UNIVERSITY OF BUCHAREST Faculty of Law Extension of the Arbitration Agreement to Non-signatory...

INTERNATIONAL ARBITRATION MASTER PROGRAM

2014 – 2015

UNIVERSITY OF BUCHAREST

Faculty of Law

Supervisor:

DISSERTATION

Extension of the Arbitration Agreement to Non-signatory Parties

under the Romanian Law and Court of International Commercial Arbitration Rules

by

RADU VALENTIN SORA MASTER OF LAWS

UNIVERSITY OF BUCHAREST ♦ FACULTY OF LAW

II

Table of Contents

INDEX OF ABBREVIATIONS .......................................................................................... IV

Abstract ..................................................................................................................................... 1

Chapter I - Introduction.......................................................................................................... 3

Chapter II - Methodology ....................................................................................................... 4

Chapter III- General considerations ...................................................................................... 5

Parties Consensus principle .................................................................................................... 5

Chapter IV - International Extension Theories .................................................................... 7

Piercing the corporate veil doctrine ....................................................................................... 7

A. International views .......................................................................................................... 7

B. Romanian views .............................................................................................................. 7

C. Reverse Piercing Theory ................................................................................................. 8

Group of companies doctrine .................................................................................................. 9

Estoppel ................................................................................................................................... 13

Group of contracts doctrine .................................................................................................. 14

Agency relationship ............................................................................................................... 15

Subrogation situations ........................................................................................................... 16

Chapter V - Obstacles of applying the Extension Theories Raised by Romanian

Legislation and CICA Rules 2014 ........................................................................................ 17

A. Arbitration agreement must be in writing ..................................................................... 17

B. Consent must be express, not implied........................................................................... 18

C. The arbitration agreement must be signed .................................................................... 19

D. Consent of all parties involved in arbitration ................................................................ 20

E. Non observance of Fairness and equality principle ...................................................... 20

Chapter VI – Special situations under CICA Rules ........................................................... 23


III

Arbitration under the Rules of another Arbitral Institution ............................................. 23

Ad-Hoc Arbitration under CICA Rules ............................................................................... 23

Chapter VII - CICA Rules possibilities to extend arbitration agreement to non-

signatory parties ..................................................................................................................... 24

Extension possibility under CICA Rules ............................................................................. 24

Third parties participation cases according to NCPC and CICA Rules .......................... 25

A. Voluntary Intervention (Principal and Accessory) ....................................................... 25

B. Joinder as Claimant - Forced Intervention 1 ................................................................. 27

C. Joinder as Guarantor - Forced Intervention 2 ............................................................... 29

D. Joinder as Rightholder - Forced Intervention 3 ............................................................ 29

Other situations that raise non signatory dilemma ............................................................ 31

E. Contract assignment ...................................................................................................... 31

F. Claim Assignment ......................................................................................................... 33

G. Merger of companies .................................................................................................... 33

H. Inheritance..................................................................................................................... 33

Chapter VIII - Relevant case law of CICA in the area of extension of the arbitration

agreement................................................................................................................................ 35

Chapter IX - Conclusions ...................................................................................................... 42

Chapter X - Bibliography...................................................................................................... 49


IV

INDEX OF ABBREVIATIONS

& and

CICA Court of International Commercial Arbitration attached to the

Chamber of Commerce and Industry of Romania

CICA Rules CICA Rules of Arbitration in force from August 2014

e.g. exempli gratia (for example)

House of Lords the highest UK appeal court formerly known as the House of

Lords; now called the Supreme Court of the United Kingdom

i.e. id est (that is)

ICC International Chamber of Commerce

ICC Rules Rules of Arbitration of the ICC in force as from 1 January 2012

id. idem (the same)

infra Below

NY Convention

United Nations Convention on the Recognition and Enforcement of

Foreign Arbitral Awards of 7 June 1959

NCC

New Civil Code of Romania in force from 1 October 2011

NCPC

New Civil Procedure Code of Romania in force from 15 February

2013

OCC Old Civil Code in force from 1865 till 1 October 2011

OCPC Old Civil Procedure Code of Romania in force till 15 February

2013

para./paras. paragraph/paragraphs

supra Above


V

UK The United Kingdom of Great Britain and Northern Ireland

UNCITRAL United Nations Commission on International Trade Law

UNCITRAL Model Law UNCITRAL Model Law on International Commercial Arbitration,

adopted by the General Assembly Resolution No. 40/72 in 1985,

amended by The General Assembly Resolution No. 61/33 in 2006

UNCITRAL Rules UNCITRAL Arbitration Rules as revised in 2010, amended by the

General Assembly in the 57th plenary meeting of 6 December 2010

USA United States of America

vs. versus (against)

vol. volume

]


1

Extension of the Arbitration Agreement to Non-signatory Parties

under the Romanian Law and CICA Rules

Abstract

1. In spite of the principle of the common will of the parties that governs the arbitration

agreement and the arbitration in general as an alternative to the State Courts, there is a

growing trend of international arbitration practice and doctrine which extends the

effects of the arbitration agreement to third non-signatory parties.

2. Arbitrators from different jurisdictions justified their extension decision on theories

such as group of companies, group of contracts, piercing the corporate veil (alter ego),

implicit agency relationship, or subrogatio situations.

3. This dissertation paper is trying to assess the applicability of these theories under the

Romanian Law, with a focus on the Romanian Procedural Law and the rules of the

Court of International Commercial Arbitration attached to the Chamber of Commerce

and Industry of Romania.

4. We shall examine the situations permitted by the CICA Arbitration Rules and

Romanian legislation when a third party non signatory can become part of an

arbitration dispute.

5. All these theories will be referred globally as the Extension Theories.

6. In the introductive chapter, first we shall present our considerations conducting to the

selection of this topic in order to become subject to the current analyse.

7. In the methodology chapter (Chapter II) we shall indicate the types of research

performed, the order of the study and the logic behind it.


2

8. In the general consideration chapter (Chapter III) we shall propose a definition for

arbitration, in close relation with the consensus principle and emphasizing the

exceptions from this principle.

9. In the next chapter (Chapter IV) we shall present the most important theories which

justify the exceptions from the party consensus principle. Flowing to this, we shall

present the Extension Theories and the arguments which justify the extension of the

arbitration agreement to third non signatory parties and the jurisdictions where these

theories are embraced by the arbitrators and the local legislations.

10. In Chapter V there will be made an analysis of the obstacles in applying the Extension

theories raised by Romanian legislation and CICA Rules.

11. Chapter VI will deal with some special situations under CICA Rules in relation with

the main topic of the dissertation.

12. Chapter VII we will present the possibilities to extend the arbitration agreement to

third non-signatory parties under CICA Rules and NCPC.

13. Chapter VIII is a collection of CICA cases where the extension of arbitration

agreement was taken into consideration.

14. And finally, in the last chapter IX conclusions:

we shall assess if the Extension Theories are applicable even in Romania and

in which situations.

we shall identify the situations from Romanian Civil Procedural Code

standpoint which allow the extension of a case to other parties as Joinder.

finally, we shall present our opinion by proposing a few law adjustments in

order to make the Extension Theories applicable in Romania on a wider scale.


3

Chapter I - Introduction

15. More and more the concept of national surrenders before the European or

international level. If in the past, the national law on the international private relations

had a principal role in the relationships between the commercial actors, the world

globalization process has affected not only the economic and cultural aspects, but as

well the legal environment.

16. The extension theories are important as long they tend to constitute exceptions from

the most important feature of arbitration which is the consensual nature of this

alternative dispute resolution method.

17. The last but not the least argument is that the international Extension Theories are

constantly invoked in International Arbitration cases that have as applicable law the

Romanian law and CICA rules of arbitration.

18. In this respect, the present research focuses on international approach on extension of

the arbitration agreement to non-signatory parties regarded from the Romanian

Legislation and CICA rules point of view.

19. It is obvious that the Romanian arbitration – both institutional and ad-hoc, are subject

to a modernization process while almost everything must remain the same. This

modernization happens if changes are effective, and the integration process of

Romania in the international framework means first to understand the global context

and then to adjust the national legislation to be integrated in that international context.


4

Chapter II - Methodology

20. In order to draft this dissertation paper we started the research studying books and

various works written by well reputed authors in the field of International Arbitration

for understanding the concept of the Extension Theories at International level, how

they started to apply and which are the conditions of application of such theories.

21. In Romania, even the institutional arbitration for the foreign trade existed from 1953 –

(Arbitration Commission attached to the Chamber of Commerce of Romania), the

arbitration between private entities resurrected in 1990 when it was issued the Decree

Law 139/1990 which provides the right of a Chamber of Commerce to administer the

ad-hoc arbitration.

22. In this respect, the research on Romanian arbitration started at the CICA library with

the collection of CICA Arbitration Case law between 1953 – 2000.

