In what instances can third parties or non-signatories be bound by an arbitration agreement or award (e.g. by joinder)?
In general, without consent, no one can be bound by an arbitration agreement. Thus, Austrian courts are very reluctant to assume that a party is bound by the arbitration agreement without signing it and do not apply the group of companies doctrine or the piercing the corporate veil theory. There are exceptions, however, including legal successors, third party beneficiary contracts and debt as well as contract assumptions.
As regards awards, section 607 ACCP stipulates that arbitral awards shall have the legal effect of legally binding judgments of domestic courts between the parties of the proceedings. The Austrian Supreme Court ruled that the legal effect of an award only binds the parties that submitted themselves to arbitration in an arbitration agreement. Thus, disputes regarding persons that are not parties to the arbitration agreement allegedly lack arbitrability.
Under general principles of French contract law, agreements bind only the contracting parties (Article 1165, Civil Code). The same rule applies to arbitration agreements, which are normally not binding on non-signatories.
However, in some instances, the French courts consider that it is possible for third parties, in some circumstances, to be bound by an arbitration clause that they have not signed. This may occur, for example, in the context of a group of companies or interconnected contracts (see Question 19).
The existence of a group of companies is, however, not sufficient in and of itself to extend an arbitration agreement to third parties (and in fact, most arbitral tribunals refuse to extend an arbitration clause solely on this basis). It is merely a circumstance that may favour such an extension, which requires interpreting a party’s behaviour to infer its consent to be bound by the arbitration agreement. Accordingly, this doctrine is very fact-dependent, and French courts take into account a variety of elements, particularly the third party’s participation in the negotiation, conclusion, performance and termination of the contract.
The CCP provides no specific rules in relation to the joinder of third parties. In any event, the third party must have given its consent (or be deemed to have given its consent) to be joined to the proceedings.
A third party (even where it was not a party to the arbitration) may also be liable for an arbitration award under the corporate veil piercing and agency doctrines. For example, an award rendered against a State can be enforced against a State-owned company, if the party seeking enforcement of the award can prove that the company is in fact the alter ego (émanation) of that State (see Paris Court of Appeal, 3 July 2003, No. 2002/03185, Société Nationale des Pétroles du Congo). Similarly, an award rendered against a subsidiary would be enforceable against its parent company if the conditions for piercing the corporate veil under French law are met.
Only third parties bound by the arbitration agreement are allowed to join ongoing arbitral proceedings. Such adhesion may happen whether from the date of such agreement or subsequently. Should the adhesion be subsequent it requires the consent of all parties to the arbitration agreement.
In what concerns the effectiveness of the award, it is subject to the general rule applicable to all court decisions, ie, it has a limited effectiveness.
Under Romanian law, the arbitration agreement and the award may not impose obligations on third parties. Debate is ongoing over the extension of the arbitration agreement to non-signatories – for example, following their direct involvement in the negotiation, performance or termination of a contract containing an arbitration clause.
Since the entering into force of the Code of Civil Procedure in 2013, a new provision was introduced stating that third parties may take part in arbitral proceedings following the general civil procedure rules on this aspect, but only if such third party and all the parties agree. Only an accessory joinder claim - meaning a third party bearing an interest voluntarily joins an ongoing procedure to support one of the parties’ positions - is admissible even in the absence of the consent of all the other parties.
Generally, the arbitration agreement is only binding between the parties. However, a third party or a non-signatory may be bound by an arbitration agreement in case of universal succession. Moreover, following a Supreme Court Case in 1997 (the Emja case), it is now generally accepted that an arbitration agreement may be transferred with binding effect also in case of singular succession.
The issue whether a guarantor of any of the parties to the main contract also should be bound by the arbitration clause in the main contract has been deliberately left open for case law to decide and it is fair to say that yet there is no precedence. Rather, case law shows that tribunals and the courts have taken a pragmatic stance and the outcome is very much dependent on the particular circumstances of the case.
Under Swedish law, the approach is generally sceptical towards the so-called 'group of companies' doctrine and the possibility to pierce the corporate veil is very limited. The same goes for binding third parties to an arbitration agreement by so-called third party beneficiary agreements.
Third parties cannot readily be bound by an arbitration clause. In the leading New Zealand case on this issue, the Court of Appeal held that an arbitration clause between A and B did not extend to C so as to give C standing to appeal the arbitral award, notwithstanding that C had – with agreement – participated in the arbitration on a limited basis (Methanex Motunui Ltd v Spellman  3 NZLR 454). Joinder is, however, possible with party agreement (although the Act is silent on this point). There is no recognised third-party notice procedure for arbitration in New Zealand.
Under the AMINZ Arbitration Protocol, third parties, such as subcontractors or insurers, may be invited to join the arbitration by agreement between all parties.
Whether in international arbitration an arbitration agreement can be extended onto a non-signatory third party must always be assessed on a case-by-case basis. Pursuant to the Swiss Federal Tribunal’s case law, an extension of the arbitration agreement onto non-signatory third parties may in the following scenarios be possible:
- A non-signatory third-party may become subject to an arbitration agreement based on an implied intent, typically expressed by such party’s conduct. Under certain circumstances, an interference by a third party in the negotiations or performance of a contract containing an arbitration clause may lead to the applicability of such arbitration clause to the interfering third party.
