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Electronic copy available at: http://ssrn.com/abstract=1421201 “Non-Signatories” and the Long Arm of Arbitral Jurisdiction V LADIMIR P AVIĆ 1. Introduction Every “traditional” dispute resolution mechanism, be it litigation or arbi-tration, has a design built around compromise. Litigation offers reassuring permanence of court offices, dignity and solemnity of the judicial apparatus and the promise that any mistakes of the lower tier might be rectified at a higher instance. At the same time, rectification might come at a high cost in time, money and subpar quality of decision making. In addition, the resulting judgment may be declared by a judge who is not necessarily well versed in the subject-matter and who is imposed on the parties by the state’s “invisible hand.” Arbitration promises a relatively relaxed, flexible procedural surround-ing, swift delivery of the final award and very limited opportunities for review. Judgment is handed over by those regarded by the parties to be true experts fit for the job. However, setting arbitration in motion requires undertaking certain preparatory steps by the parties. The cornerstone of arbitration proceedings, since the very beginning, has been the arbitration agreement. It is the arbitration agreement that provides mandate for the arbitrators, determines the scope of the subject-matters they can rule on, and sometimes even sets a map of procedural and substantive rules to be followed. Arbitration agreement is the beginning and the end of all things arbitral, so much so that it is often regarded as the single most important and defining feature of arbitration. 1 1 French Cour de cassation, 27 July 1937, Roses v. Moller et Cie I Dalloz 25 (1938). For overview of discussion on contractual nature of arbitration see Fouchard/Gaillard/ Goldman, On International Commercial Arbitration, sec. 44–57; J. Lew, L. Mistelis, S. Kroell, Comparative International Commercial Arbitration, Kluwer Law International 2003, p. 77 et seq. with further references. Electronic copy available at: http://ssrn.com/abstract=1421201 214 RESOLVING INTERNATIONAL CONFLICTS However, the view on what the essence of arbitration is has been any-thing but uniform. A fair number of authors pointed out that while the whole process is about delivering justice and contracted for and organized privately, its end result is to produce a decision whose standing equals court judgment. It was submitted that the primary feature of arbitration is to displace jurisdiction of state courts, and that this mission was more important than the means of accomplishing it. 2 As it often happens, both sides (“jurisdictionalists” and “contractual-ists”) were right to a certain degree. Arbitration did take off because states actually allowed it to take off, and it was permitted to develop in the shadow of the existing systems of the judiciary. At the same time, this alternative way of settling disputes could only be initiated if there was agreement of the parties to resort to it. It was a way of asking parties if they “really, truly want” to displace regular recourse to courts. This trade-off promised them a relaxed and supposedly less costly procedure, after the initial transaction costs of concluding an arbitration agreement. As arbitration became a primary dispute resolution choice of those en-gaged in international transactions, the limitations of such a compromise design began to show. Litigation could quickly attract additional parties with rights and obligations inextricably linked to the srcinal controversy. Attraction of jurisdiction is a powerful tool of the judiciary which can greatly maximize its efficiency. Yet this possibility was denied to the arbi-trators: they could adjudicate only a dispute between the parties to the arbitration agreement. In most cases this meant that there was a total of two parties unambiguously opting out of court adjudication. However, just as the models used by economists cannot possibly capture the complexity of everyday interactions, the two-party design of the arbitration agreement is every now and then less than adequate when it comes to encompassing transactions that involve several actors. One way of dealing with this problem is to anticipate it. If the web of relationships is complex (as it often is in, e.g. construction projects), so should be the pertinent clause. Drafting arbitration agreements for possi-ble multi-party arbitration is anything but straightforward. Its goal is to 2 The most forceful jurisdictional argument was probably made by F. A. Mann in “Lex Facit Arbitrum,” in P. Sanders, ed., Liber Amicorum Martin Domke , The Hague 1957, p. 158 et seq. As far as case law is concerned, the high water mark so far is perhaps a judg-ment of the Supreme Court of Columbia commented in A. M. Garro, “The Colombia Supreme Court Holds Unconstitutional the Participation of Foreign Arbitrators Under the New Arbitration Law,” 1 American Review of International Arbitration 594 (1990). “Non-Signatories” and the Long Arm of Arbitral Jurisdiction 215 test the srcinal two-party design of arbitration without seriously distort-ing it—and so is the Anpassung of provisions related to appointment of arbitrators and other matters. 