Problems Raised by Complex Arbitrations Involving Multiple Contracts - Parties - Issues - An Analysis

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Document information Problems Raised by Complex Arbitrations Involving

Multiple Contracts-Parties-Issues - An Analysis
Publication Bernard Hanotiau
Journal of International (*)
Arbitration
Introduction
Bibliographic The purpose of this article is to analyse the substantive and procedural legal problems
encountered by parties and arbitrators in multicontract, multiparty, multi-issue
reference arbitrations. (1) Where a dispute arises that involves more than two parties, a series of
Bernard Hanotiau, contracts and multiple issues, it may happen that the plaintiffs or potential plaintiffs are
'Problems Raised by P 254 not in a position to bring the various desired defendants to one single arbitration
Complex Arbitrations proceeding. The same problem is encountered when a claimant or defendant wishes to
Involving Multiple add to the proceedings another party to the economic transaction. Such will be the case,
Contracts-Parties-Issues - for example, if out of the three contracts forming the contractual chain, one includes an
An Analysis', Journal of arbitration clause and the two others include clauses giving jurisdiction to different
International Arbitration, courts; or alternatively, if the three contracts contain different arbitration clauses
(© Kluwer Law (different institutions or different seats); or if a plaintiff wishes to join as an additional
International; Kluwer Law defendant or claimant in the arbitration a subsidiary of the defendant's or claimant's
International 2001, Volume group that has not formally signed the contract containing the arbitration clause but has
18 Issue 3) pp. 253 - 360 played a leading role in the conclusion and performance of the disputed project.
Such problems are accentuated when the parties have provided for submission to
arbitration rather than to ordinary courts. Arbitration is, in essence, consensual by
nature, with the consequence that the principle of privity of contract applies to the
arbitration clause, limiting its effect to the contracting parties alone. Joining non-
signatories or third parties often proves difficult, sometimes impossible.
The issues raised by multiparty, multicontract arbitration are essentially the following:
• Who are the parties to the contract and/or the arbitration clause contained therein?
• May an arbitration clause be extended to non-signatories within a group of companies:
other companies of the group, directors or shareholders?
• To what extent can one bring to a single arbitration proceeding the various parties who
have participated in a single economic transaction through several contracts?
• May an arbitral tribunal hearing a dispute that arises principally from a specific
contract decide issues arising from connected agreements entered into by the same
parties, possibly alongside other contractors?
• If separate arbitration proceedings need to be started, can these different proceedings
be consolidated and under what conditions?
• If they cannot be consolidated, how and to what extent can one overcome the
inconveniences that arise from having several parallel proceedings?
• Who can act as claimant and against which defendants? Can a defendant join other
defendants, be they privy to the arbitration agreement or third parties? Can a party to
the complex contractual structure intervene voluntarily in the proceedings?
• When there are several defendants who have divergent interests and do not therefore
want to appoint the same arbitrator, how does one go about constituting the arbitral
panel?
• Can a defendant in the arbitration proceedings bring a claim against another
defendant?
• How does one handle these complex or parallel proceedings in the interests of the best
P 255 administration of justice?
• What are the consequences of the answers to the above questions for the enforceability
of the award?
• To what extent should an arbitral tribunal take into consideration an arbitral award
rendered in a connected arbitration arising from the same project?
These questions will be successively examined below.
Before addressing these questions, however, a few clarifications should be made. First, a
clear methodological distinction–one that is not often made–should be made between
the issues arising from the circumstance in which the project at the centre of the dispute
has been negotiated and performed by one or more companies that belong to a group,
some of which are not signatories of the arbitration clause (Part II), and the issues arising
from the fact that the dispute involves or concerns a variety of problems originating from,
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or in connection with, two or more agreements entered into by the same and/or different
parties and which do not all contain the same–or at least compatible–arbitration clauses
(Part III). In this second scenario, the fact that the parties to the contracts may belong to
a group is a priori irrelevant, although it may in some cases help clarify or resolve the
issues that arise from the existence of a group of contracts. (2)
In other words, the question of extension of the arbitration clause to non-signatory
members of a group of companies, and the question whether and to what extent it is
possible to bring into one arbitral proceeding all the parties that have participated in a
single economic transaction through various agreements and to decide in the same
proceeding all the issues arising from the latter, should be clearly distinguished and are
indeed–in the main–the subject of distinct case law.
On the other hand, the widely used concept of “extension” of the arbitration clause to
non-signatories is a misleading concept, and moreover, is probably wrong to a large
extent since, in most cases, courts and arbitral tribunals still base their determination of
the issue on the existence of a common intent of the parties and, therefore, on consent.
The basic issue therefore remains: who is a party to the clause, or has adhered to it, or
eventually is estopped from contending that it has not adhered to it. This is in other
words a classic problem of contract law. The real issue therefore becomes whether in
international arbitration, given its specific character and taking into consideration the
usages of international trade, one should follow the same rules as are applicable to
ordinary civil and commercial cases or adopt a more liberal approach; and in the latter
case what approach should be adopted. We will therefore start this article by an analysis
of the various theories on which courts have relied in complex multiparty, multicontract
cases to determine whether or not an individual or company was to be considered a
party to an arbitration agreement.
A large number of courts, arbitral tribunals and writers in continental Europe continue to
P 256 contend that arbitral clauses should receive a restrictive interpretation, since they
remove the parties from the jurisdiction of their “natural” judge: the national network of
law courts. Such reasoning is obsolete, at least in international matters. The total
liberalisation of arbitration in many western countries, organised by the local
Parliaments, is clear evidence that even the legislature no longer views arbitration as a
second-class method of dispute settlement, but simply an additional one, perhaps more
appropriate for certain categories of disputes, and much needed to alleviate the plight
of overburdened national courts. On the other hand, over the course of the last few
decades, there has been a growing tendency to submit to arbitration all international
commercial disputes of a certain importance, with the consequence that at the beginning
of this new century, it is the arbitral institution that is perceived by the international
society of merchants–with the support of the lawmaker–as its “natural” judge, rather than
the national networks of law courts, which most of them have deserted. I therefore
propose to bury once and for all this obsolete principle of restrictive interpretation of
arbitral clauses, one of the last relics of the ice age of arbitration. In the United States,
courts have for decades reaffirmed the principle that “ambiguities as to the scope of an
arbitration clause must be resolved in favor of arbitration.” (3) In Europe, the same
approach has been followed in Switzerland. (4)
Part I. Who are the Parties to the Contract(s) or to the Arbitration Clause(s)
Contained Therein?
A. Introduction
In an ad hoc (UNCITRAL) award of 17 November 1994, (5) the arbitral tribunal pointed out
that
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 to the essentially voluntary
nature of arbitration, is recognised internationally by virtue of Article II of the New York
Convention. (6)
The consequence of this, the arbitral tribunal concluded, is that parties who are not co-
signatories of the arbitration clause, either directly or through a written power of
attorney entitling a signatory to sign the arbitration agreement on their behalf, may not
participate in the arbitration. (7) The tribunal further determined that, in the case in
P 257 question, the assertion by these parties that they formed with one of the signatories a
société de fait could not change the above conclusion. A société de fait (8) does not have
legal personality and hence it could not have a legal representative entitled to sign on its
behalf as a party to an arbitration agreement. (9)
In other words, when a court or an arbitral tribunal has to determine who is a party to an
arbitration agreement, it will first determine–with more or less formalism–who has
consented to the agreement. The consent may be express or implicit. In the latter case,
the court or arbitral tribunal will base its determination on a close analysis of the facts of
the case. For example, in ICC case no. 1434, (10) the tribunal deduced the consent of the
non-signatory defendants to be determined by the arbitration provision contained in the
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main agreement between A (contractor) and B (employer) from the close network of
contractual relationships between the various companies of group A and the absence of
formalities in the determination of the parties to the various contracts. Claimant B had
contracted with a group of companies A, he had no interest whatsoever in interfering in
their internal organisation, as long as he received from the group the appropriate
guarantees. Therefore no company of the group could hide behind a “literal
interpretation of a provision inserted in a contract of the chain,” isolated from its
context, to object to the application of the arbitration clause in a dispute which
concerned the whole group. Of course, the tribunal concluded, no such consent could
have been implied if various agreements of the contractual chain had contained
incompatible arbitration or jurisdiction clauses. This issue of consent will be further
analysed in Section G.
On the other hand, it may happen that those who are formal signatories of the agreement
are not the real parties to it or at least are not the sole parties to it. This can be
explained in many cases by the mechanism of representation or the existence of a
principal-agent relationship (Section B).
But this is not all. Persons 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 assignees of the contract
containing the clause or members with the signatories of a general partnership or a
community of rights and duties (Sections C, D and H).
Other theories have also been used to decide that the clause binds persons other than
signatories, such as estoppel in the United States and England or incorporation by
reference of the arbitration clause in a subcontract. (Sections E and F)
Moreover, the conduct of a legal or natural person in the negotiation and performance of
the contract is sometimes considered by courts and arbitral tribunals as an expression of
implied consent or even as a substitute for consent (Section G). If such conduct has been
P 258 fraudulent, it may even justify piercing the corporate veil (Section I).
Finally, concerns of equity and good administration of justice are not foreign to the
decisions of judges and arbitrators. One is occasionally tempted to wonder whether
equity is not in some cases the paramount consideration and all the legal theories
advanced to justify the final decision, ex post facto creation (Section J).
In order to determine who is party to the contract and/or the arbitration agreement, it is
necessary to interpret the relevant terms. We will not examine here the question of which
law governs this process. The law governing the contract or the arbitration clause should
obviously be applicable and will indeed in most cases be the same. (11)
Other laws may also play a role in the determination of the scope and effect of the
arbitration clause, for example:
• the law applicable to the power of representation of a party or its quality to act: who is
bound by the acts of X, in what capacity did X act and did he have the quality and power
to bind C or D? It is on this basis that the Swiss Federal Court, in the Cartier decision, (12)
refused to extend an arbitration clause to other companies of a group dominated by a
single person, considering that the powers of signature which were to be complied with in
order to bind the whole group had not been respected.
• the law applicable to formal requirements, such as the requirement that the arbitration
clause be in writing, provided for in various international conventions, such as the New
York Convention, (13) or in various national laws. It should however be pointed out that
even in countries where the written form is said to be mandatory, such as, for example,
Switzerland under the Swiss Concordat, courts and arbitrators have most of the time
given an extremely flexible interpretation to the requirement and refused to determine
the scope of the arbitration clause on this basis only. This has been the case for example
in relation to groups of companies: once the clause is signed, the requirement is
considered to be fulfilled and the problem becomes one of substance, i.e., who is bound
by the signature. (14)
It will be seen that in the vast majority of cases, arbitral tribunals and courts determine
who is party to the arbitration clause without much recourse to conflict rules, on the sole
basis of an analysis of the facts and circumstances of the case, sometimes also taking into
consideration the usages of international trade.
B. Representation and Agency

A person or entity A will be considered a party to a contract and therefore to the
arbitration agreement contained in it, if the person or entity B that formally signed the
P 259 agreement was only representing A. In such circumstances, B's mandate to represent A
may be either express or implied. In other words, there must have been an express or
apparent mandate. (15)
Consequently:
– if the business entity that has signed the contract does not have legal personality, the
owner of the entity is bound by the contract; (16)
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– if the signatory of the contract is a branch without legal personality, the party to the
agreement is the parent company; (17)
– a person may not request the extension of the clause to itself on the basis of the fact
that it was involved with the signatory in a société de fait. Such a société does not have
legal personality and therefore does not have representatives who are authorised to sign
for the de facto partners; (18)
– the arbitration clause may not be extended to a second defendant, non-signatory, on
the basis that its president signed the agreement, if he turns out to have done so only as
a representative duly mandated by the first defendant. (19)
On the other hand, where it is established that the person who signed the agreement was
acting as agent of another person or entity, the latter will be considered bound by the
arbitration clause, alone or together with the agent. Agency is not presumed, however: it
must be proved. If no evidence is brought in support of the contention that the party
concerned was contracting as agent on behalf of others without personal engagement, the
contention will be dismissed. (20)
In an ad hoc (UNCITRAL) award of 27 October 1989, (21) the arbitral tribunal considered
that the agreement concluded with GIC, an agency of the Government of Ghana, clearly
bound the government. The tribunal found support for its finding in the arbitration clause
which expressly referred to disputes arising “between the foreign investor and the
government in respect of the enterprise.” And in ICC case no. 9797, (22) the arbitral
tribunal was also able to find, on the basis of the agency theory, that all member firms of
a large worldwide organisation were parties to one arbitration proceedings brought by
P 260 one group of firms against another group of firms and a Swiss company member of the
worldwide organisation whose activities consisted in coordinating on an international
basis the professional practices of its partners and the member firms. Member firms were
in fact national practice entities which had entered into a member firm interfirm
agreement (the “MFIFA” or the “Agreement”) with the Swiss company. The Agreement
contained an ICC arbitration clause. The arbitrator pointed out that the Swiss company
was represented in each agreement, that it entered into it on its own behalf and on
behalf of all member firms, therefore acting as agent. (23) The Swiss company's authority
as agent of all member firms could also be inferred from several provisions of the
Agreement. The arbitrator therefore reached the conclusion that the agency provisions of
each agreement bound each member firm to all agreements; that this “interfirm link”
created an intricate network of multiparty contracts in which all interfirm rights and
obligations, including those arising from the arbitration provision, accrued to the benefit
of and bound every member firm.
In the United States, it has been recently observed that agency theory is probably the
most common basis asserted by a non-signatory claiming the benefit of an agreement to
arbitrate. (24) The American theory of agency, which is far from identical to the agency
doctrine applied in civil law countries, holds that when a principal is bound under the
terms of a valid arbitration clause, its agents, employees and representatives are also
covered under the terms of the agreement. This theory has led at least one court to
decide that “[w]here the parties to [an arbitration] clause unmistakably intend to
arbitrate all controversies which might arise between them, their agreement should be
applied to all claims against agents or entities related to the signatories.” (25) In the case
concerned, this entailed the extension of the clause to an employee and a sister
corporation of the brokerage firm.
In Arnold v. Arnold, (26) a stock purchaser who was a party to an arbitration agreement
with the issuer brought a securities law action in court against the officers and directors
of the issuer. The latter raised the arbitration exception, arguing that they were not
signatories of the arbitration clause. The court found that the alleged wrongdoing by the
officers and directors was related to the stock purchase agreement. It refused jurisdiction
on the basis of the “well-settled principle affording agents the benefit of arbitration
clauses made by their principal.” The court further pointed out that if parties “can avoid
the practical consequences of an agreement to arbitrate by naming non-signatories as
[defendants] ... the effect of the rule requiring arbitration, would, in effect, be nullified.”
P 261 (27)
Reference is also made from time to time to the theory of apparent mandate or
ostensible authority. For example, in ICC case no. 1434 of 1975, the tribunal implicitly
referred among other theories to the fact that Mr. A “had led the national company of
State B to justifiably believe that he engaged all the companies of the group that he
managed.” (28) The court finally found on this basis and other factual findings that the
national company of State B had in fact contracted with group A.
Another example is the award in ICC case no. 5730 of 1988 (29) where, from a careful
analysis of the facts, the arbitral tribunal concluded that Mr. Z had, by his conduct,
acknowledged that Mr. E had the power to handle the contract in Z's name and in
particular to sign the contract, which included the arbitration clause, and which Mr. E had
already submitted to Mr. Z and signed in his presence. Even if it could be considered that
Mr. Z had not validly conferred power on Mr. E, the latter had in any case “apparent
powers” (pouvoirs apparents). The arbitral tribunal added that the facts also
demonstrated that in any case, it could be considered that Mr. Z had confirmed or
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ratified the undertaking made in his name by Mr. E.
Reference may also be made to award no. 188/1991 of 11 February 1993 rendered under
the rules of the Zurich Chamber of Commerce and confirmed by the Swiss Federal
Supreme Court on 1 September 1993, (30) in which the arbitral tribunal decided to impute
to the supervising national organisation of China–on the basis of the theory of ostensible
authority–a contract containing an arbitration clause entered into by the claimant, an
Austrian company, with a lower level Chinese provincial organisation.
C. Third-party Beneficiaries and Guarantee Clauses (clauses de porte-for)

What appears in the first place to be a bi-party arbitration may become a multiparty
arbitration as a consequence of a stipulation in favour of a third party (“stipulation pour
autrui”) or a guarantee clause (“clause de porte-for”). Thus, if A, a computer manufacturer,
contracts with B, the client, to provide computer equipment, and A makes a parallel
contract with C on the terms that C undertakes to provide B with computer software, we
have what appears on the face of it to be two separate contracts. However, if A provides
an undertaking in the first contract for a number of C's engagements vis-à-vis B, and in
the second contract for different engagements of B vis-à-vis C, each contract becomes, by
way of the subsequent ratification of the undertaking by performing the subscribed
obligations, a triangular A-B-C contract. If they both contain a similar arbitration clause,
there is nothing to stop the three parties being brought to the same arbitral proceedings
P 262 for all of their disputes.
The issue of the opposability of an arbitration clause in a guarantee (promesse de porte-
for) has been clearly analysed by P. Delebecque in a note on a French Supreme Court
decision of 16 July 1992:
In such a promise, a first person, the promisor, promises to a second person, the
beneficiary, the fact of a third person, which in relation to the promise is a third party.
The promisor is therefore engaged vis-à-vis the beneficiary, with the consequence that
the clause stipulated in the promise has effect in the relationship between these two
parties. This solution is applicable as long as the third party does not ratify the promise.
It also remains applicable when it is established that the third party has not ratified the
promise. In this case, the promisor has not fulfilled its obligations, he therefore engages
his responsibility and in the consecutive dispute, the clause is applicable: the
contractual liability is not autonomous, it is closely related to the obligation which has
not been performed and to the clauses that this obligation includes. If, however, the third
party ratifies the transaction, the promisor is normally released, the third party becomes
a party, retroactively, and becomes therefore bound, in its relationship with the
beneficiary, by the arbitration clause. Consequently, the third party, in a promise of
guarantee, becomes a co-contracting party if it decides to ratify the promise. (31)
In the United States, various court decisions have confirmed that the right to arbitrate is
a right that can be conferred on a third party if the intention to do so can be discerned
from the contract. For example, in Spear, Leeds & Kellogg v. Central Life Assur. Co., (32)
various insurance companies sought to arbitrate claims against a brokerage firm based
on the latter's alleged participation in a fraud perpetrated by their insured. The firm
raised the defence that there was no agreement, and therefore no arbitration clause,
between itself and the insurance companies. The Court of Appeals for the 2nd Circuit
found however that the Constitution and Rules of the New York Stock Exchange, which
require members to arbitrate controversies with non-members arising out of their
members' business, was equivalent to a contract between the Stock Exchange and its
members, and that the insurance companies should therefore be considered third-party
beneficiaries of the arbitration agreement. Consequently, the insurance companies could
compel the brokerage firm to arbitrate.
On the other hand, in Hugh Collins v. International Dairy Queen, Inc., (33) a United States
District Court sitting in Georgia decided that even if a non-signatory is a third-party
beneficiary of a contract, it is not necessarily a third-party beneficiary of the arbitration
clause contained in that contract. The court found that a franchisor, as a third-party
P 263 beneficiary of the contracts between its franchisee and the latter's sub-franchisees,
was entitled to compel arbitration of claims brought by certain sub-franchisees because
the arbitration clause in their contracts provided for arbitration of disputes “between the
parties hereto”. But the franchisor was not authorised to compel arbitration of claims put
forward by other sub-franchisees, even though he was also a third-party beneficiary of
their contracts, because the particular clause contained in those contracts provided only
for arbitration of disputes “between Territory Operator and Licensee”. The court pointed
out that “determination of intent is the crucial element” and concluded that, while the
term “parties” could be regarded as including all parties to the contracts in question,
including the franchisor, the latter was not intended to be covered by the terms “Territory
Operator” or “Licensee”.
D. Universal and Individual Transfers

By the effect of a universal or individual transfer (merger, demerger, succession,
novation, subrogation, transfer of contract or transfer of debt), the actual parties to the
arbitration clause (the new shareholders, the new owner of the company, the heirs, the
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transferees of the contract or the debt, the subrogated party) may be different from the
ones who signed the clause in the first place. The issue has been addressed from time to
time in multiparty situations.
It is generally agreed that when X transfers to Y a contract containing an arbitration
clause which it has concluded with Z, if a dispute arises it is Y and not X that has the right
to start the arbitration proceedings against Z, as the new party to the contract and
therefore to the arbitration clause. (34) If no the other hand the assignment is invalid
under the applicable law, only the original party has standing and only on its own behalf.
(35)
In the first interim award in the Westland case, (36) the arbitral tribunal pointed out that:
In certain circumstances, those who have not signed an arbitration clause are
nevertheless bound by it (and can avail themselves of it as a means of objection, if
proceedings are instituted against them before the ordinary courts). This is true for the
successor in title or any other successor, for example whomsoever may acquire rights
over property or a concern with assets and liabilities of the nature referred to in article
180 et seq. of the Swiss Federal Code of Obligations or for an assignee. It is thus that two
awards given under the aegis of the ICC held that in cases of subrogation and of universal
succession, the subrogated party and the successor were bound by an arbitration clause.
(Clunet, 1978, p. 976 at 980)
The Paris Court of Appeals addressed the issue of subrogation in a multiparty situation in
P 264 a decision of 13 November 1992. (37) Company S had sold paint to B. The paint was
defective and S had to pay damages to B. The paint had been manufactured by company
C. S, which had been partly indemnified by its insurance company K, started arbitration
proceedings with K against C. C subsequently started an action to set aside the award on
the grounds that the arbitrator had decided the case in the absence of a valid arbitration
agreement. The action was dismissed by the Court of Appeals which decided that “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.”
As was noted by a commentator, subrogation not only operates to the benefit of the
assureur de choses who has indemnified the insured victim, but also to the benefit of the
liability insurer who has indemnified the victim for the account of its insured, which was
the case here. (38)
If the subrogation takes place in the course of the arbitral proceedings, it is effective
immediately and entails the transfer of the procedural contract which constitutes the
terms of reference. Technically, there is no “intervention” of the subrogated party in the
proceedings. The transferee of the action acquires the procedural position of the
transferor. (39)
E. Estoppel
Even if estoppel is regarded today as a general principle of international law according
to which “il est interdit de se contredire au détriment d'autrui,” it remains in its inception
an Anglo-American concept that is rarely applied as such in continental Europe in
international commercial arbitration between private parties.
In the United States, some courts have applied the doctrine of equitable estoppel to
prevent a signatory from avoiding arbitration with a non-signatory when the issues which
the non-signatory seeks to resolve in arbitration are intertwined with an agreement
(containing an arbitration clause) that the estopped party has signed with him. In
multiparty cases, equitable estoppel has generally been used defensively, as a response
to an action in which the signatory claims tort damages against an affiliate of a party to
an arbitration agreement. Court decisions applying this theory tend to rely on the well-
established rule that parties cannot avoid their obligations to arbitrate by bringing
claims in tort rather than in contract. (40)
In Hughes Masonry Co v. Greater Clark County School Building Corp., (41) a masonry
contractor sued a construction manager for interference with its contractual relationship
with the building owner. Both the contractor and the manager had separate contracts
with the owner but only the contractor's agreement contained an arbitration clause. The
P 265 contractor pointed out that the manager was not a party to the agreement.
Nonetheless, the Court of Appeals for the 7th Circuit decided that the contractor was
“equitably estopped” from refusing to arbitrate, because the “very basis of [its] claim
[was] that [the manager] breached the duties and responsibilities assigned and ascribed
to [the manager] under the agreement” that contained the arbitration clause. According
to the court, the tort claims against the manager were actually claims of a breach of the
manager's contractual obligations, and the manager was specifically named and its
duties were outlined in the underlying contract. Consequently, it would have been
“manifestly inequitable” to allow the contractor both to claim that the manager was
liable for a failure to perform under the terms of the contract, and at the same time to
deny that the manager was a party to the contract in order to avoid arbitration.
In Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., (42) the licensor of a soft drink
trademark sued a licensee's parent corporation for allegedly managing the licensee in
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such a manner as to cause the licensee to violate the licensing agreement. The parent
company argued that under the terms of that agreement, the licensor should be
compelled to pursue its claims through arbitration. The Court of Appeals for the 11th
Circuit decided that the licensor was equitably estopped from asserting the lack of a
written agreement between itself and the parent in view of the close relationship
between the entities involved and the relationship of the alleged wrongs to the non-
signatory's obligations and duties in the contract.
In a recent decision rendered by the United States Court of Appeals for the 2nd Circuit,
Smith Enron Cogeneration Limited Partnership, Inc. v. Smith Cogeneration International
Inc., (43) the US Court of Appeals for the 2nd Circuit enforced an arbitration agreement by
requiring a party to the agreement to arbitrate with a person who was no longer a party
thereto. The agreement related to a joint venture between Enron and Smith to construct
and operate a power plant. The original parties to the agreement later assigned their
rights to their respective affiliates. When a dispute arose, the Smith affiliates who had
been assigned rights under the agreement brought a lawsuit against Enron, which was no
longer a party to it since it had also assigned its rights. Enron however sought to enforce
the arbitration agreement to require arbitration of the claims asserted in the court
action. The court ruled that notwithstanding the assignment, Enron was entitled to
enforce the arbitration agreement, even though it was no longer a party to it. The court
indeed considered that it could pierce the corporate veil among Enron and its affiliates
to allow Enron, a non-signatory, to enforce the rights of its affiliates who were signatories.
The court stated that the Smith affiliates were estopped from resisting arbitration on this
basis, because they themselves had treated various Enron affiliates as a single party in
the lawsuit.
On the other hand, equitable estoppel has only rarely been applied as a “sword”, to
P 266 compel a non-signatory to arbitrate. For example, in Thomson-CSF, S.A. v. American
Arbitration Association, (44) the corporate parent, which had recently purchased a
subsidiary, brought an action against a subsidiary's supplier, seeking a declaration that it
was not bound by the arbitration clause contained in the agreement between the
subsidiary and the supplier, as well as an injunction prohibiting further proceedings
against it under the arbitration agreement. The supplier cross-moved to compel
arbitration with the parent. The United States District Court for the Southern District of
New York denied the parent company's request for declaratory and injunctive relief and
granted the suppliers' motion to compel arbitration. The corporate parent appealed and
the Court of Appeals reversed the lower court's decision. Answering a request to apply the
theory of equitable estoppel, the Court of Appeals pointed out that if “the Circuits 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 the estopped party has signed, ... the situation here is inverse: as E&S, as
signatory, seeks to compel Thomson, a non-signatory.” The Court of Appeals emphasised
that the nature of arbitration made this distinction important: “Arbitration is strictly a
matter of contract; if the parties have not agreed to arbitrate, the courts have no
authority to mandate that they do so.” Here, “Thomson ... cannot be estopped from
denying the existence of an arbitration clause to which it is a signatory because no such
clause exists ... Therefore, the District Court properly determined these estoppel cases to
be inapposite and insufficient justification for binding Thomson to an agreement that it
never signed.”
There are, however, cases in which estoppel has been applied to compel a non-signatory
to arbitrate when it has derived other benefits under the agreement containing the
arbitration clause. For example, in Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S.,
(45) a Norwegian accounting firm received an agreement concerning the use of the trade
name “Deloitte” in association with accounting practices. The terms of the agreement–
containing an arbitration clause–specifically provided that the local affiliates of the
international accounting association Deloitte Haskins & Sells International were entitled
to use the trade name “Deloitte” in exchange for compliance with the provisions of the
agreement. The Norwegian accounting firm made no objection to the terms of the
agreement and proceeded to use the trade name, despite the fact that it never signed
and returned the agreement to Deloitte U.S., as required. The Court of Appeals for the 2nd
Circuit held that by knowingly exploiting the agreement, the accounting firm was
estopped from avoiding arbitration despite having never signed the agreement.
According to the Court of Appeals, “Noraudit failed to object to the agreement when it
received it ... In addition, Noraudit knowingly accepted the benefits of the agreement ...
Thus, Noraudit is estopped from denying its obligation to arbitrate under the ...
P 267 agreement.” There is no doubt that the same result would have been reached in a civil
law context, but on the basis of acceptance based on subsequent conduct.
Although the theory of estoppel–indeed a very useful theory–does not seem to have been
used in multicontract, multiparty disputes in cases where the law of a country of
continental Europe applied to the agreement (for the very simple reason that estoppel is
not part of the Continental legal tradition), an estoppel wording or approach is
sometimes used in arbitral awards rendered in Western Europe, based on the theory of
good faith or the theory of apparent mandate or ostensible authority. For example, in ICC
case no. 2375 of 1975, (46) the arbitral tribunal considered that despite the wording of
certain clauses in the agreement concluded between company B, companies of group A
7
and Mr. A, its representative, it was obvious that B had made a deal with group A, and
that therefore the tribunal had jurisdiction over the various companies of the group that
had been brought in the arbitration as defendants by B. In its reasoning, the arbitral
tribunal noted that:
In these conditions, one must adopt the position, conform to the spirit of the contracts
and to economic reality that neither group A, nor its president, or any company member
of the group, may shelter behind the wording of specific provisions, strictly construed and
isolated from the context of the whole agreements to request the Tribunal to refuse
jurisdiction on itself in a dispute which directly concerns the group or the organisation A.
(47)
The same reasoning can be found in the award rendered in ICC case no. 5730 of 1988, (48)
in which the tribunal decided that it had jurisdiction over Mr. Z because
in the eyes of third parties, all the companies owned by Mr. Z undoubtedly form a group
of companies dependent on Mr. Z. The existence of such a group has been recognised in
numerous judicial decisions, in Greece and abroad. In procedings before the High Court
of Justice in England, Mr. Z has admitted that all the business handled under “X Lines” or
“X Line” engaged the personal liability of Mr. Z. ... Mr. Z could not in good faith argue the
contrary. He has entertained a total confusion between the different companies in the
eyes of third parties... .
F. Incorporation by Reference
In substance, incorporation by reference concerns the issue whether an arbitration clause
contained in general or standard conditions or in a document or contract (between the
same parties or not) other than the main contract concluded between the original parties
binds the latter or third parties or permits bringing all the parties to these agreements to
P 268 the same arbitral proceeding. We will address this issue in detail in Part III.
Such incorporation by reference seems to be generally admitted by statute or case law in
Western European countries. The requirement that an arbitration clause be in writing,
whether by effect of a local statute or by application of article II.2 of the New York
Convention has been recently interpreted by most courts, including in Switzerland, in a
more relaxed fashion. The issue has rather become whether the party against whom the
clause is invoked was aware of the incorporation of the related conditions or documents
containing the clause in the original agreement and had a real opportunity to know their
contents. When deciding the issue, the courts take into consideration various elements
such as whether the parties are both professionals, whether the contract is an isolated
one or whether there was an ongoing relationship between the parties, and whether the
clause accords or not with trade usages. (49)
In the United States, there is fairly abundant case law on this issue. When a contract
containing an arbitration clause is incorporated by reference into a completely separate
agreement, which does not contain an arbitration clause, a non-signatory to the former
agreement, A, may nevertheless be required to arbitrate if a dispute arises under the
latter agreement (50) which A has signed.
American law follows a two-step approach. On the one hand, a non-signatory may compel
arbitration against a party to an arbitration agreement when that party has entered into
a separate contractual relationship with the non-signatory that incorporates the
arbitration clause. (51) For example, in Import-Export Steel Corp. v. Mississippi Valley
Barge Line Co., (52) the Court of Appeals for the 2nd Circuit held that a separate
agreement with the non-signatory expressly “assum[ing] all the obligations and privileges
of [the signatory party] under the ... sub-charter” constituted grounds for enforcement of
the arbitration clause by the non-signatory.
On the other hand, notwithstanding the existence of a separate contract between the
signatory and the non-signatory incorporating the arbitration agreement by reference,
the non-signatory cannot be compelled to arbitrate unless the arbitration clause itself
contains language broad enough to allow non-signatories' disputes to be brought within
its terms.
One leading case is Progressive Casualty Insurance Co. v. C.A. Reaseguradora Nacional de
Venezuela, (53) which involved disputes arising out of a reinsurance policy that stated
that it was subject to a Facultative Reinsurance Agreement (FRA). The FRA was a prior
agreement between other insurers and reinsurers containing an arbitration clause which
provided that “[a]ny question or dispute arising between the contracting parties
concerning the interpretation of this reinsurance agreement, which cannot be otherwise
P 269 arranged shall be settled by arbitration in London, England.” The plaintiffs American
Reinsurers were not signatories to the FRA and accordingly argued that they were not
bound by the arbitration clause in the FRA. The 2nd Circuit disagreed, finding that the
FRA's arbitration clause was worded broadly enough to allow its effective incorporation
by reference into other contracts:
[u]nlike the clause in Import-Export case, the FRA's clause is not restrictively worded by
referring to the immediate parties to that contract by name. Rather, the FRA merely
provides for arbitration of disputes between “the contracting parties”. We do not think it
would be “unduly stretching” the language of the clause to term the American Reinsurers
8
... “contracting parties”. (54)
In the Import-Export case, (55) the Court of Appeals for the 2nd Circuit indeed refused to
compel arbitration on the basis of a charter party clause that provided for arbitration of
disputes “between the Disponent Owners and the Charterers”, even though the
charterparty had been incorporated by reference into a bill of lading. The court reasoned
that it would be unduly stretching the language of the arbitration clause to say that a
non-party was one of the “Disponent Owners or Charterers”. (56)
In another important case, Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A.,
(57) the owner of a vessel attempted to compel a charterer's guarantor to arbitrate, even
though the guarantor was not a signatory to the charterparty. The guarantor had agreed to
assume the rights and obligations of the charterer on the same terms and conditions as
contained in the charterparty and to perform the balance of the contract. In addition, the
arbitration provision in the charterparty was applicable by its own terms to all disputes
and was not limited to those arising between the owner and the charterer. The 2nd Circuit
emphasised that the determination of the issue 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 guarantee, and it upheld the District Court's conclusion that
the guarantor was obligated to arbitrate “in view of the broad language of the guarantee”.
(58)
The issue of incorporation by reference often arises in connection with guarantees. For
example in Gruntstad v. Ritt, (59) the Court of Appeals for the 7th Circuit held that an
arbitration clause was not incorporated by reference into a guarantee that appeared
below the signatures at the end of the contract in which the arbitration clause appeared.
The court considered that the guarantee did not unambiguously express the guarantor's
intent to be personally bound by the arbitration clause. The arbitration clause referred
to “any dispute between the parties” and the court decided that “parties” did not mean
P 270 guarantors. However, in a more recent case, Kvaerner v. The Bank of Tokyo Mitsubish,
(60) the US Court of Appeals for the 4th Circuit required the bank to arbitrate disputes
under a guarantee which did not have an arbitration clause. The guarantee related to a
construction contract which contained an arbitration provision and the court ruled that
the bank was bound by that clause when it sought to enforce the guarantee. The
construction agreement, to which the bank was not a party, included a broad arbitration
clause requiring arbitration of disputes arising out of or relating to the construction
agreement, under the rules of the American Arbitration Association (AAA). When the bank
instituted a court action on the guarantees, the guarantors brought an action in the
Federal District Court in North Carolina to compel the banks to arbitrate. The decision of
the District Court, which was affirmed by the US Court of Appeals, was that the banks were
required to arbitrate because the arbitration clause of the construction agreement was
incorporated into the guarantees and the dispute related to the construction agreement.
This incorporation was accomplished, according to the court, by a provision in the
guarantees that gave the guarantors the same “rights and remedies” as were available to
the joint venture under the construction agreement.
G. Consent or Conduct as an Expression of Implied Consent or as an Alternative to

