Allocation & Mgt Co. v. W. Employers
Ins. Co., 892 F.2d 566, 574 (7th Cir. 1989) (arbitration agreement may be invoked
against assignee); Johnson Controls v. City of Cedar Rapids, 713 F.2d 370 (8th Cir. 1983)
(assignment of contract assigns arbitration clause); Erichsen v. RBC Capital Mkts, LLC,
883 F.Supp.2d 562 (E.D.N.C. 2012) (assignee can invoke arbitration clause in assigned
contract); Conerly Corp. v. Regions Bank, 668 F.Supp.2d 816 (E.D. La. 2009) (when
“assignee is subrogated to the rights of the assignor against the debtor … [t]his
means that the assignee [that] steps into the shoes of the assignor has any rights
that it had at the time of the assignment … as long as they are not strictly personal
or the assignment is not otherwise prescribed by law”); Fla. Farm Bureau Ins. Cos. v.
Pulte Home Corp., 2005 WL 1345779, at *10 (M.D. Fla.) (assignment); 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); Elzinga &
Volkers, Inc. v. LSSC Corp., 838 F.Supp. 1306, 1310-11 (N.D. Ind. 1993) (same); Star-Kist
Foods, Inc. v. Diakan Hope, SA, 423 F.Supp. 1220, 1222-23 (C.D. Cal. 1976); Crown Oil &
Wax Co. of Del., Inc. v. Glen Constr. Co. of Va., Inc., 578 A.2d 1184, 1192 (Md. 1990)
(assignment of arbitration agreement); 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); M. Domke,
G. Wilner & L. Edmonson (eds.), Domke on Commercial Arbitration §13.17 (3d ed. 2013
& Update July 2020).
341) 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 ¶¶3.37-46 (1991 & Update March 2020).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
¶¶45-46 (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.”).
342) 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); Award in Confidential CIETAC
Case, cited in J. Tao, Arbitration Law and Practice in China 51 (2d ed. 2008) (partial
assignment transfers arbitration agreement of original contract to transferee);
Chinese Supreme Court, Interpretation Concerning Some Issues on Application of the
Arbitration Law, [2006] Fa Shi No. 7, Art. 9 (“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).
82
343) See Judgment of 9 May 2001, 20 ASA Bull. 80 (Swiss Fed. Trib.) (2002). See also
Judgment of 19 April 2011, DFT 4A_44/2011 (Swiss Fed. Trib.); Judgment of 19 August
2008, DFT 4A_128/2008 (Swiss Fed. Tribunal); Judgment of 18 December 2001, LUKoil-
Permnefteorgsintez, LLC v. MIR Müteahhitlik ve Ticaret A.S., 20 ASA Bull. 482 (Swiss
Fed. Trib.) (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 Fed. Trib.) (2002).
344) 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. 1) (assignee of contract bound by arbitration clause contained in
contract).
345) Judgment of 20 April 2010, Case No. A56-29770/2009, 5 (Russian S. Arbitrazh Ct.), aff’d,
Judgment of 22 September 2010, Case No. A56-29770/2009 (Russian Arbitrazh Ct.
App.). See also Award in ICAC Case No. 258/2014 of 1 June 2016, 1 Int’l Comm. Arb. Rev.
(2017) (claims against assignee rejected on basis that primary debtor had been
wound up before assignment was effective); Award in ICAC Case No. 102/2013 of 13
March 2014, 2 Int’l Comm. Arb. Rev. 300, 312 (2014) (“both Russian and foreign law
widely recognize the principle pursuant to which the assignee of the rights under
the contract containing an arbitration agreement becomes automatically bound by
the provisions of such agreement as regards the assignee’s relationships with its
contractor”).
346) See, e.g., Norwegian Arbitration Act, §10 (assignment or transfer of contract also
assigns or transfers arbitration clause); Russian Arbitration Law, Art. (11) (“In the
event of a change of an entity in a creditor-debtor relationship, with regard to which
an arbitration agreement was concluded, the arbitration agreement shall be valid
with regard to the new creditor as well as with regard to the original one, and with
regard to the new debtor as well as with regard to the original one”).
347) 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
¶¶3.37-45 (1991 & Update March 2020).
348) 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 &
Environmental Tech. Corp. v. Zelinger, 726 F.Supp.2d 135, 148 (D. Conn. 2009)
(assignment agreement did not transfer rights under arbitration clause); U.S. v.
Panhandle E. Corp., 672 F.Supp. 149 (D. Del. 1987) (same); GMAC Commercial Credit LLC
v. Spring Indus., Inc., 171 F.Supp.2d 209 (S.D.N.Y. 2001) (“a finance assignee suing on
an assigned contract is bound by that contract’s arbitration clause unless it secured
a waiver from the signatory seeking to arbitrate”). 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.
349) See, e.g., Trefny v. Bear Stearns Sec. Corp., 243 B.R. 300, 316 (Bankr. S.D. Tex. 1999)
(assignors of sale contract can enforce arbitration clause); Nissan Motor Acceptance
Corp. v. Ross, 703 So.2d 324, 326 (Ala. 1997).
350) 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).
351) See §3.03[D].
352) See §1.04[E][2].
353) See §3.01; §3.02_[B][2]; §3.02_[E]; §3.03[A].
354) See Judgment of 16 October 2001, 2002 Rev. Arb. 753 (Swiss Fed. Trib.) (agreement
prohibited assignment of arbitration clause); Judgment of 9 April 1991, DFT 117 II 94,
98 et seq. (Swiss Fed. Trib.) (same). See Scherer, Three Recent Decisions of the Swiss
Federal Tribunal Regarding Assignments and Transfer of Arbitration Agreements, 20
ASA Bull. 109 (2002). See also Final Award in ICC Case No. 6363, XVII Y.B. Comm. Arb.
186 (1992).
355) See §7.03[A][2][a].
356) 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., Inc. v.
Chemrite (Pty) 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).
357) See §5.01_[B][2]; §8.02_[C]; §8.03.
83
358) See, e.g., Judgment of 28 May 2002, 2003 Rev. Arb. 397, 398 (French Cour de Cassation
Civ. 1) (“in 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”). Compare Judgment of 16
October 2001, 2002 Rev. Arb. 753 (Swiss Fed. Trib.) (assignment of arbitration clause
depends on validity of assignment of principal contract).
359) 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., Inc. v. Chemrite (Pty) 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).
360) 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 ¶¶3.38-42 (1991 &
Update March 2020) (notice of assignment shall be sent to arbitrator and other
party).
361) NBP Dev. Ltd v. Buildko & Sons Ltd (1992) 8 Const. L.J. 377 (QB) (English High Ct.); R.
Merkin, Arbitration Law ¶3.41 (1991 & Update March 2020).
362) Bel-Ray Co., Inc. v. Chemrite (Pty) 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 & Supp. 2019); 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).
363) 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.
364) See Judgment of 30 January 1957, 23 BGHZ 198, 200 (German Bundesgerichtshof)
(characterizing arbitration agreement as “a contract of substantive law governing
procedural relations”).
365) 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).
366) For a decision erroneously taking the opposite approach, see Harris Adacom Corp. v.
Perkom Sdn Bhd, [1994] 3 MLJ 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].
84
367) See, e.g., Holiday Inns SA/Occidental Petroleum Corp. v. Morocco, Award in ICSID Case
No. ARB/72/1 of 1 July 1973, discussed 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); Alstom Brasil Energia e Transporte Ltda v.
Mitsui Sumitomo Seguros SA, 2016 WL 3476430, at *6 (S.D.N.Y.); W. Tankers Inc. v. Ras
Riunione Adriatica di Sicurta SpA [2005] EWHC 454 (Comm) (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 ¶32-045 (33d ed. 2018) (“A
person subrogated to the rights of an assured under a policy of insurance by virtue
of the Third Parties (Rights Against Insurers) Act 1930 [superseded by 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 China Pac. Prop. Ins. Corp. v. Beijing COSCO Logistics Co.
Ltd, [2009] Min Si Ta Zi No. 11 (Chinese S.Ct.) (arbitration agreement in contract not
binding on insurer because insurer not party to contract and arbitration agreement
not expression of its will).
368) See §4.04[A][3].
369) 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).
370) For commentary, see Adeline, L’Edification 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); Judgment of 6
July 2005, Golshani v. Gouvernement de la République Islamique d’Iran, 2005 Rev. Arb.
993 (French Cour de Cassation Civ. 1), Note, Pinsolle; 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).
371) See, e.g., P. Feltham, D. Hochberg & T. Leech (eds.), Spencer Bower: Reliance-Based
Estoppel (5th ed. 2017); J. Herbots (ed.), International Encyclopaedia of Laws:
Contracts ¶209 (France) (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”).
372) E. Cooke, The Modern Law of Estoppel 2 (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.”).
373) 4 Williston on Contracts §8.3 (4th ed. 1990 & Update 2013).
374) B. Hanotiau, Complex Arbitrations ¶¶41, 55-56 (2005).
375) See, e.g., Judgment of 6 July 2005, Golshani v. Gouvernement de la République
Islamique d’Iran, 2005 Rev. Arb. 993 (French Cour de Cassation Civ. 1), Note, Pinsolle;
Judgment of 16 January 1995, Compagnie de Navigation et Transports SA v.
Mediterranean Shipping Co. SA, XXI Y.B. Comm. Arb. 690, 698 (Swiss Fed. Trib.) (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 (2007-08) (“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, 247; 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).
376) See §5.02_[A][12]; §10.02[E].
85
377) 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. Arb. 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”); The
Titan Unity, [2014] SGHCR 4, ¶30 (Singapore High Ct.) (citing U.S. authority regarding
estoppel and arbitration agreement), ¶36 (applying doctrine of estoppel to hold
that “it would not lie in the mouth of Portigon to say that it did not consent to have
its claim against Singapore Tankers arbitrated); Jiangxi Provincial Metal & Minerals
Imp. & Exp. Corp. v. Sulanser Co. Ltd, [1995] 2 HKC 373 (H.K. High Ct.) (binding non-
signatory to arbitration agreement based on estoppel, where party invoked
arbitration agreement but later challenged tribunal’s jurisdiction because
agreement was unsigned); Hadad v. Dadon, Case No. 1030/15 (Israeli S.Ct. 2015)
(binding non-signatories to arbitration agreement based on estoppel); Rosenhouse,
Annotation: Application of Equitable Estoppel to Compel Arbitration by or Against
Nonsignatory – State Cases, 22 A.L.R.6th 387 (2007) (“The federal courts have initiated
