This article explores the role of international law in relation to the extension of arbitration agreements contained in contracts concluded by States (or State entities) with non-signatory State entities (or States). As contract-based arbitrations involving States or State entities are on the rise, identifying the legal framework governing which parties are covered by the relevant arbitration agreements is of practical importance. The analysis demonstrates that international law forms part of the relevant law, alongside other applicable laws including law of contract, law of the seat and transnational law, concerning the extension of arbitration agreements concluded by States or State entities to non-signatories. Previous analyses have neglected the role of international law by not distinguishing contract-based arbitrations involving private parties from contract-based arbitrations involving States or State entities. Public international law recognises that arbitration agreements can be extended to non-signatories on the basis of implied consent, or abuse of separate legal personality and estoppel. Therefore, foreign investors can rely on international law to extend arbitration agreements to non-signatories in arbitrations conducted under investment contracts concluded by States or State entities, even if the relevant domestic law is agnostic or hostile to this. This has significant legal, and practical, importance.
Copyright © The Author(s), 2022. Published by Cambridge University Press for the British Institute of International and Comparative Law
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The author is grateful to Dr Michail Dekastros, Dr Berk Demirkol, Dr Marco de Benito, Mr Alexey Vyalkov, and Dr Harry Annison for their input, as well as to the ICLQ editors and peer reviewers. Any errors or omissions are the author's sole responsibility. Part of the research leading to this article has received funding from the European Research Council (ERC) under ERC Grant Agreement No 313355, as part of the research project on ‘Transnational Private-Public Arbitration as Global Regulatory Governance: Charting and Codifying the Lex Mercatoria Publica’ (LexMercPub) carried out at the University of Amsterdam.
1 See eg Petrochilos , G , ‘ Extension of the Arbitration Clause to Non-Signatory States or State Entities: Does It Raise a Difference? ’ in Hanotiau , B and Schwartz , E (eds), Multiparty Arbitration ( Wolters Kluwer 2010 ) 119 –30Google Scholar . cf Stoehr , J , ‘ A Question of Sovereignty, Development, and Natural Resources: A New Standard for Binding Third Party Nonsignatory Governments to Arbitration ’ ( 2009 ) 66 Wash&LeeLRev 1409, 1434Google Scholar .
2 On the role of contracts with States or State entities, see J-F Lalive, ‘Contracts between a State or a State Agency and a Foreign Company: Theory and Practice: Choice of Law in a New Arbitration Case’ (1964) 13 ICLQ 987, 990.
3 ICC, ‘ICC Dispute Resolution 2019 Statistics’ (2020) 10, available at ; the same figure was 8.6 per cent in 2001, C Leben, ‘La théorie du contrat d’État et l’évolution du droit international des investissements’ (2003) 302 RCADI 197, 297. See also J-F Lalive, ‘Contrats entre États ou entreprises étatiques et personnes privées: Développements récents’ (1983) 181 RCADI 9.
5 See Hamilton , JC et al. , ‘ Latin American Arbitration and Investment Protections ’ in Hamilton , JC et al. (eds), Latin American Investment Protections ( Martinus Nijhoff 2012 ) 2CrossRefGoogle Scholar ; Gaillard , E , ‘ The Denunciation of the ICSID Convention ’ ( 2007 ) 237 NYLJ 1Google Scholar ; Schreuer , C , ‘ Denunciation of the ICSID Convention and Consent to Arbitration ’ in Waibel , M et al. (eds), The Backlash against Investment Arbitration: Perceptions and Reality ( Kluwer Law International 2010 ) 353 –68Google Scholar ; Garibaldi , OM , ‘ On the Denunciation of the ICSID Convention, Consent to ICSID Jurisdiction, and the Limits of Contract Analogy ’ in Binder , C et al. (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer ( Oxford University Press 2009 ) 251 –77CrossRefGoogle Scholar . Having denounced the ICSID Convention in 2009, Ecuador signed it again in June 2021 .
6 Examples include Ecuador and Indonesia, see N Bernasconi-Osterwalder et al., ‘Terminating a Bilateral Investment Treaty’ (International Institute for Sustainable Development, March 2020) ; see also T Voon and AD Mitchell, ‘Denunciation, termination and survival: the interplay of treaty law and international investment law’ (2016) 31 ICSID Review 413.
7 Case C-284/16 Slovak Republic v Achmea BV EU:C:2018:158. The CJEU held that Investor-State Dispute Settlement (ISDS) clauses contained in intra-EU BITs are incompatible with EU law. Following the Achmea decision, 23 EU Member States signed the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union [2020] OJ L169/1.
