Our client's challenge

Extending the arbitration clause contained in a contract to the parent company of its counterpart

A company has entered into a distribution agreement containing an arbitration clause with the subsidiary of a chemical industry group for the supply of certain products in France. Further to a disagreement, it wishes to introduce an arbitral proceeding against its counterpart. However, as the latter only a limited activity, it wishes to act against the group, which is more solvent.

The company wishes to examine the possibility to extend the arbitration clause contained in the distribution agreement to the parent company to bind it to the arbitration.

Our way

Advising and supporting our client in extending the arbitration clause to a third-party

Despite the contractual nature of arbitration, French law recognizes the transmission, circulation and extension of arbitration clauses, notably in group of contracts or in complex operations. Case law also allows the extension of arbitration clauses in group of companies.

In order to extend an arbitration clause to a non-signatory company, the arbitral tribunal will look to the intent of the parties, which can manifest itself implicitly, through the knowledge of this clause and the direct implication of the non-signatory company to the contractual relationship.

In this case, it will be necessary to demonstrate that the parent company had knowledge of the content of the distribution agreement, and notably of the arbitration clause, and of its implication in the business relationship in order to convince the arbitral tribunal that it has jurisdiction with regard to the third-party parent company.