23. The research continued with the study of the entire modern collection of Romanian

Arbitration Journal since 2007 till the current time, where there were found a few

articles on the extension of the arbitration agreement to non-signatories parties in

cases defended in front of the Romanian arbitral institution-CICA.

24. Various other legal books were reviewed with the purpose of identifying references to

the analyzed topic, e.g., the cases presented by Marin Voicu in his book which

represents a case arbitral law collection for the period 2004 – 2014.

25. In the same time, the President of the Court of Arbitration granted the permission to

study some of the Arbitral Decisions issued in cases when parties requested the

Arbitral Tribunal to join non signatories to arbitral proceedings.

26. To these, we added several internet searches on the matter where we found

International case law and studies.


5

Chapter III- General considerations

27. In our opinion, Arbitration is the private justice arising from the will of parties that

come from different jurisdictions or systems of law, but yet capable to conclude

arbitration agreements in order to find that intersection between them, that necessary

common ground, in order to reach an acceptable resolution in case of a dispute,

observing in the same time the public order as provided by different national laws.

28. Arbitration is founded on the consent of the parties which recognize a tribunal or an

arbitrator as being capable to solve a dispute and after the resolution is made, that the

decision will be respected or if not, will be enforced.

Parties Consensus principle

29. As we already defined arbitration being a private justice arising from the will of the

parties, it becomes very clear that is an alternative to the national justice established

by the legislative and administrative structures of a country. Being the law of the

parties, arbitration is based on the consent to arbitrate of all parties involved in

arbitration.

30. In this respect, the principle is that a case is submitted to arbitration if the parties

reach a consensus in this matter. The moment of consensus can intervene:

a) when the parties concluded a contract which contains an arbitration clause;

b) when a dispute arise by way of a submission clause or

c) even in front of the arbitration tribunal.

31. However, in some cases this principle is affected by other principles and realities

which are leading arbitrators to take decisions that are in fact exceptions from the

consensus principles.


6

32. Even that is widely accepted that consensus must exist, the concept of the form of the

consent evolved and now we are in the situation where we must assess if consent must

be express or implied, and if the arbitrators have also the power to interpret the

manifestation of the parties „will.

33. More recently there were identified arbitral decisions that joined third parties to

arbitration even that these parties did not agree expressly to the arbitration, in fact did

not sign such an arbitration agreement.

34. The most common situation is joining a non-signatory party who did not sign or

consent, in an express manner, to the arbitration agreement, but when responding to a

claim did not argue about the lack of arbitration agreement which equals with a tacit

consent to arbitration.

35. However, these cases are not the main problem but the cases when even there is no

express agreement and the third party is contesting the very existence of arbitration

agreement, economic reasons make the arbitration to extend the effects of arbitration

agreement to these non-consenting parties.

36. In international arbitration practice and not only we can find evolving theories or

doctrines which constitute exceptions from the Parties Consensus Principle. These are

the theories or doctrines of group of companies, group of contracts, piercing the

corporate veil (alter ego), implicit agency relationship, subrogation situations or

estoppel.


7

Chapter IV - International Extension Theories

Piercing the corporate veil doctrine

37. Piercing the corporate veil (Alter ego doctrine) is a legal decision to treat the right and

duties of a company as the right or duties of the shareholders of that company1 . In

this view, the shareholders are considered as an alter ego of the company and they can

be held jointly liable for a debt of the company.

A. International views

38. Generally, at international level, in the case of this doctrine the limited legal

responsibility concept is ignored in favor of the economic reality concept in order to

protect the interests of the creditor of an obligation.

39. Even that some authors2 consider there are more conditions in order to pierce the

corporate veil of a company and to attire the responsibility of a third party, we

consider that the main conditions that must be met, in an aggregated manner, are:

a) The shareholder must have control of the company which is debtor.

b) There must be evidence of fraud or bad faith of that shareholder in connection with

the debt.

B. Romanian views

40. Romanian legislation is not so friendly with the piercing the corporate veil concept,

being more on the side of the separate legal personality which impedes that.

41. Even if in arbitration we do not have a clear procedure on the cases where piercing the

corporate veil principle should apply, it must be mentioned that, in relations between

1 http://en.wikipedia.org/wiki/Piercing_the_corporate_veil

2 Holman Fenwick Willan - http://www.hfw.com/Piercing-the-Corporate-Veil-Dec-2012

http://en.wikipedia.org/wiki/Piercing_the_corporate_veil

http://www.hfw.com/Piercing-the-Corporate-Veil-Dec-2012


8

fiscal authorities and tax payers, the fiscal legislation3 provides the possibility for the

fiscal authority to pierce the corporate veil and attire the joint responsibility of a legal

person if, directly or indirectly, controls the debtor of fiscal obligations, or is

controlled by the debtor or is under the same control as the debtor and contributed

with bad faith to the failure of the debtor to undertake the tax payments.

42. This possibility of the fiscal authority is based on the same two main conditions as in

the case of piercing the veil theory: a) the existence of control of the debtor and b) the

bad faith of the shareholder which intentionally provoked the impossibility for the

debtor to pay the fiscal debt.

43. In the relations between private entities, the joint responsibility of the shareholders or

other persons which had a contribution to the insolvability state of the debtor

company can be invoked only when the debtor company, which entered in bankruptcy

procedure, is still unable to solve its financial problems.

44. As opposed to the possibility of the fiscal authorities to declare a third person as

jointly liable with a tax payer, a private individual or legal person can start legal

action against a person that provoked the insolvency or had a role in it, only after the

insolvency procedure was followed and the bankruptcy is declared, which is usually

happening after a very lengthy insolvency procedure and usually without great

success in recovering any money.

C. Reverse Piercing Theory

45. In this case, a creditor of a shareholder is trying to obtain the joint liability of the

company owned by the shareholder. The reverse piercing is very controversial

especially when the company is owned by multiple shareholders. But, the judges are

reluctant to apply this theory even when the company is owned by a single

3 Chapter IV from the ANAF Order no. 127/2014 concerning the application of the procedure to attire the

solidar responsibility regulated by art. 27 si 28 from the Fiscal Procedure Code


9

shareholder. We will present two cases from the judicial case law because ultimately,

the Courts have the power to uphold or to set aside an arbitral decision.

46. One of the oldest cases4 of reverse piercing is considered to be Kingston Dry Dock

Co. v. Lake Champlain Transp. Co (USA). In this case, the plaintiff, Kingston,

repaired a ship owned by a company where the defendant was shareholder. The

repairs were ordered by the shareholder. After Champlain did not pay for the repairs,

Kingston requested to the Court the seizure of the boat to satisfy the Kingston debt.

The trial court admitted the seizure request, but Judge Learned Hand did not uphold

the decision.

47. A very well known Case is Macaura v Northern Assurance Co Ltd5. (UK). According

to the facts, it seems that Mr Macaura was the sole owner of a company he had set up

to grow timber. The trees were destroyed by a fire but the insurer refused to pay since

the policy was personally with Mr. Macaura (not the company) and he was not the

owner of the trees. The UK House of Lords upheld that refusal based on the separate

legal personality of the company.

48. Reverse piercing is a theory that was not widely applied in arbitration, but it is a

theory which is trying to demonstrate that in some cases the company is an alter ego

of the shareholder, situation that can attract the joint liability of the company and the

shareholder.

Group of companies doctrine

49. The Group of companies‟ doctrine is a legal theory invoked in order to join a non-

signatory party to arbitration.

4 See Allen Nicholas - Reverse Piercing of the Corporate Veil: A Straightforward Path to Justice, NY Business

Law Journal | Summer 2012 | Vol. 16 | No. 1 55




10

International views

50. At international level a group of companies is a collection of parent and subsidiary

corporations that function as a single economic entity through a common source of

control6.

51. In this case, the arbitrators are examining the extension of arbitration agreement from

ratione personae point of view.

52. According to this theory the arbitration agreement may be extended to the dominant

company even this company is a non-signatory third party or it can be extended to

other entities from the group controlled by the dominant company.

53. This doctrine started with the approach of the ICC Arbitral Tribunal in Dow Chemical

vs Isover St. Gobain case which decided to extend an arbitration agreement to a non-

signatory party based on a double determination, on one hand, of

a) whether the group of companies represented „one and the same economic

reality” and on the other hand,

b) of the scope and effect of the arbitration agreement by reference to the parties’

implied consent that the non-signatory be bound by the arbitration agreement.

54. Actually, in this case7, an American parent Dow Chemical USA and its French

subsidiary Dow Chemical France invoked an arbitration clause contained in

agreements that affiliates Dow Chemical AG and Dow Chemical Europe had signed

with companies whose rights were transferred to Isover St. Gobain.