and many state courts have recognized and adopted a unique body of ‘equitable
estoppel’ law that is peculiarly applicable in cases in which a non-signatory to an
arbitration agreement either seeks to compel arbitration of a claim against itself
brought by a signatory party to the arbitration agreement or asserts a claim against
such a signatory, who then seeks to compel the non-signatory to arbitrate that
claim”). See also Kabab-ji SAL v. Kout Food Group [2020] EWCA Civ 6, ¶31 (English Ct.
App.) (non-signatory not party to contract or arbitration agreement by conduct due
to “no oral modification” clause unless conditions for estoppel or preclusion
satisfied, which it was not on facts); Oceanografia SA de CV v. DSND Subsea AS [2006]
EWHC 1360, ¶¶107-08 (Comm) (English High Ct.) (non-signatory bound by contract,
including arbitration clause, because it waived right to insist on need for signature
and was estopped by convention from denying that it was bound by its conduct).
378) See, e.g., Flintkote Co. v. Aviva plc, 769 F.3d 215, 220 (3d Cir. 2014) (considering
“knowing exploitation” and “detrimental reliance” theories of equitable estoppel
under Delaware law, although these were not established on facts); Sunkist Soft
Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993); Hughes Masonry Co. v.
Greater Clark County Sch. Bldg 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).
86
LLC, 590 U.S. –, – (U.S. S.Ct. 2020) (“The ‘traditional principles of state law’ that apply
under Chapter 1 include doctrines that authorize the enforcement of a contract by a
nonsignatory,” including “equitable estoppel doctrines”); Crawford Prof. Drugs, Inc.
v. CVS Caremark Corp., 748 F.3d 249 (5th Cir. 2014) (binding non-signatories to
arbitration agreement based on equitable estoppel); 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 AS v. Deloitte Haskins & Sells, U.S., 9
F.3d 1060, 1064 (2d Cir. 1993); Hughes Masonry Co. v. Greater Clark County Sch. Bldg
Corp., 659 F.2d 836, 838 (7th Cir. 1981); Harland Clarke Holdings Corp. v. Milken, 997
F.Supp.2d 561, 582 (W.D. Tex. 2014) (direct benefit estoppel is “a type of equitable
estoppel first applied in the arbitration context by federal courts and subsequently
adopted by [state] courts”); 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 Environmental 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”). See also Frankel, The Arbitration Clause
as Super Contract, 91 Wash. U. L. Rev. 531, 587 (2014) (“By creating special rules that
favor arbitration and that deviate from state contract law, courts are enforcing
arbitration agreements in situations where they would not enforce other
agreements. … Due in no small part to the liberal federal policy favoring arbitration,
courts have created a ‘unique’ doctrine of equitable estoppel as it applies to
arbitration.”).
380) 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”); In re Weekley Homes, LP, 180 S.W.3d 127, 133
(Tex. 2005) (“by demanding compliance with provisions of the contract” between her
husband and the defendant, plaintiff “cannot equitably object to the arbitration
clause attached to them”).
381) See, e.g., Blaustein v. Huete, 449 F.App’x 347, 350 (5th Cir. 2012) (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
Consult, 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 Fiber
& Resin Intermediates, 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”)
(quoting Thompson-CSF, SA v. Am. Arb. Ass’n, 64 F.3d 778, 779 (2d Cir. 1995)).
382) See, e.g., CE Int’l Res. Holding v. Yeap Soon Sit, 2013 BCSC 1804 (B.C. Sup. Ct.) (binding
non-signatory to arbitration agreement based on estoppel where non-signatory
knowingly accepted benefits of contract containing arbitration clause).
87
383) See, e.g., Trina Solar US, Inc. v. Jasmin Solar Pty Ltd, 2020 WL 1592487 (2d Cir.)
(although nonsignatory benefited from contractual relationship, it did not invoke
agreement to obtain benefit and agreement does not provide it with direct benefit);
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. Arb. 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., 761 F.Supp.2d 492 (S.D. Tex. 2011) (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.).
384) 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 LP, Inc. v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 98 (2d. Cir. 1999));
Thomson-CSF, SA, 64 F.3d at 779.
385) 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).
386) See, e.g., 2550 Olinville Ave., Inc. v. Crotty, 149 Misc.2d 806, 810 (N.Y. Sup. Ct. 1991),
aff’d, 185 A.D.2d 200 (N.Y. App. Div. 1992) (estoppel “is a shield, not a sword” and “will
not operate to create a right where none exists”); Mount v. Morton, 20 Barb. 123, 135
(N.Y. Sup. Ct. 1855) (“Estoppels are not favored – they are odious – to be used as a
shield sometimes, never as a sword”); Welland Canal Co. v. Hathaway, 8 Wend. 480,
480 note a (N.Y. Sup. Ct. 1832) (“estoppel is to be resorted to solely to prevent
injustice; always as a shield, never as a sword”).
387) Thomson-CSF, SA, 64 F.3d at 779. See also 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); Choctaw Generation LP 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); BCC Merchant Solutions, Inc. v.
Jet Pay, LLC, 129 F.Supp.3d 440, 457 (N.D. Tex. 2015) (“Under Utah law, equitable
estoppel is typically used as a ‘shield,’ not a ‘sword’ capable of creating a cause of
action”) (quoting Youngblood v. Auto–Owners Ins. Co., 158 P.3d 1088, 1093 (Utah
2007); Tri-State Truck Ins., Ltd v. First Nat’l Bank of Wamego, 2011 WL 3349153, at *19
(D. Kan.) (“Equitable estoppel is a defense which, if established, would preclude
Plaintiffs from asserting their rights against FNBW, but cannot be affirmatively used
by FNBW to create a cause of action”); 2550 Olinville Ave., Inc. v. Crotty, 149 Misc.2d
806, 810 (N.Y. Sup. Ct. 1991) (direct benefits estoppel cannot be used as a sword to
“create a right where none exists”), aff’d, 185 A.D.2d 200 (N.Y. App. Div. 1992); Klinke v.
Famous Recipe Fried Chicken, Inc., 616 P.2d 644, 646 (Wash. 1980) (“Equitable
estoppel … is available only as a ‘shield or defense’”) (quoting Tiffany Inc. v. W.M.K.
Transit Mix, Inc., 493 P.2d 1220, 1224 (Ariz. App. 1972)).
388) 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”).
88
389) 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 AS v. Deloitte Haskins & Sells, U.S., 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); Belzberg v. Verus Invs. Holdings Inc., 999 N.E.2d 1130,
1133 (N.Y. 2013) (“New York courts have relied on the direct benefits estoppel theory,
derived from federal case law, to abrogate the general rule against binding
nonsignatories”).
390) 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. Gouvernement de la
République Islamique d’Iran, 2005 Rev. Arb. 993 (French Cour de Cassation Civ. 1).
391) 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. Ltd,
[1994] HKC 375 (H.K. Ct. First Inst.) (“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).
No. 2375, 103 J.D.I. (Clunet) 973 (1976); Judgment of 16 January 1995, Compagnie de
Navigation et Transports SA v. Mediterranean Shipping Co., XXI Y.B. Comm. Arb. 690,
698 (Swiss Fed. Trib.) (1996) (“in particular situations, a certain behavior can replace
compliance with a formal requirement according to the rules of good faith”).
394) 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).
395) See, e.g., Kingsley Capital Mgt, LLC v. Sly, 820 F.Supp.2d 1011, 1021-23 (D. Ariz. 2011)
(unclear whether estoppel is federal common law or state law); DK Joint Venture 1 v.
Weyand, 649 F.3d 310, 313, 314 n.4 (5th Cir. 2011) (same).
396) See §§4.04[A][2]-[3]; §10.02[E] (group of companies); §10.02[G] (guarantors); §10.02[H]
(succession); §10.02[K] (estoppel); §10.02[J].
397) 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].
89
398) 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 AS 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
Fed. Trib.) (2004) (“retroactive approval”).
399) See, e.g., CMA CGM SA v. Hyundai Mipo Dockyard Co. Ltd [2008] EWHC 2791 (Comm)
(English High Ct.); Judgment of 11 June 1998, Ferring AB v. 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, Van Hopplynus v.
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); Nigerian Nat’l Petroleum Corp. v. Clifco Nigeria Ltd, Suit No. 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).
400) See §10.02[G].
401) See, e.g., Partial Award in ICC Case No. 18830, XLIII Y.B. Comm. Arb. 153 (2018)
(director of signatory not proper party to arbitration even though director signed
personal guarantee in respect of contractual obligations of signatory), Interim Award
in ICC Case No. 11405, described in B. Hanotiau, Complex Arbitrations ¶158 (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. 5730,
117 J.D.I. (Clunet) 1029 (1990); 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); 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) (owner of corporation not bound as
individual by contract when owner signed in his capacity as president); Judgment of
23 October 2003, 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”); Judgment of 27 April 2016, Case No. 310/2015
(Dubai Cassation Ct.), in A. Hassan & L. Hammoud (eds.) Summaries of UAE Courts’
Decisions on Arbitration, Including DIFC Courts’ Decisions (2012-16) 1 (2018)
(presumption that person signing contract with company name in preamble and
body is doing so in name of company).
402) See §10.02[A].
403) 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. Mirvish, 88 N.Y.2d 1054 (N.Y. 1996).
404) Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1012 (3d Cir. 1993).
405) 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., Inc. v. Chemrite
(Pty) 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).
406) Westmoreland v. Sadoux, 299 F.3d 462, 467 (5th Cir. 2002).
407) 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). See also A Co. v. D, [2018] SGHCR 9, ¶¶51, 64 (Singapore High Ct.) (citing G.
Born, International Commercial Arbitration 1479, 1486 (2d ed. 2014)) (refusing to
extend arbitration agreement to officers and directors as “agency principle”
allowing non-signatory directors to compel arbitration does not apply in
Singapore).
408) Judgment of 22 October 2008, Système U Centrale Régionale sud v. M. Jacques Médard,
