As we have seen, virtually all international and national legal regimes regard arbitration as consensual and provide that only the parties to an arbitration agreement are obliged to comply with that agreement.1 In most cases, the parties to an arbitration agreement are—and are only—the entities that executed the underlying contract containing the arbitration clause.2 Nevertheless, some cases involve claims that entities which have not formally executed a contract (so-called “non-signatories”) are bound by its arbitration clause. This chapter examines the issues that arise in determining whether a non-signatory is bound, or benefitted, by an agreement to arbitrate.3
A. NON-SIGNATORIES TO ARBITRATION AGREEMENTS
A variety of legal theories have been invoked to bind non-signatories to arbitration agreements. These include alter ego and agency principles, assignment and other transfer doctrines, third-party beneficiary status, estoppel, assumption and ratification, implied consent and guarantor relations.4 The materials excerpted below illustrate the application of these legal theories to determining the identity of the parties to international arbitration agreements and the scope of the arbitrators’jurisdiction.
BRIDAS SAPIC v. GOVERNMENT OF TURKMENISTAN
345 F.3d 347 (5th Cir. 2003)
BENAVIDES, Circuit Judge. Plaintiffs-appellees, Bridas SAPIC, Bridas Energy International, Ltd, Intercontinental Oil & Gas Ventures, Ltd, and Bridas Corporation (collectively, “Bridas”) originally brought this action to confirm an international arbitration award rendered in Bridas’s favor against Defendants-appellants, Government of Turkmenistan (“the Government” or “Turkmenistan”), Concern Balkannebitgaz-Senegat, and State Concern Turkmenneft (collectively “Turkmenneft”).
Bridas, an Argentinian corporation, entered into a joint venture agreement (“JVA” or “the agreement”) on February 10, 1993, with a production association, Turkmenneft, formed and owned by the Government at the time that the JVA was signed. The Government itself was not a signatory to the agreement. The JVA designated Bridas as the “Foreign Party,” and Turkmenneft as the “Turkmenian Party.” Over time, the Government substituted various other entities to serve as the Turkmenian Party, ultimately resting with State Concern Turkmenneft and Concern Balkannebitgaz-Senegat (collectively, “Turkmenneft”).
The JVA created a joint venture entity called Joint Venture Keimir (“JVK”). JVK was established “for the purpose of conducting hydrocarbon operations in an area in southwestern Turkmenistan, known generally as Keimir.” The relevant part of Article XXIV of the agreement stipulates that “any dispute, controversy or claim arising out of or in relation to or in connection with the agreement … shall be exclusively and finally settled by arbitration, and any Party may submit such a dispute, controversy or claim to arbitration.” The parties further agreed that any arbitration would be “conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce as amended from time to time.” The law governing the interpretation of the agreement was to be the law of England.
Bridas claims that in November 1995, the Government “ordered Bridas to suspend further work in Keimir, and prohibited Bridas from making imports and exports in or from Turkmenistan.” Consequently, on April 16, 1996, Bridas initiated an arbitration proceeding against Appellants with the [ICC]…. Turkmenistan argued to the ICC Court of Arbitration that it was not a proper party to the arbitration because, among other reasons, it did not sign the JVA and was thus not a party to the arbitration clause contained within it. The ICC Court subsequently confirmed by letter that the arbitrators themselves would determine whether the Government was subject to their jurisdiction. The dispute was subsequently referred to a three-person tribunal. Although the arbitration agreement contemplated that the arbitration proceeding would be held in Stockholm, Sweden, the parties instead agreed to arbitration proceedings in Houston, Texas.
The arbitral proceedings … involved 19 days of hearings, various expert reports, testimony concerning damages, and extensive legal briefing. On June 25, 1999, a two-person majority of the Tribunal issued its First Partial Award (“FPA”). The FPA held that (1) the arbitrators had jurisdiction to determine whether they had jurisdiction over the Government, and (2) that “the Government [was] a proper party to the arbitration.” The Tribunal also ruled that Appellants had repudiated the JVA. The FPA stated: “If [Bridas] were to accept repudiatory conduct by the [Defendants] and [Turkmenistan] and thus to bring the [joint venture] agreement to an end, their damages would be calculated on a loss-of-bargain basis, involving 218,560,935 barrels of oil equivalent at a net-back price of $10.50 per barrel, using a discount rate of 10.446% based on a contract term of 25 years.” In a letter dated July 5, 1999, Bridas formally accepted the Defendant’s repudiation of the JVA.
On October 21, 1999, the arbitrators issued their Second Partial Award (“SPA”). In its SPA, the same two-person majority held that the Tribunal had “the jurisdiction to consider and make an award concerning [Bridas’s] claim for damages arising out of their acceptance of the repudiatory conduct of the [appellants].” The Third Partial Award (“TPA”) was rendered on September 2, 2000. In the TPA, the same two-person majority clarified its previous rulings in the FPA and calculated damages for Bridas. The Tribunal … awarded a grand total of $495,000,000 in damages to Bridas. The Final Award was issued on January 26, 2001.
Bridas initiated this lawsuit on July 7, 1999, when it filed its application for confirmation of the FPA. The Government and Turkmenneft, in response, filed motions to dismiss the application for confirmation and to vacate and refuse confirmation of the FPA. On December 22, 2000, Turkmenneft, conditionally joined by the Government, moved to vacate or modify both the TPA and the Final Award. The district court denied Appellants’ motions to vacate or modify the FPA, TPA, and the Final Award. The Government and Turkmenneft appealed the district court’s judgment….
The first issue we address is whether the Tribunal properly exercised jurisdiction over the Government.… The parties agree that federal common law governs the determination of this issue. In order to be subject to arbitral jurisdiction, a party must generally be a signatory to a contract containing an arbitration clause. [ Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir. 2002) (holding that arbitration agreements “must be in writing and signed by the parties” and may apply to nonsignatories only “in rare circumstances”). Accord Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 528 (5th Cir. 2000) (noting that “arbitration is a matter of contract and cannot, in general, be required for a matter involving an arbitration agreement nonsignatory”).] Even though the Government did not sign the JVA, the Tribunal held that the Government was bound to arbitrate the dispute with Bridas because (1) the Government had not taken any steps to extricate itself from the proceedings and (2) its evaluation of the evidence revealed at least 22 commitments in the JVA “that only the Government could give or fulfill.”
The district court, because it did not find “clear and unmistakable” evidence that the parties agreed that the Tribunal would determine its own jurisdiction, undertook an independent review of whether the Government was bound to arbitrate with Bridas. First Options, 514 U.S. at 944-47. Whether a party is bound by an arbitration agreement is generally considered an issue for the courts, not the arbitrator, “unless the parties clearly and unmistakably provide otherwise.” AT&T Technologies, 475 U.S. at 649. The district court concluded that despite the Government’s nonsignatory status, principles of agency and equitable estoppel bound the Government to the JVA.
As a preliminary matter, we will address Bridas’s assertion that the Government waived its right to contest the Tribunal’s jurisdiction because it voluntarily took part in the arbitration through Turkmenneft.. [W]hile it is rare that we are asked to decide a jurisdictional issue such as this one after the proceedings have concluded, neither the fact that the Government “allowed the proceeding to continue” over its objection, nor its “virtual representation” at the arbitration by Turkmenneft, waive its right to dispute the Tribunal’s jurisdiction in court. See, e.g., First Options, 514 U.S. at 946-47….
We begin our review by considering the terms of the JVA. Who is actually bound by an arbitration agreement is a function of the intent of the parties, as expressed in the terms of the agreement. It is apparent that the four corners of the agreement do not bind the Government to arbitrate this dispute. The Government did not sign the JVA, nor was it defined as a party in the agreement. The agreement describes the framework for the relationship between two parties: the “Foreign Party,” defined as Bridas, and the “Turkmenian Party,” defined as Turkmenneft. Considering that the purpose of the joint venture was to develop the hydro-carbon resources of a nation whose economy and land is dominated by the Government, the Government itself is not mentioned frequently in the agreement. Corporations commonly elect to establish “liability insulating entities” to enter into particular types of transactions, and the structure of the JVA indicates that this was exactly what the Government intended to do with respect to the JVA. The agreement itself does not signal an intention to bind the Government to its terms, and thus to arbitrate this dispute.
Nevertheless, federal courts have held that so long as there is some written agreement to arbitrate, a third party may be bound to submit to arbitration. Ordinary principles of contract and agency law may be called upon to bind a non-signatory to an agreement whose terms have not clearly done so. See E.I. DuPont de Nemours & Co. v. Rhone Poulenc, 269 F.3d 187 (3d Cir. 2001); Thomson-C.S.F., S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995). Six theories for binding a nonsignatory to an arbitration agreement have been recognized: (a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing/alter ego; (e) estoppel; and (f) third-party beneficiary. Thomson-C.S.F., 64 F.3d at 776; DuPont, 269 F.3d at 195-97….
The district court held that the Government was bound to arbitrate the dispute with Bridas because Turkmenneft signed the JVA as an agent of the Government…. [T]he district court’s holding that Turkmenneft is an agent of the Government does not withstand our review, regardless of the standard applied. Turkmenneft is entitled to a “presumption of independent status.” Hester Int’l Corp. v. Federal Republic of Nigeria, 879 F.2d 170, 176 (5th Cir. 1989). Bridas, therefore, carried the burden of proving that Turkmenneft signed the JVA as an agent of the Government. Agency is “the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.” Restatement (Second) of Agency §1(1) (1958). An agency relationship may be demonstrated by “written or spoken words or conduct, by the principal, communicated either to the agent (actual authority) or to the third party (apparent authority).” Hester, 879 F.2d at 181. If Turkmenneft indeed signed the JVA in its capacity as the Government’s agent, the Government would be bound by the JVA’s arbitration requirement.
The district court primarily relied upon three pieces of evidence to support its determination that Turkmenneft signed the JVA as the Government’s agent. First, it pointed to a letter from Mr. Suyunov, Deputy Chairman of the Council of Ministers of Turkmenistan, and Mr. Ishanov, Chairman of the Turkmenian Party, that confirmed, during negotiation of the JVA, that “all Joint Venture Keimir rights … established in the organization documents are fully and completely guaranteed by the Government, and there is no additional need for any further decisions, decrees, or approvals.” Second, the district court referred to Article 22.3 of the JVA which states that the “interests, rights and obligation of Turkmenistan” are represented by the Turkmenian Party. Third, the district court relied upon a statement made in a 1996 letter by the Government’s Ministry of Oil and Gas to the director general of JVK and JVY (another joint venture with Bridas), that “the Ministry is the Turkmenian Party.”
Given the language and structure of the JVA, these evidentiary findings are insufficient to support an agency determination. First, typically a guarantor cannot be compelled to arbitrate on the basis of an arbitration clause in a contract to which it is not a party. Inter-ocean Shipping Co. v. Nat’l Shipping & Trading Co., 523 F.2d 527, 539 (2d Cir. 1975). Second, a statement of representation, such as that in Article 22.3, in the midst of a provision regarding oral modifications of the agreement, is not remarkable. “All corporations to some degree represent their owners,” and Turkmenneft is an oil company wholly owned by Turkmenistan. Hester, 879 F.2d at 180. As we have held in the past, such a statement does not establish an agency relationship. And third, the 1996 letter from the Ministry, while probative of how the Government conceived of its role in JVK in 1996, does not overcome the fact that the preamble to the JVA defines the Turkmenian Party as Turkmenneft—a “legal entity within the meaning of the laws of Turkmenistan”—not the Government or the Ministry. The JVA was signed in 1993, before the Ministry penned the letter that Bridas claims demonstrates that Turkmenneft signed the JVA as an agent.
Arbitration agreements apply to nonsignatories only in rare circumstances. We are simply unable to conclude that the parties, one a multi-national corporation who has negotiated joint venture agreements in the past, and the other, a sovereign nation, both represented by able counsel, intended Turkmenneft to sign the JVA as an agent of the Government in the absence of clearer language…. “The mere fact that one is dealing with an agent, whether the agency be general or special, should be a danger signal, and, like a railroad crossing, suggests the duty to stop, look, and listen, and he who would bind the principal is bound to ascertain, not only the fact of agency, but the nature and extent of the authority[.]” Standard Accident Ins. Co. v. Simpson, 64 F.2d 583, 589 (4th Cir. 1933). Had Bridas truly felt that Turkmenneft was signing the agreement not for itself but on behalf of the Government, it had the obligation to make that fact clear on the face of the agreement. This could have been accomplished in a myriad of ways. Bridas could have requested that the Government sign the agreement, or inserted a prominent and direct statement as to Turkmenneft’s status.... Bridas was doubtlessly well aware of the risks inherent in investing in countries of the former Soviet Union in 1993, and the possibility that its investment would be swept away in political turmoil. We will not bind the Government to the agreement, simply because Bridas lost a gamble that it was willing to take. To do otherwise would vitiate the predictability of the legal backdrop against which the parties voluntarily agreed to do business.
Bridas has set forth ample evidence regarding the extent to which Turkmenneft was controlled by the Government subsequent to the signing of the JVA. Such evidence, however, does not establish that Turkmenneft had the apparent authority to bind the Government in 1993. Bridas did not satisfy its burden in this regard, and the district court’s holding that Turkmenneft signed the JVA as an agent of the Government was clearly erroneous.
Courts occasionally apply the alter ego doctrine and agency principles as if they were interchangeable. The two theories are, however, distinct. Under the alter ego doctrine, a corporation may be bound by an agreement entered into by its subsidiary regardless of the agreement’s structure or the subsidiary’s attempts to bind itself alone to its terms, “when their conduct demonstrates a virtual abandonment of separateness.” Thomson-C.S.F., 64 F.3d at 777. This is due to the doctrine’s strong link to equity. The laws of agency, in contrast, are not equitable in nature, but contractual, and do not necessarily bend in favor of justice. Courts are thus comparatively free from the moorings of the parties’ agreements when considering whether an alter ego finding is warranted. This is not to say that the decision to apply the alter ego doctrine to bind a parent is made routinely. “Courts do not lightly pierce the corporate veil even in deference to the strong policy favoring arbitration.” ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995). The corporate veil may be pierced to hold an alter ego liable for the commitments of its instrumentality only if (1) the owner exercised complete control over the corporation with respect to the transaction at issue and (2) such control was used to commit a fraud or wrong that injured the party seeking to pierce the veil.
The district court held, in a brief paragraph, that the Government was not the alter ego of Turkmenneft. After finding that the evidence reveals that Turkmenneft was controlled by the Government, the court stated, “despite this control … Bridas has not offered evidence proving ‘an absence of corporate formalities.’ Moreover, there is no indication of ‘an intermingling of corporate finances and directorship’ between Turkmenneft and the government. Thus, Turkmenistan cannot be bound under an alter ego theory.”
The district court erred in premising its conclusion solely upon the existence of corporate formalities and an absence of comingling of funds and directors. Alter ego determinations are highly fact-based, and require considering the totality of the circumstances in which the instrumentality functions. No single factor is determinative.... Because the district court failed to take into account all of the aspects of the relationship between the Government and Turkmenneft, it committed an error of law and must reconsider the issue on remand.5
The district court, relying on Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 527 (5th Cir. 2000), held that a nonsignatory may be equitably estopped from asserting that it is not bound by an arbitration agreement when the signatory raises allegations of substantially interdependent and concerted misconduct against both a nonsignatory and one or more of the signatories to the contract. As the Government correctly points out, the district court misapplied the “intertwined claims” theory of equitable estoppel…. In Grigson, we estopped a signatory plaintiff from relying upon the defendants’ status as a nonsignatory to prevent the defendants from compelling arbitration under the agreement. We justified applying equitable estoppel in Grigson in part because to do otherwise would permit the signatory plaintiff to have it both ways. “[The plaintiff] cannot, on the one hand, seek to hold the nonsignatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration’s applicability because the defendant is a nonsignatory.” Grigson, 210 F.3d at 528.
The rationale of Grigson does not apply to the circumstances of this case. Here, the Government, unlike the estopped party in Grigson, did not sign a contract containing an arbitration provision and never sued Bridas on the agreement…. The Second Circuit has expressly stated that the Grigson version of estoppel applies only to prevent “a signatory from avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed” Thomson-CSF, 64 F.3d at 779 (emphasis added). “Because arbitration is guided by contract principles, the reverse is not also true: a signatory may not estop a non-signatory from avoiding arbitration regardless of how closely affiliated that nonsignatory is with another signing party.” MAG Portfolio Consult, 268 F.3d at 62….
