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&operation=go&searchType=0
&lastSearch=simple&all=on&titleOrStdNo=1814-0408recentdecisionof
the
arbitrator.on-iestovation:developmentsneoftheperceivedadvantagesofarbitrationasaform
ofdisputeresolutionisthatitischosenconsensually
bycontractingparties.
Itwouldthereforeseemlogicalthatonlyapartytoanarbitrationagreementcanbecompelledtoarbitratewiththeotherparty(ies)tothatagreement,
and that any arbitrationnecessarilyinvolves onlythe partiesto
theagreement.However,insomecircumstancescertainnationallawspermitapartywhichisnotasignatorytoanarbitrationagreementtoparticipateinanarbitration,eitherasclaimantorrespondent.joindermaybedesirableinanumberof
situations.Forexample,disputesoftenarisewheretherearemultiplebutinterdependentcontracts,or
wheremultiplepartiesareinvolvedinacommercialtransactionbut only
some of themare
partytotheagreementcontainingthearbitrationclause.This
canariseparticularlywhereacontractingpartyisamemberof agroupof
companiesandwhereitsparentortheothersubsidiarieshavebeeninvolvedinthecommercialtransactionunderlyingtherelevant
contract, eventhough they may not besignatories to that
contract.While in nationalcourt proceedings joinder is commonin
mostjurisdictions,ininternationalarbitrationjoinder is generallynot
possiblewithout someformof contractual relationshipbetween
theparties.Againstthisbackground,thisarticleconsiders the extent to
whichvarious nationallaws permitjoinderin arbitration even
thoughthere may be no strict contractual relationshipbetween the
parties, and how this concept hasdeveloped.Inparticular, it
examines:* Joinder ofanon-signatoryin the US, throughat least
fivedistinctlegalprinciples.*
Joinderofanon-signatoryinEurope(specifically, France,England,
Switzerland,Russiaand Germany).oJoinder when states and
state-ownedentitiesare involvedinthedispute.The UnitedStatesThe
USapproach towhether a non-signatoryto
anarbitrationagreementcanbebound byit isprincipally governed,at
bothfederalandstatecourtlevels,bycommon-lawprinciplesof contract
and agency. Thiswassummarisedinthe judgmentof
theSecondCircuitcourtin Thomson-CSP;SAv Ameican ArbitrationAssocand
Evans &SutherlandComputer Corp, 63
F3d773,766:'Arbitrationiscontractualbynature...Itdoesnotfollow,however,thatunderthe[FederalArbitration]Actanobligationtoarbitrateattachesonlytoonewhohaspersonallysignedthewrittenarbitrationprovision.Thiscourthasmadeclearthatanon-signatorypartymaybeboundtoanarbitrationagreementif
sodictatedbytheordinaryprinciplesofcontractandagency.'Significantly,
the court identified five principlesunder which a non-signatorycan
be bound byan
arbitrationagreement:ThIN-HOUSEPERSPECTIVEVolume3Issue3"estoppel;*incorporationby
reference;"assumption;*agency;andveilpiercing/alterego.Equitable
estoppelUSfederalcourtsdrawonthedoctrineofequitableestoppeltobindnon-signatoriestoarbitrationagreementsinthefollowingcircumstances:*Whenthesignatory'sclaimspresumetheexistenceof
a written agreement containinganarbitrationclause."If the signatory
alleges concerted misconductbetweena non-signatoryand
asignatory.TheFourth,Fifth,andEighthCircuitshaveexpresslyadoptedthisapproachbutothercircuits,suchastheSecondCircuit,haveusedaslightlydifferentformula,althoughthe
effectisbroadlythe same.Intherecentcaseof
MeyervWMCO-GPLLC,211SW3d302,305(Tex2006),theTexasSupreme Court
concisely explained thedoctrine of estoppel and held that any
person(including a non-signatory)claiming a