Consent
Consent is the foundation of arbitration, and in general a court or an arbitral tribunal will
refuse to treat a person or entity as a party to the contract or at least to the arbitration
clause if it has not expressly or implicitly consented to it, a fact that in most–but not all–
cases will be expressed by the signature of the person or entity concerned on a
contractual document. But on the other hand, as we will see below, it is possible to
become party to a contract without having signed the instrumentum and, on the contrary,
the fact that a party has affixed its signature on the contract does not necessarily mean
that it has agreed to become a party to the agreement. For example, in ICC case no. 6769
of 1991, (61) a contract had been concluded between an African company X and a
company Y from Eastern Europe. The contract, which contained an arbitration clause,
provided that the materials would be equipped with a part manufactured by Z. Z had
initialled the parts of annex 1 to the contract describing the characteristics of the
element to be supplied. X alleged the existence of defects in the item manufactured by Z
and started arbitration proceedings against Z on the basis of the arbitration clause
included in the contract concluded with Y. The arbitral tribunal decided that, in the
absence of reciprocal undertakings, the signature of a third party, Z, did not have the
effect of making this third party a party to the agreement between X and Y. In this
respect, the arbitrators pointed out that under the agreement, X assumed full
responsibility for the conformity of the supplies with the agreement and that if
P 271 payment for the specific item manufactured by Z was to be made directly by X to Z, Y
again took full responsibility since the payment could be made only upon its instructions.
There was therefore no personal undertaking by Z to X. By initialling the pages relating to
the technical characteristics of the item to be manufactured, Z only wanted to confirm to
X and Y that it was well aware of the technical elements of the project. The arbitral
tribunal further pointed out that Z had not played a specific role in the conclusion or the
performance of the agreement.
The capacity in which a person signs an agreement is also of the utmost importance. In
9
ICC case no. 4504 of 1985-1986, (62) the arbitral tribunal found that it lacked jurisdiction
vis-à-vis the second defendant, which was not formally a signatory of the agreement. The
fact that the president of the second defendant had signed the agreement was
considered irrelevant, since he had done so as the duly mandated representative of the
first defendant; and where he had written letters to the claimant, they had been signed in
the name and for the account of the first defendant. In much the same vein, in ICC case
no. 5721 of 1990, (63) the arbitral tribunal refused to extend its jurisdiction to Mr. Z, who
had signed two contracts for the account of X Egypt, a party to the contract and to the
arbitration proceedings. The reasoning of the arbitrator was that it was not certain that
“Claimant had the intention to deal with Mr. Z through X, nor that Mr. Z had the intention
to be himself party to the arbitration agreement”. In another case, (64) the arbitral
tribunal also refused to extend its jurisdiction to a non-signatory company that had
issued letters of guarantees in favour of one of the parties to a turnkey contract and the
arbitration proceedings. The tribunal considered that the fact that the letters of
guarantee had been signed, as had the turnkey contract, by Mr. X, was not sufficient to
establish an acceptance of the arbitration clause, in the absence of any clear reference
to the latter.
In the United States, in Kaplan v. First Options of Chicago, Inc., (65) the court declined to
allow one party to the contract containing an arbitration clause to compel the corporate
president of the other party to arbitrate. The court pointed out that the president had
signed the loan agreement in his corporate capacity and therefore had never intended to
be bound personally by the arbitration clause contained therein. The Supreme Court
affirmed the decision and emphasised that arbitration was a matter of contract, that it
was indeed a method of resolving disputes–but only those disputes that the parties had
agreed to submit to arbitration. The 3rd Circuit went even further than the Supreme Court
in a subsequent decision, Ayhoff v. H.J. Heinz Co., construing First Options to mean that no
party could be compelled to arbitrate unless it specifically and expressly agreed to
P 272 arbitration. (66)
If there is no evidence of an express agreement, courts and arbitral tribunals will often
take into consideration the conduct of the party concerned as an expression of implied
consent or, as we will see later, as a substitute for consent. For example, if A and B enter
into an agreement containing an arbitration clause and subsequently A sues B in court
together with C, a non-signatory, but the latter, like B, invokes the existence of the
arbitration clause to challenge the jurisdiction of the court, an arbitral tribunal, to which
the case is subsequently referred, will be justified in considering that it has jurisdiction
over C, inferring C's consent to arbitration from the fact that it invoked the arbitration
agreement in the court proceedings. (67)
More often, however, the issue of conduct arises in relation to the role a party has played
in the negotiation or performance of the agreement. Only a substantial involvement may
amount to consent. For example, in ICC case no. 4504 of 1985-1986 (68) and ICC case no.
4972 of 1989, (69) the arbitrators considered, respectively, that the role played by the
second defendant, a second company of the same group as the first defendant but not a
signatory of the agreement, and by Mr. W, an individual, the general manager of first
defendant and signatory of the agreement, was not substantial enough, and that
consequently, “one could not deduce therefrom that second defendant had ratified the
agreement”; and in the second case, that the role Mr. W had played in the negotiation
and the performance of the agreement did not make him a party to the contract.
As we will see in subsequent Parts of this article, it is in the context of groups of contracts
and groups of companies that the issue of conduct as an expression of implied consent or
as a substitute for consent is especially important. Unless the existence, in other
contracts of the contractual chain, of a clause which is incompatible with the arbitration
clause contained in the first one, leads to the conclusion that there is no will of the
parties to have all the disputes arising from the contractual relationship decided by one
arbitral tribunal, courts and arbitrators will generally base their decision of this issue on
the research of a common intention of the parties to have their controversies brought
together before–and decided together by–the same arbitral tribunal. By way of
illustration, in the first interim award in the Westland case, the arbitral tribunal pointed
out that
everything depended on the intention expressed by the parties in the arbitration clause.
It is necessary and therefore sufficient, in principle, that they wished to bind themselves
for the arbitrators to have jurisdiction at the same time in respect of them all and for one
of them to be able to initiate proceedings against all the others within one set of
arbitration proceedings. It thus matters little that there are several arbitration clauses
when their content shows that they make up a whole in the minds of the parties. Such are
the circumstances of the present case ... The series of documents concluded constitute an
indivisible whole and the four states thus truly demonstrated their desire to act together,
P 273 by joining together under one name. The similarity of the clauses used in the various
contracts can only serve to bear out this interpretation. It follows that the Tribunal is not
merely competent as regards each of the states, AOI and ABH, but is justified in
adjudicating upon their cases in one and the same award. (70)
The existence of a group of companies gives a special dimension to the issue of conduct
or consent. It is a special case and we believe that the case law in relation to groups of
10
companies should not be automatically extrapolated to other types of situations. As
several authors have pointed out, when there is a group of companies, one may presume
that the parent company binds its subsidiaries; but on the other hand, only the
companies that have been substantially involved in the negotiation and performance of
the agreement containing the arbitration clause will be considered parties to the latter.
The case law is not always entirely clear in this respect. In most cases, it seems that only
a substantial involvement is considered sufficient to constitute consent or ratification.
Some cases however suggest that a party's conduct should not necessarily be regarded as
an expression of a party's implied consent; rather a party's substantial involvement in
the negotiation and performance of the contract and the knowledge of the existence of
the arbitration clause have a standing of their own, as a substitute for consent. (71)
One will note in this respect the difference between the wording of the Dow case, on the
one hand:
Considering, in particular, that the arbitration clause expressly accepted by certain of
the companies of the group should bind the other 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 (72)
and that of the decision of the Paris Court of Appeals of 22 March 1995 (73) in the SMABTP
case:
The arbitration clause inserted in an international contract has self-standing validity and
effectiveness which requires that its application be extended to parties which are
directly implicated in the performance of the contract and in the disputes that may arise
therefrom as long as it is established that their situation and their activities give rise to
the presumption that they were aware of the existence and the scope of the arbitration
clause, even though they were not signatories of the contract which provides for it.
What may be accepted in the context of a group of companies is more difficult to accept
when there is no such group, as in the decision of the Paris Court of Appeals of 7
December 1994 (74) in the Jaguar case, where the court nonetheless did not hesitate to go
P 274 one step further by deciding that
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 the scope of the arbitration clause in order for the arbitrator to be seized
of all economical and legal aspects of the dispute.
In this last decision, the court was obviously less focused on the issue of consent than on
another important concern: the good administration of justice.
H. Existence Between the Parties of a Community of Rights and Interests

The existence between the parties of a community of obligations and interests is one of
the elements that may lead an arbitral tribunal to decide that an arbitration clause to
which a company is a party also binds other entities that formally are not signatories.
For example, in the Westland case, (75) the four Arab states that were members of the
Arab Organisation for Industrialisation (AOI) had entered into a shareholders' agreement
with Westland Helicopters by which they created a joint stock company, the Arab British
Helicopters Company (ABH). The agreement contained an ICC arbitration clause.
Westland also signed a series of contracts with ABH that also provided for ICC arbitration.
A dispute arose and Westland initiated ICC arbitration against the four Arab states, AOI
and ABH. Egypt and ABH objected to the competence of the arbitral tribunal. The other
respondents did not appear.
The arbitrators considered that the four states were bound by the arbitration clause,
although they had not signed the clause themselves. According to the arbitral tribunal:
The question whether the four states are bound by the arbitration clause concluded by
the AOI in its own name (shareholders agreement contracted with Westland, clause 12.1)
is exactly the same as the substantive law question whether the four states are bound in
general by the obligations contracted by the AOI. If the obligations under substantive law
flowing from the shareholders agreement are obligations not only of the AOI but also of
the four states, if the locus standi to conduct the defence in relation to those obligations
can be attributed not only to the AOI, but also to the four states, then the latter are
therefore bound by the arbitration clause, just as they might, had they been summoned
before an ordinary court, have availed themselves of the clause as a ground in their
defence. 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 AOI 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. (76)
On this basis, the arbitrators also held that the attribution of legal personality to the AOI
P 275
11
P 275
would not affect the liability of the four founding states. Indeed, the AOI was akin to a
general partnership. In this respect, the tribunal further noted: “A partner is bound by the
arbitration clause entered into by a general partnership (société en nom collectif) of
which he is a partner, and the co-contracting party may rely upon the arbitration clause if
he brings his action against the partner instead of bringing it against the partnership.”
It must of course be pointed out that the award was subsequently challenged by the
State of Egypt and annulled in relation to that State (the award remaining valid vis-à-vis
the other, defaulting, States: U.A.E., Saudi Arabia and Qatar) by the Swiss Federal Court in
a decision of 29 July 1988, (77) on the following grounds:
An 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 ...
The Shareholders Agreement is a private law contract, explicitly regulated by Swiss law.
AOI is a public international law legal entity ... AOI's legal personality, together with its
juridical, financial and procedural autonomy–including a specific power to conclude
arbitration clauses or agreements–... are the evident and unequivocal indications that
AOI was totally independent from the founding states. AOI's autonomy rules out the
possibility that its contracts with third parties, and more particularly the arbitration
clauses signed by it, may be considered as contracts concluded by a representative or an
agency, i.e., binding on the founding states. The predominant role played by these states
in AOI ... cannot affect AOI's independence and legal personality, nor can it lead to the
conclusion that AOI bound the founding states when dealing with the third parties. (78)
According to Poudret, (79) this rule remains valid under the new Swiss law, subject to the
proviso that the presumption no longer results from an absence of signature, but from an
absence of mention in the contract of the State or the group for the account of which the
subsidiary would act. The recourse to a subsidiary would, according to Poudret, entail a
presumption of a will not to be bound by the agreement and therefore by the arbitration
clause, and not the contrary, as French courts have often decided.
Several other arbitral tribunals have also invoked the existence of a community of
obligations and interests among the parties to a group of contracts or among companies
of a group that had all participated in the negotiation and performance of a project to
decide that the arbitration clause included in some of the contracts could be opposed to
all the parties or companies which had participated in the economic transaction through
interrelated contracts. (80)
The existence of joint rights, obligations and interests was also fundamental in the
P 276 decision of the arbitral tribunal in a recent ad hoc unpublished case in which the
question arose whether the arbitration clause contained in the agreement between the
claimant and the first defendant also bound second and third defendants. After a very
long and careful examination of the facts, the arbitral tribunal answered in the
affirmative, finding that the claimant could not have regarded its relationship with first,
second, third and fourth defendants other than as a relationship with various members of
a partnership with joint and several liability with respect to the claimant. Within the
framework of this partnership or consortium, the defendant most certainly acted as a
legal entity but was run and financed by the three companies, which were the only
companies that could be solvent and, moreover, had full control over the management of
the defendant.
I. Confusion and Fraud

The word “confusion” as used in arbitral awards and court decisions has various
meanings. In a first sense, courts and arbitral tribunals refer to “confusion” to mean that
all of the various persons involved in a project or all of the various members of a group
all participated, without distinction, through the various contracts signed by all or some
of them, in the performance of a single economic transaction, without the possibility of
determining who took responsibility for what. One could refer to some extent to an
indivisible whole of parties and contracts. (81)
But the term “confusion” is also used in a more negative sense when an individual tries to
create confusion in the mind of his co-contractors, particularly by involving companies of
his group in various interrelated contracts. Here, we are very close to fraud, and the
leading case is probably the ICC partial award of 24 August 1988 in case no. 5730, the Orri
case. (82) The claimant initiated an arbitration against Mr. Z, company X SA and
enterprise X, claiming that the defendants had not paid various invoices issued in
performance of a contract to supply oil for ships. The claimant had concluded two
contractual documents on the same day:
One, a memorandum, which did not include an arbitration clause and which was signed
by Mr. Z and one of his employees (Mr. E), contained a schedule of payment of
outstanding invoices. This memorandum was typed on the letterhead of the company X
SA; on the other hand, a supply agreement was made on the standard form generally
used by the claimant. The named buyer was enterprise X, represented by Mr. Z. His name
was however later deleted and one of its employees, Mr. E, signed in his place. The
12
P 277 contract contained an ICC arbitration clause. The purpose of the agreement was to define
the conditions under which the enterprise could procure marine oils in the main ports
of the world and which were necessary to operate the different ships named in the
contract.
Company X SA did not challenge the jurisdiction of the arbitral tribunal but Mr. Z did,
arguing that he had not signed the supply agreement. X SA also indicated that itself and
enterprise X were one and the same person, X being the trade name used by X SA.
After a careful examination of the facts of the case, the arbitral tribunal decided that Mr.
Z was the true contracting party and that the arbitration clause was valid and bound Mr.
Z. The arbitral tribunal reasoned:
• In the eyes of third parties, all the companies owned by Mr. Z undoubtedly formed a
group of companies depending on him. The existence of such a group had been
recognised in numerous judicial decisions.
• Mr. Z had created a total confusion between his different companies in the eyes of third
parties. In particular, the management and the accounts of the various companies had
been constantly mixed.
• From the beginning, the claimant had dealt with enterprise X and therefore Mr. Z. If the
latter subsequently used manoeuvres to try avoiding being personally bound by his
undertakings, these manoeuvres cannot be opposed to the claimant.
Two years later, in ICC case no. 5721 of 1990, (83) the arbitral tribunal found that it lacked
jurisdiction over Mr. Z, president of one of the defendants and who had signed the two
disputed contracts. The arbitral tribunal found:
In summary, the 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. Nevertheless, where a company or an individual appears to be
the pivotal point in contractual relations in a particular matter, it is appropriate to
examine carefully whether the legal independence of the parties should, exceptionally,
be disregarded in favour of a global judgement. One would entertain this exception
where confusion is fostered by the group or by the majority shareholder. (84)
The arbitral tribunal applied these principles to the facts of the case. It concluded that
they did not reveal a confusion between Mr. Z and company X and therefore the
arbitration clause could not be extended to Mr. Z. The arbitral tribunal further stated:
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
P 278 contracts and undertakings signed by the artificial person. In the present case the
presumptions listed above do not afford complete certainty in this regard. (85)
Finally, fraud and more generally the existence of an abuse of rights have been the first
basis on which arbitral tribunals have relied to pierce the corporate veil. In an ad hoc
interim award of 9 September 1983, (86) the tribunal pointed out that the doctrine of
piercing the corporate veil is based upon the principle of good faith and the concept of
an abuse of rights, i.e., the inadmissible abuse of the separation of legal entities. Piercing
of the corporate veil will take place when a corporation is used inappropriately as a
shield against liability and is essentially under the influence of a natural or legal person.
(87)
J. Equity and Good Administration of Justice

Even if they are not clearly expressed, for obvious reasons, concerns of equity very often
underlie the reasoning of courts and, even more, of arbitral tribunals, especially when an
arbitral clause is extended to the mother company or to subsidiaries or sister companies.
Reference is often made in court decisions and arbitral awards to such notions as
“practicality”; (88) the need for the arbitrator to be seized of all the economic and legal
aspects of the dispute; (89) the fact that if a company has to start two proceedings, one in
court and one before an arbitral tribunal, in relation to “inherently inseparable facts”,
the arbitration proceedings would be rendered “meaningless and the federal policy in
favour of arbitration effectively thwarted”; (90) and to the circumstance that a large
multinational brokerage firm can only act through its employees and an arbitration
agreement “would be of little value if it did not extend to them” (although they are not
signatories). (91)
In the first interim award in the Westland case, (92) the arbitrators stated at the end of
the award:
Finally, mention must be made of the practical reasons and considerations of equity
which have motivated the arbitrators in this matter, quite apart from the legal ground.
P 279 Westland is justified in bringing the four states themselves before the arbitrators. Were
this not the case, there would be a real denial in justice. In other words, Westland would
not recover anything.
In another recent unpublished ad hoc case, the arbitral tribunal also stated that its
13
decisions on matters of competence were justified not only in law but also in equity; that
this did not mean that the tribunal sought to give a legal justification to any
preconceived idea it might have had of equity; that on the contrary, the arbitral
tribunal's strictly legal conclusions were at a second stage of its analysis, consistent with
the spirit of justice that is also one of the basic features of international arbitration.
This, and the fact that the stated reasons for including non-signatories have very often
appeared to be interchangeable, not to say contradictory, have led various arbitrators
and commentators to wonder whether these rationales are not sometimes ex-post facto
creations, and to consider that “the equities that appear from the underlying facts are
likely to be far more important to the outcome than which theory of law is advanced.” (93)
Part II. May an Arbitration Clause be Extended to Non-signatories within a

Group of Companies: Other Companies of the Group, Directors,
Shareholders?
A. Introduction
Given the increasing number and complexity of national and international groups of
companies and the fact that for financial, tax or other commercial reasons, there is not
always an identity between the company or companies that have signed the agreement
and those that perform it, international arbitrators and national courts are more and
more often confronted with the issue whether an arbitration agreement concluded by one
company of the group may be extended or imputed to other non-signatory companies of
the same group as additional claimants or defendants.
B. Analysis of Case Law

