Veil Piercing

PIERCING THE CORPORATE VEIL IN
INTERNATIONAL ARBITRATION
DR. YARASLAU KRYVOI1

ABSTRACT ........................................................................... 169
I. INTRODUCTION .................................................................... 170
II. CORPORATE FORM AND VEIL PIERCING ............................... 171
A. The Rationale Behind the Corporate Form .................171
B. The Concept of Piercing the Corporate Veil ............... 173
III. PIERCING THE CORPORATE VEIL IN INTERNATIONAL
COMMERCIAL ARBITRATION ................................................ 173
A. Approaches of International Tribunals ....................... 173
B. Enforcement of Awards................................................ 175
IV. PIERCING THE CORPORATE VEIL IN ICSID PROCEEDINGS... 178
A. The Legal Regime Under the ICSID Convention ........ 178
B. Approaches of ICSID Tribunals .................................. 179
1. Formalistic Approach ........................................... 179
2. Treating Non-Signatory Corporations as
“Investors” ............................................................ 181
3. Treating Non-Signatory Corporations as
“Investment”......................................................... 183
V. CONCLUSION .............................................................................. 186
ABSTRACT
This article examines the application of the piercing the corporate veil concept in
international arbitration. Interpretation of this concept is inconsistent even within
one domestic legal system, and it is even less predictable ininternational arbitration
when several legal systems come into play. Piercing the corporate veil may help to
give a concrete practical meaning to the purpose of an arbitration agreement or a
bilateral investment treaty. However, there are downsides of such piercing because
it negates many of the benefits which the corporate form offers.
Domestic courts are likely not to recognize and enforce anarbitration award
piercing the corporate veil in the absence of a written arbitration agreement.
Jurisprudence under the International Centre for Settlement of Investment Disputes
(“ICSID”) Convention allows one to avoid the enforcement problem. However, the
1

The author wishes to thank Professor Reiner Kraakman of Harvard Law School for an
interesting discussion on the problems examinedin the article, Constantine Partasides on his
comments on an earlier draft and participants of February 2010 Freshfields seminar in London
for their feedback.

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approaches of ICSID tribunals are inconsistent. This article identifies three major
conceptual approaches ICSID tribunals took in the past, namely: (1) declining
jurisdictionin the absence of an explicit arbitration agreement, (2) piercing the veil
by looking into the issue of foreign control, and (3) piercing the veil on the basis of
interpretation of the concept of “investment” in accordance with the intent of parties
to the arbitration agreement or purpose of an international treaty.
The practical advice offered by this article is to make written arbitrationclauses
as inclusive as possible, to avoid dealing with piercing the corporate veil altogether.
I. INTRODUCTION
King Solomon ended up not splitting the baby when he understood who the real
parent of the child was.2 Almost three thousand years after King Solomon, the
judges and arbitrators might be fully aware of the real parent of the company, but it
is very difficult to predict whether theywould split the rights and liabilities, or treat
the group of companies as one entity.
When parties conclude a number of contracts at realization of a common
economic transaction, advance planning for dispute resolution becomes an inherently
complex issue.3 One of these complexities involves piercing the corporate veil. The
primary impression such piercing leaves is that of uncertainty and...