benefitfromacontractcontaininganarbitrationagreement is equitably
estopped from refusingto
arbitrate.Thecaseinvolvednon-signatoriestoanarbitrationagreementseekingtorelyonit.ThedisputearoseoutofWrMCO'sproposaltobuyBullock'sForddealership.Bullock'sdealershipagreementwithFordMotorCompany,themanufacturer,gaveFordacontractualrightof
firstrefusaltobuythedealership.SinceFordhadtheoptiontoexerciseitsright
orallowBullocktosellthedealershipto another buyer, Bullockdecidedto
enter a purchase and sale agreement(PSA)with WMCO.The
PSAacknowledgedFord'sright of first refusal and stipulated that if
Fordexerciseditsoption,BullockwaspermittedtoterminatethePSAandselltoFord.ThePSAalsocontainedanarbitrationclauserequiringWVMCOtoarbitrateanydisputeswithBullock.Ultimately,Fordexerciseditsrightof
first refusalandBullockterminatedits PSA with WMCO.Ford assigned
its right toacquirethe dealershiptoMeyer andBullocksoldto
Meyer.BasedonthePSA,WMCOsuedFordandMeyerincourtfortortiousinterferenceandBullockforbreachof
contract.EventhoughFordandMeyerwerenot partiestothe
arbitrationagreementwith
WMCO,theydemandedarbitrationunderthePSA.Thetrialcourt
refusedtocompelarbitrationandthis wasupheld bythe Court of
Appeals.TheTexas SupremeCourt, however,
reversedthosedecisionsbasedonthe doctrineof
equitableestoppel.Thecourtheldthatequitableestoppel
appliesintwocircumstances:"Ifthesignatory'sclaimspresumetheexistence
of a written agreement
containinganarbitrationclause,arbitrationiswarranted.Theclaimant'cannot,ontheonehand,seekto
holdthenon-signatoryliablepursuanttodutiesimposedbytheagreement,whichcontainsanarbitrationprovision,but,ontheotherhand,denyarbitration'sapplicabilitybecausethedefendant
isa
non-signatory'."Ifthesignatoryallegessubstantiallyinterdependentand
concertedmisconductbetweenanon-signatoryandasignatory,arbitrationis
appropriate.(This is sometimesreferredto as
the'inextricablyintertwined'or'inherentlyinseparable'test.)TheSupremeCourtheldthatbothcircumstancesappliedtobindWMCOtoarbitration.Allof
WMCO'sclaimsanddamagesdependedontheexistenceofthePSAandwereintertwinedwithitsclaimsagainstBullock.Thecourtalsoheldthattrialcourtsdonothavediscretiontoapplyequitableestoppel.Equitableestoppelhasalsobeenappliedincasesbythecourtsof
otherstatessuchasNew York, Hawaiiand Florida, but not all
statecourtsadheretotheprinciple.StatecourtsinbothMissouriandIllinoishaveheldthatequitableestoppelisinconsistentwiththepolicy
that arbitrationis a matter of agreementbetweenthe
parties.Incorporation byreferenceApplying ordinary principles of
incorporationbyreference,statecourtshaveincorporatedan arbitration
agreement from onedocumentinto another merely by reference.In a
disputebetweenacontractorandsubcontractor,aFloridacourtheldthatthesubcontractincorporatedbyreferencethetermsof
theheadcontract.TheheadcontractreferredtotheprovisionsoftheAmericanInstituteofArchitects,whichinturncontainedanarbitrationclause.Thesubcontractorwasthereforeentitledtoarbitratethedisputearisingfromthesubcontract(FrankjRooneyInc
vCharles WAckermanof Fla Inc, 219So2d110(Fla3d
DCA1969)).TheIN-HOUSEPERSPECTIVEVolume3
Issue3USfederalcourtshavetakenadifferentapproach. While a Florida
state court in Rooneyacceptedincorporationof
thearbitrationagreement bywayof generalreferenceto
thetermsoftheheadcontract,federalcourtshaveonlyallowedincorporationbyspecificreferencetothearbitrationclauseintheother
document.InGrundstad v Ritt
