Arbitration of joint venture disputes

01 August 2008

Jane Player, Claire Morel de Westgaver

Joint ventures may inevitably lead to disputes and deadlocks.  Yet, while arbitration clauses are the norm in joint venture agreements, little is written about disputes arising out of such agreements and the considerable advantages that arbitration can offer.  Jane Player and Claire Morel de Westgaver report on this growing area.

Arbitration of joint venture disputes raises various issues which are examined in detail in this article.

  • Arbitrability – one of the questions on which advice is often sought is whether these disputes are arbitrable, i.e. capable of being resolved by arbitration.

  • Scope of the arbitration agreement – this is an important issue in many arbitrations, as this will often determine whether the arbitrators have jurisdiction over the dispute.  In some circumstances specific to joint venture disputes the scope of the arbitration clause may be extended ratione materiae (i.e. in terms of disputes covered) or ratione personae (i.e. in terms of parties involved).

  • Remedies – what types of relief are available in arbitration? In situations where there is a deadlock or the pursuance of the relationship is questioned the key challenge is whether the arbitrators have the power to order a sale of shares or terminate the joint venture agreement itself.

  • Multi-party arbitrations – many joint venture agreements involve more than two parties. Indeed, they will normally involve not only all the business partners or shareholders of the joint venture company, but also in some instances the joint venture company itself.

  • State party arbitrations – as a vehicle for foreign investment, joint venture agreements may involve public bodies or publicly owned companies. Accordingly, some questions such as joinder of the non-signatory state to the proceedings, state immunity, changes in the law of the state and even bribery[1] or state aid may arise.[2] 

Benefits of Arbitration for joint venture disputes

In the context of joint venture disputes, clients find the advantages commonly attributed to arbitration even more relevant. Although not a panacea, in some situations, such as project complexity and multi-party undertakings, arbitration may constitute the only acceptable and viable alternative.

Neutrality – arbitration permits the resolution of international disputes in a neutral forum by independent decision-makers. By picking a neutral jurisdiction as the arbitration seat, the joint venture partners can avoid litigating in courts of the country in which one of the parties is based. The benefits are clear since litigation in many jurisdictions has considerable shortcomings in terms of time, costs and even outcome. This is largely due to concerns regarding unknown legal systems, foreign languages and possibly unsympathetic foreign courts. In selecting the location for arbitration some forum shopping may be required.

Privacy – in most cases arbitration ensures that parties do not have to wash their “dirty laundry” in public.  Being able to resolve disagreements in private is even more crucial in cases where the project is still ongoing and the joint venture partners are attempting to maintain a « business as usual » attitude.  More and more, parties realise that the disclosure to the public of the joint venture’s internal machinations could not only devastate the reputation of the business but also ruin the viability of the project/joint venture itself.

Expertise of tribunal – for technical disputes within a particular industry, appointing arbitrators with sector specific expertise provides both a significant advantage and added security. The classic question is whether or not the arbitration clause should stipulate the requisite qualifications or whether this is better left until the dispute has arisen.  In our view, it is better to leave this issue open since until you know the nature of the dispute as well as the strategy you wish to adopt you cannot make a decision regarding the background and capabilities of the panel.

Final and enforceable decision – often investment projects are operated on an international basis with business partners and/or joint venture companies located in different countries.  Thanks to the New York Convention 1958 and its ratification by over 140 countries[3], a foreign arbitral award is more easily enforced overseas than a judgement delivered by a domestic court.  Moreover, joint venture partners are typically keen to obtain a fast resolution of the dispute in order to be able to make a decision as to the future of their joint venture, if still existent/viable. As a result, arbitration’s unique features of absence of (or restricted) appeal and limited grounds for challenge of the award increasingly attract parties driven by business priorities and cost control.   

Arbitrability of JV disputes

The New York Convention 1958[4] as well as most of the international arbitration regimes provide that their application is limited to disputes capable of settlement by arbitration. Excluded from this list are the types of disputes that belong exclusively to the domain of the court under the relevant domestic law. Given that jurisdictional challenges, including on grounds of inarbitrability, can potentially be made at different stages in the arbitral proceedings, the lex arbitri (usually the law of the seat), the law applicable to the substance and the law of the place of enforcement are likely to be relevant in determining whether the dispute is arbitrable. 

