'I. The applicable law

376. Article 17 of the ICC Rules [1998 version] provides that:

1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate.

2. In all cases, the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages.

377. Pursuant to Clause 50 of the General Conditions of Contract, the Contract shall be governed and construed in accordance with the laws of [State X]. The parties further specified in paragraph 45 of the Terms of Reference, that the Arbitral Tribunal had not been given the power to act as amiable compositeur or to decide matters ex aequo et bono.

378. The fact that [State X] law governs the merits of the dispute does not mean that it necessarily also governs the issue of joining a non-signatory or, in other words, the issue of whether the arbitration clause should be extended to [the Parent Company].

379. It appears from the record that there is broad agreement between the parties concerning the rules of law applicable to the issue of the extension of the arbitration clause to a non-signatory, including the issue of whether the corporate veil should be pierced in a particular case. In support of their positions, the parties have submitted detailed and extensive legal opinions of prominent law professors and leading arbitration practitioners. All of them agree that international arbitrators often decide this issue in cases with a cross-border element through the application of transnational legal principles and that it is legitimate for them to do so, although there are differences among the experts with respect to the importance to be accorded such principles in respect of possible corporate veil-piercing.

380. On [Claimant]'s side, Professor [A] has explained why the choice of a national law to decide upon the extension of the arbitration clause to a non-signatory is inappropriate. In his opinion, the lex societatis does not qualify, since the issue concerns the scope rationae personae of the arbitration clause rather than an issue of capacity or power. On the other hand, the law of the seat has sometimes been applied on the theory that the issue of extension brings into question the jurisdiction of the arbitral tribunal and that this issue would be governed by the law applicable to the arbitration proceedings, which would be identified as the law of the seat of the arbitral tribunal. Such an approach is obsolete and should therefore not be followed. Finally, applying the law of the principal contract, as being the law governing the arbitration clause - a solution which is also sometimes followed by arbitral tribunals - is to some extent putting the cart before the horse. Since one does not know whether the non-signatory is bound by the contract, it has been suggested by various commentators that one should apply a law other than the law of the agreement to determine the issue.

381. Professor [A] advocates the application, followed by numerous arbitral tribunals and recommended by several authors, of a transnational approach, that is, of transnational principles. What are these principles?

382. To answer this question, [Claimant]'s expert refers to various ICC arbitral awards where the Arbitral Tribunal has decided, for example, that:

- the issue should be decided "on the basis of the joint intention of the parties to the present proceedings, as shown by the circumstances surrounding the conclusion, the performance and the termination of the contracts, also taking into account (…) usages of international commerce, particularly in the presence of a group of companies" (ICC award no. 4131 (1982), Dow Chemical, JDI 1983, p. 899, comment Y.D.; Rev. arb., 1984, p. 137; Yearbook 1984 (Vol. IX), p. 131);

- in relation to the issue of lifting the corporate veil: "[a]rticle XIII, paragraph 5 of the ICC Rules of Arbitration invites the tribunal to take into account commercial usage and the contractual documents. From this perspective, the tribunal is justified in referring to the lex mercatoria. The principle of autonomy of arbitration clauses, now widely recognized, justifies this reference to a non-national rule construed from international commercial usages alone. In particular, it is justified to separate the merits from the validity and scope of the arbitration clause. The Arbitral Tribunal will thus rule on the basis of general notions of good faith and business transactions and international commercial usage" (ICC award no. 5721 (1990), JDI 1990, p. 1020, comment J.J.A.);

- also in relation to the issue of lifting the corporate veil: "[i]n international relations, the tribunal considers that it is preferable to apply rules adapted to the conditions of the international market and which provide a reasonable balance between the company's confidence in its distinct legal status and the protection of entities which may fall victim to the manipulations of a company controlling its subsidiary to deprive a creditor of the benefits to which it is entitled... The application of international principles offers many advantages. They apply in a uniform fashion and are independent from the peculiarities of each national law. They take into consideration the needs of international relations and allow for a fruitful exchange between systems which are sometimes excessively attached to conceptual distinctions, and systems which seek a just and pragmatic solution to particular situations. This is therefore an ideal opportunity to apply what is increasingly referred to as the lex mercatoria". (ICC award no. 8385 (1995), JDI 1997, p. 1061, comment Y.D.).

