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Stockholm Arbitration Report (SAR)

Preview Page SAR 2001 - 1

Final Arbitral Award rendered in 2000 in case 108/1997

Observations by Michael S. Walker

Subject-matters:

(1) Law applicable to the obligation to arbitrate.

(2) Whether, because of its conduct, a parent company is considered party to an arbitration agreement concluded by its subsidiary.

(3) Liability for arbitration costs in a parallel arbitration.

Findings:

(1) The law applicable to the agreement to arbitrate is the law to which the agreement has the strongest connecting factors. The place of arbitration is considered a strong connecting factor.

(2) Under the Swedish contractual principle of “theory of trust”, where a parent company holds itself out as the party managing and implementing a contract between one of its subsidiaries and a third party, by means of renegotiating such contract and making payments thereunder, the third party is entitled to trust its impression that the parent company has entered as a party into the same contract.

Where a parent company’s conduct must be considered to constitute acceptance of the entire contract, it includes the agreement to arbitrate any dispute with the third party.

(3) The parent company is not held liable for the arbitration costs incurred by its subsidiary in a parallel arbitration against the third party.

Parties:

Claimant: X (United States)

Respondent: Z (Russian Federation)

Subsidiary of the Respondent: Y (Russian Federation)

Place of arbitration: Stockholm, Sweden

Nationality of arbitrators:

Chairman: Swedish

Arbitrator: Swedish

Arbitrator: Russian