1. 1. The Factual Schemes
The arbitral awards and court decisions in which the tribunal was confronted with the
issue of extension of the arbitration clause to non-signatories may be subdivided into
some nine different factual patterns which may themselves be put into two groups:
extension of the clause to one or several other defendants, and extension to one or
several other claimants.
Extension to one or several non-signatories as additional defendants:
P 280 – to the parent company of the group;
– to one or more subsidiaries or one or more companies of the group that are not
subsidiaries;
– to a sister corporation and an employee;
– to a director or general manager;
– to an individual, possibly a majority shareholder of the group or another company
within the group;
– Extension to one or several non-signatories as additional claimants;
– to the parent company of the group;
– an individual (possibly a majority shareholder of the group) and other companies
within the group;
– to one or more subsidiaries or one or more companies within the group that are
not subsidiaries;
– to a director and principal shareholder.
We will analyse below the various cases that fall within these various categories.
2. Extension to One or More Non-signatories as Additional Defendant(s)
a. Extension to the Parent Company
This fact pattern is one which had to be addressed by the Paris Court of Appeal in a
decision delivered on 26 November 1986 in the case Société Sponsor A.B. c/Lestrade. (94)
A company, Sponsor AB, the parent company of the Swedish group Sponsor, had started
negotiations with the French group Lestrade with a view to acquiring the control of two
companies of this group, “Stéréoscopes Lestrade & Cie” and “Sodilest”. A protocol was
signed between Lestrade and Sponsor AB which provided inter alia for the setting up of a
French subsidiary, Sponsor S.A. which would hold the shares of the two target companies.
Later, the Lestrade group transferred to Sponsor SA 80% of the shares of Stéréoscopes
Lestrade & Cie and Sodilest. The same day, Sponsor SA also signed an irrevocable
promise to purchase from the Lestrade group the remaining shares of the two target
companies. This agreement contained an arbitration clause. Four years later, Lestrade
exercised the purchase option but Sponsor SA did not respond. The Lestrade group was
therefore forced to start arbitration against Sponsor SA and its parent company, Sponsor
AB. Again, the defendants did not respond, and the Lestrade group was forced to start
proceedings before the Commercial Court of Tarbes in order to have an arbitrator
appointed for the two defendants. The Commercial Court appointed an arbitrator and the
14
defendants appealed. They argued that the arbitration clause could not be opposed to
Sponsor AB. The Paris Court of Appeals confirmed the first decision. It pointed out that
Sponsor SA had been created by Sponsor AB only to acquire the target companies, and
P 281 that: “... whereas Sponsor A.B. played an important role in the conclusion of the promise
to purchase, it played no lesser role as regards its non performance. Consequently, the
third party sought is such in appearance only, and in fact seems to be the soul, the
inspiration, to put it bluntly, the mastermind of the contracting party.” (95) The principles
underlying the decision were summarised by the court as follows:
It is admitted in law that the arbitration clause expressly accepted by some of the
companies of the group, must bind the other companies which, owing to the role they
played in the conclusion, performance or termination of the contracts containing said
clauses, appear, according to the common will of all the parties to the proceedings, as
having been true parties to these contracts, or as being directly concerned by them and
by the disputes that may arise from them.
In fact, a group of companies, in spite of the separate legal personality of each of the
latter, has a single economic reality, which the courts must take into account, as its
existence is recognized by the usages of international trade. (96)
On the contrary, in ICC case no. 4402, (97) an arbitral tribunal sitting in Geneva refused to
extend to the parent company SD the arbitration clause which had been signed by X for
the account of a subsidiary FD, specially set up to perform the disputed project. The
arbitrators not only pointed out that the parent company had not signed the agreement,
as required at the time by article 6 of the Swiss Concordat, but also based their decision
on the following elements:
– X only had the power to bind the subsidiary, and consequently, signed the contract on
behalf of the latter;
– X did not have the power to act in the name of the group and, in particular, in the name
of the parent company;
– at the time of the signature of the first memorandum of agreement, the plaintiffs
already knew that the subsidiary, and not the parent company, would perform the work. If
they had intended to include the parent company in the agreement, they should have
done so before signing.
This award, compared to the Sponsor v. Lestrade case, shows the opposition between the
liberalism of French courts (and arbitrators) and the greater reluctance of Swiss
arbitrators (and courts) to extend an arbitration clause signed by a company to other
companies of the group. According to Poudret, (98)
In short, Swiss law ignores the notion of group of companies ... and 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
P 282 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. (99)
On the other hand, in another ad hoc award rendered in Switzerland in 1991, (100) the
tribunal, after determining that the theory of a group of companies could not be applied,
decided to pierce the corporate veil and to extend to the parent company the
arbitration clause entered into by its wholly-owned subsidiary. The arbitral tribunal
based its decision on the total control and mastery of the subsidiary by the parent
company, the inadequacy of the subsidiary's capital in view of the nature and value of
the transactions entered into by it, the total confusion in their administration,
management and assets, and the fact that the subsidiary was not correctly dissolved and
its assets channelled to the parent company.
Was this approach correct? It would seem not, in the opinion of the Swiss Federal
Supreme Court, if one reads its decision of 29 January 1996, (101) in which it rejected an
action to set aside introduced against an interim award of 25 October 1994. B had
concluded a contract for the construction of a pipeline with a consortium consisting of YY,
other companies belonging to the YY group and company M. On the other hand, the
Association A and ZZ had entered into a subcontract for part of the works with Y, a
subsidiary of YY, which was not part of the consortium. The subcontract contained an
arbitration clause providing for arbitration in Switzerland. In December 1990, Z and ZZ
started arbitration proceedings against Y and YY. The arbitral tribunal decided in an
interim award that it did not have jurisdiction over YY. The decision was approved by the
Swiss Federal Court which made the following points:
• The group of companies doctrine does not per se justify extending an arbitration clause
to another company within the group.
• Unless there is an independent and formally valid manifestation of consent of the other
company of the group to the agreement to arbitrate, such an extension will be granted
only in very particular circumstances which justify a bona fide reliance of a party on an
appearance caused by the non-signatory. (102)
• The doctrine of piercing the corporate veil has nothing to do with the issue of consent or
reliance on appearance and should not either be applied in a case of confusion of assets
15
or undercapitalisation of the subsidiary. The latter will not justify an extension of the
clause unless there is a manifestation of assent.
• Applying the doctrine of piercing the corporate veil supposes that the facts of the case
P 283 lead to denying the legal independence of the subsidiary, with the consequence that
the arbitration clause will be directly imputed to the mother company.
In relation to the same factual pattern, the requirements of American courts to decide
the extension of the clause to the parent company are much less stringent. As we have
already emphasised, in the United States, the federal policy in favour of arbitration is of
paramount importance and even seems to outweigh the requirement of intent to be
bound by the clause. A close relationship between the entities or evidence that they are
inherently inseparable seem to suffice to permit an extension to the parent company.
This was illustrated in Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc. (103) and J.J. Ryan &
Sons v. Rhone Poulenc Textile, S.A. (104)
In the Sunkist case, the licensor of a soft drink trademark started an action against its
licensee's parent corporation for allegedly managing the licensee in a manner that
caused the licensee to violate the licensing agreement. The parent argued that under the
terms of the licencee agreement, the licensor should be compelled to pursue its claim
through arbitration. Although the parent company was not a signatory of the arbitration
clause, the Court of Appeals for the 11th Circuit agreed and decided that in view of the
“close relationship between the entities involved as well as the relationship of the
alleged wrongs to the non-signatory's obligations and duties in the contract,” the licensor
was equitably estopped from asserting the lack of a written agreement between itself
and the parent.
In the Ryan case, the Court of Appeals for the 4th Circuit justified its decision to accept
the extension of the clause to the non-signatory parent company:
When the charges against a parent company and its subsidiary are based on the same
facts and are inherently inseparable, a court may refer claims against the parent to
arbitration even though the parent is not formally a party to the arbitration agreement ...
If the parent corporation was forced to try the case, the arbitration proceedings would be
rendered meaningless and the federal policy in favour of arbitration effectively thwarted.
(105)
b. Extension to One or More Subsidiaries or One or More Companies of the Group Which
Are Not Subsidiaries
In ICC case no. 7626 of 1985, (106) the parties to the arbitration agreement were B and A-
Europe, a holding company. B started arbitration proceedings against A-Europe and A
which was part of the latter. B argued that A was the alter ego of A-Europe and that it was
A who was the real contracting party, the real party in interest; or at least that A-Europe
was acting as the undisclosed agent of A, thus rendering A liable for its agent's actions. B
P 284 relied in its argument on the fact that all negotiations were conducted by A and that A-
Europe's late involvement in the contract was purely as financial guarantor. The arbitral
tribunal, sitting in London, found that it had no jurisdiction over A. It decided that it
could not reach a contrary conclusion without lifting the corporate veil, which it refused
to do, resting its position on the precedent of Adams v. Cape Industries plc. (107) In that
case, the Court of Appeals held:
... We do not accept as a matter of law that the court is entitled to lift the corporate veil
as against a defendant company which is the member of a corporate group merely
because the corporate structure has been used so as to ensure that the legal liability (if
any) in respect of particular future activities of the group ... 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. (108)
The Court of Appeals accepted however that it might possess the power to pierce the
corporate veil, but only in circumstances in which the defendant, by means of a
corporate structure, attempted to evade mandatory legal provisions or the enforcement
of existing third-party rights.
In another ICC case, no. 4504 of 1985-1986, (109) the arbitral tribunal also considered that
it could not accept jurisdiction in relation to the second defendant, a company within the
same group as the first defendant, but not signatory to the agreement with the claimant.
The arbitration took place in Geneva. Two arguments were raised by the claimant to try to
justify the jurisdiction of the arbitral tribunal vis-à-vis the second defendant:
1. Both companies had institutional links and indeed had one single identity, the second
company being totally dependent on the first. On this point, the arbitral tribunal
concluded that in law, they were two independent companies.
2. After the signature of the contract, the second defendant had behaved in such a way to
suggest that it had been signatory of the arbitration agreement and would therefore have
ratified it. The claimant pointed out the role played by the president of the second
defendant in the negotiation and the performance of the agreement. In this respect, the
arbitral tribunal pointed out that if the president of the second defendant had signed the
agreement, he had done so as a representative duly mandated by the first defendant,
16
and if he had written letters to the claimant, they had been signed in the name and for
the account of the first defendant.
After a careful examination of the facts, the arbitral tribunal further admitted that there
had been interference on the part of the second defendant in the performance of the
P 285 agreement, but one could not deduce therefrom that the second defendant had
ratified the agreement. In other words, from a legal point of view, these interferences
could not amount to ratification. (110)
In the United States, in the case United Int'l Holdings, Inc. v. Wharf (Holding) Ltd., (111) the
Court of Appeals for the 10th Circuit, adopting a more conservative approach than the
one followed in the 11th and 4th Circuit cases analysed above, (112) refused to extend the
effect of an arbitration clause in a contract between one of a group of defendant
companies and one of a group of plaintiff companies to all of the defendant companies.
The court's reasoning was that “Wharf Cable was a separate legal entity from the other
Wharf companies and Wharf Cable alone, not its affiliates or parent companies, signed”
the contract including the arbitration clause. It further pointed out that “courts do not
lightly pierce the corporate veil, even in deference to the strong policy favouring
arbitration”. (113)
On the other hand, in ICC case no. 1434 of 1975, (114) the arbitral tribunal accepted the
extension of the arbitration clause to non-signatory members of the same group in the
following situation. Two contracts had been concluded by a state company of country B,
various companies of group A and Mr. A, its main director. The two agreements, which
were part of a larger network of contractual relationships, concerned the construction of
a plant and its technical management at the time of starting its operation. The arbitral
tribunal noted that the designation of the parties had been made with great flexibility
and a total absence of formalism. One contract mentioned the American company A,
represented by its president, Mr. A; another agreement was concluded by Mr. A
“representing organisation A”. (115) In the same spirit, Mr. A. concluded another
agreement whose preamble pointed out that he signed in his own name as well as in its
capacity of agent of A Canada and A England, two companies within group A. After a
careful examination of the facts, the arbitral tribunal accepted the extension of the
clause to the non-signatory defendant members of Group A, on the following grounds:
• a reasonable interpretation of the contract, the common will of the parties and the
spirit of the whole operation;
P 286 • the fact that the claimant “wanted to deal and in fact did deal with the group or
organization A, represented by its chairman Mr. A, and that the latter throughout the
conclusion of the agreements required by the transaction behaved in conformity with
what he was in fact, that is, the manager in charge and the leader of this large industrial
group”; (116)
• the practice of contracting with groups of companies which, for the arbitral tribunal,
reveals the true intention of the parties:
As is frequently the case in international industrial agreements of this scope, the country
or the national company that intends to acquire and have installed on its territory a new
plant or industrial complex deals with a group, or with a large “multinational”
corporation which, for reasons of organisation and of expediency internal to the group,
will entrust the performance of the transaction to one or more subsidiaries that either
already exist or are to be created ad hoc. In a general manner, the contracting party has
no direct interest and does not intend to interfere in these internal organisation matters
of the group, provided that the latter guarantees, by appropriate clauses, the proper
performance of the obligations undertaken.
In this particular case
... the variations in the choice or designation of the companies of the group which were
called upon to carry out the transaction clearly show that for all parties, these
designations were of secondary importance, as they were in fact methods opted for by
Group A to perform the obligations it had undertaken. (117)
Although it did not concern the issue of extension of an arbitral clause to other
companies of the group, ICC case no. 5103 of 1988 (118) is worth mentioning. The dispute
opposed three European companies belonging to the same group, the plaintiffs, and
three Tunisian companies, the defendants. The defendants filed a counterclaim. The
arbitral tribunal decided a set-off between the reciprocal debts of the parties and
ordered the defendants jointly to make payment of the balance, relying on the notion of
group of companies, in the following terms:
The arbitral tribunal considers that in this case, the conditions for recognising the unity of
the group are met, as the constituent companies thereof have all participated, in a
confusion that is as real as it is apparent, in a complex international contractual
relationship, where the interest of the group took priority over the interest of each of the
companies. The security of international relations requires that due account be taken of
this economic reality and that all the companies of the group are held jointly and
severally liable for the debts from which they have directly or indirectly benefited on this
occasion. Furthermore, this admission of reciprocal joint and several liability, active and
17
passive, in the relations between companies belonging to the same group, is in line with
the positions taken expressly or implicitly by all plaintiffs and defendants, with equity,
and is not contrary to any rule of international public policy of the French and Tunisian
P 287 legal systems. (119)
In Smith/Enron Co-Generation Limited Partnership, Inc. v. Smith Co-Generation
International, Inc., (120) the US Court of Appeals for the 2nd Circuit enforced an
arbitration agreement by requiring a party to the agreement to arbitrate with companies
which were no longer parties to the agreement. The disputed agreement related to a joint
venture between Enron and Smith to construct and operate a power plant. The original
parties to the agreement later assigned their rights to their respective affiliates. When a
dispute arose, the Smith affiliates who had been assigned rights under the agreement
brought a lawsuit against five Enron affiliates who were no longer parties to the
agreement, their rights having been assigned to other affiliates. The defendants invoked
the arbitration agreement. Smith's principal argument was that there was no valid and
enforceable agreement to arbitrate between the parties to the proceedings; that in
particular, none of the Enron petitioners had the right to enforce a contract to arbitrate
to which they were no longer parties.
The Court of Appeals concluded that the Enron petitioners, although they were no longer
parties to the disputed agreement, had the right to enforce the arbitration clause. The
court based its conclusion on an identity of interest between petitioners and the current
Enron signatories to the disputed agreement. It also based its conclusion on estoppel,
considering that by treating the Enron entities as a single unit in its complaint in the
lawsuit, Smith was estopped from claiming that the current signatories to the disputed
agreement were distinct from the defendants in those proceedings.
c. Extension to a Sister Corporation and an Employee
These facts were addressed by the Court of Appeals for the 3rd Circuit in the United
States in the case Pritzker v. Merrill Lynch, Pierce, Fenner & Smith. (121) The case involved
a suit by a pension plan trustee against a brokerage firm, an employee of the firm and a
sister corporation of the firm. The underlying agreement containing the arbitration clause
had only been signed by the brokerage firm and the pension fund. Neither the employee
nor the sister corporation was a signatory. The defendants moved to stay court
proceedings and to compel arbitration. The court granted the request. It explained that
an “entity such as Merrill Lynch can only act through its employees, and an arbitration
agreement would be of little value if it did not extend to them.” (122) It further decided
that agency logic also required the application of the arbitration clause to the sister
corporation which was obliged to perform certain services in connection with the
trustees' accounts and whose interests were therefore directly related to, if not
predicated upon, the brokers' conduct. The Circuit Court concluded that “where the
P 288 parties to (an arbitration) clause unmistakably intend to arbitrate all controversies
which might arise between them, their agreement should be applied to all claims against
agents or entities related to the signatories.” (123)
It is obvious that such a liberal approach would not have been adopted by a court in
Europe, in the absence of specific circumstances showing (at least implicitly) the
intention of the employee and the sister company to be bound by the arbitration clause.
d. Extension to a Director or General Manager
In ICC Case no. 4972 of 1989, (124) a contract had been concluded between X and Y on the
one hand and Z on the other hand. Under the contract, Z granted X and Y the exclusive
right to distribute its range of perfume products in France. Z decided to terminate the
contract. X and Y considered that the termination was abusive and started the
arbitration against Z and Mr. W, an individual, General Manager of Z, who had signed the
disputed contract. The arbitration took place in Paris. To support their claim against W,
the claimants invoked the notion of a group of companies alleging the active role of Z in
the negotiation and the performance of the agreement, claiming that the real contracting
party was group Z and in particular its leader, Mr. W. The arbitral tribunal found that it
did not have jurisdiction vis-à-vis W, since the role he had played in the negotiation and
the performance of the agreement did not make him a party to the contract.
In the United States, in the famous case Kaplan v. First Options of Chicago, Inc., (125) the
court refused to allow one party to an agreement containing an arbitration clause to
pierce the corporate veil to force a corporate president and sole shareholder of the other
party to arbitrate. The Court of Appeals for the 3rd Circuit pointed out that in signing a
loan agreement in his corporate capacity and a letter of agreement in his personal
capacity, both as part of a work-out agreement, the corporate president never agreed or
intended to be bound personally by the arbitration clause in the loan agreement. The
decision was confirmed by the Supreme Court. But its opinion concerns primarily the
question of whether courts or arbitrators should decide who has agreed to be bound by
an arbitration clause. According to the Supreme Court, the answer “turns upon what the
parties agreed”. (126) The court emphasised that “[A]rbitration is simply a matter of
contract between the parties; it is a way to resolve those disputes–but only those
disputes that the parties have agreed to submit to arbitration ... [A] party can be forced
P 289 to arbitrate only those issues it specifically has agreed to submit to arbitration.”
18
In Canada, the Court of Appeal of the Province of Quebec, in a decision of 30 July 1996,
(127) decided that it was justifiable to extend to the two main shareholders and managers
of defendants D the arbitration clause contained in the agreement concluded between D
and the claimant, the company CPM. The court first underlined the great liberalisation
(128) of its case law in relation to the extension of the clause and the fact that each
decision turns upon the facts of the particular case. It justified its decision by the fact, on
the one hand, that D could enter into the arbitration agreement only through the will of
its main shareholders and managers, and on the other hand that the dispute could end
up in an absurd result if the extension was not authorised. One of the judges dissented.
(129) On the other hand, in the province of Alberta, the Court of Appeal, in a decision of 16
January 1992, (130) decided, after a close analysis of the case law, including the Dow case,
that it could not compel persons who were not parties to the arbitration agreement to
submit to arbitration.
e. Extension to an Individual (Possibly a Majority Shareholder of the Group) or Another
Company Within the Group
In a case decided by the Paris Court of Appeals on 7 July 1994, (131) the facts were as
follows. UEI had entered into an agreement with Attock Cement Company Ltd. (ACL) for
the construction by UEI of a cement manufacturing plant in Pakistan. The contract had
been signed by Mr. G.R. Pharaon. A letter of guarantee had been issued in favour of UEI by
Redec. It had been signed for the account of Redec by Mr. Pharaon and contained a
reference to the turnkey contract. An arbitration was started by UEI against ACL, ACPL (a
subsidiary of ACL which had adhered to the contract at the request of UEI), Redec and Mr.
Pharaon. The ICC considered that there was no prima facie arbitration clause between
UEI and Mr. Pharaon. With regard to Redec, the arbitral tribunal considered that it was
not established that Redec had accepted the arbitration clause included in the turnkey
agreement. It concluded that the reference to the turnkey contract in the letter of
guarantee and the fact that it had been signed, like the turnkey contract, by Mr. Pharaon,
was not sufficient to establish an acceptance of the arbitration clause in the absence of
P 290 any clear reference to the latter.
In another ICC case no. 5721 of 1990, (132) an employer had concluded an agreement with
X Egypt (main contractor) and had appointed SA, a European company, the claimant in
the arbitration, as subcontractor. SA had concluded two subcontracts with X Egypt–which
had presented itself as a subsidiary being established (en formation) in Egypt of a US
company, X USA, represented by its president, Mr. Z. Mr. Z had signed the two contracts on
behalf of X Egypt. The latter did not perform its duties and the employer therefore
decided to expel it from the site and gave the direct responsibility of the project to SA. X
Egypt then tried to call several first demand guarantees–guarantee of restitution of down
payment and guarantee of good performance–which had been supplied by SA. The latter
started an arbitration against X USA, X Egypt and Z in Geneva. SA requested the arbitral
tribunal, among other things, to decide that the subcontracts had been terminated and
that the letters of guarantee were null and void.
In the first place, X USA argued that the arbitral tribunal had no jurisdiction and that only
X Egypt had entered into the contract. It emerged that X Egypt was only a branch, without
legal personality. The arbitral tribunal therefore decided that it was indeed X USA, which
through its Egyptian branch had signed the subcontracts, and that it therefore had
jurisdiction against X USA.
On the other hand, Mr. Z argued that the arbitral tribunal did not have jurisdiction over
him, since he had not been party to the subcontracts, which he had signed in his capacity
as president of X. To decide this issue, the arbitral tribunal applied the rules of lex
mercatoria, i.e., the general notion of good faith in business and the usages of
international commercial trade. The tribunal also proceeded to examine the position of
the law of the United States, Switzerland and Egypt concerning the lifting of the
corporate veil, and concluded:
In the United States, the corporate veil may be lifted in particular circumstances such as
where the subsidiary is a “mere instrument” of the parent company, that is, where one of
the parties is in fact no more than a representative or mere instrument in the control of
another... The concept of lifting the corporate veil ... is justifiable wherever the principle
of limited liability gives rise to situations which are wholly unjust.
In Swiss law ... [t]he Durchgriff theory is based upon the prohibition against abuse of law
... a company's independence should only be disregarded in exceptional cases, where it
is used fraudulently, that is, contrary to the principle of good faith
...
Egyptian law does not contradict these general principles. It too attaches decisive
importance to the principle of good faith and punishes any abuse of the law .. . .
The arbitral tribunal then proceeded to set forth the principles which, in its opinion, were
to govern the issue of extension of the arbitration clause:
It is worth adding that arbitration is essentially based upon the principle of consent. So
too, any extension of the scope of application of the arbitration clause must have a
P 291 voluntary basis.
19
Of course, such an intention can be merely implicit, otherwise any discussion of extension
would have no meaning. But any extension must not, on the other hand, take place as a
way of punishing the behaviour of a third party. Such action must be reserved to the
ordinary courts before which a party may raise an argument drawn from the lifting of the
corporate veil.
In summary, the fact that two companies belong to the same group, or that a single
shareholder has a dominant position, are never sufficient, in and of themselves, to legally
justify lifting the corporate veil. Nevertheless, where a company or an individual appears
to be the pivotal point in contractual relations in a particular matter, it is appropriate to
examine carefully whether the legal independence of the parties should, exceptionally,
be disregarded in favour of a global judgement. This exception will be accepted where
confusion is fostered by the group or by the majority shareholder. (133)
The arbitral tribunal applied the above principles to the facts of the case. It concluded
that they did not reveal the existence of a confusion between Mr. Z and company X and
therefore that the arbitration clause could not be extended to Mr. Z. The tribunal further
pointed out that:
An arbitral body must be very circumspect in relation to the extension of the effect of an
arbitral clause to a director or manager who has acted strictly in this capacity. Any such
extension presupposes that the artificial person has been no more than the business
instrument of the natural person, so that one can ascribe to the natural person the
contracts and undertakings signed by the artificial person. In the present case, the
presumptions enumerated above do not afford complete certainty in this regard.
The arbitrator concluded that it was not certain that
the claimant intended to deal with Mr. Z through X, or that Mr. Z intended personally to
be a party to the arbitration agreement. If claimant wishes to put Mr. Z's liability in issue
because of fraud or other conduct, such as the breaking up or the appropriation of X's
assets, it must bring suit against Mr. Z before the competent courts: the extension of an
arbitration clause does not constitute the sanction of a liability but must have, as we
already said, a voluntary basis.
As we have seen above, (134) the arbitrators–followed by the Paris Court of Appeals and
the French Cour de Cassation–reached a different conclusion in the Orri case. It decided
to extend the arbitration clause to Mr. Z, the owner of group X who had entertained a
total confusion between its different companies in the eyes of third parties and had used
manoeuvres to avoid being personally bound by its undertakings.
3. Extension to One or More Non-signatories as Additional Claimant(s)
a. Extension to the Parent Company
In ICC case no. 6673 of 1992, (135) claimant 1 had entered into two contracts with the
defendant: an exclusive licence of know-how and a confidentiality agreement. Both
P 292 agreements contained the same arbitration clause. Claimant 2 was the parent
company of claimant 1. It had not signed the agreement but argued that it was the owner
of the licence of know-how and had therefore suffered damages because of the violations
imputed to the defendant. The arbitral tribunal decided that the fact that the claimant
might well own the intellectual property rights licensed to the defendant did not give
him the quality of co-owner of the contractual rights and obligations flowing from the
disputed agreements containing the arbitration clause. It did not therefore have
jurisdiction over claimant 2.
On the other hand, in the ICSID award Holiday Inn v. Morocco of 1 July 1973, (136) the
contractual negotiations had been carried out by the parent company at a time when the
subsidiary had not yet been established. Moreover, the non-signatory parent company
had guaranteed the performance by its subsidiary of the agreement containing the
arbitration clause. To the extent that it had performed the contractual obligations, an
argument of subrogation was raised and the arbitral tribunal decided that the parent
company could invoke the arbitration clause. The agreement also provided that the
contract could be transferred, with the consequence that the tribunal could make the
point that the contracting parties had provided for a large degree of flexibility in the
determination of the companies which would assume the responsibility for the
performance of the contract.
b. Extension to an Individual (Possibly a Majority Shareholder of the Group) and Other
Companies Within the Same Group
In ICC case no. 9517, (137) the facts were unusual to the extent that an individual claimant,
Mr. X, presumably owner or at least majority shareholder, of a group wanted to avail
himself of an arbitration clause included in an agreement to which he was not formally a
party to join as claimant, together with two other companies of his group, B and C, also
non-signatories, the first claimant in the arbitration, company A, a member of the same
group, the only one who had signed the agreement with the defendant, Mr. Z. In order to
justify this extension, the additional claimants, X, B and C argued among other things that
Mr. Z had negotiated the agreement with Mr. X, that at that time it did not make any
difference to Mr. Z who would be his counterpart, that Mr. X was the pivotal element in
20
the contractual relationship, that he could have chosen a company other than A to
conclude the agreement, and finally that X, B and C had been instrumental in the
negotiation and/or the performance of the disputed agreement. Before making its
decision, the arbitral tribunal restated the principles that could be drawn from existing
P 293 case law on the issue of extension of the arbitration clause to a non-signatory.
On the one hand, although a large part of the case law concerns the extension of the
clause to non-signatory respondents, and although the issue generally arises in relation
to companies, not individuals, the principles that govern the issue may generally be
considered applicable, mutadis mutandis, to a case where a party–individual or
company–tries to avail itself of an arbitration clause to which it did not formally adhere.
In other words, whether additional claimants tried to avail themselves of the clause or
whether the respondent Z had tried to extend the clause to the additional would-be
claimants, the answer should be the same. The principles that apply in the first case also
govern the answer to the second and vice-versa.
Courts require proof of the existence of intent–at least implicit–of all the parties, that the
non-signatories be parties to the underlying contract and its arbitration clause. This
intent must be common to the non-signatories and the other parties to the arbitration
clause.
The existence of such intent–to the extent it is only implicit–is to be found in the role the
non-signatories have played in the conclusion and performance of the agreement.
One element which is also taken into consideration by arbitral tribunals to determine the
implicit intent that a non-signatory be party to the agreement is whether the non-
signatory may be deemed to have agreed to assume the obligations flowing from the
underlying agreement, in the same manner as the parties who have signed the
agreement.
Arbitral tribunals sometimes extend a clause to a non-signatory on the basis of the
confusion engendered by the various companies of the group (signatories and non-
signatories) in the conclusion and the performance of the agreement.
On the other hand, the fact that those who have signed the arbitration agreement and the
non-signatories belong to the same group, or the domination of a shareholder, are never
in themselves sufficient to justify an extension of the clause.
The arbitral tribunal also referred to the English precedent, Adams v. Cape Industries plc.,
already quoted above, (138) in which the court refused to extend the arbitration clause to
a non-signatory company of the group merely because the corporate structure had been
used so as to ensure that legal liability in respect of particular future activities of the
group would fall on another member of the group (the company signatory of the clause)
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. The only exception is the hypothesis of fraud, for example
when it is evident that the company which is 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
P 294 avoid being personally bound by its undertakings. (139)
Applying these principles to the case, the arbitral tribunal considered that it was clear
that additional claimants B and C were in no way involved either from the beginning or
later on in the conclusion or carrying out of the disputed agreement; that additional
claimant X indeed had some limited involvement in the conclusion and performance of
the agreement. On the other hand, it could undoubtedly have chosen to be a party to the
disputed contract and instead chose to exercise this activity solely through company A,
which choice undoubtedly was the result of a weighing of its own interest; it chose to take
a distant and merely supervisory role in the performance of the contract; it could not now
be allowed to assert the contrary, just because it might be in its interest to do so. The
arbitrators therefore concluded that they did not see any reason to lift the corporate veil
of claimant A in order to permit the extension of the arbitration clause to claimant X.
They decided that they had jurisdiction only in relation to claimant A.
c. Extension to One or More Subsidiaries or One or More Companies Within the Group
Which Are Not Subsidiaries
In ICC case no. 6519 of 1991, (140) the contract containing the arbitration clause had been
signed by XA, majority shareholder of XB, XC and XD, which was to bring part of its shares
in those companies to XB, and YA, which was also to bring to XB various shares which it
held in other companies of its group. The arbitral tribunal considered that the fact that
shares held by XA in other companies of its group were to be brought to XB was not
sufficient to find that XC and XD were concerned by the underlying agreement containing
the arbitration clause; but that on the other hand, XB was directly concerned by the
agreement and indeed, had taken steps in order to convene a general assembly to
modify accordingly its own by-laws; that it had in this way expressed its will to
implement the provisions stipulating to its benefit and in particular, the arbitration
clause which made an indivisible whole with the totality of this agreement. The arbitral
21
tribunal indeed considered that:
As things stand, the arbitration clause can only be applied to the companies of group X
which did effectively take part in the negotiations which led to the signature of the
Protocol or which are directly concerned by it, to the exclusion of those which were
nothing but instruments of a financial transaction between the hands of a majority
shareholder ... . (141)
In ICC case no. 2375 of 1975, (142) the underlying agreement had been concluded between
a French company W, which at the time of conclusion was the parent company of the
P 295 claimant X, and the second defendant Z, parent company of the first defendant Y. The
arbitration had been initiated by X against Y and Z. Neither X, the claimant, nor Y, the
first defendant, had formerly been a party to the disputed agreement.
The arbitral tribunal decided that the parent companies had clearly “stipulated” not only
for themselves but also for their respective subsidiaries and that it had therefore
jurisdiction over all parties to the arbitration. It based its decision on the concept of
groups of companies. More precisely, it deduced from the protocol signed by W and Z
that it was “a whole where each of the dominated and dominant companies of the two
groups are indissolubly bound and committed,” a complex network of rights and duties,
(143) and that therefore “... it would be inconceivable that the arbitral tribunal should
isolate the (arbitration) clause of Article 9 from these complex links and decide that it
does not apply to the present proceedings.”
One of the most famous cases in relation to groups of companies is ICC case no. 4131 of
1982, the Dow Chemical case. (144) The Dow Chemical group had entered into two
contracts for the distribution and sale of its products in France. The first one (the
distribution agreement) had been concluded between Dow Venezuela which had
subsequently assigned the contract to Dow Chemical AG (Zurich), itself a subsidiary of
Dow USA, and a French company whose rights had been later assigned to Y (France). The
second contract had been concluded between X Europe SA (Zurich), a subsidiary of X AG
(Zurich), on the one hand, and company Z (France), company Y and a third company F
whose rights were assigned to Y. The arbitration proceedings had been started by Dow
Chemical France (France), Dow Chemical Company (USA), Dow Chemical AG (Switzerland)
and Dow Chemical Europe (Switzerland) against Isover Saint Gobain. The latter argued
that no arbitration clause existed between itself and Dow Chemical France and Dow
Chemical Company.
The arbitral tribunal determined the test to be applied as follows:
Considering, in particular, that the arbitration clauses expressly accepted by certain of
the companies of the group should bind the other 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.
In the case under reference, the arbitral tribunal decided that it had jurisdiction over all
the parties. It pointed out that:
• Dow Chemical Company USA exercised 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;
• neither the sellers nor the distributors had attached the slightest importance to the
P 296 choice of the company within the Dow group that would sign the contracts. In reality,
all the entities of the Dow group involved in the distribution in France understood
themselves to be contracting with the distributor (or distributors) in France and likewise
it was with the aggregate of these entities that the defendant's predecessors understood
themselves to be contracting;
• Dow France played an equally preponderant role in the performance of the contract as
it did in the establishment of the contractual relations and for exercising its contractual
activities the distributor necessarily needed to make use of the trademarks belonging to
the parent company, Dow Chemical Company USA;
• Dow Chemical France and Dow Chemical USA played an essential role in the termination
of the contract.
d. Extension to a Director and Principal Shareholder
In an ad hoc case which was decided by an award of 27 October 1989, (145) Marine Drive
Complex (MDCL), a foreign investor, had entered into an investment agreement with
Ghana Investment Centre (GIC), seeking investment concessions from it. Mr. B was the
majority shareholder and chairman of MDCL. MDCL was later expropriated and started an
arbitration with Mr. B as co-claimant against GIC and the Government of Ghana. The
tribunal was requested to determine whether it had jurisdiction over the parties. As far as
Mr. B was concerned, the arbitral tribunal answered in the affirmative, even though he
was not party to the GIC agreement. The tribunal based its conclusion on the fact that Mr.
B was chairman and principal shareholder of MDCL and had played a major role in the
financing and directing of the project, a fact that was well known to GIC. The tribunal
22
found further support for this conclusion in article 22 of the GIC agreement which, after
providing that no enterprise approved under the code should be expropriated by the
government, added that “No person who owns, whether wholly or in part, the capital of an
enterprise approved under the code shall be compelled by law to cede his interest in the
capital to any other person.”
C. Conclusion
It is very difficult to draw general conclusions from the above survey of the case law. The
“extension” of the arbitration clause to other companies of the group–non-signatories–
started in France, and still today, its courts and arbitrators are among the most
innovative in the development of this jurisprudence. Swiss courts, on the other hand,
appear extremely reluctant to accept the extension of an arbitration clause to non-
P 297 signatories. A leading Swiss author has recently written that the notion of a group of
companies does not exist in Swiss law (146) and the same position also seems to prevail
in England, where such a doctrine is said to be inconsistent with the principle of privity of
contract, the principle of the corporate veil and the treatment of derivative actions.
Moreover, the principles of lex mercatoria are not part of English law. The issue of who is
party to the arbitration clause is therefore mainly viewed as an issue of consent, but
“extension” may nevertheless be achieved by recourse to such other theories as agency,
trust or piercing the corporate veil. The same theories are also applied in the United
States, which to some extent appears to be one of the most liberal jurisdictions with
respect to the extension of the arbitration clause to non-signatories.
Subject to these reservations, a first conclusion may be drawn from the awards and court
decisions to the effect that the determination whether an arbitral clause should be
extended to other companies of the group or its directors or shareholders is “fact
specific” and may differ depending upon the circumstances of the case. (147) As was
expressed by the arbitral tribunal in its first interim award in ICC case no. 9517: (148)
... 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-to-
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.
A second conclusion is that arbitral tribunals do not often base their decision to extend
the clause or not on a prior determination of the applicable law. Starting from the
principle of autonomy of the arbitration clause, they generally feel free to determine
their competence according to what they consider to be–on the basis of the facts of the
case–the common intention of the parties, also taking into consideration the usages of
international trade.
There seems on the other hand to be an agreement that the existence of a group of
companies is not per se a sufficient element to allow the extension to a non-signatory of
an arbitration agreement concluded by another member of the group.
In most cases, courts and tribunals require proof of the existence of an intention at least
implicit of all the parties that the non-signatories be parties to the underlying contract
and its arbitration clause. Some courts however limit themselves to an awareness of the
clause and the requirement that the additional claimant or defendant be concerned by
the dispute. But the company concerned must always have played a role in the
conclusion and the performance of the agreement and this has to be proved by the party
P 298 requesting the extension of the clause.
The analysis of the arbitral awards also leads to the emergence of a rebuttable
presumption that a parent company binds its subsidiaries (149) but that, on the other
hand, only companies that have participated in the conclusion and performance of the
agreement will be bound by the contract and the arbitration clause.
Various other elements equally play a role in the decision to extend the clause to a non-
signatory:
– the fact that the other party has obviously entered into the agreement with a group as a
whole and did not really care which companies would be involved in its performance; it
is assumed that the determination of the signatory companies only concerns the details
of performance of the contract;
– or the fact that all the companies concerned have participated in the rights and
obligations of the contractual relationship (in what has sometimes been called “a total
confusion”).
The application of the theory of lifting the corporate veil is generally considered to be
limited to cases of fraud, abuse of rights, and violation of mandatory rules.
It is also admitted that the extension of the clause can never be considered a sanction of
the conduct of the non-signatory.
23
Arbitral tribunals and courts have also emphasised the right to use a group structure as
appropriate, but once a choice has been made, it must be fully assumed. In this respect,
the use of a company vehicle for tax or other reasons is not per se an argument to justify
lifting the corporate veil and extend the arbitration clause to the underlying
shareholders.
It seems that at least in a great number of cases, a good test to decide whether an
extension of the clause is appropriate is to determine whether the same solution would
be justified if the situation was reversed. In other words, it is tentatively suggested that
the principles used to determine the eventual extension of the clause to additional
defendants should also be applied when the case concerns additional claimants and vice
versa.
Finally, it appears that in relation to the issue of extension of the clause to non-
signatories, American case law is much more liberal than any in Europe, at least in some
circuits, the paramount concern of the courts being the “federal policy favouring
arbitration”.
Part III. The Possibility of Bringing Together in one Single Proceeding all the
Parties who have Participated in the Performance of one Economic
Transaction through Interrelated Contracts
A. Introduction
It frequently happens that an economic transaction involves more than one contract. If
P 299 one or more disputes arise between parties to one of the agreements of the
contractual structure, can all those who have participated in the economic transaction–
or at least several of them, parties to different contracts–be brought together in one
single arbitration, before one single arbitral tribunal, which will then have to decide all
their disputes? And may an arbitral tribunal hearing a dispute which arises principally
from a specific contract decide issues arising from connected agreements entered into
by the same parties, possibly alongside other contractors?
On the other hand, an arbitration clause normally has effect only in relation to the
parties named in the agreement as parties to it. It may happen however that a particular
dispute may extend beyond the parties to the agreement. May a third party be brought
into the arbitral proceedings by one of the signatories of the contract? May he intervene
voluntarily? These are the issues which will be dealt with in the following sections.
B. Groups of Contracts
1. The Issues and the Various Contractual Schemes
The problem of deciding in one single issue proceeding the disputes which arise from
interrelated contracts may arise in two-party as well as in multiparty situations.
In the first case, A and B sign two or more agreements: a supply or a sale agreement and a
loan agreement, a sale purchase agreement and an escrow agreement or a later
agreement finalising the amount due to the buyer under the guarantee provisions
included in the first contract, or a contract for the preparation of a feasibility study and a
second one for assistance in the preparation of the file to be submitted to bidders.
In multiparty situations, three contractual scenarios are encountered:
• A, B and C (or a greater number of parties), members of a consortium, all sign different
contracts: a framework agreement or a cooperation agreement, a joint venture
agreement, specific contracts.
• A signs a contract with B, a second contract with C and a third contract with D. In this
case, one generally talks of a horizontal contractual relationship: for example, the
employer who signs a contract with an architect, a second with a construction company
and a third with consultant engineers. (150)
• A contracts with B, B with C and C with D. In this case, the discussion is of vertical
contractual situations. This is notably the case with the employer who contracts with a
construction company which itself subcontracts the whole undertaking while the
P 300 subcontractor does the same for part of the project.
Additional distinctions are made by French doctrine in relation to the type of contractual
structure: (151)
– complementary contracts
– successive contracts
– main contract and subcontract
– main contract and accessory contract
Of course, the above scenarios may in some cases be much more complicated, as for
example in the Westland case. (152) The states of the United Arab Emirates, Saudi Arabia,
Qatar and Egypt concluded an agreement by which they established the Arab
Organisation for Industrialisation (AOI). Three years later, the AOI and Westland
24
Helicopters signed a shareholder's agreement by which they created a joint stock
company, the Arab British Helicopters Company (ABH). On the same day, Westland signed
a series of contracts with ABH.
In each of the above hypotheses, one must start by asking whether, in the case of a
dispute originating from several of these contracts, all the disputes may be decided
together–and all the parties can be brought together–in one and the same arbitration
proceeding. Other parallel questions also arise: if, in hypothesis 2 and 3 above, A brings
proceedings against B, can B join C and D as parties to the same proceedings? From the
point of view of methodology, these questions will be addressed after one has
determined who is a party to the underlying contracts containing an arbitration clause or
at least to the arbitration clause. We refer in this respect to the first and second parts of
this article.
In a great number of cases, national courts and arbitral tribunals have been confronted
with the issue of whether it is possible to join and decide together in one single set of
proceedings all the disputes arising from interrelated contracts. The problem may arise
because:
• the parties to the various contracts are not identical; or
• the jurisdiction clauses in the various agreements are not identical (for example, one
arbitration clause and one clause giving jurisdiction to national courts) or compatible (for
example, two arbitration clauses under two different institutions), or one or more
contracts do not contain any jurisdiction clause.
When the parties are the same, the issue with which the arbitral tribunal is confronted
often arises in different terms: may the arbitral tribunal, which undoubtedly has
jurisdiction to hear a dispute that arises principally from a specific contract, decide
issues arising from–or at least take into consideration–connected agreements entered
P 301 into by the same parties, possibly alongside other contractors?
Before starting the analysis of the case law in the following section, we will make two
general remarks (2) and set forth a few basic principles (3).
2. General Remarks
One should not exaggerate the difficulties raised by resolving disputes pertaining to
interdependent contracts. There are many multiparty, multicontract arbitrations. (153)
The problems they create are not always complex ones, and even if they are, more often
than not an acceptable solution is found.
In some cases, still somewhat uncommon, a multiparty arbitration clause (154) has been
drafted which the various parties to the different contracts have adopted. Sometimes
this is done by drafting an umbrella arbitration agreement or by inserting a clause in a
framework agreement that is referred to in the other individual contracts. Sometimes an
identical ad hoc clause is stipulated in the different agreements. The purpose of this
clause, which permits proceedings to be commenced, whatever the contractual dispute,
against all or some of the parties to the different instrumenta, is specifically to allow the
introduction, in the different eventualities, of a single arbitration, according to the
conditions laid down in the clause, among others in relation to the appointment of the
arbitrators. While one tends to come across such stipulations in large property and
industrial projects, they are less common in smaller scale projects, either because the
parties never envisaged the problem, or because they deliberately wanted it that way,
one party or the other seeing no advantage in a multiparty arbitration clause. Thus, in
most cases, the employer sees only very few advantages in a consolidated arbitration. He
wants to hold the main contractor fully liable for building defects and is hardly
interested in the question of knowing whether his co-contractor can call other potentially
liable parties to the proceedings. Conversely, it will generally be in the main contractor's
interest to make sure that one single tribunal–arbitral or judicial–decides all the
disputes that it has against the employer and the subcontractor. As for the interests of
the latter, he might prefer in the circumstances one alternative or the other, depending
for example upon the terms of payment for his intervention. (155) The absence of
coordination of dispute resolution clauses, therefore, is not necessarily pathological. It is
sometimes intended deliberately. The same goes for the possible refusal to consolidate
the proceedings. In addition to the questions of defence strategy, one party may very
well not want its relationship with a contractual partner to be revealed to other parties,
as would be the case in the event of a merger of separate proceedings. Thus, the desire
P 302 to keep secret information of a confidential nature, such as know-how, marketing, pricing
and profit margins, often plays an important role. (156)
3. Basic Principles
Concrete solutions to the problems dealt with in this chapter cannot be examined
without calling to mind several fundamental principles of arbitration.
On the one hand, as we have already mentioned, arbitration is consensual by nature. The
arbitrators exclusively derive their jurisdiction from the will of the parties, expressed in
an arbitration agreement. Any answer to the questions raised above must therefore start
from an interpretation of the intent of the parties in the case in question, such as it is
25
expressed in the arbitration clause.
On the other hand, if it is true that the arbitrator can only be empowered by virtue of one
or more arbitration clauses agreed between the parties, it is ultimately up to the arbitral
tribunal itself (subject to the final control of the courts) to decide upon its own
jurisdiction (the Kompetenz-Kompetenz principle) with regard to the various parties to the
proceedings.
It should, however, be pointed out that in the context of an institutional arbitration, the
role of the institution remains very significant. Thus, when an arbitration is brought
before it, and the respondent does not file any answer or contends that there is no
arbitration agreement, the ICC International Court of Arbitration must first determine
(157) whether there is prima facie an agreement between the parties to submit the
dispute to arbitration. (158) This implies that:
• If A brings proceedings against B and C in its Request and if the court considers that
P 303 there is, prima facie, no arbitration agreement between A and C, it will decide that A
cannot bring proceedings against C. (159) The validity of this practice by the ICC has been
frequently confirmed by national jurisdictions. (160)
• If A brings arbitration proceedings against B, C and D, when, prima facie, there are only
separate arbitration clauses, and they do not reflect a party's intent, express or implied,
for them all to be brought to the same proceedings, the International Court of Arbitration
will normally object to a single arbitration proceeding if all of the defendants do not
consent to it.
If the dispute brought by A against B, C and D is submitted to one arbitral tribunal, the
latter will still have to decide upon its jurisdiction and, in particular, whether the agreed
arbitration clause allowed the joinder of C and D in a single arbitration. It may be that
the arbitral tribunal will decide this issue in a partial award.
On the other hand, given the contractual nature of arbitration, the arbitrator does not
have, with respect to multiparty arbitration, all the powers at the disposal of a judge. In
the absence of an agreement between the parties (either express, or by reference to
arbitration rules which authorise it, or implied), neither the tribunal, nor the institution
which handles the arbitration, is entitled to consolidate ipso iure separate arbitration
proceedings. (161) It appears however that this lack of imperium does not prevent the
arbitrator from deciding in certain cases, at the request of one of the parties to the
arbitration, to stay the proceedings if the arbitrator judges them to be irregular, as long
as another party to the contract and to the arbitration agreement has not been joined by
the claimant, in the case, for example, that the parties' obligations are indivisible. (162)
The arbitrator could even invite the claimant, if the defendant so requests, to introduce
parallel arbitration proceedings against a third party heavily implicated in the economic
transaction by virtue of an interrelated contract–and to request the merger of the two
proceedings if the arbitration rules referred to in the two contracts so permit–in the case,
for example, that the arbitrator finds that the failure to join that party–which would
otherwise be justified–is motivated purely by a strategy of obstruction. (163)
Indeed, if the claimant does not comply, the arbitrator could not force him to do so, but
he would be entitled to draw the resulting adverse inferences. The same situation can be
found when the arbitrator invites one party to the arbitration, in response to a claim for
provisional or conservatory measures, to refrain from carrying out an attachment, or not
to release funds, or alternatively to submit a document being held by himself or by a
P 304 third party.
It is indeed another basic principle of international commercial arbitration that the
parties have the duty to cooperate in good faith in the performance of their agreement as
well as in the arbitral proceedings, e.g., at the stage of the constitution of the arbitral
tribunal. (164)
Arbitral institutions and arbitrators therefore have a correlative obligation to make sure
that the duty of good faith is respected by the parties; consequently, they should, by all
means within the limits of their rules or prerogatives, make it impossible for a party to
jeopardise another party's case by abusing its rights and unduly opposing the conduct of
a single arbitration or the joinder of parallel proceedings. It should, however, never be
overlooked that the parties' agreement is paramount: striking a balance between this
agreement, the duty of the parties to act in good faith, and their right to a fair trial (the
latter being closely related to the right of the parties to present their case in an equal
position), is therefore probably one of the most difficult challenges with which arbitrators
and arbitral institutions are faced. It is their duty to solve it in the best possible way by
all available means.
C. Analysis of Case Law