106F3d201(7thCir1997),theCourtofAppealsforthe7thCircuitheldthattherewasnoincorporationbyreferenceof
anarbitrationclause intoa guarantee whichappeared
belowthesignaturesattheendof thecontractbecausethere wasno
clearexpressionof theguarantor'sintentionto be personally boundby
the arbitrationclause.The
clausereferredto'anydisputebetweentheparties'anditwasheldthat
guarantorswerenotpartiestothe contract.AssumptionTheprincipleof
assumptionisbasedonthenotionofconsentwhichcanbeinferredfromaparty'sconduct.Forexample,intheclassactionGvozdenovicvUnited
Air LinesInc933F2d1100(2nd
Cir1991),theclaimantsappealedajudgmentofthetrialcourtdismissingaclassactiontheyhadbroughtinwhichtheysoughttovacateanarbitralaward.Intheappeal,theyarguedthatthetrialcourthadimproperlydismissedtheirpetitionforvacatingtheawardbecausetheywerenot
partiesto the arbitration
agreement.However,theSecondCircuitfoundthattheclaimantshadbeenrepresentedinthearbitrationby
counsel whohad been
selectedandinstructedbyacommitteespecificallydesignated by the
claimantsto represent
theminthearbitration.Thecourtheldthattheclaimantshadvoluntarilyandactivelyparticipatedinthearbitrationprocess
and were therefore boundby its outcomeasif they had been
signatoriestothearbitrationagreement.The doctrine of assumption may
overlap withother contractualor equitableprinciples
andtheremaybesome
varianceinthedifferentcourts'analysisofhowanon-signatoryhasbeenheldtobeboundbyanarbitrationagreement.InWetzelvSullivan,King&Sabom,PC745SW2d78(TexApp-
Hous[1stDist]1998),aTexascourtheldthatacompany'sconduct in
accepting the benefit ofshareholders'and
compensationagreementsmeant that thecompany wasdeemedto
haveratifiedthem and wasestopped fromdenyingtheexistenceof
thearbitrationagreements,eventhoughit hadnot
signedthem.AgencyOrdinary principlesof agency
havealsobeenjudicially appliedto the issueof
identificationofthepartiestoanarbitrationagreement.Anundisclosedprinciplecanenforceanarbitrationagreementmade
forits benefit byan agent, despite the fact that the signatory
tothe arbitration agreement did not know of theexistenceof the
undisclosedprinciple.Veilpiercing/alter egoWherea signatory to
anarbitration
agreementismerelythealteregoofanon-signatory,theUScourtshaveallowedthepiercingofthe
corporateveilof theentity whichagreedto
arbitrate,sothatthenon-signatoryisalsoboundbythearbitrationagreement.Thiswill
bethe casewhere it can be shownthat inthe circumstances,to
distinguish between thesignatory and non-signatory tothe
arbitrationagreementwould be perpetuatinga fraudorinjustice. A
likely scenario is where a
subsidiaryhassignedanarbitrationagreementonitsownbehalfbutinfactitsparentcompanyiscontrollinganddirectingthesubsidiaryinrespectofthecommercialtransactiontowhichthearbitrationagreement
relates.Similarly, inthe caseof Bridas SAPIC v Gov'tof Turkmenistan
345F3d347(5thCir2003),anofficerorshareholderofthecorporatesignatorytothearbitrationagreementwasheldto
be bound by the arbitration agreementwheretherewasaunityof
ownershipandinterestbetweenthecorporatesignatoryandtheindividual,suchthattheirdistinctpersonalities
no longer existed, and to
adheretothatshamdistinctionwouldpromoteafraudor perpetuatean
injustice.EuropeanjurisdictionsFranceUnderFrenchlaw,it
maybepossibleforanon-signatorytoanarbitrationagreementtobe
joinedtothearbitration,eitherasclaimantorrespondent,underthe'groupof
companiesdoctrine'.Asits nameimplies,where a signatory to an