In many jurisdictions, the boundaries of arbitrability have been pushed further and further.  Depending on the nature of the issues involved, most of the disputes arising out of or in relation to joint venture agreements are arbitrable. This includes issues relating to breach of contract, competition law[5] and intellectual property rights.  With regard to the latter, it should however be noted that under the law of some jurisdictions such as France, Spain and Brazil issues relating to the validity of registered rights are deemed unarbitrable. Other issues usually considered unarbitrable include bankruptcy[6], and matters involving corruption and fraud (as a result of the general prohibition on arbitration of criminal matters).[7] 

Minority shareholder claims and statutory claims in general may also be excluded from arbitration in some jurisdictions (see explanatory box).  These are typically provided for by company legislation in the jurisdiction where the joint venture company is incorporated. This jurisdiction does not necessarily correspond to either the arbitration seat or the applicable law.

Arbitrability of shareholder statutory claims

Under English law, the arbitrability of such claims appears uncertain insofar as petitions under s459 of the Companies Act 1985 are concerned (now replaced by s994 of the Companies Act 2006), which offers unfairly prejudiced members of a company the right to apply to court for an order.  In Re Vocam Europe Ltd[8] decided in 1998, the court held that a petition under the Companies Act 1985 s459 was capable of being referred to arbitration and granted a stay of the judicial proceedings initiated under this provision. In contrast, the Chancery division in Bristol held in 2004 in Exeter City AFC Ltd v Football Conference Ltd and another[9] that statutory rights conferred on shareholders to apply for relief were inalienable and that such disputes were not arbitrable.  Judge Weeks Q.C. declined to follow Re Vocam Europe Ltd on the basis that the argument relied on by Rimer J. was limited and that no reference was made to the reasoning in the Australian case A Best Floor Sanding Party Ltd[10] (finding that winding-up proceedings are not arbitrable, see below), on which Judge Weeks placed a strong reliance.

In another Australian case, ACD Tridon Inc. v Tridon Australia Pty Ltd, the court held that matters arising under the Corporations Act can generally be submitted to arbitration, but only provided that these do not concern the parties’ rights stemming from the statute, instead of the contract.[11] The prohibition seems broader in India where unfair prejudice claims and mismanagement are not arbitrable, whether based on alleged violation of the Companies Act 1956 or the Articles of Associations of the company.[12] The answer still appears unclear under the laws of Hong Kong, where both the Arbitration Ordinance and section 168A of the Companies Ordinance are silent as to whether the statutory claims provided therein are arbitrable, and courts have not yet been required to give judicial guidance.  

On the contrary, the Irish Supreme Court ruled in 2002 that operating the arbitration clause (contained in a shareholder agreement) in a manner which deprived a party of their statutory right to have an oppressive allegation claim determined by the High Court is not contrary to public policy.[13] In France, the general rule is that, with regard to international joint ventures, limitations on arbitrability of disputes imposed by French law are not applicable in international arbitration as a result of the theory of party autonomy with regard to arbitration clauses in international contracts expounded by the French Supreme court (Cour de cassation) in the Dalico case of 20 December 20 1993.[14] Under the Swedish Companies Act 2005, the Articles of Association of a Swedish company limited by shares may provide that certain corporate disputes[15] (between shareholders, the company, the board of directors, a director, the managing director or a liquidator) shall be resolved by arbitration. Such provision constitutes a valid arbitration agreement. Moreover, section 22:5 of the same act interestingly provides that all disputes concerning the existence of a buy-out right or obligation[16] or, most commonly, the amount of the purchase price for the buy-out must be determined by a panel of arbitrators.  This is the most important example of statutory arbitration (i.e. arbitration based on law and not on an agreement) under Swedish law. An award rendered under these provisions may be appealed (on the merits) to the Stockholm District Court, and subsequently to the Svea Court of Appeal.

Under sections 34 and following of the Italian Act of 17 January 2003[17] shareholder claims can be subject to arbitration, as long as arbitration is provided for by the (joint venture) company bylaws and the rights which are going to be subject to arbitration can actually be disposed of by the shareholders.  Therefore, all disputes which involve the individual position of the shareholder can be subject to arbitration, whereas those disputes which involve subject matters which go beyond the sole interests of the parties but affect also the position of other shareholders or third parties may not be subject to arbitration.  A similar reasoning has been adopted by the Austrian Supreme Court, in a case decided in 1998.  The Court held that unless the arbitral award affects third-party interests (e.g. the creditors) disputes arising out of the corporate context, including pursuant to statutory rights, are arbitrable.[18]  Finally, anecdotal evidence suggests that the overwhelming majority of issues relating to shareholder statutory rights are arbitrable in Belgium[19] and in Germany as well.

