1 Introduction: Setting the Framework of the Discussion
Stavros L. Brekoulakis
- Arbitral agreements — Awards — Third party participation — International courts and tribunals, jurisdiction
1.01 This book discusses legal issues associated with third parties in international commercial arbitration. Two different aspects of this theme are examined in particular: first, the role of third parties in arbitration agreements and proceedings; second, the role of third parties in arbitral awards.
1.02 In spite of the extensive case law and scholarly discourse1 surrounding these subjects, both remain largely undetermined. The question of the interaction between international (p. 2) arbitration and third parties has become one of the most pervasive problems in current international arbitration.
• Which is the proper party in arbitration?
• Can a tribunal assume jurisdiction over claims by or against a party that is not designated in the arbitration clause (‘third-party claims’)?
• Can a party rely on the findings of a previous arbitral award in subsequent proceedings against a third party?
• Can a third party to an arbitral award rely on its findings in proceedings against one of the parties to the award?
There are a number of factors affecting the discussion on third parties.
1.05 The first factor relates to inconsistency in the use of terms employed by courts, tribunals, and scholars. For example, the terms ‘third party’ and ‘non-signatory’ are regularly used interchangeably. However, they have different meanings: ‘third party’ is a wide term referring to any party that is not designated in an arbitration clause. In its wide sense, which is used in this study, the term ‘third party’ includes two different groups:
• First, parties that have failed to sign an arbitration clause, but are otherwise bound by it.2 It is this type of party that the term ‘non-signatory’3 is appropriate to describe, and it is in this meaning that the term is employed in this work.
• Second, parties that neither have signed nor otherwise consented to an arbitration clause. The work employs the descriptive but more accurate term ‘third party stricto sensu’ for this type of third party.
1.06 As regards parties and non-parties to arbitral awards, the terminology is clearer. Here, the term ‘third party’ refers to a party that has not taken part in the arbitration proceedings that resulted in the crucial award. The term is used irrespective of whether or not a party was bound by the arbitration clause that was the basis of the crucial award.
1.07 Further complications arise from the fact that the current study touches upon the fundamentals of arbitration, and indeed challenges the ever-present principles of consent and contractual nature of arbitration.
1.08 In litigation the parties to court proceedings are determined on the basis of interests. Provided that it is subject to the territorial jurisdiction of the particular national court,4 a legal or a natural person is entitled to commence court proceedings in order to protect its legal or financial interests.5
1.09 By contrast, in the context of arbitration, it is generally accepted that the capacity to take part in proceedings is exclusively determined on a contractual basis.6 Entering into an arbitration agreement is the indispensable requirement for a person to participate in the arbitration proceedings and be bound by the resulting arbitral award.7 Thus, any legal or financial interest that a third party might have in the dispute between the parties bound by an arbitration agreement is, in principle, irrelevant.
1.10 Its contractual nature makes arbitration a very flexible dispute resolution mechanism, and together with the principle of procedural party autonomy it allows parties to design dispute resolution proceedings in accordance with their commercial needs. This has proved a significant advantage of arbitration over litigation, and has contributed to the increasing popularity of the former amongst members of the international commercial community.
1.11 The above is also in line with the historical role of arbitration, as an informal and bilateral dispute resolution process, particularly popular in linear bilateral transactions, such as sales of goods and transport contracts.
1.12 But oftentimes the traditional role and bilateral nature of arbitration cannot accommodate modern international transactions that have become significantly sophisticated and require the participation of several parties for the delivery of large-scale projects.
1.13 Development in international trade is prominently evident in areas such as construction contracts, banking and financial transactions, reinsurance contracts, and transactions with multinational corporations and states operating through state agencies or other emanations of the state. For example, new forms of construction and finance projects, involving several partners from both the private and public sector have occurred in the last twenty years, such as Public and Private Partnerships and Private Finance Initiatives.8
(p. 4) 1.14 The same is true for transactions with large corporations, which typically carry out their affairs through a number of subsidiaries. Nowadays multinational groups adopt new corporate structures which are more sophisticated than the linear parent-subsidiary type of organization seen previously. These structures may take the form of groups based on contract, or equity-based corporate groups, joint ventures between independent firms, informal alliances, publicly owned multinationals, and supranational forms of international business.9 Multinationals often reorganize their structures along the process of ‘divisionalization’,10 which may result in a ‘shift of emphasis away from a hierarchical, vertical control structure to a “heterarchical” network of cooperative and lateral relationships’.11 This, in effect, means that new models of corporate organization, that have been followed in recent years by several multinational groups, no longer fit into the legal types provided in traditional company law.
1.16 The unprecedented scale of the sophistication of modern international trade presents crucial challenges for international arbitration and tests its traditional role and bilateral nature to its limits. While one has to respect the privity of contracts, economic reality nowadays may have outgrown the doctrine.
1.17 Strict adherence to the requirement of consent has two main shortcomings, which become increasingly obvious in the context of multiparty transactions. First, it renders the issue of the identification of proper parties in arbitration proceedings into a formalistic exercise, where evidence of consent to arbitrate matters more than the actual legal or financial interests of a party in the dispute. Second, and equally important, it converts the jurisdictional task into a rather cumbersome quest for evidence of consent, which often proves elusive.
1.18 This may result in inconsistent, sometimes even unwarranted, decisions on jurisdiction where commercial parties with a significant interest or involvement in a particular transaction cannot appear before a tribunal to take part in the resolution of the disputes arising out of this transaction. Tribunals assume jurisdiction only over persons that can prove consent to arbitration, rather than persons that are crucially relevant in a dispute before a tribunal.
1.19 Indeed, national courts and tribunals have often referred to third parties, such as shareholders or affiliated companies or guarantors as strangers to arbitration, refusing to investigate their active role and involvement in the dispute before a tribunal.12
(p. 5) 1.20 However, one should not readily dismiss a party, such as a guarantor, whose obligation is often dependent upon and collateral to the main obligation,13 as a stranger to arbitration proceedings between the creditor and the main debtor. Equally, an entity that has exercised significant influence over another company through contractual rather than equity means, such as international consortia or franchising agreements,14 and has affected the performance of a contract between two signatories can hardly be called a stranger in arbitration proceedings between these two signatories. Being unable to allow for legitimate interests of third parties, arbitration effectively reaches its adjudicatory limitations in the confines of consent.
1.22 But does this actually have to be the case? Is the nature of arbitration exclusively contractual? More generally, should arbitration be an exclusive, in the sense of restricted, dispute resolution system or should it be more open and able to interact with third parties?
1.23 As will be seen, especially in Part II and Part III of this book, there is an obvious common thread running through numerous awards, national judgments, and theories concerning third parties: namely, the realization that there are cases and circumstances where arbitration needs to be able to interact with third parties that are crucially involved in the dispute before an arbitral tribunal.
(3) Multifaceted fact patterns relating to several overlapping theories
1.24 Complexity increases further due to the fact that third-party situations invariably arise in very different factual and legal contexts. As already indicated, third-party claims may relate to many aspects of commercial life and many different types of contracts, from construction contracts and guarantees to maritime and reinsurance transactions.
1.25 They may also involve different laws and theories, including agency or assignment, third-party beneficiary, incorporation-by-reference, ratification, even corporate law and ‘group of companies’ theories. Each one of these theories and laws requires different types of inquiries from different standpoints.
1.26 Worse still: very often in practice a single set of facts will involve the application of several overlapping theories at once. For instance, a third-party parent of a wholly owned signatory subsidiary will provide a guarantee for the obligations of the subsidiary, and will be actively involved in the performance of the contract too. In addition, the officer that negotiates and signs a contract containing an arbitration clause will usually be acting as a representative of both the parent and the subsidiary.