arbitration agreementispart of a groupof
companies,thedoctrineallowsfortheextensionoftheapplicationofthearbitrationagreementtooneorTheIN-HOUSEPERSPECTIVEVolume3
Issue3morecompaniesinthesamegroupasthesignatory.However,FrenchcourtsandarbitraltribunalsapplyingFrenchlawhavetendedonlyto
extend arbitration agreements to othercompany(ies)in thesame
groupifboth:*Thenon-signatoryhasplayeda part in
theconclusion,performanceorterminationofthecontractcontainingthearbitrationagreement.*Itwasthecommonintention(expressorimplied)ofthepartiesthatthenon-signatory
be bound by the contract and thearbitrationagreementwithinit.The
first and best-knowncaseonthis issue wastheDowChemicalGroup
vIsover-Saint-Gobain(ICC
CaseNo4131)(DowChemical).TwocompanieswithintheDowChemicalgroupeachenteredintodistributionagreementswithanumberofcompaniestherightsofwhichweresubsequentlyassumedbyIsover-Saint-Gobain.Eachagreementcontainedanarbitrationclause.Whenadisputearose,arbitrationproceedingswerecommencedagainst
Isover-Saint-Gobainby not only the twoDow Chemicalcompanieswhichhad
signedthe agreements,but also their parent companyand another
subsidiary, neither of which
hadsignedtheagreements.Isover-Saint-Gobainobjectedtotheclaimsbroughtbythenon-signatoryclaimantcompanies,astheywerenot
partiestotheagreementscontainingthearbitrationclauses.Thetribunalrejectedthechallenge,consideringthat:"One
of the non-signatory companieshad infactmadeallthedeliveriesto
Isover-Saint-Gobainundertheagreements.-
Theothernon-signatorycompanywastheparentofoneofthesignatories,theownerof
thetrademarksunderwhichtheproducts weremarketed, and
hadabsolutecontrol
overthosesubsidiariesthatweredirectlyinvolvedorcouldcontractuallyhavebecomeinvolvedintheconclusion,performanceorterminationofthedistributionagreements.The
tribunal thereforeconcludedthat,
giventherolethatthenon-signatoriesplayedinthe
conclusion,performanceor
terminationofthecontractscontainingthearbitrationagreementsandthemutualintentionofallparties
to the proceedings,the non-signatorieswere
defactopartiestothecontractsandshould thereforebe bound by the
arbitrationclausescontainedwithinthem.ThiswasupheldbytheParisCourtof
Appeals(CAParis,21Oct1983,Isover-Saint-Gobain
vDowChemicalF.rance).Thenotion,therefore,thatagroupofcompanies
comprisesdistinct legal entities thecontractualarrangementsofwhich
can remaindistinct fromthe other entities in the group isto
acertainextenteroded underFrenchlawby thegroupof
companiesdoctrine.InDowChenical, thetribunalfoundthatit
wasthecommonintentionof
thepartiesthatnon-signatoriesshouldbeboundbythearbitrationagreementsaswellasthedistributionagreementsinwhichtheywerecontained.However,itshouldbenotedthattoinferacommonintentionthatanon-signatorybeboundbyanarbitrationagreement,itwasinsufficienttoestablishthatthenon-signatorywasinvolvedintheoverallcommercialtransactionifit
wasnotalsoinvolved in theconclusion, performanceor terminationof
the contract containing thearbitrationagreement.In
ICCCaseNo2138of1974,thetribunalrefusedtoextendanarbitrationclausesignedby
onecompany toanother companyof thesame group becauseitwasnot
establishedthatthenon-signatorypartywouldhaveacceptedthearbitrationclauseifithadsignedthecontractdirectly.The
non-signatoryhad negotiatedthe overallcommercialtransactionand
signedthemainprovisionsbut
hadnotsignedthecontractcontainingthearbitrationagreement.Byanalogywiththegroupofcompaniesdoctrine,Frenchlawalsopermitsincertaincircumstancesthe