55. Due to the fact that the party that was against to the joinder - Isover St. Gobain -

already consented to arbitrate pursuant to the relevant arbitration clauses binding Dow

Chemical AG and Dow Chemical Europe, the dilemma was if Isover St. Gobain will

be forced to observe that commitment with respect to non-signatory companies Dow

6 http://en.wikipedia.org/wiki/Corporate_group

7 Dow Chemical v. Isover Saint Gobain, ICC Case No. 4131, Interim Award, Sept. 23, 1982, JDI p. 899 (1983),

comment Yves Derains

http://en.wikipedia.org/wiki/Corporate_group


11

Chemical USA and Dow Chemical France that wished to participate in the arbitral

proceedings.

56. The Arbitral Tribunal joined the non-signatory companies to the arbitration admitting

their request and denying the arguments of Isover St. Gobain.

57. The view of the ICC Arbitral Tribunal was confirmed by the French Court which

rejected the setting aside action and confirmed the Arbitral Tribunal theory.

58. This case is a reference in International Arbitration and the theory is being largely

embraced especially in Europe.

59. On the other hand, Courts of Law from US did not agree to the Group of Companies

doctrine, being faithful to the classic theories such as: incorporation by reference,

assumption, agency, third-party beneficiary, veil-piercing/alter-ego, and estoppel.

Romanian Views

60. Some Romanian authors believe that Romanian Legislation, does not contain an

unitary legal definition of the Group of companies8.

61. In the same time, other authors9 are considering that the existence of group of

companies in Romania are “an economic reality that cannot be challenged” and

according to the provisions of art. 3 from the New Civil Code10

it is possible to

consider that the “group of companies can have the quality of a professional which

exploits a enterprise, through the controlled companies”.

8 DINESCU, Sandra - The extension of the Arbitration Agreement. Group of companies and group of contracts,

Romanian Arbitration Journal nr. 4, Chamber of Commerce and Industry of Romania, 2012. 9 PIPEREA, Gheorghe - Original Title Grupurile de societăţi şi influenţa acestora asupra principiilor

fundamentale ale contractelor bilaterale – English Translation – Groups of companies and their influence on the fundamental principles of the bilateral contracts – Analele Universitatii Bucuresti, Second Part, 2011; 10

idem


12

62. In this view, Group of companies may be characterized through “(i) the control of the

dominant entity over the companies from the group and by the (ii) sole risk of the

activities performed by the group”.

63. We believe that in this case doctrine goes further than the intention of the legislative

body which did not define the group of companies concept from a general point of

view.

64. However, Romanian legislation is not fully unaware of the concept of group of

companies, if the art. 3 from the New Civil Code does not provide a clear definition of

the group of companies, we certainly have a definition in the Fiscal Code11 of a „sole

fiscal group” and that is „a group of taxable persons established in Romania, which,

even they are independent from a legal point of view, they have tight relationships

from an organizational, financial and economic point of view”.

65. Finally, we consider that the New Civil Code should contain a definition for the group

of companies which would be:

“Group of companies defines two or more entities which are independent from a legal

point of view, but in the same time are controlled by a dominant entity or a group of

entities that are working together, based on a unity of decision and a common

economic goal”.

66. But the question is “Would be a definition enough to attire the responsibility of the

group for the obligation of a company which is part of a group?” Or do we need an

entire set of regulations that will constitute the framework which must be respected by

judges and arbitrators in order to have similar awards in similar situations? We will

respond to this question in the Conclusion Chapter of this paper.

11

Art. 127 para. 8 from Romanian Fiscal Code


13

Estoppel

67. From the above mentioned theories only the estoppel seems to be the most „exotic”

case of extension to non-signatory third party, which intervenes when a signatory is

barred (estopped) from asserting inapplicability of an arbitration clause, if the essence

of a claim relates to a contract that contains an arbitration clause.

68. In the broadest sense, the principle of estoppel prevents a party from denying or

alleging certain facts that are inconsistent with the party‟s previous positions if others

relied upon those positions12.

69. The principle of estoppel13 is based upon the fundamental legal obligation to conduct

dealings on the basis of fairness and good faith.

70. This type of equitable estoppel is illustrated by William Park with a case14 arising

from supply and services agreements between two groups of companies that worked

together to construct a power plant in Saudi Arabia.

71. Some members of each group had concluded contracts containing arbitration clauses,

while others did not.

72. Alleging that the contracts had been induced through misrepresentations about the

work to be performed, the claimants sought damages in court against non-signatory

affiliates of the companies that had signed the relevant agreements.

12

Girard Gibs LLP and Lazareff L eBars AARPI – Estoppel has its place in arbitration law 13

Idem 14 Fluor Daniel Intercontinental, Inc. v. General Electric Co., Inc No. 98-Civ. 7181 (WHP), 1999 WL 637236

(S.D.N.Y. 1999).


14

73. The court ordered arbitration, reasoning that the claimants could not “rely on the

contract when it works to their advantage…but then repudiate the contract and its

arbitration clause when they believe it works against them.”

74. Thus a signatory to an arbitration clause will be precluded from refusing to arbitrate

with a non-signatory when the essence of the dispute is intertwined with, or derived

from, the contract containing the arbitration clause15

.

Group of contracts doctrine

75. The Group of Contracts is another legal theory utilised by arbitrators in order to join a

non signatory party to arbitration.

76. In this case, the arbitrators are examining the extension of arbitration agreement from

ratione materiae point of view.

77. In fact, here the arbitrators are trying to assess if the signatory of a multitude of

contracts that are related through a common objective, should be bound to an

arbitration agreement signed only by two parties of this group.

78. A very good example is taken from the construction area where an objective is

realized following the conclusion of a Construction Main Contract and a multitude of

complex contracts and subcontracts for design, acquisition of materials, supplying

utilities, guardianship, management, insurance, bank guarantees, etc. This kind of

group of contracts has a radius structure.

79. In France, it was formed a case law that supports the principle that arbitration rights

and duties follow the cause of action itself as derivative from agreements in earlier

“chains” of property transfers16. This is the linear structure of a group of contracts.

15

William W Park – Non signatories and International contract: An arbitrator’s dilemma


15

80. The third category identified by doctrine is the single contractual ensemble when

multiple contracts are related by the identity cause. An example would be the sale

purchase contract of a product and a related contract of financing the buying of that

product.

81. French judicial system decided that there is a justified extension of an arbitral

agreement to a non-signatory third parties which were engaged in the performance of

a contract under the assumption that they know about the existence and the

applicability of the arbitration agreement.

82. Basically, in order to apply an arbitration clause to a third party non signatory of the

contract that contains the clause, the case law established that the engagement of a

third party in the performance of a contract creates two presumptions17:

a) the third party knows the arbitration clause;

b) the third party adhered to the arbitration clause.

Agency relationship

83. At international level the agency agreement is a legal contract creating a fiduciary

relationship whereby the first party ("the principal") agrees that the actions of a

second party ("the agent") binds the principal to later agreements made by the agent

as if the principal had himself personally made the later agreements18.

84. According to the New Romanian Civil Code the above mentioned agency relationship

is similar with the provisions from the mandate without representation and Agency

16

William W Park – Non signatories and International contract: An arbitrator’s dilemma 17

Sandra Dinescu - The extension of the Arbitration Agreement. Group of companies and group of contracts 18

http://en.wikipedia.org/wiki/Agency_agreement


16

contract – in this case, the Agent (Romanian: mandatar) can conclude legal acts in his

name, but on Principal‟s behalf19.

85. There are cases in International arbitration when an Agent which signed a contract in

the name of its Principal with a contracting party is summoned to participate in

arbitration to be jointly liable with the Principal or with the contracting party.

86. This right usually arises from the lack of empowerment from the Principal or when

the Agent has exceeded the powers granted by the Principal. In both cases, the Agent

is called in Arbitration to pay damages to the party that submitted the claim even that

the Agent has not signed the Arbitration Agreement in his behalf.

87. In US arbitration an undisclosed Principal may enforce a contract made for its benefit

even though the obligee did not know there was an undisclosed principal”. In this

case, the non-signatory is the Claimant which invokes the fact that the signatory party

acted in their behalf and in this respect, the agent acted in his behalf20.

Subrogation situations

88. Subrogation21 is the right for an insurer to pursue a third party that caused an

insurance loss to the insured. This is done as a means of recovering the amount of the

claim paid to the insured for the loss.

89. With insurance subrogation, there are three parties involved: the insured; the insurer;

and the tortfeasor (the party who is responsible for the damages). Under subrogation,

the insurance company assumes the right to sue the tortfeasor for the amount of the

damages reimbursed to the insured22.

19

Art. 2074 from New Romanian Civil Code concerning the Agency contract and Art. 2039-2042 New Romanian Civil Code from concerning the mandate without representation 20

Interbras-cayman-co-v-orient-victory-shipping-co-sa 21

http://www.investopedia.com/terms/s/subrogation.asp 22

http://en.wikipedia.org/wiki/Subrogation



17

Chapter V - Obstacles of applying the Extension Theories

Raised by Romanian Legislation and CICA Rules 2014

90. Having in mind that the Extension Theories such as piercing the corporate veil, group

of companies or group of contracts appeared especially under the French law

jurisdiction, we must mention that this was possible especially because Article 1507

from the French New Civil Procedure Code provides that „an arbitration agreement is

not subject to any requirements as to its form”.

