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Analysing the Group of Companies Doctrine

[This article is authored by Jasleen Virk, a penultimate year law student from JGLS, Sonipat.]

Keywords: Third Party, Group of Companies Doctrine, Implied Consent.


Party autonomy is at the heart of arbitration. It is the fundamental principle that provides parties with the freedom to govern the persons eligible to participate in the arbitration contractually. It is only logical then to presume that parties who have expressly consented to arbitration will be bound by it. Thus, being a party to the arbitration agreement is a prerequisite to participate in arbitration proceedings. However, under certain circumstances, even non-signatories are allowed to join the arbitration through various legal theories[i] where Group of Companies is the most contested doctrine.

The Group of Companies doctrine allows non-signatories to join the arbitration proceedings if the signatory is part of a Group of Companies where the arbitration agreement can be extended to non-parties. Such a company needs to be of the same group provided the following conditions are fulfilled: (a) the non-signatory played a role in the performance or conclusion of the contract consisting of the arbitration agreement; (b) the signatories had the common intention to bind the non-signatory by the arbitration agreement.[ii]

The international case of Dow Chemicals,[iii] was the first case to invoke the “Group of Companies” doctrine. The ICC applied this doctrine to conclude that “non-signatory companies must have played an essential role in the ‘conclusion, performance or the termination’ of the contract and that mere corporate ties between different companies were not enough to bind them to a single arbitration”.

The Group of Companies doctrine has been widely accepted under French law, but English courts have rejected the application of the said doctrine.[iv] The U.S. Courts have identified five doctrines on the basis of which a non-signatory can be bound by an arbitration agreement viz. (i) Estoppel; (ii) Incorporation by Reference; (iii) Assumption; (iv) Agency; and (v) Veil piercing/Alter Ego.[v] Interestingly, even U.S. does not recognise the Group of Companies doctrine.

Indian Scenario

The Supreme Court of India in the case of Sukanya Holdings held that “an arbitration agreement will only bind the parties which have entered into the same in view of Section 8 of the A&C Act.” In 2003, party autonomy was given paramount importance and the Court’s decision not to bind third parties reflected their attitude towards dismissing the commercial intent of the signatories.

Later, the very same Court in the seminal judgment of Chloro Controls, adopted the Group of Companies doctrine and diluted the principle of party autonomy as the courts recognised the importance of commercial prudence and brought the entire dispute under one umbrella where the arbitration proceedings involved not only signatories but also, non-signatories. The Court stated, “ ‘intention of the parties’ is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties”. Post this, significant amendments were made, especially in Section 8 of the Act, which allowed third parties to be included in arbitration proceedings. Ameet Lalchand was a ground-breaking judgment where the Court correctly applied the ratio of Chloro Controls to domestic arbitration and diluted the ratio of Sukanya Holdings to an extent.

The Supreme Court of India in Reckitt Benckiser had occasion to revisit the principles expounded in Chloro Controls where it held, “that non-signatory cannot be impleaded without establishing its intention to be bound to arbitration as burden is upon the party seeking to implead a non-signatory, to show its intention to consent to the arbitration agreement. A non-signatory without any causal connection with the process of negotiations preceding the arbitration agreement cannot be made a party to the arbitration. Circumstances and correspondence post-execution of an arbitration agreement cannot bind a non-signatory to the arbitration agreement”. The Apex Court’s approach here reflects a stringent formulation of the “Test of Intent” where a subsidiary contract associated with the principal contract, by itself, is not sufficient to bind third parties even though it belongs to the same group of companies. The Court thought a more holistic approach would be to analyse the rationale behind a transaction along with the intent of the parties before impleading a non-signatory.

The Supreme Court in the case of Mahanagar Telephone invoked the Group of Companies doctrine and referred the matter to single composite domestic arbitration by impleading non-signatories. Courts following this evolution have come to the conclusion that the Group of Companies doctrine will be applied in India once the following conditions are fulfilled – 1) Establish the intention of the parties to bind the non-signatory to the arbitration agreement; 2) Demonstrate that the third party is either involved in the performance or termination of the contract; 3) The third party has a direct relationship with the signatory; 4) That signatory and non-signatory exist in a tight group; and 5) The signatory and non-signatory constitute ‘a single economic unit’.

In the contentious arbitration battle between Amazon and Future Group, the Emergency Arbitrator rightly invoked the Group of Companies Doctrine to hold Future Retail Ltd. (“FRL”), a non-signatory, as a party to the arbitration since FRL and the signatory, Future Group, belonged to the same group, i.e., Biyanis and qualified the parameters enunciated above to implead non-signatories under the doctrine.

