Background

In October 2019, Westcon Yards AS and Rimfrost Antarctic AS entered into a shipbuilding contract that contained an arbitration clause.  Shortly afterwards, Westcon Yards AS’s contractual rights and obligations were transferred to Westcon 39 AS through an addendum. As part of that transfer, Rimfrost Holding AS — the parent company of Rimfrost Antarctic AS — issued a guarantee for its subsidiary’s obligations under the contract. 

Westcon 39 AS subsequently terminated the shipbuilding contract and arbitration proceedings between Westcon 39 AS and Rimfrost Antarctic AS were commenced. In view of the delays in those arbitration proceedings, Westcon 39 AS brought court proceedings against the guarantor, Rimfrost Holding AS, claiming NOK 117 million under the guarantee. Rimfrost Holding AS applied to have that claim dismissed, arguing that it fell within the scope of an arbitration agreement with Westcon 39 AS.

Norwegian Arbitration Act and Lower Court Decisions

Under the Norwegian Arbitration Act, there is no requirement that an arbitration agreement must be in writing. This may pose challenges for parties relying on a non-written arbitration agreement if they seek to enforce any award based on such an agreement outside of Norway, in light of the requirement for a written arbitration agreement under the New York Convention.

In the event, both the District Court and the Court of Appeal agreed with Rimfrost Holding AS and dismissed the claim. Applying the Norwegian general contractual law principles, those courts found that the parties shared a common understanding that the guarantee relationship was subject to arbitration. Westcon 39 AS appealed to the Supreme Court.

Supreme Court’s Ruling

The Supreme Court reversed the lower courts’ decisions. In doing so, it emphasised that dismissal under Section 7 of the Norwegian Arbitration Act requires the dispute to “belong under arbitration,” which in turn requires a valid arbitration agreement between the parties. Whether such an agreement exists must be assessed on the basis of general principles of contract law, and — as established in the Supreme Court’s earlier decisions — the threshold for finding that a party has waived its right to court proceedings is high: the waiver must be voluntary and informed. 

It was undisputed that no written arbitration agreement existed between Westcon 39 AS and Rimfrost Holding AS. While the Court of Appeal had pointed to the guarantee’s connection to the shipbuilding contract, the corporate relationship between the Rimfrost entities, and the desirability of consolidated dispute resolution, the Supreme Court held these circumstances were insufficient to establish a binding arbitration agreement. The Court of Appeal’s decision was set aside, with the effect that Westcon 39 AS’s claim will proceed in the Norwegian courts. 

Key Takeaways

The Supreme Court’s decision serves as a clear reminder that arbitration clauses do not automatically extend to related parties — even within the same corporate group. A parent company’s guarantee of a subsidiary’s obligations does not, without more, bind the guarantor to the subsidiary’s arbitration clause — even if that arbitration clause is found in a related contract. Companies structuring multi-party transactions should ensure that every party intended to be bound by arbitration is expressly included in a written arbitration agreement.