91. As opposed to that, Romanian Old Civil Procedure Code and the New Civil Procedure

Code corroborated with the Old and New Civil Code provide a series of requirements

which I will discussed them below.

A. Arbitration agreement must be in writing

92. The arbitration agreement must be concluded in writing under sanction of nullity.

93. This is the provision stipulated in Art. 343 of Old Civil Procedure Code applicable to

legal relations till 15 February 2015 when it was abrogated by the New Civil

Procedure Code.

94. Art. 548 of New Civil Procedure Code contains the same provision, and in this respect

we can talk about a continuity of a period of 150 years in respect to the written form

required ad validitatem for an arbitration agreement.

95. Moreover, in the New Civil Procedure Code para. 2 of the same art. 548 brings into

question a much restrictive condition for the validity of an arbitral agreement that can

refer to an immovable property. In that situation, the arbitral agreement under private

signature is not sufficient, because it must be authenticated by a Public Notary under

the sanction of absolute nullity.


18

96. This is in fact also a provision that is circumscribing the New York Convention rule

about the written form of the arbitration agreement. Romania is an adherent party of

the New York Convention as from 1963 when the Decree no 186/1961 was published

in the Official Monitor no. 12.

97. The consideration of the art. 548 according to which one can interpret that the

arbitration agreement can be express verbally23 (is valid a verbal arbitration

agreement?) before the Arbitration Tribunal is contradicted also:

a) by the written requirement of the arbitration agreement concluded in front of the

Arbitral Tribunal ( see Art. 549 para. 2) and

b) by the fact that a verbal statement made by a Respondent in front of the Arbitral

Tribunal is recorded in the procedural order of the hearing as a response to the

written arbitration request of the Claimant.

98. On the other hand, the supporters of the extension of the arbitration agreement to non-

signatory third parties, when they are claiming that the New York Convention permits

the extension, they assert that it is fulfilled the „in writing” condition, an arbitration

agreement in relations between countries which laws do not impose the written form,

they forget that as opposed to the French Civil Procedure Code, where there is no

form requirement, the Romanian Civil Procedure Code requires under sanction of

nulity, the „in writing” form of the arbitration agreement.

B. Consent must be express, not implied

99. The arbitration agreement must follow the conditions of validity of any other contract

according to the Romanian Law. In this respect we remind that in Romania in order to

have a contract we need to have valid capacity, object, cause and consent.

23

Radu Bogdan Bobei – Domestic and International Arbitration 2013 – Editura CH BECK pag 45.


19

100. Both, the Old Civil Code and the New Civil Code contain provision that

impedes the extension of the arbitration agreement to non-signatory parties.

101. Old Civil Code24 states that consent is not valid, if is given by error, taken by

violence or by deceitful action which means that consent must be express and given

by a person that is fully aware of the consequences of consent.

102. New Civil Code25 provides that the consent must be serious, free and

expressed in full awareness of the object of consent and it has to be unaffected by the

vices of consent which are the error (misrepresentation), violence or deceitful actions.

103. In other words, both laws remain consequent to the same principles of consent

existence which impedes the interpretation of an implied consent in case of a non-

signatory party and by that to the extension of the arbitration agreement to that party.

C. The arbitration agreement must be signed

104. In Romania an agreement must be signed by a party in order to be attributable

to that party. The signature requirement is necessary under both the Old Civil Code26

and the New Procedural Civil Code27.

105. We already established that an arbitral agreement must be at least a contract

under private signature, if not related to an immovable property.

24

Art. 953 from the Old Civil Code 25

Art. 1204 from the New Civil Code 26

Art. 1177 from the Old Civil Code – a person to which opposes a document under private signature

is due to recognize or to reject the writing or the signature.

27 Art. 272 from the New Civil Procedure Code – The document under private signature is the one

which bears the parties signatures, notwithstanding their matterial support. This document is not

bound by any other formality, with the exceptions provided by the law.


20

106. The New Civil Procedure Code mentions expressly that a document under

private signature is the one that is signed by the representatives of the parties. This is

a requirement ad validitatem for the existence of the consent.

107. So, a party to a contract is deemed to have given his consent through the

signature.

108. This means that if an arbitral agreement that does not bear the signature of a

party there is no proof that party has given its consent.

D. Consent of all parties involved in arbitration

109. According to the article 581 from the New Civil Procedure Code the third

parties may participate in arbitration only with their consent and with all parties

consent in case of the Intervention (Joinder) procedure regulated by art. 61-77 from

the same New Civil Procedure Code.

110. The provision, in our view, is mandatory not only for the ad-hoc arbitration

but as well for institutional arbitration regulated by CICA rules.

111. The only exception provided by the law is the Accessory Joinder (amicus

curiae) which is admissible without the fulfillment of the said conditions.

112. This means that a non-signatory third party cannot be joined in a case where

the Joinder or one party of an arbitration is resisting the Joinder request.

E. Non observance of Fairness and equality principle

113. When there are more than two parties involved in a dispute each party must

have equal opportunities to participate in the selection of the arbitrators.

114. This is circumscribing to the principle of fairness and equality which was

confirmed in the Dutco case in 1992 by the French Cour of Cassation.


21

115. Dutco construction vs BKMI and Siemens case, was an arbitration

administered under ICC rules. At that moment, ICC decided that the respondents

BKMI and Siemens should appoint one and the same arbitrator.

116. BKMI and Siemens obeyed the decision of ICC under protest.

117. The ICC award was challenged on the reason that it was contrary to the public

policy principle of equality between the parties and the Cour of Cassation set aside the

ICC award condemning the ICC‟s practice.

118. Consequently, many institutions changed its rules, as such, that in cases with

more than two parties to the dispute, if they failed to agree on the nomination of

arbitral tribunal, the person or institution that administers the arbitration will nominate

all arbitrators.

119. As an example:

Art. 12.8 from ICC rules:

„In the absence of a joint nomination pursuant to Articles 12(6) or 12(7) and where all

parties are unable to agree to a method for the constitution of the arbitral tribunal, the

Court may appoint each member of the arbitral tribunal and shall designate one of

them to act as president. In such case, the Court shall be at liberty to choose any

person it regards as suitable to act as arbitrator, applying Article 13 when it considers

this appropriate.”

120. Art. 10.3 from UNCITRAL Rules of arbitration:

„In the event of any failure to constitute the arbitral tribunal under these Rules, the

appointing authority shall, at the request of any party, constitute the arbitral tribunal

and, in doing so, may revoke any appointment already made and appoint or reappoint

each of the arbitrators and designate one of them as the presiding arbitrator.”


22

121. CICA Arbitration Rules do not have provisions in order to ensure the principle

of fairness in nominating the arbitrators.

122. The provision concerning the multiparty arbitration is contained by Art. 11.3

from CICA Rules New Civil Procedure Code and stipulates that

123. „If there are more claimants or more respondents, the parties with common

interests will jointly nominate one arbitrator.”

124. In case the parties fail to reach a decision, the common arbitrator will be

nominated by the President of the Court of Arbitration”.

125. So, the second phrase from Art.11.3 contains a rule that was already in the

case law of International Arbitration as being contrary to the public policy because it

did not ensure the observance of the fairness and equality principle.

126. We deem that the lack of a provision that would ensure the observance of the

fairness and equality principle does not affect the existence of the arbitration

agreement but the enforcement of an award that can be set aside on grounds of public

policy.


23

Chapter VI – Special situations under CICA Rules

Arbitration under the Rules of another Arbitral Institution

Ad-Hoc Arbitration under CICA Rules

127. Art. 6 of the CICA Rules 2014 provides the possibility of the parties to request

to the Court of Arbitration Board the applicability of different rules of arbitration than

the CICA rules, if there is no explicit prohibition contained in the rules to be applied.

128. Moreover, if we keep in mind that CICA Rules 2014 states in article 83 that

„In case the parties opted for the UNCITRAL Rules of Arbitration, under the

assistance of the Court of Arbitration”28, the appointing authority for arbitrators shall

be the president of the Court of Arbitration.

129. As a matter of comparative analysis UNCITRAL Rules of Arbitration 2010

contain in article 10.3 (see supra para. 117) provisions on multiparty arbitration which

are deemed to ensure the observance of the principle of fairness in relation with the

appointment of arbitrators.

130. In this respect, even not directly, and without any limits, in a „lato sensu”

interpretation, the Extension Theories can be applicable in Romania, and the

Arbitrators must be aware that under the Romanian Law and CICA Rules 2014 there

are possibilities to arbitrate a dispute giving effect to these theories.