Analysis of the case law will be divided into five parts. In the first three parts, the
following situations will be examined:
(1) The parties are different but the contracts contain the same arbitration clause or the
clauses are compatible.
(2) The parties are different and the contracts do not contain identical or compatible
26
arbitration clauses.
(3) The parties are the same and they have concluded two or more contracts, one without
an arbitration clause, or containing a clause which gives jurisdiction to national courts, or
another incompatible arbitration clause.
In the last two sections, we will address two further issues:
(4) Whether an arbitral tribunal hearing a dispute which arises principally from a specific
contract, may decide issues arising from connected agreements entered into by the same
parties.
(5) Whether the same arbitral tribunal may decide issues arising from one or more
connected agreements when the latter does not bind all the parties to the first
P 305 agreement or also binds one or more persons who are not party thereto.
1. The Parties Are Different but the Contracts Contain the Same Arbitration Clause or at
Least the Clauses Are Compatible
In an arbitration case decided under the auspices of the Chamber of National and
International Arbitration of Milan on 2 February 1996, (165) the tribunal concluded that
the fact that A entered into three successive similar contracts having the same purpose,
with B, C and D, was not sufficient to allow B to start an arbitration proceedings with A
against C. In the case under consideration, A had entered into identical cooperation
contracts in relation to the development of a new pharmaceutical product. The costs of
the research phase were to be shared by A, B, C and D. After termination of the research
phase by A one year later, A and B filed a joint request for arbitration against C, seeking
C's share in the research costs to be paid to B or if necessary, to claimant A. C objected
that the request for arbitration was inadmissible and the arbitral tribunal indeed found
that it had no jurisdiction over the dispute between claimant B and claimant C, for lack of
a valid arbitration agreement. The arbitral tribunal considered that the three contracts
were separate agreements and did not constitute one single multilateral contract. The
fact that they contained an identical arbitration clause was found to be irrelevant. B
could not therefore participate in the arbitration without the assent of C.
In ICC case no. 7453 of 1994, (166) the facts were more unusual. There was only one
contract (between A and B) but also an arbitration agreement by implied consent
(between A and C). The claimant was the exclusive sales agent in the United States and
Canada for first defendant's (a German company) products. The contract contained an
arbitration clause providing for ICC arbitration. After termination of the agreement by
first defendant, the claimant instituted court proceedings in a US District Court against
the first defendant and one of its managing directors, the second defendant. The first and
second defendants invoked the arbitration clause in the contract and the District Court
stayed the proceedings in favour of arbitration. Subsequently, during the arbitration, the
second defendant contested that the arbitral tribunal had jurisdiction over him, as he
was not a party to the arbitration agreement. This was not accepted by the claimant, who
deduced the second defendant's consent to arbitration from the fact that he had invoked
the arbitration agreement in the court proceedings. The arbitral tribunal considered that
even if it could be so interpreted, the second defendant could not have been joined to
the arbitration proceedings without the consent of the first defendant, which the latter
was not ready to give. Consequently, any offers made by the second defendant that the
claim against him should be subject to arbitration were a nullity because they were
incapable of being given effect. Any consent or concurrence by the claimant to
P 306 arbitration against the second defendant would therefore be void. (167) The fact that in
the United States there exists a strong policy in favour of arbitration did not alter this
conclusion. (168)
In the first interim award in the Westland case, the facts of which have been stated above,
(169) disputes arose both from the contract concluded between AOI and Westland and
the contracts concluded between Westland and ABH. All the contracts provided for ICC
arbitration. Westland filed a request for arbitration with the ICC against AOI, United Arab
Emirates, Saudi Arabia, Qatar, Egypt and ABH. In the interim award of 5 March 1984 on
jurisdiction, the arbitral tribunal declared itself competent with regard to all the
respondents. On the one hand, the arbitrators considered that the four states were bound
by the arbitration clause, although they were not signatories. On the other hand, the
arbitral tribunal refused to follow Egypt's contention that Westland had improperly
instituted a single arbitration against six respondents with conflicting interests. The
arbitrators referred to article 24, para. 2 of the Swiss Concordat which explicitly permits a
claimant to proceed against multiple defendants jointly (a) if there is among them “a
community at law”, or (b), if “claims of the same character, founded upon an essentially
common cause of substance and law constitute the subject matter of the dispute.” The
arbitral tribunal found that the request satisfied the two conditions and therefore had to
be declared admissible. It further pointed out that
everything depended on the intention expressed by the parties in the arbitration clause. It
is necessary and therefore sufficient, in principle, that they wished to bind themselves for
the arbitrators to have jurisdiction at the same time in respect of them all and for one of
them to be able to initiate proceedings against all the others within one set of arbitration
proceedings. It thus matters little that there are several arbitration clauses when their
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content shows that they make up a whole in the mind of the parties. Such are the
circumstances of the present case ... and
the series of documents concluded constitute an indivisible whole and the four states
thus truly demonstrated their desire to act together, by joining together under one name.
The similarity of the clauses used in the various contracts can only serve to bear out this
interpretation. It follows that the tribunal is not merely competent as regards each of the
states, AOI and ABH but is justified in adjudicating upon their cases in one and the same
award. (170)
In the case submitted to the Paris Court of Appeals on 31 October 1989, (171) Kis France,
the manufacturer of new equipment for the quick development and printing of
photographs, had set up a system with Société Générale to permit the marketing of this
equipment in various countries, including the United States, under the form of leasing
and through their respective local subsidiaries. Various conventions had been signed:
– a framework agreement between Kis France and Société Générale acting in their own
P 307 name and for the account of their subsidiaries;
– agreements between local subsidiaries of Société Générale and Kis France for the
implementation of the framework agreement and in particular, for the United States; an
agreement concluded between Sogelease Corporation, a leasing subsidiary of Société
Générale and Kis California, later renamed Kis Corporation, a subsidiary of Kis; an
agreement followed by two subsequent contractual documents; an addendum to the
framework agreement signed by Société Générale acting in its own name and for its
subsidiary and by Kis France also acting in the same qualities and, secondly, a contract
between Société Générale acting for its own account and for its subsidiary and Kis Photo
Industrie, also acting for its own account and for its subsidiary Kis USA.
The framework agreement contained an ICC arbitration clause to which an express
reference was made in the local agreements and the addenda.
Arbitration was initiated by Société Générale, Sogelease Pacific and Sogelease
Corporation, two subsidiaries of Société Générale against Kis France, Kis Photo Industrie
and Kis Corporation. The arbitral tribunal considered that it had jurisdiction over all
claimants and respondents, as well as jurisdiction to decide all the issues arising under
the various agreements.
An action to set aside was filed with the Paris Court of Appeals which confirmed the
arbitrators' jurisdiction. According to the Court of Appeals:
The Local Agreement, concluded by the subsidiaries of Société Générale and Kis France,
refers to this arbitration clause. We infer from this reference that the arbitrators may
decide the disputes concerning the execution of both the Basic and the Local Agreement,
but only upon request of the two parent companies. The position of the subsidiaries in
this sense is totally subordinate.
In granting the claim filed by Société Générale and its subsidiaries against Kis France and
Kis Photo, the arbitrators examined the agreements between the parties and held that
the parties' mutual obligations were inexorably linked and that the parent companies
played a dominant role vis-à-vis their subsidiaries, which were bound to abide by the
former's commercial and financial decisions ...
The arbitrators inferred from the contractual relationships between the two groups of
companies that there was a common intention of the parties to consider Kis France and
Kis Photo liable for any amounts owed by them or their subsidiary Kis Corporation. Hence,
the arbitrators deemed that the claim filed by Société Générale and its subsidiaries was
admissible. (172)
As was rightly pointed out by Laurent Aynès, (173) in this case the “existence of a
subordination which has permitted to identify the group constituted of a main agreement
and a subcontract as well as the group of companies: the domination of the mother
company vis-à-vis its subsidiaries and the participation of the latter to the performance
P 308 of a contract concluded by the first.” (174) It is obvious that in the case under
consideration, the existence of a group of companies has been decisive in reaching the
conclusion of the existence of a group of contracts.
2. The Parties Are Different and the Contracts Do Not Contain Identical or at Least
Compatible Arbitration Clauses
When the parties to the various contracts are not the same and the contracts do not
contain compatible arbitration clauses, bringing the disputes together in one single
arbitration proceeding will generally not be possible. One early example is the Sofidif
case. (175) Three different French entities, Eurodif, Sofidif and Cogema together started
ICC arbitration against the Iranian Atomic Energy Organisation (OEAI) and the Iranian
Organisation for Investment and Economic and Technical Aid (OIAETI) in relation to
different contracts (between different parties and containing different arbitration
clauses) relating to Iran's cooperation with France in an uranium enrichment project.
OEAI and OIAETI objected but the arbitration proceeded. The arbitral tribunal decided
that it had jurisdiction given the complementarity and interdependence of the contracts.
The award was annulled by the Paris Court of Appeals and, in a series of subsequent
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judgments, the French courts pointed out that in the circumstances of the case, a single
arbitration could take place only with the consent of all the parties concerned.
The same solution was reached in cases where there was no incompatibility between the
arbitration or jurisdiction clauses. For example, in two cases in which A concluded a main
contract with B containing an arbitration clause and B contracted a guarantee agreement
with C which did not include such a clause, the French Supreme Court decided that the
guarantor, not being a party to the main contract, could not invoke clauses included in
that contract and in particular the arbitration clause. This was said to be a consequence
of the principle of privity of contracts (effet relatif des conventions). (176)
The reverse solution however recently prevailed in the United States. In Kvaerner v. The
Bank of Tokyo-Mitsubishi, (177) the US Court of Appeals for the 4th Circuit required a bank
to arbitrate disputes under a guarantee which did not have an arbitration clause. The
main contract, which contained a broadly phrased clause, had been concluded between
an employer and a joint venture, acting as general contractor, to design and construct a
waste-to-energy plant. A syndicate of banks, with one bank acting as lead agent, financed
P 309 the project. The parties to the joint venture executed guarantee agreements in favour
of the banks to guarantee performance of the joint venture under the construction
agreement. When the joint venture defaulted on its obligation to make payment to the
bank, the bank instituted a court action on the guarantees. The guarantors then brought
an action in the Federal District Court in North Carolina to compel the banks to arbitrate.
The District Court, which was affirmed by the US Court of Appeals, ruled that the banks
were required to arbitrate because the arbitration clause of the construction agreement
was incorporated into the guarantees, and the dispute related to the construction
agreement. This incorporation was accomplished, according to the court, by a provision
in the guarantees that gave the guarantors the same “rights and remedies” as were
available to the joint venture under the construction agreement. This is a very liberal
approach which would most probably not have been followed in Western European
jurisdictions.
Reference may also be made–although this case is at the edge of our analysis, since it
does not strictly concern a group of contracts–to the decision rendered on 19 May 1993 by
the Paris Court of Appeals in the Labinal case. (178) In this case, M and W entered into a
joint venture (containing an ICC arbitration clause) in order to better compete on a bid
with company L (tender made by British Aerospace for GIE Airbus Industrie).
Subsequently, following the first reactions of British Aerospace to the bid, M, W and L
entered into negotiations to determine the possibility of working together. These
negotiations were unsuccessful, but L and W reached an understanding to the detriment
of M. M therefore started an arbitration against W and L complaining that they had
entered into an unlawful understanding and that their conduct amounted to unfair
competition. The first court accepted its jurisdiction but the Court of Appeals reversed
and upheld its jurisdiction only on L. The court considered that contrary to M's
contention, the dispute was not indivisible and that consequently, “the existing link
between the two disputes, as well as the interest of good administration of justice, cannot
impede the arbitral tribunal from applying an arbitration clause freely agreed and
accepted by company M”.
Various cases also illustrate the unsuccessful attempt to have the disputes arising under
successive agreements forming a horizontal contractual relationship decided in one
single arbitration proceedings. For example, the case decided by the Paris Court of
Appeals on 22 March 1995 (179) concerned a multiparty dispute arising from a
construction project. The employer started an action in France against all the companies
which had contributed to the project among them the company which had supplied the
roof panels and its manufacturer. The latter invoked the existence of an arbitration
clause contained in the agreement with its distributor and concluded therefore that the
court had no jurisdiction. The Commerce Court, followed by the Paris Court of Appeals,
P 310 decided that it was competent to hear the case, arguing that:
The arbitration clause inserted in an international contract has self-standing validity and
effectiveness, which requires that its application be extended to parties which are
directly implicated in the performance of the contract and in the dispute that may arise
therefrom, as long as it is established that their situation and their activities give rise to
the presumption that they were aware of the existence and the scope of the arbitration
clause, even though they were not signatories of the contract which provides for it.
This is not the case of a company (here the employer) which limited itself to acquiring,
through sub-contractors, products manufactured by a third company, about which it is
neither alleged nor shown that it had knowledge of the obligations entailed by the
agreement concluded by the third company and said sub-contractors.
An arbitration clause contained only-in one agreement of the contractual chain could not
therefore be opposed to other participants to the contractual relationship, since the
requirements for such an extension of the clause were not met.
The ICC arbitral awards rendered in cases nos 2745 and 2762 of 1977 (180) illustrate how
the proceedings normally result when some of the contracts of the horizontal contractual
chain contain an arbitration clause and the others contain a clause giving jurisdiction to
national courts or do not contain any clause at all. In the case under consideration, B, the
29
employer, had concluded a contract with A, who in turn had concluded a contract with C.
C had entered into an agreement with D, who had contracted with E. Only the contracts
between A and C and C and D contained an arbitration clause. Disputes arose and four
proceedings took place. C started ICC arbitration proceedings against A. E started a court
action against D before the Belgian courts. The decision was appealed and D decided to
bring C into the proceedings, who in turn did the same with A. The purpose of the claims
filed by D against C and C against A was limited to the request to have the decision
declared common to C and A (déclaration de jugement commun). It is accepted that such
a request is acceptable notwithstanding the existence of an arbitration clause between D
and C and C and A, since no formal condemnation is requested. The Court of Appeals
confirmed the judgment against D who then decided to start arbitration proceedings
against C. C also started an arbitral proceedings against A. The two proceedingss were
consolidated by the International Chamber of Commerce.
Finally, reference should also be made to very specific Belgian case law arising from a
decision of the Belgian Cour de Cassation of 9 May 1963, (181) which decided that if an
indivisible dispute opposes, on the one hand, parties bound by an arbitration agreement
and on the other hand, parties to an agreement which does not contain such a clause,
only the courts will have jurisdiction, with the consequence that the arbitration
agreement is inapplicable. This precedent has been approved by Belgian commentators,
(182) although the facts as they came before the Cour de Cassation are extremely rare.
P 311 The concept of indivisibility which is referred to in this case law, which predates the
application of the Judicial Code, (183) concerns the sole situation where the enforcement
of separate decisions which would arise from the same dispute would be materially
impossible. Commentators conclude that only indivisibility defined in this way would
nullify the effect of an arbitration agreement. (184) One may certainly wonder how one
reconciles this case law with Article II of the New York Convention, (185) which obliges
national courts to refer the parties to arbitration, whenever there is an arbitration clause.
This Article nevertheless excludes the hypothesis where it is established that the clause
is void or “ineffective or inapplicable”. This last argument has sometimes been raised by
a party in order to oppose the implementation of ICC arbitration, in cases of coexistence
of arbitration clauses and jurisdiction clauses (in some cases, within the same contract),
or in situations where the judicial proceedings were already under way. The argument
does not seem to have met with much success, at least as far as the prima facie control of
the arbitral institution is concerned. (186)
3. The Parties Are the Same and They Have Concluded Two or More Contracts, One
Without an Arbitration Clause, or Containing a Clause Which Gives Jurisdiction to
National Courts, or Another Incompatible Arbitration Clause
In all the cases which will be examined below, the courts have uniformly considered that
if two agreements between the same parties are closely connected and one finds its
origin in the other or is the complement or the implementation of the other, the absence
of an arbitration clause in one of the contracts does not prevent disputes arising from the
two agreements being submitted to an arbitral tribunal and being decided together.
In the presence of a series of agreements between the same parties, the main problem is
determining whether these contracts constitute an indivisible whole (ensemble
contractuel unique). The solution will rest on an interpretation of the will of the parties. As
was pointed out by Laurent Aynès: the court will conclude to the existence of an
P 312 indivisible whole
if each of the partial agreements exists only by the preceding and calls on the following;
a will, unique in its aim, is expressed in a variety of complementary instruments. It is also
the existence of a subordination that makes it possible to identify the group formed by a
main contract and a sub-contract .. . . (187)
In a case which was decided by the French Supreme Court on 14 May 1996, (188) an
exclusive distribution agreement had been concluded by two companies and contained
an arbitration clause providing that any dispute resulting from the agreement or its
termination or relating thereto would be decided through arbitration. A dispute had
arisen and the parties had concluded an additional agreement providing for the
payment of commission to the distributor for sales performed outside the scope of the
distribution agreement. This second agreement did not contain any arbitration or
jurisdiction clause. It generated a new dispute and the distributor started an action
before the Commerce Court of Bobigny which upheld its jurisdiction considering that the
second agreement was not an accessory of the first one since they concerned different
types of transactions and also the fact that the absence of any explicit reference to the
arbitration clause in the second agreement excluded any acceptance of the said clause
in the context of this second agreement. The French Supreme Court decided that the
decision was wrong since it resulted from the decision that the second agreement found
its origin in the breach of the first one and was its complement, with the consequence
that it fell within the scope of the arbitration clause contained in the first contract.
In a previous case decided by the French Supreme Court on 5 March 1991, (189) the
dispute arose from a share transfer agreement concluded between A and B and
containing a guarantee in favour of the purchaser. It contained an arbitration clause. Two
months later, another agreement was concluded by the same parties to the effect that
30
after establishment of a final accounting, the debt of the seller amounted to a certain
sum. This second agreement did not contain any arbitration clause. A dispute arose and
the purchaser started an action before the French courts. The French Supreme Court
considered that the second contract was only the implementation of the first, that both
formed a whole and that therefore the force obligatoire of the arbitration clause included
in one agreement extended to the other.
The same approach was confirmed in a recent decision of the French Supreme Court
dated 30 March 2000. (190) In this case, a businessman residing in France agreed to sell
his shares in two companies to a German firm. The share sale agreement contained an
arbitration clause and stipulated that the price had been determined in accordance with
the companies' December 1995 accounts and would be revised should there be a
P 313 difference between the 1997 and the 1995 accounts. The parties also entered into an
escrow agreement with two French escrow agents whereby they would jointly hold nine
million francs in escrow and would pay the money to the seller a month after the price
had finally been determined. A dispute arose between the French seller and the German
buyer over the price. As a consequence, the seller initiated two sets of interlocutory
proceedings before the French courts. Among other matters, he applied for a court order
providing that the escrow agents should release the sum they were holding. The escrow
agreement did not contain an arbitration clause. However, the share sale agreement
referred to the escrow agreement by providing that the nine million francs would only be
released after the final determination of the price. The German buyer argued that as the
arbitration clause purported to apply to all disputes arising from the share sale
agreement, it also applied to the escrow agreement. Contrary to this, the seller pointed
out that the application relied solely upon a contract that contained no arbitration
clause and that the court therefore had jurisdiction to order the release of the money.
The French Supreme Court held that (a) there was a link between the share sale
agreement and the escrow agreement; and (b) the arbitration clause contained in the
agreement also applied to the escrow agreement. Therefore, the Supreme Court ruled
that French courts did not have jurisdiction to order the escrow agents to release the nine
million francs which they were holding.
The same reasoning was applied by the Paris Court of Appeals in a recent decision of 23
November 1999. (191) A Dutch company, G, had sold a large quantity of rice to a Congolese
company, A. The contract contained an arbitration clause and provided for the
application of French law. Following the war in Congo, the two companies subsequently
agreed that the Dutch company would repossess the goods and would repay the price
that it had already received. A dispute arose and the Congolese company started an
arbitration against G. The latter claimed that the arbitration tribunal had no jurisdiction
since the dispute arose from the second agreement which did not contain an arbitration
clause. The arbitral tribunal rejected the argument considering that there had been only
one agreement whose initial terms had been subsequently novated. An action to set
aside was introduced against the award but was rejected by the Paris Court of Appeals,
which did not retain the argument regarding the novation, but rather based its decision
on the implicit will of the parties and on the existence of two “complementary or at least
connex” agreements, the second being “the follow-up and the consequence” of the first.
(192)
In another case decided on 29 March 1990 by the Commercial Court of Bobigny, (193) a
French company had concluded two contracts with a company from Mauritius, one for a
feasibility study, the other one for the preparation of a tender for the exploitation of a
P 314 mine. The contracts contained an ICC arbitration clause. A dispute arose between the
parties in relation to work which, in part, had been supplied beyond the scope of the two
contracts. The court decided that the case had to be decided through arbitration, since
these subsequent contracts–which by definition did not contain an arbitration clause–
were concluded “in the frame” of the two original agreements and were to be considered
as an accessory thereof.
The situation is different if the dispute only relates to the one agreement which does not
contain an arbitration clause. In a case which was decided on 8 March 1995 by the Paris
Court of Appeals, (194) X and Y had concluded a franchise agreement which did not
contain an arbitration clause. Following difficulties of payment by the franchisee, X and Y
concluded three additional agreements. Two of these did not contain any arbitration
provision. The third one, which provided for the transfer of the shares of the franchisee to
the franchisor in the event of default of payment up to a certain date, contained an
arbitration clause. However, the option had expired when a new dispute arose between
the parties. It could not therefore fall within the scope of this expired agreement. The
court considered that the dispute concerned the execution by the franchisee of its
obligations in the context of the franchise agreement which did not contain an
arbitration clause. The decision of the Commercial Court upholding its jurisdiction was
confirmed by the Court of Appeals.
Finally, in a decision of 29 November 1991, (195) the Paris Court of Appeals was confronted
with a different situation. One of the connected agreements contained an arbitration
clause and the other one contained a clause giving jurisdiction to ordinary courts. In the
first place, a protocol containing an arbitration clause had been concluded between two
car distributors. They had decided to unify their distribution network in France and to
31
entrust the latter to a new company, through the conclusion of contracts of leasing-
management (location-gérance) of their business. The said contracts were signed two
years later. They contained a clause giving jurisdiction to the courts of Paris. An action
was started before the latter. On appeal, the Paris Court of Appeals decided in favour of
arbitral jurisdiction:
In the presence of a protocol constituting the basic agreement between the parties, and
leasemanagement contracts signed in performance of this framework agreement and in
accordance with the terms and conditions it had laid down, it is worth pointing out that
such agreements constitute a contractual whole, a group of contracts, in which the lease-
management appears as a means of implementing the protocol. The arbitration clause,
which reveals the common will of the parties to the contract, concerns all disputes
pertaining thereto and in particular those relative to the consequences of the
termination of the lease-management contracts concluded in performance of said
protocol.
The scope of the arbitration clause as an expression of the will of the parties is far wider
than that of a jurisdiction clause, in that it has the effect of vesting the arbitrators with
the power to judge, thereby excluding the intervention of State courts, whereas the
jurisdiction clause only designates the court which is territorially competent to decide
P 315 the disputes.
It was indeed obvious that the two contracts, a framework agreement and its
implementation, constituted a group; but this determination was not enough to solve the
issue before the court. As was rightly pointed out by L. Aynès, the two parties signed two
agreements because they did not want to have one single contract. The second
agreement was concluded two years after the first one. The court should have determined
whether the dispute was the type of controversy that the parties to the framework
agreement had in mind when they drafted this agreement. According to Aynès, this
implies a two-step approach: (1) Is the framework agreement enforceable in itself or does
it necessarily imply the conclusion of additional agreements? In the latter case, the
disputes that the parties intended to submit to arbitration could only be those which
would arise from the subsequent contracts (contrat d'exécution). (2) Proceeding also to an
analysis of the dispute itself: does it call into consideration the elements which were
agreed to in the framework agreement? In this respect, the Court of Appeals decided that
the dispute concerning the consequences of the termination of the leasing-management
contracts related to the initial agreement since the termination called into question the
whole contractual relationship between the parties. (196)
The decision of the Court of Appeals can certainly be criticised. It would probably have
been correct if the second agreement did not contain a clause giving jurisdiction to the
Paris courts. In the presence of such a provision, the Court of Appeals should probably
have upheld its jurisdiction.
4. May an Arbitral Tribunal Hearing a Dispute Which Arises Principally from a Specific
Contract Decide Issues Arising from Connected Agreements Entered into by the Same
Parties?
As will be seen from an analysis of the following cases, arbitral tribunals which have
jurisdiction under an arbitration clause contained in an agreement concluded between
two or more parties will generally extend their jurisdiction to disputes arising under a
closely connected agreement between the same parties which does not contain an
arbitration clause, at least as long as the second agreement does not contain a clause
giving jurisdiction to ordinary courts. More restrictive positions are the exception rather
than the rule.
In the ICSID case Soabi v. Republic of Senegal, (197) the Republic of Senegal had entered
into an agreement with a Panamanian corporation (the developer) for the construction of
low-cost dwellings on land provided by the government and to be leased by the
developer. The developer undertook to create a Senegalese corporation which would be
the owner of a plant to be erected by it for the manufacture of prefabricated elements
for the construction programme. The first agreement was therefore followed by an
agreement between the Republic of Senegal and Soabi, a Senegalese corporation in the
P 316 process of formation (the Soabi Agreement). It repeated the undertakings with respect
to the building programme including those concerning the negotiation of a loan to be
granted under the Senegalese Investment Code. None of these contracts contained an
arbitration clause.
Subsequently, the government and Soabi concluded the Establishment Agreement
relating to a plant for the prefabrication of elements of reinforced concrete. It provided
for ICSID arbitration.
A dispute arose between the parties. Soabi claimed that it had met all its obligations but
that the government had defaulted on its obligations to make land with site utilities
available. On the other hand, the government asserted that Soabi had not conformed to
the contract prices for the units and had failed to meet its obligations with respect to
financing. The government filed objections to the jurisdiction of the Centre claiming that
the dispute was not within the scope of the arbitration clause in the Establishment
Agreement. It based its objections on the fact that the agreement for the construction of
32
15,000 dwelling units, which it was said to have breached, was not part of the
Establishment Agreement; the dispute between the parties concerning the alleged
breach of that contract was not just a dispute relating to the execution of that agreement
or to rights and obligations resulting therefrom, the only category of disputes which the
parties had consented to submit to the Centre.
For Soabi, this was not an obstacle to the jurisdiction of the Centre: the first agreement
and the Soabi agreement were preliminary contracts followed by a definitive contract,
the Establishment Agreement. The first one was no more than a statement of intent.
For the Government of Senegal, the absence of an arbitration clause in the first two
agreements proved the will of the parties to submit to the jurisdiction of the Senegalese
courts, which was in no way changed by the arbitral clause in the Establishment
Agreement which was aimed exclusively at the construction of the plant.
Finally, the arbitral tribunal considered that the agreements between the parties, other
than the Establishment Agreement, were implicitly encompassed by the Establishment
Agreement, and that the disputes related to their execution or to the rights and
obligations arising thereunder therefore fell within the scope of the arbitration clause
contained therein. It pointed out that the parties had defined in the three agreements
the totality of the project which they envisaged carrying out jointly; to wit, the
construction of a prefabrication plant in a first phase followed by the construction of
15,000 dwelling units in a second phase. The construction of the prefabrication plant
envisaged by the Establishment Agreement constituted the realisation of the first phase
of the project for the construction of the 15,000 dwelling units. The parties' will did not
therefore relate to the execution of two independent projects but to the execution of a
single project consisting of two closely related parts, one of which was the technical pre-
P 317 condition for the implementation of the other and therefore had to precede it.
The Soabi award was referred to in an interim award in ICC case no. 7929 of 1995, (198) in
which two Finnish companies, A and its wholly-owned subsidiary B (collectively referred
to as A), had started an arbitration in Zurich against C, an Oregon Corporation. A and C
had entered into a series of agreements including a Partnership Agreement (the 1986
Agreement) containing an arbitration clause and a Cooperation Agreement (the 1987
Agreement) not containing such a clause. C objected to the jurisdiction of the arbitral
tribunal. The latter rendered an interim award in which it decided that it had jurisdiction
over any claims arising from the 1986 Agreement; that as far as the 1987 Agreement was
concerned, it had jurisdiction over any claims arising from it “if and to the extent that this
is shown to be part of a unified contractual scheme with the 1986 Agreement but not from
the 1987 Agreement on its own.” (199) To define the phrase “unified contractual scheme”,
the arbitrators referred to the words used by Craig, Park and Paulsson: “Complex
situations where numerous contractual documents relate to one or organic relationship.”
(200)
The same issue had to be decided in ICC case no. 8420 of 1996, (201) a case where a Syrian
agent (claimant) and an Italian supplier (respondent) had concluded an agreement
whereby the agent undertook to promote the sale of the supplier's products. Four years
later, the parties had entered into two secondary contracts (a Protocol and a Customs
clearance letter). The main agreement contained an ICC arbitration clause providing for
arbitration in Geneva. The secondary contracts contained no arbitration clause. However,
disputes arising from the agency agreement and the secondary contracts were all
submitted to a sole arbitrator. The supplier objected to the tribunal's jurisdiction over
the Protocol and the Customs clearance letter.
The sole arbitrator decided that he did not have jurisdiction over disputes arising from
the secondary contracts. He referred in the first place to cases in which the validity of
arbitration by a tacit reference was accepted on the grounds that the subsequent
secondary contracts were just an implementation, amendment or fulfilment of the
previous principal contractual relationship or constituted the necessary consequence of
the first principal contract, a consequence already known at the signing of the latter.
However, he concluded his analysis of the facts of the case by a determination that the
two secondary contracts represented neither a fulfilment nor an amendment of the
previous contractual relationship but something completely new which gave the parties
different duties and obligations which were not directly connected with the agency.
Therefore, the arbitrator did not have jurisdiction over a Protocol and a Customs
clearance letter which did not form an economic unit (unitééconomique) with the agency
P 318 agreement, and were neither an amending contract (contrat accessoire) to the latter
nor a necessary and previously agreed consequence of the agency agreement. (202)
The very close connection between two contracts has often been the basis on which an
arbitral tribunal has consented to extend its jurisdiction under one contract to a second
agreement not containing an arbitration clause. In case no. 60/1980 of the Court of
Arbitration at the Chamber of Commerce and Industry in Sofia, (203) a sales contract
containing an arbitration clause and a loan agreement not containing such a clause had
been concluded between a Bulgarian seller (claimant) and a German buyer (defendant).
The German enterprise refused to repay the loan, contending a set-off based on the sales
agreement. The Bulgarian enterprise sought recovery of the loan before the German
courts. The Court of Appeal in Nuremberg held that because of the narrow link between
33
the sales contract and the loan agreement, the arbitration clause contained in the former
extended also to disputes arising out of the latter. This decision was affirmed by the
German Federal Supreme Court.
The Bulgarian enterprise subsequently started arbitration in Sofia. The arbitration court
examined its jurisdiction ex officio and followed the view of the German courts in stating
that the sales contract and the loan agreement were mutually connected and that the
loan was given in order to finance the purchase under the sales contract. Furthermore,
the loan agreement had been contemplated at the time the sales contract was
concluded. Within this perspective, the loan agreement could be regarded as a clause of
the sales contract, albeit embodied in a separate agreement.
The same approach was followed by an arbitral tribunal (204) which had jurisdiction
under an arbitration clause contained in an agreement in which the buyer of the
company undertook that the chairman of the board would have his director's mandate
renewed. The renewal took place and the director's contract was reconfirmed. However,
some time later, the director was dismissed and his contract was terminated. He started
an arbitration proceedings and the arbitral tribunal rendered an award on the claim for
damages based both on the breach of the undertaking contained in the protocol and the
termination of the contract of employment (which did not contain an arbitration clause).
An action to set aside was introduced before the Court of Appeals. The Court of Appeals
dismissed the claim considering that the arbitrators rightly decided that at the occasion
of the sale of the shares, the parties had intended to establish between themselves a new
relationship, which included the confirmation of the contract. The dispute was therefore
linked to the obligations undertaken in the protocol and hence fell under the arbitration
clause.
The same approach was also followed by an ICC arbitral tribunal in case no. 4367. (205)
P 319 The defendant contended that the claimant's claim for interest arose out of, or was
related to, promissory notes which were contracts separate and independent from the
basic supply agreements, which provided for arbitration; and that the promissory notes
did not contain any arbitration clause. According to the defendant, the arbitral tribunal
did not therefore have jurisdiction. The tribunal disagreed and pointed out that a bill or
note does not discharge a debt unless it is part of the contract that it shall do so, for a
mere promise to pay cannot be regarded as an effective payment. It added that in the
case under reference, the promissory notes were not considered payments in discharge
of obligations under the contract. The terms of the contract indicated that the parties
intended that they were to operate as conditional payments. It also added that in any
event, even if the promissory notes were separate contracts, the arbitral tribunal would
find that the arbitration clause was sufficiently wide to embrace disputes between the
parties arising from them. (206)
In ICC case no. 5117 of 1986 (207) the arbitration took place in Paris. The dispute related to
the performance of two agreements for the study, prefabrication and erection of pipes in
Mexico. Both contracts contained an identical arbitration clause providing for ICC
Arbitration. In the course of performance, the contracts were followed by orders relating
to contractual works. The defendant challenged the jurisdiction of the arbitrators in
relation to two of these orders, because they did not contain an arbitration clause. The
arbitral tribunal decided that it had jurisdiction because the two orders did not have any
autonomy. They were to be considered amendments or complements to the initial
agreement and were therefore an integral part thereof and it was not necessary that they
contain once again the arbitration clause included in the original agreement. The
solution would have been different if the amendment or appendix to the original
agreement included another provision for the solution of the dispute arising therefrom.
The arbitral tribunal would then have to determine whether the parties had the intention
to modify the original arbitration clause or if the amendments should be considered a
contract which, even though accessory to the main agreement, would enjoy total legal
autonomy.
In ICC case no. 4392 of 1983, (208) the arbitral tribunal refused to extend its jurisdiction
under a first contract containing an arbitration clause to issues arising under a second
agreement containing–by incorporation of general conditions–a clause giving jurisdiction
to the courts of Gaggenau. The main agreement related to the erection of a plant for the
manufacture of concrete beams. The second agreement concerned an order for an
industrial saw and could therefore be considered an accessory of the first contract. After
pointing out that arbitration clauses had to be restrictively construed and taking into
consideration the existence of a jurisdiction clause in the second contract, the arbitral
tribunal refused to extend its jurisdiction to disputes arising under the additional order.
P 320
The same approach, for the same reasons, was followed in the famous ICSID case Klöckner
v. Cameroon. (209) Klöckner, a German company, and the United Republic of Cameroon
had entered into a protocol of agreement and a supply agreement for a fertiliser plant in
Cameroon, each of which contained an ICSID arbitration clause. They had also entered
into a management contract containing an ICC arbitration clause.
Klöckner was to supply and erect a fertiliser plant, and the factory was then to be
operated by a Cameroonian joint venture company in which Klöckner was to be
34
responsible for the technical and commercial management. Due to the inadequate
operation under Klöckner's management, the factory was finally shut down. Klöckner filed
a request for arbitration, claiming the outstanding balance of the price for supplying the
factory. Cameroon counterclaimed, alleging mismanagement by Klöckner. The protocol of
agreement provided that Klöckner “shall have responsibility for the technical and
commercial management of the company (Socamé) which shall be ensured by a
management agreement.”
The arbitrators resolved the question as to whether the counterclaim was to be decided
in ICSID arbitration or ICC arbitration, by holding that they were competent to decide on
the execution of the obligations undertaken by the parties as to Klöckner's responsibility
for the technical and commercial management of the company, which was to be assured
by means of a management agreement, but that they were not competent to decide this
dispute arising exclusively out of the management agreement itself. Klöckner challenged
the decision. It contended that in so deciding, the arbitrators had exceeded their
competence because disputes concerning the alleged mismanagement by Klöckner of
Socamé were, following the intention of the parties, clearly meant to be referred to ICC
arbitration.
The ad hoc committee who had to decide on the recourse rejected this contention and
very wisely made the following distinction, which should be kept in mind by all
arbitrators confronted with the same type of situation:
It is appropriate to distinguish between two aspects: (i) giving effect (which includes
interpretation) to the management contract, which escapes the jurisdiction of the
tribunal in the latter's opinion, and (ii) taking the same contract into consideration for
the purposes of interpretation and application of the protocol of agreement and in order
to understand the general context of the relationship between the parties to the
arbitration. As the consistent practice of international arbitral tribunals demonstrates,
the second type of activity is perfectly possible, normal and called-for and need not be
inhibited by the lack of jurisdiction of the tribunal over the management contract. By
contrast, the first type of activity is not open to a tribunal lacking jurisdiction, as the
award itself expressly recognises: “the tribunal lacks jurisdiction to rule on the
P 321 management contract itself or on its interpretation.” (210)
If two parties enter into a series of agreements, all of which, except for one, contain an
ICC arbitration clause, even though the phrasing of the clauses is slightly different and
disputes arise under the various agreements, may the parties have all the issues decided
by one single arbitral tribunal? This issue was addressed in ICC case no. 5989 of 1989. (211)
A state organisation wished to reorganise its fuel distribution network. The parties agreed
to conclude a basic agreement and several application contracts, further to specify their
contractual obligations in the course of their relationship. Article 4.3 of the basic
agreement provided that in case of termination, the employer would have the right to
purchase the materials imported in the country by the contractor. Article 20 provided for
the creation of a coordination committee which would “co-ordinate the activities of each
of the parties and solve disputes which may arise in the course of the execution of the
contractual obligations.” Article 21 further provided that all disputes which could not be
amicably settled with the intervention of the coordination committee were to be settled
by ICC arbitration in Geneva according to the law of country X.
Three years later, the employer terminated application contract no. 1 and further
expressed its intention to discuss the modalities of the purchase of the materials. A
purchase contract was signed by the contractor and initialled by the employer. It
provided that all disputes were to be referred to a sole arbitrator and if the parties could
not agree on a sole arbitrator, the dispute was to be settled by ICC arbitration in Geneva,
according to law X.
A few months later, a technical assistance and services contract was signed by the
contractor and initialled by the employer. The contract was complementary to the
purchase agreement. It did not contain a separate arbitration clause.
Three years later, the contractor formally requested payment of certain amounts due
under the purchase and the technical assistance contracts. It further asked for a meeting
of the coordination committee and proposed that a sole arbitrator be appointed to
settle the dispute. It also stated that it would initiate arbitration proceedings if the
coordination committee did not meet or reach a solution or the parties did not agree on
a sole arbitrator. A meeting took place and an agreement was reached concerning the
payment of the amounts claimed by the contractor. A termination agreement was
subsequently prepared and signed by the parties. It provided that any dispute would be
settled according to the arbitration clause contained in the basic agreement.
Payment of the amounts agreed upon by the parties were not made in full and the
contractor initiated ICC arbitration against the employer. It requested the arbitral
tribunal to declare that the basic agreement was terminated because of a breach of
contract by the employer and claimed various amounts under the technical assistance
contract and the purchase contract and interests thereon. The contractor based its
P 322 request for arbitration on the two clauses contained in the basic agreement and in the
purchase contract. The employer contended that the request was inadmissible because
it was based on two different arbitration clauses. It asked the arbitral tribunal to declare
35
that it had no jurisdiction over the request by the contractor based on the purchase
contract. The reasoning of the employer was that the two clauses provided for two
different mechanisms for the settlement of disputes: the purchase contract did not
provide for the intervention of the co-ordination committee but provided that any
dispute which could not be amicably settled should be referred to a sole arbitrator. Only
if the parties could not agree on the arbitrator should the dispute be submitted to ICC
arbitration. The employer further stressed that the law applicable to the merits of the
dispute arising under the two contracts was different, the law applicable to the basic
agreement being fixed at the date of signature of the agreement. The employer argued
that these differences demonstrated that the parties intended to avoid application of
the arbitration clause in the basic agreement to the disputes arising under the purchase
contract. It finally alleged that even if the contractor's requests were admissible, the
arbitral tribunal could only decide on the basis of one of the two arbitration clauses and
not on both clauses at the same time. In this case, it should find that it could not decide
on the dispute based on the purchase contract, since this arbitration clause was invoked
after the arbitration clause in the basic agreement.
The arbitral tribunal found that the differences invoked by the employer were non-
existent or irrelevant in the context of the issue of jurisdiction. The request for arbitration
was filed only after the amicable settlement proceedings under both contracts had been
exhausted. Hence, at this point, the only clause which was still in operation for each of
the contracts was the ICC arbitration clause. According to the arbitral tribunal:
It is beyond doubt that the parties intended to have their disputes settled by arbitration,
that both the arbitration clauses and the parties are identical and that the claims are
connected in such a manner that in the context of an international arbitration we must
find that their joint examination is admissible in the light of the intention of the parties,
as expressed in the arbitration clauses. In fact, the purchase contract has been
concluded in application ... of the basic agreement.
Thus, ... the mere fact that a new arbitration clause has been included does not show the
unequivocal intention of the parties to rule out the arbitral proceedings provided for in
the basic agreement. On the contrary, the purchase contract falls squarely within the
contractual provisions of the basic agreement.
The arbitral tribunal also decided that the fact that an arbitration clause had been
inserted in the purchase agreement did not rule out “the possibility of hearing all
disputes in one arbitration concerning the claims arising between the parties under a
group of contracts concluded in the framework of one international commercial
P 323 operation.” (212)
Finally, the arbitral tribunal found that the contractor's request to have the disputes
heard in one arbitration proceedings was admissible and that it had jurisdiction over all
disputes between the parties. (213)
In some–fortunately rare–cases, legal requirements relating to the form of the arbitration
clause may have a decisive influence on the final decision of the arbitral tribunal. In ICC
case no. 7154 of 1993, (214) three of the four contracts binding the parties (a shipbuilder Y
and a ship owner X) contained an ICC arbitration clause. Y argued that the arbitral
tribunal did not have jurisdiction in relation to the fourth contract, which did not contain
an arbitration clause. For the arbitral tribunal, the question was whether one could
accept an implied arbitration clause to the extent that there would have been a practice
to insert an arbitration clause in contracts to repair ships; or alternatively whether one
could accept the existence of an arbitration clause to the extent that the parties would
have referred in their agreement to another document containing such a clause. By
reference to Swiss law, the law of the seat of the arbitration, the arbitral tribunal gave a
negative answer to both questions and therefore decided that it had no jurisdiction in
relation to the fourth agreement. Concerning the first question, the tribunal decided that
an implied arbitration clause was not sufficient on the basis of article 178 of the Swiss law
on private international law and even added that the same solution would prevail on the
basis of article 6 of the Swiss Concordat and of Article II, al. 2, of the New York Convention.
In relation to the second question, the arbitrators concluded that in the system of article
178, the contract containing the reference and the document to which it is referred must
both present the character of a text. But here, the disputed contract did not contain such
a reference. In other words, article 178 did not authorise the admission of an implied
arbitration clause based on past business relationships or past agreements containing
such a clause. (215)
5. May an Arbitral Tribunal Hearing a Dispute Which Arises Principally from One or More
Contracts Decide Issues Arising from One or More Connected Agreements When the
Latter Do Not Bind All the Parties to the First Agreements or Also Bind One or More
Persons Who Are Not Parties Thereto?
When A and B conclude a construction contract containing an arbitration clause and B
enters into a subcontract with C containing a clause giving jurisdiction to local courts, the
arbitral tribunal which has to decide issues arising under the A-B agreement does not
have jurisdiction to decide issues arising under the B-C contract. This was decided inter
alia by an arbitral tribunal sitting under the rules of the Poland Court of Arbitration,
award dated 18 May 1987 in case no. 69/86. (216)
36
The same solution may also apply in cases where the second agreement between B and C
P 324 does not contain a clause giving jurisdiction to national courts and the main
agreement between A and B contains an arbitration provision. In ICC case no. 6829 of
1992, (217) the arbitral tribunal pointed out that if various parties conclude a series of
contracts which are interrelated or interlocked, the fact that the contracts are
interrelated is not sufficient to permit the arbitral tribunal to extend its jurisdiction
based on one contract to another contract to which only one of the parties to the
arbitration is a party. The fact that the termination of disputed agreements has been
triggered by the termination of another agreement in the contractual chain is not a
sufficient element. In the case under reference, the arbitral tribunal also pointed out that
the fact that certain provisions of the disputed agreement referred to provisions of
another agreement did not afford the tribunal jurisdiction on any issue relating to the
interpretation or application of this second agreement. The arbitrators also emphasised
that the decision of the tribunal could in no way be affected by the fact that in order to
decide under the disputed agreement, the tribunal would have to take into consideration
the second agreement on which it did not have jurisdiction.
Such a distinction between deciding issues arising under a contract–which the arbitral
tribunal refuses to do–and taking into consideration the provisions of this contract–which
the arbitrators will accept or even will be bound to do–is a traditional distinction in
private international law which has been illustrated in numerous cases. (218) For
example, in case no. 1491 of 1992, decided under the rules of the Chamber of National and
International Arbitration of Milan, (219) a contract had been concluded between the main
contractor and an Iraqi employer for the supply of parts of a plant to be built in Iraq. The
main contractor had entered into a subcontract with a subcontractor. The dispute
resolution clause included in the subcontract provided that in the case of disputes
involving the customer, an Iraqi ministry, the subcontractor was bound by the agreement
reached by way of settlement on these disputes by the main contractor and customer
with the participation of the subcontractor. Should an amicable settlement not be
reached, the subcontractor would be bound by an arbitral award made in arbitration
proceedings between the customer and the main contractor. On the other hand, all
disputes which did not involve the customer and the documents issued by the customer
were referred to a sole arbitrator to be appointed according to the national rules of the
Milan Chamber of National and International Arbitration. On 8 August 1990, EC Council
regulation no. 2340, declaring an embargo against Iraq, was issued. On 27 August 1990, the
main contractor informed the subcontractor that the subcontract was suspended. On 17
October 1991, the subcontractor notified a request for arbitration to the main contractor.
The arbitrator decided that he only had jurisdiction to decide the issue of the effect of
the embargo legislation on the contract between the main contractor and subcontractor
but not on the contract between the main contractor and the Iraqi customer. The
P 325 arbitrator also decided that he could not limit his analysis to a mere interpretation of
EC provisions. A connection existed between the main contract and the subcontract at
the economic and functional level. The arbitrator therefore had to reach his conclusion
on the impossibility to perform in a broader perspective, taking into consideration the
main contract and the fact that the subcontractor and main contractor knew at the time
of the negotiations that the final destination of the supply was Iraq. The impossibility to
perform, based on the embargo legislation, affected the whole performance, with the
consequence that the subcontractor's claim for indemnification could not be granted.
The damage did not result from a fact imputable to the main contractor but from an
impossibility to perform.
Another illustration is ICC case no. 6230 of 1990. (220) The Government of Z, as owner, and
the respondent, as main contractor, had concluded a main contract for certain works
relating to the construction of a power plant. It incorporated the Fidic conditions of
contract. The owner nominated an engineer under the main contract. After the conclusion
of the latter, the respondent entered into a subcontract with the claimant. It was
composed, inter alia, of the subcontract agreement and the Fidic conditions of contract
concluded between the respondent and the Government of Z as far as applicable to the
scope of supply. With respect to the subcontract, no additional engineer was nominated
by respondent. Article 3 of the subcontract concerning payments corresponded exactly to
the main contract as applicable to civil works. Payments to the subcontractor were also
made dependent upon a receipt of payment (if and when) from the Government of Z. The
project became jeopardised as a result of the owner's financial difficulties. The claimant
continued to work on the project for a period of 14 months but was not paid. It therefore
initiated ICC arbitration. The main contract and the subcontract contained an identical
arbitration clause providing for arbitration in Zurich: the arbitral tribunal found that it
had jurisdiction and held that the claimant was entitled to claim for compensation for
the construction work performed. An action to set aside was filed before the Swiss
Federal Supreme Court which, in a judgment of 14 November 1990, rejected the appeal.
(221)
In its decision, the arbitral tribunal took the main contract into consideration in various
respects. Firstly, the respondent objected to its jurisdiction because the claimant had not
resorted to the dispute settlement mechanism of clause 67 of the Fidic conditions for the
compensation claim. The arbitral tribunal rejected this objection. It decided that the
engineer nominated for the relationship between the owner and the respondent did not
37
automatically fulfil the functions of an engineer in the subcontract relationship. Clause 67
of the Fidic conditions was thus to be applied to the relationship between the parties in
such a way as if the respondent had not elected an engineer for contractual dealings in
the subcontractor relationship. On the other hand, the arbitral tribunal decided the
claimant's compensation claim taking into consideration how the payments had been
P 326 made by the owner to the respondent. It ordered the respondent to pay the claimant
in proportion to the amounts received from the owner even though the respondent had
transferred a substantial portion of these payments as down payments for various
subcontractors or suppliers. These special arrangements could not be used against the
claimant, since neither the main construction contract nor the subcontract contained any
sort of provision that would have obliged the respondent as contractor to transfer certain
payments received from the owner to specific subcontractors or suppliers.
In the Zurich Chamber of Commerce case no. 2273/ 95 of 31 May 1996, (222) a Russian raw
material supplier (respondent) entered, after the collapse of the Soviet Union, into a
commercial relationship with an Argentine processing group (second claimant) interested
in finding a reliable source of supply for raw materials for its works and wishing to expand
into Eastern Europe. The Argentine processing group was the main shareholder of an
Argentine processing company to which the respondent was to supply raw materials and
in which the respondent took a 20% shareholding. Later, the Argentine processing group
purchased a processing company in Hungary (first claimant) to which the respondent also
supplied raw materials, and in which it took a 15% shareholding. Finally, the raw
materials were to be supplied through a Spanish trading company, 95% of which was
owned by the respondent. The latter was subsequently privatised and stopped all
deliveries of raw materials to the claimants, who instituted arbitration in Zurich seeking
damages for breach of contract.
The parties were bound by various agreements: in the first place, two protocols (protocol
1 and 2), each containing a Zurich Chamber of Commerce arbitration clause; in the second
place, two framework agreements (3 and 4), only the first of which contained a Zurich
Chamber of Commerce arbitration clause and to which apparently the two claimants and
defendants were parties. The second one did not contain any jurisdictional provision.
It seems that not all contracts were concluded between the three parties but the
reported decision is not entirely clear in this respect.
To justify the jurisdiction of the arbitral tribunal to decide disputes arising under
agreement 4 (not containing any arbitration clause), the claimants relied on the
arbitration provision contained in agreement 3, invoking the group of companies theory.
The arbitral tribunal decided that this theory was not applicable in the case since there
was not really a group of companies. On the other hand, it found that it had jurisdiction to
decide all the claims, even those arising under agreement 4, under the group of contract
theory. The reasoning was the following:
Where in the top layer agreement the parties have provided for a particular type of
arbitration any dispute that arises under a contract of a lower layer such as a dispute
leading to claimants' claims will be governed by the top layer arbitration clause unless
there is a different arbitration clause or a jurisdiction clause on a lower level or in the
contract under which a particular, specific dispute arises. ... All claims ... before the
P 327 arbitral tribunal in this arbitration ... are covered by the arbitration clauses in the
protocols ... Most of them are also covered on a lower level by the arbitration clause in
the first claimants' framework agreements. All these arbitration clauses, even though
worded differently, mean the same thing. Under these circumstances, one must
understand them all to provide for the same arbitral jurisdiction, or for several arbitral
tribunals set up by the same institutions. ... Accordingly, these claims all fall under the
Zurich Chamber of Commerce arbitration and the jurisdiction of this tribunal. (223)
The arbitral tribunal cited the following passage from Laurent Aynès: (224)
If the contract in which it [the arbitration clause] is contained is itself incapable of giving
rise to disputes because it needs to be completed or to be put in precise form by other
agreements, the disputes which the parties envisioned are those which may arise from
the future group of contracts. This clause has no object if it is limited to the single
agreement in which it is contained. This is the case with an arbitral clause in a framework
agreement, followed by contracts aimed at implementing the agreement or in a letter of
intent, presupposing the conclusion of agreements on the details. Naturally, at the time
of their conclusion, the parties may renounce the initial arbitration clause and adopt
other means for settling their future disputes, for example, if the contracts for the
implementation of the agreement contain a clause which is incompatible with that in the
framework agreement. Their silence, however, militates in favour of the coming into play
of the arbitral clause. (225)
In ICC case no. 3896 of 1982, (226) various European companies had started an arbitration
proceedings against an Asian respondent in relation to the construction of a power plant,
alleging defaults of payment. The claimants had terminated the agreement. On the other
hand, bank guarantees had been issued by Banque de l'Union Européenne in favour of
the respondent. These guarantees had created a direct contractual relationship between
the bank and respondent. They contained the following arbitration clause: “Any dispute
arising under this guarantee shall be settled in accordance with the contractual
38
provisions relating to the settlement of disputes.”
In the course of the arbitration, the claimants requested from the arbitral tribunal a
decision that the bank guarantees were null and void and that the call to the guarantees
should be considered fraudulent and abusive. The arbitral tribunal decided that it could
not and did not intend to decide a dispute arising between the parties to the bank
guarantees but that this did not prevent the arbitrators from discussing issues relating to
these guarantees and among other things the issue of their validity between the parties
to the arbitration. The arbitral tribunal decided that it had jurisdiction to decide
between the parties to the arbitration the issue of whether the call to the guarantees was
abusive and also to decide in due course, together with the merits, whether the
guarantees–in the relationship between claimants and respondent–were to be
considered null and void.
The same result, on the basis of the same reasoning, was reached by the arbitral tribunal
P 328 in ICC case no. 5721 of 1990. (227) The case concerned a dispute which had arisen in
relation to a construction project in Egypt. An employer had concluded a main agreement
with X Egypt (main contractor) and had appointed SA (claimant), a European company, as
subcontractor. SA had concluded two subcontracts with X Egypt which had presented
itself as a subsidiary in formation in Egypt of a US company X USA and was in fact a
branch–without legal personality–of the latter. X Egypt did not perform its obligations
and therefore the employer decided to expel it from the site and to give the direct
responsibility of the project to SA. X Egypt then tried to call several first demand
guarantees which had been supplied by SA. SA started an arbitration against various
parties including X USA and X Egypt and requested the arbitral tribunal to decide that
the subcontracts had been terminated and that the letters of guarantee were null and
void. The arbitral tribunal decided that it had jurisdiction to decide these issues. It
pointed out that a bank guarantee–a contract concluded between the guarantor and the
beneficiary–is independent of the underlying agreement. However, since the bank
guarantee finds its foundation in the latter, the arbitrators have jurisdiction in the
context of the relationship between the donneur d'ordre and the beneficiary. In the words
of the arbitral tribunal:
It is not disputed that the relationships created between the guarantor (the bank) and
the beneficiary and between the donor or principal (the applicant) and the sub-
guarantor (the European bank) are not covered by the arbitration clause contained in the
contracts of June 1983. The arbitration is therefore only concerned with the relations
between the applicant and X.
The arbitral tribunal therefore lacks jurisdiction to give orders to either of the banks. On
the other hand, it does have jurisdiction to rule whether the beneficiary of the letters of
guarantee, X, is entitled, with respect to the applicant, to take advantage of the
guarantees.
It also has jurisdiction to rule whether the guarantees are valid in the context of the
relations between the principal and the beneficiary. These guarantees have their
foundation in the contracts of June 1983 and are linked, for the parties to the arbitration,
to the validity, the scope and the termination of the underlying contracts.
...
The arbitral tribunal may rule on the beneficiary's right to call the guarantees. It is also
entitled to rule on the illicit nature of a call upon the guarantee .. . . (228)
6. Conclusion
Our first conclusion from the above analysis is that the awards and court decisions are
P 329 based on a close analysis of the particular facts of the dispute. Any attempt to induce
general principles should never overlook the very important factual dimension of any
given case.
It is striking that contrary to what is experienced in relation to the issue of extension of
the arbitration clause to non-signatory companies of the same group, very little concern
seems to have been expressed in the case law relating to groups of contracts for a good
and efficient administration of justice, i.e., for the unification on this basis in one single
proceedings of connected disputes between parties to various interrelated agreements.
The focus in the case law which we have analysed is on the interpretation of the will of
the parties, the research of a common intention. This is why courts and arbitral tribunals,
in the absence of an agreement of the parties to that effect, will generally refuse to unify
in one proceedings under one arbitration clause all the disputes arising under various
agreements, when they contain incompatible arbitration clauses or jurisdiction clauses,
unless it undoubtedly appears that they fall within the scope of the relevant arbitration
clause. However, the fact that the arbitral tribunal only has jurisdiction to decide
disputes arising under one contract does not prevent the arbitrators from taking another
related contract into consideration. The case law indeed clearly emphasises the
difference between giving effect to another contract X, by deciding issues arising under it,
and taking the same contract into consideration for the purposes of interpretation and
application of agreement Y, falling within the jurisdiction of the arbitral tribunal. This
second type of activity is not inhibited by the lack of jurisdiction of the arbitral tribunal
39
over contract X. On the contrary, giving effect to the latter is not open to a tribunal having
only jurisdiction in relation to agreement Y.
If, on the other hand, the various agreements of the group do contain the same
arbitration clause or do not contain the same clause but at least do not contain
incompatible arbitration or jurisdiction clauses (for example, when only one contract of
the group contains an arbitration clause and the others do not contain a jurisdiction
clause), the will of the parties will be investigated to determine whether they conceived
of the various contracts as one contractual entity, one single multilateral contract or
forming together one single economic transaction. The fact that the contracts form an
indivisible whole, or are very closely connected, or that there is a close linkage of the
reciprocal rights and obligations and in some cases that the parties belong to the same
group, tends to support the existence of such a will. The conclusion will of course be
easier to reach if the parties to the various contracts are the same. If this is not the case,
courts and arbitral tribunals will more rarely decide that they have jurisdiction to hear
all the disputes arising under the various agreements, unless they all contain identical
arbitration clauses, as one arbitration clause in one of the agreements seems generally
not to be enough. (229)
Finally, particular mention should be made of the courts of the United States, which once
again appear to be much more liberal in their approach than Western European
P 330 jurisdictions.
D. The Intervention of Third Parties: Legislative Provisions