383. [Claimant]'s expert finally approves the conclusion of a commentator of ICC award no. 6769 (S. Jarvin, "The group of companies doctrine", ASA Bull. 1994, Spec. Series no. 8, p. 181, esp. p. 196(197), that "the traditional approach to the problem that the arbitrators take, is done without reference to any particular law (…). The existence of an intention to be bound to an arbitration agreement is demonstrated without reference to a particular law; it is a matter of facts and evidence, not of law." Professor [A] also approves two other commentators' conclusion that: "it is notable that, in order to impose an arbitration clause on a member company of a group which did not sign the said clause, arbitrators do not rely on any national law which may be applicable to the clause. One may thus see a principle of lex mercatoria in the solution which they adopt" (Y. Derains and S. Schaf, "Clauses d'arbitrage et groupes de sociétés", RDAI 1985, p. 31, esp. p. 236 en-rule 237).

384. From the above, [Claimant]'s expert therefore concludes that arbitrators "prefer to rely on a direct assessment of the facts and circumstances of each instance in order to determine the actual or supposed intention of the parties to be bound by the arbitration clause, or to sanction behaviour considered abusive. Such an approach is certainly explained by the essentially factual nature of the issue ... It ... depends above all on a precise analysis of the facts of each case, which makes the question of deciding on the applicable law less essential." This conclusion was reaffirmed in a recent ICC case no. 9517 of 2000 (ICC Bull. 2005, vol. 16, no. 2, p. 80, esp. p. 81).

385. Mr [D], [Claimant]'s other expert, also agrees with the above conclusion, that "international" or "transnational" standards should govern the question of contractual assumption and consent to the arbitration clause.

386. This is also the conclusion reached by [Respondents]' experts, Professors [B] and [C].

387. Professor [B] affirms in various parts of his two expert reports that "[f]aced with questions related to non-signatories, arbitral tribunals often look to 'transnational norms' to decide whether joinder of a non-signatory might be appropriate. Largely fact-based and derived from common sense, these norms draw their content and value from decisions in a wide range of national courts and arbitral proceedings. These decisions can constitute an emerging corpus of principles that address circumstances under which an arbitration clause might be extended to a non-signatory." He therefore concludes that "[i]n determining whether [the Parent Company] consented to arbitrate, an Arbitral Tribunal should (and normally would) apply principally transnational norms, rather than [the principles of relevant national laws]".

388. According to Professor [B], such an approach is even more justified in ICC arbitration since Article 17(1) of the ICC Arbitration Rules provides that the Arbitral Tribunal "shall apply the rules of law which it determines to be appropriate" and paragraph 2 of the same Article directs the Tribunal to take account of "relevant trade usages", a term which is often used in a broad sense as extending to a type of "transnational commercial law" or lex mercatoria for business conduct.

389. There are however some nuances in Professor [B]'s opinion on the applicable law when it comes to veil piercing. Rightly, he points out that:

the expression "piercing the veil" has become a term of somewhat promiscuous usage, taking different meanings in different contexts. In the context of disputes such as this one, however, "veil piercing" serves as shorthand for the jurisdictional practice of holding a shareholder liable for arbitration commitments of its shareholders. ...

Legal systems apply analogous concepts under varying labels and overlapping theories ... These notions include theories related to confusion, fraud, alter ego, abuse of rights (abus de droit). Their precise formulation differs from country to country, and even among authorities within a single jurisdiction ...

In addition to purely national lines of analysis, Arbitral Tribunals and courts have sometimes pressed into service what might be called "transnational" approaches. In determining whether the corporate personality should be respected, these approaches invoke many of the same factors: fraud, undercapitalization, intermixture of management and the potential for misleading the public.

390. With respect to what he calls the "veil piercing exercise", Professor [B] considers that "[t]he type of fraud and abuse that justifies collapse of two entities would normally be defined by the national law of the place of incorporation, at least as a starting point for analysis". He therefore submits that "[i]f the legal personality of [the Contractor] (as contrasted to the implied consent of [the Parent Company]) becomes an issue, the Arbitral Tribunal would give consideration to [State Y] law as the lex societatis, since parent and subsidiary were each incorporated in that State".

