DOI: 10.14457/tu.the.2023.195
title: Legal effect of arbitration agreement on non-signatories

description: In the modern world, litigation might not be the most suitable course of action in cross-border disputes due to the duration, the inability to address the complexities of cross-border issues, and the gap between the judicial and national court systems. The parties attempt to find different methods of resolving the dispute outside of national courts, referred to as alternative dispute resolution, or ADR. Even though there are numerous kinds of ADR, including but not limited to mediation, conciliation, negotiation, and arbitration. Arbitration is the preferred resolution method for most parties due to the preservation of confidentiality, the impartial selection of arbitrators, and the enforcement of arbitral awards within the contracting states. The arbitration process in Thailand relies on the agreement and mutual consent of the parties, which can be established by either including an arbitration clause in their contract or entering into a separate written arbitration agreement. The absence of the parties’ agreement to arbitrate leads to the arbitral tribunal’s lack of jurisdiction in settling the dispute. Moreover, the absence of an arbitration agreement or its invalidity will result in an award being set aside or refused by the court in accordance with Article V of the New York Convention, the UNCITRAL Model Law, and the Thai Arbitration Act B.E. 2545.The requirement that the arbitration agreement must be in writing and signed by the parties is stated in Article II (2) of the New York Convention, Article 7 of the UNCITRAL Model Law, and Section 11 paragraph 2 of the Thai Arbitration Act. It implies that an arbitration agreement will bind only the parties who agree to submit their dispute to arbitration proceedings by creating a written and signed arbitration agreement; however, those provisions are silent on the parties who are not signing an arbitration agreement but are involved in the underlying transaction. The legal effect of arbitration agreements on non-signatories is still controversial among scholars, arbitral tribunals, and national courts.In today’s globalized economy, the growing complexity of international trade frequently results in multinational business transactions that involve multiple companies. These transactions go beyond the traditional parent-subsidiary structure and instead adopt more complex corporate arrangements. Corporate groups can manifest as contractual or equity-based organizations, joint ventures between independent enterprises, informal alliances, publicly owned multinational corporations, and supranational entities engaged in worldwide business. The question of how we should deal with disputes arising out of transactions with multinational groups of companies may arise.This independent study pursues to seek proper legal provisions and appropriate approaches and solutions for arbitral tribunals and courts to deal with the matter of non-signatories in Thailand, especially to have jurisdiction over the non-signatories by comparing international rules, i.e., the New York Convention, the UNCITRAL Model Law, and foreign legislations as well as landmark case law in France, the United States and the Republic of China. This independent study will focus on the “group of companies doctrine,” under which an arbitration agreement will bind non-signatory subsidiaries or parent companies within the same group as the signatory party. The “piercing of corporate veil doctrine,” in which the non-signatory parent corporation’s veil will be pierced to bind arbitration agreements since it has excessive control over its subsidiaries and its conduct is for its benefit. The “principal-agent doctrine” is one in which the non-signatory undisclosed principal could be bound by the arbitration agreement, even though it was executed by the agent.