JurisData No. 2008-045519 (French Cour de Cassation Civ. 1).
90
409) See, e.g., Remax Royal Jordan v. Maragoudakis, [2006] RJQ 295 (Québec Ct. App.);
Décarel Inc. v. Concordia Project Mgt Ltd, [1996] RDJ 484 (Québec Ct. App.) (principal
shareholders and officers of company that executed contract with arbitration
agreement could invoke agreement); Rodrigue v. Loisel, [2004] CarswellQue 11694
(Québec Super. Ct.).
410) 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).
411) See §10.02[A].
412) 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).
413) 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).
414) See generally ABA Model Business Corporation Act, §§7.40-47 (3d ed. 2002)
(“Derivative Proceedings”); 1994 ALI Principles of Corporate Governance: Analysis
and Recommendations, §§7.01-17; Foss v. Harbottle [1843] 67 ER 189 (English Vice-Ch.
Ct.); 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. Euro. 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).
415) 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”).
416) 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).
417) See, e.g., Konamaneni v. Rolls-Royce Indus. Power (India) Ltd [2002] 1 All ER (Comm)
532, ¶¶45-55 (English High Ct.) (law of place of incorporation governs right to bring
derivative action).
418) 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).
419) Id. at 776.
420) Id. at 776-78.
421) 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.
2004) (describing derivative suit as enabling “a stockholder to bring suit on behalf
of the corporation for harm done to the corporation”).
91
422) 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).
423) See G. Born & P. Rutledge, International Civil Litigation in United States Courts 188-89
(6th ed. 2018); 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.) (“while conspirators consent to accomplish an unlawful act, that does not
mean that they impliedly consent to each other’s arbitration agreements”).
424) See §10.02[E].
425) 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); A.
Badia & J. Lew, Piercing the Veil of State Enterprises in International Arbitration
(2014); 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).
426) See §1.02_[B][10]; 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 2018, approximately 15% of new ICC cases
involved a state or a state entity. ICC, 2018 Dispute Resolution Statistics, 2019:1 ICC
Disp. Resol. Bull. 12, 18. See §1.02[B][10].
427) See, e.g., Amoco Int’l Fin. Corp. v. 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 Comercio Exterior de Cuba, 462 U.S. 611, 629-34 (U.S.
S.Ct. 1983); Bridas SAPIC v. 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.
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”).
428) Award in ICC Case No. 3493, IX Y.B. Comm. Arb. 111, 112 (1984).
429) Id. at 115.
430) Judgment of 12 July 1984, X Y.B. Comm. Arb. 113 (Paris Cour d’Appel) (1985), aff’d,
Judgment of 6 January 1987, S. Pac. Props. Ltd v. République Arabe d’Egypte, 26 I.L.M.
1004 (1987) (French Cour de Cassation Civ. 1). But see Judgment of 12 July 1984, SPP
Ltd v. Egypt, X Y.B. Comm. Arb. 487 (Amsterdam Rechtbank) (1985) (granting leave for
enforcement of award on same day Paris Cour d’Appel annulled award).
431) Award in ICC Case No. 8035, 124 J.D.I. (Clunet) 1040 (1997).
432) Id.
[2010] UKSC 46 (U.K. S.Ct.). See also §26.05[C][1][g][iii].
434) Final Award in ICC Case No. 9987, 2(4) Int’l J. Arab Arb. 420 (2010).
435) 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, ¶145 (U.K. S.Ct.). See also §26.05[C][1][g][iii].
437) For commentary, see Chen, The Outsider’s Identity in International Commercial
Arbitration: From the Group of Companies Doctrine and IBA Guidelines on Conflict of
Interest to Adverse Costs Awards Against Third-Party Funders, 12 Contemp. Asia Arb. J.
21 (2019); Gayner & Khouri, Singapore and Hong Kong International Arbitration Meets
Third Party Funding, 40 Fordham Int’l L.J. 1033 (2017); ICCA, Report of the ICCA-Queen
Mary Task Force on Third-Party Funding in International Arbitration (2018); Lévy &
Bonnan, Third-Party Funding: Disclosure, Joinder and Impact on Arbitral Proceedings,
in B. Cremades & A. Dimolitsa (eds.), Third-Party Funding in International Arbitration
78 (2013); Mechantaf, Third-Party Funding in International Arbitration: Active Funders
as Parties in Arbitration Proceedings, 82 Arb. 371 (2016); J. von Goeler, Third-Party
Funding in International Arbitration 207 (2016).
438) J. von Goeler, Third-Party Funding in International Arbitration 209 (2016).
92
439) The influence that third party funders may have on the arbitral process is
recognized in the IBA Guidelines on Conflicts of Interest, which, for purposes of
arbitrator conflicts of interest, provides that “any legal or physical person having …
a direct economic interest in, or a duty to indemnify a party for, the award to be
rendered in the arbitration, may be considered to bear the identity of such party.”
2014 IBA Guidelines on Conflicts of Interest, General Standard 6(b). The explanation
to that General Standard confirms that the direct economic interest that third party
funders and insurers have in the award is such that they may be considered to be
the equivalent of the party in identifying conflicts of interest. See id. at Explanation
to General Standard 6(b).
440) See J. von Goeler, Third-Party Funding in International Arbitration 212-13, 221-25
(2016). See also Chen, The Outsider’s Identity in International Commercial Arbitration:
From the Group of Companies Doctrine and IBA Guidelines on Conflict of Interest to
Adverse Costs Awards Against Third-Party Funders, 12 Contemp. Asia Arb. J. 21, 31-36
(2019); Gayner & Khouri, Singapore and Hong Kong International Arbitration Meets
Third Party Funding, 40 Fordham Int’l L.J. 1033, 1045-46 (2017); ICCA, Report of the
ICCA-Queen Mary Task Force on Third-Party Funding in International Arbitration 160-
63 (2018); Lévy & Bonnan, Third-Party Funding: Disclosure, Joinder and Impact on
Arbitral Proceedings, in B. Cremades & A. Dimolitsa (eds.), Third-Party Funding in
International Arbitration 82 (2013); Mechantaf, Third-Party Funding in International
Arbitration: Active Funders as Parties in Arbitration Proceedings, 82 Arb. 371
(2016).Some courts have treated third party funders as parties to the proceedings
for the purposes of making adverse costs awards in the international litigation
context. See, e.g., Abu-Ghazaleh v. Chaul, 36 So.3d 691 (Fla. Dist. Ct. App. 2009);
Excalibur Ventures LLC v. Tex. Keystone Inc. [2014] EWHC 3436 (English High Ct.), aff’d,
[2016] EWCA Civ 1144 (English Ct. App.).
441) RSM Prod. Corp. v. St. Lucia, Decision on St. Lucia’s Request for Security for Costs in
ICSID Case No. ARB/12/10 of 13 August 2014, ¶83.
442) See, e.g., ICCA, Report of the ICCA-Queen Mary Task Force on Third-Party Funding in
International Arbitration 161-62 (2018); J. von Goeler, Third-Party Funding in
International Arbitration 214-20 (2016).
443) Chen, The Outsider’s Identity in International Commercial Arbitration: From the Group
of Companies Doctrine and IBA Guidelines on Conflict of Interest to Adverse Costs
Awards Against Third-Party Funders, 12 Contemp. Asia Arb. J. 21 (2019) (supporting
arbitral tribunal’s jurisdiction over third party funders only in respect of costs
based on implied consent or non-signatory theory); Mechantaf, Third-Party Funding
in International Arbitration: Active Funders as Parties in Arbitration Proceedings, 82
Arb. 371 (2016) (supporting extension of arbitration clause to active funders based
on their direct implication in arbitral process).
444) See J. von Goeler, Third-Party Funding in International Arbitration 209, 214-15 (2016)
445) Id. at 250.
446) ICCA, Report of the ICCA-Queen Mary Task Force on Third-Party Funding in
International Arbitration 163 (2018). See, e.g., Hong Kong Arbitration Ordinance,
§§98S(2)(b), 98W (arbitral tribunal may take into account (non-)compliance with
third party funding code of practice and disclosure requirements); 2017 SIAC
Investment Rules, Art. 35 (arbitral tribunal may take into account third party
funding arrangements in making costs award). See also §[21.03[A][f].
447) 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).
448) Judgment of 7 December 1994, V 2000 v. Project XJ220ITD, 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).
449) Isidor Paiewonsky Assocs., Inc. v. Sharp Props., 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: “since the non-parties to this
arbitration agreement have related and congruent interests with the principals to
the litigation, the district court did not abuse its discretion in refusing to stay the
arbitration”).
93
450) 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) (“this
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’”) (quoting Smith/Enron Cogeneration LP, Inc. v. Smith
Cogeneration Int’l Inc., 198 F.3d 88, 98 (2d Cir. 1999); Thomson-CSF, SA v. Am. Arb.
Ass’n, 64 F.3d 773, 779 (2d Cir. 1995)).
451) 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 M. Blessing (ed.), The Arbitration Agreement: Its
Multifold Critical Aspects 151, 162 (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”).
452) See §1.02[A]. See also GE Energy Power Conversion France SAS, Corp. v. Outokumpu
Stainless USA, LLC, 590 U.S. –, – (U.S. S.Ct. 2020) (Sotomayor, J., concurring) (courts
must “strictly adhere” to “foundational” principle of consent).
453) InterGen NV v. Grina, 344 F.3d 134 (1st Cir. 2003).
454) Id. at 142. Most U.S. decisions have correctly reached different results on similar
facts. See Hernandez, S de RL de CV 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).
455) InterGen NV, 344 F.3d at 150. The court also formulated a distinction between a third
party that benefited 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 Consult, 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”).
456) See §§1.02[B][1]-[2].
457) See §10.02[E].
458) See §10.02[M].
459) See §10.02[E].
460) See §10.02[M].
461) See §9.02[D][1].
462) See §10.02_[E]; §10.02_[K]; §10.02[M].
463) See §§5.04[D][1], [4]-[5]; Granite Rock Co. v. Int’l Bhd of Teamsters, 561 U.S. 287, 303
(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., v. Rhone
Poulenc Fiber & Resin Intermediates, 269 F.3d 187, 194 (3d Cir. 2001) (“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.).