(p. 6) 1.27 To refer to a characteristic example in the case of Bridas et alia v Government of Turkmenistan et alia,15 the claimant relied alternatively upon several third-party theories, including agency, instrumentality, apparent authority, alter ego, third-party beneficiary, the theory of equitable estoppel, to prove that the government of Turkmenistan was bound by an arbitration clause signed by Turkmenneft, formed and owned by the government of Turkmenistan.
1.28 How can a scholar, a tribunal, or a national judge deal consistently and efficiently with all these multifaceted and convoluted factual scenarios that reality presents us with? Commercial reality thus inadvertently ‘undermines’ the work of tribunals and scholars to develop clear and consistent guidelines that could apply to different aspects of the problem. At the same time though, this observation makes the need for a comprehensive study of this subject even clearer.
1.29 The debate regarding third parties is closely associated with conflict of laws rules and applicable legal standards. This is of course a recurrent and overarching topic in arbitration, that is not exclusively related to third parties. But it is fair to observe that conflict of laws issues have an ever-crucial resonance to the specific discussion here.
1.30 Which national law should apply to determine whether a tribunal can entertain a third-party claim or not? Should this depend on which theory a party chooses to rely upon each time? For example, should a different law apply when a third-party claim is based on the agency theory from that applicable to a third-party claim based on the third-party beneficiary theory or the group of companies’ theory? Alternatively, is it incorrect to argue that all these matters relate to the validity and scope of the arbitration clause, and therefore the law applicable to the arbitration clause should apply to determine jurisdiction over a third party-claim, irrespective of the theory which the third-party claim is based upon each time?
1.31 Further, should national laws apply at all, or should international tribunals rely on transnational or anational standards, whatever the difference between these two terms? The debate between national vs transnational laws surely is one of the issues that arises most frequently in any discussion on arbitration.16 For many decades now arbitration has been incrementally emerging as an anational territory, autonomous from domestic procedures and substantive laws. The view that tribunals should predominantly apply transnational rules to determine third-party issues has been adopted by several tribunals to date.17 At some stage, it was even (p. 7) believed that this approach could single-handedly provide an ingenious solution to the third-party conundrum: a tribunal would only need to infer the ‘common intent’ of both parties and third parties to arbitrate, in accordance with anational rules such as ‘usages of international trade’, ‘transnational substantive rules’, even ‘lex mercatoria’.18 But, it was soon feared that this highly progressive transnational approach could equally be arbitration’s nemesis, opening the gate for national courts to—rightly or wrongly—annul awards that decide the third-party matter on an anational basis.
1.32 Court decisions such as that of the English courts in Peterson Farms Inc v C&M Farming,19 and Dallah v Pakistan,20 and the Swiss Federal Tribunal’s in Westland21 should only serve as an ominous but helpful reminder that national courts still remain in comforting touch with their domestic legal traditions and roots. Accordingly, national laws still need to be considered when tribunals and scholarly works, such as this one, attempt to move the process of transnationalization faster than they probably should, especially in very sensitive areas, such as third parties.
1.33 But this should by no means halt the ongoing, and most likely, inevitable, process of ‘transnationalization’ of substantive, procedural, and jurisdictional standards to be applied in arbitration; otherwise arbitration runs the risk of losing pertinence to international commercial reality. Indeed, there have been cases where tribunals have come to unsatisfactory decisions relying on unduly formal and restrictive national provisions, for example, on representation or power of attorney to disallow third-party claims,22 which fail to take into account reasonable expectations of parties in international commerce.
(p. 8) 1.34 Against this rather complex background of the discussion on third parties and arbitration, it is no surprise that the debate has not yet settled; and it will probably be a long time before it finally does. But this does not necessarily mean that any attempt to look into the debate again is doomed to fail or—even worse—to be no more than an unnecessary repetition of wellknown arguments and views. By contrast, discussion can help us find and agree on a common ground, and hopefully become more consistent in our approach when dealing with third parties. This is one of the main objectives of this study. More ambitiously even, this work aims to go a step further and suggest a different approach that could possibly offer workable and helpful guidelines.
1.35 The work looks at third parties in the wider sense of the term, referring to parties that are not designated in an arbitration clause. This includes both groups of third parties as distinguished above: first the non-signatories, ie parties that have failed to sign an arbitration clause, but are still bound by it, pursuant to various contractual theories, corporate laws, or arbitration rules and arbitration laws; second, third parties stricto sensu, ie parties that have neither signed nor otherwise consented to an arbitration clause.
1.36 In fact, it was exactly the group of third parties stricto sensu that was the original driving motive and main idea behind this study. But it was soon realized that it would be impossible to examine the group of third parties stricto sensu and develop a meaningful theory about it without first examining into the full picture of the third-party discussion and the group of non-signatories in particular.
1.37 In the end, the group of non-signatories proved a very intriguing and challenging topic to investigate. Further, and perhaps more importantly for the purposes of a study that aspires to provide useful guidance to practising arbitration lawyers, the area of non-signatories has immense practical relevance. Accordingly, the discussion on non-signatories occupies the biggest part of this work, namely Parts I and II. Here, the aim is to look into all the available theories and techniques that purport to hold a non-signatory party to an arbitration clause on the basis that it is contractually bound by it, notwithstanding the failure of that party to sign the clause.
1.38 The group of third parties stricto sensu is dealt with in Part III. Here, the crucial issue addressed is whether and under what circumstances there is doctrinal room and practical necessity for a tribunal to examine a third-party claim brought by or against a third party stricto sensu, who is closely interrelated in the dispute before a tribunal.
1.39 Further, the scope of the work extends to arbitral awards and third parties, ie parties that have not participated in the arbitration proceedings resulting in the crucial award. Here the aim is to examine whether a party can rely on the findings of a previous arbitral award in subsequent proceedings against a third party, and conversely whether a third party may rely on the (p. 9) findings of an arbitral award in subsequent proceedings against one of the parties to that award.
1.40 Overall, the book explores whether it is possible for arbitration to interact with third parties either at the jurisdictional stage of arbitration proceedings or at a stage after the award is granted. Consequently the epicentre of the work is the question of who is the proper party to arbitration agreements, proceedings, and arbitral awards.
1.41 From this perspective, the book is not a study of multiparty proceedings as such. Obviously third-party claims arise out of multiparty projects and transactions. But third-party claims do not necessarily coincide with multiparty proceedings, although admittedly they often do. Indeed, a party may attempt to jointly bring a claim against both a party and a third party, but not always and not necessarily. Often a claim will be brought directly and exclusively against the third party, which the claimant considers the only proper party in the arbitration proceedings. Equally, a third party may also bring an arbitration claim as a sole claimant rather than as co-claimant with another party.
1.42 Even if claims are brought by or against parties and third parties together, the question of whether the tribunal has jurisdiction over a third-party claim will normally be examined independently from that of whether it has jurisdiction over the co-claimant or co-defendant of the third party.
1.43 Accordingly, the book does not deal with multiparty arbitrations as such,23 and the numerous issues arising out of this type of proceedings. This would be the case, for example, with matters concerning the constitution of the tribunal and the input of each one of the several parties thereto; the allocation of the costs of multiparty proceedings; ways and techniques to consolidate arbitrations or hold many sets of arbitration hearings together; the procedural relationships among the several parties in multiparty arbitrations; and issues in relation to class actions.24 There is abundant literature dealing with these issues, which remain at the periphery of the scope of this work and therefore they are not dealt with here.25
1.44 As already noted, the work looks into two different aspects of the involvement of third parties in arbitration: first, whether an arbitration claim can be brought by or against a third party, and secondly whether an arbitral award can be relied upon in subsequent proceedings with a third party.
1.46 It is now common ground in scholarly work and arbitration practice that third parties lato sensu, ie parties that are not designated in an arbitration clause, may well take part in arbitration proceedings.