As the Government correctly notes, the result in Grigson and similar cases makes sense because the parties resisting arbitration had expressly agreed to arbitrate claims of the very type that they asserted against the nonsignatory. “It is more foreseeable, and thus more reasonable, that a party who has actually agreed in writing to arbitrate claims with someone might be compelled to broaden the scope of his agreement to include others.” The simple fact that Bridas’s claims against Turkmenneft and the Government are inextricably intertwined … is insufficient, standing alone, to justify the application of equitable estoppel to the Government’s assertion that it is not subject to the Tribunal’s jurisdiction. Were this to become the case, this expanded version of equitable estoppel would “threaten to overwhelm the fundamental premise that a party cannot be compelled to arbitrate a matter without its agreement.” The district court thus abused its discretion in applying the intertwined claims theory of equitable estoppel….
Bridas, however, contends that the district court’s decision may nonetheless be affirmed on the basis of the “direct benefits” version of estoppel. Direct benefits estoppel applies when a nonsignatory “knowingly exploits the agreement containing the arbitration clause.” DuPont, 269 F.3d at 199. See Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1064 (2d Cir. 1993) (holding that nonsignatory local affiliate, who used a trade name pursuant to an agreement that it ratified which contained an arbitration clause, was estopped from relying on its nonsignatory status to avoid arbitrating under the agreement); Am. Bureau of Shipping v. Tencara Shipyard SPA, 170 F.3d 349, 353 (2d Cir. 1999) (binding nonsignatory to a contract under which it received direct benefits of lower insurance and the ability to sail under the French flag).
There is an important distinction, however, between cases where the courts seriously consider applying direct benefits estoppel, and the case at bar. In the former, the non-signatory had brought suit against a signatory premised in part upon the agreement. Here, it is undisputed that the Government has not sued Bridas under the agreement. The Government has thus not “exploited” the JVA to the degree that the cases that consider applying this version of estoppel require….
While very similar to estoppel, the third-party beneficiary doctrine is distinct:
“Under third party beneficiary theory, a court must look to the intentions of the parties at the time the contract was executed. Under the equitable estoppel theory, a court looks to the parties’ conduct after the contract was executed. Thus, the snapshot this Court examines under equitable estoppel is much later in time than the snapshot for third party beneficiary analysis.” DuPont, 269 F.3d at 200 n.7.
It is not enough, therefore, that the Government benefitted from the existence of the JVA. “The fact that a person is directly affected by the parties’ conduct, or that he may have a substantial interest in a contract’s enforcement, does not make him a third-party beneficiary.” Id.
Parties are presumed to be contracting for themselves only. Fleetwood Enter. Inc. v. Gaskamp, 280 F.3d 1069, 1075-76 (5th Cir. 2002). This presumption may be overcome only if the intent to make someone a third-party beneficiary is “clearly written or evidenced in the contract.” Id. For the same reasons given supra, the JVA simply does not evince the requisite clear intent to benefit the Government, other than to the degree ordinarily expected when an instrumentality of a sovereign enters into a contract to develop the country’s natural resources. The JVA’s integration clause, moreover, specifies that the terms of the agreement apply only to the parties, defined as the Turkmenian Party (i.e. Turkmenneft) and Bridas.
Furthermore, we are again reluctant to bind the Government to the terms of the JVA on a third-party beneficiary theory because the Government has never filed a claim against Bridas premised upon the agreement, or otherwise sought to enforce its terms. Bridas has not brought to our attention a case where a third-party beneficiary has been bound to arbitrate a dispute, arising under an agreement to which it is not a party, that the third-party itself did not initiate in court. We decline to do so for the first time today….
BRIDAS SAPIC v. GOVERNMENT OF TURKMENISTAN
447 F.3d 411 (5th Cir. 2006)
[On remand, the District Court found that the Government was not an alter ego of Turkmenneft, and vacated the award. Bridas appealed. The Court of Appeals reconsidered the facts and found that “the totality of the record demonstrates that the Government should be bound as an alter ego of State Concern Turkmenneft,” because the Government both committed fraud or injustice and used the financial dependence of Turkmenneft to perpetrate such wrong. Accordingly, the Court of Appeals reversed the District Court’s judgment and recognized the award.]
INTERIM AWARD IN ICC CASE NO. 4131
IX Y.B. Comm. Arb. 131 (1984)
SANDERS, GOLDMAN & VASSEUR, Arbitrators. [Dow Chemical Company is incorporated in the United States. It owns 100 percent, either directly or indirectly, of Dow Chemical (Venezuela), Dow Chemical AG, Dow Chemical Europe, and Dow Chemical France. In 1965, Dow Chemical (Venezuela) entered into a contract with a French company for the distribution of equipment in France. Dow Chemical (Venezuela) later assigned the contract to Dow Chemical AG. In 1968, Dow Chemical Europe entered into a similar contract with different French companies. The 1965 and 1968 agreements each contained an ICC arbitration clause.
Both the 1965 and the 1968 agreement was eventually assigned by Dow’s original French counter-party to Isover Saint Gobain, a French company. Both agreements permitted any subsidiary of the Dow Chemical Company to make deliveries contemplated by the agreements. In practice, Dow Chemical France made the deliveries. Disputes arose between the parties, and Isover brought several lawsuits against various Dow Chemical entities in French courts. As a consequence, various Dow entities filed a Request for Arbitration against Isover; the claimants were Dow Chemical Company, Dow Chemical AG, Dow Chemical Europe, and Dow Chemical France. Isover challenged the tribunal’s jurisdiction to hear claims asserted by Dow Chemical Company and Dow Chemical France, as well as the standing of Dow Chemical AG and Dow Chemical Europe. The tribunal issued an interim award, which is excerpted below.]…
Considering that it is not disputed that the arbitration clauses relied upon by the claimants are contained in contracts that have been signed by neither Dow Chemical (France) nor Dow Chemical Company; that these two companies, nonetheless, maintain that they may invoke them, by reason both of the factual context of the conclusion and performance of the contracts, and of the fact that these companies, along with the signatories of the contracts, are part of a group of which Dow Chemical Company is the parent company, the three others being its daughter and granddaughters, entirely controlled by the former;
Considering, thus, that the jurisdictional objection and, in consequence, the related objection as to the admissibility of the action give rise to the issue of the scope and effects of the relevant arbitration clause. Therefore, the sources of law appropriate to the determination of said scope and said effects should be defined;
Considering that the Defendant, in fact, has argued that the arbitration clause contained in the 1968 contract, according to which “any difference arising under this agreement will be settled … , according to French law…” should be interpreted to mean not only that the merits of the dispute should be determined by reference to French law but also the scope and the effects of the arbitration agreement;
Considering, however, that in referring to the ICC Rules, the parties incorporated its provisions concerning the arbitral tribunal’s authority to decide as to its own jurisdiction, which provisions do not refer to the application of any national law. The reference to French law could therefore concern only the merits of the dispute;
Considering that the sources of law applicable to determine the scope and the effects of an arbitration clause providing for international arbitration do not necessarily coincide with the law applicable to the merits of a dispute submitted to such arbitration. Although this law or these rules of law may in certain cases concern the merits of the dispute as well as the arbitration agreement, it is perfectly possible that in other cases, the latter, because of its autonomy, is governed—not only as to its scope, but also as to its effects—by its own specific sources of law, distinct from those that govern the merits of the dispute;
Considering that this is particularly the case—unless the parties have expressly agreed otherwise—with respect to an arbitration clause referring to the ICC Rules;
Considering in effect that these Rules, in their 1975 version (whose applicability to this case, given the dates of the litigious contracts, will be decided in due course), contain provisions relating to the proper law to be applied to the merits of the dispute (Article 13(3)), but are silent on this subject in their prior version. However, both versions of the [ICC] Rules contain practically identical provisions (1955 [ICC] Rules, Article 13; 1975 [ICC] Rules, “Arbitration” section, Article 8) concerning the arbitrator’s competence to decide on his own jurisdiction. These provisions establish in particular, the principle of the complete autonomy of the arbitration clause (paragraph 4 of both texts) and confer on the arbitrator the power to take any decision as to his own jurisdiction upon the Court’s determination that the arbitration will take place (paragraph 3) without obliging him to apply any national law whatever in order to do so.
Considering that the tribunal shall, accordingly, determine the scope and effects of the arbitration clauses in question, and thereby reach its decision in regarding jurisdiction, by reference to the common intent of the parties to these proceedings, such as it appears from the circumstances that surround the conclusion and characterize the performance, and later the termination of the contracts in which they appear. In doing so, the tribunal, following, in particular, French case law relating to international arbitration should also take into account, usages conforming to the needs of international commerce, in particular, in the presence of a group of companies;
Considering that in conformity with the “General rule” set forth in Article 31 (1955 version) and Article 26 of the “Arbitration” Section of the ICC Rules, the tribunal will however make every effort to make sure that the award is enforceable at law. To this end, it will assure itself that the solution it adopts is compatible with international public policy, in particular, in France….
Considering that in conformity with the preceding it is appropriate, in order to determine the scope and the effects of the arbitration clauses relied upon, to examine in succession the circumstances under which the negotiation, the performance and the termination of the contracts in which these claims appear, took place and to explore thereafter the possible bearing, in this context, of the fact that the claimants are part of a group of companies….
Considering that in point of fact Dow Chemical France at the time of signature of the 1965 contracts as well as the negotiations which led to the 1968 contract, appeared to be at the center of the organization of the contractual relationship with the companies succeeded by the present Defendant. Moreover, this relationship could not have been formed without the approval of the American parent company, which owned the trademarks under which the relevant products were to be marketed in France.
That this analysis reveals that neither the “Sellers” nor the “Distributors” attached the slightest importance to the choice of the company within the Dow Group that would sign the contracts. It is significant to note that none of the documents produced contains any trace of a discussion on this subject. In reality all the entities of the Dow Group involved in distribution in France understood themselves to be contracting with the distributor or distributors in France and likewise, it was with the aggregate of these entities that the present defendant’s predecessors understood themselves to be contracting….
Considering that—as it has been mentioned above—the distribution agreement of 1965 as well as the one of 1968 designated first of all Dow France for delivery of the products to distributors. Although it has been provided for that deliveries could also be effectuated, at the choice of the “seller,” by other subsidiaries of Dow Chemical Company, it is to be noted that, in fact, it has not been sustained that this option has ever been used. It has always been Dow France which has assured the execution of the contracts; … Dow France, therefore, played in the execution of the contracts an equally preponderant role as it did in the establishment of the contractual relations….
[It also] appears, as was the case with respect to the conclusion and performance of the distribution agreements, that Dow Chemical France played an essential role in the termination of the 1968 contract, which had been substituted for the 1965 contract; that all of these factors permit the conclusion that Dow Chemical France was a party to each of these contracts and, consequently, to the arbitration clauses they contained; that the same conclusion should be reached with respect to Dow Chemical Company by reason of its ownership of the trademarks under which the products were marketed, and its absolute control over those of its subsidiaries that were directly involved, or could under the contracts have become involved in the conclusion, performance, or termination of the litigious distribution agreements.
Considering that the Defendant adopted the same position in its brief of 1 July 1980 before the Court of Appeal of Paris, in support of its motion for the compulsory joinder of inter alia Dow Chemical Company. That the Defendant there in fact wrote as follows: “Whereas Dow Chemical Company, owner to the patents and organizer of the manufacturing and distribution of Roofmate, decided and conceived the modalities of the manufacturing and distribution of said product, thus engaging its direct liability.”
Considering that in the circumstances of this case, the application of the arbitration clauses to Dow Chemical Company may also be justified, as we shall now show, by the fact that the contracts containing these clauses concern, in the context of a group of companies, a parent company and certain of its subsidiaries. The same fact could justify, if necessary, the application of the arbitration clause to Dow Chemical France.
Considering that it is indisputable—and in fact not disputed—that Dow Chemical Company has and exercises absolute control over its subsidiaries having either signed the relevant contracts or, like Dow Chemical France, effectively and individually participated in their conclusion, their performance, and their termination;
Considering that irrespective of the distinct juridical identity of each of its members, a group of companies constitutes one and the same economic reality (une realite economique unique) of which the arbitral tribunal should take account when it rules on its own jurisdiction subject to Article 13 (1955 version) or Article 8 (1975 version) of the ICC Rules.
Considering, in particular, that the arbitration clause expressly accepted by certain of the companies of the group should bind the other companies which, by virtue of their role in the conclusion, performance, or termination of the contracts containing said clauses, and in accordance with the mutual intention of all parties to the proceedings, appear to have been veritable parties to these contracts or to have been principally concerned by them and the disputes to which they may give rise.
Considering that ICC arbitral tribunals have already pronounced themselves to this effect (see Award in ICC Case No. 2375 of 1975, 1976 J.D.I. 978). The decisions of these tribunals progressively create case law which should be taken into account, because it draws conclusions from economic reality and conforms to the needs of international commerce, to which rules specific to international arbitration, themselves successively elaborated should respond.
Considering that it is true that in another award (Award in ICC Case No. 2138 of 1974, 1975 J.D.I. 934) the arbitral tribunal refused to extend an arbitration clause signed by one company to another company of the same group. However, in so doing it based itself on the factor “that it was not established that Company X” (which the tribunal had determined was neither a signatory nor a party to the contract) “would have accepted the arbitration clause if it had signed the contract directly.” Considering that in the absence of such a showing, the tribunal did not allow application of the arbitration clause; but that in the present case, the circumstances and the documents analyzed above show that such application conforms to the mutual intent of the parties.
That it is not without interest to recall that an American arbitral tribunal recently reached a similar result, referring to U.S. national court decisions and observing that “it is neither sensible nor practical to exclude (from the arbitral jurisdiction) the claims of companies who have an interest in the venture and who are members of the same corporate family.” (Partial Final Award No. 1510, VII Y.B. Comm. Arb. 151 (Society of Maritime Arbitrators 28 November 1980).)
Considering finally that in a matter directly connected with the issues litigated in the present arbitration, the Court of Appeal in Paris on 5 February 1982 held that it lacked jurisdiction to hear Isover Saint Gobain’s motion for the compulsory joinder of not only Dow Chemical Europe (which signed the 1968 distribution contract), but also Dow Chemical Company (U.S.A.) and “(referred) Isover Saint Gobain to the proper jurisdiction of the arbitral tribunal of the ICC in Paris.” In order to justify this decision, the Court of Appeal stated “that Isover Saint Gobain cannot dispute the fact that the litigation is pending and that its claims against Dow Company and Dow Europe in their relations inter se flow directly from the two contracts” (of 1965 and 1968);
It is true that by the same decision the Court reached a decision on the merits as regards Dow Chemical France. However, in that case, the said company had been sued on the grounds of quasitortious liability, and did not invoke the arbitration clauses and did not contest jurisdiction.
In conclusion, it is appropriate for the tribunal to assume jurisdiction over the claim brought not only by Dow Chemical AG (Zurich) and Dow Chemical Europe, but also by Dow Chemical Company (U.S.A.) and Dow Chemical France.
In so doing, the tribunal contradicts no principle nor any rule of international “public policy,” in particular, that of the French legal system. The latter is not based on any principle, nor does it contain any rule of such a stature, that would prohibit giving to an arbitration clause implicating companies that are legally distinct but form part of a group of companies, the scope attributed to it by the present award. To the contrary, by taking into account, in reaching this result, the needs of international commerce to which the rules of international arbitration should be responsive, the tribunal follows the example of French case law to which express reference was made in the report to the Prime Minister explaining the purposes of the Decree of May 12, 1981.
Considering that, as has been recalled, the alleged non-admissibility of the claims of Dow Chemical AG and Dow Chemical Europe invoked by the Defendant is connected by the arbitrators’ Terms of Reference, to the decision sought from the tribunal on its jurisdiction with respect to the two other Claimants;
Considering that the tribunal will reject the challenge to its jurisdiction, it will as a result, not at present uphold the challenge to the admissibility of the action. This decision will not, however, preclude a future ruling by the tribunal on the existence or the absence of interest to institute an action as far as one or both of the Claimants in question, are concerned or a possible finding that the claims of one or both of them may not be heard due to an absence of direct interest in the cause of action.