The winding up of the joint venture company (e.g. resulting from the termination of the joint venture agreement) may also raise arbitrability issues. Ultimately the question is whether the arbitral panel can dissolve the company, if it is felt that the company's shareholders are otherwise unable to resolve the dispute. However, this question can be looked at differently according to the relevant legal system. Whether arbitrators can validly wind up a company can be viewed as a matter of arbitrability or as a matter of availability of the remedy in arbitration. For the purpose of this article, we will examine this question as part of the analysis of remedies available in arbitration. 

Scope of the arbitration agreement

Subject to their arbitrability, disputes covered by a standard arbitration clause containing the common expression “arising out of or in relation to” include not only contractual but also tort and statutory claims.  Such clauses can be included in the letter of intent, joint venture or cooperation agreements as well as the company’s articles of association.  Depending mostly on the contract containing it, the entities party to it and its wording, the scope of the arbitration clause tends to be a relevant issue in joint venture disputes.  In some circumstances particular to joint venture disputes the scope of the arbitration clause may be extended ratione materiae and/or ratione personae. 

Scope ratione materiae

In the absence of a conflicting clause in the contract deprived of an arbitration clause (usually an implementing contract or a contract subsequently negotiated in the context of the joint venture), the scope of the arbitration clause included in joint venture agreement may be extended to this contract. Such extension ratione materiae will however be subject to the existence of a substantial link between the two contracts.[20] This link can be economic[21] or structural, i.e. one contract is complementary to the other or refers to the performance of the other, etc.  

In the ICC Arbitration No. 8342, the arbitrator proceeded to the analysis of the link between the joint venture agreement and the implementing agreements stemming from it.[22]  The reasoning was based on the theory of “group of contracts”.  Given that both the joint venture agreement and the implementing agreements were part of the execution of a single project, a breach of an implementing agreement amounted to a breach of the joint venture agreement.  The scope of the arbitration clause contained in the joint venture agreement could therefore be extended to this implementing agreement.

Scope ratione personae

The scope ratione personae relates to who can/should be party to arbitral proceedings.  The contractual nature of arbitration means that only parties who undertook to submit their disputes to arbitration can be party to it.  Effectively it often means that there can be no joinder of a third party to the arbitration agreement unless the latter as well as all current parties to the arbitral proceedings consent to it. 

This mechanism is reflected in article 22 of the LCIA Rules which empowers the tribunal to allow joinder of a third party upon application of one party provided any such third party as well as the applicant party consent to it.  This “extra” power of the tribunal appears to replace the need of the other parties’ consent and thereby facilitates such joinder. The ICC International Court of Arbitration has a unique practice with that regard. Pursuant to its article 6(2), if the respondent does not file an Answer or if any party raises one or more pleas concerning the existence, validity or scope of the arbitration agreement, the Court itself – rather than the tribunal – may decide that the arbitration shall proceed if it is prima facie satisfied that an arbitration agreement may exist (without prejudice to the admissibility or merits of the plea or pleas). When the claimant files its request for arbitration against multiple respondents amongst whom at least one is a non-signatory, the Court applies the provisions of article 6(2) to determine whether the matter can proceed against all the respondents.

As frequently occurs in joint venture disputes, the joint venture agreement can be assigned or a third party could simply acquire shares in the company. In that instance, the question is whether the original arbitration agreement binds the third party. The answer depends then on the validity of such assignment and the applicable provisions in the agreement. If the assignment is valid under the applicable law[23], it is generally accepted that the new party to the agreement is entitled to commence arbitration pursuant to the arbitration clause contained in the assigned agreement.[24]  In Marchetto v Dekalb[25], one of the 50/50 shareholders sold its shares in the joint venture company to third-party A, which was a partnership formed between this original shareholder and third-party B.  Later, the original shareholder became third-party C and third-party D replaced the original shareholder as a partner in third-party A. The District Court held that given that third-party C is the successor of one of the initial shareholders, the other defendants may also be joined. 

