On The Extension Of Validity Scope Of Arbitration Agreement Over Parties

As to jurisdiction of arbitral tribunal over quarreling parties and arbitral claims, whether the arbitration agreement has binding effect over both parties shall be the premise of exercising jurisdiction. Traditionally speaking, the criteria with respect to determine validity scope of an arbitration agreement over parties are regarded as legal conditions criteria regarding a legally effective arbitration agreement and arbitration consensus criteria demonstrating by signing the agreement in writing. These criteria end up with a simple standard in practice which is understood as only the parties of the arbitration agreement or the signatory of the agreement should be deemed to be the eligible parties to attend the arbitration procedure. The traditional standard is established on the ground of the principle of party autonomy and principle of privity in arbitration contract.However, the old criteria of validity doesn't adapt well to the reality of changeable relationship in transactions. Under the circumstances such as agency, assignment, delegation, statutory joint liabilities and exceptions of contract privity, the signatories of contract are usually different from those who are legally entitled to enjoy the rights or assume the obligations out of the contract. It would probably incur negative consequences on validity of arbitration agreement and governing scope of arbitration if the agreement has no binding effect over material interested but non-signatory parties, further, the public policy concerning encouraging arbitration for the purpose of establishing multiple dispute resolution mechanism is also suffered from this old standard. In front of this realistic problem, it is commonly recognized by judicial authorities in several countries that arbitration agreement is capable to bind non-signatories in special cases in order to make arbitration adaptive to modern economy as an efficient dispute settlement. A couple theories discussed in domestic or foreign judgments gradually served as the general theoretical bases when courts try to extend the validity scope of the arbitration agreement, for instance like fair and reasonable expectation, estoppels, good faith, indivisible claims and redefinition of form requirement.The limits of traditional criteria and the uptrend of extending the governing scope of arbitration give birth to a new standard for determining validity scope of the agreement, which should break the old one in two aspects, one by clarifying that the validity scope is totally independent to validity conditions, another by confirming that parties of arbitration procedure is differentiated both by definition and content form parties of arbitration agreement. The new criterion should also constitute, according to judicial practice, that arbitration agreement shall be interpreted in the manner of making it efficient to settlement of disputes as much as possible which requires all parties concerned are able to be involved and have legal standings in the arbitration procedure other than excluded out of hearing. Pursuant to these characteristics, the writer tries to establish a new criterion with regard to validity scope of arbitration agreement over quarreling parties, which is, arbitration obligations shall be imposed on parties upon the substantial standing of the applicant and respondent as well as the substantial nature of arbitration claim. If the relevant claim has already covered by a valid arbitration agreement, all parties legally connected to the claim shall be governed by arbitration when the particular claim is referred to arbitration, no matter in what ways the parties are involved in the alleged contract. In a word, the binding effect upon person of an arbitration agreement shall decided by the coverage of contract issues by the said agreement.Comparing with traditional criteria, the new claim criterion significantly realize the extension of governing scope of the arbitration agreement without violation the principle of arbitration autonomy and principle of independence of arbitration agreement. Substantial claim criterion has already generally recognized by legislation and judicatory in several countries in the event of party alteration, resulting in that principal, assignee, inheritor and shareholder in a piecing-veil corporation shall be bound by the arbitration agreement which they didn't signed related to contract issues in alleged contract. On the other hand, Where comes to exception of privity, whether the benefit third party, subrogater and statutory joint debtors are entitled to refer claim out of said contract to arbitration and have the burden of arbitration is far form certainty, which still ask for more creative discussion and promotion.