FOR THESE REASONS, the Tribunal: 1. Assumes jurisdiction to decide the claims of the four Claimants. 2. Rejects, for the present, the Defendant’s challenge to the admissibility of the action of Dow Chemical AG (Zurich) and Dow Chemical Europe….
AWARD IN ICC CASE NO. 8385
in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 474 (2003)
[X, a company incorporated in Maine, and Y, a Belgian corporation, entered into a contract providing for X to provide its know-how and services to Y for the purpose of building a factory in Bulgaria. The agreement contained an ICC arbitration clause. Disputes subsequently arose over Y’s alleged non-payment of royalties. X initiated an ICC arbitration against Y and, because Y was insolvent, Y’s parent corporation, Z, another Belgian corporation. The sole arbitrator decided that Z’s corporate veil should be lifted under principles of lex mercatoria.]
Z has filed what it called a motion for special appearance “for the sole purpose of demonstrating that it was unduly designated as Defendant.” It also asked the Tribunal to make a decision on the issues raised by this special appearance in limine litis. The Tribunal has rejected this request based on the fact that a proper assessment required an analysis of the facts and that Z would be free to defend itself on the merits without giving up in anyway on its objections regarding the jurisdiction of the tribunal. Of course, Z’s defense as to the merits of the dispute was to be the same as Y’s, especially given the fact Y and Z are represented by the same counsel. In any case, Z had the same opportunities as Y in order to defend itself and cannot argue to the contrary. The tribunal’s refusal to decide in limine litis on Z’s objection regarding the tribunal’s jurisdiction is justified since the tribunal was informed and able to make a decision on this request only after it had heard the parties’ pleadings on the merits.
It must be underlined that the claims against Z raise two questions: first, can Z be a party to this arbitration and, second, can Z be held liable for Y’s debt? The answer to those two questions depends on determining whether Z could be bound by Y’s contracts and the obligations resulting from said contracts….
The first point to solve concerns the applicable law. The conflict rule provided by article 15 of the contract [which provided: “New York state law, United States, shall apply”] cannot be considered applicable to solving this issue. Indeed, one must first determine whether Z is bound by the contract, including article 15, and said determination must be carried out pursuant a law other than the one specified in the contract. Referring to article 15 in order to determine the applicable law would amount to putting the cart before the horse. The applicable law should be determined by referring to the appropriate conflict rule other than the one provided by the contract.
In fact, the situation the tribunal is facing is the same faced by an ad hoc tribunal which does not possess any contractual indication as to the applicable law. A tribunal in such a situation could wish to share the analysis that would be followed by a tribunal having its sit at the place of arbitration and apply the law of the seat. It is generally accepted that a tribunal shall apply the law of the place where it sits.... Applying the lex fori is thus not unreasonable. However, the place of arbitration is often chosen with neutrality concerns in mind and does not have any particular connection to the parties. In this case, Y and Z are Belgian corporations and X a Maine corporation headquartered in Connecticut. Applying the New York conflict rule simply because the tribunal sits in New York is thus not necessarily reasonable.
It is true that the tribunal’s situation is the same as a state tribunal in a neutral forum and which has jurisdiction pursuant to a choice of forum clause. But this does not mean that the tribunal should apply the conflict rule of the lex fori that would be applied by a state tribunal which jurisdiction would solely depend on a choice of forum clause. On the contrary, the state tribunal should ask itself, as an arbitral tribunal would, whether, even in this case, the conflict rule of the lex fori should be applied. The tribunal considers that, in the case of a neutral forum such as this one, the automatic application of the conflict rule of the place of arbitration must be rejected and the tribunal shall apply the law, and if necessary the private international law, which is the most appropriate in those circumstances. That is, the law that best fits the need of the international business community, which does not conflict with the legitimate expectations of the parties, which generates uniform results and offer a reasonable solution to the dispute.
In this case, the tribunal, when trying to determine the applicable law, will examine New York law where the tribunal sits, the law of Belgium, where the place of conclusion of the contract as well as the main establishments of Y and Z are located, and also the principles of law developed by the international community. The application of New York state law is justified since it has been chosen by X and Y in article 15 of the contract. It must be determined whether Z should be bound by this choice as it was made by a third party under its complete control, as demonstrated below. Furthermore, the application of New York law would not contradict the parties’ legitimate expectations most directly involved, and would give rise to uniform results. Finally, New York state law is sufficiently developed in order to decide the case at issue.
Belgian law is also a real contender as the applicable law since it is the law of the place of conclusion and of the main establishment of Z and Y. The fact that the law of the place of conclusion applies to incidents taking place during the lifetime of the corporation is a sound argument. In fact, it is the law of the incorporation that determines the extent to which a corporation can be deemed to have a separate legal existence and the application of the law of the place of incorporation guarantees the foreseeability and uniformity of the result.… Yet, a distinction must be drawn between questions involving the relationship between the corporations and its shareholders or its managers and directors, or the relationship between the corporation and third parties,… Whilst it can be fair and reasonable to bring a corporation, its shareholders, directors and managers under the law of incorporation when dealing with their internal relationship, the third parties dealing with those corporations cannot be considered as getting bound by taking the risk of being governed by the law of the state of incorporation. This is particularly true for third parties coming from other countries who will not necessarily be fully informed about the law of the State of incorporation.
Indeed, in [the context of] international relations, the tribunal considers that it is preferable to apply rules that fit the conditions of the international market and which achieve a reasonable balance between the trust a corporation bestows upon its distinct legal personality and the protection of persons who can be the victims of manipulations by a parent corporation using its subsidiary as a shield from a creditor. Applying international principles offers many advantages. They can be applied in uniform fashion and are independent from the particularities of each national law. They take into account the needs of international relations and allow a fruitful exchange between systems that are sometimes overly linked to conceptual distinctions and those that are seeking a pragmatic and fair solution to specific cases. It thus constitutes a unique and ideal opportunity to apply what is increasingly referred to as lex mercatoria. Even though the tribunal considers that it is preferable to apply the principles of international commerce dictated by the needs of the international market, it comes to the conclusion that the result is the same regardless of the application of New York law, Belgian law or of international principles. Those three systems recognize, at least in certain situations, that the corporate veil can be lifted and the tribunal concludes that, considering the particular circumstances of this dispute, those three systems allow for the veil to be lifted.
Whether or not one lifts the corporate veil depends on many factors in each case. Certain elements are almost always necessary. They include a significant amount of control of the subsidiary’s actions by the parent company or the shareholder and the insolvency of the subsidiary. But this is not generally sufficient. The end of significant activity of the subsidiary and its directors is equally a factor which facilitates the lifting of the corporate veil. And if the control and effective management of the subsidiary by the parent company has contributed towards making a remedy against the above mentioned subsidiary elusive, the lifting of the corporate veil becomes even more important. Unlawful conduct towards the person seeking to lift the corporate veil by the subsidiary upon the instigation of the parent company is another factor that can facilitate the lifting of the corporate veil. The question that one must ultimately answer is when the legal fiction of corporate legal personality must bow to the reality of human behavior and cease protecting those who hide behind the corporate veil as a way of promoting their own interests at the expense of those who have traded with the company….
In light of the above mentioned facts, Z, in the present case, is bound by the arbitration clause and liable for Y’s debts towards the claimant according to the law of the State of New York, Belgian law and the law of the international commercial community.
The law of New York is very well summarized in the cases of Carte Blanche (Singapore) Pte vs. Diners Club Int’l, Inc., 2 F.3d 24 (2d Cir. 1993) and Passalacque Builders Inc. vs. Resnick Dev. South Inc., 933 F.2d 131 (2d Cir 1991). It should be noted that this line of case law states several factors that are mostly superficial …, such as knowing whether separate corporate documents are kept, though in the present case, there are very substantial factors that argue in favor of lifting the corporate veil.
Lifting the corporate veil is a relatively new concept in civil law countries. Belgium is not an exception. The traditional approach has been to apply the conceptual methodology more or less to the facts which as a result, has prevented a swift consensus to a global doctrine in relation to the lifting of the corporate veil. However, Belgian law recognizes that an abuse of power when in control of a company can justify the person who exercised it as being considered liable for the obligations of the said company. Furthermore a parent company can, in particular circumstances, be considered as having employed its subsidiary as an agent. The use of these different constructions arrives at the same result as the one produced by lifting the corporate veil (Verougstrate, I, Het Waterdicht Beschot, in Liber Amicorum Jan Ronse, E. Story-Scientia, 19; De Smedt v. P V B A Duerinckx, RAC, 1990-10, 884 (Court of Cassation, 1990)). The well-known Badger case demonstrates Belgium’s approval of the principle of lifting the corporate veil. In this case, the American parent company denied all responsibility of its insolvent subsidiary in relation to its pensions obligations. Belgium rigorously pursued the parent company which, in the end, was forced to face up to its obligations. Lowenfeld, International Litigation and the Quest for Reasonableness 245 Academy of International Law 138-144 (1994-I). In the present case, the tribunal considers that a Belgian tribunal, according to Belgian law, would consider Z bound by the contract’s arbitration clause and that Z would be obligated to honor the obligations of Y vis-à-vis the claimant.
However, while the tribunal considers that, according to the law of the State of New York and Belgian law, Z is to be held responsible in relation to the contract and the agreement…, the decision to this effect must in the first place be based on the law applicable to the international commercial community. It believes that, for the reasons already mentioned above …, it is this law that must guide the decision of the tribunal. There is no doubt that the international community has developed a law in relation to this question. In many international disputes, arbitral tribunals, while applying international principles, have lifted the corporate veil. It is important to remember the remarkable precedent and to emphasize the authority of the decision taken by a group of distinguished arbitrators (Professors Sanders, Goldman and Vasseur) in the case of Dow Chemical v. Isover Saint Gobain, ICC Case No. 4131 (1982). In this case, the tribunal, in lifting the corporate veil, according to international principles, stated that:
“The decisions of these tribunals … have progressively formed an established jurisprudence which should be taken into account since the jurisprudence has taken to heart the consequences of the economic reality and is in conformity with the needs of international commerce, which must respond to specific rules, themselves progressively elaborated, by international arbitration.”
Significantly, in the case determined by that tribunal, the principal circumstances on which the tribunal was founded were that the subsidiary of which the corporate veil were to be lifted was part of a company group that constituted “one and the same economic reality” and that the parent company exercised such total control over the subsidiary that it executed and terminated contracts of its subsidiary. By way of comparison, in the present case, as we see above …, there are numerous significant circumstances which provide even more reasons to lift the corporate veil. For other international precedents of application of international principles to this question. See also Westland Helicopters Limited vs. AOI, etc., ICC Case No. 3879/AS, in which the tribunal, confronted with an international entity deprived of financial resources, declared liable the states which created that entity and considered that: “Equity, in common with the principles of international law, allows the corporate veil to be lifted, in order to protect third parties against an abuse which would be to their detriment.”…
JUDGMENT OF 30 MAY 1994
XX Y.B. Comm. Arb. 745 (1995) (Tokyo High Ct.)
PETERSON FARMS INC. v. C&M FARMING LTD
 1 Lloyd’s Rep. 603 (Comm) (English High Ct.)
MR. JUSTICE LANGLEY. The claimant (“Peterson”) seeks a declaration that certain findings in an ICC Arbitration Award were made without jurisdiction. The application is made under §67 of the Arbitration Act 1996 [excerpted in Documentary Supplement at p. 131].
The arbitration involved a claim for damages by the respondent (“C&M”) as claimant against Peterson as respondent arising out of the sale by Peterson of live poultry. C&M is an Indian company. It changed its name from “Nasik” in the course of the material events. Peterson is a company organized under the laws of the State of Arkansas, U.S.A. The sales of poultry were made under a written contract entitled “Sales Right Agreement” made on September 7, 1996 (“the Agreement”). Clause 17 of the Agreement provided that: “All disputes … which may arise between the parties out of or in relation to or in connection with this agreement or for the breach thereof, shall be finally settled by International Chamber of Commerce, U.K.” Clause 19 of the Agreement provided: “This agreement shall be interpreted and construed in accordance with the laws of Arkansas, U.S.A.”
The poultry was infected with an avian virus. C&M claimed some U.S. $16 million in damages. C&M initiated the arbitration by a Request dated April 27, 2000. The appointed tribunal was Joel Hirschhorn, Judge Abraham Gafni and Julian D.M. Lew as Chairman…. The Final Award … was dated March 10, 2003. The tribunal awarded C&M damages in the sum of U.S. $6,747,217.
Under the Agreement Peterson sold to C&M male “grandparent” birds. C&M mated the birds to produce “parent” males which it would sell on as hatching eggs or day-old chicks. Those sales were made both to other “C&M group entities” (60 per cent) and (40 per cent) to other purchasers. The other C&M group entities used the parent males to breed with parent females to produce broiler chicks which they would sell on as chicks or hatching eggs. The award of damages was made up of two parts: i. Losses suffered by C&M itself, consisting of lost sales because of the reduced numbers of parent male chicks and hatching eggs it was able to produce and lost market share and loss of future profits. The total of this award (“the grandparent loss”) was U.S. $1,222,448. There is no challenge to this part of the award. ii. Losses suffered by the other C&M group entities consisting also of lost sales, lost market share and loss of future profits (“the parent losses”) in the total sum of U.S. $5,524,768. It is this part of the award which is the subject of Peterson’s challenge. Essentially it is Peterson’s submission that the tribunal had no jurisdiction to entertain claims by entities which were not named as parties to the Agreement.
The jurisdiction issue was before the tribunal itself. Entirely sensibly, it was agreed that the issue should be dealt with in the course of the hearing and in the award.... The tribunal had jurisdiction to rule on its own substantial jurisdiction as there was no contrary agreement: §30. It … dealt with jurisdiction in its award on the merits: pars. 78 to 102 and Section Fa of the Final Award. It ruled that it did have jurisdiction to consider and determine the damages claims of the other entities not named as parties to the Agreement….
The tribunal decided that it had jurisdiction on two bases: i. First, and primarily, by application of what has come to be known as “the group of companies doctrine.” The “doctrine” finds its origin in the [Interim ICC Award in Case No. 4131] in which the claimants were a number of companies in the Dow Chemical “group;” and ii. Second, on the basis that C&M entered into the Agreement as agent for the other entities in the group who were thus parties to the Agreement and the arbitration clause contained in it..
The tribunal recorded Peterson’s submissions that C&M had not mentioned a principal and agent relationship and that reliance on the group of companies doctrine was misplaced because identification of the parties to the Agreement was a matter of substantive law governed by Arkansas law. The Award continues:
“86. The tribunal does not accept Peterson’s arguments. Under the doctrine of separability, an arbitration agreement is separable and autonomous from the underlying contract in which it appears. The autonomy of arbitration agreements has become a universal principle in the realm of international commercial arbitration. A corollary to the separability doctrine is that the law applicable to the arbitration agreement may differ from the law applicable both to the substance of the contract underlying the dispute and to the arbitral proceedings themselves. The right of C&M to make claims for the C&M Group is a question of interpretation of the arbitration agreement contained in the Agreement, including the intention of the parties. In the absence of any choice of law made by the parties with regard to the arbitration agreement itself, this tribunal will determine this question in accordance with the common intent of the parties.
87. The Tribunal considers that Peterson was aware throughout the negotiating period and at the time of contracting that it was dealing with the C&M Group. Furthermore, Peterson intended to deal with C&M Group. This is apparent from the correspondence and internal reports [and a draft Sales Right Agreement]....
92. The Tribunal considers that it was logical to have the name of one member of that group as the contracting partner with Peterson. One company had to take formal legal responsibility for the contract with Peterson. C&M Group, as such, was not a legal entity and therefore could not contract in its own name. There would have been greater uncertainty had it sought to do so. Nasik contracted on behalf of and as agent for the whole C&M Group. This was clearly understood by Peterson.
93. The Tribunal does not consider that it is legally precluded from considering C&M’s damages claims to cover and embrace the damages of all C&M Group companies. The group of companies doctrine provides that an arbitration agreement signed by one company in a group of companies entitles (or obligates) affiliate non-signatory companies, if the circumstances surrounding negotiation, execution and termination of the agreement show that the mutual intention of all the parties was to bind the non-signatories. Following the Dow Chemical decision … the Tribunal recognised that because a group of companies constitute the same “economic reality” one company in the group can bind the other members to an agreement if such a result conforms to the mutual intentions of all the parties and reflects the good usage of international commerce. The Tribunal considers that such circumstances are present in this case..
