The Scope of an Arbitration Agreement Is a Third Party Bound by It - Dissertation Example

The arbitration agreement or clause is usually attached to a principal contract defining the relationship between the parties. When claims arise based on the main contract, then arbitration is resorted to. There is a system of rights and obligations that come into play that occasionally involves third parties non-signatory to the contract (and consequently the arbitration clause) either as beneficiary or in some other capacity that is intricately connected to the transaction subject of arbitration.

A dilemma is created when the need arises to include such third party under the coverage of the arbitration procedure to provide complete relief to the signatory parties, as this goes against the consensual nature of the arbitration procedure and the legal principle that only signatories to a contract may be bound by it. The problem is already difficult to address in the context of national law. Where the dispute involves a transaction between parties in different countries, however, then the dilemma becomes more complicated.

Arbitration being an informal process, it relies much on broad considerations of case law, customs, and traditions, and of course the original intention of the parties which, of itself, may also be interpreted from the viewpoint of tradition. In the case of international commercial disputes, where the only practical recourse is through arbitration, the matter of which laws should govern becomes itself a complication to the adjudication of the original dispute. The intricacies of international public law and conflicts in international private law between the countries confound the use of customs and traditions and the interpretation of the parties’ original intention; this makes third party inclusion more difficult to determine, and an examination of existing case law bears witness to this.

Given different situs of the arbitration proceedings, sometimes conflicting decisions are issued by different arbitration institutions. This research is essentially a cursory survey of the provisions, doctrines, and case law on the matter of inclusion in arbitration proceedings of third parties who are non-signatories to the arbitration agreement.