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This article has been written by Kaushiki Vatsa pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. This article has been edited by Ruchika Mohapatra (Associate, Lawsikho) 


The most basic or fundamental thing required to start or complete the process of arbitration is consent. By the term consent, it is meant that the parties should have the common intention to take the legal matters to an arbitral tribunal instead of the court when any disputes occur. This proof of consent is properly highlighted in the agreement of arbitration. Hence, in most circumstances, the parties which have signed the arbitration agreement are bound by the law of the arbitration. It can also be considered as a cornerstone. However, in some very rare situations, the parties which have not signed the agreement of arbitration will also be bound by the same law. This happens in the cases where it becomes difficult to solve that particular dispute without the third party being involved during the proceedings. The point to ponder here is: how can the consent of these parties be ensured? What is the mechanism to ensure this “implied” consent? For this very same purpose, a variety of legal doctrines have been used which are derived or taken from the well-known concepts of company law and contract law. One such legal principle that has become popular over time is the “group of companies ‘ doctrine.

Group of companies doctrine

From a superficial point of view or as the name suggests, this doctrine states that a non-signatory can be also bound by the arbitration agreement if the non-signatory and the signatory belong to the same group or the company and all the parties that are mutual to the arbitration agreement have agreed that the non-signatory will also be bound by the law of arbitration. What is important to note here is that the parties’ intention can be figured out or implied by their conduct as well. By the term conduct, it means activities such as non-signatory were present during the negotiations, or when the agreement was performed.  If we are talking in a practical context, the value of this doctrine is consistently rising because of the complex nature of society. This doctrine seems to be contrary to the very basic or fundamental principles of a legal personality that is very important in common as well as civil jurisdictions.

Moreover, the “group of companies” doctrine tends to divert from all the orthodox principles that have been governing our legal area and our legal framework for a long time. Hence, this is obvious to create some controversies and debates. Some scholars believe that this doctrine erodes the foundation of the consent of the parties. But it is important to note that a detailed analysis of this doctrine will help us to realize that it is not against the foundation of the arbitration.

The “group of companies” doctrine uses a three-fold test to determine whether the non-signatory party is involved in the process of Arbitration or not. This three-fold test is- the presence of a tight group structure, involvement of the non-signatory party in the conclusion of the agreement, and the mutual intention of the parties to bind the non-signatory party to the arbitration agreement. This article tries to provide a defense for this doctrine by countering some of the claims against its validity. 


The “group of companies’ doctrine was discussed thoroughly for the first time in the International Chambers of Commerce in the case of Dow Chemicals Company & Ors v. Isover Saint Gobain (Dow Chemicals). At this time, this doctrine was way out of the ordinary concepts of contract law that were prevalent at that time and therefore was a novelty. in the above-mentioned case, there was a group of companies that were together known as Dow chemical group and they filed a case against Isover. What is important to note here is that in the Dow chemical group, some companies (parent companies) have signed the arbitration agreement while some did not (French subsidiary). The matter was brought to the tribunal when both the companies who had signed the arbitration agreement had some distribution disagreement.  

At the tribunal, not only the two companies who had signed the arbitration agreement were the parties but also all the companies of the Dow Chemical group (Dow Chemical Venezuela, Dow Chemical AG, Dow Chemical Europe and Dow Chemical France) were considered as the parties to the arbitration agreement as well. This was one of the very first times when the parties that were not exclusively mentioned in the arbitration agreement or did not intend to take a part in the arbitration were a part of the arbitration. 


This judgment was severely criticized because it included the non-signatory party only because of the fact that the parties had a parent-subsidiary relationship. Moreover, the critics also added that the decision of the court was problematic because many parent companies were put at risk. The article further explains the three-fold test that was used in the Dow Chemical case to reach the conclusion. This has also become the basic requirement for the non-signatory party to be bound by the law nowadays. The article also intends to counter the above criticism of the case and wants to show that the tribunal reached the conclusion by believing that there was a common intention of all the parties (signatory parties) to bind the non-signatory party to the contract.

Countering the criticism of the Dow Chemical case

To apply the “group of companies” doctrine all the aspects must be fulfilled (Subjective and Objective). The objective aspect looks for the relation between signatory and non-signatory companies while the objective criteria looks for the intention of the parties to get the third party involved in the arbitration agreement. Both of these aspects have been fulfilled in this case as the relationship between the signatory and the non-signatory party is justified as well as there is enough evidence to show that the parties wanted a third party to be involved in their arbitration agreement. The tribunal further justified the conduct of the non-signatory company by stating that this non-signatory company was a parent company of the signatory company and therefore the signatory party is controlled by the parent company. They finally concluded by saying that these are the conditions that provide implied consent from the third party as the members of this company are so tightly related to one another that all the members have enough control over each other. 

The tribunal said that the non-signatory party has a right to come before arbitral because they have played a crucial role in the performance of the agreement as to all the distributions that were made as per the agreement were made by this very non-signatory party only. It is also important to note that why will a third party be so interested in the completion of the contract if they have no intention to be a part of it and why will the involved parties bring a third party if they don’t want the third party to be the part of the contract. Hence this was a valid decision.