96.... Thus, Peterson was aware not only of the integrated nature of the poultry business but also that an agreement with Nasik would impact the operations of all of the C&M Group.... Peterson, therefore, was aware of the integrated nature of the poultry business. It also fully recognised and expected that on the international level, providing grandparent level stock to a company like Nasik was but the first step in the process under which Nasik would, through the integrated complex of businesses of which it was a part, complete the further production and distribution of the Peterson Breed. In short, it understood that the Agreement with Nasik was, in effect, an agreement with and would impact the operations of all the entities comprising the C&M Group.
100. In summary, the record of correspondence between the parties and internal documents of Peterson, the preliminary documents exchanged between the parties, and the general nature of the poultry business demonstrate that Peterson intended to enter into and perform under a contract with all the entities forming the C&M Group of companies. Peterson knew that it was contracting with the group as a whole and that its product would be used in an integrated operation that involved all members of the C&M Group. The Tribunal considers that C&M is fully entitled to claim all damages suffered by the C&M Group and arising out of the contractual relationship with Peterson …”
In my judgment, the tribunal’s approach to the issue is open to a number of substantial criticisms and is seriously flawed in law. The predicate (par. 86) of the tribunal’s approach was that the Agreement contained no choice of law with regard to the arbitration agreement in cl. 17. Yet, as the tribunal also and rightly recognized, the issue raised a question of interpretation of the Agreement and such questions were expressly subject to Arkansas law by cl. 19. The identification of the parties to an agreement is a question of substantive not procedural law.
“The autonomy” of the arbitration agreement is not in point. The question is whether it is governed by Arkansas law. In my judgment it plainly is. There was, therefore, no basis for the tribunal to apply any other law whether supposedly derived from “the common intent of the parties” or not. The common intent was indeed expressed in the Agreement: that is both English and Arkansas law. The “law” the tribunal derived from its approach was not the proper law of the Agreement nor even the law of the chosen place of the arbitration but, in effect, the group of companies doctrine itself.
[The C&M group] submitted that the tribunal’s approach was in accord with §46 of the 1996 Act. It is not. Section 46(1)(a) sets out the basic rule that the tribunal “shall” decide the dispute in accordance with the law chosen by the parties as applicable to the substance of the dispute. That was Arkansas law. Section 46(1)(b) provides only that “if the parties agree” the tribunal shall decide in accordance with that agreement. There was no relevant agreement within this provision. It was (a) not (b) which should have been applied.
The reference to an early draft of the Agreement … is in fact mistaken. Not only was the draft just that, but it in fact named as party another supposed corporate entity “C&M Group” which it transpired did not exist. C&M was the named party in the final agreement in recognition of that.
The reasoning of the tribunal in par. 92 is in my judgment [also inconsistent]. Far from there being “greater uncertainty” had the Agreement named “C&M Group” as a party, on the tribunal’s reasoning that would have been both accurate and well understood. In contrast the nomination of Nasik on that reasoning created or at least increased any uncertainty. The last two sentences of par. 92 represent all that the tribunal said about “agency.” Not only do those sentences ignore the fact that no case in agency was ever advanced by C&M before the tribunal but had there been an agency relationship between C&M and “the whole C&M Group” there would have been no need for C&M to advance the Group of Companies doctrine as it did nor for “one company to take formal legal responsibility for the contract.” That company could indeed have signed as agent as well as for itself. In my judgment, therefore, the tribunal’s award on this issue cannot stand….
It was not suggested to the tribunal that the Group of Companies doctrine was recognized by Arkansas law. The witness statements prepared for this appeal by Ms. Stewart and Mr. Hollingsworth addressing Arkansas law are plainly at odds on a number of matters. Those matters include the question whether or not Arkansas law would by one legal route or another permit resort by the tribunal to the doctrine.… In the context of the Group of Companies doctrine the agreement was that Arkansas law was the same as English law. As I have already said, English law treats the issue as one subject to the chosen proper law of the Agreement and that excludes the doctrine which forms no part of English law.
The principles of the law of agency in Arkansas law are also in substance the same as those of English law. The questions whether there is a relationship of principal and agent and whether an agent acted as such are questions of fact. Unsurprisingly, as agency was not alleged or addressed in the evidence before the tribunal, there was no evidence to establish either fact. Indeed the evidence and commercial reality was to the contrary and there is no further evidence on the matter before me.
The Agreement itself is drafted and signed in terms of an agreement between the two named companies. Clause 10 forbad assignment of the rights acquired by C&M to any other entity. It contains no reference to any other companies or entities. It is true … that the restriction on C&M selling any other “meat-type Male Parent” in Clause 6 was arguably ineffective unless it applied to other group entities but I think that is of no real significance. Clause 12, in contrast, restricted sales by C&M of “Peterson Male Parents” to third parties outside the agreed territory “directly or indirectly.” The evidence was that C&M itself sold parent chicks to other group entities which bought them from C&M. That was the basis on which, albeit not pursued or proved before the tribunal, it was said that C&M was liable to indemnify those entities. It was also the basis on which C&M itself recovered damages (included in the award which is not challenged) for the loss of sales to those entities. That is consistent with the relationship of buyer and seller, not principal and agent, along the chain starting with C&M purchasing the grandparent chicks from Peterson.
In commercial terms the creation of a corporate structure is by definition designed to create separate legal entities for entirely legitimate purposes which would often if not usually be defeated by any general agency relationship between them. Moreover the corollary of C&M acting as agent for the other group entities named would be that those entities would themselves be bound by C&M’s obligations under the Agreement, including the obligation to pay for the chicks. That would extend, for example, to Mr. D’Souza personally insofar as he was a partner in any of those entities.… [T]he only identification of those entities for which it is said C&M acted as agent in entering into the Agreement are those who happened subsequently to suffer losses when the infected poultry was delivered. In my judgment the Award cannot be sustained on the basis of agency. There is no evidence to support it and the evidence there is contradicts it….
Peterson is entitled to have that part of the Award which awarded payment of losses by other C&M group entities set aside for want of jurisdiction….
JUDGMENT OF 17 FEBRUARY 2011, GOV’T OF PAKISTAN, MIN. OF RELIGIOUS AFFAIRS v. DALLAH REAL ESTATE & TOURISM HLDG CO. XXXVI Y.B. Comm. Arb. 590 (Paris Cour d’appel)
I. Sole Ground for Annulment: Lack of Arbitration Agreement (Art. 1502(1) [N]CCP)6 The Government of Pakistan, Ministry of Religious Affairs (the “MORA”) claims that the arbitration clause in the Agreement of 10 September 1996 cannot be invoked against it; in its opinion, the arbitral tribunal held that it had jurisdiction by mistakenly finding that in accordance with transnational principles the MORA is but a ministerial department of the Government of Pakistan without an autonomous juridical personality, and further that it was the Pakistani party to the Memorandum of Understanding (“MOU”) that preceded the Agreement. The MORA contends that the [MOU] of 24 July 1995 and the Agreement of 10 September 1996 are completely independent, that the MOU expired before the creation of the Trust and was replaced by the Agreement; that it was neither the intention nor the common will of the parties that the MORA be a party thereto; that arbitration clauses must be interpreted strictly, and that the Agreement was signed only by the Trust created by the Government of Pakistan for the financial and material organization of pilgrimages of its nationals to Mecca.
The MORA argues that the First Award shows that there were differences among the arbitrators and that [arbitrators] Shah and Mustill only agreed after hesitations with the conclusion that [the MORA] was a party to the Agreement and thus to the dispute. Claimant adds that the English court seized by Dallah with proceedings to enforce the final award [denied leave to recognize and enforce the award] in the United Kingdom at the request of the Government of Pakistan, that the Court of Appeal confirmed this decision on 20 July 2009 and that the Supreme Court rejected Dallah’s appeal on 3 November 2010.
By a letter of 16 February 1995 …, Dallah informed the MORA that the King of Saudi Arabia and the Keeper of the Holy Sites entrusted [Dallah] with the maintenance of those sites and that [Dallah] was authorized to offer a long-term lease of a complex for hosting pilgrims to Islamic governments. It proposed to the Government of Pakistan to lease several plots of land at Mecca on which Dallah would build a housing complex; Dallah would also provide financing. On 15 July 1995, Dallah submitted the financial conditions for the project to the [Pakistani] Ministry of Finances. The project was concretely realized by the conclusion of a MOU on 24 July 1995 between the President of the Republic of Pakistan, through Mr. Lutfullah Mufti, Secretary of the MORA, on the one hand, and Dallah, through Mr. Nackvi, on the other.
Dallah undertook under the MOU to purchase plots of land at Mecca and build lodgings thereon for Pakistani pilgrims; [the lodgings] were to be leased to the Government of Pakistan for 99 years. Dallah would also provide the financing for the operation as provided for in its offer of 16 February 1995. Pursuant to Art. 4 of the MOU, Dallah was to supply within 90 days to the Government of Pakistan, for its approval, the terms and conditions of the lease and the financing plan; pursuant to Art. 5, the financing was to be given to an entity (“the Borrower”) designated by the Government of Pakistan. Pursuant to Art. 28, the Government of Pakistan reserved the faculty to grant the managing and the maintenance of the housing complex to one or more persons or legal entities or to a Trust, which would be the Borrower.
Since the signature of the MOU on 24 July 1995 until the signature of the Agreement, Dallah had dealings only with the Government of Pakistan, to which it sent the draft lease between the Government of Pakistan and Dallah on 17 August 1995. The financial proposal was not approved by the Government, and the MOU expired on 17 November 1995.
The President of the Islamic Republic of Pakistan issued an ordnance [sic] on 31 January 1996, notified on 14 February 1996, which created a Trust called Awami Hajj Trust, a “statutory corporation” under Pakistani law having essentially the aim of “mobilizing the savings of pilgrims,” “financing the costs of the pilgrimage,” investing the savings of the pilgrims in order to “obtain maximum returns and compound interest” and taking and “adopting measures facilitating the realization of the pilgrimage by the members.” Art. 10 of the Ordnance [sic] provided that the Trust would have at its disposal a fund, the Awami Hajj Fund, financed by savings of pilgrims, donations and investment income managed by a bank (the Trustee Bank) which would be responsible for collecting the savings and investing the assets of the fund. The Trust was incorporated; the Minister of Religious Affairs, the secretary of the MORA, Mr. Lutfullah Mufti, and the Minister of Finances were members of its Board of Trustees.
During the pre-contractual phase, which lasted over six months, Dallah detailed in several correspondences the roles assigned to the future contracting parties—collecting savings of pilgrims and donations by the Trust, advance by Dallah given to the Trust, guarantee by the Government of Pakistan for the reimbursement of Dallah’s US$ 100 million financing. In Mr. Nackvi’s letter of 29 February 1996 and its annexe A, Dallah described its financing plan and expressly proposed to the Government of Pakistan a second option, for five years from the signature of the Agreement, in view of the construction of additional lodgings for 45,000 pilgrims. The financial division of the MORA asked questions in respect of this proposal in a letter of 4 April 1996.
The MORA also relies on a letter of 15 March 1996 to the Al Rajhi Banking and Investment Group, in which Dallah presented the fund indicating the Trust as the Pakistani contracting party, in support of its argument that Dallah accepted that [the MORA] was the only co-contracting party. However, on 4 April  the MORA wrote to the presidents of [certain] banks, inviting them to express their interest to become the Trustee Bank, indicating that “the Government wishes to appoint as Trustee Bank….” On 14 April, the Albaraka Islamic Investment Bank of the Dallah group [the Albaraka Bank] presented its candidacy to the MORA, which accepted delivery [of the offer] on 23 April and invited Mr. Nackvi to present his proposal at the Ministry’s offices. After exchanging several communications—particularly a letter of Dallah to the MORA dated 23 May 1996, recording the discussions which took place with the Ministry of Finances—on 30 July 1996 the MORA, on stationery of the Government of Pakistan, informed Dallah that the Albaraka Bank had been appointed and confirmed that it agreed with the “B plan” proposed by Dallah, concerning the free lodging of 12,000 pilgrims for the “Government of Pakistan,” with “the Government of Pakistan” having to pay US$ 395 per pilgrim for the remaining pilgrims.”
It is true that when presenting the contractual provisions to its lawyers, who were charged with drafting the Agreement, Dallah mentioned the Trust as the Pakistani party, but the negotiations took place solely between Dallah and the MORA, not the Trust, until the day before the Agreement was signed (letter of 8 September 1996 of Dallah to the Ministry). Moreover, on 30 July 1996 Mr. Nackvi clearly indicated to the president of the Dallah group that approving the envisaged financial operation was the Ministry’s decision and informed him that the Prime Minister would hold a meeting on this issue on 15 June. In fact, a press article of 17 July 1996 tells of the meeting of the Board of Trustees, presided by the Prime Minister of Pakistan, who was not, however, one of its members.
The MORA argues that since the Trust, which was juridically and financially independent, concluded the Agreement, including the arbitration clause, with Dallah, “the acts of the Trust cannot be attributed to the Government of Pakistan,” which excludes that it was “the true party to the Agreement,” and that this was the common intention of the parties.
However, in the period of contractual performance, two functionaries of the MORA who held no position within the Trust addressed to Dallah within six weeks of each other, on 26 September and 4 November 1996, letters concerning the savings plans which were to be offered to the pilgrims, the announcement of the advertising information campaign to be launched by the Albaraka Bank to make itself known as the Trustee Bank with the public, and a request for a copy of the agreement between the [Albaraka Bank] and the Muslim Commercial Bank concerning the use of [the latter’s] network of agencies for collecting the savings. No reason can justify the intervention of these two state functionaries.
Further, the Trust ceased to legally exist on 12 December 1996 because the presidential decree was not re-issued.
On 19 January 1997, Mr. Lutfullah Mufti informed Dallah, on stationery of the MORA, that: “according to the above-mentioned Agreement for the lease of a lodgings complex in the holy city of Mecca, you were obliged, within 90 days from the Agreement, to have the detailed specifications approved by the Trust” and “you failed in your obligation to supply the specifications and plans for the approval of the Trust, you are in breach of a fundamental clause of the Agreement which equals a repudiation of the totality of the Agreement, a repudiation that is accepted hereby.” No confusion is possible because Mr. Lutfullah Mufti was also secretary of the Board of Trustees or because the Trust did not have its own stationery. Everything in this letter indicates in what quality the Ministry in whose name he accepts the repudiation of the Agreement acted.
It is irrelevant in this respect that Mr. Lutfullah commenced proceedings in an Islamabad court in the name of the Trust. By having its high official denounce Dallah’s breach of contract on 19 January 1997, the MORA behaved as if it were a party to the Agreement.
This involvement of the MORA, without there being record of acts performed by the Trust, as well as [the MORA’s] behavior at the time of the pre-contractual negotiations, confirm that the creation of the Trust was purely formal and that the MORA, as argued by Dallah, behaved as the true Pakistani party to the financial operation.
As a consequence, the [Government of Pakistan’s claim] that the arbitral tribunal incorrectly extended the arbitration clause to the MORA and held that it had jurisdiction is unfounded. Hence, the applications for setting aside the award on jurisdiction of 26 June 2001 rendered in Paris and consequently the two following awards of 19 January 2004 and 23 June 2006 are dismissed….
DALLAH REAL ESTATE & TOURISM HOLDING CO. v. MINISTRY OF RELIGIOUS AFFAIRS, GOVERNMENT OF PAKISTAN
 UKSC 46 (U.K. S.Ct.)
1. Only parties to arbitration agreement are bound or entitled to arbitrate. Consider the language of Article of the New York Convention and Article 7(1) of the UNCITRAL Model Law. Article of the Convention provides that Contracting States “shall recognize an agreement in writing under which the parties undertake to submit [their disputes] to arbitration,” while Article 7(1) of the Model Law defines an arbitration agreement as “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them.” Note the courts’ analyses in Bridas and Peterson Farms. As with Article and Article 7(1), both courts refuse to require (or permit) entities that are not parties to the arbitration agreement to arbitrate. Is there any question but that an arbitration agreement only binds (and benefits) the parties to that agreement? Is any other approach conceivable?