464) See §5.04[D][5].
465) See §10.02[H].
466) See §10.02[D] (alter ego); §10.02[K] (estoppel).
94
467) 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 generally Gabriel, Congruence of the NYC and Swiss Lex Arbitri Regarding
Extension of Arbitral Jurisdiction to Non-Signatories: BGE 145 III 199 (BGer Nr.
4A_646/2018), 37 ASA Bull. 883 (2019); Habegger, Note – Federal Tribunal (1st Civil
Court), 16 October 2003 (4P.115/2003): 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.
468) See §5.02[A][10].
469) This is most clearly the case where agency, alter ego, guarantor and third party
beneficiary theories are involved. See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S.
624, 630 (U.S. S.Ct. 2009) (FAA did not “alter background principles of state contract
law regarding the scope of agreements (including the question of who is bound by
them)”); Washington Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260 (5th Cir. 2004); E.I.
DuPont de Nemours & Co., v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187
(3d Cir. 2001); Thomson-CSF, SA v. Am. Arb. Ass’n, 64 F.3d 773, 776 (2d Cir. 1995);
Judgment of 16 October 2003, 22 ASA Bull. 364, 383 (Swiss Fed. Trib.) (2004)
(concluding that underlying agreement between signatories satisfied written form
requirements).
470) See Judgment of 17 April 2019, DFT 4A_646/2018, ¶2.4 (Swiss Fed. Trib.) (“the
distinction between formal and substantive validity of the extension of an
arbitration agreement to a third party pursuant to the New York Convention is not
different from the described jurisdiction of the Federal Tribunal”). But see Gabriel,
Congruence of the NYC and Swiss Lex Arbitri Regarding Extension of Arbitral
Jurisdiction to Non-Signatories: BGE 145 III 199 (BGer Nr. 4A_646/2018), 37 ASA Bull.
883 (2019) (Swiss Federal Tribunal’s finding of congruence between formal validity
requirements of New York Convention and Swiss national law ignores lack of
“exchange” requirement under Swiss national law).
471) 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 Fed. Trib.); 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.”).
472) Judgment of 16 October 2003, 22 ASA Bull. 364, 386 (Swiss Fed. Trib.) (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”); Judgment of 17 April 2019,
DFT 4A_646/2018, ¶2.4 (Swiss Fed. Trib.) (rejecting argument that Article II of
Convention prohibits applying “valid arbitration agreement to third Parties that do
not meet the formal requirement”; Article II(2)’s “wording ‘signed by the Parties’
[should be] understood as meaning that the arbitration agreement must be signed
by the (original) parties to the agreement when the agreement is concluded” and
non-signatory must not “meet any additional formal requirement”); Judgment of 8
May 2014, III ZR 371/12 (German Bundesgerichtshof) (Article II form requirement does
not prevent application of arbitration agreement to non-signatory).
473) GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 590
U.S. – (U.S. S.Ct. 2020) (apparently treating existence of arbitration agreement under
Article II(1) as distinct question from right of entity to enforce that agreement under
Article II(3): Articles II(1) and II(2) “address the recognition of arbitration
agreements, not who is bound by a recognized agreement”).
474) Habegger, Note – Federal Tribunal (1st Civil Court), 16 October 2003 (4P.115/2003):
Extension of Arbitration Agreements to Non-Signatories and Requirements of Form, 22
ASA Bull. 398, 410 (2004).
475) See, e.g., Judgment of 5 December 2008, DFT 4A_376/2008, ¶8.4 (Swiss Fed. Trib.)
(“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 behaviour 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 behaviour, may be deducted from its behaviour.”).
476) See §5.02[A][1].
95
477) Nonetheless, a few national court decisions are to the contrary. See, e.g., Indowind
Energy Ltd v. Wescare (India) Ltd, (2010) 5 SCC 306 (Indian S.Ct.) (rejecting claim that
non-signatory may be bound by arbitration clause by virtue of its conduct, holding
that written form requirement was mandatory).
478) 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.
479) 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
et al. (eds.), Dicey, Morris and Collins on The Conflict of Laws ¶¶16R-001 et seq. (15th
ed. 2012 & Supp. 2019). See also Bravo Abolafia, Implied Choice of the Law Applicable
to the Arbitration Agreement: The Effect on Non-Signatories in International
Arbitration, 37 ASA Bull. 64 (2019); Landbrecht & Wehowsky, Determining the Law
Applicable to the Personal Scope of Arbitration Agreements and Its “Extension”, 35 ASA
Bull. 837 (2017). For cases where the status of a non-signatory apparently turned on
the applicable law, see Kabab-ji SAL v. Kout Food Group [2020] EWCA Civ 6 (English
Ct. App.); Egiazaryan v. OJSC OEK Fin. [2015] EWHC 3532 (Comm) (English High Ct.).
480) See §10.02[D] (alter ego); §10.02[E] (group of companies); §10.02[K] (estoppel).
481) See §10.02[A] (agency); §10.02[H] (succession); §10.02[G] (guarantor).
482) See §10.05[A].
483) See, e.g., Ocean-Air Cargo Claims, Inc. v. 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); Dow Chem. France v. ISOVER St. Gobain, Interim Award in ICC Case
No. 4131 of 23 September 1982, IX Y.B. Comm. Arb. 131, 135 (1984); Final Award in
Chamber of National & International Arbitration of Milan Case No. 1795 of 1 December
1996, XXIV Y.B. Comm. Arb. 196 (1999) (applying UNIDROIT Principles); Sea-Land Serv.,
Inc. v. 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) (“arbitrators 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 behaviour in negotiations
and contract formation, or performance of related contracts which form part of a
single contract scheme constituted by multiple agreements.”).
484) 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).
485) Id. at 478 (“[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 M. Blessing (ed.), The Arbitration Agreement: Its
Multifold Critical Aspects 181, 196-97 (1994) (“[T]he traditional approach to the
problem that the arbitrators take, is done without reference to any particular law. …
The existence of an intention to be bound to an arbitration agreement is
demonstrated without reference to a particular law; it is a matter of facts and of
evidence, not of law. … [T]he choice of a national law as source seems to be in the
defensive.”).
Collection of ICC Arbitral Awards 1996-2000 474 (2003) (“The application of
international principles offers many advantages. They apply in a uniform fashion
and are independent from the peculiarities of each national law. They take into
consideration the needs of international relations and allow for a fruitful exchange
between systems which are sometimes excessively attached to conceptual
distinctions, and systems which seek a just and pragmatic solution to particular
situations. This is therefore an ideal opportunity to apply what is increasingly
referred to as the lex mercatoria.”); Award in ICC Case No. 5721, 117 J.D.I. (Clunet) 1019
(1990).
487) Compare Habegger, Note – Federal Tribunal (1st Civil Court), 16 October 2003
(4P.115/2003): Extension of Arbitration Agreements to Non-Signatories and
Requirements of Form, 22 ASA Bull. 398, 399 (2004).
488) See §4.04[A][2][j][iv]; §4.04[B][3][e].
96
489) Judgment of 21 October 1983, Isover-Saint-Gobain v. 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”). See §10.02[E]. See also Judgment of 26
November 1986, Sponsor AB v. Lestrade, 1988 Rev. Arb. 153 (Pau Cour d’Appel) (group
of companies doctrine “accepted in law”).
490) See, e.g., E.I. DuPont de Nemours & Co., v. Rhone Poulenc Fiber & Resin Intermediates,
269 F.3d 187 (3d Cir. 2001); McCarthy v. Azure, 22 F.3d 351, 355 (1st Cir. 1994) (federal
common law rules “dovetail[] precisely with general principles of contract law”);
McPheeters v. McGinn, Smith & Co., 953 F.2d 771 (2d Cir. 1992); Hester Int’l Corp. v.
Nigeria, 879 F.2d 170, 177 (5th Cir. 1989) (“The Court specifically declined to apply the
law of the chartering state to determine the separate juridical status of its
instrumentality”); Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 845 (2d Cir. 1987)
(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. MT 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 v. Int’l Bank, 282 F.2d 231, 233
(2d Cir. 1960); Alstom Brasil Energia e Transporte Ltda v. Mitsui Sumitomo Seguros SA,
2016 WL 3476430, at *4 (S.D.N.Y.) (“The application of federal arbitration law,
consonant with the ‘general principles of domestic contract law,’ is thus
appropriate, and consistent with the parties’ demonstrated intent through their
selection of a U.S. arbitral forum”); Harland Clarke Holdings Corp. v. Milken, 997
F.Supp.2d 561, 582 (W.D. Tex. 2014) (“Direct benefits estoppel is a type of equitable
estoppel first applied in the arbitration context by federal courts and subsequently
adopted by [state] courts”); 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”); Wood v. PennTex Res., LP, 458
F.Supp.2d 355, 371 (S.D. Tex. 2006); Ecuador v. ChevronTexaco Corp., 376 F.Supp.2d
334, 334 (S.D.N.Y. 2005) (“apply federal common law to the question of whether [a
non-signatory] is bound by the arbitration clause”), rev’d on other grounds, 638 F.3d
384 (2d Cir. 2011); 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.,
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); Belzberg v. Verus Invs. Holdings Inc.,
999 N.E.2d 1130, 1133 (N.Y. 2013) (“New York courts have relied on the direct benefits
estoppel theory, derived from federal case law, to abrogate the general rule against
binding nonsignatories”); In re Weekley Homes LP, 180 S.W.3d 127, 134 (Tex. 2005)
(“Like the equitable doctrine of promissory estoppel, we do not understand direct-
benefits estoppel to create liability for noncontracting parties that does not
otherwise exist. As [the nonsignatory] and [the signatory] had no contract between
them, estoppel alone cannot grant either a right to sue for breach.”); In re Kellogg
Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005) (“‘direct benefits estoppel’ is “a
type of equitable estoppel that federal courts apply in the arbitration context”).
See also Frankel, The Arbitration Clause as Super Contract, 91 Wash. U. L. Rev. 531, 531,
587 (2014) (“By creating special rules that favor arbitration and that deviate from