With this regard, it has been reported that the trend in the United States is that courts tend to ensure – based on the arbitration provision and the assignment agreement – that it was intended by the parties that the contract assignee be bound by the arbitration agreement.[26] In contrast, the position in France in the context of international commerce is that there is a “presumption” of “automatic” transfer of the arbitration agreement as part of the assignment of the contract.[27]

Moreover, it appears that the ratification of the arbitration agreement by a third-party can be implied from its participation in the performance of the joint venture agreement. In a partial award rendered in the ICC Arbitration No. 8594, one of the joint venture partners’ subsidiaries (non-party to the joint venture agreement containing the arbitration clause but which owned 34.9% of the shares of the joint venture company) could be a party in the arbitral proceedings. The arbitral tribunal relied not only on the fact that this subsidiary was wholly owned by a party to the arbitration agreement but also on its involvement in the performance of the contract containing the arbitration clause.[28]

Although not universally recognised, the group of companies doctrine may be of assistance to join non-signatories to the arbitral proceeding. In Isover-Saint-Gobain v Dow Chemical France [29], the Paris Court of Appeal held that the arbitration clause expressly accepted by certain of the companies of the group should bind the other companies which by virtue of their role in the conclusion, performance or termination of the contracts containing said clauses, and in accordance with the mutual intention of all parties to the proceedings, appear to have been veritable parties to these contracts or to have been principally concerned by them and the disputes to which they may give rise.  However the ruling in Dow has no counterpart in English law.[30] 

The alternative may therefore be for the arbitral panel to pierce the corporate veil of the entity party to the arbitration agreement in order to obtain jurisdiction against a non-signatory within the same group of that party. In the ICC Arbitration No. 7626 sited in London[31], the arbitral tribunal found that it had no jurisdiction over a subsidiary of one of the parties.  In its view, it could not reach a contrary conclusion without lifting the corporate veil, which it refused to do, resting its position on the precedent of Adams v Cape Industries plc[32].  According to this case, the corporate veil may be pierced only in circumstances in which the defendant, by means of a corporate structure, attempted to evade mandatory legal provisions or the enforcement of existing third-party rights. In the United States, it appears that if an entity within the same group proves to be the alter ago of a party to the arbitration agreement, the latter shall be bound by it.[33]

It is also worth noting that section 8(1) of the English Rights of Third Parties Act 1999 offers an interesting tool. This permits a third-party beneficiary to a contract to enforce the arbitration clause contained in the contract provided that two conditions are fulfilled: firstly, that the arbitration agreement is in writing and secondly that the term which purports to confer a benefit to it is subject to a term providing for the submission of disputes to arbitration. 

Finally, in the United States, some courts have applied the doctrine of estoppel to prevent a party to the arbitration agreement from resisting arbitration against a non-signatory when the former has treated the latter as a signatory.  In Smith Enron Cogeneration Limited Partnership, Inc. v. Smith Cogeneration International Inc.[34] two parties, Enron and Smith, had entered into a joint venture agreement for the construction and operation of a power plant.  Both original business partners had subsequently assigned their rights under the joint venture agreement to their respective affiliates. A dispute arose and the Smith affiliate sued Enron in court. As a defence, Enron objected to the jurisdiction of the court, on the basis of the arbitration agreement contained in the joint venture agreement.  The US Court of Appeals for the Second Circuit ruled that Enron, although no longer a party to it could enforce the arbitration agreement.  The court pierced the corporate veil among the entities of Enron and declared the Smith’s affiliate estopped from resisting arbitration against Enron because it had treated Enron and its affiliate as a single party in the lawsuit. Moreover, there have been cases in which estoppel has been applied to non-signatories claiming a benefit from the contract containing the arbitration clause.[35]


As a general principle, arbitrators have the powers granted to them by both the parties (directly in the arbitration clause or the submission agreement and indirectly in the arbitration rules adopted by the parties) and the arbitration law applicable to the procedure. Moreover, because of the contractual nature of arbitration, arbitrators only have powers over parties to the arbitration agreement.  This restriction obviously impacts upon the type and magnitude of relief capable of being granted by arbitral panels and the extent to which these are enforceable. 

Experience also shows that foreseeing contractual remedies in the joint venture agreement puts the parties in a far better position should they find themselves in disagreement as to the future of the joint venture. Indeed, reducing the tribunal’s discretion by providing detailed and comprehensive rights exercisable in case of breach or deadlock will add great value in terms of predictability and therefore security.

Remedies available under the Arbitration Act 1996

The Arbitration Act 1996 s48 expressly provides that, unless otherwise agreed by the parties, the tribunal has the power to:

  • Grant declaratory relief

  • Order the payment of a sum of money, in any currency

And the same powers as the court:

  • To order a party to refrain from doing anything

  • To order specific performance of a contract, and

  • To order the rectification, setting aside or cancellation of a deed or other documents.