If, in principle, only the parties to the arbitration clause may be parties to the arbitration
proceedings, it remains true that various national legislations offer the possibility for
third parties to intervene or to be joined as parties in arbitral proceedings. But such
intervention remains in principle subject to the consent of the other parties to the
proceedings and of the arbitral tribunal. (230)
For example, article 1696 Bis of the Belgian Judicial Code provides that:
1. Any affected third party may request the arbitral tribunal to intervene in the
proceedings.
2. A party may serve a notice of joinder on a third party.
3. In any event, in order to be admitted, the intervention of a third party requires an
arbitration agreement between the third party and the parties in dispute. Furthermore, it
is subject to the unanimous consent of the arbitral tribunal.
A similar provision is included in article 1045 of the Dutch Code of civil proceedings.
Part IV. The Possibilities of Consolidating Parallel Proceedings

If the disputes which derive from different contracts must be the object of separate
arbitration requests, can the different arbitral proceedings subsequently be
consolidated?
If the envisaged arbitration is an institutional arbitration, this presupposes that in any
case the different proceedings are administered by the same institution. Consolidation is
possible in different cases. On the one hand, the parties may decide that,
notwithstanding the intention which they have expressed in the arbitration agreement,
they agree to the joinder of proceedings. (231) On the other hand, consolidation may be
ordered, in certain cases, by the arbitral institution to whose rules the parties have
adhered in their agreement or by the arbitral tribunal appointed in accordance with
those rules. Such a joinder is organised by different arbitration rules, such as the Rules of
the International Chamber of Commerce, the CEPANI Rules, the rules of the Chambers of
Commerce of Zurich (232) and Geneva. (233) This is also the case with various arbitral
P 331 rules of professional associations. (234)
Article 13 of the ICC 1988 Internal Rules already provided the following:
Joinder of claims in arbitration proceedings
When a party presents a Request for Arbitration in connection with a legal relationship
already submitted to arbitration proceedings by the same parties and pending before
the International Court of Arbitration, the Court may decide to include that claim in the
existing proceedings, subject to the provisions of Article 16 of the ICC Rules of Arbitration.
According to this provision, the joinder of claims therefore requires a twin identity
between parties and between legal relations. (235) Alongside this substantive condition,
there was also a procedural condition; that the pending proceedings had not gone
beyond the stage of the Terms of Reference. Beyond that stage, the joinder would
normally be subject to the parties agreeing to sign an addendum. Moreover, a joinder at
the initiative of the court became impossible once the parties had undertaken a
different constitution of the arbitral tribunal in both cases, even if the conditions of
article 13 of the Internal Rules were met.
In the new 1998 rules, article 4(6) provides that:
40
When a party submits a Request in connection with a legal relationship in respect of
which arbitration proceedings between the same parties are already pending under
these Rules, the Court may, at the request of a party, decide to include the claims
contained in the Request in the pending proceedings, provided that the Terms of
Reference have not yet been signed or approved by the Court. Once the Terms of
Reference have been signed or approved by the Court, claims may only be included in
the pending proceedings subject to the provisions of Article 19.
And according to the new article 19:
After the Terms of Reference have been signed or approved by the Court, no party shall
make new claims or counterclaims which fall outside the limits of the Terms of Reference
unless it has been authorised to do so by the arbitral tribunal, which shall have regard to
the nature of such new claims or counterclaims, the stage of the arbitration and other
relevant circumstances.
According to Derains and Schwartz, article 4(6) only incorporates minor modifications.
(236) The joinder of more than one arbitration still requires an affirmative decision of the
court. The arbitrators have therefore no authority to decide to join arbitration cases,
although, independently of article 4(6), they may, pursuant to article 19, admit new
claims or counterclaims in a pending arbitration. The court's authority to join an
arbitration with another arbitration that is already pending depends, pursuant to article
4(6), on the satisfaction of the following conditions:
– the joinder is requested by a party;
P 332 – the arbitration proceedings are between the same parties;
– they are “in connection with” the same “legal relationship”; and
– the terms of reference have not yet been signed or approved by the court (or, if they
have, the claims that are sought to be added must be admissible under article 19 of the
rules).
The consent of all the parties is not required as a condition for any such joinder. However,
in recent years, the court has generally been reluctant to order the joinder of two
arbitrations over the objection of one of the parties. (237)
According to the same authors, article 4(6) would only appear to serve a purpose where
the party seeking the joinder is not the party making the claims that are sought to be
joined, since a party asserting new claims should not normally be required to commence
a new arbitration for that purpose if all the conditions of article 4(6) are satisfied.
However, occasionally a party may decide to commence a new arbitration deliberately
with respect to claims that it would be free to introduce in an already pending
proceeding, usually for the purpose of gaining some perceived tactical advantage. In
theses circumstances, article 4(6) can serve a purpose, as the other party may apply to
the court to request that the new arbitration be joined with the arbitration already
pending between the same parties in connection with the same legal relationship. (238)
Finally, it appears that the drafters chose in the new article 4(6) the term “legal
relationship” rather than “contract” in order to leave open the possibility of joinder in
circumstances other than two arbitrations concerning the same contract, i.e., where it
may have been the parties' intention to have disputes arising in connection with more
than one contract resolved in a single arbitration proceeding. (239)
A similar consolidation proceedings, but formulated in different terms, is also set out in
Article 11 of the CEPANI rules. This article provides that:
When several contracts containing the Cepani arbitration clause give rise to disputes that
are closely related or indivisible, the Appointments Committee or the Chairman of
Cepani is empowered to order the joinder of the arbitration proceedings. This decision
shall be taken, either at the request of the arbitral tribunal, or, prior to any other
measure, at the request of the parties or of themmost diligent party, or even on Cepani's
own motion.
Where the request is granted, the Appointments Committee or the Chairman of Cepani
shall appoint the arbitral tribunal that shall decide the disputes that were joined. If
necessary, it shall increase the number of arbitrators to a maximum of five.
The Appointments Committee or the Chairman of Cepani shall make its decision after
having summoned the parties and, if need be, the arbitrators who have already been
appointed. They may not order the joinder of disputes in which an interim award, or an
award on admissibility or on the merits of the claim has already been rendered.
Within the framework of the CEPANI rules, consolidation is possible, even if the parties to
P 333 the different disputes are not the same in whole or in part. All that is required is some
link of connexity or indivisibility. CEPANI's approach therefore appears to be wider and
more flexible than that of the ICC. It can be compared to the very flexible approach
adopted by the Zurich Chamber of Commerce. (240)
The consolidation of parallel arbitration proceedings can be a court initiative. This has
long been the case in the United States. For many years, the New York State courts have
effectively allowed the possibility of consolidating separate arbitration proceedings
41
when they raised the same issues of law or fact. (241) This position has been questioned
since 1993: consent of the parties now appears necessary. Indeed, in Government of the
United Kingdom of Great Britain v. The Boeing Company, (242) the Government of the
United Kingdom moved to consolidate separate arbitration proceedings involving the
same questions of law and fact. The United States District Court for the Southern District
of New York granted the motion for consolidation and the Boeing Company appealed. The
Court of Appeals reversed the ruling, holding that a District Court cannot order
consolidation of arbitration proceedings arising from separate agreements to arbitrate
absent parties' agreement to allow such consolidation, even when the proceedings
involve the same questions of fact and law. This was again confirmed recently by the 2nd
Circuit in Glencore, Ltd. v. Schnitzer Steel Products Co. (243) Glencore had entered into a
contract for the purchase of steel scrap from Schnitzer Steel and had entered into a
separate contract with Halla Merchant Marine Co. to ship the steel. Each contract
provided for arbitration in New York City, but the arbitration proceedings were to be held
in two different arbitration forums. The arbitration agreements did not provide for
consolidated or joint hearings in related arbitrations. The Circuit Court held not only that
consolidation was not possible given the absence of an agreement between the parties
but also that it lacked authority to order joint hearings: “Federal rule of civil proceedings
42(a) states that ‘[w]hen actions involving a common question of law or facts are pending
before the Court, it may order a joint hearing or trial...; it may order all the actions
consolidated ...’ but the arbitrations here are not ‘actions ... pending before the Court’.”
The court further addmd that although duplication, delay and the risk of inconsistent
decisions may be valid concerns, they do not provide courts with the authority to reform
the private contracts which underline a dispute.
In certain countries it is the law which has organised, at the behest of the courts, the
harmonisation or the forced consolidation of connected proceedings. This is notably the
case in Canada (in the provinces of British Columbia, Alberta, Prince Edward Island,
Manitoba, new Brunswick, New Scotland, Ontario, Saskatchewan, Terra Nova, Yukon, North
P 334 West Territories and Nunavut), Florida, Hong Kong and the Netherlands. (244) Article
1046 of the Dutch arbitration law entitles the president of the Amsterdam Court of First
Instance to order the consolidation of connected arbitral proceedings which take place
in the Netherlands. Nevertheless, this consolidation may be excluded by the parties.
(245)
If consolidation takes place, the parties will eventually have to harmonise the various
arbitration agreements, in particular in relation to the conditions of constitution of the
arbitral tribunal, the fixation of the place of arbitration and the determination of the
applicable rules of law. (246) It may also involve, in certain cases, specific problems in
relation to the allocation of costs. (247)
Part V. Parties to the Arbitral Proceedings

A. The Issues
In this part we will address a number of issues relating to the identity of the parties to
the arbitral proceedings, which are specific to multicontract, multiparty situations.
It should first be pointed out that in a multiparty situation, the parties to the arbitral
proceedings will not necessarily be all the parties bound by the arbitration clause; and
conversely, there may be parties to the arbitral proceedings who were not parties to the
original arbitration clause or at least not signatories of the contract in which it was
P 335 included.
If A, B, C and D have concluded an agreement containing an arbitration clause, it may
well happen that one or more of them will not participate in the arbitration proceedings
or at least will not be able to participate therein, for example, for reasons which pertain
to the rules of the arbitral institution itself. It may also happen that a party to the
original agreement may no longer avail itself of the arbitration clause included in it: for
example, in the case where a mother company and a subsidiary signed an agreement
with another party and the mother company subsequently transfers to a third party its
shares in the subsidiary, (248) or when a party to the contract has subsequently waived
the arbitration clause, for example by starting an action on the merits against another
party to the agreement. (249)
On the other hand, it may also happen that C, which is not, or at least did not appear
prima facie to be a party to the arbitration agreement, may subsequently become a
party to the arbitral proceedings, either because it does not object to the jurisdiction of
the arbitral tribunal, (250) or because in previous court proceedings it invoked an arbitral
clause included in a contract between the claimant and another defendant to oppose the
jurisdiction of the court and requested the latter to refer the matter to an arbitral
tribunal, (251) when C, through its involvement in the conclusion and the performance of
the agreement, is said to have adhered to the arbitration clause. This will mostly happen
in relation to groups of companies.
It may also happen that a company may be considered to be bound by an arbitration
clause and the subsequent award because an analysis of its conduct indicates that it has
assumed the obligation to arbitrate. It was so decided by the US Court of Appeals for the
42
2nd Circuit in Gvozdenovic v. United Airlines, Inc. (252) The case arose out of United
Airlines' acquisition of a division of Panam. At the time of the acquisition, a collective
bargaining agreement providing for arbitration existed between United and its
employees' union. Panam flight attendants were not members of this union nor employed
by United when the agreement was signed. However, the court held that they were bound
by the results of an arbitration conducted after the acquisition. The reason set forth by
the court was that they had actively and voluntarily participated in the arbitration by
choosing a committee and counsel to represent them in the proceedings. According to
the Circuit Court, “Although a party is bound by an arbitration award only where it has
agreed to arbitrate, an agreement may be implied from the party's conduct.”
The above situations do not raise any specific problems. The first procedural issue that
we will deal with is concerned with the intervention of new and third parties, namely
whether it is possible to extend the proceedings to other parties after the arbitration has
P 336 started (Section B).
On the other hand, if A, B and C are parties to an agreement containing an arbitration
clause, the question arises whether A may start an arbitration against B without involving
C, or whether A may start two arbitrations, one against B and the other one against C,
although they were all parties to one single agreement (Section C).
The more common issue of whether and to what extent the defendant can join third
parties or whether and to what extent such parties may intervene voluntarily in the
proceedings has already been dealt with in Section D of Part III.
B. Is it Possible to Extend the Proceedings to Other Parties after the Arbitration Has
Started?
In Section D of Part III, we referred to legislative provisions and institutional rules which
provide for the possibility of third parties to intervene or to be joined in arbitral
proceedings. This does not normally raise any particular difficulties when the third party
is joined at the beginning of the arbitral proceedings. If, on the other hand, the latter is
already in motion when the intervention takes place or is considered, serious difficulties
will arise, as we will see below.
Bringing into the proceedings a party to the agreement which had not originally been a
named party to the arbitral proceedings raises more difficulties where the arbitration is
institutional rather than ad hoc. For example, in the ad hoc (UNCITRAL) case Marine Drive
Complex v. Ghana, (253) the claimants started arbitration proceedings against Ghana
Investment Centre and, after arbitration had started, decided to join the Government of
Ghana as defendant. The arbitral tribunal accepted the joinder, pointing out that under
Article 20 of the UNCITRAL rules, a claimant may amend its claim at any time, unless such
factors as undue delay or prejudice suggest that such amendment is inappropriate or the
amended claim would fall outside the arbitration clause. The arbitral tribunal concluded
that in consideration of the circumstances of the case, no prejudice appeared and
therefore the amendment could be accepted. (254)
The answer of the arbitral tribunal was exactly the same in another recent unpublished
ad hoc case in which the claimant extended the arbitral proceedings to three new
defendants several years after the arbitration had started. The arbitrators considered
that there was no reason why the claimant could not join, at a later stage of the
proceedings, other parties to the contract containing the arbitration clause. It pointed
out that an arbitral proceeding cannot be fully equated to a judicial proceeding. The
issue is more complex in cases where the parties include in their agreement or make
reference to rules of proceedings imposing terms and conditions, deadlines and solutions
for settling difficulties in the proceedings or for taking various procedural measures. The
P 337 parties might, for example, have provided that the claimant should immediately
identify all defendants once the request for arbitration has been made. In such a case,
the arbitral tribunal said, these rules must be deemed part and parcel of the arbitration
agreement and therefore the expression of the will of the parties. The arbitral tribunal
further determined that in the case at hand, the parties had provided that the arbitrators
were not bound by the rules applicable to judicial proceedings. There was therefore no
requirement to identify all the defendants in limine litis, in the request for arbitration.
The situation may be more complex if the arbitration proceeds under the rules of an
institution. In ICC arbitration, under the old 1988 rules there was an automatic prima
facie examination of the arbitration clause in accordance with articles 7 and 8(3), as was
illustrated in various multi-contract, multiparty cases. (255) In other words, there was a
prior administrative decision of the ICC Court that there existed, prima facie, an
arbitration clause between these parties. (256) In the new rules, the scope of the prima
facie examination has been considerably reduced. Article 6(2) comes into play only if
“the Respondent does not file an answer” or a party “raises one or more pleas concerning
the existence, validity or scope of the arbitration agreement”. It therefore does not
preclude arbitration from being set in motion if there is no prior ICC arbitration
agreement but the respondent nevertheless submits an answer without objecting to the
commencement of arbitration. (257) On the other hand, in practice, the ICC Court rarely
refuses to set arbitration in motion. Indeed, it is extremely unusual for a party to file a
request for arbitration with the ICC in the absence of any evidence at all of an arbitration
43
agreement. (258)
But when a party to ICC arbitral proceedings wants to extend the latter to parties which
were not originally named in the request, as explained in detail in ICC case no. 5625 of
1987, (259) whether this is acceptable or not, raises the question of who is, or who is to be
made, a party to the arbitration. The answer to the question turns around the definition
that the ICC Rules give of a party, i.e., claimant on the one hand, and respondent on the
other hand.
According to the common approach, from the moment A claims relief against B, A and B
will be party to the proceedings. Conversely, as was emphasised by the arbitral tribunal
in an ad hoc award of 27 October 1989, (260) the sole fact that the claimant refers in its
claim to the wrongful act of a number of entities controlled by the government, the
defendant in the arbitration, is not sufficient to consider that these entities are also
defendants. In the words of the arbitral tribunal, “no relief is sought against these entities
P 338 and they need not be parties to this arbitration for their acts to be relevant and
considered by this tribunal in determining the obligations of those entities which are
parties to the arbitration.” (261)
However, the definitions of claimant and respondent under the ICC Rules are much more
specific. The claimant can only be the person who submits, on the basis of Article 4(1), a
request for arbitration and the respondent can only be the person who is identified as
such in the request. Moreover, a counterclaim can only be a claim by the respondent–
that is, the person identified as such by the claimant in its request for arbitration–against
the claimant, that is, the person who has submitted the request and identified himself as
the claimant.
In ICC case no. 5625 quoted above, A had started an arbitration against X. After the
arbitration was started, X, the defendant, took the position that the proceedings should
be extended to company B (signatory of the agreement) on the one hand, and to
companies Y and C (non-signatories), on the other hand.
According to the tribunal, the following consequences necessarily followed from the ICC
Rules:
• Both the fact that company B is a signatory to the agreement on which claimant A bases
its claim and the fact that it would have an interest in the outcome of the arbitral
proceedings are irrelevant to the question whether it is, or should be made, a party to
the arbitration. It is up to the interested person involved to determine whether it wishes
to be a claimant in a proceedings through the mechanism thereto prescribed, i.e., in this
case, through the mechanism of Article 3 of the 1988 ICC Rules.
• The debate as to whether and under what circumstances companies Y and C belonging
to one group are bound by an agreement to arbitrate which has been signed by other
companies belonging to that same group, can only arise in a situation where they identify
themselves as claimants, or are being identified by a claimant as defendants, in a
request for arbitration. Consequently, in the case referred to, the debate as to whether Y
and C were bound by the agreement to arbitrate contained in the contract concluded
between claimant A, company B and defendant X could not be argued, as a procedural
point, given the proceedings as they had been framed by claimant A. It could only arise
when and after defendant X and/or company Y would have submitted, on the basis of
Article 3 of the 1988 Rules, a request for arbitration identifying C corporation, whether or
not together with claimant A and/or company B as defendants. This was the case in Dow
Chemical (262) and in Holiday Inns. (263) This was not the case in the situation submitted
P 339 to the arbitral tribunal. (264)
• Under the ICC Rules, once the arbitrators have been nominated, they have no discretion
to add as parties to the arbitration claimant(s) or defendant(s) who were not identified as
such in the request for arbitration.
• A different situation might have arisen if company Y and defendant X had attempted to
file a request for arbitration naming claimant A, company B and corporation C as
defendants. Then the question might have arisen whether A could be a defendant and
whether Y and corporation C were bound by the agreement to arbitrate, to which they
were not signatories.
C. Is There a Duty to Bring into the Arbitration Proceedings All the Parties to the
Agreement?
In ICC case no. 5625 analysed above, (265) the question was also raised whether claimant
A could claim under the contract without the presence of company B as co-claimant. The
arbitral tribunal considered that the issue should be decided together with the merits of
the case.
In ICC case no. 5029, (266) a joint venture agreement was entered into by the contractor, a
joint venture X, consisting of French company A, its subsidiary B and two Egyptian
companies, C and D. The defendant was an Egyptian employer. Both parties had
concluded a contract for the construction of certain civil works in Egypt. Arbitration was
started by companies A and B, with the exclusion of companies C and D. The question
arose whether A and B had locus standi to start the arbitration. After having determined
44
that the joint venture was a mere contractual relationship, the arbitral tribunal decided
that the authorisation of one party to act on behalf of another in an arbitration in a case
where the other party is also linked to the contract which forms the subject matter of the
arbitration, must be determined under the law governing the contract at issue. In the
case under reference, the applicable provision was article 302 of the Egyptian Civil Code
which provides that when there are several creditors in respect of an indivisible
obligation, each of the creditors may demand the performance in its entirety of the
indivisible obligation. Co-creditors will have remedies against a creditor who has
received payment, each for its share. The arbitral tribunal had previously determined
that the parties had clearly intended that defendants' obligations were indivisible under
the contract.
A different answer was proposed some time ago by Professor Giorgio Bernini, taking into
consideration mainly Italian law:
A feature peculiar to the same hypothesis resides in the circumstance that all parties are
contractually bound by the arbitration clause/agreement; therefore, their participation
in the relative proceedings is to be deemed obligatory, unless the issue in dispute is
restricted to matters particular to individual parties. One is thus faced with a situation
well known in civil proceedings under the definition of litis consortium. In such a case,
P 340 necessarily involving the presence of all parties concerned (litisconsorzio necessario in
Italian terminology), one may go so far as to conclude that the arbitrator has the power to
refuse the issuance of the award unless the same is binding on all the said parties ...
Through the execution of the arbitration agreement, each party acquires the right, and is
subject to the duty, of intervening in the arbitration proceedings. (267)
Finally, if A, B and C have concluded a contract and a dispute arises, may A start two
arbitrations, one against B and the other one against C? This is quite unusual but such
situations have happened in the past. (268) Unless the obligations arising under the
contract are clearly indivisible under the applicable law, with the potential consequence
that all disputes should be brought before one single arbitral tribunal, nothing prevents A
from starting two arbitral proceedings. However, except for very specific circumstances,
this is not to be advised.
Part VI. Appointment of Arbitrators