1.47 In particular, it is generally accepted that a third party may be introduced in arbitration through specific theories of contract law and general principles of corporate law. Thus, for example, a third-party claim may be brought before a tribunal pursuant to the theories of
• agency and representation;
• assignment and transfer of a right or a contract containing an arbitration clause;
• incorporation of an arbitration clause by reference; and
• third-party beneficiary.
1.48 These are all traditional contract law theories that are well established in most jurisdictions and they generally apply to any ordinary contract: they therefore apply as well to arbitration agreements. The same can be said as regards general principles of corporate law. For example, it is accepted that:
• A third-party general partner will be bound by an arbitration clause concluded by its partnership, if it is bound by any other substantive contract concluded by the partnership.
• A third-party shareholder may be bound by the arbitration clause concluded by its corporation on the basis of the theories of alter ego and lifting the corporate veil.
1.49 It is also generally clear that in all of the above cases, the party that is not designated in the arbitration clause—for example the principal, the assignee, the third-party beneficiary, the general partner, etc—will not strictly speaking be a third party. As it will be bound by an arbitration clause pursuant to general contractual and corporate law theories, it will be an actual party to the arbitration clause albeit a non-signatory.
1.50 It is further agreed that a third-party claim can be introduced in arbitration pursuant to institutional arbitration rules and national arbitration laws, to the extent that they expressly allow for such a possibility. This situation is self-explanatory and does not normally give rise to complex issues.
(p. 11) 1.51 However, looking beyond these areas of consensus, divergent views exist as to whether other types of third party can participate in arbitration. There are broadly two different viewpoints on this matter.
1.52 According to the first view, a person can only be bound by an arbitration clause by his or her express consent that is evidenced by signature or exchange of documents.26 Any third party will have to remain a stranger to an arbitration agreement and proceedings between the signatories.
1.53 The second, and prevailing, stance advocates that arbitration agreements, like any substantive contract, can be binding—‘extended’ is the term often used—on a non-signatory party on the basis of implied consent, evidenced in ways other than signature or exchange of documents. The basic proposition here is that signature should be distinguished from consent to arbitrate. Thus, a non-signatory can still be de facto bound by an arbitration clause, if implied consent to arbitrate can be proved through means other than signature, and irrespective of whether any of the aforementioned traditional theories of contract law apply.27
1.54 However, implied consent is notoriously difficult and controversial to prove. Accordingly, specific theories and doctrines have emerged setting out specific fact patterns whereby implied consent is proved or even presumed. The most prominent of these theories, which are called here ‘non-signatory theories’, are the ‘group of companies’ doctrine in the European continent and the ‘arbitral estoppel’ theory,28 in the USA. The fact patterns that allow courts and tribunals to infer ‘common intention of all parties’29 are:
• For the group of companies: first, the group of companies structure and, second, active involvement of the non-signatory to the negotiation, performance, or termination of the contract containing an arbitration agreement.
(p. 12) • For the arbitral estoppel: first, the fact that a dispute between the signatory and the nonsignatory is intertwined with the contract containing the arbitration clause and, second, contractual or close corporate links between the non-signatory and one of the signatory parties.30
1.55 As will be explained in the main part of the book,31 not even the non-signatory theories challenge ‘consent’ as an indispensable requirement for the participation of the non-signatory party to arbitration proceedings between the signatories. Indeed, the core argument of all non-signatory theories is merely that signature on an arbitration agreement is not the only means to ascertain consent to arbitrate.
1.56 Overall, both views above take a contractual approach allowing a third-party claim only if a party is de facto bound by the arbitration clause. The essential difference between these two views merely pertains to how consent to arbitrate will be evidenced: either by signature or exchange of documents only, or by other fact patterns that prove the common intention of the parties. Therefore, both views are set in a strict contractual context, where the main question is whether a non-signatory, rather than a third party stricto sensu, can be contractually bound by the arbitration agreement that it failed to sign.
(2) Contribution of the book on arbitration agreements and third parties: the jurisdictional approach
1.57 This work accepts to a large extent the prevailing contractual approach and examines in detail all the available contractual bases and techniques for third-party claims, but it goes further, exploring the possibility of introducing a third-party claim on a jurisdictional rather than a contractual basis.
1.58 Overall, the book puts forward a scheme of five different bases to introduce a third-party claim. The first four bases are within the context of the prevailing contractual approach and the last one relates to the jurisdictional approach, which is suggested as an alternative to the non-signatory theories and the doctrine of group of companies in particular, which—as is argued here—have notable practical and theoretical limitations.
1.59 1. The book first looks into the situations where a third-party claim can be introduced in arbitration pursuant to traditional theories of contract law and general principles of corporate law, as mentioned above.
1.60 Contract law theories and corporate principles will apply to arbitration clauses as they generally apply to ordinary contracts too. Thus, the main focus of the discussion is on the substantive part of the contract containing an arbitration clause. Here, the principal reason for an arbitration clause to be binding upon a non-signatory is that the non-signatory will normally be bound by the substantive contract first.
(p. 13) 1.61 Still, there are two specific issues here associated with arbitration clauses in particular, which the book discusses in detail. First, the role of separability. More specifically, the question that invariably arises is whether an arbitration clause will be binding upon the non-signatory as part of the substantive contract—often as an accessory to it—or whether specific and separate consent to the arbitration clause is required. As the study shows, there is no answer that can collectively apply to all the different theories of contract law. The role of separability, and whether specific arbitration consent is required, is an issue that must be discussed and evaluated in view of the specific circumstances of each one of the contract law theories separately. For example, the role of separability has to be different in the case of transfer of an arbitration clause, where the transferee subrogates into already existing rights and duties, including the arbitration clause, and in the case of agency, where the arbitration clause is concluded for the first time when the agent enters into the contract containing an arbitration clause.
1.62 Second, conflict of laws issues, which regularly arise in each one of the contractual theories. The prevailing view here endorses a conflict of laws approach.32 Thus, national conflict of laws rules will apply to designate one or several national laws to determine whether a third party will be bound by an arbitration clause. By contrast, this work resists the traditional conflict of laws view and adopts an approach favouring transnational substantive rules.
1.63 As is argued here the conflict of laws approach is likely to create tensions in an international environment, as it will lead to the application of different laws depending on the forum before which a dispute appears. This practice undermines uniformity and increases uncertainty in commercial transactions.
1.64 Further, domestic national rules and contract law theories have been developed to primarily apply to substantive contracts. This is particularly the case for example with regard to theories of assignment or agency and representation, where domestic national laws often provide for formalities and other requirements which parties in an international context may not be reasonably expected to be familiar with. International arbitration clauses, although contractual in nature, serve different purposes from those served by substantive contracts. The effectiveness of international arbitration clauses may thus be compromised by the application of national laws for example on assignment or agency.
1.65 The study engages in a comparative analysis to examine whenever reasonable consensus among various legal systems allows for the development of transnational substantive rules or standards which international tribunals may rely upon to determine whether a third party is bound by an arbitration clause under specific contractual theories. When divergence does not allow for the development of such transnational substantive standards this is clearly mentioned.
(p. 14) 1.66 Of course the approach in favour of the application of transnational substantive rules, advocated by this study, is hardly a novelty. This theory was convincingly put forward long ago.33 The study attempts to add further support to it and provide additional arguments and evidence based on more recent research and sometimes wider comparative analysis.
1.68 Here, any party attempting to bring a third-party claim before a tribunal will have to rely on an express or implied term in the arbitration clause per se allowing for the introduction of such a claim, rather than on a theory of contract law. This is for example the case with arbitration clauses that are often found in standard forms of construction subcontracts, which expressly allow for a third-party claim by or against the subcontractor. Similarly in cases where two arbitration clauses, contained in two closely connected contracts, are drafted in identical or compatible terms, which may allow by implication for a third-party claim.