391. The Arbitral Tribunal does not consider that these additions contradict the general principle that transnational norms should be applied to determine the issue of extension of the arbitration clause to a non-signatory, even when piercing the corporate veil is at issue. First, Article 17(2) of the ICC Rules does not restrict in any way the duty of arbitrators to take into consideration trade usages to decide the issues before them. Moreover, Professor [B] himself recognizes that transnational norms "direct arbitrators to principles contained in more than one national legal system, as well as established practices and expectations in cross-border business transactions"; and that "[a] transnational version of 'veil piercing' amalgamates notions linked to several legal systems". He further recognizes that "[g]iven that national and transnational criteria for veil piercing generally relate to fraud, abuse and confusion, the application of both sets of principles can be broadly similar. Different legal systems might differ one from another in the emphasis given to particular criteria."

392. In other words, Professor [B] does not object to the application, even in relation to the veil-piercing exercise, of a transnational approach, which, by definition, is based on a comparison of several national legal systems with respect to one issue. To what extent should in this case the law of [State Y] more specifically be taken into consideration? According to Professor [B], the law of [State Y] is to be considered only as a starting point, to the extent that both [the Parent Company] and [the Contractor] are incorporated in [country Y] and the Arbitral Tribunal's determination concerns an issue of legal personality. On this last point, the Arbitral Tribunal slightly disagrees. As [Respondents'] expert has rightly pointed out "[f]or better or for worse, the expression 'piercing the veil' has become a term of somewhat promiscuous usage, taking different meanings in different contexts". While in national legal systems, piercing the corporate veil is in most cases a substitution mechanism, and therefore an issue of corporate legal personality, it is not generally considered as such in transnational arbitration, but rather as another method of extending the arbitration clause to a non-signatory in case of abusive or fraudulent behavior by the parent company or the owner of the group.

393. We also adhere in this respect to the excellent reasoning of the United States Supreme Court in the Bancec decision (First National City Bank v. Banco Para el Comercio Exterior ("Bancec"), 462 US 611) in which the Court decided:

As a general matter, the law of the state of incorporation normally determines issues relating to the internal affairs of a corporation. Application of that body of law achieves the need for certainty and predictability of result while generally protecting the justified expectations of parties with interests in the corporation … Different conflicts principles apply, however, where the rights of third parties external to the corporation are at issue … (p. 621).

394. With respect to the choice-of-law rule to be applied in cases where the contractual rights of a third party are alleged to require a corporate veil-piercing analysis, the Supreme Court decided that "[t]he principles governing this case are common to both international law and federal common law, which in these circumstances is necessarily informed both by international law principles and by articulated congressional policies" (p. 623).

395. Finally, based on the evidence submitted by both Mr [D] and Professor [B] on the law of [State Y], we do not consider that the criteria set forth by the latter for veil piercing are dissimilar to those applied in other continental jurisdictions or to the transnational norms applied by arbitration tribunals or recommended by leading arbitration specialists.

396. The Arbitral Tribunal will therefore decide the issue of jurisdiction and therefore of extension of the arbitration clause to [the Parent Company] by application of transnational principles, as will be further explained below.

II. The applicable theories

A. Express consent

397. [The Employer] submits that its request to have the arbitration clause extended to [the Parent Company] is based on three theories: express consent, implied consent and piercing the corporate veil.

398. In the first place, [the Employer] considers that [the Parent Company] has expressly consented to the Contract and its arbitration clause in a letter written . . . by . . ., corporate counsel of [the Parent Company].

399. This letter was written in answer to a request for an explanation contained in a letter sent by [the Employer]'s Construction Manager . . . It is written on [the Parent Company's] letterhead, is signed by ..., Corporate Counsel, [Parent Company], Legal Department ... and provides as follows:

... To Whom It May Concern:

I am sending this letter of explanation to you in accordance with your request. [The Parent Company], a publicly-traded engineering and design firm ..., incorporated in [country Y], acquired [the group of companies that owned the Contractor]. The various ... companies [in this group] continue to operate as separate subsidiaries under their existing names, although all correspondence is now on [the Parent Company's] letterhead.