In the context of joint venture disputes, monetary compensation, specific performance and other injunctions are generally available.  For example, a tribunal could order the following:

  • a defaulting party to comply with its capital increase obligation

  • a joint venture partner to enter into implementing contracts[36]

  • the respondent(s) to instruct the members of the board appointed by them to adopt the articles of incorporations or appoint management as foreseen in the joint venture agreement[37]

  • a sale or transfer of shares

  • to terminate the joint venture agreement and possibly wind up the company.

Transfer of shares and termination of the joint venture agreement appear slightly more controversial but will sometimes be key to the resolution of a deadlock in a joint venture dispute. These remedies and their practical applications are analysed below.

Transfer of shares

Subject to relevant national law, arbitral tribunals generally have the power to order a transfer of shares which was specifically contemplated in the joint venture agreement. In an unpublished ICC Arbitration, the tribunal ordered a transfer of shares pursuant to a shareholder agreement providing the respondent with a call option over 4.13% of the shares of the company in the event of the company’s failure to reach certain EBIT figures.[38]

This situation must be distinguished from ones where there is a deadlock or where some actions on the part of a party have jeopardised the relationship.  The tribunal may be unable to resolve a deadlock preventing the parties from working together. It can not, however, substitute itself for the board of directors and the shareholders for the decision making.[39]  In some circumstances, a corporate divorce and the termination of the joint venture agreement is therefore the only solution and a remedy sought by at least one of the parties. 

In the presence of an exit/termination clause in the joint venture agreement (e.g. “blind bid mechanism” or “Russian roulette”), the arbitral panel will apply the contractual procedure and remedies. Upon a party’s request, the tribunal could declare that the clause requirements are met and order the failing party to participate in the procedure provided for in the agreement.[40]  This is the best scenario – indeed when no exit clause is provided in the joint venture agreement, granting of such remedy will be at the entire discretion of the tribunal and therefore uncertain.

In a recent case decided by the Indian Supreme Court, the court reviewed the arbitral award directing one joint venture partner to transfer its entire shareholding in the Indian-registered joint venture company to its counterpart.[41]  The dispute had arisen between the two joint venture partners under the shareholder agreement which contained an arbitration clause providing for arbitration under the LCIA Rules.  Although the option to purchase the shares had been contemplated by the parties, the Indian Supreme Court indicated that such relief provided by the arbitral panel violated Indian law. To the surprise and disappointment of the international arbitration community, the Court concluded that the award therefore conflicted with Indian public policy and had to be set aside.

This case shows how important selecting the arbitration venue can be, not only in relation to the seat of the arbitration which determines where the award will have to be challenged (as in the case above), but also as to the jurisdiction(s) where the award may potentially be sought to be enforced.

Another example where a transfer of shares was ordered by an arbitral tribunal can be found in an unpublished ICC Arbitration. The dispute arose out of a production sharing arrangement.  The parties had signed a Joint Management Agreement setting out the participating interest of the parties as being for the first claimant 50%, the second claimant 20% and the respondent 30%. The law applicable to the dispute was English law. Upon the claimants’ request, the tribunal ordered among other things the transfer of the respondent’s 30% of the participating interest to the claimants, on the basis that damages were not an adequate remedy and that “an award of damages alone would leave the respondent as a partner in what is essentially a joint venture in which all the parties must be able to work harmoniously together”.[42]  To date this has not been challenged by any court. 

Winding up of the joint venture company

Whether arbitrators have the powers to wind up a company will again depend on the relevant national law. Unlike bankruptcy which involves the rights of the creditors and hence third parties, such procedure is in theory not a matter of public policy.  Nevertheless, because of the statutory nature of a company or limited liability partnership and the right to apply to have it wound up, in some jurisdictions only state courts have the power to grant such relief.  This is the case in England.  In Re Magi Capital Partners LLP, one party applied to stay the other party’s petition for the winding up of their limited liability partnership.  The court granted the stay on the basis that before it could make a winding up order it had to be satisfied that it was just and equitable. In this respect, the court found that the allegations which were before the arbitrator could be material to the decision to be made on the hearing of the winding up petition. In its reasoning the court indicated that if the partnership at stake had been an ordinary partnership as opposed to a limited liability partnership, the arbitral panel would have had jurisdiction and adequate power to wind up the partnership. However, in the case under consideration, the entity to be wound up was a limited liability partnership which is, like companies, a creature of statute. Accordingly, the court declared that parties can not oust their statutory right[43] to apply to have the statutory entity wound up by the court.  