application of anarbitrationagreementsigned bya companyto
the(non-signatory)individualwithcontrolofthatcompany.TheParisCourtof
Appeals(CAParisJan111990,Orri vSociete des LubrifianlsElf
Aquitaine)andSupremeCourthavepermittedtheapplicationofanarbitrationTheIN-HOUSEPERSPECTIVEVolume3
Issue3agreementto a non-signatoryindividualwhowas foundto be
thealter egoof the signatorycompany,onthebasisthat
onthefacts,thesigningofthecontractbythecompanyandnottheindividualconstituteda'subterfuge,amountingto
fraud,aimed at concealingtheidentityof the
actualcontractor'.EnglandThegroupofcompaniesdoctrineunderFrenchlawhasnocounterpartinEnglishlaw(obiter
Peterson Farms [nc vC&M FarmingLtd
[2004]EWHC121(Comm),LangleyJatparagraph62).InPeterson Farms,
thecourtconfirmedthatunderEnglishlaw,itisthesubstantiveratherthantheprocedurallawof
anagreementwhichshould beappliedtoidentifythepartiesto
anagreement.InPeterson Farms,
thesubstantivelawoftheagreementwasArkansaslaw.FollowinganICCarbitrationaward,PetersonFarms(therespondentinthearbitration)soughtadeclarationfromtheEnglishcourtthatcertainfindingsintheawardweremadewithout
jurisdiction,onthebasisthatsomeoftheclaimantsinthearbitrationwerenotsignatoriesto
the arbitrationagreement. Thetribunaldecidedthat it had
jurisdiction overallthe partiesby applicationof,among
otherthings,thegroupofcompaniesdoctrine,followingtheDowChemical
case.However,thecourtheldthatthetribunalwaswrongnot to
haveappliedthe substantivelaw of thedispute, Arkansaslaw,to
identifytheparties.The court applied Arkansas law and held thatthe
group of companiesdoctrine did not formpart of that law, andstated
thatthis wasalsothepositionunder
Englishlaw.However,evenifEnglishlawisthesubstantivelaw,'otherconsiderations'canbetakenintoaccountbythetribunalindecidingthe
dispute,if theparties agreeor
ifitissodeterminedbytheTribunal(section46(1)
(b),ArbitrationAct1996(1996Act)).Therefore,under section46
(1)(b)the groupof
companiesdoctrinecouldconceivablybeappliedbyatribunalevenwhereEnglishlawisthesubstantivelawof
thedispute(forexample,ifallparties,signatoryandnon-signatory,agreetotheapplicationofthedoctrine).Itisarequirementof
theConventiononthe Recognitionand Enforcementof ForeignArbitral
Awards1958(New York Convention)that theconsentto arbitrationbein
writing.Therefore,theparties'consenttotheapplicabilityofthearbitrationagreementtothenon-signatoriesmustbeexplicit.If
itwereexplicit,thensection5(3)of
the1996Act('Wherepartiesagreeotherwisethaninwritingbyreferencetotermswhichareinwriting,theymakeanagreementin
writing')wouldarguablybesatisfied.Aimpliedorinferredintentionisunlikelytotriggersection5
(3)and, intheabsenceof
awrittenagreementtoarbitration,thearbitrationwouldstand outsidethe
1996 Act. In this case,anyawardinfavourof
oragainstthenon-signatorieswouldnotbeenforceablebytheEnglish court
undersection 66 of the1996 Act(which relates to the enforcement of
awards).Likewise,a foreignawardinvokingthe groupof companies
doctrine maynot be enforceableunder section100of the 1996
Act(relating toNew YorkConvention
awards).Additionally,anon-signatorytoanarbitrationagreementcanbecomea
partytoan arbitration under it by way of the Contracts(Rights of
Third Parties)Act
1999(1999Act).The1999Actabolishedthelong-standingdoctrineofprivityofcontract(thatonlyapartytoacontractcanenforceitsterms).Athird
party canenforce a term of the
contractifthecontractexpresslyprovidesthatit candoso(section1
(a),1999 Act),or ifthe