1.69 The main issues under this type of legal basis for third-party claims mainly relate to issues of contract interpretation. Thus, the study reviews several examples from case law to explore how national courts and tribunals tend to treat these cases, particularly cases of implied terms in arbitration clauses purporting to allow for third-party claims.
1.70 3. A third and least controversial basis to introduce a third-party claim pertains to institutional rules and arbitration laws. The work gives a detailed overview of numerous institutional rules and arbitration laws providing for third-party procedural mechanisms, such as joinder, intervention, respondent third-party claims, or even consolidation. As this overview shows, it is only in exceptional cases where rules and laws expressly allow for a third-party claim, in a conscious decision on the part of the drafters to leave this matter largely unregulated and at the hands of party autonomy. In the few examples where arbitration rules and national laws have adopted an ‘interventionist approach’, in the hope of providing a solution to the third-party conundrum, the results have usually been less successful than originally anticipated.
1.71 4. Fourthly, the book looks into third-party claims introduced on the basis of implied consent, evidenced by conduct or fact patterns developed by non-signatory theories. The study looks into those cases focusing on the theories of arbitral estoppel and group of companies in particular. However at the end it adopts a critical approach against such theories on the following grounds.
1.72 In essence, non-signatory theories have been developed and employed to facilitate deduction of implied consent to arbitrate.34 Their main purpose is to presume or at least facilitate the deduction of consent.35 For example, in the context of the group of companies doctrine it can (p. 15) be enough for a party to prove that several companies constitute an ‘economic unit’ and that the non-signatory company has taken an ‘active role in the negotiation or the performance of the contract containing the arbitration agreement’ for the tribunal to presume the ‘common will of the parties to arbitrate’.36 In some cases non-signatory theories have gone as far as to suggest that mere awareness of the existence of an arbitration clause will be sufficient for a party to be bound by it.37
1.73 However, while it may be incorrect to argue that consent to arbitrate can only be proved by signature or an agreement in writing,38 it is equally incorrect to suggest that consent to arbitration agreements can be presumed or ascertained more easily than consent to any other procedural or substantive agreement, a suggestion occasionally adopted by tribunals and national courts.39 As the book demonstrates, the question of whether a third party is bound by an arbitration agreement or not pertains to the validity rather than the scope of an arbitration agreement. Therefore, the assertion of implied consent requires the application of specific principles and techniques of interpretation which must reveal the ‘intention to arbitrate’ with a degree of certainty rather than probability.40
(p. 16) 1.74 In the exercise of contract interpretation, the principle of in favorem validitatis cannot apply.41 There can be no presumption in favour of the validity of an arbitration agreement, and therefore, no presumption in favour of the existence of an intention to arbitrate.42 Therefore, the premisses of non-signatory theories are undermined by a basic conceptual contradiction: although they adhere to the requirement of consent, they violate fundamental principles of contract law and contract interpretation as they effectively establish fact patterns, suggesting that consent to arbitrate should be more easily inferred or even presumed. Eventually, nonsignatory theories may unwarrantedly lower the threshold of required consent and compromise the very same objective that they originally intended to observe, namely clear intention to arbitrate.
1.75 These observations indicate the main weakness of the contractual approach in general. If arbitration agreements are viewed as ordinary contracts only, the issue of third parties is reduced to issues of contract interpretation and evidence of consent. This approach first reduces the reaches of arbitration and second often leads to inconsistent and unwarranted results.
1.76 Generally, the existing discussion on arbitration agreements and third parties has failed to pay sufficient attention to the specific characteristics of arbitration agreements, as opposed to ordinary contracts. Thus, the theory behind the existing views on arbitration agreements and third parties is mainly related to contract rather than arbitration law.
1.77 5. These observations lead to a fifth alternative basis to introduce a third-party claim, which constitutes one of the main contributions of this study. As is argued here, if a third party in its wide sense cannot be introduced into arbitration on the basis of a traditional theory of contract law, express or implied terms in an arbitration clause, or a provision in institutional rules and national laws, a jurisdictional approach may be adopted by tribunals as an alternative to non-signatory theories, and the group of companies in particular.
1.78 As already indicated, non-signatory theories exclusively focus on the contractual characteristics of arbitration agreements. However, arbitration agreements have important jurisdictional effects too. Arbitration law is not, and should not be viewed merely as an advanced version of contract law.
(p. 17) 1.79 Under the jurisdictional approach put forward here, it is suggested that the focus of the examination should be shifted from whether arbitration agreements as ordinary contracts may bind third parties to whether the dispute pending a tribunal strongly implicates a third party. It is the dispute before the tribunal rather than the arbitration agreement which should be the focus of the analysis for a tribunal to determine whether to assume jurisdiction over a third-party claim. The analysis in this work suggests that the necessary legal framework and legal tools exist to support such a jurisdictional approach.
1.80 Of course, the key issue here is to allow more discretion to tribunals to deal with third-party claims.Whether and in what circumstances a tribunal should decide to exercise this discretion is a matter of wise judgment and good practice on the part of the tribunal. But there is no reason to curtail in advance the power of the tribunal on this matter, out of general mistrust for arbitrators’ ability to exercise their judgment wisely. Such an approach would effectively undermine the cause and purpose of arbitration itself, which is based on the parties’ trust in the system and necessarily the ability of arbitrators to deliver good justice.
1.81 To prevent misinterpretation, this argument is delimited by a caveat: it is only in extremely exceptional circumstances and with particular caution that a tribunal should assume jurisdiction on claims over a third party. Even in cases where a third-party claim is essentially part of the dispute that is the main subject of the arbitration, the tribunal should carefully take into account various factors, such as confidentiality for example, before deciding whether to exercise its discretion and examine the third-party claim.
1.82 Further, it should be underlined that this study does not dismiss the relevance of the prevailing contractual approach. Indeed the book accepts that the third-party claims can be introduced on the basis of traditional theories of contract law or implied consent. However it questions whether implied consent can safely be proved by fact patterns and presumptions. More crucially the study argues that the contractual approach reaches its limitations, and thus it suggests an alternative approach to non-signatory doctrines by focusing on the dispute and its implications rather than on the contractual boundaries of arbitration agreements.
1.83 Overall, the traditional contractual approach has arguably the same main objective as the jurisdictional approach suggested here. Both approaches provide a theoretical basis for tribunals to be able to assume jurisdiction over relevant third parties. But the jurisdictional approach exhibits a crucial advantage over the traditional contractual approach and the nonsignatory theories. While the latter focus on peripheral issues such as ‘signature’ and ‘evidence of putative consent’, the jurisdictional approach focuses on what really matters in an arbitration, namely the dispute. Therefore it allows the tribunal to determine its jurisdiction on a basis closer to commercial reality.
1.84 In the long-term, the jurisdictional approach enhances the commercial pertinence of arbitration and increases its effectiveness in complex multiparty disputes in particular. International commerce becomes increasingly complicated and companies are organized on the basis of previously unknown forms. In order to remain commercially pertinent and effective, arbitration must be able to take the new developments in international commerce into account, especially for jurisdictional purposes. Otherwise, parties with an important role in the commercial aspect of the dispute might be left outside the scope of arbitration for lack of sufficient evidence of consent.
(p. 18) 1.85 To conclude, the study suggests a scheme of five bases, theories, and techniques that tribunals may rely upon to determine whether to assume jurisdiction over a party that is not designated in an arbitration clause. In particular, tribunals should examine:
• First, whether the third party can be introduced into the arbitration proceedings on the basis of a theory of contract law, such as agency, transfer or assignment, third-party beneficiary, incorporation by reference.
• Second, whether the third party can be introduced into the arbitration proceedings on the basis of an express or implied term in an arbitration clause or on the basis of several compatible arbitration clauses.
• Third, whether the third party can be introduced into the arbitration proceedings on the basis of an express provision of a set of institutional rules or domestic arbitration law.