8 Case C-741/19 Republic of Moldova v Komstroy EU:C:2021:655, para 66 (holding that art 26(2)(c) of the Energy Charter Treaty (providing for Investor-State arbitration) ‘must be interpreted as not being applicable to disputes between a Member State and an investor of another Member State concerning an investment made by the latter in the first Member State’).
9 Case C-109/20 Republic of Poland v PL Holdings Sàrl EU:C:2021:875, para 56 (holding that ‘Articles 267 and 344 TFEU [Treaty on the Functioning of the European Union] must be interpreted as precluding national legislation which allows a Member State to conclude an ad hoc arbitration agreement with an investor from another Member State that makes it possible to continue arbitration proceedings initiated on the basis of an arbitration clause whose content is identical to that agreement, where that clause is contained in an international agreement concluded between those two Member States and is invalid on the ground that it is contrary to those articles’).
10 Gaillard , E , ‘ Effectiveness of Arbitral Awards, State Immunity from Execution and Autonomy of State Entities: Three Incompatible Principles ’ in Gaillard , E and Younan , J (eds), State Entities in International Arbitration ( Juris Publishing 2008 ) 189 (emphasis added)Google Scholar . See also in the same book: E Teynier, ‘Can a Party Benefiting from an Award Rendered against a State Enforce the Award against an Instrumentality of Such State? French Law’ (pp 103–30); J Gill, ‘Can a Party Benefiting from an Award Rendered against a State Enforce the Award against an Instrumentality of Such State? English Law’ (pp 131–47); E Gaillard, ‘Can a Party Benefiting from an Award Rendered against a State Enforce the Award against an Instrumentality of Such State? U.S. Law’ (pp 149–64).
11 Arbitrazh Court of the City of Moscow, Case No А40-230382/2018 (27 February 2019). See also La Générale des Carrières et des Mines v FG Hemisphere Associates LLC [2012] UKPC 27.
12 Swiss Federal Tribunal, 4A 128/2008 (19 August 2008) para 3.2.; Banque Arabe et Internationale d'Investissement v Inter-Arab Investment Guarantee Corp, Award (17 November 1994), (1996) 21 YBCA 13, 18; Convention on the Recognition and Enforcement of Foreign Arbitral Awards (adopted 10 June 1958, entered into force 7 June 1959) 330 UNTS 3 (New York Convention) art II.1; UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments as adopted in 2006 (UNCITRAL Model Law) art 7(1); E Gaillard and J Savage, Fouchard Gaillard Goldman on International Commercial Arbitration (Kluwer Law International 1999) 280; G Born, International Commercial Arbitration (3rd edn, Kluwer Law International 2021) 1518.
13 cf Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] EWCA Civ 6 and Cour d'appel (CA) Paris, Kabab-Ji SAL Company v Kout Food Group Company, Judgment (23 June 2020) (English translation available at ). See also Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48. On Dallah, see below Section IV.
14 cf Chevron Bangladesh Block Twelve, Ltd and Chevron Bangladesh Blocks Thirteen and Fourteen, Ltd v People's Republic of Bangladesh, ICSID Case No ARB/06/10, Award (17 May 2010) (Chevron v Bangladesh), (2011) 26 ICSID Review 265; Niko Resources (Bangladesh) Ltd v Bangladesh Petroleum Exploration & Production Company Limited (Bapex) and Bangladesh Oil Gas and Mineral Corporation (Petrobangla), ICSID Case No ARB/10/18, Decision on Jurisdiction (19 August 2013) (Niko Resources v Bapex and Petrobangla). See below Section IV.
15 Swiss Federal Tribunal (19 July 1988), (1991) 16 YBCA 174, (1989) 80 ILR 652.
16 Brekoulakis , S , ‘ Rethinking Consent in International Commercial Arbitration: A General Theory for Non-Signatories ’ ( 2017 ) 8 JIDS 610, 612Google Scholar ; Martines-Fraga , P , ‘ The Dilemma of Extending International Commercial Arbitration Clauses to Third Parties: Is Protecting Federal Policy while Accommodating Economic Globalization a Bridge to Nowhere? ’ ( 2013 ) 46 CornellIntlLJ 291, 294Google Scholar ; see also Petrochilos (n 1) 119–30; A Mišović, ‘Binding Non-Signatories to Arbitrate—the United States Approach’ (2021) 37 ArbIntl 749.
17 M Magnarelli and AR Ziegler, ‘Irreconcilable Perspectives Like in an Escher's Drawing? Extension of an Arbitration Agreement to a Non-Signatory State and Attribution of State Entities’ Conduct: Privity of Contract in Swiss and Investment Arbitral Tribunals’ Case Law’ (2020) 36 ArbIntl 509, 519–20.
