Extending the Application of an Arbitration Clause to Non-Signatories: Which Law Should Apply?

Abstract

Arbitration law imposes strict form requirements on arbitration agreements, but once these are met, the subsequent question of who is a proper party to the agreement may be determined without reference to similar requirements. One such question is whether a third party, which is not a party (or 'signatory') to the contract containing the arbitration agreement, may nevertheless be bound to arbitrate. While various legal doctrines in various jurisdictions permit third party non-signatories to be bound to contracts, arbitral tribunals encounter difficulty deciding which law, rule or principle should ultimately determine the matter. As long as this question is determined by reference to national laws, transnational business actors face a juridical framework that is complex, but predictable nonetheless. However, some arbitral tribunals have decided this question by reference to a broader set of principles including lex mercatoria, bona fides, or agreement of the parties. The availability to arbitral tribunals of divergent laws, principles and approaches to resolving this question creates considerable uncertainty for transnational actors.