• Fourth, whether the third party can be introduced into the arbitration proceedings on the basis of implied consent, as long as this can be safely proved, rather than presumed. Here, tribunals should be cautious applying of non-signatory theories such as that of the group of companies in particular.
• Fifth, whether the third party can be introduced into the arbitration proceedings on the basis of the jurisdictional approach, provided that the third-party claim is strongly implicated in the dispute before the tribunal.
1.86 This issue has been relatively overlooked since the attention of academic doctrine and jurisprudence has focused principally on the potential effects of arbitration agreements rather than the potential effects of arbitral awards upon third parties.
1.87 The sole existing view equates arbitral awards to national court decisions.43 Consequently, the question of whether an arbitration award may have any sort of impact upon third parties (p. 19) depends on the national provisions regarding res judicata, which, as is shown in the book, largely provide that the res judicata effect is strictly limited to the parties in action. The only persons, apart from the parties to the proceedings, who are bound by the res judicata effect of a national judgment and, therefore, an arbitral award are third parties with identical interests with those of the parties to the proceedings, namely the persons that are privies to the parties to the proceedings.44 Therefore, as far as an arbitral award is concerned, any person other than the parties in the proceedings or their privies is regarded as a complete stranger.
1.88 This work challenges the prevailing view and practice of the majority of national jurisdictions according to which an international award, once it is recognized domestically, is equated to a domestic judgment in terms of its effects. It is argued here that this practice overlooks the international character of an international award, whose character should survive even after an award is incorporated into a national legal system. Most importantly, though, this practice fails to accommodate the systemic problems arising in international arbitration with regard to intertwined multiparty relationships.
1.89 Instead the work argues for a third-party effect of arbitral awards specially designed for the needs of international arbitration. In particular, it is argued that arbitral awards as opposed to national judgment may be able to affect certain types of third parties. This is necessary to compensate for the lack of third-party mechanisms in arbitration analogous to the mechanisms provided in litigation. Thus, it is suggested that arbitral awards should, under specific conditions, be opposed to and relied upon by certain types of third parties, namely third parties that are very closely linked to one of the parties to the proceedings, in terms of interest and liability.
1.90 The work is divided into four Parts. The first three Parts are concerned with the issue of third parties to arbitration agreements, and third-party claims. Part IV is concerned with the issue of third parties to arbitral awards.
1.91 Following this introductory chapter, Part I consists of two chapters. Chapter 2 looks into third-party claims pursuant to traditional theories of contract law. The focus is in particular on the following theories:
1.92 Chapter 2 further deals with third-party claims pursuant to principles of corporate law. In particular it examines whether third-party claims are possible in
• the context of corporations. Here, third-party issues in relation to insolvency and intracompany disputes are also examined;
• the context of partnerships.
1.93 Finally Chapter 2 looks into third-party situations that will normally fall short of privity and any of the above traditional theories of contract law, and therefore they will not allow for a third-party claim. Here the focus is on third parties in
1.94 Scholarly work and case law from different jurisdictions are reviewed for each one of the above areas and theories. The purpose of this comparative exercise and analysis is to identify any transnational substantive rules or convergent standards that international tribunals can use as guide.
1.95 Chapter 3 examines two further bases for third-party claims: first, third-party claims introduced on the basis of an express or implied term in one or several arbitration clauses; second, third-party claims introduced pursuant to institutional arbitration rules and national arbitration laws.
1.96 Part II is concerned with implied consent and non-signatory theories. It contains three chapters: Chapter 4 looks into the US theory of arbitral estoppel, whereas Chapter 5 examines the most prominent of the non-signatory theories, namely the ‘group of companies’ doctrine. Chapter 6 further discusses the non-signatory theories adopting a more critical stance. This Chapter highlights the conceptual and practical limitations of the non-signatory doctrines and of the contractual approach in general. The discussion inChapter 6 demonstrates that a different approach to the issue of arbitration and third parties needs to be adopted further to the prevailing contractual approach and in the alternative to non-signatory theories and the group of companies doctrine in particular.
1.97 This alternative approach is presented in Part III. As opposed to the previous two Parts, which deal with non-signatories, ie parties that have failed to sign an arbitration clause but are nonetheless bound thereby,Part III deals with third-party lato sensu, including both nonsignatories and third parties stricto sensu, ie parties that are not contractually bound by an arbitration clause. It contains two chapters. Chapter 7 deals with the question of whether and under what circumstances tribunals can assume jurisdiction over a third-party claim, while Chapter 8 deals with the question of whether and under what circumstances tribunals should assume jurisdiction over third-party claims. Chapter 8 concludes with final remarks on the jurisdictional approach and discusses its practical relevance and advantages over the contractual approach.
1.98 In Part IV, the attention is shifted from arbitration agreements to arbitral awards. It contains three chapters. Chapter 9 gives an overview of the current legal framework of the effects of (p. 21) an arbitral award at international level. The chapter eventually challenges the prevailing view according to which an international award, once it is recognized domestically, is equated to a domestic judgment in terms of its effects. Chapter 10 puts forward a new suggestion on the topic, arguing that arbitral awards should be able to affect a wider circle of persons than are affected by national judgments. It is suggested that arbitral awards should, under specific conditions, be opposed to and relied upon by certain types of third parties, namely third parties that are very closely interrelated with one of the parties to the proceedings, in terms of interest and liability (third-party effect of arbitral awards). Finally Chapter 11 looks into some selected issues related to the effect of arbitral awards: first, whether the arbitral effect should depend on a previous review of the award by the second forum in terms of procedure; second, the case where a third party has contractually agreed to be bound by an arbitral award; and third which law should govern the effect of arbitral awards.
1.99 Arguably, the role of third parties constitutes the biggest challenge for international arbitration currently. Part of the discussion touches on policy matters. A key question, for example, is whether arbitration should remain a closed dispute resolution system, reserved only for those parties that are contractually bound by an arbitration agreement; alternatively, whether arbitration should be a more open and flexible dispute resolution system, able to communicate with third parties, namely persons that have not entered into an arbitration clause in the first place, but which happen to have significant legal and financial interests in the outcome of the arbitration. In certain circumstances, inclusiveness may be an important element of fairness and effectiveness; values that are indispensable for all types of dispute resolution systems, including arbitration.
1.100 One of the most important aspects of the discussion is the role and pertinence of arbitration in the modern international trade. Here, there is a risk that, if arbitration remains firmly adhered to its traditional role as a bilateral and strictly contractual dispute resolution mechanism, it may be lost and it may eventually become incapable of serving the more nuanced and multifaceted needs of contemporary trade transactions.
1.101 To avoid this, tribunals may need to focus less on issues of consent and evidence of consent, and more on the type and nature of a dispute submitted before a tribunal in order to investigate whether a dispute has any important implications for third parties. Equally, tribunals may need to focus less on contractual purism and more on business and economic reality.
1.102 This observation does not necessarily suggest a heresy or a schism from the prevailing dogma of consent. It simply suggests that arbitration should, as regards third parties, be reconciled with its jurisdictional side, which is as important and practically relevant as its contractual nature. Avoiding jurisdictional aspects of arbitration altogether will deprive arbitration of the academic depth necessary to address real problems in practice.
1.103 This study undertakes an in-depth analysis of the role and pertinence of third parties in international commercial arbitration. It adopts a comparative approach reviewing the laws, rules, and jurisprudence of all major arbitration laws and institutional rules. Further, the analysis covers almost all aspects of private international law, drawing equally on conflict of laws, contractual law theory, and procedural doctrine.
(p. 22) 1.104 More importantly, this book adopts a problem-solving approach, offering clear guidance to practising lawyers and arbitrators as to which types of legal basis they may rely upon to introduce claims by or against third parties in arbitration proceedings.