18 B Hanotiau, ‘The Issue of Non-Signatory States’ (2012) 23 AmRevIntlArb 379, 405. cf the approach of the arbitral tribunal and the Paris Court of Appeal in the Pyramides case, discussed below in Section IV.A.
19 See Born (n 12) 1525–6; B Hanotiau, ‘Problems Raised by Complex Arbitrations Involving Multiple Contracts - Parties - Issues – An Analysis’ (2001) 18 JIntlArb 251, 258; see also WW Park, ‘Non-Signatories and International Contracts: An Arbitrator's Dilemma’ in Permanent Court of Arbitration (ed), Multiple Party Actions in International Arbitration (Oxford University Press 2009) 3–33; G Petrochilos, ‘Extension of the Arbitration Clause to Non-Signatory States or State Entities: Does It Raise a Difference?’ in B Hanotiau and E Schwartz (eds), Multiparty Arbitration (Kluwer Law International 2010) 119–28.
20 On the complexity of the issue, see Hosking , JM , ‘ Non-Signatories and International Arbitration in the United States: the Quest for Consent ’ ( 2004 ) 20 ArbIntl 289, 302Google Scholar and Girsberger , D and Hausmaninger , C , ‘ Assignment of Rights and Agreement to Arbitration ’ ( 1992 ) 8 ArbIntl 121, 149 –50Google Scholar .
21 See BGH, III ZR 371/12 (8 May 2014); see also Landbrecht , J and Wehowsky , A , ‘ Determining the Law Applicable to the Personal Scope of Arbitration Agreements and its “Extension” ’ ( 2017 ) 35 ASA Bulletin 837, 851Google Scholar and K Schwedt, ‘When Does an Arbitration Agreement Have a Binding Effect on Non-Signatories? The Group of Companies Doctrine vs. Conflict of Laws Rules and Public Policy’ (Kluwer Arbitration Blog, 30 July 2014) .
22 Brekoulakis, ‘Rethinking Consent in International Commercial Arbitration: A General Theory for Non-Signatories’ (n 16) 629 (‘Under this approach, what matters is not whether a non-signatory has presumably consented to arbitration but whether and to what extent a non-signatory is actually implicated in the dispute before an arbitration tribunal’). However, in public international law, the fact that, without being subject to the jurisdiction of an international court or tribunal, a State is intrinsically implicated in a dispute between two States which is subject to that court's or tribunal's jurisdiction, speaks against—and not in favour of—the expansion of their jurisdiction ratione personae (personal jurisdiction). See Case of the monetary gold removed from Rome in 1943 (Preliminary Question) [1954] ICJ Rep 19, 32; Military and Paramilitary Activities in and against Nicaragua (Jurisdiction and Admissibility) [1984] ICJ Rep 392, 431, para 88; Land, Island and Maritime Frontier Dispute (El Salvador/Honduras) (Application for Intervention) [1990] ICJ Rep 92, 114–16, paras 54–56; Certain Phosphate Lands in Nauru (Preliminary Objections, Judgment) [1992] ICJ Rep 240, 258–62, paras 48–55; East Timor [1995] ICJ Rep 90, 102–5, paras 28–35; The M/V ‘Norstar’ Case (Panama v Italy) (Preliminary Objections Judgment of 4 November 2016) ITLOS Reports 2016, 44, para 172; Larsen v Hawaiian Kingdom, PCA Case No 1999-01, Award (5 February 2001) para 11.17; Chevron Corporation and Texaco Petroleum Corporation v Ecuador, PCA Case No 2009-23, Third Interim Award on Jurisdiction and Admissibility (27 February 2012) para 4.60. cf N Zamir, ‘The Applicability of the Monetary Gold Principle in International Arbitration’ (2017) 33 ArbIntl 523; O Pomson, ‘Does the Monetary Gold Principle Apply to International Courts and Tribunals Generally ?’ (2019) 10 JIDS 88; M Paparinskis, ‘Revisiting the Indispensable Third Party Principle’ (2020) 103 Rivista di diritto internazionale 49; A Orakhelashvili, ‘The Competence of the International Court of Justice and the Doctrine of the Indispensable Party: From Monetary Gold to East Timor and Beyond’ (2011) 2 JIDS 373.
23 Mavroidis , PC , ‘ Legal Eagles? The WTO Appellate Body's First Ten Years ’ in Janow , M et al. (eds), The WTO: Governance, Dispute Settlement, and Developing Countries ( Juris Publishing 2008 ) 360Google Scholar . See also Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48, para 1: ‘When a court has to decide whether an international arbitration agreement is valid or whether it covers a particular dispute, the first step is to identify which system of law the court must apply to answer this question.’