Non Signatories To Arbitration Agreement

In their desire to emphasize the importance and inviability of the doctrine group, the Indian courts have ruled in favour of extending references to non-signatories to an arbitration agreement, provided certain thresholds are met. The courts have broadened their approach, supported no doubt by the amendments made in 2015 and the 246th report of the Law Commission of India to broaden the principles that were first outlined in Chloro Controls (supra) in the international arbitration scenario on national arbitration. The acquisition of such a position from Ameet Lalchand Shah (supra) and Mahanagar Telephone Nigam (supra) undoubtedly significantly weakened the law of Sukanya Holdings (supra). In addition, Mahanagar Telephone Nigam (supra) provided urgent clarification on the circumstances under which the “business group” doctrine can be invoked. However, as we have seen, the courts in the United Kingdom and Singapore have treated with suspicion the doctrines of the “business group” or the “single economic reality” and rejected their applicability in such legal systems. One of the first known assumptions and preachings of the “Group of Companies” doctrine can be attributed to the CCI Arbitration Award to Dow Chemical v. Isover-Saint-Gobain1. In this case, the litigation adle adhies adhies between several contracts executed by various subsidiaries of Dow Chemical Company (but not of Dow Chemical Company itself) and Isover. Dow Chemical Company has commenced arbitration proceedings with its subsidiaries. Isover challenged the jurisdiction of the rights invoked by Dow Chemical Company on the grounds that it was not a party to the contract. The court upheld his jurisdiction.

In its distinction, the ICC Court of Arbitration stated that mere business relationships between different companies were not sufficient to bind them to a single arbitration and that non-signatory firms must have played a key role in the “conclusion, execution or termination” of contracts. It was treated as follows: 2. The application under subsection 1 is dealt with only if it is accompanied by the original arbitration agreement or a properly certified copy. “66. Although the scope of an arbitration agreement is limited to the parties who have entered into it and to those who are entitled to it, under English law, the courts have also, in some cases, applied the Group of Companies Doctrine. This doctrine has developed in an international context where an arbitration agreement concluded by a company belonging to a group of companies may bind its non-signatory related enterprises or its brother or mother interests, where circumstances show that the mutual intention of all parties was the union of non-signatory signatories and partners. This theory has been applied in a series of arbitrations to justify a court assuming the jurisdiction of a party that is not a party to the contract that contains the arbitration agreement. [“Russell on arbitration” (Twenty Third Edition)

Fotos: Kathrin Leisch
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