1.105 The key ways in which this study contributes to the discussion are: first, it consolidates the discussion on issues where reasonable agreement among scholars and tribunals exists; but it also identifies areas where further convergence is required. Second, it examines and classifies all the existing theories and legal bases of third-party claims in clearly defined groups. Finally, it puts forward a new systematic approach to the discussion to be used as an alternative to the existing theories.
1.106 Despite its intrinsic complexities the issue of third parties should be viewed more as a challenge and less as a problem for international arbitration. Above all, it should be understood as a call for realism and evolution: international trade is evolving and arbitration has to follow suit. This call for realism and evolution is clearly echoed in this work, whose main aim is to strike a balance between theoretical constrains and practical needs; between dogma and business necessity.
1 See indicatively as regards major textbooks and specialized books G Born, International Commercial Arbitration (Kluwer, 2009) ch 9; J Lew, L Mistelis, and S Kröll, Comparative International Commercial Arbitration (Kluwer Law International, 2003) ch 6; P Fouchard, E Gaillard, and B Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage (Kluwer, 1999) Part 2, Chapter II, para 452 et seq; B Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-issue, and Class Actions (Kluwer, 2006); Permanent Court of Arbitration (ed), Multiple Party Actions in International Arbitration (Oxford University Press, 2009); Complex Arbitrations, Perspectives on their Procedural Implications, ICC International Court of Arbitration Bulletin Special Supplement (2003); N Blackaby, C Partasides, A Redfern, and M Hunter, On International Arbitration (Oxford University Press, 2009) paras 2.23 et seq; K. Youssef, Consent in context: Fulfilling the promise of international arbitration — Multiparty, Multi-contract and Non-contract arbitration (West Thomson, 2009).
As regards articles see indicatively, M Blessing, ‘Extension of the Arbitration Clause to Non-Signatories’, in Arbitration Agreement: Its Multifold Critical Aspects (1999) 8 ASA Special Series 161; Y Derains, ‘L’Extension de la clause d’arbitrage aux non-signatories: la doctrine des groupes de sociétés’, in Arbitration Agreement ibid 242; A Dileo, ‘The Enforceability of Arbitration Agreements by and against Nonsignatories’ (2003) 2 Journal of American Arbitration 31; J Hosking, ‘Non-Signatories and International Arbitration in the United States: The Quest for Consent’ (2004) 20(3) Arb Int 292; E Loquin, ‘Arbitrage et Cautionnement’ (1994) Rev Arb 236; I Fadlallah, ‘Clause d’arbitrage et groupes de sociétés’ (1987) Travaux du Comité Français de Droit International Privé 1984–1985 105 ; F Nicklisch, ‘Multi-Party Arbitration and Dispute Resolution in Major Industrial Projects’ (1994) 11(4) J Int’l Arb 69 et seq; O Sandrock, ‘Extending the Scope of Arbitration Agreements to Non-Signatories’, in Arbitration Agreement ibid 165; C Stippl, ‘International Multi-Party Arbitration: The Role of Party Autonomy’ (1994) 7(1) Am Rev Int Arb 49–50; J M Townsend, ‘Non-Signatories in International Arbitration: An American Perspective’, in ICCA International Arbitration Congress, International Arbitration 2006: Back to Basics? (Kluwer Law International, 2007); N Voser, ‘Multi-party Disputes and Joinder of Third Parties’, in A-J van den Berg (ed), Years of the New York Convention: ICCA International Arbitration Conference, ICCA Congress Series, 14 (2009) 345; T Zuberbühler, ‘Non-Signatories and the Consensus to Arbitrate’ (2008) 26 ASA Bull 21; I Schwenzer and F Mohs, ‘Arbitration Clauses in Chains of Contracts’, (2009) 27(2) ASA Bull) 230–1.
2 Park aptly refers to this type of parties as the ‘less-than-obvious parties’, in ‘Non-signatories and International Contracts: An Arbitrator’s Dilemma’ in the collection of essays edited by Permanent Court of Arbitration, Multiple Party Actions in International Arbitration (Oxford University Press, 2009) 5.
7 See J Lew, L Mistelis, and S Kröll, Comparative International Commercial Arbitration (Kluwer Law International 2003), para 7-3 et seq; P Fouchard, E Gaillard, and B Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage (1999), para 498.
8 According to the European Investment Bank more than 1,000 PPP contracts for the amount of about 200 billion euros were signed in the European Community in the course of the last decade. See F Blanc-Brude et al, ‘Public-Private Partnerships in Europe: An Update’ (2007) European Investment Bank Economic & Financial Report No 2007/03.
10 ‘Divisionalization is defined as the process by which the structure of a group of companies is changed from the traditional relationship of parent and subsidiary company to one where all the operation functions of several, or possibly all of the wholly-owned subsidiaries, are performed within one corporate entity, and the discrete functions are organized within separate divisions of that company. The previous structure in which each function had a separate formal and legal corporate existence is dispensed with.’ See Deloitte, Haskins, and Sells, Corporate Structure: Subsidiaries or Divisions? (August 1983) cited in P Muchlinski, Multinational Enterprises and the Law, n 9 above, 59.
11 P Muchlinski, Multinational Enterprises and the Law, ibid; J H Dunning, Multinational Enterprises and the Global Economy (Addison Wesley, 1992) ch 8.
14 P Muchlinski, Multinational Enterprises and the Law, 63 et seq, and 327 et seq. In such cases, the question that arises is whether the contractual rather than corporate veil between the contractually associated parties can be lifted, so that the controlling party could be held liable along with the controlled party for acts causing loss to third parties in which both contracting parties have participated by reason of the economic and business relationship underlying the contract between them where the managerial control is.
15 Bridas SAPIC, Bridas Energy International Ltd, Intercontinental Oil and Gas Ventures Ltd and Bridas Corporation v Government of Turkmenistan and State Concern Tukmenneft, 345 F.3d 347 (5th Cir. 2003).
17 See eg the arbitral awards ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-Gobain (1984) Rev Arb 137, (1984) 9 YBCA 131, which took into account the usages conforming the needs of international commerce (‘et en tenant également comte […] des usages conformes aux besoins du commerce international’); see ICC case no 6000 of 1988, (1991) 2(2) ICC Bull 34, which noted ‘the usages of the international trade […] would justify and require the extension to this company, party to a group of companies, of the arbitration clauses included in the contracts executed’ by the other companies of the group; similarly in partial award ICC case no 5894 of 1989, (1991) 2(2) ICC Bull 25; in ICC case no 5721 of 1990, (1990) 117 Clunet 1019, with note Y Derains; and in ICC award, on 10 March 2003, C&M Farming Ltd v Peterson Farms Inc (unpublished). This is the prevailing view in arbitration literature too: G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009) 1211 et seq; J Lew, L Mistelis, and S Kröll, Comparative International Commercial Arbitration (Kluwer, 2003) para 6–73; P Fouchard, E Gaillard, and B Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage (Kluwer, 1999) para 443 et seq; see also Y Derains and S Schauf, ‘Clauses d’arbitrages et groupes de sociétés’, (1985) Rev Dr Aff Int 231; J-F Poudret, ‘L’Extension de la clause d’arbitrage: approches française et suisse’ (1995) 122 Clunet 923; S Jarvin, ‘The Group of Companies Doctrine’, in The Arbitration Agreement: Its Multifold Critical Aspects 181, 196–7; J Gaffney, ‘The Group of Companies Doctrine and the Law Applicable to the Arbitration Agreement’ (2004) 19(6) Mealey’s Int’l Arbitration Report 47 and M Blessing, ‘The Law Applicable to the Arbitration Clause and Arbitrability’, in A-J van den Berg (ed), ICCA Congress series no 9, p 174. Contra O Sandrock, ‘Extending the Scope of Arbitration Agreements to Non-Signatories’, in Arbitration Agreement ibid 167, and O Sandrock, ‘Arbitration Agreements and Group of Companies’ (1993) 27 International Lawyer 945, who argues that the contours of lex mercatoria are too vague to provide support to the group of companies doctrine. Instead, Sandrock argues for the application of national law as determined by the relevant conflict of laws rules.
