Impacts of Contractual Rights' Assignment on Arbitration Agreements

This article discusses the legal and practical problems arising from the assignment of contractual rights and obligations, with particular emphasis on binding nature of arbitration agreements for assignees. By considering the needs and risks of international commercial relations, it is true that arbitration is the most suitable mechanism to solve such legal disputes. However since, as all contracts do, arbitration clauses or arbitration agreements also derive their validity from parties’ mutual consent one should be extra cautious while determining their validity and bindingness against assignees or other third parties in general. This study analyzes impacts of contract’ assignments on validity of arbitration as a dispute resolution mechanism against assignees in a comparative way and in light of recent judicial decisions from various jurisdictions. Arbitration as a contractual right is also subject to transfer of underlying contract. Since arbitration clause is separate from validity of main contract due to separability doctrine, the author underlines that it should be arbitral tribunal itself to decide on validity of transfer and whether transferee has right to initiate arbitration against debtor in light of kompetenz- kompetenz doctrine. In that regard privity of contract should not be used as an excuse to invalidate arbitration clause stipulated in the underlying contract upon the transfer. This study examines both court cases and arbitral awards in a comparative approach to support this dominant view. Thus, it concludes that arbitration clause is directly related to the right to sue under dispute resolution clauses of contracts, so it should be deemed as an accessory of the assigned contractual right.