Extension of Arbitration Agreements to Third Parties 2.0: Deconstruction, Evolution and Reconsideration - European International Arbitration Review (EIAR) - Volume 9 - Issue 1
Originally from European International Arbitration Review
The arbitration agreement is the cornerstone of any arbitral proceedings, and, in principle, any agreement binds only its parties in accordance with the universal doctrine of “privity”. However, in the context of arbitral proceedings, the definition and scope of a “party” is broadened in some cases, and the arbitration agreement can possibly be extended to non-signatories in other cases. Thus, it may be argued that a coach-and-four is driven through the doctrine of privity in relation to arbitration agreements.
That said, it is worth noting that the extension of the arbitration agreement to third party non-signatories raises fundamental legal issues pertaining to the law governing such extension and its scope in light of the factual matrix of the case and the applicable legal principles. On such account, the issue of extension of the arbitration agreement to third parties and the applicable legal norms thereto continue to be subject to a lot of controversy and heated debate before arbitral tribunals and national courts in diverse jurisdictions, hence the need to deconstruct and reconsider certain legal principles pertinent to issues of extension to third parties.
The intricacy and convolution of this topic is further magnified and amplified by: (a) the fact that international commercial arbitration instruments such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the “NYC”) and the UNCITRAL Model Law on International Commercial Arbitration (the “ML”) do not address such thorny topic; (b) diverse jurisdictions adopt divergent views in this regard which may not only result in conflicting arbitral awards, but inconsistent court rulings as well, which ultimately impacts the requirements of legal certainty and parties’ expectations; and (c) the ramifications of such extension, which may result in arbitral awards rendered for or against a non-signatory, the vacation of arbitral awards by national courts that adopt divergent approach(es), the refusal of recognition and/or enforcement of arbitral awards on the basis of, and/or the creation of limping arbitral awards.