Arbitration Jurisdiction and Parties Involved: A Case of Contract Assignment
In this arbitration case, we had the privilege of representing the claimant in a dispute that emerged from the assignment of a contract by one party (the assignor) to its affiliated company (the assignee). The claimant filed a claim naming both the assignor and the assignee as respondents, raising a fundamental question about the jurisdiction of the arbitration and whether the assignor, despite the assignment, could still be considered bound by the arbitration agreement. This dispute highlighted the interplay between contract law, corporate relationships, and arbitration principles.
Our legal stance was grounded in several key arguments. We contended that the assignor could not escape the obligations of the arbitration agreement simply by assigning the contract. Drawing on the doctrine of alter ego and piercing the corporate veil, we argued that the assignor and assignee were, in essence, operating as a single entity under the same corporate umbrella. The assignor’s pervasive role in project financing and operational decisions reinforced this point. Furthermore, we invoked the group of companies doctrine, emphasizing that the assignor was deeply involved in both the negotiation and execution phases of the contract, demonstrating implied consent to arbitration even after the assignment.
The technical aspects of the project also played a significant role in our arguments. The assignor, as the original contracting party, remained a critical stakeholder in the engineering and financial performance of the project. This level of involvement, we argued, should tether the assignor to the arbitration agreement despite the formal transfer of the contract to its affiliate. The doctrine of implied consent was another cornerstone of our case, as the assignor’s continuous participation made it unreasonable to consider them entirely detached from the arbitration process.
Despite our comprehensive approach, the arbitral tribunal, relying on the principle of competence-competence, ruled that it had jurisdiction to decide its own jurisdiction. In its partial award, the tribunal concluded that the arbitration agreement was transferred in full along with the contract to the assignee, leaving the assignor outside the scope of the arbitration. The tribunal rejected our arguments based on the group of companies doctrine and alter ego, stating that there was insufficient evidence to disregard the formal separation between the assignor and the assignee.
This outcome illustrates the strict approach taken by arbitral tribunals in matters of jurisdiction and the involvement of non-signatory parties. It also sheds light on the complexities of extending arbitration agreements in cases involving corporate affiliates, especially in jurisdictions where consent remains a paramount principle. For practitioners and businesses alike, this case underscores the importance of addressing the fate of arbitration clauses explicitly during contract assignments, particularly in sectors like engineering and construction, where corporate relationships are often intertwined with project execution and financing.