Abstract

Does a unilateral right to invoke arbitration invalidate the arbitration agreement? In the seven decades since the issue first arose for the courts' consideration, there has been no consensus between the High Courts. This essay argues that the judicial recognition of such a right would be consistent with existing Indian jurisprudence. To do so, it first discusses the legal history of clauses such a conferring a right in India, culling out both the prevailing and potential grounds on such clauses can be opposed. On the basis of a discussion of these grounds, it concludes that courts can check the substantial and procedural soundness of unilateral option clauses to give better effect to party autonomy and mutual consent.

Part I: Introduction

On 24th November 2021, the Delhi High Court held that a unilateral 'opt-out' clause, conferring the right to exit an ongoing arbitration on only one party, invalidated the arbitration agreement.1 The decision came as another in a long line of similar judgements: starting with Union of India v. Bharat Engineering Corporation (1977)2, the Delhi HC has repeatedly shunned one-sided arbitration agreements of any kind. Particularly emphatic has been its rejection of clauses creating the unilateral right to refer the dispute to arbitration (hereinafter "Unilateral Option Clauses" or "UOCs"), which the Court opined "...cannot be called arbitration clauses" at all.3 Other fora, including the Calcutta and Madras High Courts, have taken a less disapproving view of the clauses. Since the issue has not yet come up before the Supreme Court, this deadlock between the High Courts has created a muddled jurisprudence.

In the five decades since Bharat Engineering, a number of jurisdictions (Singapore, England & Wales, Israel) have confirmed the validity of UOCs,4 while some others (Russia, France, Turkey) have rejected them.5 Considering most countries now provide express legislative or judicial guidance regarding these clauses, as well as the Indian government's concerted push to convert the country into a 'global arbitration hub', the uncertainty of the Indian legal position is conspicuous.

This paper argues that the judicial recognition of UOCs is consistent with existing Indian jurisprudence. Part II discusses the legal history of UOCs in India. Part III draws from both Indian and foreign jurisprudence to discuss the prevalent and potential grounds based on which courts may strike down UOCs, addressing each of these in turn. On the basis of the foregoing discussion, Part IV proposes a six-factor test that Indian courts can use to examine the validity of UOCs. Part V offers concluding remarks.

Part II: Background

For the purpose of this paper, UOCs are defined as arbitration agreements which give one party the exclusive right to commence arbitration.6 For this reason, they are also called asymmetrical, non-mutual, one-sided, or sole-option clauses.7 As mentioned above, the Indian jurisprudence around UOCs has been erratic, inconsistent, and often unsatisfactory.

Some of India's ambivalence about UOCs can be attributed to the enduring influence of English law, though it must be noted that England (like most other common-law jurisdictions) now legitimates UOCs.8 On the point of English jurisprudence itself, there is broad consensus that the first case to discuss the validity of such a clause was Baron v. Sunderland Corporation (1966).9 Curiously, the ratio of the case is usually simplified to be that any non-mutuality would negate an arbitration clause. However, the case involved a schoolteacher who was suing an education corporation for back wages. The County Court judge was of the view that a particular provision in the legislation known as the Remuneration of Teachers (Primary and Secondary Schools) Order, 1963 constituted an arbitration clause.10 Therefore, he rejected the teacher's claim. The Court of Appeals reversed this decision, holding that "...it [was] necessary in an arbitration clause that each party shall agree to refer disputes to arbitration... and it [was] an essential ingredient in that that either party may, in the event of a dispute arising, refer it in the provided manner to arbitration."11

In other words, the Court rendered its decision not simply on the basis of a lack of the bilateral right to refer a dispute to arbitration, but also (and to a greater extent) on the basis that the statute did not create an exclusive arbitration clause (Justice Davies remarked that the provision was "about as unlike an arbitration clause as anything that one could imagine.")12 Even if it did create an arbitration clause, neither party 'opted-in' or ever agreed to submit their dispute to arbitration. In any case, the larger power imbalance between an individual schoolteacher and a corporation may help us understand how the Court of Appeals arrived at their decision, and why, when the issue came up before the Court in Pittalis v. Sherefettin (1986), it held that UOCs were valid.13 In Pittalis, the Court started by observing that the parties' relationship was commercial in nature; keeping this in mind, the Court ruled that the "sophisticated" parties were free to design and conclude an asymmetric clause as long as the "arrangement [suited] both parties."14