[The Contractor] has not changed its corporate name. It continues to operate as a separate subsidiary under its own, current name.

You will see no change in the manner in which we serve you or in our commitment to provide you with quality services. All prior commitments, including your contract, will continue to be honoured. Please do not hesitate to call me if I can be of assistance or if you have any further questions ...

400. [The Employer] refers to the use of "we serve you" and "our commitment" to conclude that [the Parent Company] has expressly consented to the "Contract". The Arbitral Tribunal does not share this conclusion. The use of "we" and "our" certainly expresses the idea that [the Contractor] had become part of the [Parent Company] Group but not more, especially from the moment the letter clearly specifies that [the Contractor] will continue to operate as a "separate" subsidiary under its own, current name. [The Contractor] was therefore to continue as a separate entity and honour the Contract. It is in that sense that the Arbitral Tribunal understands the sentence "all prior commitments, including your contract, will continue to be honored". The words used cannot be understood as a novation of the Contract, i.e. that the latter is taken over by [the Parent Company], or as an express adhesion to it and its arbitration clause. This is not what the letter says.

B. Implied consent

401. In a number of awards, arbitral tribunals have accepted to extend actively or passively the arbitration clause to a non-signatory on the basis of implied consent. Such consent has generally been implied from the conduct of the non-signatory in the conclusion, performance and possibly the termination of the contract. Such conduct, and therefore the way in which the relationship between the parties to the project has developed in reality, is then considered by those arbitral tribunals as expressing the parties' intent that the non-signatory be bound by the contract and its arbitration clause as well as an expression of the non-signatory's consent to adhere to the relevant contract.

402. To determine if [the Parent Company] has impliedly consented to the Contract, we must therefore review in the first place the role it has eventually played in the conclusion, performance or termination of the said Contract.

403. [The Parent Company] has not played any role in the negotiation of the Contract, since it was concluded ... five months before [the Parent Company] acquired the [group that owned the Contractor].

404. [The Parent Company] has not played an active role in the termination of the Contract. The latter was terminated by [the Employer].

405. [The Employer] submits that this is not however sufficient to exclude the existence of implied consent, especially when, as in the case at hand, the signatory has been reduced by the parent company to an empty shell and the contract has in reality been performed by the parent company itself. [The Parent Company] disputes this and alleges that the Contract continued to be performed by [the Contractor] and that many facts and circumstances alleged by [the Employer] to conclude that the Contract was performed by [the Parent Company] and no longer by [the Contractor], are just manifestations of a bona fide reorganization of the group, in accordance with standard practice after an acquisition.

406. Whatever the merits of [Respondents'] position, it is clear that the group reorganization left [the Contractor] with little substance, as evidenced by the record.

407. After the taking over, [the Contractor] became part of the [Parent Company's] Construction Services Division of the [Parent Company] Group. All [Contractor] offices have been progressively shut down or transferred to [the Parent Company]. [The Contractor] has progressively stopped all activities. [The Contractor]'s contracts have been novated to [the Parent Company] (with the exception of the [Contractor's] branch office in [the capital city of country X]). The only remaining contract performed by [the Contractor] is the [construction project]. [The Contractor] no longer has any other recognizable presence in the world.

408. It is a fact that, with the exception of a branch office business address in [the capital city of country X], [the Contractor] has no independent head office address, no independent office, no independent telephone and fax number and no website. ...

409. [The Contractor] no longer has its own accounting, human resources and legal department. Corporate filings and the accounting of [the Contractor] have been handled by [the Parent Company].

410. The record also evidences that the [Contractor] brand name was abandoned in favor of the [Parent Company] corporation brand name. [The Contractor] projects were also rebranded [Parent Company] projects.

411. Moreover, [the Parent Company] received from [the Contractor]'s ... office [in the capital city of country X] all cash for the [construction project] that exceeded 45 days of working capital needs.