Note that in national court litigation, all entities that are involved in a dispute will ordinarily be subject to joinder in litigation concerning the dispute. Consider the following:
“Contrary to litigation in front of state courts where any interested party can join or be adjoined to protect its interests, in arbitration only those who are parties to the arbitration agreement expressed in writing could appear in the arbitral proceedings either as claimants or as defendants. This basic rule, inherent in the essentially voluntary nature of arbitration, is recognized internationally by virtue of Article II of the New York Convention.” Banque Arabe et Internationale d’ Investissement v. Inter-Arab Inv. Guar. Corp., Ad Hoc Award of 17 November 1994, XXI Y.B. Comm. Arb. 13, 18 (1996).
Can you imagine a different approach to the question of who is bound or benefitted by an arbitration agreement? What if any entity whose presence would materially contribute to expeditious, final resolution of the dispute could be joined to, or could join, an arbitration, regardless whether that entity had consented to arbitrate? Are there suggestions of such an approach in ICC Case No. 4131 and ICC Case No. 8385?
2. Signatories to “arbitration agreement.” What is the most obvious, and reliable, way to determine who the parties to an arbitration agreement are? Is it not by ascertaining what parties have expressed their consent to be bound by the agreement, by executing the agreement to arbitrate? Consider the courts’ remarks on this issue in Bridas and Dallah. (Recall also the formal requirements of the New York Convention and many arbitration statutes, supra pp. 375–92 & infra pp. 586–58, often requiring that arbitration agreements be signed.)
How frequently are arbitration agreements—as distinguished from the underlying contract with which they are associated—actually signed? In fact, it is very rare for parties to separately sign their agreements to arbitrate, instead executing the contract in which an arbitration clause appears. How then does one determine the “signatories” to an agreement to arbitrate? Does this question present any real practical difficulty? Consider the following analysis from one arbitral award:
“It is generally accepted that if a third party is bound by the same obligations stipulated by a party to a contract and this contract contains an arbitration clause or, in relation to it, an arbitration agreement exists, such a third party is also bound by the arbitration clause, or arbitration agreement, even if it did not sign it.” Award in ICC Case No. 9762, XXIX Y.B. Comm. Arb. 26 (2004).
Is there any reason to think that someone who signs a contract containing an arbitration clause does not mean for its signature to constitute consent to the clause?
3. Non-signatories may be bound by arbitration agreement. Although the most common manner in which a party may be bound by an arbitration agreement is by signing it, this is not the only way to become a party to an agreement to arbitrate. Consider the court’s comment in Bridas that “federal courts have held that so long as there is some written agreement to arbitrate, a third party may be bound to submit to arbitration. Ordinary principles of contract and agency law may be called upon to bind a non-signatory to an agreement whose terms have not clearly done so.”
How is it that general “principles of contract and agency law” apply to bind a non-signatory to an agreement to arbitrate? In particular, is a non-signatory bound by the arbitration clause because the non-signatory becomes a party to the underlying contract (for example, if the underlying contract is assigned to a non-signatory or because a non-signatory merges with a signatory)? Or is a non-signatory bound by the arbitration clause because it becomes a party only to the arbitration agreement itself? Or are both avenues possible ways for a non-signatory to be bound by an arbitration agreement?
4. Distinction between jurisdiction and substantive liability. Note that it is possible for a non-signatory to be bound by an underlying commercial contract, but not the associated arbitration clause. Note, conversely, that a non-signatory might be bound by an arbitration clause, but not the associated commercial contract. Construct hypotheticals in which each result is plausible. Consider the discussion of this issue in ICC Case No. 8385.
5. Alter ego status or veil-piercing as basis for subjecting a non-signatory to arbitration agreement. A number of authorities have concluded that a party that has not executed or otherwise directly assented to a contract containing an arbitration provision may nonetheless be bound by the provision, albeit only in exceptional cases, if that party is an “alter ego” of an entity that did execute the agreement. Phrased differently, an entity may be bound by an agreement (including an arbitration agreement) executed by a corporate affiliate if its “corporate veil” is “pierced,” subjecting one party to the contractual and other liabilities of the first. The ICJ has explained the doctrine as follows:
“the process of ‘lifting the corporate veil’ or ‘disregarding the legal entity’ has been found justified and equitable in certain circumstances or for certain purposes. The wealth of practice already accumulated on the subject in municipal law indicates that the veil is lifted, for instance, to prevent misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as creditor or purchaser, or to prevent the evasion of legal requirements or of obligations.” Case Concerning the Barcelona Traction, Light & Power Co., 1970 I.C.J. 3, 38-39 (I.C.J.).
Consider the comparable discussions of the veil-piercing doctrine in Bridas and ICC Case No. 8385.
(a) Standard for establishing alter ego status. Standards for veil-piercing or alter ego status vary, in and among different legal systems, but generally require evidence that one entity dominated the day-to-day actions of another entity and/or that it exercised this power to work fraud or other serious injustice upon a third party. Consider the standards that are set forth in Bridas and ICC Case No. 8385. How do they differ? How are they similar?
(b) Presumption of separate corporate identity. The standard for establishing alter ego status or piercing the corporate veil in most legal systems is difficult to satisfy. The starting point is a strong presumption that a parent corporation and its affiliates are legally separate and distinct entities and that a company is legally independent from its shareholders. See, e.g., Bridas, 345 F.3d at 356 (“presumption of independent status”); Am. Renaissance Lines, Inc. v. Saxis SS Co., 502 F.2d 674, 677 (2d Cir. 1974) (“absent findings of fraud or bad faith, a corporation … is entitled to a presumption of separateness from a sister corporation … even if both are owned and controlled by the same individuals”); Salomon v. A Salomon & Co Ltd  AC 22, HL 31 (House of Lords) (“once a company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself … whatever may have been the ideas or schemes of those who brought it into existence”). What is the reason for this presumption? Note that: “Normally, the corporation is an insulator from liability on claims of creditors…. Limited liability is the rule not the exception; and on that assumption large undertakings are rested, vast enterprises are launched, and huge sums of capital attracted.” Anderson v. Abbott, 321 U.S. 349, 362 (1944). Compare the similar reasoning in Bridas and Peterson Farms. Does this rationale really apply to veil-piercing for jurisdictional purposes (as distinguished from veil-piercing to impose substantive liability)?
(c) Standards for overcoming presumption of separate corporate identity. Although standards in various jurisdictions differ, most authorities have held that two basic inquiries are relevant to overcoming the presumption of separate corporate identity: (i) the extent of domination and control of a corporate affiliate, including disregard of corporate formalities; and (ii) fraudulent or otherwise abusive misuse of that control to the injury of adverse parties. See, e.g., Faiza Ben Hashem v. Abdulhadi Ali Shayif  EWHC 2380, ¶¶166-184 (English High Ct.) (“in the various cases to which I have referred, the attempt to pierce the veil succeeded only in … cases [involving] the twin features of control and impropriety”; “[t]hese cases can be contrasted with the cases where the claim failed … each of these cases lacked at least one of the necessary ingredients”). See also cases referred to in G. Born, International Commercial Arbitration 1431-44 (2d ed. 2014). Why is not one company’s “domination” of another sufficient to pierce the corporate veil—why is some form of abusive conduct also typically required? Should it be? Should the standard for piercing the corporate veil be different for jurisdictional purposes (i.e., for binding a party to an arbitration agreement) than for purposes of substantive liability (i.e., for holding a party liable for breaches of the underlying contract)?
Consider the following rationale, from a maritime award made in a U.S.-seated arbitration:
“It has been argued by some that the charter party arbitration simply provides for the adjudication of disputes between Owner and Charterer and that no other party may enter the proceedings unless it does so with the express consent of the two so named.... [I]t is neither sensible nor practical to exclude the claims of companies who have an interest in the venture and who are members of the same corporate family. The practicality of such an approach is apparent. The major shipping organizations often charter through a subsidiary company, ship their cargoes through another and sometimes consign them to other related companies. To consider the arbitration clause as one which limits the right to arbitrate to the chartering subsidiary and to no other company within the same corporate family involved in the venture is to narrowly restrict the parties’ apparent intention to arbitrate their differences. We consider our conclusion in this respect to be consistent with the more recent court decisions in on this matter. [The tribunal held that all members of the Mobil Oil Group were bound by the arbitration clause.]” MAP Tankers, Inc. v. Mobil Tankers, Ltd, Partial Final Award in SMA Case No. 1510 of 28 November 1980, VII Y.B. Comm. Arb. 151 (1982).
Is that rationale persuasive? Is it alter ego analysis? Or something else?
Should the standards for veil-piercing be lower in tort cases? Consider Adams v. Cape Indus. plc  Ch. 433, 545 (English Ct. App.), where the technical application of the veil-piercing doctrine had the effect that hundreds of employees suffering from an incurable professional disease were denied enforcement of the judgment awarding them compensation (“we do not accept as a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the member of a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. Mr. Morison urged on us that the purpose of the operation was in substance that Cape would have the practical benefit of the group’s asbestos trade in the United States of America without the risks of tortious liability. This may be so. However, in our judgment, Cape was in law entitled to organise the group’s affairs in that manner and … to expect that the court would apply the principle of Salomon v. A. Salomon & Co. Ltd  A.C. 22 in the ordinary way”). The court applied the rule that, in order for the veil to be pierced, the requirement that the company structure has been used in order to evade an existing liability should be satisfied. Consider the facts and the procedural history of Adams v. Cape—can it be said that the liability in question was purely a future one? Where is the borderline?
(d) Factors relevant to control or domination. Different authorities have identified a variety of factors that are relevant to establishing control or domination for purposes of piercing the corporate veil. Note the various factors identified in Bridas and ICC Case No. 8385. For additional lists, see Carte Blanche (Singapore) Pte Ltd v. Diners Club Int’l, Inc., 2 F.3d 24 (2d Cir. 1993) (absence of corporate formalities; inadequate capitalization; financial dealings between parent and subsidiary; overlap in ownership, officers, directors, and personnel; common office space, address, and phone numbers; business discretion of allegedly dominated company; whether companies deal with each other at arms’ length; whether companies are separate profit centers; parent’s payment or guarantee of subsidiary’s debts; subsidiary’s use of parent’s property); G. Born, International Commercial Arbitration 1431-44 (2d ed. 2014). How do these factors compare to those relevant to the “group of companies” doctrine?
(e) Showing of fraud or its equivalent. Even if a company is controlled or dominated by another company or individual, many authorities (including Bridas) hold that there must be a showing of fraud or similarly abusive conduct in order to bind a non-signatory to an arbitration agreement. Freeman v. Complex Computing Co., 119 F.3d 1044, 1053 (2d Cir. 1997) (“While complete domination of the corporation is the key to piercing the corporate veil, … such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is required.”); Interocean Shipping Co. v. Nat’l Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir. 1975) (even if company has “no mind of its own,” showing of fraud or something akin to fraud is needed); Judgment of 11 June 1991, Orri v. Société des Lubrifiants Elf Aquitaine, 1992 Rev. arb. 73 (French Cour de cassation civ. 1e); Ord v. Belhaven Pubs Ltd  2 BCLC 447 (English Ct. App.) (“The approach of the judge in the present case was simply to look to the economic unit, to disregard the distinction between the legal entities that were involved and then to say: since the company cannot pay, the shareholders … should be made to pay instead. That of course is radically at odds with the whole concept of corporate personality and limited liability and the decision of the House of Lords in Salomon v. Salomon  AC 22. On the question of lifting the corporate veil … they were of the view that there must be some impropriety before the corporate veil can be pierced.. in the present case no impropriety is alleged”). Other authorities (in some countries) hold, however, that a sufficient showing of control and domination or other factors may independently justify piercing the corporate veil. See, e.g., Middendorf v. Fuqua Indus., Inc., 623 F.2d 13, 17 (6th Cir. 1980); Del Santo v. Bristol County Stadium, Inc., 273 F.2d 605, 608 (1st Cir. 1960); P. I. Blumberg et al., Blumberg on Corporate Groups Chapter 12 (2005 & Update 2014); Strasser, Piercing the Veil in Corporate Groups, 37 Conn. L. Rev. 637 (2005) (citing cases). Which approach is wiser?
(f) Law applicable to veil-piercing. What law applies to determine whether the corporate veil may be pierced? What law is applied in Bridas? In ICC Case No. 8385? Why? Consider also ICC Case No. 8163, 16(2) ICC ICArb. Bull. 77 (2005) (seat in France, applicable substantive law German; German law applied to veil-piercing); Final Award in ICC Case No. 7626, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection of ICC Arbitral Awards 1996-2000 122, 124 (2003) (law applicable to the arbitration clause as chosen by the parties); Judgment of 16 October 2003, 22 ASA Bull. 364 (2004) (Swiss Fed. Trib.) (arbitral tribunal applied Lebanese law governing the main contract, interpreting this law in light of lex mercatoria being part of French law, which is cognate to Lebanese law); Aloe Vera of Am., Inc. v. Asianic Food (S) Pte Ltd,  SGHC 78 (Singapore High Ct.) (law of Arizona, to which the parties subjected the underlying contract).
Is the law applicable to determine whether the corporate veil may be lifted the law of the state of incorporation of the subsidiary company, whose separate corporate identity would be set aside? Is it the law of the place of incorporation (or domicile) of the shareholder, who is to be subjected to the arbitration agreement? Is it the law of the place where the acts of control and/or abusive conduct occurred? Is it the law chosen by the parties’ underlying contract? Is the choice of any jurisdiction’s law satisfactory in most settings, where conduct occurs in multiple different jurisdictions, without any clear center of gravity? Would it be preferable to apply an international standard of veil-piercing? Is that what was done in ICC Case No. 8385? What about in Bridas? What does the principle of party autonomy suggest?
Contrast the choice-of-law analysis in ICC Case No. 8385 and Aloe Vera v. Asianic Food. Is the law chosen by the parties to govern their underlying contract a sensible choice for the law governing veil-piercing of one party to the contract?
What considerations are relevant to selecting the law applicable to veil-piercing? Is the fact that the non-signatory in veil-piercing cases usually has a close connection with the controlled signatory persuasive enough to apply the law, in the explicit or implied choice of which the non-signatory formally did not participate? Why or why not?
6. Agency as basis for subjecting a non-signatory to arbitration agreement. The simplest, least controversial circumstance in which a non-signatory will be bound by an arbitration agreement is when an agent executes a contract on behalf of its principal. It is well settled, under all developed legal systems, that one party (an “agent”) may in certain circumstances legally bind another party (a “principal”) by its acts. Among other things, an agent may enter into contracts, which will be legally binding on its principal, although not necessarily on the agent. See G. Born, International Commercial Arbitration 1419-20 (2d ed. 2014); Hanotiau, Problems Raised by Complex Arbitrations Involving Multiple Contracts-Parties-Issues—An Analysis, 18 J. Int’l Arb. 251, 258-60 (2001).
(a) Principal bound by arbitration clause in contract executed by agent. As Bridas illustrates, most jurisdictions hold that a principal may be bound by an arbitration clause contained in a contract executed on its behalf by an agent. The least controversial example of this is where a disclosed agent, with all parties’ consent, executes an agreement on behalf of its principal, with the purpose of binding (only) its principal. More difficult issues arise, as in Bridas and Peterson Farms, when one party is alleged, after-the-fact, to have been the undisclosed agent of a non-signatory.
As Bridas illustrates, most authorities have applied generally applicable agency law in determining whether a non-signatory is bound by an arbitration agreement. See InterGen NV v. Grina, 344 F.3d at 142-43, 147-48 (“[i]t is hornbook law that an agent can commit its (nonsignatory) principal to an arbitration agreement”; applying “traditional principles of agency law”); Judgment of 22 December 1992, 14 ASA Bull. 646, 649 (Swiss Fed. Trib.) (1996) (citing generally applicable principle of reliance to conclude that under Spanish law, no special mandate was required for agent to bind principal to arbitration agreement).