Unfortunately, Baron v. Sunderland Corp. became the leading authority cited by a number of Indian judgements in the same vein as it. Interestingly, in the case of Kedarnath Atmaram v. Kesoram Cotton Mills, Ltd (1956), decided ten years before Baron, and thirty years before Pittalis, the Calcutta HC had upheld the validity of UOCs.15 The clause in question conferred upon the seller an exclusive right to refer the dispute to arbitration before the Indian Chamber of the Commerce. The Court took a stern view of the matter, holding that the unilateral option to arbitrate did not touch the validity of the arbitration agreement. Once this option was exercised, the parties were bound to participate in the arbitration and comply with the Tribunal's directions.16 This decision was discussed with approval by the Calcutta HC in Jyoti Brothers vs Shree Durga Mining Co. (1956).17 Apart from a slight blip in Union of India v. Ratilal R. Taunk (1966),18 decided the same year as Baron, the Court has largely taken an accepting view of UOCs.

The Delhi HC entered the fray with Union of India v. Bharat Engineering Corporation (1977), wherein it applied to the principles of contract to UOCs to term them "contracts of option," as opposed to legally binding arbitration agreements.19 Simply put, consent of both parties would have to be re-obtained in order to proceed to arbitration, effectively negativing the 'unilateral' nature of the clause. The Calcutta HC firmly rejected this analysis in New India Assurance Co. Ltd. v. Central Bank of India (1985), pointing out the obvious by holding that "...if the privileged party alone can refer the dispute, it can do so only on the basis of the advance consent by the other party."20

However, in its next significant judgement on the issue, Bhartia Cutler Hammer Ltd.  v. AVN Tubes Ltd (1995), the Delhi High Court once again ruled against the validity of the UOCs, though it may be noted that the factual matrix in this case was somewhat egregious.21 In the Bhartia case, the defendant could opt for either arbitration or litigation, but the plaintiff could not do either. Furthermore, the defendant would unilaterally appoint the arbitrator, if any. The plaintiff brought proceedings before the Delhi HC. Importing the principles set out in the Baron judgement, the Court ruled in favour of plaintiff and decreed the clause as void and unenforceable.22

Significant here were the observations made by the Court: first, that even the parties' express consent could not validate a clause that stripped one party of the right to pursue legal action, and second, that the Indian Arbitration Act presupposed the 'mutuality' of arbitration agreements, mandating that both parties had to be allowed to refer a dispute to arbitration.23 Though certainly appreciable in the context of the case, the Court's ruling had the effect of generating a great deal of confusion. Apart from detracting from the consent of the parties, the Court effectively also read 'in' a mutuality requirement into Section 7 of the Arbitration Act, which itself is silent on bilateral or unilateral reference to arbitration.

Consequently, just as the Calcutta HC reiterated its pro-UOCs stance in S&D Securities v. Union of India (2003),24 the Delhi HC felt itself bound by its previous decisions to take the opposite position. The effect of Bhartia Cutler was felt in Emmsons International Ltd. v. Metal Distributors (2005), wherein under the parties' agreement, the plaintiff could not initiate legal proceedings at all, and thus had no way of enforcing its contractual rights. Since this clearly contravened Section 28 of the Indian Contract Act, the Delhi HC invalidated the UOC.25

The issue cropped up again in Lucent Technologies Inc. v. ICICI Bank Ltd. (2009), where the impugned dispute-resolution clause was more 'balanced,' i.e., one party could only approach the domestic courts, while the other could initiate litigation or "approach any alternate dispute forum."26 Still, the Delhi HC cited "binding judicial pronouncements" to reject the validity of UOCs.27 In other words, the Court's well-intentioned judgements in Bhartia Cutler and Emmsons International ended up operating as precedent against all UOCs. Oddly enough, Lucent Technologies relied on the English case Tote Bookmakers v. Development and Property Holding (1985)28, overlooking Pittalis, which had overruled Tote a year after it was decided.29

However, in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2009), the Delhi HC took a more favourable view of UOCs, though the issue was decided under English, not Indian, law.30 Interestingly, in Fuerst Day Lawson, the plaintiff-buyer was the party that could elect either litigation or arbitration. However, it was now approaching the Court arguing, inter alia, that the impugned clause was not an arbitration clause at all. The Court rejected this contention, holding that the clause met the requirements under the applicable provisions of both contract and arbitration law. The parties' consent to the inclusion of the dispute resolution clause was sufficient to constitute a valid arbitration agreement, irrespective of the power to refer the dispute to arbitration.31

