Non-Signatory parties to multi-party ICC arbitrations

It is common ground that an arbitration clause generally binds only the signatories to the agreement, reflecting the fact that arbitration is consensual in nature. There are, however, exceptions to this rule, for example, where a non-signatory parent company is required to participate, either voluntarily or against its will, in an arbitration involving its subsidiary. This is often referred to as the "group of companies doctrine".

Second, a non-signatory company held to be the alter ego of an affiliate signatory company may be required to participate in an arbitration involving its affiliate: the "piercing the corporate veil" theory. Finally, an arbitral agreement may be held to include non-signatories when assent may fairly be implied by their conduct due to their active participation in the negotiation or execution of the contract in question. This situation is also usually connected with the group of companies doctrine.

Manuel P. Barrocas socio y árbitro del bufete Barrocas Sarmento Neves, pone de relieve los problemas que surgen cuando una parte no signataria en un arbitraje tiene que aceptar una sede hostil a sus intereses para un proceso arbitral. Cita como ejemplo una reciente decisión de la Cámara de Comercio Internacional (CCI) por la que no sería necesario cambiar la sede de arbitraje seleccionada con anterioridad por las partes si posteriormente fuese determinado que la sede podría ser perjudicial a una parte no signataria. El autor opina que la CCI debería revisar su planteamiento ya que este tercero se vería obligado a participar en los procedimientos de arbitraje y a aceptar el acuerdo final.

The choice of arbitrator, in accordance with Article 10 of the ICC Arbitration Rules, should be by agreement of all the co-respondents including the non-signatory party.

However, a non-signatory party has no influence over the arbitration seat if this has been previously chosen by the signatory parties. This circumstance may lead to inequality as between the parties and will constitute a double burden for the non-signatory party, who may be compelled to participate in an arbitration it never agreed to and without many of the safeguards and rights afforded to the signatory parties.

A non-signatory party, particularly where it is not part of a group company structure, may be forced into the potentially prejudicial situation of having to accept an arbitration seat which is hostile to its interests. The independence and neutrality of the arbitration seat in international arbitration will be compromised because a foreign party may effectively be compelled to participate in what is truly a domestic arbitration because the arbitration seat, lex causae and lex arbitri and nationality of the signatory parties correspond to the place of the nationality of the arbitration seat.

This very point was recently submitted to the ICC Court for determination. The Court treated the arbitration seat as set in stone on the basis that this was chosen in advance by the signatory parties. It showed no tolerance or flexibility in relation to the position of the non-signatory party, which had been compelled to participate in an arbitration with a seat completely alien to it.

This position is based on Article 14(1) of the ICC Arbitration Rules, which provides that the place of arbitration shall be fixed by the ICC Court unless agreed upon by the parties.

Our view is that the ICC Court´s position is to be criticised. Its inflexible approach results in a non-signatory party being unprotected, with the Court taking no steps to ensure the neutrality of the forum. Article 14(1) refers to the parties to the arbitration agreement, not a non-signatory party not wishing to participate in the arbitration.

This double difficulty may be summarised as follows. First, a third party is bound by and compelled to participate in an arbitration it has not chosen, often against its will. Second, the ICC Court's approach is rigid and formalistic without consideration of a non-signatory´s desire to have its case heard in a neutral arbitration seat.

The Court therefore needs to urgently review its approach in these cases. The intervention of a third party in an arbitration has a direct impact on the choice of the arbitration seat. There should be no question that ensuring the neutrality of the seat for all parties concerned must prevail over the prior choice of the signatory parties.

If this position is not reviewed it will result in non signatories being treated as second class parties and being place at a procedural disadvantage.

Manuel P. Barrocas is active in international arbitrations before the ICC Court both as an arbitrator and advocate with a particular focus on M&A and investment disputes. He can be contacted at mpbarrocas@barrocas.com.pt.

Non-Signatory parties to multi-party ICC arbitrations

Garcia-Sicilia

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