Critique of the Doctrine

The International Commercial Arbitration has acknowledged the Group of Companies Doctrine by differentiating it with ‘piercing of the corporate veil’.[vi] However, some nations have not embraced this doctrine. One of the reasons is the belief that this doctrine disregards the “principles of privity of contract and separate legal personality, thereby blurring the requirement of consent in international arbitration”. In the landmark judgment of Manuchar Steel, Singapore refused to apply the Group of Companies because the Court held “a basic tenet of company law in Singapore is that a company and its shareholders are separate legal persons”. Moreover, it would be anathema to the ‘internal logic of the consensual basis of an agreement to arbitrate’”.[vii] Even Swiss and German courts refuse to invoke this doctrine.[viii] Staunch critic Bernard Hanotiau argues that this doctrine is “a shortcut permitting avoidance of rigorous legal reasoning”.[ix]

The defenders of this doctrine argue that it does not disregard corporate personality and is applicable only in cases where consent of the third party is proved.[x] In fact, it is a manifestation of ‘implied consent.’[xi] “It simply seeks to ascertain whether all parties, signatories and non-signatories alike, intended the non-signatory to be bound by the arbitration agreement based on the conduct of the parties as objectively construed”. In this context, the existence of non-signatories in the same Group of Companies is just one facet in determining the intent of the parties to be bound by arbitration. The same was concluded in Chloro Controls as well, where the Court opined, “the intention of the parties to refer all the disputes between all the parties to the arbitration tribunal is one of the determinative factors”.

It is pertinent to note that critique is also aimed towards lowering the threshold of ‘common intent’ in Mahanagar Telephone, wherein the intent is only restricted to financial links between a subsidiary and parent company. The Apex Court in Cheran Properties, enforced an arbitral award against a non-signatory thereby, going beyond the original ambit of the doctrine. This has created a dangerous precedent and raised due process concerns w.r.t non-signatories. Thus, the Supreme Court needs to determine the parameters of this doctrine.

The theory of implied consent binds non-signatories to arbitral proceedings. It is similar to the Group of Companies doctrine as both emanate from a similar foundational basis, i.e., intent or conduct of third parties to be bound by arbitration with one difference. While implied consent is applicable universally, the Group of Companies doctrine is limited to the affiliates of the signatory. This means the theory of implied consent encompasses the Group of Companies’ doctrine and is sufficient to bind third parties. Could it then be argued that the Group of Companies doctrine is redundant? The answer to this question lies in the amended Section 8 of the Arbitration & Conciliation Act, 1996, where “any person claiming through or under him” means the legislature does not limit inclusion of third parties only to affiliates of group companies but ‘any person’ who has a connection or relation with the signatory. Nevertheless, the judiciary needs to clarify that under this doctrine, a non-signatory is a “party” in its own right and not “claiming through or under” a signatory affiliate.


This article explored the role of the Group of Companies doctrine to bind non-signatories. Certain jurisdictions that allow the inclusion of non-signatories refrain from relying on the Group of Companies since it contradicts separate legal personality and contractual privity. In contrast, India has adopted this doctrine which has developed through judicial interpretations. However, the imposition of arbitral awards against non-signatories through a group of companies has obfuscated the jurisprudential basis of this doctrine in law.

[i] Andrea Marco Steingruber, “Consent in International Arbitration” Oxford International Arbitration Series, Oxford University Press (2012). [ii] Richard Bamforth, Irina Tymczyszyn, Olswang, and Allan Van Fleet, Mark A Correro, Greenberg Traurig “Joining Non-Signatories to an Arbitration: Recent Developments” (2007/08), Cross-Border handbook, Dispute Resolution 2007/08 Volume 2: Arbitration at 11. [iii] Dow Chemical v. Isover-Saint-Gobain, ICC Award No. 4131, YCA 1984, at 131. [iv] Peterson Farms Inc. v C&M Farming Ltd [2004] EWHC 121 (Comm), Langley J. at para 62. [v] Simon Greenberg, Christopher Kee & Romesh Weeramantry, “International Commercial Arbitration: an Asia-Pacific Perspective” (2011), Cambridge University Press at 165. [vi] Pietro Ferrario, 'The Group of Companies Doctrine in International Commercial Arbitration: Is There any Reason for this Doctrine to Exist?', (2009), 26, Journal of International Arbitration, Issue 5, pp. 647-673, [vii] Manuchar Steel H.K. Ltd. v. Star Pac. Line Pte Ltd. [2014] SGHC 181at 70. [viii] Bundesgericht [Bger] [Federal Supreme Court] Jan. 29, 1996, 14(3) ASA BULL. 496 (Switz.); see also Daniel Girsberger & Natalie Voser, International Arbitration: Comparative And Swiss Perspectives 101 (3d Ed. 2016); See Also Andrea Meier, Multi-Party Arbitrations, In Arbitration In Switzerland: The Practitioner’s Guide 2505, 2508 (Manuel Arroyo Ed., 2d Ed. 2018); Oberlandesgericht Hamburg [Olg Hamburg] [Higher Regional Court Of Hamburg] Nov. 8, 2001, 2002 Oberlandesgericht-Report 305 (Ger.) [ix] Bernard Hanotiau, Complex Arbitrations: Multi-Party, Multi-Contract, Multi-Issue – A Comparative Study (2d Ed. 2020) at 245. [x] Yves Derains, Is There a Group of Companies Doctrine?, In Dossier Of The Icc Institute Of World Business Law: Multiparty Arbitration At 138 (Bernard Hanotiau & Eric E. Schwarz Eds., 2010); Fouchard Gaillard Goldman On International Commercial Arbitration ¶ 498 (Emmanuel Gaillard & John Savage eds., 1999) at 500–01 (1999). [xi] Gary Born, International Commercial Arbitration 280–81 (3d Ed. 2021) at 1564.

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