## Facts

- X, an American corporation, and Y, a Belgian corporation, entered into a contract under which X would provide technical know-how and services to assist Y in building a factory in Bulgaria.
- The contract was signed in Belgium and included an arbitration clause providing for arbitration under the International Chamber of Commerce (ICC) Rules.
- A dispute arose when X alleged that Y failed to pay royalties due under the contract and withheld information needed to calculate or claim the balance.
- X commenced ICC arbitration in New York against Y.
- Y was insolvent.
- Because of Y’s insolvency, X also named Y’s Belgian parent company, Z, as a respondent, even though Z had not signed the contract or the arbitration clause.
- Z appeared and sought to show that it had been improperly named as a defendant, arguing it could not be bound by Y’s contracts and could not be held liable for Y’s debts.
- In addition to contractual relief, X sought (among other remedies) treble damages under the U.S. Racketeer Influenced and Corrupt Organizations Act (RICO), as reflected in published excerpts and summaries.

## Issues

1. Whether the tribunal had jurisdiction over Z, a non-signatory parent company, and could treat Z as bound by the arbitration clause signed by Y.
2. What law the tribunal should apply to the question of extending obligations to Z (including whether it could apply international trade principles often described as lex mercatoria).
3. Whether the circumstances justified lifting the corporate veil to hold Z responsible in relation to Y’s obligations (including consideration of control within the group and Y’s insolvency and inactivity).

## Decision

- The sole arbitrator declared the tribunal competent as to Z and rejected Z’s request to be removed from the arbitration.
- The tribunal held that, on the facts, it was justified to lift the corporate veil so that Z could be treated as bound in the arbitration alongside Y.
- The tribunal stated a preference for applying international principles of international trade (lex mercatoria) and explained that such principles offer a uniform approach not tied to the technicalities of any single domestic system.
- The tribunal also concluded that the result would be the same whether the analysis proceeded under New York law, Belgian law, or international principles: each permits veil-lifting in certain situations, and the case met the conditions on its facts.
- Publicly available excerpts confirm that a RICO treble-damages claim was pleaded, but they do not reliably set out the tribunal’s final disposition on that claim or the final damages allocation.

## Legal Principles

- A non-signatory parent may be brought within an arbitration clause where the corporate veil is lifted on the facts, allowing the tribunal to treat the parent as implicated in the subsidiary’s contractual obligations.
- Whether to lift the corporate veil depends on the particular facts; commonly considered factors include meaningful direct control by the parent over the subsidiary, the subsidiary’s insolvency, and the subsidiary’s cessation of significant activity.
- An ICC tribunal may apply international principles of international trade (lex mercatoria) as the substantive standard in appropriate cases, especially where the transaction is international and the tribunal seeks a uniform rule.
- A tribunal may test its outcome against multiple potentially relevant legal systems and proceed where those systems converge on permitting veil-lifting in comparable circumstances.
- Insolvency within a group structure, when combined with control and lack of real separate activity, can support disregarding corporate separateness for purposes of jurisdiction and responsibility in arbitration.

## Conclusion

In ICC Case No. 8385, arising from an international contract for services related to a factory project in Bulgaria, the sole arbitrator accepted jurisdiction over a non-signatory Belgian parent (Z) after the Belgian signatory subsidiary (Y) became insolvent. The tribunal concluded that lifting the corporate veil was warranted and that Z could be treated as bound by the ICC arbitration clause. The award is also cited for its discussion of applying lex mercatoria and for its view that New York law, Belgian law, and international principles would lead to the same veil-lifting result on the circumstances described in published sources.


Award in ICC Case No. 8385, in J.-J. Arnaldez, Y. Derains & D. Hascher (eds.), Collection of Arbitral Awards 1996-2000 474 (2003)