termprovidesabenefittoit(sectionl(b),1.999Act).Section8ofthe1999Actexpresslyenvisagestheapplicabilityof
sectionI toarbitrationagreements.However,itisnowcommonfor
commercialcontracts to excludetheapplicabilityof the1999
Act.SwitzerlandTheextensionofthebindingnatureofarbitrationtonon-signatoriesinSwitzerlanddependsontheroleplayedbythenon-signatory
in the performanceof the agreementcontainingthe
arbitrationclause.Whileanarbitrationagreementwouldtraditionallynotbeextendedtonon-signatoriesunderSwissprocedurallaw,adecision
of the SwissFederalTribunal(YSALvZSarlA7F129 III
727-4P.115/2003)(XSAL)on16October2003forthefirsttimetookamoreliberalapproachtonon-signatories.Inthiscase,threeLebanesecompanies(X,YandZ)enteredintoaconstructioncontractcontaininganarbitrationclause.Whenadisputearose,Zcommencedproceedingsagainst
X, Y andMrA(who was not
apartytotheagreement),onthebasisthatMrAactivelyparticipatedinthenegotiationsandperformanceofthecontract.TheFederalTribunal,applyingtheprincipleof
goodTheIN-HOUSEPERSPECTIVEVolume3 Issue3IETRLRILfaith, allowedan
extensionof the arbitrationagreementto Mr A, on the basis of the
writtenevidenceshowing Mr A's active involvement inthe management
of X and Y, and in the actualperformanceof thecontract
withZ.TheFederalTribunalalsoheldthatthefactthatMrAownedcompaniesXandY,heldtheconstructionpermitfortheworksunderthecontractbetweenX,Y
andZandrepresentedtheconstructionprojectdealtwithby
thecontractpersonallyinthemediawerenotsufficientgroundsforextendingthe
arbitrationagreementto Mr A.It
washisactiveinvolvementinthemanagementandimplementationoftheconstructionprojectwhichbecamethebasisfortheextension,becausebyhisactions,MrAshowedhiswillingnesstobeboundbythearbitrationagreement
withinthe contract.Thedecisionwasastepforwardintheinterpretationof
theSwissstatutegoverninginternationalarbitration,the
FederalActonPrivateInternationalLaw1987(PIL).Thearbitrationagreementmustbe'evidencedbytext'(thatis,havesome
formof
writtenexpression)(Article178(1)PIL).TheFederalTribunal,whileacceptingthattherewasnosuchwrittenagreementwithMrA,consideredthatthepurposeofthelegalrequirementswereto
forminasimilarwaytoitspracticeof
acceptingarbitrationclausesincorporatedbyreference.Inthecircumstances,theFederalTribunalfoundthattheserequirementsshouldbekepttoaminimum(thatis,theexistenceofthedocumentsevidencingMrA'sinvolvementintheperformanceofthecontractwassufficient).Anarbitrationagreementisvalidifitconformstothelawchosenbytheparties,thelawgoverningthesubjectmatterof
thedispute,or to
Swisslaw(Article178(2),PIL).TheFederalTribunalsupportedthe
arbitraltribunal'sapplicationof
Lebaneselawasthelawgoverningthecontract,relyingontheconceptoflexmercatoria
(principlesderivedfromtheestablishedcustomsof merchantsand
tradersrather thanthe laws of a
particularstate)andtheFrencharbitralpracticeofinvolvementin
theconclusion, performanceor termination of the contract containing
thearbitrationagreement.RussiaRussian lawprovidesthat an
arbitraltribunalonlyhas
jurisdictionovernon-signatoriestoanarbitrationagreementif
allthepartiesexplicitlyagreeonthis,includingthenon-signatoryitself(Article19,InternationalCommercial
Arbitration Act 1993). In
practice,thisprovisioneffectivelyrestrictsjoinderofnon-signatories,asinmostcasesnon-signatoriesobjecttobeingaddedaspartiesto
arbitration.GermanyTherearelimitedinstanceswherenon-signatoriestoanarbitrationagreementcanbecompelledtoarbitrateinGermany.Forexample,