The same approach is adopted in the following jurisdictions. In France, despite the permissive finding in Dalco (mentioned above), in the ICC Award No. 11090 the arbitrator refused to dissolve the joint venture company.[44] The law applicable to the joint venture contract was French and the arbitration was sited in Paris, but the joint venture company was incorporated in a third country.  The arbitrator denied its jurisdiction to grant such remedy which could be granted only from a judicial court of the third country, on the basis that the dissolution of the company would have an impact on third parties and could contravene with that third country’s public policy. In a New South Wales case, the High Court held that the right of a contributory to apply to the court for a winding-up order can not be limited by agreement. The court refused to stay a winding-up petition because it did not fall within the scope of the discretionary provisions of section 53 of the Commercial Arbitrations Act 1984.[45]  A Court of Appeal in Singapore refused to grant a stay of the winding up proceedings of the Singaporean joint venture company on the basis that the relief of winding up is not available in arbitration.[46]  Also, in India, an application for the winding up of a company belongs to the exclusive jurisdiction of the Company Court under the provisions of the Companies Act 1956 and a relief of this nature cannot be granted by an arbitral tribunal.[47]  Finally, in Hong Kong, it is within the discretion of the court to determine whether the dispute sought to be referred to arbitration concerns a debt arising from a contract or a winding-up petition.  In Re Sky Datamann (Hong Kong) Ltd, the defendant of a winding up petition brought in court was granted a stay on the basis of the arbitration agreement contained in the contract entered into by itself and the claimant.  In exercising its discretion, the Court considered all the relevant circumstances including the financial position of the company to be wound up, the existence of other creditors and the position taken by them.  The Court found that the defendant had adequately demonstrated that it had a bona fide dispute on substantial grounds. It was therefore inappropriate for the matter to continue by petition, especially when arbitration had commenced.[48]

On the other hand, under Belgian law, a claim requesting the dissolution of a company can be subject to arbitration if the articles of association provide for an arbitration clause which is formulated in a fashion that gives it a wide scope.[49] With regard to the latter requirement, it has been recognised that as the dissolution of the company would not only impact the shareholders but the company as well, the arbitration clause contained in the articles of association must specifically refer to disputes between shareholders as well as disputes between shareholders and the company.[50]

Equally, in an arbitration case administered under the Zurich Chamber of Commerce Rules, upon request of both parties, the tribunal ordered the termination of the joint venture agreement.  In a first interim award, the tribunal declared the joint venture (two companies) between the parties dissolved and appointed a liquidator. In a further interim award, the tribunal ordered that the sale of the shares of the joint venture companies be carried out in an auction to be held under its supervision and according to procedures decided by it.  As the parties subsequently settled, how these awards would have been enforced will remain unknown.[51]

Multi-party arbitration

Joint venture stakeholders should bear in mind that the joint venture company will not possibly be party to the arbitral proceedings, unless it was party to the arbitration clause or is subsequently joined. 

Issues inherent to multi-party arbitrations tend to arise with even more relevance in the context of joint venture disputes.  These include:

  • Establishment of the tribunal – In Siemens et al v Dutco[52], three parties had entered into a consortium agreement for the construction of a cement plant in Oman. While Dutco had appointed its own arbitrator, Siemens and BKMI, both respondents in the proceedings, jointly appointed one arbitrator (solution specifically provided by article 10 of the ICC Rules of Arbitration).  Siemens and BKMI claimed that they had distinct interests and should both have the right to appoint their own arbitrator. The tribunal disagreed with them and confirmed that it had been validly constituted. The final award was subsequently upheld by the Paris Court of Appeal.  The case then went up to the French Cour de Cassation that set aside the ICC award on the ground that, as a matter of public policy, the principle of the equality of the parties in appointing arbitrators can be waived only after the dispute has arisen. In this instance, parties did not waive their right after the dispute had arisen, and had formally objected to jointly appointing one arbitrator and reserved their rights accordingly. 

  • Consolidation – the consensual nature of arbitration is an obstacle to the consolidation of disputes arising out of the same project but among parties who are not privy to a common agreement. We have examined how the scope of the arbitration agreement may be extended ratione personae. Consolidation is a different devise and can only be agreed on by all the parties to the proceeding to be consolidated as well as the tribunal. Although not excluded in principle, consolidation is far from guaranteed. As a result, failure for the parties to contemplate a dispute resolution mechanism encompassing disputes involving all the stakeholders in the project may imply a considerable increase of arbitration and legal costs and the risk of inconsistent rulings.  For instance, parties could agree that a tribunal constituted in accordance with the arbitration agreement will remain in existence until it declares itself to be functus officio.[53]  In this way, any party to the arbitration agreement will be able to submit a “fresh dispute” within the scope of the arbitration agreement without the need of the consent of the tribunal and the parties to the pre-existing dispute(s).  