The problem with appointing arbitrators in the event of a dispute with more than two
opposing parties was dealt with in France in a well known decision by the Court de
Cassation, which has been the object of abundant commentary and diverse appraisal–the
Dutco decision. (269) A consortium agreement brought together three companies, BKMI,
Siemens and Dutco, for the construction of a cement factory. The arbitration agreement
referred to the ICC rules and stipulated the appointment of three arbitrators. Dutco
submitted a request for arbitration and appointed its arbitrator. The two defendants
were not prepared jointly to appoint a single arbitrator, considering that they had
divergent interests. Nevertheless, the tribunal was constituted and a request to have the
award set aside was subsequently submitted to the Paris Court of Appeals. The two
defendants emphasised that it was a breach of the principle of equality to deprive them
of the fundamental right for each party to appoint its own arbitrator. The Court of Appeals
rejected their claim. However, the Cour de Cassation acceded to it, on the basis of article
1502,2 of the new French Code of civil proceedings which provides that the arbitral
tribunal must be properly constituted, and article 6 of the Code Civil concerning the
respect for public policy in contracts. The court was of the opinion that “the principle of
the equality of the parties in the appointment of the arbitrators is a matter of public
policy; one cannot therefore waive it until after the dispute has arisen.”
The Dutco decision sent a few shudders through the international commercial arbitration
P 341 arena. However, the difficulties which it raises are not insurmountable. The scenario to
which the Dutco decision applies is relatively unusual. The claimant must have
summoned at least two defendants who themselves must have divergent interests, the
arbitration clause must have expressly provided for the appointment of three arbitrators,
thereby preventing the ICC Arbitration Court from appointing only one, and finally, the
responding parties must refuse to proceed with a joint-nomination. Furthermore, the
Dutco case law is only a priori applicable when the arbitration has its seat in France. It is
by no means certain that other national jurisdictions would decide in the same way if the
problem came before them. (270)
It remains the case today that arbitral institutions are extremely careful when they have
to appoint arbitrators in Dutco situations. In observance of the principle of equality in
such cases, the ICC immediately changed its practice to require that the claimant refrain
from appointing its arbitrator, while the court alone would appoint one or three
arbitrators, (271) or equally that the claimant bring separate proceedings against each of
the defendants. It seems that in general, all situations of this type have managed to find
an appropriate solution, through discussions with the parties. (272)
The 1998 ICC Rules have incorporated this new practice in their article 10:
(1) Where there are multiple parties, whether as Claimant or as Respondent, and where
the dispute is to be referred to three arbitrators, the multiple Claimants, jointly,
and the multiple Respondents, jointly, shall nominate an arbitrator for confirmation
45
pursuant to Article 9.
(2) In the absence of such a joint nomination and where all parties are unable to agree
to a method for the constitution of the arbitral tribunal, the Court may appoint each
member of the arbitral tribunal and shall designate one of them to act as chairman.
In such cases, the Court shall be at liberty to choose any person whom it regards as
suitable to act as arbitrator, applying Article 9 when it considers it appropriate ...
P 342
Similarly, article 8.1 of the new LCIA 1998 Rules (273) also provides that:
Where the Arbitration Agreement entitles each party howsoever to nominate an
arbitrator and the parties to the dispute number more than two and such parties have
not all agreed in writing that the disputant parties represent two separate sides for the
formation of the arbitral tribunal as Claimant and Respondent respectively, the LCIA
Court shall appoint the arbitral tribunal without regard to any party's nomination. (274)
In consideration of its importance, the Dutco decision deserves our attention, even if it
applies a priori only in the event of a single contract involving more than two parties. But
this article also deals with situations where several contracts form a horizontal or vertical
unit. Disputes arising from such a contractual unit will be decided–if we limit ourselves to
cases where they all contain an arbitration clause–either by one single arbitral tribunal,
or by arbitral tribunals sitting in parallel. For the moment we will address only the first
hypothesis, coming back to the second in Part VIII.
There are four possible scenarios:
(a) The constitution of a single tribunal is the result of an agreement of the parties. In this
case, it will be constituted as per their agreement, possibly as per the multiparty
arbitration clause which they finalised at the time of the signing of the various contracts.
It will sometimes stipulate that the arbitral tribunal will be composed of more than three
arbitrators, or more often, that the appointment of arbitrators will be carried out under
the aegis of a permanent arbitral institution.
(b) A single arbitral tribunal is constituted on the basis of the arbitration rules referred to
in the parties' agreement, whether these rules permit the constitution of a single arbitral
tribunal when the disputes originate from interrelated contracts, (275) or whether they
permit the consolidation of parallel arbitral proceedings in case of connexity. (276) In
this latter case, the appointment of arbitrators will be carried out in accordance with the
provisions of the said rules. (277)
(c) The law applicable to the arbitral proceedings permits the consolidation, upon the
intervention of local courts, of different parallel arbitral proceedings. In this latter case,
it is the court who will appoint the arbitrators, in accordance with the method specified
in the applicable statute. Thus, the arbitral legislation of Hong Kong provides that in the
event of consolidation of the arbitration proceedings, the court has the power to impose
P 343 the appointment of all the arbitrators. (278) This is also the case in California and
Massachusetts. In the Netherlands, Article 1046 of the Dutch Code of Civil Procedure
provides that in the event of consolidation by the court, the parties are obliged to
consult each other in order to jointly nominate a single arbitrator or an odd number of
arbitrators. In case of failure to do so, the president of the Court of First Instance of
Amsterdam will appoint the arbitrator or arbitrators.
(d) The consolidation is ordered by a court. In this case, it is the court which decides the
consolidation which also determines the way the arbitrators will be appointed. Thus, in
the Nereus case, (279) the American Federal Court of Appeal for the 2nd Circuit ordered
the consolidation of disputes between A and B on the one hand, and B and C on the other,
and decided that the arbitrators would be nominated by the following process. Each of
the parties would nominate an arbitrator within twenty days; if one of the parties failed
to do so, the state court would intervene to nominate the unappointed arbitrator; the
three existing arbitrators would then choose two other arbitrators by unanimous
decision.
If the parties have not included an appropriate provision for the appointment of
arbitrators in a Dutco situation and the arbitration is not institutional, the Dutco case law
may lead in France to serious difficulties, as evidenced by the case which was decided by
the Court of Appeals of Aix-en-Provence on 9 October 1997. (280) The arbitration clause
provided as usual for the appointment of one arbitrator by each party and the
appointment of the chairman by the first two members of the panel. A dispute gave rise
to an arbitration involving two claimants and three defendants. One arbitrator was
appointed by the claimants and each respondent appointed its own arbitrator. The
claimants asked for the appointment of one single arbitrator for all the respondents but
they disagreed. They requested the President of the Commercial Court to appoint one
additional arbitrator for a defaulting company, two separate arbitral panels and
therefore two arbitral proceedingss. The Commercial Court, whose decision was later
confirmed by the Court of Appeals, considered that it could not grant the relief
requested. According to article 1458 of the French Code of Civil Procedure, the decision
whether the arbitral tribunal was properly set up or not belongs only to the tribunal
itself. The only decision which may be made by a court is to decide that the arbitral
provision is patently null and void, which was obviously not the case here since the very
46
wording of the case did not contain any violation of the principle of equity and at least
authorised the organisation of dual disputes or of multiparty disputes in cases where
parties having common interest would appoint one arbitrator in common. It was
P 344 therefore for the arbitral tribunal to decide on its competence, and depending on its
decision, the person concerned could take the procedural initiatives which would be
necessary to the solution of their disputes. According to the commentator, in the event
that it is impossible for the parties to reach agreement, nothing could be done by a local
court. The local court would not have the authority to make the appointment of an
arbitral panel which would not conform to the existing arbitration clause or, conversely,
to the principle of equity.
As already mentioned, Dutco only applies when claimants or respondents have
conflicting interests. In a recent unpublished ad hoc arbitration, the claimant had started
the arbitration against one defendant and had only at a later stage brought into the
proceedings three additional defendants. The latter argued that since the arbitral
tribunal had already been set up, they were deprived of their rights to appoint one
arbitrator. Stressing that there could be a problem only if the co-defendants do not
belong to the same group or do not have the same interests, the arbitral tribunal
concluded that the three additional defendants and the first defendant had behaved as
a consortium or partnership with respect to the claimant and had therefore to be
considered as one and the same party. They were bound by what Swiss law (the law of the
seat of the arbitration) refers to as the “necessary consority”. The arbitrators quoted
Lalive, Poudret and Reymond to the effect that “consorts, such as in indivisum, constitute
one and the same party, must appoint a single arbitrator, and there is no multi-party
arbitration strictly speaking.” (281) They further stated that each of the defendants had
proved in the course of the proceedings that there were no real conflicting interests
among them.
Part VII. Cross-claims

Another question raised by arbitration and complex contracts is that of cross-claims–
claims formulated by one defendant to the arbitral proceedings against another
defendant. A subcontractor against whom proceedings have been brought may want to
bring a claim on guarantee or in damages against another subcontractor who has also
been brought to the proceedings by the main contractor. Are such claims admissible?
Once again, everything depends on the wording of the arbitration clause, and
consequently, on the answer to the question as to whether the parties intended to allow
such claims to be made within the context of the same arbitration proceedings. If the
arbitration clause refers to specific arbitration rules, the question will arise whether
those rules allow cross-claims, in the event that one of the parties in the proceedings
objects to them. Thus, in proceedings started under an ICC arbitration clause contained
in a consortium agreement, the International Court of Arbitration of the ICC (under the
1988 rules) decided, in the absence of any express provision and taking into account the
P 345
objection raised by one of the defendants, that the cross-claim brought by one
defendant against another was not admissible, and that consequently, the defendant
should pursue the matter with the said co-defendant in a separate arbitral proceeding.
The court considered that claims between co-defendants would only be admissible with
the consent of the parties, since the ICC Rules do not provide for this type of cross-claim.
(282) Moreover, this separate arbitration request could not be consolidated with the
main proceedings without the consent of all the parties concerned.
Other institutions have appeared to be more flexible in practice, such as the American
Arbitration Association. Practioners seem to favour the possibility of a wider
admissibility of cross-claims, in the context of ongoing proceedings, on condition that the
claims are formulated before the arbitral tribunal has been constituted. (283)
The formulation of the new article 19 of the ICC Rules (284) certainly offers more
possibilities in this respect than the old 1988 rules.
Part VIII. Arbitration Proceedings

In practice, multi-contract, multiparty arbitration may raise a number of additional
issues in the course of the arbitral proceedings. These will be examined in Section A. They
also present a number of specific aspects in relation to the conduct of the hearing. A brief
insight will be given. Furthermore, it is important to bear in mind the methods adopted
by practitioners of international commercial arbitration to circumvent, where they can,
the difficulties which can arise from a separately conducted parallel arbitral hearing.
These methods raise a number of problems in relation to the need to conduct a fair
hearing and compliance with due process (Section B).
A. Specific Issues Which May Arise in the Course of the Arbitral Proceedings
1. Opposability of the Name-borrowing Provision
In ICC case no. 6648 of 1992, (285) company X had been awarded the contract for the
construction of an expressway. It contracted as employer with contractor Y for the
construction of a bridge segment of the expressway (the bridge contract). The latter
47
provided for the settlement of disputes by ICC arbitration. Y entered into an agreement
with subcontractor Z, whereby it subcontracted all the works in its contract with X
together with the terms and conditions contained in that contract. Y started an
P 346 arbitration against X, claiming damages. X alleged in its defence that any loss or
damage had been suffered by Z, to whom Y had subcontracted the work. Y responded
that the subcontractor agreement contained a name-borrowing provision according to
which, if Z suffered damages, Y would allow it to use its name for the purpose of
arbitration proceedings with the employer X, to determine the matter. The main
contractor Y would be bound to pay to the subcontractor Z the amount of any award in
the arbitration proceedings. X contended that no subcontractor (Z) could use the name of
a main contractor (Y) on a name-borrowing basis to institute legal action against an
employer or building owner since there is no privity of contract between the
employer/building owner and the subcontractor.
The arbitral tribunal held that its jurisdiction was limited by agreement. It decided that
it did not have jurisdiction to resolve disputes between Z and X since the contractual
authority to arbitrate them stemmed from the settlement of disputes clause of the
general conditions of contract executed between the claimant (Y) and the defendant (X)
and Z was not a party to that agreement. It further decided that in English law, a
subcontractor would be entitled to start arbitral proceedings against X on the basis of
the name-borrowing clause only if it was a nominated subcontractor, or more precisely, if
the following three conditions were met: the subcontractor must be selected by the
employer and nominated by the employer's architect; the terms and conditions of the
subcontract must be known to the employer; the name-borrowing machinery must be
incorporated into the subcontract.
2. Pass-through Claims
Another connected problem is the issue of pass-through claims. Can the claimant in an
arbitration, who is seeking payment of outstanding debts held by the employer, include
the indemnities which he himself is liable to pay to his subcontractors or the damages
suffered by their sister companies resulting from the same event, when these
subcontractors and sister companies are not parties to the said proceedings? Arbitral
practice is moving in this direction, provided that it does not contravene the law
applicable to the merits of the case. A leading case on this matter is the partial final
award no. 1510 of 28 November 1980, rendered under the rules of the Society of Maritime
Arbitrators of New York. (286)
A claimant suing company X may not extend its claim to include sums owed by a
subsidiary of the respondent who is not a party in the proceedings. In ICC case no. 8817 of
1997, (287) J, a Spanish distributor, was suing X, a Danish company, claiming damages for
unjustified termination of a distribution agreement. Arbitration took place in Paris and
the sole arbitrator decided to apply the Vienna Convention and the Unidroit principles. In
the course of the proceedings, J extended its claim to certain sums owed to J by a US
P 347 daughter company of X, XX Inc. X argued that it could not be directed to pay the debts
of a separate US company as it could not be held liable for XX Inc. not meeting its
obligations. It further argued that the arbitrator had no jurisdiction over XX Inc., which
was not a party to the arbitral proceedings. The arbitrator pointed out that there could
be cases in which an arbitration agreement could be extended to other legal entities
belonging to the same economic group even if they had not signed the agreement at
issue. It was not the case here. Even if XX Inc. was a customer of J, it was not a party to the
execution of the exclusive distributorship agreement.
3. Direct Action of the Subcontractor Against the Employer
When a subcontractor has a direct action against the employer and is bound by an
arbitration clause in its relations with the main contractor, does he have a choice
between starting an arbitration against the main contractor or court proceedings against
the employer? In ICC case no. 5721 of 1990, (288) the arbitral tribunal answered in the
affirmative:
The contract between X and the applicant is ancillary to the main contract between the
employer and X. Egyptian law gives the subcontractor a right of direct action. Article 662
CCE provides that “Subcontractors and workers working for a contractor in the
performance of works have a right of direct action against the employer up to the
amounts of the sums he owes to the principal contractor at the time the action is
commenced ... .”
It should however be noted that:
– this right of direct action is a form of guarantee for the subcontractor and does not
deprive him of his right to take direct action against his immediate contractual
counterpart;
– this right of direct action is limited to whatever the employer owes to the main
contractor, and this, in the present case, would cause claimant to be exposed to all the
risks of the relationship between the employer and X. Claimant, who has suffered a loss
because of the wrongful failure of its direct counterpart to perform its obligations, has a
right of action against X. (289)
48
The Brussels Commercial Court recently addressed the issue of whether, in the case
where A and B on the one hand and B and C on the other, respectively conclude a
construction contract and a subcontract, C may start a direct court action against A, the
employer, if this is provided by the law otherwise applicable. The court answered in the
affirmative in a decision of 7 April 2000, (290) in a case where the direct action was based
on article 1798 of the Belgian Civil Code which provides for such an action by the
subcontractor against the employer. The court found further support for its decision in
P 348 the interpretation of the relevant arbitration clause. On the other hand, it rightly
authorised the intervention of B, the main contractor, in the proceedings to the extent
that this intervention was purely conservatory but also rightly rejected B's incident claim
against C and C's counterclaim against B to the extent that they purported to obtain the
payment of damages. Such claims were indeed obviously covered by the arbitration
clause.
4. Determination of the Law Applicable to the Various Contracts of the Contractual Chain
Where the various contracts of the contractual chain do not contain any provision
concerning the applicable law, or only one of them does (for example the consortium
agreement or the framework agreement), should the arbitral tribunal apply to the
subcontracts or to the accessory or implementation agreement, the same law which
applies to the main contract? There are obvious arguments to contend that an accessory
or implementation contract should be governed by the same law as the basic or
framework agreement, unless there are elements which might lead one to consider that
the parties did not intend to locate the two contracts in the same legal system. (291) From
a methodological point of view, it seems that in many cases, the arbitral tribunal
determines separately the law applicable to the various contracts, even if it reaches the
conclusion that the applicable law is the same for all of them. (292) As was pointed out by
a commentator on ICC award no. 2119, the application to the subcontract of a law
different from the one applicable to the main agreement is probably an inappropriate
solution which may lead, in certain cases, to unfortunate consequences, for example
where it is necessary to determine the existence of a case of force majeure; but also if the
arbitral tribunal has to interpret an arbitration clause which is identical in both
agreements. (293)
5. Joint Responsibility for Debts Incurred by a Company of the Group and Set-off
Where various companies of a group have participated in one commercial transaction
and have all benefited from it, should one of them be declared jointly responsible for the
debts incurred by the other? This is what the arbitral tribunal decided in ICC case no.
5103 of 1988, (294) where three European companies belonging to the same group had
started an arbitration against three Tunisian companies, who in turn filed a counterclaim
against the claimants. The arbitral tribunal decided a set-off between the reciprocal
debts of the parties and jointly ordered the defendants to pay the balance, relying on the
notion of group of companies and the intermingled participation of all of them in the
P 349 performance of the contract. The Tribunal justified its decision by the requirement of
security of international commercial relationships. It further pointed out: “This admission
of reciprocal joint and several liability, active and passive, in the relations between
companies belonging to the same group is in line with the positions taken expressly or
implicitly by all plaintiffs and defendants, with equity, and is not contrary to any rule of
international public policy of the French and Tunisian legal systems.” (295)
In ICC case no. 5971, (296) the claimant, a Swedish company and the defendants, two
entities from former Yugoslavia, had entered into three different agreements: a “Joint
Investment Agreement Joint Venture” (JVA) which provided for the construction by the
claimant of a complete plant for the processing of maize in former Yugoslavia; a “Sales
Purchase Agreement” (SPC) and an agreement for the transfer of the know-how necessary
to operate the plant (KHA). All three contracts were made between the same parties but
contained different provisions as to arbitration and the substantive law applicable (JVA:
ICC arbitration in Paris, Yugoslav law; SPC: ICC arbitration in Zurich, Swiss law; KHA: ICC
arbitration in Paris, Swiss law). In the arbitration instituted by the claimant based on the
JVA, one of several issues to be decided was whether the arbitral tribunal had jurisdiction
over set-off claims raised by the defendants based on the SPC and the KHA.
The arbitral tribunal first referred to the writings of Bucher according to which an arbitral
tribunal should not adjudicate a set-off claim which is not covered by the scope of the
arbitration clause; the arbitration agreement constitutes a waiver to introduce into the
arbitral proceedings, elements, claims or causes of action which are not specifically
covered by the clause. (297) The arbitral tribunal, however, decided that set-off claims
arising under the various agreements could not be segregated, in the absence of a clear
indication that the parties had the real intention to keep them totally separate from
each other. The arbitral tribunal emphasised that the three agreements were so closely
connected that one had to look at them as constituting an “ensemble économique” and
moreover an “ensemble légal”. This close interrelation made it necessary that set-off
claims should be heard by the tribunal, applying the old principle “Le juge de l'action est
le juge de l'exception”: “[A]ny other view would appear to be overly formalistic and would
P 350 deny justice to the Parties.” (298)
49
B. How to Minimise the Difficulties Which Can Arise from Separately Conducted
Parallel Arbitral Hearings
1. Appointment of the Same Arbitrators
We have seen that it will not always be possible to bring all the parties to the same
arbitral hearing, in disputes arising from a complex contractual structure. (299)
The participation of one and the same arbitrator in parallel proceedings, where the other
arbitrators are different, has sometimes been criticised on the grounds that the said
arbitrator has access to documents or has knowledge of facts which are not shared with
the whole arbitral tribunal.
It goes without saying that the arbitrator who is appointed to a second panel will have to
disclose this at the time of his appointment. In this case, either he will then be
challenged and will step down; or there is no objection, and he will possibly encounter
the problem of potential use in the second arbitration of knowledge he has obtained in
the first proceedings.
2. Communication of Information or Documents Obtained in Another Arbitration
In essence, the problem of using in a second arbitration information or documents
obtained or produced in a first case, raises four different concerns:
(1) Why should such information or documents be used in the second arbitration? It is
true that it might help the arbitrators or the parties in their instruction or in deciding the
case. However, arbitrators will generally agree that they have been appointed to decide
a particular case on its own facts and merits and not to reach the “absolute truth”.
(2) On the other hand, due process should in all circumstances be complied with and the
solution to any problem relating to the use or communication of information or
documents coming from another arbitration should always take this paramount value
into consideration. (300) Consequently, if an arbitrator who sits on two panels thinks it
necessary to base his findings on information which was revealed to him in the context of
another arbitration, he will see that it is put before the parties in the second case, so that
it can be debated. (301) It is also obvious that if the arbitrator concerned communicates
to the other arbitrators incorrect information of such a nature as to have an influence on
their decision on their jurisdiction in the second case, it violates, at the very least, the
P 351 right of defence and the award may not be enforced. (302)
(3) There is also a dimension of confidentiality. According to various legislations, respect
for the duty of confidentiality prevents an arbitrator from disclosing during the
proceedings any information which he obtained in a parallel arbitration. Given the
previous remarks, the arbitrator concerned will then be confronted with a delicate and
awkward situation.
(4) Indeed, the principle of neutrality, independence and impartiality of the arbitrator is
of paramount concern. The duty of confidentiality will lead the arbitrator in some cases
to reach the conclusion that he is no longer able to fulfill his duties in total
independence or impartiality and he may have to resign. In other cases, he will be happy
simply to make a full disclosure of his problem to his co-arbitrators and to the parties
and the latter will of course have the right to challenge him, if they so wish. Fortunately,
such problems do not seem to happen often.
The case law on these issues is not plentiful. In France, a decision was delivered by the
Paris Court of Appeals (303) on 2 June 1989, to the effect that “an arbitral tribunal which
did base its decision partially on the terms of reference set up in a parallel proceedings,
did not violate the principle of contradiction, as the terms of reference had been
subjected to debate.”
With respect to confidentiality, one may refer to the English decision Ali Shipping Corp. v.
Shipyard Trogir, (304) which raised the question whether an award rendered in a case
between A (a company of group X) and B (a company of group Y) might be produced in
another arbitral proceedings between company C (of group X) against the same company
B (of group Y). According to the decision of the Court of Appeals, the interest of justice
should prevail on the principle of confidentiality. But if the latter is no longer an obstacle
to a possible production of an award rendered in a connected case, the question remains
whether the award should be produced. The decision of the Paris Court of Appeals of 14
October 1993 (305) might suggest an affirmative answer to this question in a case where
the two arbitral tribunals were presided over by the same arbitrator. The decision has,
however, been criticised by its commentator, a former president of the French Supreme
Court.
3. Independence and Impartiality of the Arbitrator Appointed in Parallel Cases
If there is nothing in principle to prevent the same arbitrator sitting in connected
arbitrations, a second nomination must nonetheless be avoided from the moment that
P 352 the arbitrator has already “reached his conclusion” in the other case. (306) Indeed, the
practice of institutions such as the ICC seems to be moving in this direction. It is also the
position which was adopted by the Paris Court of Appeals in two decisions delivered on 2
50
June 1989. (307) The court was called to decide on an application to set aside based on
the breach of the principle of contradiction and of the rights of defence, as well as the
violation of international public policy; one of the arbitrators allegedly failing to give the
guarantees of independence required by the ICC rules and French law. (308) The court
decided that the recognised and apparent position of the arbitrator, whose nomination
in the context of the first case was known to the parties, would have entitled them to use
this fact in support of a possible challenge, but they had abstained. The set-aside
proceedings could not therefore be used to make up for their failure to exercise their
right to challenge in due course. Moreover, as already stated, the court decided that
there was no breach of the principle of contradiction by the arbitral tribunal which had
based its decision partly on the Terms of Reference concerning parallel proceedings,
since these Terms had been filed before the court; similarly, there was no breach of this
principle, nor of the rights of defence, when the same arbitrator was sitting in two
parallel cases. Conversely, the solution might be different if a decision had been reached
in the other proceedings which might constitute unfavourable prejudice on the part of
that arbitrator. The court subsequently clarified its case law in a decision of 14 October
1993 where it defined what it meant by prejudice (préjugé):
an unfavourable prejudice, particularly if the arbitrator has participated, in the first
case, in an award which logically carries certain consequences on the questions to be
decided in the second; however, this prejudice must have a bearing on the indissociable
whole of fact and law which constitutes the substance of the matter submitted to
arbitration; indeed, there is neither prevention nor prejudice when the arbitrator is
called to give his decision on a factual situation similar to the one examined before, but
between different parties, and even less so when he must decide an issue of law which he
has previously decided.. (309)
The Court of Appeals has once again further clarified its case law in a subsequent
decision of 12 January 1996 (310) where it has decided that:
There is no principle that stands in the way of asking an arbitrator to sit in a case which is
linked to another proceedings in which he was previously involved as arbitrator. The
knowledge of this prior case is indeed not of such nature as to compromise his
impartiality, unless he is in a situation of opposition with one of the parties to the
P 353 dispute, as this could in particular be due to a determination, by the arbitrators, of the
liability of a party which was not involved in the arbitration, and consequently to an
unfavourable prejudice. (311)
The dispute was between the main contractor (C) and the State of Qatar. The arbitrator
appointed by C had already been appointed in another arbitration between C and the
subcontractor. The arbitral tribunal decided that the intervention of the arbitrator in the
other proceedings was not sufficient to consider that he had “prejudged” the case under
reference. The reasoning was as follows:
Whereas, although it is established in this case, that in participating in the arbitration
concerning the subcontract, A was aware of the various difficulties that would have to be
dealt with in the arbitration between company C and the State of Qatar relating to the
main contract, and although he had to decide at this occasion questions which are
particularly identical to those raised by the dispute between C and the State of Qatar,
the fact remains that in signing the arbitral award ... A limited itself to deciding upon the
respective obligations of the subcontractor and the main contractor in their mutual
relations, but at no time did he decide on the fate of entirely different commitments
undertaken by the main contractor in regard to the client, as on the contrary, the tribunal
deferred ruling on the counterclaims of company C as they were subordinated to
decisions to be made in the present arbitration; this award ... cannot therefore constitute
a prejudice.
Finally, in a decision of 2 April 1998, (312) the Court has again confirmed that:
The principle of contradiction is not violated, nor are the rights of defence, when the
same arbitrator sits in two parallel cases; things are very different if, in the other
instance, a decision was handed down that can constitute an unfavourable prejudice on
the part of this arbitrator, in particular if the arbitrator participated in the first case, in
an award which logically entails certain consequences for the issues to be decided in the
second. (313)
4. How to Alleviate the Inconveniences Which Can Result from the Existence of Parallel
Arbitrations
If the different arbitral tribunals have identical members or share a president, steps can
be taken more easily with a view to alleviating the inconveniences which can result from
the duality or the multiplicity of cases. These steps would include, for example:
– nomination of the same technical experts;
– fixing a calendar for the proceedings designed to avoid the prejudgment of certain
P 354 issues common to all the proceedings;
– fixing, with the same object of avoiding prejudgment, deadlines for the submission of
evidence and the briefs, for the organisation of hearings, the depositions of witnesses, the
51
examination of the parties. (314)
If the rules of the arbitral institution allow it, which will rarely be the case, the hearings in
the various cases might even be held together. (315)
The appointment of the same experts should of course be done in full compliance with
due process, as is evidenced by the decision of the Paris Court of Appeals of 6 February
1997. (316) In the case referred to, two arbitration proceedingss took place, the first one in
Geneva between S and A and a second one in Paris, between A and C. In the first case, two
experts were appointed, Mr. H and Mr. B. In the second, only Mr. H was appointed with the
duty to examine “all the technical documentation of the dispute”. The first arbitral
tribunal declared A responsible vis-à-vis S. The second arbitral tribunal, which had
suspended its decision until the first tribunal would have rendered its award, decided
that C was responsible vis-à-vis A. C started an action to set aside the second award. Its
claim was dismissed but raises an interesting problem. Although Mr. H was sole
appointed expert in the second proceedings, he decided to associate Mr. B to his
technical investigations, in order to avoid any contradictions between the two experts'
reports. In fact, before the two arbitral proceedingss took place, Mr. B had been
appointed “en référé” by a French national court to make an expert report and had
decided that the origin of the trouble was the defective design and manufacture of the
pumps manufactured by C. Was it not appropriate for C, in these conditions, to consider
that the participation of Mr. B in the second expert assessment had “vitiated the normal
course of the expert assessment” (faussé le déroulement normal des opérations)? This
decision clearly provides evidence of the risks involved in trying to limit the
inconveniences generated by the existence of two or more proceedings in a multiparty
case. In theory, it is a good idea to have the experts involved in the various proceedings
cooperate, but this may raise serious problems of due process. Given the case law
analysed above on the independence and impartiality of arbitrators, it may be
justifiable to consider that if one party associates with its expert findings a technician
who has already submitted a report on the origin of the problems in dispute, the
expertise is vitiated by a lack of objectivity. However, in the current case, the Court of
Appeals refused to annul the award, basing its decision on the fact that the appointed
P 355 expert, Mr. H, had only gathered, as he had been requested, “toute la documentation
technique du litige” and had made his final conclusion in total independence.
On the other hand, if the various arbitral tribunals have completely different members,
any cooperation is theoretically impossible, (317) and the risks of contradiction cannot be
excluded, particularly if the substantive and procedural law applicable in different cases
is not identical. But as commentators have pointed out, such risks of contradiction
equally exist in the judicial sphere.
Finally, it is also a delicate situation where, in a horizontal contractual chain, the
arbitration is between A and B, while C, a consultant and co-contractor with A, has played
a significant role in the disputed transaction but has not been, and indeed could not be,
joined either to the arbitration in question or in another proceeding. The best way to
partially get around C's absence will be to call him to the hearing as a witness. This
appearance will nevertheless be limited to determining, for all purposes, the role which
he played in the disputed project.
Part IX. Enforcement of the Arbitral Award

The procedural decisions which are made by the arbitrators in the context of a complex
contractual structure require particular attention. Indeed, as we have already seen in the
context of the Dutco case, (318) an arbitral award can be set aside in the State where it
was made. National legislations in this matter generally provide that such an application
to set aside is open to the parties, either when the arbitral tribunal has not been validly
constituted, or has exceeded its jurisdiction or powers, or where the principle of
contradiction and of the rights of defence have not been respected, or in the event of a
violation of international public policy. (319)
Similarly, the recognition or enforcement of the award can equally be refused, by virtue
of Article V of the New York Convention (320) on the following grounds:
(a) The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable
to present his case; (321) or
(b) the award deals with a dispute not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond the scope of the
P 356 submission to arbitration; (322) or
(c) the composition of the arbitral authority or the arbitral proceedings was not in
accordance with the agreement of the parties, or, failing such agreement, was not in
accordance with the laws of the country where the arbitration took place; (323) or
(d) the recognition or enforcement of the award would be contrary to public policy of that
country. (324)
National legislation concerning enforcement of arbitral awards generally provides for
analogous grounds, in whole or in part. (325)
52
It is certain that the grounds cited above are such that would allow a party brought to
consolidated arbitration proceedings against its will to lodge an application to set aside
the award or to oppose its enforcement. Even if the decisions in this respect are rare, not
to say practically non-existent, the risk of annulment or a refusal of exequatur is a real
one and should therefore encourage caution.
Part X. The res judicata Effect of an Award Rendered in a Connected