18 See eg the arbitral awards ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-Gobain, ibid looking into usages conforming to the needs of international commerce (‘et en tenant également comte […] des usages conformes aux besoins du commerce international’); and ICC case no 6000 of 1988, (1991) 2(2) ICC Bull 34, 100, which noted ‘the usages of the international trade […] would justify and require the extension to this company, [which is a] party to a group of companies, of the arbitration clauses included in the contracts executed’ by the other companies of the group; and in ICC award, on 10 March 2003, C&M Farming Ltd v Peterson Farms Inc (unpublished). See in more detail Chapters 5 and 6 below.
21 Swiss Federal Tribunal, 19 July 1988, in (1989) Rev Arb 514 and also in (1991) 16 YBCA 174–81, which annulled an arbitral award that relied on principles of international corporate law in case no 3879 Interim Award of 5 March 1984, (1986) 11 YBCA 127.
24 Especially in class actions there are interesting recent developments and new materials; see in particular the recent decision on the US Supreme Court in Stolt-Nielsen SA v Animalfeeds International Corp 559 US (decided on 27 April 2010) ruling in a 5 : 3 opinion that class arbitration may not be imposed on parties who did not agree to it in their arbitration contracts.
25 See in particular, B Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-issue, Class Action (Kluwer, 2006) chs V, VI, and IX entitled ‘Setting in Motion of Arbitral Proceedings and Appointment of Arbitration’, ‘Arbitration Proceedings’, and ‘Classwide Arbitration’ respectively. See also J Chiu, ‘Consolidation of Arbitral Proceedings and International Commercial Arbitration’, (1990) 7(2) J Int’l Arb 53; R Chernick, ‘Class-Wide Arbitration in California’, in Permanent Court of Arbitration (ed), Multiple Party Actions in International Arbitration (Oxford University Press, 2009) 337; E Gaillard, ‘The Consolidation of Arbitration Proceedings and Court Proceedings’, in (2003) ICC Complex Arbitrations, ICC Special Supplement Bulletin 35; V Veeder, ‘Multiparty Disputes: Consolidation under English Law’ (1986) 2 Arb Int’l 310; M Platte, ‘Multiparty Arbitration: Legal Issues Arising out of Joinder and Consolidation’, in E Gaillard and D Di Pietro (eds), Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice (Cameron May, 2008) 485; E Tuchmann, ‘The Administration of Class Action Arbitrations’, in Permanent Court of Arbitration (ed), Multiple Party Actions in International Arbitration (Oxford University Press, 2009) 325; S Strong, ‘Enforcing Class Arbitration in the International Sphere: Due Process and Public Policy Concerns’ (2008) 30(1) University of Pennsylvania Journal of International Law 200.
26 See eg ICC no 10758 of 2000, in JJ Arnaldez, Y Derains, and D Hascher (eds), Collection of ICC Arbitral Awards 2001–2007 (Kluwer, 2009) 537 with note Arnaldez, which held that pursuant to Swiss PILA Art 178(1) an arbitration agreement must be at least proved in writing. The tribunal held that the parties failed to submit evidence of consent of the non-signatory party in writing and it thus concluded this ‘would suffice for this tribunal to decline jurisdiction [over the non-signatory]’ at 542.
27 Park, n 2 above; para 1.26 et seq; Hanotiau, n 1 above; J Lew, L Mistelis, and S Kröll, Comparative International Commercial Arbitration (Kluwer, 2003), para 6–73; P Fouchard, E Gaillard, and B Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage (Kluwer, 1999), para 443 et seq; G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009) 1150 et seq; Voser, n 1 above, 372 et seq.
28 See eg Hanotiau, n 1 above, para 41 et seq; J M Townsend, ‘Non-Signatories in International Arbitration: An American Perspective’, in International Arbitration 2006: Back to Basics?, ICCA International Arbitration Congress (Kluwer Law International, 2007); Williston on Contracts, ed R Lord, 4th edn (West Group, 2001), ch 57: 19; J Douglas Uloth and J Hamilton Rial, ‘Equitable Estoppel as a Basis for Compelling Nonsignatories to Arbitrate: A Bridge Too Far?’ (2002) 21 Review of Litigation 593; J Douglas Uloth and J Hamilton Rial, ‘Enforcing Arbitration against Nonsignatories’ (2002) 65 Texas Bar Journal 802; H Warren Knight et al, ‘Arbitration by and against Nonsignatories’, in California Practice Guide: Alternative Dispute Resolution (Rutter, 1998) paras 5:261–5:288; J DeArman, ‘Resolving Arbitration’s Nonsignatory Issue: A Critical Analysis of the Application of Equitable Estoppel in Alabama Courts’, (1998–1999) 29 Cumberland Law Review 645.
29 See eg the arbitral awards ICC case no 4131 of 1982, Dow Chemical v Isover-Saint-Gobain, (1984) 9 YBCA 131; ICC case no 6000 of 1988, (1991) 2(2) ICC Bull 34; partial award ICC case no 5894 of 1989 (1991) 2(2) ICC Bull 25; ICC case no 4131 (Interim Award) of 1982, (1983) 110 Clunet 899, with note Y Derains; and in ICC case no 5721 of 1990, (1990) 117 Clunet 1019, with note Y Derains; and in ICC award, on 10 March 2003, C&M Farming Ltd v Peterson Farms Inc (unpublished).
30 Choctaw Generation v American Home Assurance 271 F 3d 403 (2d Cir 2001) or McBro Planning Development v Triangle Electrical Construction 741 F 2d 342, 343 (11th Cir 1984). Hughes Masonry v Greater Clark County School Bldg 659 F 2d 836 (7th Cir 1981).
32 See eg G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009), at 1147 (as regards agency and representation), 1180 (third-party beneficiary), 1191 (as regards assignment and transfer). Swiss Federal Tribunal, 9 April 1991, (1991) 8(2) J Int’l Arb 18 (as regards assignment), D Girsberger, ‘The Law Applicable to the Assignment of Claims Subject to an Arbitration Agreement’, in F Ferrari and S Kröll (eds), Conflict of Laws in International Arbitration (2010), 392 et seq, and Lew, Mistelis, and Kröll, n 27 above, 7–55 (as regards assignment).
33 Fouchard and Gaillard, above n.1, para 704 et seq have particularly and extensively looked into substantive rules in the area of assignment. Other authorities have further supported the substantive transnational rules theory albeit on more general terms rather than the issue of third parties in particular: Lew, Mistelis, and Kröll, n 26 above, ch 6; P Fouchard, E Gaillard, and B Goldman, On International Commercial Arbitration, ed E Gaillard and J Savage (Kluwer, 1999); E Gaillard, ‘Transnational Law: A Legal System or a Method of Decision Making?’ (2007) 17(1) Arb Int 54.
35 B Hanotiau, Complex Arbitrations: Multiparty, Multi-contract, Multi-issue and Class Actions (Kluwer Law International, 2006) at 51; see also B Hanotiau, ‘Groups of Companies in International Arbitration’, in L Mistelis and J Lew (eds), Pervasive Problems in International Arbitration (Kluwer Law International, 2005), paras 14-5 and 14-6.
36 The reference to ‘the common will of all the parties to the proceedings’ (‘selon la commune volonté de toutes les parties’) was first found in the seminal Dow Chemical award in ICC case no 4131 (1982), Dow Chemical v Isover-Saint-Gobain (1984) Rev Arb 137; (1983) 110 Clunet 899, with note Y Derains. Since then it can be found in many other awards or court decisions applying the group of companies doctrine; see eg the more recent arbitral award in ICC case 10758 of 2000, (2005) 16(2) ICC Bull 87; Pau Cour d’Appel, 26 November 1986, Société Sponsor AB v Lestrade (1988) Rev Arb 153, with note A Chapelle; see also the award of the tribunal and the decision of the Paris Cour d’Appel in the case Re Société Kis France v Société Générale (1992) Rev Arb 90; (1991) 16 YBCA 145; Cour de Cassation, 20 December 1993, Municipalité de Khoms El Mergeb v Société Dalico (1994) 1 Rev Arb 116.