(b) Agent’s right to invoke arbitration clause in principal’s contract. In most cases, an agency relationship will be alleged as binding a non-signatory principal to an arbitration clause. That was the result unsuccessfully sought in Bridas and Peterson Farms. Nonetheless, some authorities have held that an agent may invoke an arbitration clause contained in a contract which it executes on behalf of a principal. Arnold v. Arnold Corp., 920 F.2d 1269, 1282 (6th Cir. 1990) (applying “the well-settled principle affording agents the benefits of arbitration agreements made by their principal”). What is the rationale for such conclusions? Note that, in most cases, there will be no direct evidence of the parties’ actual intentions for an agent to be benefitted by its principal’s arbitration clause. Why should such an intention be presumed? If an agent is benefitted by an arbitration agreement, is it also bound by that agreement?
(c) Law applicable to agency relation. What law applies to determine whether an agency relation, binding a principal to its agent’s arbitration agreement, existed? Is it the law governing the validity of the arbitration agreement? The law governing the underlying contract? The law of the agency relation? What does Bridas hold? What is the most appropriate choice-of-law rule? Consider the facts in Peterson Farms, where the arbitration agreement was held to be governed by Arkansas law. What law would have applied to determine the existence of an agency relationship between C&M and its corporate affiliates?
(d) Apparent or ostensible authority. Closely related to agency as a basis for concluding that an entity is party to an arbitration clause is the doctrine of ostensible or apparent authority (sometimes referred to as the “principle of appearance” or “mandat apparent”). Under this doctrine, a party may be bound by another entity’s acts purportedly on its behalf, even where those acts were unauthorized, if the putative principal created the appearance of authority, leading a counter-party reasonably to believe that authorization actually existed. See G. Born, International Commercial Arbitration 1424-27 (2d ed. 2014); E. Gaillard & J. Savage (eds.), Fouchard Gaillard Goldman on International Commercial Arbitration ¶470 (1999); Kett v. Shannon,  ILRM 364, ¶8 (Irish S.Ct.) (“Ostensible authority, on the other hand, derives not from any consensual arrangement between the principal and the agent, but is founded on a representation made by the principal to the third party which is intended to convey, and does convey, to the third party that the arrangement entered into under the apparent authority of the agent will be binding on the principal.”). In particular, this theory can bind the “apparent” principal to a contract (including an arbitration clause) entered into putatively on its behalf by the “apparent” agent. Note that the apparent authority doctrine does not rest on principles of consent, but is more akin to estoppel or veil-piercing, by mandating that in certain circumstances a party will be bound by an arbitration agreement even if it did not intend to be. Do the same choice-of-law considerations apply to questions of apparent authority as to questions of actual authority? Are the choice-of-law considerations closer to those in veil-piercing settings?
(e) Agency and alter ego distinguished. What is the difference between alter ego and agency theories? Consider application of each theory to the facts in (i) Bridas; (ii) Peterson Farms; (iii) ICC Case No. 4131; and (iv) ICC Case No. 8385.
7. Implied consent. Under most developed legal systems, an entity may become a party to a contract, including an arbitration agreement, impliedly—typically, either by conduct or non-explicit declarations, as well as by express agreement or formal execution of an agreement. Where a party conducts itself as if it were a party to a commercial contract, by playing a substantial role in negotiations and/or performance of the contract, it may be held to have impliedly consented to be bound by the contract. See G. Born, International Commercial Arbitration 1427-31 (2d ed. 2014). Which theory does the Paris Cour d’appel apply in Dallah, upholding the arbitral award? Is it the alter ego theory? The theory of implied consent? Is it different from the theory relied upon by the arbitral tribunal in the same case?
What law did the arbitral tribunal apply in Dallah? What law did the French annulment court apply? The English recognition court?
8. Guarantor relationship as basis for subjecting non-signatory to arbitration agreement. Commercial arrangements sometimes involve one party (Party A) guaranteeing the performance or liability of another party (Party B), thereby permitting Party B’s contractual counter-party (Party C) to assert claims directly against Party A, in the event of non-performance by Party B. If such a guarantee relationship exists, with respect to a contract containing an arbitration clause, is the guarantor party to that arbitration agreement? Note that the guarantor often will not be a signatory to the guaranteed contract between Party B and Party C.
Most authorities hold that a guarantor relationship may potentially have the effect of making the guarantor a party to an arbitration clause in the underlying contract, but that this is a question of the parties’ intentions, which will vary from case to case. Compare Kvaerner v. Bank of Tokyo Mitsubishi, 210 F.3d 262, 265 (4th Cir. 2000) (compelling guarantor to arbitrate dispute on underlying contract because guaranty agreement mandated that “the same ‘rights and remedies’” be available to parties as under contract) with Compania Espanola de Petroleos SA v. Nereus Shipping, SA, 527 F.2d 966, 973 (2d Cir. 1975) (“[t]he determination of whether a guarantor is bound by an arbitration clause contained in the original contract necessarily turns on the language chosen by the parties in the guaranty”; distinguishing broader language in guaranty and arbitration clauses at issue from narrower language of such clauses in other cases). See G. Born, International Commercial Arbitration 1459-63 (2d ed. 2014).
Note the comment in Bridas that the guarantor of a contract “typically” will not be bound by the agreement to arbitrate in that contract. See supra p. 554. What justifies this assumption? Isn’t the arbitration clause one of the provisions that the guarantor has guaranteed? Suppose the guarantee is reflected in a separate contract between the guarantor and the party benefitting from the guarantee. Suppose the guarantor signs the guaranteed contract, with the statement: “Party A guarantees the full performance of all provisions of the contract.” Do the two cases present different considerations?
9. Transfers of arbitration agreements. There are a number of circumstances in which an arbitration agreement may be transferred from its original signatories to a non-signatory, resulting in the non-signatory being bound and benefitted by the agreement to arbitrate.
(a) Assignment of arbitration agreement. Contracts are frequently transferred from one party to another by way of assignment or novation. In these circumstances, disputes sometimes arise as to whether the transferee or assignee of a contract is bound by an arbitration clause contained in the transferred/assigned agreement. See G. Born, International Commercial Arbitration 1465-71 (2d ed. 2014); Girsberger & Hausmaninger, Assignment of Rights and Agreement to Arbitrate, 8 Arb. Int’l 121 (1992); Yang, Who Is A Party? The Case of the Non-Signatory (Assignment), 2005 Asian Disp. Resol. 43. Should an agreement to arbitrate be assignable? Could one argue that the obligation to arbitrate is “personal” or “unique,” and that it should either not be assignable or should be capable of assignment only by very clear language? See Cotton Club Estates Ltd v. Woodside Estates Co.  2 KB 463 (English K.B.) (“The arbitration clause is a personal covenant, and cannot be transferred; nor indeed was it transferred in any sense in this case. The arbitration clause remained in full force and effect as between the original parties”).
Most authorities agree that an assignment of a contract should in principle have the effect of transferring the arbitration clause contained in the contract, as one part of the parties’ agreement, to the assignee, at least absent some sort of contractual term indicating a contrary intention or some sort of legal prohibition that renders the assignment ineffective. Should there be a presumption that assignment of the underlying contract transfers the arbitration clause? Or the contrary assumption? Or should it simply be a question of the parties’ intentions? How likely is it that the parties will express their intentions regarding transfer of the arbitration clause? Suppose that a U.S. company enters into a contract with a German company containing an agreement to arbitrate under CIETAC Rules in China; if one of the parties later assigns the contract to a Chinese state-owned entity, should the arbitration agreement be deemed to have been assigned? Consider: Award in ICC Case No. 9801, discussed in Grigera Naon, Choice-of-Law Problems in International Commercial Arbitration, 289 Recueil des Cours 9, 147 (2001) (“an arbitration clause must be considered an ancillary right (Nebenrecht) to the assigned principal rights which … follows the assigned rights.”).
(b) Ratification. A non-signatory party may be bound by an arbitration clause if it has ratified or assumed that provision. See, e.g., Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773 (2d Cir. 1995) (“party may be bound by an arbitration clause if its subsequent conduct indicates that it is assuming the obligation to arbitrate”); Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991); Day v. Fortune Hi-Tech Mktg, 2012 WL 588768, at *3 (E.D. Ky.) (non-signatories assented to arbitration clause in contract by ratifying contract through their conduct and accepting benefits thereunder); Judgment of 19 May 2003, 22 ASA Bull. 344, 348 (Swiss Fed. Trib.) (2004) (“retroactive approval”). Consider how the separability presumption applies in the context of ratification/assumption. Does every assumption of underlying contractual obligations also constitute an assumption of the arbitration clause? Is some specific assumption of obligations to arbitrate required? Compare the issues raised by guarantees of contractual obligations.
(c) Merger or universal succession. It is well settled that an entity that does not execute an arbitration agreement may become a party thereto by way of legal succession. E.g., Judgment of 19 May 2003, 22 ASA Bull. 344, 348 (Swiss Fed. Trib.) (2004) (“in principle, an arbitration clause is binding only on those parties which have entered into a contractual agreement to submit to arbitration, whether directly or indirectly through their representatives. Exceptions to this rule arise in cases of legal succession, subsequent ratification of the arbitration clause or piercing the corporate veil of the legal entity in case of abusive denial of the clause.”). See G. Born, International Commercial Arbitration 1463-65 (2d ed. 2014). The most common means of such succession is by a company’s merger or combination with the original party to an agreement. If Company Z is merged into Company A, with the latter acquiring all the assets and liabilities of the former, is there any reason to conclude that Company A does not assume the arbitration agreements associated with Company Z’s contracts? What law applies to this issue? Is it necessarily the law governing the original agreement to arbitrate?
10. Corporate officers and directors. Some national courts have adopted specialized rules with regard to the application of arbitration clauses to officers and directors of companies that have executed the arbitration agreement. In virtually all such cases, the officers and directors of the corporate party will not be parties to the relevant contract. Even in cases where a company’s officers or directors execute a contract on behalf of the company, they do not ordinarily thereby become parties to the contract. See G. Born, International Commercial Arbitration 1478-80 (2d ed. 2014); Judgment of 23 October 2003, Société Kocak Ilac Fabrikasi AS v. SA Labs. Besins Int’l, 2006 Rev. arb. 149, 152 (Paris Cour d’appel) (setting aside award against officer of corporate party; officer’s “will to be bound by the arbitration agreement could not be inferred only from his signature of the contract.”). Suppose litigation relating to the underlying dispute includes the officers and directors (or other agents) of one or both parties, with claims being asserted personally against individual officers and directors. In these cases, officers and directors frequently seek to invoke the arbitration clause (or, conversely, may have the clause invoked against them).
Some courts have permitted the employees of a corporate party to invoke the arbitration clause in that party’s underlying commercial contracts, notwithstanding the fact that the individual employees are not parties to the underlying contract under ordinary contractual principles. These decisions have held that corporate employees, sued for actions taken in the course of their employment, may invoke arbitration clauses contained in their employer’s contracts with the adverse third party. Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, 7 F.3d 1110 (3d Cir. 1993) (company can only act through employees and officers, and “an arbitration agreement would be of little value if it did not extend to them”); Nesslage v. York Sec., Inc., 823 F.2d 231, 233 (8th Cir. 1987) (employees of company that concluded arbitration clause were third-party beneficiaries of agreement).
Consider the treatment of Mr. Feld in Judgment of 30 May 1994. Was Mr. Feld a party to the relevant contract? Why was he permitted to invoke the contract’s arbitration clause? What is the rationale for extending an agreement to arbitrate to corporate officers and directors? Is it what the parties intended? Intended about their underlying contract or the arbitration agreement? Compare Westmoreland v. Sadoux, 299 F.3d 462, 467 (5th Cir. 2002) (“courts must not offer contracts to arbitrate to parties who failed to negotiate them before trouble arrives. To do so frustrates the ability of persons to settle their affairs against a predictable backdrop of legal rules—the cardinal principle to all dispute resolution.”).
11. The “group of companies” doctrine. The Dow award is widely cited as establishing the “group of companies” doctrine. That doctrine holds that companies which form part of an integrated economic “group” (“one and the same economic reality”) may, in some circumstances, be bound by one another’s arbitration agreements. See G. Born, International Commercial Arbitration 1444-55 (2d ed. 2014); Savage & Leen, Family Ties: When Arbitration Agreements Bind Non-Signatory Affiliate Companies, 2003 Asian Disp. Resol. 16; Wilske, Shore & Ahrens, The “Group of Companies Doctrine”—Where Is It Headed?, 17 Am. Rev. Int’l Arb. 73 (2006).
(a) Rationale for group of companies doctrine. What exactly is the rationale for the group of companies doctrine? A more recent award summarizes the theory as follows:
“When concluding, performing, nonperforming and renegotiating their contractual relations with [defendants], the three claimant companies appear, pursuant to the common intention of all parties engaged in the procedure, to have been real parties to all the contracts. In its formulation and in its spirit, this analysis is based on a remarkable and approved tendency of arbitral rulings favoring acknowledgement, under those circumstances, of the unity of the group.... The security of international commercial relations requires that account should be taken of its economic reality and that all the companies of the group should be held liable one for all and all for one for the debts of which they either directly or indirectly have profited at this occasion.” Award in ICC Case No. 5103, 1988 J.D.I. 1206 (quoted and translated in Sandrock, Arbitration Agreements and Groups of Companies, 27 Int’l Law. 941, 944 (1993)).
Is this persuasive? Does the group of companies doctrine provide that a non-signatory is bound by the parties’ underlying contract? Or does it provide that the non-signatory is bound only by the agreement to arbitrate? Note that the group of companies doctrine was developed in arbitral awards (and has only been applied in that context); in that regard, the doctrine is unlike veil-piercing, agency, assignment, and similar doctrines, which are generally applicable rules, not developed or applicable specifically in arbitral contexts.
Does the group of companies doctrine depend on the parties’ intentions? Only the parties’ intentions?
(b) Group of companies doctrine and alter ego theory compared. Compare the “group of companies” doctrine to the alter ego theory. Which rule is more expansive (i.e., which rule more likely will subject non-signatories to an arbitration agreement)? What precisely was the basis of the award in Dow? What if Isover had not asserted in French courts that all the Dow companies were liable under the underlying agreements? How does the group of companies doctrine compare to principles of agency?
(c) Law applicable to group of companies doctrine. What law provides the basis for the group of companies doctrine, as formulated in Dow? Is it national law or international law? If it is the latter, what are the sources of this law? What law did the Dow award apply? Note that the Dow arbitration was seated in France. Recall that, under French arbitration law, the law applicable to an international arbitration agreement is “international law,” supra pp. 307–08, 311–12. Would the tribunal have applied the same law to the group of companies doctrine if it were seated elsewhere—for example, Germany? England?
What law did the court in Peterson Farms apply to determine whether the group of companies doctrine could be applied? Note that Peterson Farms involved an action to annul an award made in England; suppose that the award in Peterson Farms had been made in France. Would the English court have nonetheless refused to apply the group of companies doctrine? Suppose that the parties’ agreement to arbitrate was governed by French law.
(d) Criticism of group of companies doctrine. Consider the criticism of the group of companies doctrine in Peterson Farms. Is that criticism warranted?
12. Estoppel as basis for subjecting non-signatory to arbitration agreement. Particularly in common law jurisdictions, “estoppel” is a well-recognized legal doctrine, which can be invoked to preclude parties from denying that they are party to arbitration (or other) agreements. In these jurisdictions, estoppel is defined in various ways, but generally means that a party is precluded by considerations of good faith from acting inconsistently with its own statements or conduct. See G. Born, International Commercial Arbitration 1472-77 (2d ed. 2014); J. Lew, L. Mistelis & S. Kroll, Comparative International Commercial Arbitration ¶7-30 (2003).
A number of authorities have applied estoppel to permit a non-signatory to invoke an arbitration agreement against its signatories: where a signatory claims rights under a contract, which contains an arbitration clause, against a non-signatory, it may be estopped from denying that the non-signatory is a party to the arbitration provision. See, e.g., Thomson-CSF, SA v. Am. Arbitration Ass’n, 64 F.3d 773 (2d Cir. 1995) (courts “willing to estop a signatory from avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed”); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993) (party that asserts claim under contract equitably estopped from denying it is party to contract’s arbitration clause).