The three-fold test requirements

 The three parameters of the test that were laid down, in this case, are as follows-

(i) The group of companies should exist in such a way that they can form a tight structure despite being different legal entities. They should not only belong to one group but the structure should be so tight that the members should have enough control over one other.  (ii) The second criteria is that the non-signatory party should perform an important or crucial role during the performance or termination of the contract containing the arbitration agreement. This participation by the non-signatory is shown by its conduct. The underlying principle behind this criterion is that it is very likely that a third party will be actively present during all the stages of the contract without having the intention to get involved. 

 (iii) The third criteria is that both the parties must have the common intention to bring the third party into their agreement of arbitration.

“Group of Companies Doctrine” in different jurisdictions

ICC has been very inconsistent with the use of the “group of companies” doctrine. In some cases, it has supported this doctrine while in some others it completely rejected the doctrine. 

US and UK 

The US, as well as the UK, have both been a little skeptical about the use of the doctrine. However, while the US had a comparatively flexible approach, the “group of companies” doctrine was completely rejected by the United Kingdom in the cases of Caparo Group Ltd v Fagor Arrastate Sociedad Cooperative and Peterson Farms Inc v C&M Farming Ltd. The US has denied this doctrine because it believes that only the old contract theories guarantee consent. This theory of the US appears to be vague and illogical with no concrete evidence. 

In the case of the UK, the reason for not accepting the doctrine in the case of Caparo Group Ltd v Fagor Arrastate Sociedad Cooparative was that the contract, as well as the arbitration agreement, was governed by English law. However, there is  no evidence to suggest that Caparo was a party to either of them. Peterson Farms Inc v C&M Farming Ltd case law rejected the doctrine because the substantive law was decided to be Arkansas law by the parties. The tribunal, however, failed to take notice of that and they assumed that it has the jurisdiction of both the signatory party as well as the non-signatory party. The matter was then brought to the English court where the court said that the tribunal had failed to take the consent of both the parties into consideration. The court said that the party has the right to choose the law and they chose Arkansas law which the tribunal failed to apply. The court then applied the Arkansas law and found that there was no role of “group of companies” doctrine and therefore, the tribunal had no jurisdiction to decide the case. The court also added that the “group of companies” doctrine does not form any part of English law.

 It can be vaguely said that Arkansas law as well as the English law have no provisions to support the Doctrine of Companies. However, it is interesting to note that some scholars argue that if the law of arbitration has recognised this doctrine then the English law cannot stop this doctrine from implementing it. 

It is not shocking to discover that like the US, the UK shares the same old thesis about consent. And they only consider the written agreement as valid proof for consent. These countries have refused to acknowledge that how to evidence consent lies in the heart of the “group of companies” doctrine. This argument can further be proved with the fact of a three-fold test that the Dow Chemical case draws. This three-fold test acts as a litmus test to determine the mutuality of the intention of the involved parties. One of the more reasons, the UK has blatantly refused to accept the “group of companies” doctrine is because of the fact that they have applied the concept of “privity of contract” very broadly and very extreme. 


France is one of the many jurisdictions that have adopted the “Group of Companies” doctrine. This country went to the extent of making this doctrine a legal rule. In the Kis France case, the court extended the arbitration agreement to the subsidiaries because there was a common intention to bring the third party into the contract. France has shown a very liberal approach in adopting this law but this doctrine is only applicable if it meets the two conditions. The company which has not signed the arbitration agreement and is considered as the third party per se must play a crucial and active role during the performing and the concluding of the arbitration agreement. The second condition is that the parties which have directly signed the arbitration agreement must have a mutual interest in binding the third party to the contract. 


Indian courts have quite a mixed reaction to the “group of companies ‘ doctrine and to some extent are quite willing to adopt the “group of companies” doctrine. The Indian law does not put emphasis on signed arbitration agreements because they gave validity to both oral and written contracts. In the Chloro Control India case, the court allowed this doctrine. For the doctrine to be applied in India the court said that there should be enough commercial evidence to show that the non-signatory has been involved during the performance of the court by the signatory party. It is also important to note that there is no hard and fast rule for this doctrine to be applied and the only way this doctrine can be applied is on a case-to-case basis. In India, the Chloro has dealt with the applicability of the doctrine but there are still some problems with solving the disputes relating to the enforcement of the awards.


The “group of companies” doctrine faces several criticisms and several challenges from the different scholars in different jurisdictions across the globe. Countries like France have been flexible enough to adapt this doctrine. While some countries like Germany are also relaxing their extreme stance and are making several provisions by which they can adopt this doctrine. It is not a surprising fact that this doctrine diverts from the traditional and the orthodox principles and the doctrine of law. But it also provides a mechanism by which the third party can be held liable which were not held liable previously because all the emphasis was given to “signatures”. Therefore, more or less, this doctrine acts as a shield against those companies who try to escape their liability by acting through the subsidiary company. It is also important to note that no mandate rule can be set up, there can be no one formula and each case should be decided on a case to case basis. And therefore, it is very important for the arbitral tribunals to strike a balance between misinterpreting consent and flexible interpretation.  

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