The globalisation of international business relationships leads inherently to both a proliferation of international joint venture and multi-party collaboration agreements. Some will fail. Arbitration is the natural dispute resolution method for international disputes; something which we have seen is even truer for joint venture disputes. However, if the remedies required are either not available within the process or are not recognised by subsequent court intervention, there is a risk that the business community will lose faith in arbitration.

The practice of international arbitration constantly brings us back to its founding principle of party autonomy. Although it gives it its great flexibility, the contractual nature of arbitration in some respects limits its span and its applications. Parties and their counsels should be aware of these limits and understand the issues well enough to overcome them. In fact, most of the limitations of arbitration identified in this article can be surmounted with appropriate contract drafting provided that possible future disputes are thought through a the outset and their consequences anticipated.    

[1] See Gulf Petro Trading Co. Inc. v Nigerian Nat’l Petrol. Corp. (5th Cir. Jan. 7, 2008).

[2] This article however will not address this standing alone and vast topic, on which extensive commentaries have been written already (especially in relation to arbitrations arising out of bilateral treaties arbitrations).

[3] See status at

[4] Articles II.1 and V.2(a)

[5] For Europe, see Decision of the French Cour de Cassation of 5 January 1999 and Decision of the Tribunal Fédéral (Switzerland), 28 April 1992, ASA Bull., 1999, 529 and 455 ; For the United States, see Mitsubishi Motors Corp v Soler Chrysler Plymouth Inc, 473 US 614, 105 S.Ct.3346 (1985).

[6] In Finland, it has been decided by the Supreme Court that the rights of creditors and shareholders of a company do dot prevent arbitration over the claim for the liquidation of a company, Case No. 2003:45 of 14 May 2003.

[7] Rory White and Ercus Stewart, “Arbitration clauses and shareholders’ remedies”, Commercial Law Practitioner, December 2002 at 247; see also G. Wetter, « Issues of Corruption before International Tribunals : The Authentic Text and True Meaning of Judge Gunnar Largegren’s 1963 Award in ICC Case No. 1110 », Arbitration International, 1994, issue No. 10, 277.

[8] [1998] B.C.C. 396

[9] [2004] EWHC 2304 (Ch)

[10] [1999] VSC 170

[11] ACD Tridon Inc. v Tridon Australia Pty Ltd [2002] N.S.W.S.C. 896.

[12] Griesheim GmbH v Goyal MG Gases Pvt Ltd, (2004) 62 CLA; Sudershan Chopra v CLB, (2004) 64 CLA 214 (P&H).

[13] In Re Via Net Works Ireland Limited, Supreme Court, Keane C.J. April 23, 2002 [find reference]

[14] Cass. 1ère civ., 20/12/1993 - Bulletin 1993 I N° 372 p. 258

[15] These include disputes relating to a shareholder’s challenge of the company’s decision to grant or refuse consent to transfer of shares to a new owner (if such consent is required by the AoA), see 4:14 of the Companies Act 2005; disputes concerning rights to first refusal (if such right is provided by the AoA), see 4:22 of the Companies Act; disputes concerning post-sale purchase rights (if such right is provided by the AoA), see 4:33 of the Companies Act; and disputes between the company and the board, the managing director, a liquidator or a shareholder, see 7:54 of the Companies Act.  

[16] See chapter 22 of the Companies Act 2005

[17] D.Lgs 17.1.2003, n. 5

[18] Austrian Supreme Court, 10 December 1998, 7 Ob 221/98 w, RdW 1999, 206 = ecolex 1999(106).

[19] Olivier Caprasse, "Les sociétés et l'arbitrage", Bruylant, Bruxelles, 2002, pp. 237-239.

[20] Valérie Pironon, in « Les joint ventures – Contribution à l’étude juridique d’un instrument de coopération internationale », Dalloz, 2004, pp. 138-143.

[21] ICC Arbitration No. 7929, partial award issued in 1995, Yearbook (XXY) 2000, p. 312; see also ICC Arbitration No. 3493 in 1983, Yearbook 1984 (IX), p. 111; Rev. Arb. 1986, p. 105.  In this last case, although the award was ultimately set aside by the Paris Court of Appeal, the extension of the clause’s scope was not questioned.

[22] ICC Arbitration No. 8342 in 1996, quoted in Valérie Pironon, op.cit., p. 292.