412. At the head office level, the management of the project was exclusively provided by [Parent Company] executives.

413. [The] Executive Vice President of [the Parent Company] notified [the Employer] that [the Parent Company's] Senior Vice President … was assigned as the Corporate Manager for the [construction project]. The contractor's representative … would now report directly to [the Parent Company's Senior Vice President]. … Change Order no. 2 was signed by [the Parent Company's Senior Vice President], although he did not hold any official position with [the Contractor] until [later].

414. Moreover, there was confusion on the site between [the Contractor] and [the Parent Company's] personnel. The [Parent Company's] personnel performing work at the Project Site and seconded to [the Contractor], were referred to as [Parent Company] employees. The C.V. of [the Contractor]'s project manager … is prepared on [the Parent Company's] letterhead, and states that [the project manager] is the General Manager of [country X] Branch [Parent Company] … It states furthermore that in addition to [Parent Company] staff, the project employs 100 to 150 subcontractor personnel.

415. ... the [Parent Company] website presented the Contract as a [Parent Company] undertaking, omitting any mention of [the Contractor]. A few months later ... the [Parent Company's] webpage listed office locations as the address for the [construction project] Site but failed to include any mention of [the Contractor].

416. The record also evidences that discussions which led to [a prior arbitration between the Employer and the Contractor] involved [Parent Company] officers and employees.

417. It also evidences that [the Parent Company] internally took responsibility for the Contract and managed and controlled its performance. For example, [the Parent Company] managed insurance issues related to the [construction project] in the period leading up to [the prior arbitration] and thereafter; and the reports issued in accordance with the terms of the Contract were prepared and issued by [the Parent Company].

418. The record also evidences that an environmental engineering group, … in association with [the Parent Company], displayed a profile on its website concerning the [construction project] and explaining that "[the Parent Company] is providing overall engineering services for this project …".

419. Finally ... the "[Contractor]" letterhead was changed into "[Parent Company] Group, Inc.", while some of the reports prepared for the project appeared on "[Parent Company]" letterhead alone. Moreover, all of the major reports related to the ... dispute were prepared by [the Parent Company], or refer inconsistently to [the Parent Company] and [the Contractor], and all of the major meetings involving [the Parent Company]/[the Contractor] were attended by [Parent Company] employees.

420. The above clearly evidences that in the context of the reorganization of the [Parent Company] Group, it was decided that [the Contractor] would disappear, except for the [construction project], and this policy has been progressively implemented. Even if the Contract remained within [the Contractor], [the Parent Company] was closely associated with its performance.

421. Is this sufficient to conclude that [the Parent Company] has impliedly consented to the Contract or its arbitration clause? As Professor [C] has rightly pointed out in his first opinion: "a differentiation must be made between evidence which reveals only the effective existence of a group of companies and evidence, the existence of which tends to give credit to the involvement of [the Parent Company] in the performance of the Contract or the creation of a misleading appearance. The former cannot in principle be used in support of the extension of the arbitration clause, as they add nothing: they are simply characteristic of the existence of a group of companies and, as has been said, all authors admit that the mere existence of a group of companies does not allow the extension of arbitration to the parent company ... By way of an example, one could cite the fact that the decision-making center is located with the parent company which can impose its views upon its subsidiary, or that in the event of a dispute, the supervision of the matter is carried out by the central legal department, or again that elements relating to the management of accounts are also centralized. Generally speaking, all grouping together of activities allowing economies of scale can be explained by the existence of a group."

422. Arbitral tribunals have generally extended an arbitration clause to a non-signatory when they have been able to conclude, as Professor [A] acknowledges, that the conduct of the non-signatory in the conclusion, performance and eventually the termination of the agreement, was clear evidence of the parties' (that is, both parties') intention that the non-signatory be party to the contract and its arbitration clause. In this case, the record does not evidence any such intention on [the Employer]'s side. As was pointed out by Professor [C], the record evidences that "[the Employer] never reacted in any way as long as the Contract was truly being performed. It was only after the launch of litigation, once the Contract's performance had already been interrupted, that [the Employer] suddenly decided to have recourse to the argument drawn from [the Parent Company]'s capacity as a party. However, it seems that [the Employer] refers to factors predating the procedural initiatives that this company had already taken against [the Contractor]. If the elements on which [the Employer] founds its case are exact, then [the Employer] should have reacted [earlier] and should therefore have behaved by addressing itself solely to [the Parent Company] (or to [the Parent Company] - [the Contractor] ..." Moreover, if [the Parent Company] has undoubtedly interfered in the performance of the Contract, it has not participated in its negotiation and has not played an active role in the decision to terminate it. The Arbitral Tribunal therefore does not find any implied consent to the extension of the arbitration clause to [the Parent Company].

