Defining the Party-Who Is a Proper Party in an International Arbitration before the American Arbitration Association and Other International Institutions

Article excerpt


The number of international arbitrations occurring under the auspices of the American Arbitration Association (AAA) has increased dramatically over the past few years. In 2001, 649 new cases, up 26 percent from 510 cases the previous year, were registered at the AAA International Center for Dispute Resolution offices in New York City and Dublin, Ireland, with parties from 63 countries participating in these cases.1 Increasingly, claims brought under AAA's International Arbitration Rules through the AAA's International Center for Dispute Resolution reflect the complex and multi-tiered nature of contemporary international transactions.2 International disputes result from complex, multi-party ventures that implicate numerous parties from different countries, IMAGE FORMULA7IMAGE FORMULA8

which may be connected to the dispute by varying degrees of involvement.3 Such disputes may concern more than one contractual agreement, and one or more of those agreements may not contain arbitration clauses that integrate all of the contracts, or contain an arbitration clause at all. Furthermore, the parties may not even have the same interests at stake or want the same arbitrators to resolve their disputes.4

Ordinarily, a party's ability or obligation to arbitrate an international dispute arises from its consent as a signatory to a contract that contains an arbitration clause.5 Article 1 of the AAA's International Arbitration Rules provides that an international arbitration shall occur "where parties have agreed in writing to arbitrate disputes."6 The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the legal framework by which the international community has chosen to regulate the enforcement of arbitral agreements and awards, imparts a similar writing requirement.7 Thus, it is difficult for an arbitral tribunal to consolidate and join related claims from different contracts of the same parties, or to include parties who are not signatories to the contract in dispute, as such joinder would violate the writing requirement. Organizations that administer international arbitrations, such as the AAA, often confront these situations.8

Frequently, AAA arbitrators hear cases involving multiparty disputes in which a non-signatory challenges whether it should have been named as a party and is bound to arbitrate a claim, or attempts to take advantage of another entity's arbitration clause by filing a claim pursuant to that clause.9 Although consent of the parties remains an underlying consideration foremost in the minds of the arbitrator or judge, decisions rendered by arbitral tribunals applying international rules, including those governed by arbitral institutions such as the AAA, the International Chamber of Commerce (ICC), the International Center for the Settlement of Investment Disputes (ICSID), and recently by U.S. federal courts, reflect a general trend to extend the arbitrability of many international disputes to non-signatories to the contracts at the center of the dispute.10 This practice allows certain affected entities, such as third party beneficiaries to a contract, corporate parents, guarantors or controlling state entities, which may not normally be eligible per se to participate in arbitration, the option to choose arbitration as an alternative to litigation. Consequently, these non-signatories also may be forced to arbitrate an international dispute without explicitly consenting to arbitration. Both U.S. courts and arbitral tribunals must consider this jurisdictional question-whether a non-- signatory can be defined as a party to an arbitration-by determining if the non-signatory implicitly consented to arbitration vis-a-vis principles of agency and contract law.11 IMAGE FORMULA12

The dispute as to whether an entity has been properly named or wrongly denied standing as a party to an international arbitration arises at various times throughout the arbitral process, but often arises in response to a motion to compel an arbitration or an action to set aside an award. …