37 Cour d’Appel, Paris, 30 November 1988, Korsnas Marma v Durand-Auzias (1989) Rev Arb 691, at 694 with note P-Y Tschanz. Cour d’Appel, Paris, 14 February 1989, Ofer Bros v Tokyo Marine and Fire Insurance (1989) Rev Arb 691, with note P-Y Tschanz; Cour d’Appel, Paris, 11 January 1990, Orri v Lubrifiants Elf Aquitaine (1992) Rev Arb 95, with note D Cohen; (1991) 118 Clunet 141, with note B Audit. It should be noted though that the Cour de Cassation distanced itself from the argument for the autonomous validity and effectiveness of the arbitration agreement adopted by the Cour d’Appel. Instead, the Cour de Cassation referred to ‘fraud aimed at concealing the identity of the real contractor’ (‘fraude, destiné à dissimuler le veritable contractant’) in order to uphold the extension of the arbitration agreement to the non-signatory (Cour de Cassation, 11 June 1991, Orri v Lubrifiants Elf Aquitaine (1992) Rev Arb 73, with note D Cohen). See also Cour d’Appel, Paris, 7 December 1994, V 2000 v Project XJ 220 ITD et autre (1996) Rev Arb 67, with note C Jarrosson (but not in the context of the group of companies doctrine); Paris Cour d’Appel, 22 March 1995, SMABTP et autre v Stationor et autre (1997) Rev Arb 550. Also more recently, Paris Cour d’Appel, 7 May 2009, in Petites Affiches 2009, nos 159–60, pp 10–22, with note B Jerome.
38 See the passage often cited in US cases in Fisser v International Bank 282 F 2d 231, 233 (2d Cir 1960): ‘It does not follow, however, that under the [Federal Arbitration] Act an obligation to arbitrate attaches only to one who has personally signed the written arbitration provision.’ X SAL, Y SAL and A v Z, SARL and ICC Arbitral Tribunal, 16 October 2003, CCI, BGE 129 III 727; cf also P Habegger, ‘Extension of Arbitration Agreements to Non-Signatories and Requirements of Form’ (2004) 22 ASA Bull 398 at 410 arguing ‘no overly strict requirements should apply to the formal validity of an extension of the arbitration clause to a third party’.
39 In the US, see in Fluehmann v Associates Financial Services 2002 WL 500564 (D Mass). ‘In the instant case, the subject arbitration provision is ostensibly broad, covering any dispute that may “arise under” or “relate to” the Loan Agreement. When confronted with such broad language, courts presume the validity of an agreement to arbitrate […] and generally find that similarly broad arbitration clauses governing “all disputes” arising under the agreement apply even to a nonsignatory. The baseline assumption here, therefore, is that the Arbitration Agreement casts a wide net.’ (emphasis added) See also citing Kiefer Specialty Flooring, Inc v Tarkett, Inc 174 F 3d 907, 910 (7th Cir 1999) and Thyssen, Inc v M/V Markos N 1999 WL 619634, 4 (SDNY1999).
40 Cf Fouchard, Gaillard, and Goldman, n 1 above, at para 472: ‘When determining whether or not the parties actually agreed to submit their disputes to arbitration, arbitrators and the courts apply various principles of interpretation. In the light of these principles, they establish the degree of certainty required for the parties’ consent to be effective as well as the scope of that consent’; and at para 482: ‘Case law shows that the primary concern shared by both arbitrators and the courts is to give full effect to the parties’ intention to refer their disputes to arbitration. This is true of both the degree of certainty required of the consent given by the parties and its scope.’
41 See Fouchard, Gaillard, and Goldman, ibid at para 477 et seq, referring to ‘the principle of interpretation in good faith’, which seeks to establish the actual intention of the parties, ‘the principle of effective interpretation’, favouring the interpretation which enables the clause to be effective over the interpretation preventing the clause from being effective, and ‘the principle of interpretation contra proferentem’ establishing the presumption that an agreement should be interpreted against the party that drafted the clause in dispute.
42 G Born, International Commercial Arbitration, at 1205 ‘The fact that a party is “directly implicated” in contractual performance and “aware of ” an arbitration clause, […] should generally be insufficient, without more, to subject that party to an arbitration agreement. Similarly the Cour de cassation has held that the acceptance of a contract, though it can be tacit, must result from acts that demonstrate with evidence the intention of the party to accept the proposed contract [Cass 2e civ 21 jan 1981 Bull Civ 1981 n 14].’
43 This is expressly stated in the French CPC Art. 1484(1) applicable to both domestic and international arbitration; see also Cour de Cassation, 19 March 1981, (1982) Rev Arb 44 and the more recent Supreme Court, Plenary Section, 7 July 2006, Césareo v Césareo, 04-10.672; in the Netherlands Arbitration Act 1986, Art 1059; in the Belgian Judicial Code, Art 1703(1); in the new Austrian CCP, s 607; in Greece, Art 35(2) of the 2735/1999 Act reads in tandem with Art 896 Code of Civil Procedure, see also Areios Pagos (Greek Supreme Court) no 448 of 1969, in (1970) Nomiko Vima 36; cf UNCITRAL Model Law Art 35(1), ‘the award is binding’ and German ZPO Art 1055, which expressly equates the effects of arbitral awards with those of national judgments: ‘The arbitral award has the same effect between the parties as a final and binding court judgment.’ These provisions practically refer to national provisions regarding res judicata; cf H Koch and F Diedrich, Civil Procedure in Germany (Kluwer Law International, 1998) para 92. In Swiss Law, it is accepted that a final award produces the effects of res judicata. Swiss law also recognizes res judicata to a foreign arbitral award to the same extent that the law of the country in which the award was made would recognize that award. On the other hand, these effects cannot go beyond those which the award would have if it was a Swiss award made in Switzerland, see Art 190 of the Private International Law Statute (1990) and S Berti (ed), International Arbitration in Switzerland (Kluwer Law International, 2000) Art 190 para 6 and Art 194 para 134 et seq.
cf. G Born, International Commercial Arbitration, 2nd edn (Kluwer, 2009) 2895: ‘In the US, if an arbitral award is judicially confirmed under the FAA (in particular, under §9 thereof ), then it becomes a judgment of the court, entitled to the same preclusive effect as any other civil judgment of a federal district court.’ Even unconfirmed arbitral awards however have res judicata effect despite the fact that the FAA lacks any specific reference to the effect of an arbitral award. It is good law that the award has the same effects as a national judgment under the rules of res judicata, subject to the same exceptions and qualifications, see Restatement (Second) Judgments (1982) para 84; R Shell, ‘Res Judicata and Collateral Estoppel Effects on Commercial Arbitration’, (1988) 35 UCLA Law Review (1988) 623 at 641 and the relevant case law therein: ‘The American courts have long held that res judicata applies to arbitration awards.’ The same is accepted in England, although the English Arbitration Act 1996 (EAA), s 58(1) merely refers to a ‘final and binding’ award: see the leading case here Fidelitas Shipping Ltd v V/O Exportchleb  1 Lloyd’s Rep 13; see also EAA s 101(3): ‘Where leave [on enforcement] is so given, judgment may be entered in terms of the award’, ie judgment and award are equated after the recognition of the award in the domestic jurisdiction. Cf also the Hong-Kong Arbitration Ordinance, ss 2GG (applicable to both domestic and international arbitration), 40B.2 (domestic only), and 42 (international only).