C. Piercing the corporate veil

423. Although arbitral awards and court decisions on joining a non-signatory are abundant, the number of published cases in which the issue of piercing the corporate veil has been raised and discussed are few. This should not however prevent us from rendering a reasoned decision on this issue. The principles enunciated in the existing case law and recommended by doctrinal writers are clear. They set forth the parameters which arbitral tribunals should take into consideration to reach their decision.

424. In this respect, we do not agree with Professor [B]'s conclusion that "[e]xperienced arbitrators would normally hesitate to join non-signatories without strong authority derived from closely similar cases". As indicated by Professor [C], "an analysis of awards can only give an indication revealing a trend. The strength of current case law cannot necessarily be judged 'by weight', that is by the number of such awards, all the more so given that the arbitrators remain free to examine the questions brought before them by considering the individual circumstances of a case and are not bound by any rules of precedent. The analysis of awards can be completed by a doctrinal analysis." This also conforms to the conclusion reached by Professor Gabrielle Kaufmann-Kohler as to the weight of previous arbitral awards, in her 2006 Freshfields lecture on "Arbitral Precedent: Dream, Necessity or Excuse" (23 Arbitration International, 2007, 357 and following, esp. p. 362 en-rule 364).

425. As they result from the arbitral case law, the transnational principles governing the issue of piercing the corporate veil are the following:

- the existence of complete control over the subsidiary by the dominant shareholder, the indicia of such control being in particular:

i. the insufficient capitalization of the subsidiary,

ii. confusion in the administration management and assets;

- the indicia must establish the existence of a fraud, a wrong or an abuse of rights, for example when the control and effective management of the subsidiary by the parent company contribute to compromise the financial situation of the subsidiary and to make any action against the subsidiary illusory or at least doubtful or are used to promote and protect the parent company's own interests at the costs of those who deal with the company.

426. This is in line with Professor [B]'s position that "[c]ourts and arbitrators sometimes 'pierce' or 'lift' the corporate veil when faced with evidence of fraud, abuse or confusion of corporate assets. In essence two companies (parent and subsidiary) might be collapsed so as to be treated as a single entity, regardless of any indicia of consent."

427. We also note from the analysis of the case law relating to the [State Y] approach to piercing the veil that it is not dissimilar to the principles enunciated above: the veil may be pierced when one company dominates another such that the relationship is equivalent to that of principal/agent; or a company utilizes its subsidiary in an inequitable, abusive, fraudulent or similarly unfair manner. Fraud is not a prerequisite.

428. Here, fraud has not been pleaded and indeed, there is no evidence whatsoever of any fraudulent conduct by [the Parent Company]. The issue is rather whether [the Parent Company] has abused [the Contractor]'s corporate structure.

429. We have seen that [the Contractor] has been maintained in existence only for the performance of the Contract and that [the Parent Company] has been in full control of the company and has managed and controlled the Contract's performance. [The Contractor] was left with no independent office (except the project office in [the capital city of country X]), telephone and fax number, human resources or legal and accounting department. Its management was totally subordinated to [the Parent Company], whose personnel performed the Contract, even if the cost related to the secondment of [Parent Company] personnel was accounted for in [the Contractor]'s bookkeeping. There was moreover confusion between [the Contractor] and [the Parent Company] among employees, suppliers and within the group itself.

430. More importantly … all of [the Contractor]'s assets were transferred to [the Parent Company]. ...

435. Consequently, [in the course of the performance of the Contract], all of [the Contractor]'s ... assets [in country Y] had been transferred to [a company] which is wholly-owned by [the Parent Company]. [The Contractor]'s only remaining assets at that point were related to the [construction project]. Apparently, the only contracts that still remained in [the Contractor]'s name were the Contract at issue and contracts related to its performance.

