ARBITRATION ARGUMENTS- BETA

1. The arbitration agreement will also bind parties who obtain derivative rights from a party to the
agreement. The arbitration agreement will also bind parties who obtain derivative rights from a party to
the agreement.1
2. Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced
in respect of a matter when one party serves on the other party or parties notice in writing requiring him
or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter.
Section 14(1) deals with the commencement of arbitration. The parties are free to make their own
agreement as to how arbitration is to be started, but in default it will be commenced when one party
serves notice on the other requiring them to appoint their arbitrator.2
3. There are a number of theories under which the arbitration can be extended to third parties 3-
(i) Incorporation by reference
(ii) Assumption
(iii) Agency
(iv) Veil-piercing/alter ego
(v) Estoppel

4. Contract based theory - has a contract which links the third party to the signatory of the arbitration
agreement and served as a basis for the extension of arbitration agreement to that third party. If the
arbitration was concluded by the representative of the principal , the principal may be bound to the
arbitration agreement.
5. “Agency is a legal concept which depends on the manifest conduct of the parties not on their intentions
or beliefs” and decided that acts of a party concluded the contract bound his principal. 4
6. Arbitration panel held that non-signatory could be compelled to arbitrate due to close corporate
relationships with signatory party and “where the non-signatory’s claim was closely intertwined with the
charterparty.5
7. In the Import Export Steel. The court stated that the party to the charter party may enforce the agreement
to arbitrate if the sub-charterer clearly assume the obligation to arbitrate and the issue in dispute falls
within the terms of the arbitration clause, but refused to bind affiliate of the party to the contract as "it is
not a holder of or shipper or consignee under the bills of lading, where its name appears only
as notify party".6
8. In Coastal States Trading the court held that the arbitration agreement was broad enough to encompass
dispute between consignee and vessel owner despite the vessel owner was not a signatory to a charter
party which contained the arbitration clause executed between the sub charterer of the vessel and the
consignee, the charter party was incorporated by reference into the bill of lading and the arbitration
clause could be enforced against the consignee by the vessel owner. he court decided that the arbitration
agreement was comprehensive enough to cover a disagreement between the consignee (the person
receiving the goods) and the owner of the ship, even though the ship owner didn't directly sign the
charter party (the contract for renting the ship).
9. In this case, there was a charter party between the sub charterer (someone who rents the ship from the
main charterer) and the consignee, and it had an arbitration clause. This charter party was mentioned in

1
The London Steam-Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain, The French State (The Prestige)
[2013] EWHC 3188 (Comm); [2014] 1 Lloyd’s Rep 309.
2
Section 76(3).
3
Thomson-CSF, S.A. v. American Arbitration Association 64 F.3d 773 (2nd Cir.1995).
4
Intercon Shipping Co. v. National Shipping and Trading Corp. and Hellenic International Shipping , S.A, 523 F.2d 527 , (2nd Cir
1975) , Interbras Cayman Co. v. Orient Victory Shipping Co., S.A, 663 F.2d 4 (end Cir. 1981) and China National Machinery &
Equipment Import & Export Corporation v. Lowbersdorfer Maschinenfabrik AG (Austria) in Tobais Zuberbuhler Non-Signatories
and Consesnsus to Arbitrate ASA Bulletin, Vol. 26 , No. 1 (2008): 21.
5
Stena Bulk v. Citgo Asphalt Refining Co., Society of Maritime Arbitrators of New York, Inc. Award No 3902 (2005).
6
In the matter of Arbitration b/w Import Export Steel Corp. and Nimpex International, Inc v. Mississippi Valley Barge Line Co., 351
F.2d 503 (2nd Cir.1965).
 the bill of lading (a document related to shipping), and the court believed that the arbitration clause from
the charter party could be enforced against the consignee by the owner of the ship, even though the ship
owner didn't sign the original charter party. The court considered the charter party to be part of the
agreement by referring to it in the bill of lading.7
10. The courts and arbitral tribunal tend to bound third parties to the arbitration clause only if they assume
the obligations under the sub charter contract or contract between the vessel owner and the sub charterer
is incorporated into the sub charter agreement. The courts and arbitral tribunals refused to recognize sub
charter contract as a basis for the extension of arbitration agreement to the vessel owner but may do so if
the vessel owner assumes the obligation under the sub charter contract or the contract contain the
reference to the charter party.
11. in The Nerano, the bill of lading provided that all terms and conditions and the arbitration clause of
the charter party were incorporated, thus satisfying stage one. However, the arbitration clause referred
only to disputes ‘between the Owners and Charterers’. The Court of Appeal held that stage two was also
satisfied: the intention to refer disputes to arbitration was clear and the wording of the arbitration
clause could be manipulated to cover disputes under the bill of lading.
12. After the stage of manipulation, it may then be necessary to consider if the incorporated charter party
provisions are consistent with the express provisions in the bill of lading. If they are not, the express
provisions in the bill of lading will prevail over the incorporated charter party provisions (Gardner v
Trechmann).
13. In The Rena K, [1978] 1 Lloyd’s Rep. 545; [1979] Q.B. 377, Mr. Justice Brandon, as he then was, took
the view that when the parties to a bill of lading contract had expressly chosen to incorporate an
arbitration clause from a charter-party, they must have intended and agreed to arbitration in accordance
with that clause as the means of resolving their disputes; from which it followed that to give effect to that
intention and agreement the words of the clause must be manipulated or adapted so that they covered
disputes arising under the bill of lading contract.
14. the parties had not merely used general words of incorporation, they had expressly identified and
specified the charter arbitration clause as something to be incorporated into their contract; by identifying
and specifying the charter-party arbitration clause it was clear that the parties to the bill of lading
contract did intend and agree to arbitration so that to give force to that intention and agreement the words
in the clause had to be read and construed as applying to those parties

7
Coastal States Trading, Inc. v. Zenith Navigation S. A. and Sea King Corporation, 446 F. Supp. 330 (1977).