state contract law, courts are enforcing arbitration agreements in situations where
they would not enforce other agreements. … Due in no small part to the liberal
federal policy favoring arbitration, courts have created a ‘unique’ doctrine of
equitable estoppel as it applies to arbitration.”); Rosenhouse, Annotation,
Application of Equitable Estoppel to Compel Arbitration by or Against Nonsignatory –
State Cases, 22 A.L.R.6th 387 (2007) (“The federal courts have initiated and many
state courts have recognized and adopted a unique body of ‘equitable estoppel’
law that is peculiarly applicable in cases in which a non-signatory to an arbitration
agreement either seeks to compel arbitration of a claim against itself brought by a
signatory party to the arbitration agreement or asserts a claim against such a
signatory, who then seeks to compel the non-signatory to arbitrate that claim”).
491) Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (U.S. S.Ct. 2009).
492) Id. at 631 (quoting 21 Williston on Contracts §57:19 (4th ed. 2001)). See also GE Energy
Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 590 U.S. – (U.S.
S.Ct. 2020) (leaving open question of “which body of law governs” application of non-
signatory theory, but observing that FAA provides for application of “state-law
doctrines” and “background principles of state contract law”) (quoting Arthur
Andersen LLP, 556 U.S. at 630); 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].
97
493) 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”); InterGen NV v. Grina, 344 F.3d 134, 143-144 (1st Cir.
2003) (“As between state law and federal common law, we conclude that uniform
federal standards are appropriate” to question of whether non-signatories can be
bound by arbitration agreement); Smith/Enron Cogeneration LP, Inc. v. Smith
Cogeneration Int’l, Inc., 198 F.3d 88, 96 (2d Cir. 1999) (applying “the body of federal
law under the FAA” to determine whether non-signatories are bound by
international arbitration agreement); Alstom Brasil Energia e Transporte Ltda v.
Mitsui Sumitomo Seguros SA, 2016 WL 3476430, at *4 (S.D.N.Y.) (“The application of
federal arbitration law, consonant with the general principles of domestic contract
law, is thus appropriate. … Under clearly established principles applied in the
federal courts, a party may be bound by an agreement to arbitrate even in the
absence of a signature.”); Lakah v. UBS AG, 996 F.Supp.2d 250, 260 (S.D.N.Y. 2014)
(“Federal arbitration law governs” the determination of whether non-signatories are
bound by international arbitration agreements); 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”); Filanto SpA v. Chilewich Int’l Corp.,
789 F.Supp. 1229, 1236 (S.D.N.Y. 1992) (“the question of whether these parties agreed
to arbitrate their disputes is governed by the [New York] Convention and its
implementing legislation. That Convention … controls any case in any American
court falling within its sphere of application. Thus, any dispute involving
international commercial arbitration which meets the Convention’s jurisdictional
requirements, whether brought in state or federal court, must be resolved with
reference to that instrument.”). 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).
494) See §1.04[B][1].
495) Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121, ¶¶45, 47 (Comm) (English
High Ct.).
496) See, e.g., Restatement of the U.S. Law of International Commercial and Investor-State
Arbitration §2.3 comment b (2019) (choice-of-law rules of forum applicable to choose
law governing agency relationship, alter ego relationship or implied consent to
arbitration agreement).
497) See, e.g., Award in Ad Hoc Case 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.) (“the 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.”).
498) See, e.g., Kabab-ji SAL v. Kout Food Group [2020] EWCA Civ 6, ¶10 (English Ct. App.)
(parties agreed that law governing validity of arbitration agreement governs
question of whether non-signatory became party to arbitration agreement);
Judgment of 8 May 2014, III ZR 371/12 (German Bundesgerichtshof) (“This justifies
applying the law applicable to the arbitration agreement to the question whether …
E.L.’s obligation to arbitrate was transferred to the Danish Assignee. In this manner,
the debtor preserves the law applicable to its relationship with the assignor, to
which he is subject on the basis of the arbitration agreement.”); Trina Solar (US), Inc.
v. Jasmin Solar Pty Ltd, [2017] FCAFC 6, ¶¶82-84, 166 (Australian Fed. Ct.) (citing G.
Born, International Commercial Arbitration 497, 1423-24 (2d ed. 2014)) (same choice-
of-law rules should apply to selecting law governing arbitration agreement’s
formation and substantive validity at stage of enforcing agreement and at stage of
enforcing arbitral award).
98
499) See, e.g., Judgment of 18 February 2016, DFT 4A_84/2015, ¶3.3.1 (Swiss Fed. Trib.)
(whether putative principal is party to arbitration agreement in Swiss-seated
arbitration is issue of formal validity governed by Swiss private international law);
Judgment of 19 August 2008, DFT 4A_128/2008, ¶4.1.1 (Swiss Fed. Trib.) (“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.”).
500) See, e.g., Judgment of 8 May 2014, III ZR 371/12 (German Bundesgerichtshof) (“It does
not suffice in this respect that the German court – had it decided the case according
to German law – would have reached a different result on the basis of mandatory
German norms. … The finding of a violation of public policy comes into
consideration only in extreme, exceptional cases.”). See Landbrecht & Wehowsky,
Determining the Law Applicable to the Personal Scope of Arbitration Agreements and
Its “Extension”, 35 ASA Bull. 837, 848 (2017) (“It is submitted that the conflict of law
rules used to determine the law applicable to the personal scope of the arbitration
agreement in case of alleged actual consent should be the same as those used to
determine the law applicable to the substantive validity of the arbitration
agreement”).
501) 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 & 7610, in J.-J. Arnaldez, Y.
Derains & D. Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 510 (2003);
Award in ICC Case No. 5730, 117 J.D.I. (Clunet) 1029 (1990) (applying law of arbitral seat
to determine status of non-signatory on grounds that this was law governing arbitral
proceedings). Compare Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D.
Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 474 (2003) (refusing to
apply law of arbitral seat to determine status of non-signatory).Some awards apply
the conflicts rules of the arbitral seat to non-signatory issues. See, e.g., Partial Award
in ICC Case No. 10818, 16(2) ICC Ct. Bull. 94 (2005); Interim Award in ICC Case No. 9719,
16(2) ICC Ct. Bull. 83 (2005) (applying conflicts rules of arbitral seat to determine
non-signatory’s status); Interim Award in ICC Case No. 4504, 113 J.D.I. (Clunet) 1118
(1986) (same); Partial Award in ICC Case No. 4402, IX Y.B. Comm. Arb. 138 (1984).
502) Sarhank Group v. Oracle Corp., 404 F.3d 657 (2d Cir. 2005) (applying “American” law
to alter ego inquiry in recognition action).
503) Id. 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.” Id. 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 Heading?, 17 Am. Rev.
Int’l Arb. 73, 83 (2006).For additional criticism of the Sarhank decision, see Garfinkel
& Herlihy, 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).
504) See §10.02[D].
505) See §10.02[K].
506) 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](8); §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](8); §10.05_[C]
[3]; §26.05[C][1][e][i].
507) See §10.02.
508) 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).
99
509) See §§4.04 et seq. (especially §4.04[B][6]); Restatement (Second) Conflict of Laws
§218 (1971); L. Collins et al. (eds.), Dicey, Morris and Collins on The Conflict of Laws
¶16-022 (15th ed. 2012 & Supp. 2019) (“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 W. Krüger & T. Rauscher (eds.), Münchener Kommentar zur
Zivilprozessordnung §1031, ¶18 (5th ed. 2016).
510) 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][6]. 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].
511) See §4.04[A][1][b][i]; §4.04[A][3].
512) See §4.04[A][1][b][i]; §4.04[A][3].
513) See, e.g., Restatement (Second) of Conflict of Laws §§187-88, 218 (1971); L. Collins et al.
(eds.), Dicey, Morris and Collins on The Conflict of Laws ¶¶16-022, 32R-106 (15th ed.
2012 & Supp. 2019) (“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).”).
514) See §10.02[E].
515) See §10.02[B] (apparent authority); §10.02[D] (alter ego); §10.02[K] (estoppel).
516) See §4.04_[A][4]; §4.05_[C][5]; §4.07_[B][3]; §5.02[C].
517) See §4.04[A][2][j][v](6); §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.”).
518) Sarhank Group v. Oracle Corp., 404 F.3d 657, 657 (2d Cir. 2005).
519) Id. at 661-62.
520) See §§4.04 et seq. (especially §4.04_[A][1]; §4.04[B][2]).
521) See §26.03[C][9].
522) See id.
523) 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[I]) 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:
Perspectives on Their Procedural Implications 7, 8-10 (2003).
524) See §7.02.
525) See, e.g., 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); 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); Dow Chem. France v.
ISOVER St. Gobain, Interim Award in ICC Case No. 4131 of 23 September 1982, IX Y.B.
Comm. Arb. 131, 138 (1984). See also authorities cited above in §10.02[B], n. 106;
§10.02[C], nn. 122-123; §10.02[D], nn. 150-151, nn. 211-213; §10.02[E], n. 237; §10.02[H], n.
328; §10.02[M], n. 401; Pimm, Jurisdiction over Non-Signatories to the Arbitration
Agreement: Can Arbitrators Pierce the Corporate Veil?, 2003 Asian Disp. Rev. 5.
526) See §7.03.
527) See §7.03[A].
100
528) Pan Liberty Navigation Co. Ltd 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 BCLR2d 113 (B.C. Ct. App.)
(“But it is not for the court, on an stay application for a stay of proceedings, 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 arbitration agreement
because those are matters within the jurisdiction of the arbitral tribunal. Only
where it is clear that the dispute falls is outside the terms of the arbitration
