Arbitration Clauses in Chains of Contracts

Abstract

To foster multi-party arbitrations French, US, and Austrian law allow, with significant nuances, for the extension of arbitration clauses through chains of contracts to claims by the ultimate buyer as a third party to the contract containing the arbitration clause against the first seller/manufacturer. The possibility of an extension of an arbitration clause in the case of a chain of contracts is inextricably intertwined with the substantive law question of whether or not the ultimate buyer may take direct recourse against a remote seller. Its admissibility cannot be regarded as a principle of international arbitration but is solely given if the domestic law of a jurisdiction that acknowledges the extension of an arbitration clause to a third party in a chain of contracts applies. Because no direct contractual relationship exists between the ultimate buyer and the remote seller, the buyer’s direct claims sound in tort. The law applicable to these claims by virtue of the conflicts rules on products liability or tort should decide on the extension of the arbitration clause as well. Remaining procedural disadvantages for the middle-man in a chain of contracts can only be addressed by contract drafting.

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