- Research/Scholar Paper name – “Extending Arbitration Agreement to Non-Signatories”
- Author: Ridima Gupta
- Institution: OP Jindal Global University
- Affiliation: Centre for Study of Contemporary Legal Issues
- Date of Publication: 01/07/2022
Abstract:
The rapid globalization and growing institutionalization of international commercial disputes have led to disputes which are not only between signatories to an arbitration agreement but also among those parties who have not signed the agreement. Since arbitration is a manifestation of a contractually agreed obligation that should bind only those parties who have agreed to be bound by the contract, Indian courts have extended the agreement to non-parties using the doctrine of a group of companies and piercing the corporate veil. However, there has been no uniformity in the decisions. There have been conflicting opinions about when courts respect privity of contract and when should they apply equitable estoppel. Moreover, there is no universal consensus in other jurisprudences as well. In the majority of the decisions, European jurisprudence seems to rely upon factors such as good faith, the group of companies doctrine, and the avoidance of a denial of justice. Recently Swiss Supreme Court held, “unless the party interferes in the negotiations and/or performance of the underlying agreement in such a way that it expresses by such conduct its willingness to be bound by the arbitration clause, agreement to arbitrate cannot be extended to such a party.” Whereas, there is not a single decision in which English Courts have extended arbitration agreements to non-signatories on the basis of implied consent. For instance, in ArsanoviaLtd. & Ors v. Cruz City Mauritius Holdings, the High Court said that “English law requires that an intention to enter into an arbitration clause must be clearly shown and is not readily inferred. More so that English law has often gone to reject the application of the doctrine of a group of companies and good faith when extending arbitration agreements. Therefore, there exists a parity when nonsignatories are compelled to participate in arbitrations. Different sets of facts are given different relevance in each jurisdiction. There are no common criteria by which an agreement is extended. The incorporation largely depends upon the jurisprudence developed by the courts in which the seat is situated or the law chosen by the parties. It is a matter of jurisdictional differences and application of the law.