Can you be bound by an arbitration clause if you did not sign the contract containing it?
Yes. Pursuant to French law, under certain circumstances you can be bound by an arbitration clause if you did not sign the contract that contains it. This is not only the case when the contract has been assigned to another party, but also for example when the non-signatory has participated in the negotiation or execution of the contract.
- Assignment: When the entire contract or a contractual right is transferred to a third party, the arbitration clause included in the contract is transferred as well. The third party does not need to have consented separately to the arbitration clause. For example, if company A has a contract with company B and company A transfers the contract to Y, a third party, by way of assignment, company B can start an arbitration against Y if a dispute arises out of the contract.
At this point, it is useful to note that there is a principle that the arbitration clause is separable from the contract. This principle is essential for the effectiveness of arbitration clauses. Therefore, if a contract is terminated, the arbitration clause, will survive. Some have tried to invoke the principle of separability of the arbitration clause to object to its transfer, but French courts have rejected this argument.
- Participation in the negotiation or performance of the contract: If you are involved in the negotiation or performance of a contract, you may be bound by the arbitration clause included in that contract, even if you are not a party to the contract itself. For example, if the parent company of the entity signing a contract containing an arbitration clause is directly involved in the negotiation and performance of the contract, the parent company will be bound by the arbitration clause included in the contract. It should be noted that the non-signatory can be bound, regardless of whether it - explicitly or implicitly - consented thereto. It does not need to have knowledge of the arbitration clause. Accordingly, it is recommended for parties which have participated in the execution of contracts, whether for a related company or otherwise, to always request a copy of the contract.