Originally from Leading Arbitrators' Guide to International Arbitration - 2nd Edition

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I. LESS-THAN-OBVIOUS PARTIES

A. Extending Arbitration Clauses

Like consummated romance, arbitration rests on consent. An agreement of some sort waives each side’s right to invoke the jurisdiction of otherwise competent courts.

Nevertheless, arbitrators do hear cases involving entities and individuals that never signed an arbitration clause. Continental scholars refer to “extending” the arbitration clause, while lawyers in Anglo-American traditions tend to speak of “joining” non-signatories.

Bringing an additional party into the proceedings often justifies itself on grounds such as apparent agency, veil-piercing, alter ego and estoppel, and can be sought by either signatories or non-signatories. Reaching for the financial resources of a large shareholder, claimants sometimes file arbitrations against a parent company. Conversely, respondents in American court action often seek arbitration as a way to escape the perceived unpredictability of jury verdicts.

For arbitrators, motions to join non-signatories create a tension between two principles: maintaining arbitration’s consensual nature, and maximizing an award’s practical effectiveness by binding related persons. Pushed to the limit of their logic, each goal points in an opposite direction. Resolving the tension usually implicates the two doctrines discussed below, implied consent and disregard of corporate personality.