CJ Jouhal
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An Entrepreneur that leverages technology to grow and enhance a business. A Technologist that understands business and entrpreneurship and makes technology facilitate the business model.

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Third Party To Arbitration Agreement

Article 8 of the Act provides that arbitration agreements have a binding effect on the claims of third parties. A third party is obliged to assert a remedy by arbitration in order to enforce the obligations owed to it by a Contracting Party. However, if the third party is more of a defendant, he or she may choose to submit to the jurisdiction of an arbitral tribunal or that of the Tribunal. The application of the law to third parties in contracts containing arbitration clauses was upheld in Nisshin Shipping Co Ltd v Cleaves & Co Ltd and others. The Hon`ble High Court of Madras, in L &T Finance Limited vs.C.T. Ramanathan Infrastructure Pvt. Ltd.5, relied on the above judgment and stated: “The Hon`ble Supreme Court in Firm Ashok Traders vs. Gurumukh Das Saluja (A.I.R. 2004 SC 1433) was pleased to note that, since the remedy under article 9 arises from the arbitration agreement, a third party who is not a party to the arbitration agreement or arbitration proceedings cannot seek recourse in that section and cannot be invoked as a party in a claim under article 9 of the Arbitration and Conciliation Act. 1996.

Consequently, the remedy of Garnishee would rarely have jurisdiction under section 9 of the Arbitration and Conciliation Act, and not otherwise. In assessing the scope of Section 9 and the party`s power of recourse, the term “party” must be understood in accordance with the definition of the term referred to in Section 2(1)(h) which states that “party” is a party to an arbitration agreement, unless the context requires otherwise. The Contract (Rights of Third Parties) Act 1999 abolished the long-standing doctrine of contractual nature (which only one party can enforce its terms). By law, a third party may impose a contract term if the contract provides that the third party may do so (section 1(a)) or if the term gives the third party an advantage (section 1(b)). The parties disagreed on the law applicable to the arbitration agreement. On the one hand, kfG argued that the Tribunal should have “applied English law to the arbitration agreement and, therefore, held that it had no jurisdiction over KFG” [para. 14]. Kabab-Ji, for its part, supported the Tribunal`s decision to apply French law, the law of the seat, in the interpretation of the arbitration agreement. The Paris Court of Appeal upheld Kabab-Jis` argument and upheld the court`s finding that French law regulated the arbitration agreement.

A rare example was the 1978 decision in the Roussel-Uclaf case v. GD Searle & Co Limited and GD Searle & Co, which granted a stay of legal proceedings in favour of arbitration proceedings under Section 1 of the Arbitration Act concerning a subsidiary whose parent company was a party to an arbitration agreement. . . .

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