a third-party beneficiary who wishesto enforcea contractual right
arisingfrom anagreement that contains an
arbitrationclausemustrespectthisdisputeresolutionchoicemadebythemainpartiestothecontract.Aprincipleisboundbythearbitrationagreementconcludedbyitsagentonitsbehalf,
evenincasesof
apparentauthority.However,itishighlyunlikelythatGermancourts
wouldfollowthegroupof companiesdoctrine.State-ownedentities
andthestateWhenastate-ownedcompany,whichisaseparatelegalentitytothestate
itself,entersintoanarbitrationagreement,thequestionoftenarisesastowhetherthearbitrationagreementcanbeenforcedagainsttherelevantstate.Similarly,wouldsuchastate-ownedentitybeboundbythearbitrationagreemententeredintoby
thestate?Extensionofanarbitrationagreementfromastate-ownedentity to
the stateThekeycaseonthisissueisSPP (MiddleEast) LtdvArab
Republicof
Egypt(CaseNo3493(1983))(knownasthePyramids),anarbitrationunderICCRulesinParis.SPP,acompanyincorporatedinHongKong,signedHeadsof
AgreementwithEGOTH,anEgyptianstate-ownedcompany,andtheEgyptian
Government, for the constructionoftwo tourist centres in Egypt. SPP
and EGOTHthen enteredinto a contract which containedan ICC
arbitration clausewith its seat in Paris.The contract was signed,
amongothers, by
theMinisterofTourismofEgypt,hissignatureappearingunderneaththe
words'approved,agreedand ratified'.TheIN-HOUSEPERSPECTIVEVolume3
Issue3Whentheconstructionprojectwascancelled,SPPcommencedthearbitrationagainst
bothEGOTHandthestateof
Egypt.Thestatecontestedthejurisdictionofthearbitraltribunalonthebasisthatithadnotagreedtobeboundbythearbitrationagreement.
However, the arbitral tribunalheldthat thesigningof theHeadsof
Agreementandof theactualcontractbyagovernmentofficialwas
clearevidenceof the intention bythe Egyptian Government to be bound
by thearbitrationagreement.The Egyptian Governmentappealedto
theParisCourtof AppealsunderArticle1502of theFrench NewCodeof
CivilProcedure,claiming lack of an arbitration agreement.
TheCourtallowedtheappeal,holdingthatthewords'approved, agreedand
ratified'did
notimplytheEgyptianGovernment'sintentiontobeboundbythearbitrationagreement,asunder
EgyptianlawtheMinister,by virtueof his office, wassupposed to grant
approvalstothecontractsenteredintobystate-ownedentities. SPP
appealedtothe French CourdeCassation, whichsupported the
interpretationof theCourt of Appeals.This judgment wasfollowed
bythearbitraltribunal inanother ICCarbitrationagainst
astate(CaseNo8035(1995)),reiteratingthefactthatasignaturebyastateofficialof
acontract on behalf of
astate-ownedcompanydoesnotautomaticallyconstitutethestate'sconsenttobeboundbythearbitrationagreement
containedin the contract. In
bothcasesthewordingbeforethesignaturewasinterpretedasmereapprovalof
thetermsofthecontractbythecompany'ssupervisoryboard.Animportantfactorwhichmayleadatribunaltodecidethatanarbitrationclauseisbindingonanon-signatorystateistheexistenceof
common obligations and
interestsbetweenthepartiesandthenon-signatory.Another ICC case,
with its seat in Switzerland,wasWestland HelicoptersLtd v Arab
OrganizationforIndustrialization
(AOI)(CaseNo3879(1984))betweenanEnglishcompany,Westland,andanentitycreatedbyfourstates,
AOL. Westlandjoinedthe fourstates
asrespondents,eventhoughtheydidnot signthe agreement under whichthe
dispute arose.In itspartialawardtheTribunalheldthat
iftheobligationsarisingoutof
theagreementarealsoobligationsofthestates,thenthestates are bound
by the arbitrationclause.