3 Another way of dealing with the problem is to cooperate: if the dispute clearly seems to reach the parties not having concluded the arbitration agreement srcinally, there is nothing to stop them from executing another one and embracing arbitration as their preferred method of dispute settle-ment. However, expecting a potential debtor to submit to arbitration and forego a potentially time-wasting jurisdictional challenge might prove too optimistic. The final way of testing the limits of arbitral design is, therefore, con-frontational. As a rule, an arbitration agreement should be in writing or evidenced in writing—more often than not this also means that the parties have affixed their signatures to it. There are generally two possible scenar-ios for the entities not appearing to be parties to the arbitration agreement to enter the stage: one is the role of the claimant, alone or alongside the party whose participation is non-contestable; another is at the receiving end, as the sole or an additional respondent. Given the traditional setting of “an agreement in writing, signed by both parties,” such third parties have repeatedly been referred to as “non-signatories.” This paper will try to shed some light on the pattern of “extension”: not on the situation where one of the parties (through different mechanisms) is replaced by another party stepping into its shoes, but rather a situation where a third party appears before arbitration despite the fact that it does not appear as a party to the arbitration agreement. 4 This either happens when a third party attempts to join the side of the claimant, alongside srcinal claimants—or, even more controversially, where the claimant tries to reach beyond the obvious respondents and get to the solvent com-panies which are not the named parties of the arbitration agreement. 3 The raw data routinely presented at arbitration conferences suggests that, at least when it comes to major institutional arbitration centers, the multiparty disputes are nowadays a rule rather than exception. 4 For other aspects of arbitration despite the parties see T. Várady, “Arbitration Despite the Parties,” in M. Sumampouw et al. eds., Law and Reality, Essays on national and interna-tional procedural law in Honour of Cornelis Carel Albert Voskuil , The Hague 1992, p. 351. 216 RESOLVING INTERNATIONAL CONFLICTS 2. Is the Signature Relevant at All? Traditionally, paramount importance has been accorded to a written arbi-tration agreement. Therefore, it is only logical that the first line of defense of non-signatories would be formal: they have not signed the agreement, hence there is no written form evidencing their consent. Basically, this amounts to declaring that extension of the arbitration agreement to a non-signatory is a contradiction in terms. However, the signature itself has already been abandoned as the formal prerequisite to an effective arbitration agreement. The 1958 New York Convention provided that the term “agreement in writing” includes: (...) arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. 5 It appears that the agreement to arbitrate has to be evidenced in writing, but need not be accompanied by signatures, at least not in the traditional sense of physical alteration or imposition made on paper or comparable material. The second milestone of modern arbitration, 1985 UNCITRAL Model Law on International Commercial Arbitration (Model Law), fur-ther relaxed the writing requirement by providing that the agreement may be contained in, inter alia : (...) exchange of letters, telex, telegrams or other means of telecommunications which provide a record of the agreement, or in exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by an-other. 6 Liberalisation of form requirements gained additional ground in the 2006 Model Law revision: there are now two options to the model. According to the first one, a written agreement exists if it was recorded in any form, regardless of the form of initial conclusion (oral, by conduct, or other-wise). The second option is even more radical and basically amounts to doing away with the requirement of writing altogether. 7 5 New York Convention, Article II.2. See generally N. Kaplan, “Is the Need for Writing as Expressed in the New York Convention and the Model Law out of Step with Commercial Practice?” [1996] 12 Arbitration International 1, 27; M.M. Cohen, “Arbitration ‘Agree-ments in Writing’: Notes in the Margin of the Sixth Goff Lecture” [1997] 13 Arbitration International 3, 273. 6 Article 7 of the 1986 version of the Model Law. 7 Article 7, Options I and II of the 2006 version of the Model Law.