28

Art. 83 from CICA Rules of Arbitration 2014


24

Chapter VII - CICA Rules possibilities to extend arbitration

agreement to non-signatory parties

131. CICA Rules 2014 has provided for the first time the possibility of expanding

the Arbitration agreement to non-signatory parties, which reflects the evolution of

CICA rules in light with this theoretical and practical approach taken from the

international arbitration practice and ruling.

Extension possibility under CICA Rules

132. In Romania, CICA Arbitration Rules 2014 version – contains specific

provisions that enable the Arbitral Tribunal to extend the arbitration agreement to

third parties Joinders in cases like Intervention of a third party, Guarantee request and

Showing the Rightholder provided by art. 61-77 from the Romanian Code of Civil

Procedure:

a) where such participation is possible under an arbitration agreement

or

b) where the effects of the arbitration agreement between the parties to the dispute

may be extended to other participants”.

133. The final thesis is contrary to the rule expressed by the article 581 of the New

Civil Procedural Code which requires the consent of all parties to the Joinder.

134. In the past, even that CICA Arbitration Rules were silent on the participation

of third parties in arbitration, the possibility of intervention, guarantee request,

showing the rightholder was possible because the CICA Rules allowed the completion

of the rules with the provisions of the Code of Civil Procedure Code.

135. Now, CICA Arbitration Rules 2014 opened expressly the possibility of

application in Romania of the Extension Theories, but in a limited manner, in the


25

framework of the intervention (Joinder), guarantee request (Joinder as Guarantor) and

showing the rightholder institutions (Joinder as rightholder) provided by the

Romanian New Civil Procedure Code.

Third parties participation cases according to NCPC and CICA Rules

A. Voluntary Intervention (Principal and Accessory)

136. New Civil Procedure Code provides in art. 61 that anyone who can justify an

interest can intervene (join) to a lawsuit between the initial parties.

137. The intervention can be principal when the Joinder claims a right for itself

(Principal Joinder) and accessory when the Joinder supports the position of one party

of the lawsuit (Accessory Joinder or Amicus Curiae).

138. Art. 33 from CICA Rules permits to the third party to become Joinder or

Amicus Curiae which are common in US Arbitration or in UNCITRAL Arbitration

Rules.

139. According to the New Civil Procedure Code „The third party will become a

Joinder party in the arbitration only if his request will be admissible (admitted in

principle)”29.

140. The admissibility we deem that must be interpreted jointly through the light of

both the rules of the New Civil Procedure Code and the Arbitration Rules:

141. So, according these rules a third party can participate as a Joinder in an

arbitration if the Joinder can justify an interest, invoking a right in his benefit or in the

benefit of a party, and:

a) such participation is possible under an arbitration agreement,

29

Art. 65 from the New Civil Procedure Code


26

or

b) where the effects of the arbitration agreement between the parties to the dispute

may be extended to other participants -

142. It seems that, the Romanian procedural pathway under the intervention form

supports, expressly, only the situation when a signatory third party of the arbitration

agreement request to join in arbitration between the other two signatories.

143. So, if in the first case, the Joinder must be a party and thus a signatory of a

valid arbitration agreement, the dilemma arise on the situation where the effects of the

arbitration agreement between the parties may be extended to other participants.

144. In the second case, the non-signatory third party of the arbitration agreement,

which has an interest in the case, request to join in an arbitration between the initial

two signatories.

145. Prima facie, this would be admissible in our opinion, because the Joinder

when manifesting the intention to participate in arbitration is expressing this „in

writing” through the Joinder request.

146. The further dilemma would be if the Arbitral Tribunal can intervene in the

initial agreement of the parties, if at least one party is resisting to the Joinder, and

decide that the Joinder is a justified adherent to the arbitration agreement concluded

by the initial parties.

147. This dilemma is generated because it was clearly emphasized by all authors a

principle that says „consent is the cornerstone of arbitration”30.

148. In this view, what happens with the consent of the signatory parties of the

arbitration agreement?

30

Park, William – Non signatories and International contract: An arbitrator’s dilemma


27

149. Is it possible to accept that consent generates the power of a private institution

to resolve a dispute and to disregard this when a third party intervenes between other

two parties?

150. Can the arbitrators decide to accept a Joinder even the parties decided

expressly that no joinder can be added to an eventual arbitration case?

151. Is it entitled the signatory party, which is resisting to the Joinder, to withdraw

its consent based on the fact the agreement is disrespected/changed without its

agreement?

152. Some practitioners are against the intervention of arbitrators in the agreement

of other parties but the international practice has developed in the sense that the

arbitrators can adjust the will of the parties when the economic reality requires this,

combined also with the application of the principle of better administration of justice.

153. As a conclusion, we consider that the vague expression „where the effects of

the arbitration agreement between the parties to the dispute may be extended to other

participants” must be completed with some conditions, theories or doctrines, that will

impede the arbitrators to give non unitary decisions, otherwise we consider that the

stipulation of final thesis of the art. 33 from the Arbitration Rules must remain

without effects in Romanian Arbitration under CICA Rules.

B. Joinder as Claimant - Forced Intervention 1

Procedural aspects.

154. According to the art. 68 from the New Civil Procedure Code any party may

request to join a third party which could ask on a separate claim, the same rights as

the Claimant.


28

155. The request can be made by the Claimant, by the Principal Joinder and by the

Respondent.

156. In this case, the Joinder becomes Claimant in the lawsuit and the award will be

produce effects towards him.

Analysis

157. In the light of the above mentioned, if one of the initial parties is resisting to

the Joinder and, the Joinder as Claimant (which is a non-signatory third party) is

challenging as well the request made in arbitration procedure, we deem that the

arbitral tribunal should not give effect to the Joinder.

158. As opposed to that, if parties and the Joinder as Claimant are bound by the

same arbitral agreement or if the parties agree to request the Joinder as Claimant and

the third party does not raise any objection at the first term of Arbitration, the arbitral

tribunal may issue a procedural order which will grant to the party the quality of

Claimant in the arbitration.

159. In this case, the problem would be the observance of the principle of fairness

and equality in nominating the arbitrators.

160. According to the actual ruling of the arbitrators nomination (art. 11 from

CICA Rules) the Joinder Claimant has to accept the same arbitrator as the other

Claimant which is in contradiction with the public policy established in the Case

Dutco vs. BKMI and Siemens.

161. If such a Claimant will object to the joint nomination of the same arbitrator it

will have a good ground to set aside the arbitral award on ground of violation of the

public policy because of non-observance of the principle of fairness and equality in

nominating the arbitrators.


29

162. So, even in the case the extension of the arbitration agreement would be

admissible, under the actual ruling of CICA Rules the resulted award is carrying a

great risk to be set aside by the Bucharest Court of Appeal.

C. Joinder as Guarantor - Forced Intervention 2

Procedural aspects

163. According to the art. 72 from the New Civil Procedure Code a party to dispute

that justify an interest can request to join as a Guarantor a third party, if that party is

entitled to sue separately the third party for a guarantee obligation or for a damage

claim.

Analysis

164. So, in this situation, if such participation is possible under an arbitration

agreement, the signatory party is entitled to request to join to arbitration a third party

signatory of the same arbitration agreement, if between that party and the third party

exists a direct guarantee obligation or at least the right to claim damages directly from

the third party.

165. In the other case described by art. 33 from the CICA Rules, „where the effects

of the arbitration agreement between the parties to the dispute may be extended to

other participants”, which means there is no consent of the third party to the

arbitration agreement, or one initial party is resisting to the Joinder, the arbitral

tribunal should not extend the arbitration agreement to the third party.

D. Joinder as Rightholder - Forced Intervention 3

Procedural aspects.

166. According to the art. 75 from the New Civil Procedure Code the respondent

which detains an asset for somebody else or which exercise a right over an asset will


30

have to indicate the person for which detains the good or exercise the right, if it was

sued by a person which claims a real right over the asset.

167. If the conditions of the above situation are fulfilled, we can distinguish

between two situations:

168. If the indicated person recognizes the Respondent claims and the Claimant

agrees, then this person will take the Respondent place in the procedure.

169. However, if this person does not participate to the procedure, does not

recognize the Respondent claims or the Claimant does not agree with the replacement

of the Respondent, this third person will become Principal Joinder in the procedure.

Analysis

170. In the first above mentioned situation (a), when everybody is in agreement, we

deem that it is a case applicable in arbitration without any problems because it

supposes the consent of all implicated parties. As long each party from the arbitration

case is in agreement with the replacement of the Respondent there is no argument to

sustain other solution.

171. But, in the second situation described above (b), as already mentioned in the

case of Intervention, we believe that if the consent of the non-signatory does not exist,

if the Claimant opposes to this replacement, there is no condition to have a valid

arbitration resolving of the dispute.

172. More specific, the joining of such non signatory to the arbitration is against the

requirements of the Romanian law and a resulting award can be set aside for the

absence of the arbitration agreement or for the non-observance of the fairness and

equality principle in nominating the arbitrators.