Conversely, a signatory to a contract, which contains an arbitration clause, may be permitted to invoke that clause against a non-signatory that has claimed rights under the contract. See, e.g., Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GmbH, 206 F.3d 411, 418 (4th Cir. 2000) (non-signatory bound by arbitration clause because “a party may be estopped from asserting that the lack of his signature on a written contract precludes enforcement of the contract’s arbitration clause when he has consistently maintained that other provisions of the same contract should be enforced to benefit him”); Tepper Realty Co. v. Mosaic Tile Co., 259 F.Supp. 688, 692 (S.D.N.Y. 1966) (“In short, [plaintiff] cannot have it both ways. It cannot rely on the contract when it works to its advantage and ignore it when it works to its disadvantage.”). Consider the discussion of estoppel in Bridas. Do you agree with the court’s conclusion that non-signatories may more readily rely on estoppel against signatories than vice-versa? What sense does this make?
13. Third-party beneficiary status as basis for subjecting non-signatory to arbitration agreement. In many legal systems, non-parties to a contract may, in certain circumstances, invoke the benefits of that contract as third-party beneficiaries. In such circumstances, the third party may either be able to invoke or be bound by an arbitration clause contained in the contract. See, e.g., Tractor-Trailer Supply Co. v. NCR Corp., 873 S.W.2d 627 (Mo. Ct. App. 1994) (third-party beneficiary that invokes contract is bound by its arbitration clause); Nisshin Shipping Co. v. Cleaves & Co.  1 All ER (Comm) 481 (QB) (English High Ct.) (brokers, who had status as third-party beneficiaries of charters, entitled to arbitrate against party thereto).
As in many other non-signatory contexts, the decisive factor in third-party beneficiary analysis is generally the parties’ intentions; in some contexts, it may be apparent that the parties did not intend for the third-party beneficiary to be bound or benefitted by the arbitration agreement. See, e.g., McCarthy v. Azure, 22 F.3d 351, 362 n.16 (1st Cir. 1994) (“Because third-party beneficiary status constitutes an exception to the general rule that a contract does not grant enforceable rights to non-signatories, a person aspiring to such status must show with special clarity that the contracting parties intended to confer a benefit on him”: declining to extend arbitration agreement to non-signatory claiming to be third-party beneficiary because agreement did not evidence such intent, and requirements for binding third-party beneficiary “are not satisfied merely because a third party will benefit from performance of the contract”); Judgment of 19 April 2011, DFT 4A_44/2011 (Swiss Fed. Trib.) (third-party beneficiary was subject to arbitration clause where this was common intention of parties and beneficiary, together with signatories, initiated arbitration, thereby agreeing to be bound by clause). In general, what should one assume about a third-party beneficiary’s status under an arbitration clause, contained in the contract that benefits him? What would considerations of efficiency and centralized dispute resolution suggest?
In addition, some courts have required that the third party be entitled to, and assert, contractual rights under a contract in order to be subject to its arbitration clause. See Fortress Value v. Blue Skye  EWHC 1486 (Comm) (English High Ct.) (non-signatory defendants could not claim benefit of arbitration agreement because they did not assert claims arising out of substantive provisions of contract but only sought to rely on limitations as contractual defense); Judgment of 8 March 2012, DFT 4A_627/2011 (Swiss Fed. Trib.) (no third party beneficiary status where alleged third party beneficiary was not granted direct rights).
14. Choice-of-law issues in determining parties to arbitration agreement. What law governs the question whether a non-signatory is bound by an arbitration agreement? As Dow, ICC Case No. 8385, and Peterson Farms illustrate, choice-of-law issues frequently arise in disputes over the identities of the parties to international arbitration agreements.
(a) Effect of separability doctrine on choice-of-law analysis. As discussed above, the separability doctrine permits the application of one law to the parties’ underlying contract and another law to the arbitration clause contained in that contract. See supra pp. 90–93, 287, 300–01. Dow illustrates this point well. What law applied to the underlying contract in Dow? To the arbitration clause? Consider the choice of law analysis in ICC Case No. 8385. What law did the tribunal, the English courts and the French courts consider applicable to the arbitration agreement in Dallah?
Recall the discussion above regarding the laws that are ordinarily applicable to the arbitration agreement (assuming no express choice of this law by the parties): (i) the law applicable to the parties’ underlying contract; or (ii) the law of the arbitral seat. See supra pp. 304–08. Consider again the arguments in favor of each. Is there any reason to prefer one or the other alternative more strongly in the context of determining the law governing the identity of the parties to an arbitration agreement? Is the law applicable to the validity of the arbitration agreement necessarily the same law that should govern the question whether a non-signatory is bound by the arbitration clause? Why or why not?
(b) Relevance of legal theory invoked against non-signatory to choice-of-law analysis. As detailed in the preceding Notes, different legal theories can be invoked to subject non-signatories to an arbitration agreement. For example, would the same law necessarily govern (i) veil-piercing and alter ego status; (ii) agency; (iii) third-party beneficiary status; (iv) guarantee claims; (v) group of companies; and (vi) implied consent claims?
Suppose that A and B enter into an arbitration agreement that is expressly governed by the laws of State X. Does the law of State X necessarily govern the question whether C is an alter ego of B or whether C guaranteed B’s obligations under the arbitration agreement? Suppose that C and B are both companies incorporated in State Y; what law applies to the companies’ alter ego status? Suppose that, in the same hypothetical, the underlying contract is governed by the laws of State Z, and C is a third party beneficiary to the underlying contract under the laws of State Z; should the laws of State X or State Z govern whether C is bound by the arbitration clause?
(c) Choice of law in Peterson Farms. What law did the English court hold applicable to the arbitration agreement in Peterson Farms? Where was the arbitral seat? Why does the court conclude that the choice-of-law clause in the parties’ underlying contract applied to the arbitration agreement? Compare ICC Case No. 8385.
15. Application of form requirements to non-signatory issues. Application of the theories discussed above to bind a non-signatory to an agreement to arbitrate raises questions of compliance with applicable formal requirements for a “written” arbitration agreement. See supra pp. 375–92, 574. Note that the decisions in Bridas, Dow, Peterson Farms, Dallah and ICC Case No. 8385, do not address issues of form. Suppose that the Bridas and Peterson Farms courts had applied alter ego or other theories to hold that non-signatories were bound by the relevant arbitration agreements. Would the formal requirements of Article II of the New York Convention have been satisfied? Of Article 7 of the UNCITRAL Model Law? How were these formal requirements satisfied in Dow and ICC Case No. 8385?
If they are applicable, how are the written form and signature requirements of Article II of the New York Convention (and Article 7 of the 1985 UNCITRAL Model Law) satisfied with respect to the “non-signatories” that are held bound by agreements to arbitrate? Does not, by definition, a non-signatory not sign the arbitration agreement (e.g., in alter ego, group of companies, estoppel, merger, and third-party beneficiary contexts)? What theory can you articulate for why Article II’s form requirement would be satisfied in each of these contexts?
Is it correct to assume that Article II’s form requirement must be satisfied with respect to the question of what parties are bound by the arbitration agreement, as distinguished from the question whether there was a valid arbitration agreement between its original signatories? Consider the following rationale:
“this formal [writing] requirement only applies to the arbitration agreement itself, that is to the agreement … by which the initial parties have reciprocally expressed their common will to submit the dispute to arbitration. As to the question of the subjective scope of an arbitration agreement formally valid [under this writing requirement] the issue is to determine which are the parties which are bound by the agreement and eventually determine if one or several third parties which are not mentioned therein nevertheless enter into its scope ratione personae....” Judgment of 16 October 2003, DFT 129 III 736 (Swiss Fed. Trib.).
Is this persuasive? What is the purpose of the form requirement? See also Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (2009) (“‘traditional principles’ of state law allow a contract to be enforced by or against nonparties to the contract through ‘assumption, piercing the corporate veil, alter ego, incorporation by reference, third party beneficiary theories, waiver and estoppel’…. If a written arbitration provision is made enforceable against … a third party under state contract law, the [FAA’s writing requirement is] fulfilled”).
16. Characterization of non-signatory issues. Should the identity of the parties to the arbitration agreement be characterized as a question of formation or existence of a valid agreement to arbitrate or a question of the agreement’s scope? What are the legal consequences of each characterization? Consider: First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (holding, in case involving non-signatory issue: “When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally … should apply ordinary state-law principles that govern the formation of contracts.”); Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Gov’t of Pakistan  UKSC 46, ¶11 (U.K. S.Ct.) (“The ‘validity’ of the arbitration agreement depends in the present case upon whether there existed between Dallah and the Government any relevant arbitration agreement at all”); Judgment of 19 August 2008, DFT 4A_128/2008, ¶4.1.1 (Swiss Fed. Trib.) (“The question as to the subjective bearing of an arbitration agreement—at issue is which parties are bound by the agreement and to determine to what extent one or several third parties not mentioned there nonetheless fall within its scope ratione personae—relates to the substance and accordingly must be resolved in light of [Article 178(2) of the SLPIL]”); Aloe Vera of Am., Inc. v. Asianic Food (S) Pte Ltd,  SGHC 78 (Singapore High Ct.) (refusing to consider argument that non-signatory was not bound by arbitration agreement under Article V(1)(c), on grounds that Article V(1)(c) of the New York Convention, concerned the “scope of the arbitration agreement, rather than … whether a particular person was party to that agreement” and considering (but rejecting on the facts) the question whether the arbitration agreement bound the non-signatory).
B. ALLOCATION OF COMPETENCE TO DECIDE NON-SIGNATORY ISSUES
Non-signatory issues also raise questions concerning the allocation of jurisdictional competence between arbitral tribunals and national courts. In particular, who should be permitted initially to consider and decide whether a non-signatory is bound by an arbitration agreement—the arbitrators or a national court? The materials excerpted below consider this issue.
ORIENTAL COMMERCIAL & SHIPPING CO. (U.K.) LTD v. ROSSEEL, NV
609 F.Supp. 75 (S.D.N.Y. 1985)
LEISURE, District Judge. Defendant moves pursuant to Article II(3) of the New York Convention and 9 U.S.C. §206 to compel arbitration.... Rosseel NV (“Rosseel”), a Belgian corporation, entered into a contract to purchase specified oil from Oriental Commercial and Shipping Co. (U.K.) Ltd (“Oriental U.K.”). The oil was apparently never delivered and Rosseel alleges damages as a result. Oriental Commercial and Shipping Co. Ltd (“Oriental SA”) is a Saudi Arabian company with … representative offices located throughout the world. The Bokhari family owns both Oriental SA and Oriental U.K. but neither corporation owns shares of the other. Oriental SA was not a signatory to the contract of sale between Oriental U.K. and Rosseel.
Rosseel served its Notice of Intention to Arbitrate upon Oriental U.K. and Oriental SA demanding arbitration under the contract. Oriental SA responded with a petition to stay arbitration….
The arbitration provision in the contract is the only contract term here in dispute. Oriental U.K.’s telex to Rosseel stated the terms of the agreement which included the following provision: “Arbitration: If required in New York City.” Oriental U.K. and Oriental SA claim that the wording of the phrase is insufficient to create an enforceable arbitration provision…. Additionally, Oriental SA claims the arbitration clause is enforceable, if at all, between Oriental U.K. and Rosseel only....
[The court first held that the arbitration clause was valid and encompassed the dispute.] It is within the province of this Court to determine whether Oriental SA, although not formally a party to the arbitration agreement, should be made a party to the arbitration proceeding in addition to Rosseel and Oriental U.K. Orion Shipping & Trading Co. v. Eastern States Petroleum Corp., 312 F.2d 299 (2d Cir. 1983). Ordinary contract and agency principles determine which parties are bound by an arbitration agreement, and parties can become contractually bound absent their signatures. Rosseel suggests two theories to support its contention that Oriental SA should be made a party to the arbitration proceeding. The first is that Oriental U.K. is merely the alter ego of Oriental SA. The second alleges that Oriental U.K. acted as Oriental SA’s agent in contracting with Rosseel. Rosseel claims that either theory allows this Court to pierce the corporative veil and bind Oriental SA to the arbitration agreement.
To apply the alter ego doctrine to justify the disregard of a corporate entity, the court must determine that there is such unity of interest and ownership that separate personalities of the corporations no longer exist, and that failure to disregard the corporate form would result in fraud or injustice. However, a stringent showing is required before a court will pierce the corporate veil. The courts do not lightly disregard the separate existence of related corporations, even in deference to a strong policy favoring arbitration of private commercial disputes. Coastal States Trading, Inc. v. Zenith Navigation SA, 446 F.Supp. 330, 387 (S.D.N.Y. 1977).
There are insufficient facts before the Court to determine whether Oriental SA should be made a party to the arbitration proceeding. Consequently, by June 1, 1985 the parties shall complete discovery on the issue of whether Oriental SA is a party to the arbitration agreement with regard to this transaction. At that time the Court shall conduct an evidentiary hearing on this issue.
The Court notes that an alternative procedure … may be useful to expedite resolution of this matter. With the assistance of this Court, if required, the parties may stipulate that a final determination of whether Oriental SA is bound by the arbitration agreement would be stayed pending arbitration of Rosseel’s claims against both companies. Oriental SA would fully participate in the arbitration proceedings. If Rosseel prevails in its claim, and Oriental U.K. alone is unable or unwilling to satisfy the arbitration award, this Court, upon Rosseel’s motion, will order discovery to proceed in the manner set forth above. An evidentiary hearing would then be held to determine whether Oriental SA was a party to the arbitration agreement and thus bound by the arbitration award. If the parties agree to this latter procedure, the matter will be referred to the [AAA]. Otherwise, Rosseel’s motion for appointing of an arbitrator is stayed pending this Court’s determination of the identity of the parties….
BUILDERS FEDERAL (H.K.) LTD v. TURNER CONSTRUCTION 655 F.Supp. 1400 (S.D.N.Y. 1987)
HAIGHT, District Judge. [Builders Federal (Hong Kong) Ltd (“Builders Federal”) is a Hong Kong corporation. Turner Construction (“Turner”) and Turner International Industries, Inc. (“Turner International”) are incorporated in the United States; Turner owned 100 percent of a Singapore company, Turner (East Asia) Pte Ltd (“TEA”); TEA was the main contractor for a major construction project in Singapore. Builders Federal was a subcontractor to TEA, pursuant to an agreement between TEA, Builder Federal and other subcontractors; Turner and Turner International were not parties to the subcontract. The subcontract contained an arbitration clause, providing for arbitration in Singapore. In addition the clause provided that:
“… if the dispute or difference between the Contractor and the Subcontractor is substantially the same as a matter which is a dispute or difference between the Contractor and the Employer under the Main Contract the Contractor and the Sub-Contractor hereby agree that such dispute or difference shall be referred to arbitration pursuant to the terms of the Main Contract.”
Disputes arose during the construction project and TEA ceased work. An action was commenced in Singapore courts by Builders Federal against TEA seeking to compel arbitration of disputes between them. TEA refused to arbitrate with Builders Federal on the grounds that the disputes had to be heard pursuant to an arbitration clause in its main contract. Builders Federal and other subcontractors filed a petition in U.S. district court seeking an order compelling Turner, TEA, and various of their affiliates to proceed with arbitration in Singapore and a declaration that each of these entities was bound to arbitrate. The court refused to grant the relief requested, reasoning as follows]....
The briefs of counsel debate at some length just what claims plaintiffs are asserting. Plaintiffs’ basic premise … is that defendants are liable for TEA’s contractual obligations (including the obligation to arbitrate) because TEA is their alter ego. Defendants, for their part, appear to characterize the plaintiffs’ theory as one of implied guaranty of TEA’s performance. Both theories of liability may, in appropriate circumstances, support an order to compel arbitration..
It is clear that plaintiffs state a viable claim under the alter ego theory. The petition is replete with allegations that defendants exercised dominance and control over TEA, and that TEA was under-capitalized. Those allegations are not sufficient of themselves to “pierce a corporate veil” so as to visit upon parent corporations the obligations of a subsidiary. Walkovszky v. Carlton, 276 N.Y.S.2d 585 (1966). But the petition alleges more than that. It alleges that the subcontract between plaintiff’s and TEA obligated TEA to make certain payments to plaintiffs upon termination of the main contract; and that defendants decided that TEA would breach those obligations, sending implementing instructions to TEA. These allegations, even in the absence of allegations of fraud requiring Rule 9(b) particularity, are sufficient to state a claim for alter ego liability. The petition states a viable claim falling within this Court’s subject matter jurisdiction.