agreement, or that a party is not a party to the arbitration agreement, or that the
application is out of time, should the court make reach any final determination. …”);
NetSys Tech. Group AB v. Open Text Corp., (1999) 1 BLR (3d) 307 (Ontario Super. Ct.).
See also P. Sanders, The Work of UNCITRAL on Arbitration and Conciliation 98 (2d ed.
2004).
529) See, e.g., Fibreco Pulp Inc. v. Star Shipping A/S, [1998] 145 FTR 125 (Canadian Fed. Ct.),
aff’d, [2000] 184 FTR 98 (Canadian Fed. Ct. App.); Décarel Inc. v. Concordia Project Mgt
Ltd, [1996] RDJ 484 (Québec Ct. App.); Endoceutics Inc. v. Philippon, [2013] QCCS 1742
(Québec Super. Ct.), aff’d, [2015] QCCA 1347 (Québec Ct. App.); World LLC v. Parenteau
& Parenteau Int’l Inc., [1998] AQ No. 736 (Québec Super. Ct.); ABN Amro Bank Canada
v. Krupp Mak Maschinenbau GmbH, (1996) 135 DLR4th 130 (Ontario Super. Ct.); Rio
Algom Ltd v. Sammi Steel Co. Ltd, XVIII Y.B. Comm. Arb. 166 (Ontario Super. Ct. 1991)
(1993); §7.03[A][2][b].
530) See, e.g., Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs,
Pakistan [2010] UKSC 46, ¶83 (U.K. S.Ct.) (in considering jurisdiction over non-
signatory, “arbitral tribunals are entitled to consider their own jurisdiction, and to
do so in the form of an award. But the last word as to whether or not an alleged
arbitral tribunal actually has jurisdiction will lie with the court”); D. Frampton & Co.
Ltd v. Thibeault, [1988] FCJ No. 305, 381 (Canadian Fed. Ct.); Aloe Vera of Am., Inc. v.
Asianic Food (S) Pte Ltd, [2006] SGHC 78, ¶63 (Singapore High Ct.) (refusing to
reconsider arbitral tribunal’s jurisdiction over non-signatory on grounds that court
is “not the supervisory court and cannot review the arbitrators’ decision in the same
way that an Arizona court could”); IMC Aviation Solutions Pty Ltd v. Altain Khuder LLC,
[2011] VSC 1 (Victoria Sup. Ct.), rev’d on other grounds, [2011] VSCA 248, ¶¶266-69
(Victoria Ct. App.). See also §7.03_[A][5]; §26.05[C][1].
531) See §7.03_[B][1]; Judgment of 26 June 2001, Am. Bureau of Shipping v. Copropriété
Maritime Jules Verne, 2001 Rev. Arb. 529 (French Cour de Cassation Civ. 1).
532) See, e.g., Judgment of 6 October 2010, Blonde Génétique v. SCEA Plante Moulet, 2010
Rev. Arb. 971, 971-72 (French Cour de Cassation Civ. 1); Judgment of 9 June 2010,
Evekas v. Macifilia, 2010 Rev. Arb. 396 (French Cour de Cassation Civ. 1) (applying
general rules of French competence-competence to hold that arbitral tribunal
should initially consider jurisdictional objection of non-signatory); Strickler,
Chronique de Jurisprudence Française, 2011 Rev. Arb. 191.
533) See §7.03[B][3].
534) See §7.03_[B][2]; Judgment of 4 December 2002, 2003 Rev. Arb. 1291 (Paris Cour
d’Appel), Note, Gaillard.
535) See, e.g., Aloe Vera of Am., Inc. v. Asianic Food (S) Pte Ltd, [2006] SGHC 78, ¶47
(Singapore High Ct.) (“It is an accepted principle of arbitration law that an arbitral
tribunal has jurisdiction to determine whether a particular person is a party to an
arbitration agreement”); Judgment of 19 October 2016, Energia Eolica SA v. Montealto
Peru, Case. No. 0045-2016-0 (Lima Corte Superior de Justicia) (“there is a partial
award whose recognition is requested [that] defines the subjective scope of the
arbitration agreement, ruling in a negative and definitive manner on the
incorporation to the arbitration of third parties as non-signatory parties. This, as is
evident, constitutes a matter intrinsically include within the objective competence
of the arbitral tribunal, in the exercise of its special jurisdiction and in accordance
with the kompetenz-kompetenz principle. …”).
536) 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).
101
537) Fiat SpA v. Ministry of Fin. & Planning 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., Ltd v. Rosseel, NV, 609 F.Supp.
75 (S.D.N.Y. 1985); Benaroya v. Willis, 23 Cal.App.5th 462, 469 (Cal. Ct. App. 2018)
(“Although a nonsignatory can be compelled to arbitrate, California case law is clear
that ‘an arbitrator has no power to determine the rights and obligations of one who
is not a party to the arbitration agreement. The question of whether a nonsignatory
is a party to an arbitration agreement is one for the trial court in the first
instance.’”) (quoting Am. Builder’s Ass’n. v. Au-Yang, 226 Cal.App.3d 170, 179 (Cal. Ct.
App. 1990)); D.R. Horton-Emerald, Ltd v. Mitchell, 2018 Tex. App. LEXIS 731, at *6-7
(Tex. App.) (“As a gateway matter involving validity, whether an arbitration
agreement binds a non-signatory must be decided by the court”). See also
Restatement of the U.S. Law of International Commercial and Investor-State
Arbitration §2.3 comment g (2019) (“Just as a court decides whether an arbitration
agreement or the underlying contact exists, a court also decides whether an
arbitration agreement or the underlying contract binds or may be invoked by a non-
signatory”).
538) See §7.03[E][4].
539) 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. 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).
540) See §7.03[E][7][c].
541) See §7.03[E][2][a]; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44 (U.S.
S.Ct. 1995).
542) 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. Liab. 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”).
543) 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. 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. Arb. 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 Beverage Inc., unreported decision (N.Y. Sup. Ct. 1995)
(issuing injunction against arbitration of claims against individual officer of
corporate signatory).
544) Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011) (arbitration agreement in BIT
incorporated UNCITRAL Rules, demonstrating parties’ intention for arbitrability
issues to be decided by arbitral tribunal). See Belnap v. Iasis Healthcare, 844 F.3d
1272, 1283 (10th Cir. 2017) (“all of our sister circuits to address the issue have
unanimously concluded that incorporation of the substantively identical (as
relevant here) AAA Rules constitutes clear and unmistakable evidence of an
agreement to arbitrate arbitrability”); 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); WTA Tour, Inc. v. Super Slam Ltd, 339 F.Supp.3d 390, 399 (S.D.N.Y. 2018) (noting
that while general presumption is that issue of arbitrability should be resolved by
courts, “[t]his presumption may be overcome by clear and unmistakable evidence
that the parties intended to arbitrate issues of arbitrability”); Neal v. Asta Funding,
Inc., 2016 U.S. Dist. LEXIS 85163, at *46 (D.N.J.) (“By agreeing to arbitrate in
accordance with AAA rules, the parties to the ITS Agreement clearly and
unmistakably agreed to arbitrate the issue of arbitrability”).
545) See §10.01[A].
102
546) 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).
547) 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 & Publ’rs, 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 Corporations §4187 (2012) (arbitration provisions for resolution of
disputes between members and corporation frequently included in bylaws).
548) 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).
549) See §6.04_[K]; U.S. 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. Kammgarn Spinnerei GmbH [1977] 1 Lloyd’s Rep. 463 (House of
Lords) (accepting validity of arbitration clause in German partnership agreement);
Fulham Football Club (1987) Ltd v. Richards [2011] EWCA Civ 855 (English Ct. App.)
(upholding arbitration agreement in articles of association in respect of unfair
prejudice proceedings); M. Domke, G. Wilner & L. Edmonson (eds.), Domke on
Commercial Arbitration §16.92 (3d ed. 2013 & Update July 2020) (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, Case No. C-214/89, [1992]
E.C.R. I-1769 (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).
550) See §2.01_[A]; §5.01[B].
551) Final Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26 (2004). See also 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) (“the
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.”).
552) 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).
553) 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 (32d ed. 2018); 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).
103
554) 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. Mohammed Benladen
Sarl, 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 Landesgericht).
See also Sandrock, “Intra” and “Extra-Entity” Agreements to Arbitrate and Their
Extension to Non-Signatories Under German Law, 19 J. Int’l Arb. 423, 436 (2002).
555) See §6.04[K].
556) See Carter, Class Arbitration in the United States: Life After Death?, in B. Hanotiau & E.
Schwartz (eds.), Class and Group Actions in Arbitration 13 (2016); Frankel, SEC Chair
Clayton Is in No Rush for Mandatory Shareholder Arbitration, Reuters (27 April 2018)
(“Clayton notably did not pledge the SEC would engage in a formal rulemaking
process under the Administrative Procedure Act before changing its longstanding
policy of discouraging mandatory shareholder arbitration”); Schneider, Arbitration
in Corporate Governance Documents: An Idea the SEC Refuses to Accelerate, 4(5)
INSIGHTS 21 (1990); Sockol, A Natural Evolution: Compulsory Arbitration of
Shareholder Derivative Suits in Publicly Traded Corporations, 77 Tul. L. Rev. 1095, 1111
(2003).
557) See §6.04[K].
558) See id. 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”).
559) See §6.04[K].
560) See Judgment of 8 December 2009, DFT 136 III 107 (Swiss Fed. Trib.) (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).
561) For commentary, see Baker, Class Arbitration in the United States: What Foreign
Counsel Should Know, 1 Disp. Resol. Int’l 4 (2007); P. Billiet (ed.), Class Arbitration in
the European Union (2013); Born & Salas, The United States Supreme Court and Class
Arbitration: A Tragedy of Errors, 2012 J. Disp. Resol. 21; Buckner, Due Process in Class
Arbitration, 58 Fla. L. Rev. 185 (2006); Carter, Class Arbitration in the United States:
Life After Death?, in B. Hanotiau & E. Schwartz (eds.), Class and Group Actions in
Arbitration 13 (2016); Dunin-Wasowicz, Collective Redress in International Arbitration:
An American Idea, A European Concept?, 22 Am. Rev. Int’l Arb. 285 (2011); M. Domke, G.
Wilner & L. Edmonson (eds.), Domke on Commercial Arbitration §§32:31-42 32.3 (3d
ed. 2013 & Update July 2020); Glover, Beyond Unconscionability: Class Action Waivers