31

Other situations that raise non signatory dilemma

E. Contract assignment

173. In case of contract assignment, that is if the underlying contract was assigned

to a third party in accordance with the rules set out in the Romanian Civil Code, the

third party Respondents have argued that they did not signed the contract which

contains the main clause and they did not expressly agreed to the arbitration

agreement which is a separate agreement in itself.

174. To some extent, the theory based on separability31 of the arbitration agreement

it is a defense that can be built by a non-cooperative assignee Respondent.

175. There are opinions32 according to which in UK, just like in Romania before the

1 October 2011, from a contract it can be assigned only the rights, and the burden or

obligations, under a contract cannot be transferred but only novated. In this respect,

there are some authors that sustain the fact that „an assignment of a contract may not

necessarily transfer the benefit of an arbitration agreement contained in the

contract”33.

176. However, after the Romanian New Civil Code entered in force, I believe that

CICA Arbitration must decide that the contract was assigned together with all benefits

and obligations including the arbitration agreement.

31

Dr. Andrea Vincze - ARBITRATION CLAUSE – IS IT TRANSFERRED TO THE ASSIGNEE? Nordic Journal of Commercial Law issue 2003 - http://www.njcl.fi/1_2003/article4.pdf ; 32

http://www.out-law.com/en/topics/projects--construction/construction-contracts/assignment-and-novation/ 33

Idem.

http://www.njcl.fi/1_2003/article4.pdf


32

177. This is because according to the art. 1315 from the New Civil Code results

that one party may be replaced or substituted by a third party in the legal relations

arisen from a contract if the contract is not entirely performed and the other party

consents to that.

178. By this assignment of contract the parties realize a „global substitution of the

contractual position” 34 that one party has in a contract, in order to solve the dilemma

of the content of transfer arisen from old Civil Code.

179. This new interpretation and regulation of the contract assignment is in line

with the international and European projects and propositions for uniform codes,

where the contract assignment is admissible and regulated as such. For example: the

contract assignment is regulated in this way in the Italian Civil Code, Portuguese Civil

Code, Dutch Civil Code or in the German or Austrian systems of law35.

180. In this view, we deem that in case of the contract assignment there are

sufficient arguments for arbitrators to consider that the arbitration agreement was

transferred together with all other right of obligations transmitted globally when the

assignment/substitution occurred.

181. In fact, we believe that assignment of contract, even it raises questions about

the existence or non-existence of arbitration agreement, together with the situations of

claim assignment, merger of companies or inheritance law is not a real case of

extension of arbitration agreement to non-signatory but rather a legal or conventional

replacement of one of the original parties to the arbitration agreement.

182. However, because sometimes parties invoke a lack of arbitration agreement in

these cases we will make some analysis of this cases as well.

34

POP, Liviu – Tratat elementar de drept civil – Universul Juridic Publishing House 2012 – pag. 670; 35

POP, Liviu – Tratat elementar de drept civil – Universul Juridic Publishing House 2012 – pag. 673;


33

F. Claim Assignment

183. The assignee of a claim is bound by the arbitration agreement by virtue of the

accesorium sequitur principale rule36;

184. In fact, this is only a variation of Contract Assignment and we deem that in

this case all analysis made in that case will apply also to Claim Assignment legal

regime in relation to arbitration of CICA.

G. Merger of companies

185. In case of a merger of two or more companies the new created company or the

absorbent company will substitute the merged companied in all their rights and

obligations because, in fact, in both situation a transmission of patrimony will take

place37.

186. In this respect, a defense which will claim that there is no consent to the

arbitration agreement contained by a contract signed by the company that cease to

exist as an effect of the merger cannot be admitted as long the new company took

over all rights and obligations of the dissolved company, including the arbitration

agreement contained by a contract signed by the dissolved company.

H. Inheritance

187. Inheritance is the institution of law through which properties, titles, debts,

rights and obligations are passed to heirs upon the death of an individual.

188. According to art. 953 from the New Civil Code „Inheritance is the

transmission of the patrimony of a deceased individual to one or more individuals”.

36

STOICA Cristiana, Andreea Micu - Arbitrations in 60 jurisdictions worldwide; 37

Art. 238 from the Law on Companies 31/1990;


34

189. Patrimony of an individual according to art. 31 from the New Civil Code

includes all rights and obligations of an individual that may be evaluated in money.

190. In the case of inheritance, the heirs and legatees of a party contracting to an

arbitration agreement are bound by such a clause by virtue of the transmission of the

contract from the deceased individual to his heirs.

191. In fact, it is the same situation as in the case of the merger of companies

because if the heirs accepted the inheritance there will be a „merger” between the

patrimony of the deceased individual and the patrimony of the heirs.

192. The consequence will be that it cannot be accepted by arbitrators a defense on

ground that the heirs are not signatory parties of the arbitration agreement contained

by the contract transferred through inheritance.


35

Chapter VIII - Relevant case law of CICA in the area of

extension of the arbitration agreement

The Joinder request is inadmissible

Case 287/2005 – Arbitral Award 103 from 17 May 200538

193. One party requested the Joinder of a third party by virtue of a Guarantee

(Fidejussio) contract contained by a principal contract of sale and purchase.

194. The arbitral tribunal decided that the arbitration agreement referred to only at

the Sale and Purchase agreement and not to the Guarantee agreement. On the other

hand, the Respondent (to be joined as Guarantor) contested permanently the Arbitral

Tribunal competence to solve the dispute, alleging that only the Courts of Law would

be competent to solve the dispute, and in this respect there is no possibility which

entitles the Arbitral Tribunal to deem that the Respondent implicitly consented to the

arbitration.

195. For these reasons, the Arbitral Tribunal admitted the the objection of lack of

the arbitral character of the dispute in regard to the Respondent Guarantor, finding

that is not competent for the lack of arbitration agreement.

The Arbitral Tribunal is not competent to arbitrate the dispute

Award 234 from 20 October 200939

196. The Arbitral Tribunal found that the objection of the Joinder as Guarantor is

admissible for the reasons that follow below.

197. Between the Joinder as Guarantor and the other two parties in the arbitration

case there is no contract that contains an arbitration agreement or a submission clause

38

VOICU, Marin – Original title : Arbitrajul Comercial Commercial Arbitration - 2004 – 2014 Case law, pag. 168. 39

VLASOV, Vanda Anamaria - Commercial Arbitration 2007 – 2009 Caselaw, Editura Hamangiu 2010 pag. 16;


36

that enables the arbitral tribunal in an express and unequivocal manner to be

competent to solve the dispute.

198. In this respect, the arbitral tribunal found that if the arbitration agreement does

not exist and the Joinder as Guarantor did not consented to arbitration, the

competence to solve the dispute belongs to the competent courts of law.

The Joinder request is inadmissible

Case 135/2015 – 4 June 2015

199. From a very recent case from the dockets of CICA, in an arbitration case

between a Construction company (as Claimant) and the Designer company (as

Respondent), the Claimant asked the arbitral tribunal to join as a Guarantor the

majority shareholder of the Respondent, in order to obtain the joint liability of the

Guarantor together with the Respondent.

200. The Claimant invoked that art. 581 from New Civil Procedure Code which

requests the consent of all parties involved for a third party to become participant in

arbitration, is applicable only in ad-hoc arbitration and not in institutional arbitration.

201. In the same time the Joinder request of the Claimant was based on the group

of companies doctrine, being indicated by the Claimant that the Joinder is controlling

the Respondent which is a „façade” company, because even that it has separate legal

personality according to the Romanian legislation, it seems that according to the

French legislation is in fact a subsidiary.

202. In this case, the arbitral tribunal dismissed as inadmissible the request of the

Claimant, as long it is not satisfied the primary condition of Claimants „entitlement to

request, separately, the enforcement of a direct guarantee obligation or at least, of a

direct right to claim damages.


37

Case 68/2012 – Award 182 from 8.10.2012

The Facts

203. In this case the Claimant requested that the Arbitral Tribunal should find

jointly liable three Respondents.

204. The Claimant asserted that within the conditions of the contract signed by the

Claimant with the Respondent in May 2011 the Claimant delivered to the Respondent

1 an amount of goods with a value of 634,642 lei.

205. According to the commercial conditions, the Claimant asserted that the goods

were delivered to Respondent 1 and the price had to be paid by the Respondent 1

jointly with Respondent 2 as Guarantor.

206. Further on, as the Claimant asserts, through a request to pay in installments

Respondent 3 (shareholder at Respondent 2), assumed the obligation of payment in

full the remaining amount of 634,642 lei.

207. Even that the Claimant accepted the installments the Respondent did not make

any payment, the Claimant asserts that the Respondent 3 adhered to the contract

concluded by the Claimant with Respondent 1 and 2, assuming all contractual clauses

and the fact that is solidary debtor with the Respondent 1 and 2.

208. For these reasons, the Claimant filed the arbitral request according to the

arbitration agreement contained by the mentioned contract.