[23] For an example where the assignment was invalid, see ICC Arbitration No. 6363 of 1991, 17 Y.B. Com. Arb. 186 (1992).

[24] Cedrela Transport Ltd v Banque Cantonale Vaudoise, 67 F. Supp. 2d 353 (U.S.D.C., S.T.N.Y. 1999); See also ICC case where the Court used its power under article 6(2) of the ICC Rules to find that the matter should proceed against a non-signatory on the basis that they were prima facie elements showing a transfer of assets and assignment, quoted by Anne Marie Whitesell and Eduardo Silva-Romero, in “Multiparty and Multicontract Arbitration: Recent ICC Experience”, Special Supplement 2003 ICC International Court of Arbitration Bulletin

[25] Marchetto v Dekalb, 711 Federal Supplement (N.D. III. 1989) pp. 936-941.

[26] Arbitration International, Vol. 20 No. 3 (2004) at 290; Britton v. Co-op Banking Group, 4 F.3d 742, 746 (9th Cir. 1993)

[27] E. Gaillard and J. Savage, Fouchard, Gaillard and Goldman on International Commercial Arbitration (1999), § 716.

[28] ICC arbitration No. 8594, quoted by Valérie Pironon, op.cit., p. 148.

[29] Court of Appeal of Paris, 21 October 1983, Isover-Saint-Gobain v Dow Chemical France, Jurisprudence française, 1984, p. 99 (ICC Arbitration No. 4131).

[30] Peterson Farms Inc. v C&M Farming Ltd [2004] EWHC 121 (Comm), Langley J. at paragraph 62.

[31] 1997, Yearbook, p. 132

[32] [1990] BCLC 479

[33] Meyer v WMCO-GP L.L.C., 211 S.W.3d 302, 305 (Tex. 2006); A.R.W. Exploration Corp. v. Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995)

[34] 198 F.3d 88 (2d Cir. 1999).

[35] Deloitte Noraudit A/S v Deloitte Haskins & Sells, U.S., 9 F.3d 88 (2d Cir. 1999)

[36] ASA-Conference, “Specific Performance as a Remedy – Non-monetary Relief in International Arbitration” by Dr. Rudolf Tschäni, 25 January 2008, p. 29

[37] Idem

[38] ICC – Mazza Report, “Non-monetary relief in selected ICC arbitration cases”

[39] Valérie Pironon, op.cit., p. 109.

[40] ASA-Conference, “Specific Performance as a Remedy – Non-monetary Relief in International Arbitration” by Dr. Rudolf Tschäni, 25 January 2008, p. 30.

[41] Venture Global Engineering v Satyam Computer Services, Supreme Court of India, 10 January 2008.

[42] ICC – Mazza Report, “Non-monetary relief in selected ICC arbitration cases”

[43] S 122(1)(g) of the Insolvency Act 1986

[44] ICC Arbitration No. 11090 dated 2002

[45] A Best Floor Sanding Party Limited v Skyer Australia Party Limited [1999] VSC 170.

[46] Court of Appeal, 6 February 1999, Four Pillars Enterprises Co. Ltd. v Beiersdorf AG., ASA Bulletin, Vol. 19 No. 2 (2001), pp. 370-379 – paragraph 22-26

[47] Haryana Telecom v. Sterlite Industries (1999) 5 SCC 688

[48] [2002] 1 HKLRD A1 (this case was followed by Re Jade Union Investment Limited [2004] HKEC 306)

[49] Cass., 2 February 1973, Pas., 1973, I, 529.; B. Tilleman, “Ontbinding van vennootschappen”, in Reeks Rechtspersonen- en Vennootschapsrecht, Deel 10, Jan Ronse Instituut, KU Leuven (ed.), Kalmthout, Biblo 1997, p.222-223

[50] Note A.C. under Rb. Mechelen, 26 November 1959, R.W., 1959-60, kol.1712.

[51] ASA-Conference, “Specific Performance as a Remedy – Non-monetary Relief in International Arbitration” by Dr. Rudolf Tschäni, 25 January 2008, p. 31-32.

[52] 7 January 1992, Revue de l’arbitrage (1992) pp. 470-472 with note by P. Bellet, pp. 473-482; Journal du Droit International (1992) pp. 712-713 with the Conclusions of the Attorney General, pp. 713-726 and note Ch. Jarosson, pp. 726-736.

[53] J. Gillis Wetter, “A multi-party arbitration scheme for international joint venture”, Arbitration International, Vol. 3 No. 1 (1987), pp. 2 - 13