and Mandatory Arbitration Agreements, 59 Vand. L. Rev. 1735 (2006); González-Arango
& Cruz-Mantilla, Class Arbitration: Here to Stay? The Potential Objections Against
Recognition and Enforcement of Class Arbitral Awards Under the New York Convention,
2017:30 Spain Arb. Rev. 19; Hagans & J. Rustay, Class Actions in Arbitration, 25 Rev.
Litg. 293 (2006); B. Hanotiau & E. Schwartz (eds.), Class and Group Actions in
Arbitration (2016); Hanotiau, A New Development in Complex Multiparty-Multicontract
Proceedings: Classwide Arbitration, 20 Arb. Int’l 39 (2004); B. Hanotiau, Complex
Arbitrations ¶557 (2005); 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 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, Class Arbitration Outside the United States: Reading the Tea Leaves, in ICC,
Arbitration and Multiparty Contracts 183 (2010); S. Strong, Class, Mass, and Collective
Arbitration in National and International Law (2013); 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, From Class to Collective: The De-Americanization
of Class Arbitration, 26 Arb. Int’l 493 (2010); 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).
104
562) 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).
563) See, e.g., Canadian Federal Courts Rules, Part 5.1 (Class Proceedings); Ontario Class
Proceedings Act; Robertson v. Thomson Corp., [2006] 2 SCR 363 (Canadian S.Ct.);
Garland v. Consumers’ Gas Co., [2004] 1 SCR 629 (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.,
[2014] 3 FCR 478 (Canadian Fed. Ct. App.); Timbercorp Fin. Pty Ltd v. Collins, [2016]
HCA 44 (Australian High Ct.) (whether defendants in recovery proceedings precluded
from raising defences not raised at earlier unsuccessful group proceeding);
Winterford v. Pfizer Australia Pty Ltd, [2012] FCA 1199 (Australian Fed. Ct.); Australian
Federal Court of Australia Act, Part IVA (Representative Proceedings). See also
Andrews, Multi-Party Proceedings in England: Representative and Group Actions, 11
Duke J. Comp & Int’l L. 249 (2001); Dunning, All for One and One for All: Class Action
Litigation and Arbitration in New Zealand, 3 Pub. Interest L.J. N.Z. 68 (2016).
564) Vernon v. Drexel Burnham & Co. Inc., 52 Cal.App.3d 706, 716 (Cal. Ct. App. 1975).
565) Id. 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 (Ga. 1977); Callaway v. Carswell, 240 Ga. 579, 582 (Ga. 1978); N.W.
Civic Ass’n, Inc. v. Cates, 241 Ga. 39 (Ga. 1978).
566) Keating v. Super. Ct., 167 Cal.Rptr. 481, 490 (Cal. Ct. App. 1980), aff’d, 31 Cal.3d 584,
610-12 (Cal. 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].
567) Keating, 167 Cal.Rptr. at 490.
568) Keating, 31 Cal.3d at 610. The California Court of Appeals had reached the same
conclusion. Keating, 167 Cal.Rptr. at 490 (“there 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.”).
569) Keating, 31 Cal.3d at 610.
570) See, e.g., Anesthesia Care Assocs. Med. Group, Inc. v. Blue Cross of Cal., 2002 WL
484662, at *7 (Cal.); Garcia v. DIRECTV, Inc., 115 Cal.App.4th 297 (Cal. Ct. App. 2004);
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).
571) 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. Super. Ct. 1986).
572) 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”).
573) 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”).
574) Champ v. Siegel Trading Co., Inc., 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.).
575) Mogilnicki & Cochran, Current Issues in Consumer Arbitration, 60 Bus. Law. 785, 791
(2005) (“mythical beast: half litigation, half arbitration and rarely seen”).
576) 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).
105
577) Bazzle v. Green Tree Fin. Corp., 351 S.C. 244, 266 (S.C. 2002). See also id. (“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.”).
578) Id. at 447.
579) Id.
580) Id. at 453. The allocation of jurisdictional competence between arbitral tribunals
and courts under the FAA is discussed above. See §7.03.
581) Bazzle, 539 U.S. at 453.
582) 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 of Chicago, Inc. v. Kaplan,
514 U.S. 938, 942-43 (U.S. S.Ct. 1995); 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).
583) Bazzle, 539 U.S. at 455 (Stevens, J. concurring in the judgment and dissenting in part).
584) Id.
585) Id. 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.” Id. 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.” Id. 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.
586) As of April 2020, the AAA’s Class Arbitration Docket of arbitrations filed as
arbitrations contained over 500 items. See www.adr.org/ClassArbitration.
587) JAMS reported over 20 consumer arbitrations that have proceeded on a class-wide
basis. See www.jamsadr.com.
588) 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 & Cochran,
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).
589) See, e.g., Johnson v. Morton’s Rest. Group, Inc., Clause Construction Award in AAA Case
No. 11 160 01513 05 of 2007; Molfetas v. Stainsafe Inc., Clause Construction Award in
AAA Case No. 11 181 00300 06 of 2006. 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).
590) 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 in AAA Case No. 11 160 01721 05 of 2006; Anderson v. Check ‘N Go of Cal., Inc.,
Partial Final Clause Construction Award in AAA Case No. 11 160 03021 04 of 2005. See
also Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (U.S. S.Ct. 2013).
591) Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir. 2007).
592) Discover Bank v. Super. Ct. of Los Angeles, 36 Cal.4th 148, 163-64 (Cal. Ct. App. 2005).
593) Id. at 156. The court also reasoned that contractual waivers of class actions allow
wrongdoers to retain the benefits of their misdeeds. Id. at 157.
106
594) Id. at 162-63.
595) Perry v. Thomas, 482 U.S. 483 (U.S. S.Ct. 1987).
596) Id. at 484, 491.
597) Discover Bank, 36 Cal.4th at 165 (quoting Perry, 482 U.S. at 493 n.9).
598) Id. at 165-66.
599) 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) (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. Dist. Ct. App.
1999); 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).
600) 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. of Los Angeles, 36 Cal.4th 148, 170 (Cal. Ct.
App. 2005); Szetela v. Discover Bank, 97 Cal.App.4th 1094 (Cal. Ct. App. 2002).
601) 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.).
602) See, e.g., Bazzle, 539 U.S. at 447; Pedcor Mgt Co., Welfare Benefit Plan v. Nations
Personnel of Tex., Inc., 343 F.3d 355, 357 (5th Cir. 2003); Sprague v. Quality Rests. N.W.,
Inc., 162 P.3d 331 (Or. Ct. App. 2007).
603) 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’”) (quoting Champ v. Siegel Trading Co., Inc.,
55 F.3d 269, 277 (7th Cir. 1995)); 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.-Ala., 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).
604) Lloyd v. MBNA Am. Bank, NA, 27 F.App’x 82, 84 (3d Cir. 2002) (quoting Johnson v. W.
Suburban Bank, 225 F.3d 366, 369 (3d Cir. 2000)).
605) Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., 559 U.S. 662 (U.S. S.Ct. 2010).
606) AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. S.Ct. 2011). See also Epic Sys. Corp.
v. Lewis, 138 U.S. 1612 (U.S. S.Ct. 2018) (applying Concepcion to arbitration agreement
subject to National Labor Relations Act).
607) Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (U.S. S.Ct. 2013).
608) Oxford Health Plans, 569 U.S. at 570-73.
609) DIRECTV, Inc. v. Imburgia 136 S.Ct. 403 (U.S. S.Ct. 2015).
610) Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407 (U.S. S.Ct. 2019).
611) Stolt-Nielsen, 559 U.S. at 667.
612) Id. at 668-69.
613) Id. at 675.
614) Id.
107
615) Id. 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.
617) Id. at 686-87.
618) Id. (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 672-74.
619) See Id. at 687 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.
See also Catamaran Corp. v. Towncrest Pharmacy, 946 F.3d 1020, 1023 (8th Cir. 2020)
(“silence does not provide a sufficient basis for concluding that the parties agreed
to class arbitration”); Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 973 (8th
Cir. 2017) (“But regarding class arbitration, there is complete silence. And silence is
insufficient grounds for delegating the issue to an arbitrator.)
620) See §25.04[F][3].
622) Id.
623) AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. S.Ct. 2011).
624) Id. at 336. 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 336
n.2.
625) Id. at 338. 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).
626) 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.” Id. at 352 (Thomas, J.
concurring).
627) Id. at 345.
628) Id. at 349 (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 362. The Court also thought
that arbitration, because it does not provide for appellate review, is “poorly suited
to the higher stakes of class litigation.” Id. at 350. The Court reasoned that “class
arbitration greatly increases risk to defendants” by aggregating claims without
providing for appellate review.
629) Id. at 352. 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.
630) Id. at 344.
631) Id. (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 360 (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 364.
632) Id. at 344.
633) Volt Info. Sciences, Inc. v. Stanford Univ., 489 U.S. 468, 478 (U.S. S.Ct. 1989).
108
634) 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][8][b] (community arbitration); §1.04[A][7] (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.
635) See §6.04[D].
636) See, e.g., 2010 IBA Rules on the Taking of Evidence, Art. 8 (witness may appear at
evidentiary hearing by videoconference).
637) 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, 563 U.S. at 336 (“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.”).
638) U.S. FAA, 9 U.S.C. §2 (emphasis added).
639) Discover Bank v. Super. Ct. of Los Angeles, 36 Cal.4th 148, 162-63 (Cal. Ct. App. 2005).
640) Id.
641) Concepcion, 563 U.S. at 357-58. 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.
642) 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).
See also Rau, Power and the Limits of Contract: The New Trilogy, 22 Am. Rev. Int’l Arb.
435 (2011).
643) Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (U.S. S.Ct. 2013).
644) Id.
645) Id. at 235. The asserted “effective vindication” exception to enforcing an arbitration