209. Respondent 1 and 2 did not submitted Statement of Defense, but the judicial

administrator of these two Respondents asked the Arbitral Tribunal to find that the

case is suspended by law because the Respondent 1 and 2 are in insolvency

procedure.

210. Respondent 3 raised an objection as of the lack of the competence of arbitral

tribunal due to the inexistence of an arbitral agreement.


38

211. Also, the Respondent 3 asserted that there is no payment obligation and valid

adhesion to the contract of the Claimant with Respondent 1 and 2.

The Award

212. The Arbitral Tribunal found that in what concerns the Respondents 1 and 2 the

arbitration of the arbitration request is suspended by law.

213. In relation with the Respondent 3 the Arbitral Tribunal found that there is

valid arbitration agreement and therefore the Arbitral Tribunal is competent to solve

the request submitted by the Claimant. In this respect, the Arbitral Tribunal examined

the Claimant request, found that there exists a payment obligation and admitted the

claim against Respondent 3.

214. The reasoning of the award is very rare to find in the CICA case law, the

Arbitral Tribunal found that Respondent 3 assumed to pay a debt of Respondent 1 and

2 which has as an accessory an arbitration agreement.

215. Also, the Arbitral Tribunal found that in the case is applicable the international

commercial practice from France, Switzerland, Germany, SUA, UK, Belgium but also

from Romania – and here is quoted the procedural order from 3 August 2006 from

CICA Case 279/2005 – published in No. 2 of the Romanian Arbitration Journal from

2007.

216. According to this procedural order40 „the extension of the effects of an

arbitration agreement to the non-signatories third parties is admissible if the third

parties have participated to the performance of the contract, showing in this way that

they are ready to be bound to the arbitration agreement included in the contract”. Also

in case it was stated that41 „when a contract was negotiated or performed, partially or

40

See Romanian Arbitration Journal – no. 2 from 2007 - page 52; 41

Idem.


39

totally, by another party than the signatory party, it is possible to presume that the real

will of the parties was to consider that the third party non signatory of the contract is

bound by the arbitration agreement”.

217. In our opinion, this procedural order is issued with the non-observance of the

cornerstone of arbitration which is the consent of the third party and the parties

involved.

Case 67/2012 – Award 186 from 9.10.2012

The facts

218. In this case the Claimant requested that the Arbitral Tribunal should find

jointly liable three Respondents.

219. The Claimant asserted that on 25 March 2011 as Supplier, has concluded a

contract with the Respondent 1 and 2 as Beneficiaries.

220. In basis of this contract the Claimant delivered the goods stipulated in the

contract and the Respondents had the obligation to pay the goods by bank order or

compensation.

221. The Claimant indicated also the fact that the first two Respondents paid a part

of the price of the delivered goods remaining to be paid 1.586.626 lei.

222. Following the nonpayment of the amounts due by the Respondent 1 and 2,

Respondent 3 committed itself to pay the remaining amount but this payment

obligation was not fulfilled.

223. The claim was founded on Art. 1283 - 1286 New Civil Code.

224. Respondent 1 and 2 did not submitted Statement of Defense, but the judicial

administrator of these two Respondents asked the Arbitral Tribunal to find that the


40

case is suspended by law because the Respondent 1 and 2 are in insolvency

procedure.

225. Respondent 3 raised an objection as of the lack of the competence of arbitral

tribunal due to the inexistence of an arbitral agreement.

The Award

226. The Arbitral Tribunal found that in what concerns the Respondents 1 and 2 the

arbitration of the arbitration request is suspended by law.

227. In relation with the Respondent 3 the Arbitral Tribunal found that there is no

arbitration agreement and therefore the Arbitral Tribunal is not competent to solve the

request submitted by the Claimant.

228. As a conclusion, the Arbitral Tribunal considered that there is no arbitration

agreement concluded with the Respondent 3 because it was no proof to consider that

the Respondent 3 adhered to the arbitration agreement signed by the Respondent 1

and 2 with the Claimant and the Respondent 3 did not express its consent to

arbitration.

Analisys of CICA Awards 182 and 186 from 2012

229. These two awards are contradictory even they are pronounced almost in the

same time and allegedly, in almost the same situation.

230. The Arbitrators that took the decision in award 182/2012 (Case 68/2012)

decided to extend the effects of the arbitration agreement over a signatory party that

did not consented to the arbitration agreement.

231. In award 186/2012 (Case 67/2012) the arbitrators rejected the extension of the

arbitration agreement to the non-signatory party.


41

232. But what happened after the arbitral awards were pronounced?

233. In case 68/2012 where the arbitration agreement was extended to the non

signatory party Respondent 3, there was no annulment action promoted by the

Respondent 3.

234. In case 67/2012 where the extension of the arbitration agreement was refused,

the annulment action promoted by the Claimant was rejected and in this way, the

arbitral award was upheld by the Bucharest Court of Appeal.

235. As a conclusion, the Court of Appeal confirmed the decision taken by

arbitrators in case of the refusal of extension of the arbitration agreement to non

signatory third party.

236. On the other hand, we believe that there were grounds for the Bucharest Court

of Appeal to set aside the arbitral decision which extended the arbitration agreement

to non signatory, one ground being the nonexistence of the arbitration agreement and

the other, the non observance of the public policy – respectively, the violation of the

principle of fairness in nominating the arbitrators.


42

Chapter IX - Conclusions

A. Are the Extension Theories applicable in Romania under CICA Rules?

237. As we already shown in the previous chapter, there are cases when extension

was accepted by the arbitrators under CICA rules, even at the time of the ruling there

were no express CICA provisions that allowed such an extension.

238. For this reason, we consider that under CICA Rules there is a fair possibility

to obtain the extension of arbitration agreement to non-signatories.

239. Also the provision of article 33 from CICA Rules „where the effects of the

arbitration agreement between the parties to the dispute may be extended to other

participants”, comes to support this possibility together with the will of arbitrators

which tend to modernise the arbitration in Romania and to accept the international

trend.

240. The CICA case law in area of Extension Theories is not so big and it is not

predictable as long there are contradictory decisions42

given by arbitrators in similar

situations.

241. However, one must know that as long the principle of fairness and equality in

nominating the arbitrators is not observed by CICA Rules (as we showed on the above

111-128 points), an arbitral award that accepted the Joinder of a resisting third party

can be set aside by the Bucharest Court of Appeal on the ground of violation of the

public policy.

242. In the same note, due to fact that the law requires the arbitration agreement to

be “in writing” under pain of nulity, there is also a possibility for the Bucharest Court

42

See supra at. Point 231-233


43

of Appeal to set aside the arbitral award on the ground of nonexistence of the

arbitration agreement.

B. The situations from Romanian Civil Procedure Code standpoint which allow the

extension of an arbitration agreement to other parties as Joinder.

243. According to the provisions of art. 86 from CICA Rules, the arbitration rules

are complemented with the provisions of the New Civil Procedure Code if the

provisions “are compatible with arbitration”.

244. This means the New Civil Procedure Code is applicable where CICA Rules

are silent. As for the compatibility with arbitration we consider that this is a vague

condition which must be clarified or eliminated.

245. The New Civil Procedure Code provides, in article 548, that “the arbitration

agreement should be “in writing” and on the other hand article 581 stipulates that

third parties may participate in arbitration only with their consent and with all parties

consent in case of the Joinder procedure regulated by art. 61-77 from the same New

Civil Procedure Code.

246. In this respect, it appears in a clearly manner, that extension of arbitration

agreement is allowed by the Romanian New Civil Procedure Code in a limited way

and with the observance of the provisions of Romanian legislation related to the

consensus principle and its form of manifestation.

247. As a conclusion, it is undisputed that arbitrators in Romania may admit the

extension in cases when a third party wants to participate in arbitration between two

signatory parties, if the third party proves an interest that can be protected by the

intervention and the initial parties agree to this participation. For the cases when the

Joinder or one party is resisting to arbitration we believe that law adjustments must be

made in order to create the possibility for arbitrators to admit the extension.


44

C. Proposals of law adjustments in order to make the Extension Theories applicable

in Romania on a wider scale.

248. We consider that Extension Theories such as piercing the corporate veil, group

of contracts and group of companies etc., bring an important contribution to a better

administration of justice in the world, because they tend to impede frauds and to

restore a fair economic relation between trade partners which sometimes is

unbalanced due to the principle of separate legal personality and responsibility.

C.1. The inclusion of Extension Theories concept in European or national legislation

249. We would expect first that these theories to be standardized and included in

legislation of any country, including Romania. If fraud provoked an insolvency state

of a company, the principle of separate legal personality and responsibility should not

be a shield which protects the author of a fraud.

250. As we already showed above on point 42, in Romania, the fiscal legislation43

provides the possibility for the fiscal authority to pierce the corporate veil and attire

the joint responsibility of a legal or natural person together with the tax payer if bad

faith is proven.