Theawardwassuccessfullychallengedbyoneofthestates atthe
SwissFederalTribunal whichconcludedthat, no matter how obviousit
wasthatthestatesintendedtobeboundbytheagreement,theycouldnotbeforcedtobeboundif
theyhadnot signed.However,thefinal award was subsequently rendered
againstboth AOLandthe
threeremainingstates.TheSwissFederalTribunalsupportedthetribunal'sreasoning,holdingthatanarbitrationagreementcouldbeextendedtothenon-partystatesiftheeconomicinterdependencebetweenthestatesandthecompanyisevident,andiftheactionsofthestatesledtheclaimanttobelievethat
thestatesintendedto beboundbythecontract, including the arbitration
agreementcontainedinit.Similarly,inarecentICCCaseSvenskaPetroleum
Exploration ABvGovernmentofRepublic of Lithuania
(1)ABGeona/ta(2)(2001),thedisputerelatedtothejointventureagreemententeredintobySvenskaand
Geonafta, which contained terms
dealingexpresslywithrightsandobligationsof theLithuanian
Government. The agreement wassigned by government officials and
containeda statement abovetheirsignaturesspecifyingthat the
government approved the
agreementand'acknowledgesitselftobelegallyandcontractuallyboundasiftheGovernmentwereasignatorytotheAgreement'.Thetribunalinitsinterimawardheldthatthegovernmentagreedtobeboundbytheagreement.Theissue
of thetribunal's jurisdiction
wassubsequentlychallengedinthecontextofenforcement proceedings
brought by
SvenskabeforetheEnglishcourts.TheCourtofAppealon13November2006heldthat
theexistenceofthestatementprovidedstrongevidencethat theparties did
intendthat thegovernment should be bound by the terms
oftheagreement(SvenskaPetroleum ExplorationABvGovernment of
Republicof Lithuania andanother [2006]EWCA Civ1529).These decisions
show that it is not sufficientforthe stateto formallyownor
part-owntheentity
whichisasignatorytothearbitrationagreement.Theintentionofthepartiesandthenon-signatorystateorstatestobeboundbythe
arbitrationagreementmust
beestablished.TheIN-HOUSEPERSPECTIVEVolume3 Issue3Extensionof
anarbitrationagreementfroma state to astate-owned
entitySimilarly,foranarbitrationagreementtobeextendedfromastatetoastate-ownedentity,therealintentionsofthepartieswhenenteringthecontractmustbeestablished.InICCCaseNo4727(1987),aSwisscorporationenteredinto
anagreementwithanAfricanstatewhichwassignedbyasenior manager of a
state-ownedcompanyonbehalfof
thestate.Whenthedisputearose,thecorporationattemptedtoincludethestate-ownedcompanyasaco-respondentonthebasisof
its signature.However,
theclaimwasrejectedbythetribunalonthebasisthatthesignaturewasclearlymade'onbehalf
ofthestate',andthecompanythereforeneverintendedtobeboundbythearbitrationagreement.
The award was upheld by the ParisCourt of
Appeals.Thecircumstancesunderwhichanarbitrationagreementcanbind
aparty whichwas not a partyto it differ from
jurisdictiontojurisdiction.The
EuropeanapproachismorelimitedinitsscopethanthefiveprincipleswhichcharacterisetheUS
approach.Carefulconsiderationshouldbegiventothisissueboth by
parties to an arbitrationagreement (asto
whethernon-signatoriescouldpotentiallyclaimthe benefit of the
arbitrationagreement)andbynon-signatories(astowhethertheirconduct
is suchthat they couldbedeemed tobe boundby
anarbitrationagreement).*-TheIN-HOUSEPERSPECTIVEVolume3 Issue3F
kLinformabLlsmess