agreement was derived from Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (U.S. S.Ct. 1985). There, the Court said that it would invalidate an
arbitration agreement as against public policy if it “operated … as a prospective
waiver of a party’s right to pursue statutory remedies for antitrust violations,” but
the Court would not do so as “long as the prospective litigant effectively may
vindicate its statutory cause of action in the arbitral forum.” Id. at 637.
646) Italian Colors Rest., 570 U.S. at 236.
647) Id. at 238.
109
648) Id. at 237 (“the exception … would perhaps cover filing and administrative fees
attached to arbitration that are so high as to make access to the forum
impracticable”).
649) DIRECTV, Inc. v. Imburgia, 136 S.Ct. 463, 466 (U.S. S.Ct. 2015).
650) Id. at 466.
651) Id. at 467.
652) Id. at 468.
653) Id. at 469.
654) Id. at 471.
655) Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 566 (U.S. S.Ct. 2013).
656) Id. at 567.
657) Id.
658) Id. at 568-69 (“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)).
659) Id. at 571.
660) Id. at 571-72.
661) Id.
662) Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407, 1413 (U.S. S.Ct. 2019).
663) Id. at 1417.
664) Id. at 1415.
665) Id.
666) Id. at 1418.
667) Id.
668) Oxford Health Plans, 569 U.S. at 569.
669) Harrington v. Waterstone Mortg. Corp., 907 F.3d 502, 508 (7th Cir. 2018) (availability of
class arbitration is gateway issue of arbitrability to be decided by courts); JPay, Inc.
v. Kobel, 904 F.3d 923, 935-36 (11th Cir. 2018) (while availability of class arbitration is
gateway issue, parties had expressly delegated arbitrability question to arbitrator
through multiple references to AAA Rules, which include supplementary rules
empowering arbitrator to decide whether class action is permitted); Spirit Airlines v.
Maizes, 899 F.3d 1230 (11th Cir. 2018) (same); Dish Network v. Ray, 900 F.3d 1230 (10th
Cir. 2018) (same); Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 971-73 (8th
Cir. 2017) (presumption that question of class arbitration belongs with courts is
substantive question but parties may delegate the question to an arbitrator); Dell
Webb Communities, Inc. v. Carlson, 817 F.3d 867, 875 (4th Cir. 2016) (“The evolution of
the [Supreme] Court’s cases are but a short step away from the conclusion that
whether an arbitration agreement authorizes class arbitration presents a question
as to the arbitrator’s inherent power, which requires judicial review”); Reed Elsevier,
Inc. v. Crockett, 734 F.3d 594, 598 (6th Cir. 2013) (“recently the Court has given every
indication, short of an outright holding, that classwide arbitrability is a gateway
question rather than a subsidiary one”); Cent. W. Va. 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); Mork v. Loram Maint. 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”). Compare
Sandquist v. Lebo Auto., 376 P.3d 506, 511 (Cal. 2016) (applying state law principles of
statutory interpretation to ambiguous contract to conclude that arbitrator, not
court, should decide if class arbitration was permitted); 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”); Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir. 2011) (no
excess of authority where award permitted class arbitration); 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).
670) See, e.g., P. Billiet (ed.), Class Arbitration in the European Union (2013); Dunning, All
for One and One for All: Class Action Litigation and Arbitration in New Zealand, 3 Pub.
Interest L.J. N.Z. 68 (2016); González-Arango & Cruz-Mantilla, Class Arbitration: Here to
Stay? The Potential Objections Against Recognition and Enforcement of Class Arbitral
Awards Under the New York Convention, 2017:30 Spain Arb. Rev. 19; B. Hanotiau & E.
Schwartz (eds.), Class and Group Actions in Arbitration (2016); B. Hanotiau, Complex
Arbitrations ¶¶557-613 (2005); Mariani, Class Arbitrations in Brazil? Kluwer Arb. Blog
(14 May 2014); Marseille, Arbitration and Class Actions in Canada: Where Do We
Stand?, 28 Class Action Reports 5 (April 2007); Neumeier, Class Arbitration in
Australia: A Bright Future or A Pipe Dream?, 14 Asian Int’l Arb. J. 143 (2018); S. Strong,
Class, Mass, and Collective Arbitration in National and International Law (2013);
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 (2012); Van Zelst,
Class Actions and Arbitration: Alternative Approaches Based on the (Ever Evolving)
Dutch Experiences with Collective Redress, 35(2) J. Int’l Arb. 203 (2018).
110
671) González-Arango & Cruz-Mantilla, Class Arbitration: Here to Stay? The Potential
Objections Against Recognition and Enforcement of Class Arbitral Awards Under the
New York Convention, 2017:30 Spain Arb. Rev. 19, 25-28 (only one class arbitration
reported outside United States, from Columbia, and in very specific circumstances).
672) 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 Columbia
statute); Heller v. Uber Techs. Inc., [2019] ONCA 1 (Ontario Ct. App.) (“I conclude that
the Arbitration Clause amounts to an illegal contracting out of an employment
standard, contrary to [§]5(1) of the ESA, if the drivers are found to be employees as
alleged by the appellant. I reach the separate and independent conclusion that the
Arbitration Clause is unconscionable at common law.”); 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
both consumer and non-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); Young v. Dollar Fin. Group Inc., [2012] ABQB 601
(Alberta Q.B.), aff’d, [2013] ABCA 264 (Alberta Ct. App.) (dismissing application for
stay on basis that arbitration clause had not been approved as required by Alberta
Fair Trading Act).
673) Griffin v. Dell Canada Inc., [2010] ONCA 29, ¶30 (Ontario Ct. App.).
674) Dell Computer Corp. v. Union des Consommateurs, [2007] SCC 34, 87 (Canadian S.Ct.)
(referring parties to arbitration and dismissing motion to certify class action under
applicable Québec law); Murphy v. Amway Canada Corp., [2014] 3 FCR 478 (Canadian
Fed. Ct. App.) (dismissing appeal and referring, parties to arbitration: “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.”);
Wellman v. TELUS Commc’ns Co., [2017] ONCA 433 (Ontario Ct. App.) (distinguishing
Seidel based on discretion under Ontario arbitration legislation to deny
enforcement of arbitration clauses for non-consumer contracts).
675) See, e.g., Chatfield v. Saskatchewan Telecommc’ns, [2014] SKCA 29, ¶14
(Saskatchewan Ct. App.) (“there is no Canadian jurisprudence which even remotely
suggests that class-wide arbitration can be ordered within the context of a class
action. Mr. Chatfield cites only some American authorities for this proposition and
[§]14 of The Class Actions Act. No lower level court has thoroughly considered this
issue.”).
676) 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.
677) 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”); 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); Ware,
Paying the Price of Process: Judicial Regulation of Consumer Arbitration Agreements,
2001 J. Disp. Resol. 89.
111
678) While investor-state arbitration is different from international commercial
arbitration in many respects, and mass arbitration is different from class
arbitration, mass arbitration was permitted by an ICSID tribunal to resolve the
claims of 60,000 bondholders against Argentina in Abaclat v. Argentina, Decision on
Jurisdiction and Admissibility in ICSID Case No. ARB/07/5 of 4 August 2011. While the
bondholders in that case consented to having a third party represent their interests
and bring a mass arbitration on their behalf, Argentina claimed that it had not
consented to mass arbitration and that the ICSID rules, which were silent on the
matter, did not permit such proceedings. The Tribunal rejected Argentina’s position
in part because “where the BIT covers investments, such as bonds, which are
susceptible of involving in the context of the same investment a high number of
investors, and where such investments require a collective relief in order to provide
effective protection to such investment, it would be contrary to the purpose of the
BIT and to the spirit of ICSID, to require in addition to the consent to ICSID
arbitration in general, a supplementary express consent to the form of such
arbitration.” Abaclat v. Argentina, Decision on Jurisdiction and Admissibility in ICSID
Case No. ARB/07/5 of 4 August 2011, ¶490. The case later settled. Abaclat v.
Argentina, Consent Award Under ICSID Arbitration Rule 43(2) in ICSID Case No.
ARB/07/5 of 29 December 2016.Abaclat has been relied upon in a number of
subsequent awards: Adamakopoulos v. Cyprus, Decision on Jurisdiction in ICSID Case
No. ARB/15/49 of 7 February 2020, ¶¶188-266; Alemanni v. Argentina, Decision on
Jurisdiction and Admissibility in ICSID Case No. ARB/07/8 of 17 November 2014, ¶¶261-
325; Ambiente Ufficio SpA v. Argentina, Decision Jurisdiction and Admissibility in ICSID
Case No. ARB/08/9 of 8 February 2013, ¶¶7-13.
Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.
If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at lrs-
sales@wolterskluwer.com or call +31 (0)172 64 1562.
KluwerArbitration
112

Chapter 10 Parties To International Arbitration Agreements

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 10 Parties To International Arbitration Agreements

Uploaded by

Copyright:

Available Formats

KluwerArbitration

Document information Chapter 10: Parties to International Arbitration

[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

[A] Agency Relationship

[B] Apparent or Ostensible Authority

[C] Implied Consent

[D] Alter Ego and Veil-Piercing (141)

[E] “Group of Companies” Doctrine (221)

[F] Third Party Beneficiaries

[G] Guarantors (298)

[H] Succession (318)

[I] Assignment and Other Transfers of Contractual Rights (334)

[K] Estoppel and Related Doctrines (370)

[M] Corporate Officers and Directors

[N] Shareholder Derivative Rights

[O] Joint Venture Relations

[P] State Non-Signatories (425)

[Q] Third Party Funders (437)

§10.03 FUTURE DIRECTIONS: LEGAL BASES FOR BINDING NON-SIGNATORIES

§10.04 FORMAL VALIDITY AND NON-SIGNATORIES

§10.05 CHOICE OF LAW GOVERNING PARTIES TO INTERNATIONAL

[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 (546)

§10.08 CLASS ARBITRATIONS (561)

[B] Other Jurisdictions

You might also like