- Unless express language in the arbitration clause determines otherwise, third party beneficiaries of agreements with arbitration clauses may generally invoke such arbitration clauses when raising claims under the pertinent agreements, even though these third party beneficiaries have not signed the agreement in question.
- In case of assignment of contracts containing an arbitration clause, the arbitration clause is generally also deemed to have been assigned onto the assignee.
- Under the alter ego doctrine, also referred to as the piercing of the corporate veil doctrine, a non-signatory party can be bound by an arbitration agreement, if such non-signatory party can be regarded as an alter ego of a party formally bound by the arbitration agreement. Such assumption requires that a party exerts complete and exhaustive control over another party and has misused such control to such extent that it may be appropriate to disregard the separate legal forms of the two parties and treat them as one entity. However, in Switzerland the separate corporate forms of companies will only under exceptional circumstances be disregarded, such as in case of fraud or blatant abuse of rights.
- It is a matter of debate in Switzerland whether the group of companies doctrine applies in Switzerland. In any event, it is submitted that in many instances where one would apply such doctrine to extend the scope of an arbitration agreement onto a third party, there is a similar likelihood to successfully achieve an extension invoking the doctrine of implied intent of the third party onto whom the agreement is to be extended (see above).
The CPC does not expressly provide for the possibility of third parties or non-signatories being bound by an arbitration agreement or award.
The DIFC Arbitration Law is silent on joinder although the DIFC-LCIA Arbitration Rules permit the joinder of one or more third persons upon application of a party and only where the applicant and the third party have consented in writing to the joinder.
Article 36(1) of the ADGM Arbitration Regulations confers the arbitral institution or, in ad hoc arbitration proceedings, the Court of First Instance of the ADGM with the power to order additional parties to be joined to the arbitration in certain circumstances. However, the ADGM Arbitration Regulations are silent in relation to the addition of non-signatories.
In Malaysia, an arbitration agreement typically does not bind third parties to the agreement. Similarly, due to the unqualified doctrine of contractual privity in Malaysia, a third party may not enforce an arbitration agreement against a contracting party. The above restrictions may be circumvented by an assignment to the third party of a contracting party’s rights under a principal contract which includes an arbitration agreement. In that event, the third party then becomes the assignee who is bound by the arbitration clause.
It should be noted that the Article 17(5), KLRCA Arbitration Rules allow the joinder of third parties to an arbitration, provided that the third party is a party to the underlying arbitration agreement.
In general, an arbitral award does not bind a third party. Malaysian courts are typically hesitant to lift the corporate veil to allow the enforcement of an award against a non-party to the arbitration. There are, however, certain circumstances, such as fraud, which permit the enforcement of an award against a third party.
See answer to Question 19.
Certain institutional rules (e.g. the AAA/ICDR International Arbitration Rules) provide for joinder of third parties.
The IAA does not expressly provide for the possibility of third parties or non-signatories being bound by an arbitration agreement or award. It is silent on joinder.
A third party can be joined to an arbitration under the SIAC Arbitration Rules. A party or non-party may file an application with the Registrar for one or more additional parties to be joined in an arbitration pending under the SIAC Rules as claimant or respondent, provided that: (i) the additional party to be joined is prima facie bound by the arbitration agreement; or (ii) all parties, including the additional party to be joined, have consented to the joinder of the additional party. The party or non-party applying for joinder must at the same time as it files its application for joinder with the Registrar, send a copy of the application to all parties. SIAC Arbitration Rules, Rule 7. Notably, the SIAC Arbitration Rules refer expressly to the rights of ‘non-parties’ to apply to be joined to a pending arbitration (i.e., by intervention).
Regarding the intervention of third parties in the arbitration, we will cover, according to the understanding of the jurists’ opinion, the hypotheses of need of the contradictory integration (compulsory joinder of parties), third-party intervention caused by any of the parties, and voluntary third party intervention. Regarding the compulsory joinder of parties, being indispensable the presence in the arbitration of a third party who has not entered into the compromissum or not signed the contract in which it operates the arbitration clause, the arbitration can’t proceed, and should be provided the involvement of the third under penalty the arbitrator having to terminate the arbitration process without judging the merits. However, if the third party whose presence is necessary in arbitration is not a party to the compromissum, nothing and no one can force him to participate in the arbitration process. If the parties are connected to the same arbitration clause, the solution will be different because the contract may involve several parties and the arbitration may not involve all parties contracting. In this case, it is possible that the arbitrator check the need to involve everyone in the process, causing the intervention of third parties (clause signatories but unrelated to the initiated arbitration proceedings). It will suffice that the party mend its application for arbitrate to engage in arbitration the other signatories of the instrument containing the arbitration clause. In this case, third parties may not choose to accept or not the arbitration and shall integrate the process.