436. [The Parent Company]/[the Contractor] was not able during the hearing to identify who made the decision to transfer [the Contractor]'s assets and for what reasons. The only witness that [Respondents] produced and who was involved in the asset transfer was Mr [E]. Despite the fact that he was the senior executive of [the Contractor], with responsibility for approving [the Contractor]'s budgets, the president of [the Contractor]'s sole member and had also signed one of the documents related to the ... asset transfers, Mr [E] testified that he was not aware of the asset transfers and only became aware of them through counsel.

437. The asset transfers should be put in perspective in the time line. It was in ... 2001 that the ... problem at the [construction project] was discovered. Subsequently, [Parent Company] employees conducted on-site investigations at the [construction project] in 2002. [The Parent Company] prepared an updated report for [the Employer] about the ... problem [in] 2002, acknowledging the existence of a ... problem, and a quality assurance audit report [later in] 2002. As we have noted above, it was precisely in ... the same month as the two [Parent Company] reports, that [the Parent Company] caused all domestic ... [Contractor] operations, contracts, property and personnel and intangibles [in country Y] to be transferred to [a company in the Parent Company's group] ...

438. As a result of the asset transfers, [the Contractor] suffered a dramatic drop in its capitalization and a steep decline in profitability. ... Moreover, after the asset transfer, audited income statements of the [Contractor] [country X] Branch for the fiscal years ending on 30 October 2002 and 31 October 2003, indicate net losses. [The Contractor] owes [the Parent Company] US$ 15 to 20 million.

439. As a consequence of this financial situation, [the Parent Company] had to provide financial support for the [construction project]. This included moneys regularly transferred from [the Parent Company] to [country X] to meet [the Contractor]'s operational expenses, including local payroll and taxes, as well as payments made for equipment used on the [construction project] Site. According to [the Employer], [the Contractor] was intentionally stripped of all its assets once it became obvious that [the Contractor] might be liable for considerable amounts, and [the Contractor] is today insolvent and will not be able to meet its liabilities. Although [the Parent Company]/[the Contractor] have contested that the asset transfers were undertaken to evade possible liability, we do not consider that [the Parent Company]/[the Contractor] could reasonably have believed at the time that [the Employer] might not be adversely affected by the transformation of [the Contractor] into a virtually empty shell. [The Parent Company's] submission that [the Contractor] would still have the benefit of insurance sufficient to cover any liability that it might incur, as well as of a performance guarantee, has, moreover, not been clearly established. The record rather seems to establish that the performance guarantee has already been paid out, and there is no convincing evidence in the documents before us that [the Contractor] undisputedly has the benefit of insurance coverage for the liabilities that it might incur, and even less for the full amount of the latter.

.........

441. Having carefully reviewed and discussed the facts above, the Arbitral Tribunal has reached the unanimous conclusion that [the Parent Company]'s behavior was abusive. It is obvious from the record that [the Parent Company] controls and dominates [the Contractor], in particular with respect to its contract with [the Employer]. At the very moment when it appeared that [the Contractor] might incur substantial liability towards [the Employer], [the Parent Company] transferred all of [the Contractor]'s assets (except those relating to the [construction project]) to a subsidiary of [the Parent Company] in [country Y], the Contract remaining however in [the Contractor]'s name. Doing so, it abused the corporate structure to protect its own interests at the possible expense of [the Contractor]'s creditors. [The Contractor]'s capitalization is negative, its audited income statements indicate net losses and [the Parent Company], which has the burden of proof in this respect, has not been able to convince the Arbitral Tribunal that, notwithstanding the transfer of assets, [the Contractor]'s liability is adequately covered by insurance. In other words, [the Parent Company] has abused its control of [the Contractor] to transfer away from the company the bulk of its assets, but not the Contract, leaving [the Contractor] substantially undercapitalized, given the nature of its then-existing business and potential obligations.

442. The Arbitral Tribunal therefore considers that this is an appropriate case in which to pierce the veil and extends to [the Parent Company] on this basis the arbitration clause contained in the Contract. The Tribunal therefore decides that it has jurisdiction over both [the Contractor] and [the Parent Company], in accordance with Article 6(2) of the Rules.'