The Group of Companies Doctrine - Assessing the Indian Approach

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Consent is a foundational requirement of any arbitration. This consent is embodied in the arbitration agreement. Typically, therefore, it is only the signatories to an arbitration agreement that are bound by the agreement to arbitrate. In limited circumstances, however, the arbitration agreement may also bind non-signatories. A variety of legal doctrines have been used, albeit sparingly, to establish consent on the part of non-signatories. The majority of these doctrines are derived from well-established principles of contract, company, and agency law in domestic legal systems. One theory that has grown specifically out of arbitral practice and jurisprudence is the “group of companies” doctrine.

As the name suggests, the “group of companies” doctrine provides, in broad terms, that a non-signatory may be bound by an arbitration agreement if it forms part of the same group of companies as a signatory and all the parties to the arbitration agreement mutually intend that the non-signatory be bound by it. The parties’ intentions are typically ascertained through their conduct, which includes a consideration of whether the non-signatory participated in the negotiation, performance, or termination of the contract.

Originally published in the Indian Journal of Arbitration Law - March 2021.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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