Arbitration Arising from the Same Project
It is now commonly accepted that arbitral awards have res judicata. (326) It is indeed so
provided for in various national legislations.
In France, under the terms of articles 1476 and 1500 of the New Code of Civil proceedings,
“[o]nce it is made, the arbitral award is res judicata in relation to the dispute it resolves.”
The same is true in Belgium where article 1703 of the Judicial Code provides that unless
the award is contrary to public policy or the dispute is not capable of settlement by
arbitration, the arbitral award is res judicata once it has been notified to the parties and
it may no longer be challenged before arbitrators. The new German statute of 22
December 1997 also provides in article 1055 of the ZPO that “[t]he arbitral award has the
same effect between the parties as a final and binding court judgement.” Similar
provisions also exist in the Netherlands (article 1059 of the Code of Civil Proceedings), in
Austria (§594 ZPO) and in Switzerland (article 190 LDIP).
On the contrary, it appears that “nowhere in a statute of a common law country it is
stated that an arbitral award has a res judicata effect like a judgement.” (327) The
UNCITRAL Model Law simply mentions that the award “shall be recognised as binding”
(article 35(1)). The US Federal Arbitration Act does not even provide that an award is
binding upon the parties. It remains that arbitral awards are in principle regarded in the
United States as having res judicata effect including collateral estoppel, and judicially
P 357 confirmed awards enjoy full faith and credit under the US Constitution. (328) In
England, section 58 of the Arbitration Act 1996 states that the award is “final and binding”.
The principle of res judicata being accepted, three questions arise:
(1) What are the conditions for res judicata to apply?
(2) What is the scope of res judicata?
(3) If an award is not res judicata, what value should be given to it by other arbitrators?
These are very broad issues which exceed the scope of this article. We will therefore limit
our analysis to a review of the case law which has had to deal with them in relation to
multicontract, multiparty disputes.
As to the first question, in ICC case no. 6363 of 1991, (329) the arbitral tribunal stated that
“where there is, cumulatively, identity as regards parties, subject matter of the dispute
petitum, and causa petendi, between a prior judgement and a new claim, the new claim is
barred by the principle of res judicata.” (330) Of course, we will also have to take into
consideration the law of the seat in this respect, since the moment at which the award
becomes res judicata may vary from one jurisdiction to the other: at the moment the
award is made or after it has been notified to the parties or when there is no longer any
possibility of challenge. It should also be kept in mind that in certain jurisdictions like
France or Belgium, res judicata only serves private interests (331) and therefore the
exceptio may only be raised by the parties and not ex officio by a court or arbitral
tribunal.
What are the scope and limits of res judicata? The issue was addressed in ICC cases nos
2475 and 2762 of 1977. (332) A had concluded a contract with B for the purchase of steel. It
had also concluded a contract of supply of the same products to C which, in turn, had
entered into an agreement for the sale of the same products to D; D had resold the steel
to E. The manufacturer did not supply the products and none of the contracts were
performed. Four proceedings took place. C started an arbitration proceedings against A. E
sued D before Belgian courts and was found liable. It therefore started an arbitration
P 358 against C and C, as a reaction, started a new arbitration against A. The two cases were
consolidated. Since a first award had already been rendered in the relations between A
and C, the question arose as to whether and to what extent the first award was res
judicata and also whether the arbitral tribunal was bound by the decision of the Court of
Appeals of Brussels which had declared it common to C and A. The arbitral tribunal
decided that the first award was res judicata and further stated that “It would be
paradoxical to contend that an arbitrator sitting under the auspices of the ICC would not
be bound by an award previously rendered between the same parties on the same issues
by another arbitrator also sitting under the auspices of the ICC.” It is true that even if the
ICC Rules do not contain any provision concerning res judicata, it would be difficult to
conceive that the ICC court could approve a second arbitral award between the same
parties and having the same object, which would be contradictory to a first award
already approved by the court.
On the other hand, the arbitral tribunal, on the basis of the Brussels Convention of 27
September 1968, also considered that it was bound by the decision rendered by the
Brussels Court of Appeals.
53
As to the scope of res judicata, it decided that in accordance with French and Belgian
law, the “autorité de la chose jugée” was not limited to the holding of the case but also
extended to the reasoning; that therefore, in casu, the court could not reconsider the
issue of force majeure which was raised by A in the first proceedings and rejected by the
first arbitral tribunal in the reasoning of its award.
The issue of the scope of res judicata was also addressed by other arbitral awards. For
example, in an ad hoc award of 31 May 1988, (333) the arbitral tribunal decided that the
principle of res judicata prevents the reopening of necessarily decided points (334)
though it does not prevent the clarification or interpretation of a decision nor the giving
of a decision on points which an award has left undecided. In another ICC award in case
no. 3267 of 28 March 1984, (335) the arbitral tribunal decided that
the binding effect of its first award is not limited to the contents of the order thereof
adjudicating or dismissing certain claims, but that it extends to the legal reasons that
were necessary for such order, i.e., to the ratio decidendi of such award. Irrespective of the
academic views that may be entertained on the extent of the principle of res judicata on
the reasons of a decision, it would be unfair to both parties to depart in a final award
from the views held in the previous award, to the extent they were necessary for the
disposition of certain issues. By contrast, the arbitral tribunal made clear in other parts
of its first award that the views expressed therein on certain other aspects of the case
were of a preliminary nature only and without prejudice to its final decision. On such
aspects, the arbitral tribunal holds itself entirely free to adopt other views with the
P 359 benefit of further evidence and investigations. (336)
On the other hand, whether and to what extent an arbitral tribunal should take into
consideration an award rendered in another connected arbitration and which is not res
judicata, is another interesting issue which was recently raised in a well known ICC case
which involved four arbitration proceedings arising from the same project. One of the
central issues in each arbitration related to the existence of deceit at the time of
conclusion of the supply agreements. The cases were heard by four different panels. In
one case, (337) the claimant submitted to the arbitrators a final award rendered in
another one of the four cases, (338) in which the tribunal had agreed the existence of
deceit and had consequently declared the disputed contract void and ordered the
defendant to pay damages to the claimant.
In its award, the second arbitral tribunal pointed out that the parties were not the same
in the two cases; that the arbitration in consideration took place under a different supply
contract and arbitration agreement, albeit with the seat of arbitration in the same city;
that the applicable law was also different and that it could not be assumed that the
same evidential materials were equally available to both arbitration tribunals. The
tribunal therefore concluded:
This arbitration tribunal is not bound by the X award; nor are the parties to these
arbitration proceedings. There can be no issue estoppel. Nonetheless, it provides a
helpful analysis of the common factual background to this dispute. Accordingly, we have
borne its findings and conclusions in mind, whilst taking care to reach our own
conclusions on the materials submitted by these parties in these proceedings.
The tribunal finally found in favour of the defendant, considering that on the basis of the
facts and the applicable law, it could not–as was the case in the award–conclude to the
existence of deceit.
In another case where the arbitral tribunal decided that a previous decision was not res
judicata, (339) it nevertheless decided that the first decision could not be ignored: “Parts
of it represent an authoritative ruling on the position of X country law on certain matters
that may be relevant in this case.” (340) This approach was not followed by an ICSID
tribunal in a proceedings started by a company against Egypt after an award rendered by
an ICC arbitral tribunal between the same parties and in relation to the same dispute
had been annulled by the Paris Court of Appeals, a decision which was later confirmed by
the French Supreme Court on 6 January 1987. (341) According to the Paris Court of Appeals,
the ICC award of 16 February 1983 was invalid because Egypt had not consented to submit
the dispute to ICC arbitration. SPP however submitted to the new arbitral tribunal that it
should “... adopt and incorporate as its own the pertinent findings of facts made by the
ICC arbitral tribunal concerning SPP's performance of its obligations under its
P 360 agreements .. . .”
The ICSID tribunalmfound this submission to be unacceptable, both in principle and
under the Centre's Arbitration Rules. It considered that the submission asked the tribunal
to abdicate its fact-finding function and adopt as its own the findings of a tribunal that
had been held to have acted in excess of the powers conferred upon it by the arbitration
clause. According to the tribunal, such an approach is hardly consistent with the basic
function of evidence in the judicial process, which is to enable the tribunal to determine
the truth concerning the conflicting claims of the parties before it. (342) Moreover, under
article 47 of the ICSID arbitration rules, the ICSID tribunals are obliged to make their own
findings of facts: (343)
1. The award shall be in writing and shall contain:
...
54
(g) a statement of the facts as found by the tribunal ...
P 360
References
*) Member of the Brussels and Paris Bars, Professor at the Law School of the University
of Louvain.
1) Among the legal commentaries, particular reference will be made to the following
books and articles: International Chamber of Commerce Institute of International
Business Law and Practice, Multi-party Arbitration: Views from International
Arbitration Specialists (1991) [hereinafter ICC Multi-party Arbitration], in particular
the references mentioned by de Boisseson, at 139; the contributions published
under the title Application of the ICC Rules of Arbitration by the International Court of
Arbitration, 7 ICC Ct. Bull. 6 (No. 2, 1996), in particular, Patrice Level, Joinder of
Proceedings, Intervention of Third Parties, and Additional Claims and Counterclaims,
id. at 36, and Serge Gravel, Multiparty Arbitration and Multiple Arbitrations, id. at 45;
the contributions published in L'Arbitrage dans la vie des sociétés (1999), in
particular, Olivier Caprasse, L'Arbitrage et les groupes de sociétés, id. at 169; Marc
Blessing, Extension of the Scope of an Arbitration Clause to Non-signatories, in Swiss
Arbitration Association, The Arbitration Agreement–Its Multiform Critical Aspects: A
Collection of Reports and Materials Delivered at the ASA Conference held in Basel
on 17 June 1994 [hereinafter ASA 1994 Conference] 151 (Marc Blessing ed., 1994); Jean-
François Bourque, Le règlement des litiges multipartites dans l'arbitrage commercial
international (1989) (unpublished thesis); ICC Guide on Multiparty Arbitration (1982);
Daniel Cohen, Le droit des groupes de sociétés (1991); Daniel Cohen, Arbitrage et
Groupes de Contrats, 1997 Rev. Arb. 471; U.K, Departmental Advisory Committee on
Arbitration Law, 1990 Report on “Consolidation”, reprinted in 7 Arb. Int'l 389 (1991);
Mathieu de Boisseson, Le droit francais de l'arbitrage 514 (2d ed. 1990); P. Deltombe,
L'Arbitrage Multipartite, 1992 Actualités du Droit 277; Jean-Louis Delvolvé, Final
Report on Multi-party Arbitrations of the ICC Commission on International Arbitration,
6 ICC Int'l Ct Arb. Bull. 26 (1995); Yves Derains et Sophie Schaf, Clauses d'arbitrage et
groupes de sociétés, 1985 Revue De Droit Des Affaires Internationales [R.D.A.I] 231;
Yves Derains, L'extension de la clause d'arbitrage aux non-signatories–La doctrine des
groupes de sociétés, ASA 1994 Conference 165; Ibrahim Fadlallah, Clauses d'arbitrage
et groupes de sociétés in Travaux du Comité Français de Droit International Privé
1984-1985 105 (1987); Fouchard Gaillard Goldman on International Commercial
Arbitration 280 (Emmanuel Gaillard & John Savage eds., 1999); Walter Habscheid,
Zum Problem der Mehrparteienschiedsgerichtsbarkeit, in ASA Swiss Essays on
International Arbitration 173 (Claude Reymond & Eugène Bucher eds., 1984); Bernard
Hanotiau, Complex–Multicontract-Multiparty–Arbitrations, 14 Arb. Int'l 369 (1998);
Charles Jarrosson, Conventions d'arbitrage et groupes de sociétés, ASA 1994
Conference 209; Sigvard Jarvin, The Group of Companies Doctrine, ASA 1994
Conference 181; Pierre Karrer, Multi-party and Complex Arbitration under the Zurich
Rules, in Aspekte des Wirtschaftsrecht (1994) 261; Philippe Leboulanger, Multi-
contract Arbitration, 13 J. Int'l Arb., 43 (No. 4, 1996); Michael Mustill, Mutipartite
Arbitrations, 7 Arb. Int'l 393 (1991); Horacio Grigera Naon, Lessons for Multi-party and
Complex International Commercial Arbitration from Recent International Economic
Cooperation Agreements, in ILA Report of the Sixty-seventh Conference, Helsinki
1996; Fritz Nicklish, Multi-Party Arbitration and Dispute Resolution in Major Industrial
Projects, 11 J. Int'l Arb. 57 (No. 4, 1994); Jean-François Poudret, Arbitrage multipartite
et droit suisse in 9 ASA Bull. 8 (1991); Jean-François Poudret, L'extension de la clause
d'arbitrage: approches française et suisse, 122 J. Droit Int'l (clunet) 893 (1995); Alan
Redfern and Martin Hunter, Droit et pratique de l'arbitrage commercial
international 150 (1994); Otto Sandrock, Arbitration Agreements and Groups of
Companies, in Etudes de Droit International en L'honneur de Pierre Lalive (1993),
Otto Sandrock, Extending the scope of Arbitration Agreements to Non-Signatories, ASA
1994 Conference 165; Otto Sandrock, The Extension of Arbitration Agreements to Non-
signatories: an Enigma Still Unresolved, in Liber Amicorum M. Buxbaum 461 (2000);
Eric Schwartz, Multi-party Arbitration and the ICC–in the Wake of Dutco, 10 J. Int'l Arb.
5 (No. 3, 1993); Emmanuel Stauffer, L'extension de la clause arbitrale à des non-
signataires, ASA 1994 Conference 229; John Townsend, Non-signatories and
Arbitration, 3 ADR Currents 19 (1998); Jacques van Compernolle, L'arbitrage
multipartite, in L'Arbitrage–Travaux offerts au Professeur Albert Fettweis 81 (Lambert
Matray & Georges de Leval eds., 1989); Pierre van Ommeslaghe, L'arbitrage
multipartite, in L'arbitrage; Het Scheidsgerecht: Papers Presented at a Conference
organized in Brussels on December 17, 1982 by the Brussels Bar and CEPANJ 109
(1983).
2) See, e.g., Société Kis France v. Société Générale (Cour d'appel Paris, 31 Oct. 1989)
1992 Rev. Arb. 90; 16 Y.B. Com. Arb. 145 (1991), and text accompanying notes 174-177.
3) Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614, 625 (1985).
55
4) In its decision of 15 March 1990 in Sonatrach v. KCA Drilling Ltd. (ATF 116 I 56), the
Swiss Federal Court decided that “if it is established that an arbitration clause
exists, there is no reason to interpret that clause restrictively.”
5) Banque Arabe et Internationale d'Investissement v. Inter-Arab Investment
Guarantee Corp., award of 17 November 1994, 21 Y.B. Com. Arb. 13 (1996).
6) Id. at 18.
7) Id. at 19.
8) A société de fait is a kind of de facto company or constructive partnership in which
physical and/or legal persons act in concert without fulfilling corporate formalities.
9) Id. at 20.
10) 103 J. Droit Int'l (Clunet) 978 (1976); Collection of ICC Arbitral Awards 1974-1985 263
(Sigvard Jarvin & Yves Derains eds., 1990) (hereinafter 1 ICC Awards) and
accompanying note.
11) The applicable law is generally considered to be the law that governs the contract
in which the clause is included, the lex mercatoria, or, in a more limited number of
cases, the law of the seat of the arbitration.
12) 10 Oct. 1979, Rép. dr. int. pr. Suisse I 259.
13) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10,
1958, 330 U.N.T.S. 3, 21 U.S.T. 2517, T.I.A.S. No. 6997, Article II (hereinafter New York
Convention).
14) Fadlallah, supra note 1, at 112.
15) ICC award in case no. 6519 of 1991, 118 J. Droit Int'l (Clunet) 1065 (1991); Collection of
ICC Arbitral Awards 1991-1995 420 (Sigvard Jarvin, Yves Derains, Jean-Jacques
Arnaldez & Dominique Hascher eds., 1997) (hereinafter 3 ICC Awards), and
observations of Yves Derains.
16) ICC award in case no. 5730 of 1988, 117 J. Droit Int'l (Clunet) 1029 (1990); Collection of
ICC Arbitral Awards 1986-1990 410 (Sigvard Jarvin, Yves Derains & Jean-Jacques
Arnaldez eds., 1994) (hereinafter 2 ICC Awards), and observations.
17) ICC award in case no. 5721 of 1990, 117 J. Droit Int'l (Clunet) 1020 (1990); 2 ICC Awards,
supra note 16, at 400, and observations.
18) Ad hoc award of 17 November 1994, supra note 5.
19) ICC award in case no. 4504 of 1985-1986, 113 J. Droit Int'l (Clunet) 1118 (1986); 2 ICC
Awards, supra note 16, at 279 and note Sigvard Jarvin.
20) ICC interim award in case no. 6610 of 1991, 19 Y.B. Com. Arb. 162 (1994) and ICC final
award in case no. 7626 of 1995, 22 Y.B. Com. Arb. 132 (1997).
21) Marine Drive Complex v. Ghana, 19 Y.B. Com. Arb. 11 (1994).
22) Andersen Consulting Business Unit Member Firms v. Arthur Andersen Business Unit
Member Firms, interim award of 29 Apr. 1999, unpublished. The Swiss Federal Court
decision of 8 December 1999 dismissing the action to set aside is published in 18
ASA Bull. 546 (2000).
23) The standard arbitration clause had been amended several times. Various member
firms contended that in any case they could not be bound by a version subsequent
to the one they had signed. The arbitrator and the Swiss Federal Court considered
that by reason of the scheme put in place, the clauses incorporated in the MFIFA's
bound all other member firms. Therefore, from the moment that the last clause had
been incorporated in one MFIFA, it did bind all other member firms.
24) Townsend, supra note 1.
25) Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, 7 F.3d 1110 (3d Cir. 1993).
26) 920 F.2d 1269 (6th Cir. 1990), referred to by Townsend, supra note 1, at 21.
27) In relation to the agency principle, see also Letizia v. Prudential Bache Securities
Inc., 802 F.2d 1185 (9th Cir. 1986) and Britton v. Co-op Banking Group, 4 F.3d 742 (9th
Cir. 1993).
28) Supra note 10: “avait permis à la société nationale de l'Etat B de croire légitimement
qu'il engageait l'ensemble des sociétés du groupe qu'il animait.”
29) 117 J. Droit Int'l (Clunet) 1029 (1990); 2 ICC Awards, supra note 16, at 410 and
observations.
30) 14 ASA Bull. 623 (1996).
31) Tareau v. Martin, Cass. 1e civ., July 16, 1992, 1993 Rev.Arb. 611: “Dans une telle
promesse, une première personne, le promettant, promet à une deuxième personne,
bénéficiaire, le fait d'une troisième personne, tiers à la promesse. Le promettant est
donc engagé vis-à-vis du bénéficiaire, si bien que la clause stipulée dans la promesse
joue dans les rapports de ces deux parties. Cette solution joue tant que le tiers ne
ratifie pas la promesse. Elle joue également s'il est établi que le tiers n'a pas ratifié la
promesse. Dans ce cas, le promettant n'a pas respecté ses obligations, engage donc sa
responsabilité et dans le litige qui s'ensuit, la clause est applicable: la responsabilité
contractuelle n'est pas autonome, elle dépend de l'obligation inexécutée et ainsi des
clauses que cette obligation recèle. Si cependant, le tiers ratifie l'opération, le
promettant est normalement libéré, le tiers devient partie, d'une manière rétroactive
et se trouve donc lié, dans la relation qu'il entretient désormais avec le bénéficiaire,
par la clause compromissoire. Ainsi le tiers, dans une promesse de porte-fort, est-il
partie et donc cocontractant s'il décide de ratifier la promesse.”
32) 85 F.3d 21 (2d Cir. 1996), referred to by Townsend, supra note 1, at 20. See also,
McCarthy v. Azure, 22 F.3d 351, 362 (1st Cir. 1994); Paine, Webber, Jackson & Curtis v.
Chase Manhattan, 728 F.2d 577 (2d Cir. 1983).
33) 2 F. Supp. 2d 1465 (M.D. Ga.), referred to by Townsend, supra note 1, at 20.
56
34) See for example ICC award in case no. 7154 of 1993, 121 J. Droit Int'l (Clunet) 1059
(1994); 3 ICC Awards, supra note 15, at 555 and note by Yves Derains. In the United
States, see for example the recent decision of the United States District Court for
the Southern District of New York in Cedrela Transport Ltd. v. Banque Cantonale
Vaudoise, 67 F. Supp. 2d 353 (U.S.D.C., S.T.N.Y. 1999) and the many references cited.
35) ICC award in case no. 6363 of 1991, 17 Y.B. Com. Arb. 186 (1992).
36) ICC interim award of 5 March 1984 in case no. 3879, 11 Y.B. Com. Arb. 127 (1986), set
aside by the Swiss Federal Court, in relation to the State of Egypt. See infra, notes 78
and 80.
37) First Suppl. Ch., 1993 Rev. Arb. 632 and note Jean-Louis Goutal.
38) Id. at 642.
39) CA Paris, Cass. 1e civ., 6 Feb. 1997, 1997 Rev. Arb. 556 and note P. Mayer.
40) Townsend, supra note 1, at 21.
41) 659 F.2d 836 (7th Cir. 1981), commented Townsend supra note 1, at 21.
42) 10 F.3d 753 (11th Cir. 1993) and Townsend supra note 1, at 22.
43) 198 F.3d 88 (2d Cir. 1999).
44) 64 F.3d 773 (2d Cir. 1995).
45) 9 F.3d 1060, 1064 (2d Cir. 1993). See also American Bureau of Shipping v. Tencara
Shipyard S.P.A., 170 F.3d 349 (2d Cir. 1999).
46) 1 ICC Awards, supra note 10, at 257.
47) Id. at 264: “Dans ces conditions, il y a lieu de s'en tenir à l'idée, conforme à l'esprit des
contrats comme à la réalitééconomique, que ni le groupe A, ni son président, ni telle
ou telle des sociétés membres de ce groupe, ne peuvent s'abriter der rière la rédaction
de telles clauses particulières, interprétées littéralement et isolées du contexte de
l'ensemble des accords, pour demander àêtre mises hors cause dans un litige qui
concerne directement le groupe ou l'organisation A.”
observations.
49) V. Van Houtte, Consent to Arbitration Through Agreement to Printed Contracts: The
Continental Experience, 16 Arb. Int'l 14 (2000); M. de Boisseson and T. Clay, Recent
Developments in Arbitration in Civil Law Countries, 1998 Int. A.L.R. 150, at 152.
51) Thomson-CSF, S.A. v. American Arbitration Association, supra note 44, at 777.
52) 351 F.2d 503, 505-506 (2d Cir. 1965).
53) 991 F.2d 42 (2d Cir. 1993).
54) Id. para 11.
55) Supra note 52.
56) Id. at 506.
57) 527 F.2d 966 (2d Cir. 1975), cert. denied, 426 U.S. 936 (1996).
58) Id. at 973
59) 106 F.3d 201 (7th Cir. 1997) commented by Townsend, supra note 26, at 20. See also
Asplundh Tree Expert Co. v. Bates, 71 F.3d 592 (6th Cir. 1995); U.S. Fidelity & Guar. Co.
v. Westpoint Constr. Co., 837 F.2d 1507 (11th Cir. 1988).
60) 210 F.3d 262 (4th Cir. 2000).
61) 119 J. Droit Int'l (Clunet) 1019 (1992); 3 ICC Awards, supra note 15, at 456.
62) 113 J. Droit Int'l (Clunet) 1118 (1986); 2 ICC Awards, supra note 16, at 279 and note
Sigvard Jarvin.
observations.
64) Cour d'appel Paris (1re ch. c.), 7 Jul. 1994, 1995 Rev. Arb. 107 and note Sigvard Jarvin.
65) 19 F.3d 1503 (3d Cir. 1994), aff'd, 115 U.S. 1920 (1995), commented on by Townsend,
supra note 26 at 22.
66) 86 F.3d 1287 (3d Cir. 1996).
67) ICC award in case no. 7453 of 1994, 124 J. Droit Int'l (Clunet) 107 (1997).
68) Supra note 62.
69) 116 J. Droit Int'l (Clunet) 1101 (1989); 2 ICC Awards, supra note 16, at 380 and note
Guillermo Aguilar-Alvarez.
70) ICC interim award of 5 March 1984, case no. 3879, 11 Y.B. Com. Arb. 127 (1986);
subsequently set aside in relation to the Republic of Egypt by the Swiss Federal
Court. See infra note 75.
71) Just as a reliance in the law of contracts is a substitute for consideration.
72) Case no. 4131 of 1982, 1 ICC Awards, supra note 10, 146 at 151.
73) (1st Ch.D.), 1997 Rev.Arb. 550.
74) 1st Ch. D., 1996 Rev. Arb. 67 and note Ch. Jarrosson, confirmed by the Cour de
Cassation (Cass. 1e civ.), 21 May 1997, Rev. Arb. 537 and note E. Gaillard.
75) ICC interim award of 5 March 1984 in case no. 3879, 11 Y.B. Com. Arb. 127 (1986).
76) Id. at 130.
77) 1989 Rev. Arb. 525; 7 ASA Bull. 63 (1989); 16 Y.B. Com. Arb.180 (1991).
78) 16 Y.B. Com. Arb. 180 (1991), at 180-181.
79) J.F. Poudret, L'extension de la clause d'arbitrage: approches française et suisse, 122 J.
Droit Int'l (Clunet) 893 (1995), at 909.
57
80) See for example ICC award in case no. 2375 of 1975, 1 ICC Awards 257, supra note 10 at
259; Cour d'appel Paris (1st Suppl. Ch.), 31 Oct. 1989, 1992 Rev. Arb. 90. See also
below, Part III, Section C.
81) ICC award in case no. 5103 of 1988, 115 J. Droit Int'l (Clunet) 1207 (1988); 2 ICC Awards,
supra note 16, at 361 and note Gullermo Aguilar-Alvarez.
observations; 1992 Rev.Arb. 25 and note Cohen; confirmed by the Cour d'appel Paris
in a decision of 11 January 1990, 1992 Rev. Arb. 95 and note Cohen; 118 J. Droit Int'l
(Clunet) 141 (1991) and by the Cour de Cassation in a decision of 11 June 1991, 1992
Rev. Arb. 73 and note Cohen.
observations.
84) 2 ICC Awards, supra note 16, at 404-405: “L'appartenance de deux sociétés à un même
groupe ou la domination d'un actionnaire ne sont jamais, à elles seules, des raisons
suffisantes justifiant de plein droit la levée du voile social. Cependant, lorsqu'une
société ou une personne individuelle apparaît comme étant le pivot des rapports
contractuels intervenus dans une affaire particulière, il convient d'examiner avec soin
si l'indépendance juridique des parties ne doit pas, exceptionnellement être éca rtée au
profit d'un jugement global. On acceptera une telle exception lorsque apparaît une
confusion entretenue par le groupe ou l'actionnaire majoritaire.”
85) “Une juridiction arbitrale doit être très circonspecte lorsqu'il s'agit d'étendre une
clause à un dirigeant qui est formellement intervenu ès-qualité, L'extension suppose
que la personne morale n'a été que l'instrument du commerce de la personne
physique, de sorte que l'on puisse faire rejaillir sur celui-ci les contrats et engagements
souscrits par celle-là. Or les présomptions énumérées ci-dessus ne permettent pas
d'avoir une certitude totale à cet égard.”
86) 12 Y.B. Com. Arb. 63 (1987).
87) Id. at 72.
88) Society of Maritime Arbitrators, Inc., New York, partial final award no. 1510 of 28
November 1980, 7 Y.B. Com. Arb. 151 (1982).
89) “Afin que l'arbitre puisse être saisi de tous les aspects économiques et juridiques du
litige,” (Cour d'appel Paris, (1er Ch.D.), Dec. 7, 1994, “the Jaguar case”) 1996 Rev. Arb.
67 and note Ch. Jarrosson; confirmed by the Cour de Cassation (1st civ. ch.) 21 May
1977, 1997 Rev. Arb. 537 and note E. Gaillard.
90) J.J. Ryan & Sons v. Rhone-Poulenc Textile, S.A., 863 F.2d 315, 320-321 (4th Cir. 1988).
91) Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, 7 F.3d 1110 (3d Cir. 1993). See also
HR 1 July 1993, NJ 461 (1994) cited and commented by O.L.O de Witt Wijnen,
Vertegenwoordiging en Conflictoplossing, in Vertegenwoordiging en Tussenpersonen,
Tjeenk Willink, 505, 516 (1999).
92) ICC interim award of 5 March 1984 in case no. 3879, 11 Y.B. Com. Arb. 127 (1986); see
supra notes 75 and 76.
94) Cour d'appel Paris, 1988 Rev. Arb. 154 and note A, Chapelle.
95) “... si Sponsor A.B. a joué un rôle important dans la conclusion de la promesse d'achat,
son rôle n'est pas moindre en ce qui concerne sa non-exécution. Dès lors, la tierce
partie recherchée n'est qu'un tiers en apparence, et en fait apparaît être l'âme,
l'inspiratrice pour tout dire, la tête pensante de la partie contractante.”
96) “Il est admis en droit que la clause compromissoire, expressément
acceptée par certaines des sociétés du groupe, doit lier les autres sociétés
qui, par le rôle qu'elles ont joué dans la conclusion, l'exécution ou la
résiliation des contrats contenant lesdites clauses, apparaissent selon la
commune volonté de toutes les parties à la procédure comme ayant été de
véritables parties à ces contrats, ou comme étant concernées au premier
chef par ceux-ci et par des litiges qui en peuvent découler.
“En effet, un groupe de sociétés possède, en dépit de la personnalité
juridique distincte appartenant à chacune de celles-ci, une
réalitééconomique unique, dont les tribunaux doivent tenir compte, son
existence étant reconnue par les usages du commerce international.”
97) 1 ICC Awards, supra note 10, at 153; 9 Y.B. Com. Arb. 138 (1984). J. F. Poudret, supra
note 79, at 910.
98) J.F. Poudret, supra note 79, at 913.
99) “En résumé, le droit suisse ignore la notion de groupe de sociétés ... et s'en tient
résolument à l'indépendance juridique de la société par rapport à son actionnaire
unique ou de la filiale par rapport à la société mère. On ne peut s'en écarter que dans
des circonstances tout à fait exceptionnelles, où le fait de recourir à l'intermédiaire
d'une telle filiale pour se soustraire à ses propres obligations constituerait une fraude
à la loi ou un abus de droit manifeste.”
100) 10 ASA Bull. 902 (1992).
101) 14 ASA Bull. 496 (1996); F. Knoepfler and P. Schweitzer, Jurisprudence suisse en
matière d'arbitrage international, Revue suisse de droit international et de droit
européen 581 (1996).
102) Reference is made to the decision of the Swiss Federal Court of 1 September 1993, 14
ASA Bull. 623 (1996).
58
103) 10 F.3d 753 (11th Cir. 1993), commented by J. Townsend, supra note 26, at 22.
104) 863 F.2d 315 (4th Cir. 1988).
105) Id. at 320-321, quoting Sam Reisfield & Son Import Co., v. S.A. Eteco, 530 F.2d 679,
680-681 (5th Cir. 1979). See also Interocean Shipping Co. v. National Shipping &
Trading Corp., 523 F.2d 527, 539 (2d Cir. 1975), cert. denied, 423 U.S. 1054 (1976).
106) (1997) Y.B. 132.
107) [1990] 1 Ch. 433.
108) Id. at 544.
109) 113 J. Droit Int'l (Clunet) 1118 (1986); 2 ICC Awards, supra note 16, at 279 and note S.
Jarvin.
110) The Arbitral tribunal distinguishes the factual pattern from other ICC arbitral awards
(including award no. 1434 of 1975, which is examined below) and also refers to a
decision of 10 October 1979 of the Swiss Federal Court in a Cartier case (supra note
12) in which A had not only started arbitration against B and B'which were parties to
the agreement, but also against the group of companies to which B and B'belonged.
The existence of the group was mentioned in the agreement. The Swiss Federal
Court decided that only A and B were bound by the agreement notwithstanding the
fact that all the companies of the group were interrelated and dominated by one
man, and further pointed out that a group of companies does not have legal
personality. According to Poudret “L'extension de la clause d'arbitrage: approches
française et suisse,”supra note 79, at 907: “Cet arrêt rejette donc la théorie du groupe
de sociétés dans la mesure où celle-ci voudrait que l'actionnaire dominant ou la
maison mère ait de plein droit le pouvoir d'engager les filiales ou réciproquement.”
111) 76 F.3d 393, 1996 WL 55657 (10th Cir. (Colo)), commented Townsend, supra note 26, at
22.
112) Supra notes 103 and 104.
113) Para. 5, citing ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995).
114) Supra note 10.
115) “Représentant l'organisation A”, the term being used together with “Groupe A” which
was obviously a synonym.
117) In ICC case no. 4504, see supra note 109, the Arbitral tribunal distinguishes the case
from award no. 1434 in the sense that in the latter case, Mr. X, president of second
defendant, had acted in the name of second defendant and not in the name of the
group to which the first defendant and second defendant belonged.
118) 115 J. Droit Int'l (Clunet) 1207 (1988), and note GAA, 2 ICC Awards, supra note 16, at 361.
119) 2 ICC Awards, supra note 16, at 366-367.
120) 198 F.3d 88 (2d Cir. 1999).
121) 7 F.3d 1110 (3d Cir. 1993), commented Townsend, supra note 26, at 21.
122) 7 F.3d 1110 (3d Cir. 1993) para. 8.
123) Id. para. IV.
124) 116 J. Droit Int'l (Clunet) 1101 (1989) and 2 ICC Awards, supra note 16, at 380 and note
GAA.
125) 19 F.3d 1503 (3d Cir. 1994), aff'd, 115 S. Ct. 1920 (1995), commented on by J. Townsend,
supra note 26, at 22.
126) 115 S. Ct. 1920, 1923 (1995).
127) Decarel Inc., Gabriel Chiniara, Robert Salicco v. Concordia Project Management Ltd,
[1996] RDJ 484 (C.A.).
128) Citing the precedents Condominiums Mont St-Sauveur Inc. v. Les Constructions
Serge Sauvé Ltée et al. [1990] R.J.Q. 2783; Guns N'Roses Missouri Storm Inc. v.
Productions Musicales Donald K. Donald Inc. [1994] R.J.Q. 1183.
129) “Ce serait une erreur, à mon avis, que de se soumettre à la juridiction de l'arbitre deux
personnes qui ne sont pas personnellement parties à la clause d'arbitrage ... Le risque
de décisions contradictoires de la part de l'arbitre et de la part de la Cour Supérieure
existe ...; ce risque, créé de toutes pièces par l'intimée, ne justifie pas que nous
soumettions messieurs Chiniara et Salicco à une juridiction d'arbitrage dont ils n'ont
jamais voulu.”
130) Kowerit Steel and Crane Ltd et al. v. Kone Corp. et al., 87 D.L.R. (4th).
131) 1st Ch. C., Uzinexportimport Romanian Co. c. Attock Cement Co., 1995 Rev. Arb. 107
and note by Sigvard Jarvin.
132) 117 J. Droit Int'l (Clunet) 1020 (1990); 2 ICC Awards, supra note 16, at 400 and note.
134) Supra note 82 and text.
observations.
136) Fadlallah, supra note 14, at 116; P. Lalive, The First “World Bank” Arbitration (Holiday
Inn v. Morocco)–Some Legal Problems, 51 Brit. Y.B. Int'l L. 123 (1998).
137) First interim award, unpublished.
138) Supra note 107.
139) Id., at 544.
observations Yves Derains.
59
141) “Le bénéfice de la clause compromissoire ne peut être étendu qu'aux seules sociétés
du groupe X qui ont effectivement participé aux négociations ayant précédé le
protocole ou qui se trouvent directement concernées par lui à l'exclusion de celles qui
