Research On Third-Party Beneficiary Bound By Arbitration Clause In Third-Party Beneficiary Contracts

With the increasing variety and frequency of civil and commercial practice,in order to meet the need of convenient trade,the theory of privity of contract obtains new explanation and development.The third-party beneficiary contract unifies the arrangement of substantive rights and obligations among the signatories and nonsignatories to the contract,is widely used in insurance,trust and other fields,and is recognized by the legislation of more and more countries.Although the third-party beneficiary has an independent claim with respect to the rights under the contract,it remains an unsettled question whether the third-party beneficiary shall be bound by the arbitration clause of a third-party beneficiary contract.China’s legislation on this issue has no relevant provisions,and the judicial practice is also lack of a unified approach.By comparing the situation that arbitration clause binds the non-signatory party to the contract,the third-party beneficiary situation has the possibility to break the relativity of contract,so that the arbitration clause can bind the third-party beneficiary.With regard to the conditions to be satisfied for an arbitration clause to bind a third-party beneficiary,firstly,it is necessary to solve who is entitled to determine this issue,and which law shall be applied to solve this issue.Since this issue is essentially the issue of arbitration jurisdiction,the tribunal has the power to resolve this issue pursuant to the principle of adjudication jurisdiction and it is advisable to apply the governing law of the arbitration clause.Secondly,with respect to the detailed conditions,if the arbitration clause is to be binding on the third-party beneficiary,the identity of the third-party beneficiary must be clear and specific.When it comes to the right and the obligation of the third-party beneficiary to file an arbitration and participate in the arbitration,different practices can be roughly divided into two different modes.With regard to the first mode,third-party beneficiaries’ right to file an arbitration is subject to whether the signing parties treat them as the party to the arbitration agreement;as long as the third-party beneficiaries intend to enforce the right under the contract,they shall be deemed to assume the obligation to enforce such by arbitration.With respect to the second mode,as long as the third-party beneficiaries intend to enforce the right under the contract,they shall be deemed to be bound by the arbitration clause,including enjoying the right to file an arbitration and assuming the obligation to participate in the arbitration.The second mode gives a better balance between fairness and efficiency,which is the better one to be adopted.After sorting out the common practice of arbitration clause binding the third-party beneficiary,we need to consider this issue comprehensively according to our national conditions.In the existing judicial practice in China,many courts have broken through the relative nature of contracts and held that the arbitration clauses may bind the beneficial third parties.Meanwhile,the circumstances of third-party beneficiaries shall be aligned with Chinese attitudes towards arbitration clause binding upon nonsigning parties.Under the current legislative and judicial practice,the substantive implication between the signing party and the non-signing party,and the party’s autonomy are mainly considered in order to protect parties’ anticipation upon dispute resolution.Therefore,the second mode is more suitable for China.To handle the issue of whether an arbitration clause binds the third-party beneficiary,we shall consider comprehensively step by step whether to conclude another arbitration clause,the scope of arbitration subjects,the scope of arbitration matters,and whether the thirdparty beneficiary clearly objects to or does not know such arbitration clause,in combination with the characteristics of arbitration.