251. Even that some authors44

are considering that the existence of group of

companies in Romania are “an economic reality that cannot be challenged” we

consider that the provisions of art. 3 from the New Civil Code45

are not sufficient to

substantiate the theory of group of companies.

43

Chapter IV from the ANAF Order no. 127/2014 concerning the application of the procedure to attire the solidar responsibility regulated by art. 27 si 28 from the Fiscal Procedure Code 44

PIPEREA, Gheorghe - Original Title Grupurile de societăţi şi influenţa acestora asupra principiilor fundamentale ale contractelor bilaterale – English Translation – Groups of companies and their influence on the fundamental principles of the bilateral contracts – Analele Universitatii Bucuresti, Second Part, 2011; 45

idem


45

252. We appreciate that we need an entire set of regulations that will constitute the

framework which must be respected by judges and arbitrators in order to avoid

contradictory awards in similar situations.

253. In this respect, a definition of the group of companies must be accompanied by

regulations that provides:

- the fact that if one of the companies from the group consented to an arbitration

agreement it is assumed that the entire group consented to the arbitration;

- the conditions that must be met in order for the companies from the group to be

liable together with the company that is party to the arbitration;

- situations when it is possible to pierce the corporate veil;

254. For these reasons, we believe that arbitration should be extended to a company

that acted in a fraudulent manner, but this must be done within the frame of the

European or national legislation, and with all form requirements provided by the

relevant law.

C.2. Exception provision from the “in writing” form requirement

255. The legislative body in Romania must solve first the problems related to the

form requirements imposed by the Romanian Legislation for the arbitration

agreement.

256. In this respect, in order to make applicable the Extension Theories I believe

that the NCPC must be modified and art. 548 should have as exceptions the cases

when the third party non signatory of the clause allegedly participated in a fraud

action which is in direct connection with the damage suffered by the Claimant.

257. Another solution would be to change entirely the form of the art. 548 of the

NCPC and all the other provisions that requires the in writing form of the arbitration


46

agreement according to the French model which in the New Civil Procedure Code

does not stipulate any requirement form for the valid conclusion of the arbitration

agreement.

C.3. CICA Rules modification proposal

Principle of fairness and equality in nominating arbitrators

258. In order to be in line with the arbitration worldwide, also CICA Rules should

ensure the observance of the principle of fairness and equality in nominating the

arbitrators in case of multiparty arbitration. In this respect, art. 11.3 from the CICA

Rules should be changed in the sense of the modifications operated by ICC or

UNCITRAL after the Dutco case.

259. CICA Rules must modify art. 11.3, which provides that two parties must share

one arbitrator, with similar provisions as the ones contained by art. 10.3. from

UNCITRAL Rules which is a stipulation that will ensure the observance of the

enunciated principle46

.

Implied consent of the initial parties of arbitration

260. In order to overcome any challenges from the initial parties of the arbitration

agreement, we believe that will be recommendable for the CICA Rules to contain an

assumption of agreement of parties to the extension of arbitration to non-signatories if

the arbitration agreement will not contain any explicit interdiction.

46 Art. 10.3. In the event of any failure to constitute the arbitral tribunal under these Rules, the

appointing authority shall, at the request of any party, constitute the arbitral tribunal and, in doing so,

may revoke any appointment already made and appoint or reappoint each of the arbitrators and

designate one of them as the presiding arbitrator.


47

261. This may be done if, to the art. 33 of CICA Rules will be added a sine qua non

condition criteria to be used when one of the Extension Theories is applicable which

must be “the extension of the arbitration agreement to third parties will be possible in

all cases if the arbitration agreement does not contain a clause which will forbid

expressly such extension”.

Consensus Principle

262. After the form requirement impediment is eliminated we must deal with the

most important character of arbitration the consensualism nature – the consent –

which is the very power of arbitrators for resolving a dispute.

263. This is maybe the biggest problem that may exist when talking about

arbitration, it is at least contradictory to sustain that arbitration is born from the parties

consent and on the other hand, to affirm that the consent can be implied or interpreted

by an arbitrator who is not empowered to arbitrate.

264. In our view, this can be overcome if the Extension Theories will be regulated

as proposed at the above point 255.

D. The direction to be followed by arbitration practitioners and legislation

265. The direction which has to be followed by the Romanian legislation and by

Arbitration in Romania is to admit the extension in cases when a third party wants to

participate in arbitration between two signatory parties, if the third party proves an

interest that can be protected by the intervention.

266. In the same time, arbitrators must accept the extension of the arbitration

agreement to non-signatories in cases when the third party, acted in a fraudulent

manner and provoked the negative economic result to the party that requested the

Joinder.


48

267. But this can happen only if legislation will be changed and the CICA Rules

will continue the modernisation process that started in 2014.

268. Till that moment, we believe that third parties non signatory (other than the

parties which are participating as successors in right of a signatory), may participate

in arbitration in Romania or when Romanian Law is applicable to the arbitration

agreement, only with the observance of article 581 from NCPC which provides that

third parties may participate in arbitration with the agreement/consent of the third

parties and the initial parties of the arbitration.

269. In the end, we strongly believe that the battle between the concept of

Economic Reality versus the institution of Legal personality and Legal responsibility,

must be won by the Economic Reality.

270. In this respect, we must not allow any entity to use the law requirements as a

protection against fraudulent action or to escape responsibility on the limited liability

ground, as long that entity determined a damage or is responsible in any way of

producing a negative economic result to other entities.


49

Chapter X - Bibliography

BOBEI, Radu Bogdan – Original title: Commercial Arbitration – Elementary

handbook on scholarly pragmatism – CH BECK Publishing House - 2014;

BOBEI, Radu Bogdan, Original title : Arbitrajul Intern si International English Title

Domestic and International Arbitration– CH BECK Publishing House, 2013;

Collection of Romanian Arbitration Journal – (Romanian: Revista Romana de

Arbitraj) Chamber of Commerce and Industry of Romania, Rentrop Straton – 2007-

2015;

DINESCU, Sandra - The extension of the Arbitration Agreement. Group of

companies and group of contracts, Romanian Arbitration Journal nr. 4, Chamber of

Commerce and Industry of Romania, 2012.

PIPEREA, Gheorghe - Original Title Grupurile de societăţi şi influenţa acestora

asupra principiilor fundamentale ale contractelor bilaterale – English Translation –

Groups of companies and their influence on the fundamental principles of the bilateral

contracts – Analele Universitatii Bucuresti, Second Part, 2011;

POP, Liviu – Original Title: Tratat elementar de drept civil - English translation Civil

law elementary course – Universul Juridic Publishing House, 2012;

OSIPENCO, Elena, Jurisprudenta Comerciala Arbitrala 1953 – 2000 English

translation Commercial Arbitration Case law 1953 – 2000 – Chamber of Commerce

and Industry of Romania Publishing House, 2002;

STOICA, Cristiana, Micu Andreea - Arbitrations in 60 jurisdictions worldwide;


50

VOICU, Marin – Arbitrajul Comercial – Jurisprudenta Adnotata si Comentata 2004

– 2014 - Editura Universul Juridic, 2014;

VLASOV, Anamaria Vanda – Original title : Arbitrajul Comercial – Jurisprudenta

arbitrala 2007-2009 Practica Judiciara – English translation : Commercial Arbitration

– 2007 -2009 Arbitral Case law – Hamagiu Publishing House, 2010 ;

Internet bibliography


Holman Fenwick Willan - http://www.hfw.com/Piercing-the-Corporate-Veil-Dec-2012



Girard Gibs LLP and Lazareff L eBars AARPI – Estoppel has its place in arbitration law

Fluor Daniel Intercontinental, Inc. v. General Electric Co., Inc No. 98-Civ. 7181 (WHP), 1999 WL

637236 (S.D.N.Y. 1999).

William W Park – Non signatories and International contract: An arbitrator‟s dilemma

http://www.arbitration-icca.org/media/0/12571271340940/park_joining_non-signatories.pdf


http://www.investopedia.com/terms/s/subrogation.asp


http://www.out-law.com/en/topics/projects--construction/construction-contracts/assignment-and-

novation/

VINCZE,. Andrea - ARBITRATION CLAUSE – IS IT TRANSFERRED TO THE ASSIGNEE?

Nordic Journal of Commercial Law issue 2003 - http://www.njcl.fi/1_2003/article4.pdf ;


http://www.hfw.com/Piercing-the-Corporate-Veil-Dec-2012



http://www.arbitration-icca.org/media/0/12571271340940/park_joining_non-signatories.pdf


http://www.investopedia.com/terms/s/subrogation.asp


http://www.out-law.com/en/topics/projects--construction/construction-contracts/assignment-and-novation/

http://www.out-law.com/en/topics/projects--construction/construction-contracts/assignment-and-novation/

http://www.njcl.fi/1_2003/article4.pdf

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