n'ont été finalement que les instruments d'une opération financière entre les mains
d'un actionnaire majoritaire....”
142) 1985 Rev. Arb. 583; 1 ICC Awards, supra note 10, at 257.
144) 110 J. Droit Int'l (Clunet) 899 (1983) and observations by Y. Derains; 1984 Rev. Arb. 137;
1 ICC Awards, supra note 10, at 464.
145) Marine Drive Complex v. Ghana, supra note 21.
146) Supra notes 99 and 110.
147) Smith/Enron Co-Generation Limited Partnership, Inc. v. Smith Co-Generation
International, Inc., 198 F.3d 88, para. 8.
148) 30 November 1998, unpublished.
149) See also K. Berger, The Creeping Codification of the Lex Mercatoria, principle 50 at
300, and M. Mustill, The New Lex Mercatoria, in Liber Amicorum for Lord Wilberforce
(Clarendon Press, 1987) principle No. 8, at 176.
150) In one variation, A–for example the purchaser of all the shares of a company–enters
into the same contract with B, C, D, E, various sellers. Karrer also refers to the case of
the issue of bonds, each bond containing the same arbitration clause: P. Karrer,
Multi-Party and Complex Arbitration under the Zurich Rules in Aspekte des
Wirtschaftsrecht (Zurich, 1994) 268.
151) See for example L. Aynès, note under Paris Court of Appeal (1st Suppl. Ch.) 29
November 1991, 1993 Rev. Arb. 617.
152) ICC Interim Award of 5 March 1984 in case no. 3879, 11 Y.B. Com. Arb. 127 (1986). See
supra note 76.
153) Each year they represent more than 20% of the new ICC arbitrations. On this subject
see S. Bond, ICC Multi-party Arbitration, supra note 1, at p. 40 and Schwartz, Multi-
party Arbitration and the ICC–in the Wake of Dutco, supra note 2, at 6.
154) See examples of such clauses in ICC Multi-party Arbitration, supra note 1, 75 et seq.
and 117 et seq., and their analysis in the same publication, at 63 et seq. and 24 et
seq. respectively. See also Delvolvé, Final Report on Multi-party Arbitrations of the
ICC Commission on International Arbitration, supra note 1, at 42 et seq.; ICC Guide on
Multiparty Arbitration, ICC Publication no. 404, supra note 1; and P. van
Ommeslaghe, L'arbitrage multipartite, supra note 1, at 124 et seq.
155) Humphrey Lloyd, ICC Multi-party Arbitration, supra note 1, at 64 et seq.
156) Sigvard Jarvin, ICC Multi-party Arbitration, supra note 1, at 209.
157) According to the new 1998 ICC Rules (Art. 6(2)): “If the Respondent does not file any
Answer, as provided by Article 5, or if any party raises one or more pleas concerning
the existence, validity or scope of the arbitration agreement, the Court may decide,
without prejudice to the admissibility or merits of the plea or pleas, that the
arbitration shall proceed if it is prima facie satisfied that an arbitration agreement
under the Rules of Arbitration of the ICC may exist. In such a case, any decision as to
the jurisdiction of the Arbitral tribunal shall be taken by the Arbitral tribunal itself.
If the Court is not satisfied, the parties shall be notified that the arbitration cannot
proceed. In such a case, any party retains the right to ask any court having
jurisdiction whether or not there is a binding arbitration agreement.”
The scope of the prima facie review was much broader under the old 1988 rules.
Article 7 of the 1988 Rules provided that: “When there is no prima facie agrcement
between the parties to arbitrate or where there is an agreement but it does not
specify the International Chamber of Commerce and if the Defendant does not file
an Answer within the period of 30 days provided by paragraph 1 of Article 4 or
refuses arbitration by the International Chamber of Commerce, the Claimant shall
be informed that the arbitration cannot proceed.” The contents of this Article were
developed in art. 12 of the Internal Rules. Article 8(3) of the 1988 ICC Rules further
provided that: “Should one of the parties raise one or more pleas concerning the
existence or validity of the agreement to arbitrate, and should the International
Court of Arbitration be satisfied of the prima facie existence of such an agreement,
the Court may, without prejudice to the admissibility or merits of the plea or pleas,
decide that the arbitration shall proceed. In such a case any decision as to the
arbitrator's jurisdiction shall be taken by the arbitrator himself.”
158) S. Bond, ICC Multi-party Arbitration, supra note 1, at 43. For some examples of
application, see A. Dimolitsa, Issues Concerning the Existence, Validity and
Effectiveness of the Arbitration Agreement, 7 ICC Ct. Bull. 2 (1996), at 15.
159) For some cases of application see T. Klein, Disagreement on the Scope of an
Arbitration Clause, 7 ICC Ct. Bull. 2 (1996) at 26.
160) S. Bond, ICC Multi-party Arbitration, supra note 1, at 43.
161) Giorgio Bernini, ICC Multi-party Arbitration, supra note 1, at 163.
162) Yves Derains and Eric Schwartz, A Guide to the New ICC Rules of Arbitration 64
(1998).
163) In this context, see Patrice Level, Joinder of Proceedings, Intervention of Third Parties
and Additional Claims and Counterclaims, supra note 1, at 38.
60
164) La bonne foi, Conférence Libre du Jeune Barreau de Liège (1990), at 411 et seq; M. de
Boisseson, Le droit français de l'arbitrage interne et international, supra note 1, at
683; S. Jarvin, L'obligation de coopérer de bonne foi, exemples d'application au plan de
l'arbitrage international in L'apport de la Jurisprudence Arbitrale (ICC Institute,
1986), at 157; P. Leboulanger, Multi-contract Arbitration, supra note 1, at 91.
165) 22 Y.B. Com. Arb. 191 (1997).
166) Id. 107.
167) Id. at 113.
168) Id. at 115.
169) Supra note 76. The award was set aside by the Swiss Federal Court in relation to the
Republic of Egypt.
170) 11 Y.B. Com. Arb. 133 (1986).
171) 1st Suppl. Ch., Société Kis France et Autres c/ Société Générale et Autres, 1992 Rev.
Arb. 90; 16 Y.B. Com. Arb. 145 (1991).
172) Id. at 147.
173) 1992 Rev. Arb. 72.
174) “C'est l'existence d'une subordination qui permet d'identifier le groupe formé d'un
contrat principal et d'un sous-contrat ainsi que le groupe de sociétés: la domination
de la société-mère à l'égard de ses filiales et la participation de celles-ci à l'exécution
d'un contrat conclu par la première.”
175) For the references and a comment, see E. Gaillard, L'affaire Sofidif ou les difficultés
de l'arbitrage multipartite, 1987 Rev. Arb. 2759 and Yves Derains and Eric Schwartz, A
Guide to the New ICC Rules of Arbitration 98 (1998).
176) Cass. Com., 22 Nov. 1977, 1978 Rev. Arb. 461 and Cass. (1re Ch.Civ.), 16 July 1992, 1993
Rev. Arb. 611 and note by Philippe Delebecque. See also in this respect our article
on Arbitration and Bank Guarantees–An Illustration of the Issue of Consent to
Arbitration in Multicontract-Multiparty Disputes, published in 16 J. Int'l Arb. 15 (No. 2,
1999).
177) 210 F.3d 262 (4th Cir. 2000).
178) 1st Ch. A., 1993 Rev. Arb. 645 and note by C. Jarrosson.
179) 1st Ch. D., SMABTP & Autres c/ soc. Statinor & Autre, 1997 Rev. Arb. 550.
181) Pas. I at p. 956, confirming an old precedent of 10 July 1875, Pas. I at p. 357.
182) See in particular van Compernolle, supra note 1, at p. 83 and references quoted.
183) See nevertheless article 31 of the Belgian Code Judiciaire.
184) van Compernolle, supra note 1, at 84.
185) Convention for the recognition and enforcement of foreign arbitral awards of 10 June
1958. Article II(3) effectively provides that: “The court of a Contracting State, when
seized of an action in a matter in respect of which the parties have made an
agreement within the meaning of this article, shall, at the request of one of the
parties, refer the parties to arbitration, unless it finds that the said agreement is
null and void, inoperative or inapplicable of being performed.” See also ICC arbitral
award no. 2272, delivered in 1975, 2 Y.B. Com. Arb. 51 (1977), in which the arbitral
tribunal accepted to decide a dispute involving an Italian patent owner, A, against
his Belgian exclusive licensee B, where the contract contained an arbitration clause.
B had entered into an exclusive distribution agreement in Belgium with C, which
contained a clause giving jurisdiction to ordinary courts. B had brought an action
against A and C before the Brussels courts and had requested the arbitral tribunal
to decline jurisdiction by reason of the connexity of the matters. The arbitral
tribunal refused to accede to B's request. For an example of the creativity which
American courts have sometimes displayed in analogous situations, see Craig,
Paulsson and Sovern, ICC Arbitration 103 et seq. (2nd ed. Paris, 1990).
186) A. Dimolitsa, supra note 158, at pp. 19-20.
187) 1992 Rev. Arb. 66, at 72: “si chacun des accords partiels n'existe que par le précédent et
appelle le suivant; une volonté, unique par son objet, s'exprime en une pluralité
d'instruments complémentaires. C'est aussi l'existence d'une subordination qui permet
d'identifier le groupe formé d'un contrat principal et d'un sous-contrat.. . .”
188) 1st Civ. Chamber, 14 May 1996, 1997 Rev. Arb. 535.
189) Commercial Ch., 1992 Rev. Arb. 66 and note by L. Aynès.
190) Société Firma Waibel v. Käuffer, ASA Bull. 381 (2000).
191) 2000 Rev. Arb. 501 and note by X-Y Li.
192) Id. at 503.
193) 1992 Rev. Arb. 66 and note by L. Aynès. See also infra, the case referred to in note
207.
194) 1st Ch. D., 1997 Rev. Arb. 547.
195) 1st Suppl Ch., 1993 Rev. Arb. 617 and note by L. Aynès.
196) At 622.
197) 17 Y.B. Com. Arb. 51 (1992).
198) ASA Bull. 544 (1996) and 25 Y.B. Com. Arb. 312 (2000).
199) ASA Bull. 562 (1996)
61
200) Lawrence W. Craig, William W. Park, & Jan Paulsson, ICC Arbitration 94 (2d ed. 1990).
The Arbitral tribunal also refers to the ICC award in the Pyramids arbitration (SSP v.
Arab Republic of Egypt and EGOTH, 9 Y.B. Com. Arb. 115 (1984)) where it was held that
the transaction as a whole (involving the proposed construction of an international
tourist complex at the site of the pyramids in Cairo), “although structured in the
form of separate agreements ... is to be viewed as a unified contractual scheme .. . .”
201) Partial award, 25 Y.B. Com. Arb. 328 (2000).
202) At 340.
203) Award of 1 October 1980, 12 Y.B. Com. Arb. 84 (1987).
204) The award is known through the decision of the Paris Court of Appeal which
dismissed an action to set aside. Paris Court of Appeals (1st Suppl. Ch., 28 February
1992, 1992 Rev. Arb. 649 and note by Cohen).
205) ICC interim award of 16 November 1984, 11 Y.B. Com. Arb. 134 (1986).
206) Id. at 138.
207) 113 J. Droit Int'l (Clunet) 1113 (1986); 2 ICC Awards, supra note 16, at 275 note by Y.
Derains. See also above, the case referred to in note 193, supra.
208) 1 ICC Awards, supra note 10, at 473 and note by Y. Derains.
209) Arbitral award of 21 October 1983, 10 Y.B. Com. Arb. 71 (1985) and ICSID annulment
decision of 3 May 1985, 11 Y.B. Com. Arb. 162 (1986).
210) At 164.
211) 15 Y.B. Com. Arb. 74 (1990).
212) At 77.
213) At 78.
214) 121 J. Droit Int'l (Clunet) 1059 (1994); 2 ICC Awards, supra note 16, at 555 and note by Y.
Derains.
215) Swiss courts and arbitrators seem to have recently relaxed their interpretation of
the requirement of a writing. See in this respect van Houtte V., supra note 49.
216) 14 Y.B. Com. Arb. 183 (1989).
217) 19 Y.B. Com. Arb. 167 (1994).
218) See also above the Klöckner award, supra note 209.
219) 18 Y.B. Com. Arb. 80 (1993).
220) 17 Y.B. Com. Arb. 164 (1992).
221) 17 Y.B. Com. Arb. 279 (1992).
222) 23 Y.B. Com. Arb. 128 (1998).
223) Id. at 136.
224) 1992 Rev. Arb. 71-72.
225) 23 Y.B. Com. Arb. 128 at 137(1998).
227) 117 J. Droit Int'l (Clunet) 1020 (1990) and 2 ICC Awards, supra note 16, at 400 and
observations. For a discussion of this case and other similar cases relating to bank
guarantees, see our article on Arbitration and Bank Guarantees, supra note 176.
228) “Il n'est pas contesté que la relation établie entre le garant (la banque) et le
bénéficiaire, entre le donneur d'ordre (demanderesse) et la sous-garante (banque
européenne) ne soit pas couverte par la clause d'arbitrage des contrats de juin 1983. Le
contrat de garantie est indépendant des contrats de juin 1983. L'arbitrage ne concerne
donc que les relations entre la demanderesse et X. Le tribunal serait donc incompétent
pour donner des ordres à l'une ou l'autre banque. En revanche, il est compétent pour
dire si le bénéficiaire des lettres de garantie, X, est en droit de se prévaloir des
garanties par rapport à la demanderesse. Il l'est également pour dire si les garanties
sont valables dans le contexte des relations entre donneur d'ordre et bénéficiaire. Ces
garanties ont leur fondement dans les contrats de juin 1983. Elles sont, pour les parties
à l'arbitrage, liées à la validité, la portée et la résiliation du contrat de base. ... Le
tribunal peut se prononcer sur le droit du bénéficiaire de faire valoir les garanties. Il
est en droit de se prononcer sur le caractère illicite d'un appel en garantie.. . .”
229) See however the Paris Court of Appeal decision of 22 March 1995, (1997 Rev. Arb. 550)
which seems to open the door to a broader and more flexible approach.
230) Whether such intervention is possible after the arbitration has started is examined
in Section B of Part V.
231) See for example ICC award in case no.6719 of 1991, 121 J. Droit Int'l (Clunet) 1071
(1994); 3 ICC Awards, supra note 15, at 567 and observations by J.J.A.; ICC award in
cases no. 7385 and 7402 of 1992, 18 Y.B. Com. Arb. 68 (1993). See also in this respect
article 35 of the new 1996 English Arbitration Act.
232) Articles 13 and 14 (Possibility of joinder by the arbitral tribunal). For more on the
subject see Pierre Karrer, op. cit. at note 1, p. 261 onwards.
233) Articles 16-18.
234) For example GAFTA, Grain and Feed Trade Association, Arbitration Rules, article 5.
235) Delvolvé, Final Report on Multi-party Arbitrations of the ICC Commission on
International Arbitration, supra note 1, at 35 et seq.. The author points out that from
the moment when the conditions of article 13 are met, the consent of all the parties
is not theoretically necessary. In practice, however, the court will intervene only at
the request of one of the parties. Furthermore, from the moment that the parties are
in agreement, a joinder can intervene even outside the conditions of article 13. See
also P. Level, supra note 1, at note 165, pp. 40 et seq.
236) Derains and Schwartz, supra note 175, at 63.
62
237) Id. at 64.
238) Id.
239) Id. at 65.
240) Articles 13 and 14 of the Arbitration Rules.
241) In application of the federal rules of civil procedure, Rule 42(a) and Rule 81(a). S.
Jarvin, Multi-party Arbitration, supra note 1, at 212 and references quoted.
242) 998 F.2d 68 (2d Cir. 1993); North River Ins. Co. v. Philadelphia Reinsurance Corp., 856
F. Supp. 850 (SDNY 1994); R. Wallace, Consolidated Arbitration in the United States.
Recent Authority Requires Consent of the Parties, 10 J. Int'l Arb., 5 (No. 4, 1993).
243) 189 F.3d 264 (2d Cir. 1999).
244) See, e.g., Alvarez, La Nouvelle Législation Canadienne sur L'arbitrage Commercial
International, 1986 Rev. Arb. 529; Prujiner, Les Nouvelles Règles de L'arbitrage au
Québec, 1987 Rev. Arb. 42; E. Gaillard, The UNCITRAL Model Law and Recent Statutes
on International Arbitration in Europe and North America, 2 ICSID Review 424 (1987)
and Pré-rapport sur L'arbitrage Multipartite et la Consolidation des Procédures
Arbitrales Connexes, International Law Association, Warsaw Conference (1988), at 14
onwards; British Columbia International Arbitration Rules, section 27, reproduced in
Delvolvé, Final Report on Multi-party Arbitrations of the ICC Commission on
International Arbitration, supra note 1, at 48; Section VI B of the 1989 Hong Kong
statute, annotated by de Speville in Arbitration International, 1985, 109; Redfern and
Hunter, Droit et pratique de l'arbitrage commercial international, supra note 1, at
154 and references quoted. Section VI B sets forth:
“Where in relation to two or more arbitration proceedings it appears to
the Court:
(a) that some common question of law or fact arises in both or all of
them; or
(b) that the rights to relief claimed therein are in respect of or arise out
of the same transaction or series of transactions, or
(c) that for some other reason, it is desirable to make an order under this
section, the Court may order those arbitration proceedings to be
consolidated on such terms as it thinks just.... ”
245) Schultsz, Les Nouvelles Dispositions de la Législation Néerlandaise en Matière
d'Arbitrage, 1988 Rev. Arb. 209; Albert Jan van den Berg, The Netherlands, 12 Y.B. Com.
Arb. 3 (1987). In France, in absence of a model clause for the constitution of the
multiparty arbitral tribunal (express or by reference to a set of rules), the state
courts refuse to grant the consolidation of the arbitral tribunals (Sofidif decision
(Cour d'appel Paris, Dec. 19, 1986), 1987 Rev. Arb. 275). In this decision, the Paris
Court of Appeal declared that “the rules of arbitration, based on the consensual
nature of the arbitration agreement, do not allow the extension of the effects of the
disputed agreement to third parties, strangers to the contract, and block any
procedure of forced intervention or call on guarantee; thus, the difficulties arising
from connexity or indivisibility can find a solution only on a contractual level.” (“Les
règles de l'arbitrage, fondées sur le caractère consensuel de la clause compromissoire
ne permettent pas d'étendre à des tiers, étrangers au contrat, les effets de la
convention litigieuse et fait obstacle à toute procédure d'intervention forcée ou
d'appel en garantie; qu'ainsi la solution des difficultés nées de la connexité ou de
l'indivisibilité ne peut trouver sa solution que sur le plan contractual.”) Similarly, in
England, see the case of Abu Dhabi Gas v Bechtel, 1983 Rev. Arb. 119, comments by J.
Paulsson.
246) ICC award in case no. 6719 of 1991, 121 J. Droit Int'l (Clunet) 1071 (1994) and
observations by JJA; 3 ICC Awards, supra note 15, at 567.
247) ICC award in cases no. 7385 and no. 7402 of 1992, 18 Y.B. Com. Arb. 68 (1993).
248) ICC case no. 2375 of 1975, 1 ICC Awards, supra note 10, at 257.
249) Cour d'appel Paris, 1e ch., 7 July 1994, 1995 Rev. Arb. 107 and note by Sigvard Jarvin.
250) ICC case no. 5730 of 1988, J. Droit Int'l (Clunet) 1029 (1990); 2 ICC Awards, supra note
16, at 410 and observations.
252) 933 F.2d 1100 (2d Cir.), cert. denied, 502 U.S. 910 (1991), commented on by Townsend,
supra note 1, at 20.
253) Award of 27 October 1989, 19 Y.B. Com. Arb. 11 (1994).
254) At 17-18.
255) See e.g. ICC award in case no. 6519 of 1991, 118 J. Droit Int'l (Clunet) 1065 (1991), 3 ICC
Awards, supra note 15, at 420, and the case cited in the award and obs. Y.D. See also
note under ICC award in case no. 5730 of 1988, 117 J. Droit Int'l (Clunet) 1029 (1990)
and 2 ICC Awards, supra note 16, at 410.
256) See e.g. Cour d'appel Paris, 1e ch., 7 July 1994, 1995 Rev. Arb. 107 and note by Sigvard
Jarvin. In this case, the ICC first considered that there was no prima facie arbitration
clause between UEI and Mr. Pharaon.
257) Derains and Schwartz, supra note 175, p. 84.
258) Id. at 87.
63
259) 4 Int'l Constr. L. Rev. 239 (1987); 2 ICC Awards, supra note 16, at 484 and note by S.
Jarvin.
260) 19 Y.B. Com. Arb. 11 (1994).
261) At 18.
262) See supra, note 144.
263) See supra, note 136.
264) See also ICC award no. 3742 of 1983, 1 ICC Awards, supra note 10, at 486 and note by
Y. Derains, where the court decided that it did not have jurisdiction vis-à-vis D and E
who had not be named defendants in the Terms of Reference.
265) See note 259.
266) Interim award of 16 July 1986, 3 Int'l Constr. L. Rev 473-476 (1986); 12 Y.B. Com. Arb.
113 (1987).
267) ICC Multi-party Arbitration, supra note 1, at 167-168.
268) Cour d'appel Paris, 1e ch., 26 Oct. 1995, 1997 Rev. Arb. 553.
269) 7 January 1992, Bull. Civ., 1, no 2; 1992 Rev. Arb. 470, comments by P. Bellet; 119 J. Droit
Int'l (Clunet) 707 (1992) (2nd decision), comments by C. Jarrosson. The 5 May 1989
decision of the Paris Court of Appeal was published in 1989 Rev. Arb. 723, comments
by P. Bellet and in J. Droit Int'l (Clunet) 707 (1992) (1st decision) comments by C.
Jarrosson. See also E. Schwartz, Multi-party Arbitration and the ICC–In the Wake of
Dutco, 10 J. Int'l Arb., 5 (No. 3, 1993).
270) In the famous Westland case, which led to an arbitral award of 25 March 1984, the
ICC's appointment of a single arbitrator for the different defendants, with the
arbitration taking place in Geneva, was not judged to be contrary to the principle of
equality by the Swiss Federal Court (16 May 1983, 2 ASA Bull. 293 (1984) onwards and
19 July 1988). On this subject see J.F. Poudret, Arbitrage multipartite et droit suisse, 9
ASA Bull. 8 (1991). See also in the recent case law Tribunal Fédéral Suisse, 4 January
1995, 13 ASA Bull. 210 (1995).
271) In his Final Report, (see supra note 1) at 33, Delvolvé points out that when the court
has appointed one arbitrator for all the defendants, it considers that there are no
grounds for replacing him when the arbitral tribunal subsequently declared itself
without jurisdiction with regard to one of these defendants. Likewise, see article
18.4 of the arbitration rules of the Geneva Chamber of Commerce.
272) In a note by the ICC Court secretariat, on the subject of the constitution of arbitral
tribunals in cases involving several parties, 4 ICC Ct Bull. 6 (October 1993), the court
defined its position as follows: “The judgment of the Cour de cassation leaves
parties wishing to institute proceedings against multiple defendants with a number
of different options in order to avoid violating the principle of equality upon which
the Dutco decision is founded. One would be to seek to reach an agreement with the
defendants concerning the constitution of the tribunal. This would not offend the
principles upon which the Cour de cassation's judgment is based, provided,
however, that the dispute has arisen. In the event that agreement with the
defendants were no longer possible, or that the defendants cannot agree on the
joint nomination of a coarbitrator or do not accept that an appointment be made
on their behalf by the ICC Court, the claimant might then consider requesting the
ICC to appoint an arbitrator on its behalf. In such case, the defendants could not
claim to be disadvantaged if a joint appointment were made by or for them. Nor
would any such argument be available to them if a sole arbitrator were appointed
by the ICC in accordance with Article 2, paragraph 5 of its Rules. Of course, it may
also be possible for the claimant to introduce separate arbitration proceedings
against the different defendant parties concerned.” See also Delvolvé, Final Report
(supra note 1), at 32 et seq. and Serge Gravel, Multiparty Arbitration and Multiple
Arbitrations, supra note 1, at 45 et seq. For an example of solving the problem in the
context of an ad hoc arbitration, see Derains, ICC Multi-party Arbitration, supra note
1, at 58.
273) See also Articles 16(7) and 18 of the 1996 Arbitration Act.
274) See also Article 6(5) of the new 1997 AAA Rules, Article 18 of the WIPO Rules, Article
16(3) of the 1999 Stockholm Arbitration Rules, Section 13 of the DIS Rules, and Article
10 of the Rules of the Austrian Federal Economic Chamber.
275) See notably article 13 of the Arbitration Rules of the Zurich Chamber of Commerce.
276) See for example Article 11 of the CEPANI Rules.
277) These cases can sometimes lead to the appointment of more than three arbitrators.
For the ICC practice, see S. Gravel, supra note 1, at 51 onwards.
278) See supra note 244.
279) Compania de Petroleos v. Nereus, 527 F.2d, 966 (2d Cir., 1975). See also 512 F. Supp.
1308 (SDNY 1976). See comments by de Boisséson, ICC Multi-party Arbitration, supra
note 1, at 146 and references quoted.
280) 1998 Rev.Arb. 383 and note by Jean-Louis Delvolvé.
281) Le droit de l'arbitrage interne et international en Suisse, Payot, Lausanne, 1989, 151 (
“Les consorts, par exemple les indivis, constituent une seule partie, doivent désigner
un seul arbitre et il n'y a pas à proprement parler d'arbitrage multipartite” ).
282) Delvolvé, Final Report, supra note 1, at 34.
283) Summary of the discussions of the Committee of International Commercial
Arbitration of the International Law Association, Helsinki Meeting, August 1996, p. 2.
284) Supra note 213.
285) 23 Y.B. Com. Arb. 30 (1998).
64
286) 7 Y.B. Com. Arb. 151 (1982).
287) 25 Y.B. Com. Arb. 355 (2000).
observations.
290) 11th Ch. B, unpublished, but commented on by B. Hanotiau, Récentes évolutions
législatives et jurisprudentielles en matière d'arbitrage en Belgique, Gazette du Palais
57, 60 (2000).
291) Note under ICC award no. 3043 of 1978, 1 ICC Awards, supra note 10, 358 at 361.
292) ICC cases no. 2119 of 1978, 1 ICC Awards, supra note 10, at 355 and note; no. 2745 and
no. 2762 of 1977, 1 ICC Awards, supra note 10, at 325 and note; no. 3043 of 1978, 1 ICC
Awards, supra note 10, 358.
293) See note 292, 1 ICC Awards at 358.
294) 115 J. Droit Int'l (Clunet) 1207 (1988) and note by GAA; 2 ICC Awards, supra note 16, at
361.
296) 13 ASA Bull. 728 (1995).
297) At 736.
298) At 738-739. See also article 27 of the Zurich Arbitration Rules which provides that:
“[t]he Arbitral tribunal also has jurisdiction over a set-off defense if the claim that is
set-off does not fall under the arbitration clause and even if there exists another
arbitration clause or jurisdiction clause for that claim.”
299) See Abou Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corporation (English
Court of Appeal, 23 June 1982) 1983 Rev. Arb. 119 and comments by J. Paulsson.
300) Cl. Reymond, Des connaissances personelles de l'arbitre à son information privilégiée,
1991 Rev. Arb. 3.
301) H. van Houtte, ICC Multi-party Arbitration, supra note 1, at 191 et seq.
302) Cass. 1e civ., March 24, 1998, 1999 Rev. Arb. 255.
303) 1st Suppl. Ch., 1991 Rev. Arb. 87: “Ne viole pas le principe de la contradiction le
Tribunal Arbitral qui a pu fonder sa décision particllement sur l'acte de mission
concernant une procédure parallèle, cet acte ayant été versé au débat.”
304) 1998 Rev. Arb. 579 and note by L. Burger.
305) 1994 Rev. Arb. 380 and note by P. Bellet: “Le principe de la contradiction impose que
chaque partie soit mise en mesure de débattre contradictoirement des faits de la
cause; rien de ce qui sert à fonder le jugement de l'arbitre ne doit échapper au débat
contradictoire des parties.”
306) On this point, see Fouchard, Gaillard and Goldman, supra note 1, at 585 et seq.
307) TAI companies and others v. SIAPE companies and others, and Société Gemanco v.
SAEPA and SIAPE companies, 1991 Rev. Arb. 87.
308) Articles 1502-4 and 1502-5 of the New French Code of civil procedure.
309) Ben Nasser and others v. BNP and Credit Lyonnais, 1994 Rev. de l'Arb. 380 et seq.:
“Un préjugé défavorable, en particulier si l'arbitre a participé, dans la première affaire,
à une sentence qui entraîne logiquement certaines conséquences sur les questions à
trancher dans la seconde; cependant le préjugé doit porter sur cet ensemble
indissociable de fait et de droit qui constitue la cause soumise à l'arbitrage; en effet, il
n'y a ni prévention ni préjugé lorsque l'arbitre est appeléà se prononcer sur une
situation de fait proche de celle examinée antérieurement, mais entre des parties
différentes, mais encore moins lorsqu'il doit trancher une question de droit sur
laquelle il s'est précédemment prononcé.”
310) 1st Ch.C., 1996 Rev. Arb. 428 and note by Fouchard.
311) “Aucun principe ne s'oppose à ce qu'un arbitre soit appeléà statuer sur une procédure
connexe à autre instance dont il a cu précédemment à connaître comme arbitre, la
connaissance de cette procédure antérieure n'étant pas de nature à mettre en cause
son impartialité, à moins qu'il ne soit en situation d'opposition avec l'une des parties
au litige, celle-ci pouvant tenir notamment à une appréciation par les arbitres de la
responsabilité d'une partie qui n'avait pas été attraite à l'arbitrage et à l'existence de
ce fait d'un préjugé défavorable.”
312) 1999 Rev. Arb. 821.
313) “Le principe de la contradiction n'est pas violé, pas plus que les droits de la défense,
lorsqu'un même arbitre statue dans deux instances parallèles; il en va autrement si est
intervenue dans l'autre instance une décision pouvant constituer de la part de cet
arbitre un préjugé défavorable, en particulier si l'arbitre a participé dans la première
affaire, à une sentence qui entraîne logiquement certaines conséquences pour les
questions à trancher dans la seconde.”
314) Bernini, ICC Multi-party Arbitration, supra note 1, at 165. As the author writes (at 168):
“special attention must be devoted by the arbitrators to the logical and
chronological sequence that said plurality may suggest in terms of coordination. It
may happen, for instance, that certain activities reveal themselves as preliminary
with respect to others; that a correct implementation of the proceedings require
that parties be interrogated, and/or witnesses heard, with absolute priority to avoid
prejudging identical and/or ancillary issues and/or conclusions; that the whole fact
finding stage be broken down in separate steps rather than being conducted
simultaneously.” See also S. Jarvin, supra note 1, at 209 and Delvolvé, Final Report,
supra note 1, at 38, no. 100.
65
315) Maritime arbitral Chamber of Paris, Bilitis, arbitral award of 13 April 1979, 1979 Rev.
Arb. 381 and note J.L. Delvolvé. See also article 35(1)(b) of the 1996 English
Arbitration Act.
316) 1st Ch.C., 1997 Rev. Arb. 556 and note P. Mayer.
317) It has been suggested that even in this case, there should be some kind of
coordination or harmonisation between the parallel tribunals. Leboulanger, supra
note 1, at 97.
318) See supra note 269.
319) See for example article 1704 C.J. in Belgium or article 1484 NCPC in France, or
alternatively Article 34(1) and (2)(a)(ii)(iii)(iv) and b(ii) of the UNCITRAL Model Law on
International Commercial Arbitration.
320) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June
1958. To illustrate the problems which might arise, see i.a. the battle between S.
Jarvin and A.J. van den Berg over the consolidation provisions of the Netherlands
Arbitration Act 1986 in 3 Arb. Int'l 254, 257 (1987).
321) V, 1, b.
322) V, 1, c.
323) V, 1, d.
324) V, 2, b.
325) In Belgium, see article 1710(3) as well as 1723 of the Code Judiciaire of which
paragraph 3 refers to the grounds to set aside set out in article 1704.
326) Note under ICC arbitral award in case no. 3383 of 1979, 1 ICC Awards, supra note 10, at
394, 397.
327) P. Schlosser, Arbitral Tribunal or State Court–Who must defer to whom? Setting the
scene, Report to ASA Conference, January 2000, at 8.
328) US courts have also repeatedly affirmed that a res judicata objection to a new
arbitration based on a prior arbitration proceeding is a legal defence that, in turn,
is a component of the dispute on the merits and must be considered by the
arbitrator, not the courts. See for example Chiron Corporation v. Ortho Diagnostics
Systems, Inc., 207 F.3d 1/26 (9th Cir. 2000), John Hancock Mutual Life Insurance Cy v.
Olick, 151 F.3d 132 (3d Cir. 1998); National Union Fire Insurance Cy v. Belco Petroleum
Corp., 88 F.3d 129 (2d Cir. 1996). See on the issue of res judicata in commercial
arbitration Shell R., Res Judicata and Collateral Estoppel Effects of Commercial
Arbitration, 35 UCLA L. Rev. 623 (1988); Riback S., Are arbitrations final?, 67-Nov N.Y.
St. B.J. 18 (1995) and Res Judicata and the FAA, 9 World Arb. & Mediation Rep. 291
(1988).
329) 17 Y.B. Com. Arb. 186 (1992).
330) Id. at 198. See also Smithkline Beecham v. Biogen, Inc. 1996 WL 209897 (S.D.N.Y.), 15
ASA Bull. 141 (1997). A dispute arose between the same parties to two different
licensing agreements, one granting a licence for the world other than the US and
Japan and providing for arbitration in London under English law, and the other
granting a licence for the US and providing for arbitration in New York under New
York law. A first award under the first contract was rendered in favour of plaintiff in
London. The New York tribunal then proceeded with the second arbitration. It
concluded that collateral estoppel did not govern the New York proceeding
because the two arbitrations addressed (1) different agreements with different
arbitration clauses and (2) different contractual rights. The New York arbitration
tribunal found in favour of defendants.
331) It seems however that in France the question is still debated. See for example the
comments of Catherine Vergne under Paris Court of Appeal (1st Suppl. Ch.) 21 March
1991, 1993 Rev. Arb. 94.
333) 15 Y.B. Com. Arb. 30, 56 (1990).
334) See also the comment under ICC award no. 3383 of 1979, 1 ICC Awards, supra note 10,
at 398: “Les solutions retenues par une sentence arbitrale jouissent de l'autorité de la
chose jugée vis-à-vis d'un autre arbitre tant que la validité de cette sentence n'a pas
été contestée devant les autorités étatiques compétentes. En mparticulier, il
n'appartient pas aux seconds arbitres de vérifier que la sentence réunit les conditions
nécessaires à sa reconnaissance par les autorités judiciaires.”
335) 12 Y.B. Com. Arb. 87 (1987).
336) Id. At 89.
337) ICC case no. 7061, award dated 28 November 1997, unpublished.
338) ICC case no. 7056, award dated 4 August 1995, unpublished.
340) At 201.
341) ICSID decision on jurisdiction, 14 April 1988 in case S.P.P. v. Arab Republic of Egypt
(the Pyramid case), 16 Y.B. Com. Arb. 39 (1991).
342) At 39-40.
343) At 40.
66
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Problems Raised by Complex Arbitrations Involving Multiple Contracts - Parties - Issues - An Analysis

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Document information Problems Raised by Complex Arbitrations Involving

B. Representation and Agency

C. Third-party Beneficiaries and Guarantee Clauses (clauses de porte-for)

D. Universal and Individual Transfers

G. Consent or Conduct as an Expression of Implied Consent or as an Alternative to

H. Existence Between the Parties of a Community of Rights and Interests

I. Confusion and Fraud

J. Equity and Good Administration of Justice

Part II. May an Arbitration Clause be Extended to Non-signatories within a

B. Analysis of Case Law

C. Analysis of Case Law

D. The Intervention of Third Parties: Legislative Provisions

Part IV. The Possibilities of Consolidating Parallel Proceedings

Part V. Parties to the Arbitral Proceedings

Part VI. Appointment of Arbitrators

Part VII. Cross-claims

Part VIII. Arbitration Proceedings

Part IX. Enforcement of the Arbitral Award

Part X. The res judicata Effect of an Award Rendered in a Connected

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