In the alternative, defendants ask that proceedings in this Court be stayed pending completion of the arbitration proceedings in Singapore. I will grant that application, subject to the conditions set forth below…. When the existence of any agreement obligating anyone to arbitrate anywhere is at issue, then by definition the [trial under §4 of the FAA] must precede the arbitration. But that is not necessarily so when an arbitration agreement concededly exists, undisputedly binding named parties to arbitrate, and the §4 petitioner claims that non-signatories to the contract are also bound to arbitrate. In those circumstances an arbitration will in any event take place between the named parties to the contract. If the prevailing party’s award is not satisfied by the other party, the prevailing party may subsequently proceed against the non-signatory, either as guarantor of the named party’s obligations or on an alter ego theory…. [T]he Second Circuit’s … holdings … prompted Judge Carter of this Court in Cochin Refineries Ltd v. Triton Shipping Inc. , S.D.N.Y. 74 Civ. 216 (March 19, 1974), to stay a corporate veil piercing effort until resolution of the arbitration between the named parties. Judge Carter wrote: “If plaintiff prevails against Triton at arbitration, and the latter is unable to satisfy the judgment award, plaintiff’s action against the other defendants will still be pending. It will be time enough at that time for a trial to determine whether these defendants are bound.”
I declined to follow Judge Carter’s lead in Hidrocarburos y Derivados, CA v. Lemos, 453 F.Supp. 160, 173-74 (S.D.N.Y. 1977). But in that case, the non-signatory party flatly declared that it would not be bound by any award in the arbitration involving the company for whose performance the non-signatory party was said to be liable. Furthermore, the signatory party was pressing affirmative claims against the §4 petitioner. 453 F.Supp. 174 at n.31. In those circumstances, it seemed to me right to direct that New York arbitrators determine in advance of the arbitration whether the non-signatory parties would be fully bound by the arbitration, both in respect of an obligation to arbitrate and the quantum of the arbitrators’ award….
In the case at bar, were I to “proceed summarily” at this time to the trial of plaintiff’s petition, it would have a disruptive effect upon the pending judicial and arbitral proceedings in Singapore, the agreed-upon situs of the arbitration. Plaintiffs’ brief seeks to minimize that disruption, but it appears to me both real and significant. Plaintiffs’ discovery demands in aid of its alter ego theory are far-reaching, in respect of both document production and answers to interrogatories. The taking of depositions of TEA and defendants’ officers and employees cannot be far behind. I say this not in criticism of the litigation tactics of plaintiffs’ counsel here, but in recognition that such litigation would in all likelihood disrupt and delay the rather stringent procedural deadlines imposed by Mr. Gardam, the Singapore arbitrator.… This Court’s order, adding three additional corporate parties to the Singapore proceedings, would constitute an intrusive action against which comity counsels.
Quite apart from these considerations, resolution of the issues in the Singapore arbitration may well limit or narrow the issues here. That is a sufficient basis for this Court to exercise its inherent power “to control the disposition of the cases on its docket with economy of time and effort for itself, for counsel and for litigants.” There is ample authority in this circuit for staying suits here on alleged guarantees given by corporate parents pending arbitration abroad between plaintiff and subsidiary.
The concerns this Court addressed in Hidrocarburos, are alleviated by the present defendants’ willingness, expressed through counsel, to waive any “due process” arguments arising out of their desired non-participation in the Singapore arbitration. I will exact that undertaking as a condition for a stay of these proceedings.... In addition, this court directs in an exercise of its equitable powers that the defendants take no steps which would hamper the progress of the Singapore arbitration, or serve to impede its completion within a reasonable time. In making that direction, I do not mean to preclude such litigation steps as TEA may be advised by their Singapore counsel to pursue. My focus will be upon possible bad-faith obstructionism generated by the corporate parents…. On these terms and conditions and in the exercise of my discretion, I grant a stay of proceedings under the petition and complaint, including discovery….
BRIDAS SAPIC v. GOVERNMENT OF TURKMENISTAN
345 F.3d 347 (5th Cir. 2003)
PETERSON FARMS INC. v. C&M FARMING LTD
 1 Lloyd’s Rep. 603 (Comm) (English High Ct. 2004)
DALLAH REAL ESTATE & TOURISM HOLDING CO. v. MINISTRY OF RELIGIOUS AFFAIRS, GOVERNMENT OF PAKISTAN
 UKSC 46 (U.K. S.Ct.)
JUDGMENT OF 17 FEBRUARY 2011, GOV’T OF PAKISTAN, MIN. OF RELIGIOUS AFFAIRS v. DALLAH REAL ESTATE & TOURISM HLDG CO.
XXXVI Y.B. Comm. Arb. 590 (Paris Cour d’appel)
1. Allocation of competence to consider identity of parties to arbitration agreement. As with other disputes over the enforceability and interpretation of arbitration clauses, disputes over the identities of the parties to an arbitration agreement give rise to debates concerning the allocation of competence between national courts and arbitrators.
(a) Arbitral awards considering arbitrators’ competence to determine parties to arbitration agreement. The tribunals in Dow and ICC Case No. 8385, excerpted above at pp. 558–62 & 562-66, readily concluded that it had the authority to decide whether the parties’ arbitration agreements were binding on particular parties. Other international tribunals have agreed. See Partial Award in ICC Case No. 4402, IX Y.B. Comm. Arb. 138, 139 (1984). See also supra pp. 218–87.
What was the rationale for the tribunal’s conclusion in Dow that it possessed competence to determine the parties to the relevant arbitration agreement? What role did the ICC Rules (and particularly Article 8 of the 1975 ICC Rules) play in the tribunal’s conclusion? Is there any reason to think that arbitrators would not have competence to determine the parties to an arbitration clause? How (if at all) do disputes regarding the identity of the parties to an arbitration clause differ from other disputes over the validity and interpretation of arbitration agreements?
(b) Arbitrators’ competence to consider identity of parties to arbitration agreement under national arbitration statutes. As discussed above, most arbitration statutes address the allocation of competence between courts and arbitrators to decide disputes over the validity and interpretation of arbitration agreements. See supra pp. 272–84. Consider Articles 7, 8 and 16 of the UNCITRAL Model Law, Articles 1448 and 1465 of the French Code of Civil Procedure and Articles 178 and 186 of the SLPIL, excerpted at pp. 87–90, 144–47 & 158-59 of the Documentary Supplement. How does each provision deal with the allocation of competence to determine the parties to an arbitration agreement?
(c) Court decisions holding that arbitrators can consider identity of parties to arbitration agreement. In Builders Federal, the court upheld an arbitrator’s power to decide, subject to subsequent judicial review, what parties are bound by an arbitration clause. Consider the court’s reasoning. Does the court discuss how the parties’ arbitration clause submitted disputes to arbitration over the parties to the arbitration agreement? Consider also the English and French court decisions, reviewing the arbitrators’ award in Dallah.
(d) Court decisions holding that arbitrators cannot consider identity of parties to arbitration agreement. In apparent contrast to Builders Federal, Oriental Commercial and other courts have suggested that arbitrators should not consider the identity of the parties to an arbitration agreement. See also ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995) (“It is the province of the court, not the arbitrator, to determine whether a party has a duty to arbitrate”); Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir. 2004) (court must determine whether non-signatory is successor corporation before compelling arbitration); Orion Shipping & Trading Co. v. E. States Petroleum Corp., 312 F.2d 299, 301 (2d Cir. 1983); Fiat SpA v. Ministry of Fin. & Planning, 1989 U.S. Dist. LEXIS 11995 (S.D.N.Y.) (“the determination as to whether to afford relief against FIAT, a non-party to the arbitration clause, was not the arbitrator’s to make”). What is the rationale for this result?
(e) Allocation of competence to consider identity of parties to arbitration agreement under FAA. Review the analysis in First Options, excerpted above at pp. 230–33. Does anything in First Options suggest that an arbitral tribunal cannot consider the identity of the parties to an arbitration agreement? Does First Options instead address the finality of the arbitrator’s award after such consideration occurs?
(f) Judicial abstention from considering identity of parties to arbitration agreement under FAA. The Builders Federal court declined to consider whether to compel the various Turner entities, which had not executed the arbitration agreement, to participate in the Singapore arbitration. In doing so, the court cited considerations of comity and deference to the Singapore arbitral proceedings. Was this a sensible decision? Is this the same conclusion as a decision that the parties had agreed to arbitrate arbitrability issues? Does the FAA permit the abstention practiced in Builders Federal? Other U.S. lower courts have concluded that it does not and have compelled the joinder of non-signatories. O & Y Landmark Assocs. of Va. v. Nordheimer, 725 F.Supp. 578 (D.D.C. 1989). Note that, in Builders Federal, the court only agreed to abstain from deciding the proper parties to the arbitration after extracting commitments from the non-signatories to be bound by the award. Is this appropriate? Is it less of an interference in the Singapore arbitration than compelling the non-signatories to arbitrate? Why would the Turner companies have agreed to such an arrangement? Consider the issue of discovery in the Singapore arbitration.
(g) Allocation of competence to consider identity of parties to arbitration agreement under prima facie jurisdiction standard. Consider again the approach to the allocation of jurisdictional competence to consider the existence and validity of an arbitration agreement under French law. See supra pp. 274–75. Is there any reason not to apply the general French approach to consideration of the identity of the parties to an arbitration agreement?
(h) Allocation of competence to consider identity of parties to arbitration agreement under UNCITRAL Model Law. Consider again the approach to the allocation of jurisdictional competence to consider the existence and validity of an arbitration agreement under the Model Law. See supra pp. 275–77. Again, is there any reason that this approach should not apply to consideration of the identity of the parties to an arbitration agreement?
2. Finality of arbitral award determining identity of parties to arbitration agreement. If an arbitral tribunal considers the identity of the parties to an arbitration clause, what are the effects of its jurisdictional award? Is the award a final resolution of the identity of the parties to the arbitration agreement, or is it subject to subsequent judicial review? If the latter, what standard of judicial review is appropriate?
(a) Finality of arbitral award determining identity of parties to arbitration agreement under FAA. Consider the court’s decision in Bridas. Does the court treat the arbitrators’ award regarding the identity of the parties to the arbitration agreement as final? Or is the award subject to judicial review? Under what standard?
Does the Bridas court recognize circumstances in which the arbitrators’ decision regarding the identity of the parties to the arbitration agreement would be final? When? Recall the First Options holding that, where there is “clear and unmistakable” evidence of an agreement to arbitrate disputes over the identity of the parties to an arbitration agreement, the arbitrators’ resolution of this issue is final, subject to only minimal judicial review in a vacatur action. See supra pp. 230–33, 280–83. When will there be “clear and unmistakable” evidence of an agreement to arbitrate disputes over the identity of parties to the arbitration agreement? What might constitute “clear and unmistakable” evidence that a party had agreed to arbitrate arbitrability issues? Wouldn’t such evidence necessarily require showing (in court) that the company was a party to the arbitration agreement itself? See supra pp. 281–83, 373–74.
(b) Finality of arbitral award determining identity of parties to arbitration agreement under UNCITRAL Model Law. Consider the court’s decision in Peterson Farms under the English Arbitration Act. Does the court treat the arbitrators’ determination of the identity of the parties to the arbitration agreement as binding? What standard of review does the court appear to apply? Compare the standard of review of the English court in Dallah. Note that Dallah involved recognition of a foreign award, not annulment of an award made in England.
(c) Finality of arbitral award determining identity of parties to arbitration agreement under French law. What standard of review did the Paris Cour d’appel apply in Dallah?
(d) Appropriate standard of judicial review of arbitral award determining identity of parties to arbitration agreement. What is the appropriate standard of judicial review of an arbitral award’s determination of the identity of the parties to an arbitration agreement? Is de novo judicial review appropriate? Is complete judicial deference to the arbitrators’ decision appropriate? Is there a sensible middle ground?
3. Determining parties to arbitration agreement in action to enforce arbitral award. Suppose that an arbitral award is made against one party and then is sought to be enforced against another entity. May a party seek to enforce an award made against one entity against another entity? For a negative answer, see IMC Aviation Solutions Pty Ltd v. Altain Khuder LLC,  VSCA 248 (Victoria Ct. App). A few courts have suggested, however, that where factual issues are simple, an award made against one party can be enforced against another entity. See Productos Mercantiles etc. v. Faberge USA, Inc., No. 92 Civ. 7916 (S.D.N.Y. Sept. 14, 1993) (alter ego liability can be considered in §9 action to confirm award, where “factual determination at issue is not complex”); Int’l Ass’n of Machinists, Inc. v. Numberale Stamp & Tool Co., 1987 U.S. Dist. LEXIS 12736 (S.D.N.Y.); In re Arbitration Between Bowen & 39 Broadway Assocs., 1992 WL 73480 (S.D.N.Y); Orlogin, Inc. v. U.S. Watch Co., 1990 U.S. Dist. LEXIS 7794, at *17 (S.D.N.Y.).
Some courts have also suggested that an arbitral award can be enforced, after it has been confirmed against one party, against another party. See Carte Blanche (Singapore) Pte, Ltd v. Diners Club Int’l Inc., 2 F.3d 24 (2d Cir. 1993); Cecil’s, Inc. v. Morris Mechanical Enters., Inc., 735 F.2d 437 (11th Cir. 1984) (award enforced against non-signatory subcontractor); Orion Shipping & Trading Co. v. E. States Petroleum Corp., 312 F.2d 299 (2d Cir. 1963); Gilberg Switzer & Assocs. v. Nat’l HousingP ‘ship, Ltd, 641 F.Supp. 150 (D. Conn. 1986) (award enforced against general partner and third-party defendant). Other courts regard a party’s failure to join a non-party to an arbitration as a waiver of any right to enforce the award against the non-party. Brownko Int’l, Inc. v. Ogden Steel Co., 585 F.Supp. 1432 (S.D.N.Y. 1983) (where party to arbitration tried to join third party, but abandoned effort, it cannot later attempt to enforce award against that third party).
2. G. Born, International Commercial Arbitration 1406-10 (2d ed. 2014).
3. A separate issue is whether an entity that is a party to a multiparty arbitration agreement may properly be made a party to a particular arbitration that is commenced under the agreement. For example, if A, B and C are parties to an arbitration agreement, and an arbitration is brought only between A and C, can B either voluntarily intervene or be non-voluntarily joined by A or C? We discuss this issue below. See infra pp. 933–60.
5. Once it has been determined that the corporate form was used to effect fraud or another wrong upon a third-party, alter ego determinations revolve around issues of control and use. On remand, the court should explore the totality of the environment in which Turkmenneft operated, including those factors normally explored in the context of parent-subsidiary alter ego claims, such as whether: (1) the parent and subsidiary have common stock ownership; (2) the parent and subsidiary have common directors or officers; (3) the parent and subsidiary have common business departments; (4) the parent and subsidiary file consolidated financial statements; (5) the parent finances the subsidiary; (6) the parent caused the incorporation of the subsidiary; (7) the subsidiary operated with grossly inadequate capital; (8) the parent pays salaries and other expenses of subsidiary; (9) the subsidiary receives no business except that given by the parent; (10) the parent uses the subsidiary’s property as its own; (11) the daily operations of the two corporations are not kept separate; (12) the subsidiary does not observe corporate formalities. Additional factors include: (1) whether the directors of the “subsidiary” act in the primary and independent interest of the “parent”; (2) whether others pay or guarantee debts of the dominated corporation; and (3) whether the alleged dominator deals with the dominated corporation at arms length.
While the preceding considerations are adaptable to a certain degree to the context of a sovereign government and its instrumentality, the district court should also consider the factors that we take into account when determining if a state agency is the “alter ego” of a state for 11th amendment sovereign immunity purposes: (1) whether state statutes and case law view the entity as an arm of the state; (2) the source of the entity’s funding; (3) the entity’s degree of local autonomy; (4) whether the entity is concerned primarily with local, as opposed to statewide, problems; (5) whether the entity has the authority to sue and be sued in its own name; and (6) whether the entity has the right to hold and use property.
6. Article 1502(1) of the French [New] Code of Civil Procedure provide[d]:
“Appeal of a court decision granting recognition or enforcement is only available on the following grounds: (1) if the arbitrator has rendered his decision in the absence of an arbitration agreement or on the basis of an arbitration agreement that is invalid or that has expired;….”