Originally from ADR and the Law - 22nd Edition

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Second Circuit—Foreign Award–New York Convention¬–Non-Signatory¬–Egyptian Law–Piercing Corporate Veil

The Second Circuit determined that it was the duty of the district court to decide whether a non-signatory was bound by its subsidiary’s signature on an arbitration agreement under U.S. contract or agency law. Sarhank Group v. Oracle Corp, 404 F.3d 657 (2d Cir. 2005).

Oracle Corporation, a Delaware corporation with its principal office in California, has a wholly owned subsidiary, Oracle Systems, established under the laws of the Republic of Cyprus. In June 1991, Sarhank Group and Oracle’s subsidiary entered into a bilateral executory agreement. The agreement contained an arbitration clause submitting all disputes to arbitration under Egyptian law. Oracle itself was not a signatory to the agreement, and it did not execute any written agreement to arbitrate with Sarhank. In 1997 a dispute arose between Sarhank and Oracle's subsidiary. Sarhank served a demand for arbitration on both oracle and its subsidiary. The arbitration panel determined that Oracle was subject to the arbitration agreement its subsidiary had signed and issued a decision holding Oracle and its subsidiary jointy and severally liable to Sarhank. Thereafter, Sarhank petitioned a district court in New York to confirm and enforce the foreign arbitration award against Oracle. In February 2004, the district court ordered an amended judgment confirming the award and additionally awarded pre-judgment interest to Sarhank. Oracle appealed.