The hypotheses of provoked third-party intervention correspond in the Civil Procedure Code of 2015 to the cases of impleader (causes the introduction in the process of a new demand with increased process object, so that the arbitrator must judge the demand between the original parties and the regressive demand between the original defendant and the impleaded party; if there is no arbitration clause in the contract with the third party, or if the clause point to a different arbitration body that administering the current procedure, the intervention will depend on dual agreement, of the opponent of original defendant and of the impleaded party) and to the cases of third party complaint (the situations are of solidarity, so that the third person called remains legal relationship with the opponent of the person calling; if the arbitration is established by compromissum, signed only between the parties to the contract, the third can only intervene if everyone, including him, agree; if arbitration is established by means of the arbitration clause (inserted in the contract signed between the parties), the consensus for intervention would be guaranteed beforehand, but the situation would not be resolved in the composition of the arbitral court (the third will not have influenced the court's composition)).
The hypotheses of voluntary third-party intervention correspond in the Civil Procedure Code of 2015 to cases of simple intervention or joinder of parties. Transporting the two situations to arbitration, simple assistance can be better controlled than joinder of parties, as in the first case the assistant will not be, as a rule, linked to the arbitration convention, what will submit their entry in the arbitration to the consent of the parties. In the second situation, the third party who pleads entering the arbitration process may be connected to the arbitration convention binding the parties: if the arbitration was established by arbitration clause included in the main contract, the intervenor will be part of the contract and signed the same clause (this will not occur if the arbitration is established by compromissum), what will put the third party in direct contact with the parties; moreover, the third party will occupy in the legal relationship a legal position equal or equivalent to the parties involved in arbitration, so that would not be possible, in such circumstances, to deny the access of the third party to the arbitration processes.
For parties to be bound by an arbitration agreement, generally there must be privity under the law of contract. Non-parties may be bound by the arbitration agreement through the law of contract by means of agency, assignment, or another recognised legal concept.
The Panama Arbitration Law is silent as to whether third parties or non-signatories can be bound by an arbitration agreement or award.
However, one of the two main arbitral institutions in Panama has rules regarding the joinder of third parties to the arbitration proceedings.
Under the rules of the “Centro de Arbitraje y Conciliación de Panamá (CeCAP)”, in the complaint, in the statement of defense, in the counterclaim or in response to the counterclaim, parties may request the arbitration center to join another party or parties to the arbitration, as long as this application is made prior to the constitution of the arbitral tribunal.
The new rules of different Arbitration Courts (e.g. CAM new rules in effect since 1 March 2015) expressly recognize this possibility.
Third parties or non-signatories cannot be bound by the arbitration agreement. Also, according to the Law No. 4686, the arbitral tribunal cannot decide on the interim measures or provisional seizures that are binding third parties.
A party is bound by an arbitration agreement only if such party has agreed to this arbitration agreement, i.e. a party cannot be forced to join an arbitration without its consent. Therefore, a joinder of parties, as practiced in German litigation, is not applicable to arbitration.
If the third party consents, the (original) parties may agree on the participation of hat third party in the arbitration or in institutional rules which provide for a special legal construction of joinder (e.g. the 2009 DISSupplementary Rules for Corporate Law Disputes).
Under Italian law, third parties or non-signatories can join the proceedings if all the parties and the arbitrator(s) agree on it. Joinder is always allowed if it is necessary to sustain the claims of one of the existing parties and it is in the interest of the joining party to intervene or if the joining party must be a party to the proceedings (litisconsorte necessario) to render an effective award.
In addition to the above, some Italian case law supports the view that an arbitration clause is also enforceable and valid against a third-party who has rights under the contract, and assignees of the contract.
See question 9 above.
As a general rule, parties to an arbitration agreement should consent to be regarded as a party to an arbitration agreement.
However, third parties or non-signatories can be bound by an arbitration agreement under the rules of contract law by means of agency, alter ego, implied consent, group of companies doctrine, estoppel, beneficiary law, guarantee, subrogation, succession, ratification and assumption.
An arbitration agreement is generally binding only on the parties. Exceptions extending the arbitration clause to third parties include assignment of the underlying contract, general succession, and acquisition of an enterprise (with respect to disputes concerning liabilities connected with operation of the enterprise). Moreover, an arbitration clause included in the articles of association of a company extends to the company and any subsequent shareholder (the same rule applies also to an arbitration clause included in the statute of an association or cooperative).
The arbitration law does not contain any provisions regarding third-party joinder or notice, but it is generally accepted that it is allowed if both the parties and the third party consent. This could be addressed in the arbitration rules or the arbitration agreement. For example, under the Rules of the Court of Arbitration at the Polish Chamber of Commerce, upon application of a third party the arbitral tribunal may allow it to participate in arbitral proceedings, subject to the consent of the parties.
Cyprus Courts have recognised the defence of state immunity but have clarified that it does not extend to the actions of foreign states which are of a financial and commercial nature that could also be conducted by a natural person (jure gestionis). A state may invoke such immunity via its Defence to the proceedings, and the Tribunal shall decide accordingly.