Contextualizing the Doctrine of Privity of Contract in Relation to International Investment Arbitration

Abstract

International investment arbitration, though within the sphere of public international law, is organically linked with conflict of laws and private contract law. International investment arbitration will, therefore, always, follow the same trajectory as the contract law of the country whose laws parties have chosen to govern their contract or relationship. Scholarly conversation now emerges with regard to third-party rights in municipal contract law and the dwindling influence of the doctrine of privity in both municipal and international laws. This work aims at examining the effect of the evolving legal order relating to privity of contract on international investment arbitration. The contract law of the country, which the parties have chosen as the lex loci, undoubtedly, impacts the conduct of the arbitration between the parties; especially, as it relates to third-party rights to join in arbitration, enforcement of arbitration agreements, and enforcement of arbitral awards. Qualitative research methodology is adopted in the work and this enabled the interrogation of previous literature on the dwindling status of the doctrine of privity and emerging third-party rights in municipal contract law. The selected research methodology particularly enabled the researchers to examine the effect which emerging third-party rights may have on international investment arbitration. The work finds: (i) that international investment arbitration and private contract law are, indeed, organically connected and that this connection is causal; (ii) that international investment arbitration will, continually, follow the same trajectory as the domestic contract law of the country whose laws parties have chosen to govern their contract or relationship; and (iii) that the national contract laws of some countries now contain third-party rights, which provide leeway for participation by third parties in arbitral proceedings in certain instances. The work recommends that the inroad of the privity of contract doctrine in international investment arbitration is salutary and that maximizing the gains of this massive inroad necessitates increased legislative intervention, which will empower third parties who are able to show prima facie that the outcome of the arbitral proceedings will affect them one way or the other, to join in such arbitral proceedings in order to protect their rights or interests. This is especially so in international investment arbitration ensuing from the petroleum and mining sectors, where investment activities fundamentally disrupt the lives of locals and violate their internationally recognised human rights.

Keywords: Arbitration, Contract, International law, Privity, Third-Party Rights

DOI: 10.7176/JLPG/127-04

Publication date: December 31^st 2022