Though Fuerst Day Lawson Ltd. was decided on the basis of English law, it was relied on by the Madras HC in Castrol India Ltd.  v. Apex Tooling Solutions (2015).32 In Castrol India, the Court noted that the Indian Arbitration Act was based on the UNCITRAL Model Law.33 The same has been mentioned in the Preamble to the Act, which further talks about the recommendation of the United Nations General Assembly that "...all countries give due consideration to the said Model Law," in order to bring about uniformity to arbitration law across the world.34 Consistent with this view, the Madras HC observed that as per international practice, the non-mutuality of an arbitration agreement would not necessarily invalidate the agreement.35 Though the parties in Castrol India were ultimately not referred to arbitration due to the circumstances of the case (including the participation of both parties in litigation proceedings), it signalled a shift away from the traditional anti-UOCs approach of Indian courts.

Part III: Existing and Potential Grounds

Mutuality

The strongest objection Indian courts have had to UOCs is the absence of 'mutuality'. The Arbitration Act itself is silent on this requirement. Section 7 of the Act only stipulates there must be an "agreement between the parties".36 This 'implicit' mutuality requirement can be interpreted in three ways:

  • There must be mutuality of consent.
  • There must be mutuality of invocation.
  • There must be mutuality of consideration.

Mutuality of Consent

The interpretation that there must be mutuality of consent has the strongest support. Since arbitration is a creature of contract, the SC has consistently affirmed that party autonomy reigns supreme. Even when the SC extensively discussed the requirements of a valid arbitration agreement in Jagdish Chander v Ramesh Chander (2007), it held that "there [could] not be a reference to arbitration...unless there [was] mutual consent of all parties for such reference."37 Conversely, it nowhere said that a valid arbitration clause had to be bilateral vis-à-vis consideration or the right to invoke arbitration.

Mutuality of Invocation

Decisions like Bhartia Cutler and Lucent Technologies have held that the right to invoke arbitration must be mutual.38 This is the position on UOCs in many civil law jurisdictions,39 and is based on the notion that the parties must have equal procedural rights. For example, a French Court in the famous Rothschild case struck down a unilateral jurisdiction clause as 'potestative' or conferring excessive and unbalanced power on one party.40 Similarly, in Russia, a court confronted with a UOC will convert it to a bilateral clause to place the parties on equal footing.41

However, there are two criticisms of such an approach. First, UOCs only give one party the right to commence arbitration. As long as the parties are treated equally and fairly by the arbitral tribunal, UOCs do not interfere with their procedural rights. Such an interpretation is supported by international legal provisions such as Article 6 of the European Convention on Human Rights42 and Article 18 of the Model Law43, both of which deal within procedural fairness within the chosen forum, and not the choice of forum itself. This has also been expressly stated in judgements such as the English case of Mauritius Commercial Bank v. Hestia Holding Ltd. (2013)44

Second, India is a common-law jurisdiction. There have been a number of cases wherein the courts have prioritized the freedom of commercial parties to contract with one another.45 As held by the SC in Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986), when mutual consent is proven, the threshold of procedural unconscionability is very high, and is unlikely to be reached simply because one party can unilaterally elect a forum.

Mutuality of Consideration

Section 7 has also been read with Sections 10 and 25 of the Indian Contract Act to require mutuality of consideration.46 This contention was raised by the Delhi HC in Bharat Engineering. The Court opined that in a conventional arbitration agreement, the consideration for the promise of each party to submit the dispute to arbitration was the "reciprocal promise" of the other.47 Since this was absent in a UOC, it was not a valid arbitration agreement.

This is a somewhat hypertechnical way of looking at things that does not accurately reflect commercial reality. Often, UOCs are the product of extensive negotiations. For example, a party may accept a UOC in exchange for a Limited Liability Clause. This means that the consideration for that right is located at some other place in the main contract, and not within the arbitration agreement itself. The doctrine of the separability of the arbitration agreement has no application here: as Smit points out, this rule was evolved to save arbitration clauses, not frustrate them.48

Moreover, consideration is not a strict requirement. Two parties that conclude a contract are almost always undertaking some obligations towards each other, and insisting on a pre-determined form of 'consideration' can restrict their freedom to contract. This is the prevalent approach in international commercial law, and finds mention in Article 29(1) of the CISG49 and Article 3.2.1 of the UNIDROIT Principles of International Commercial Contracts.50

This does not mean that parties should be able to conclude unconscionable agreements. Article 3.2.7 of the UNIDROIT Principles itself says that "gross disparity," such as dependence, economic distress, ignorance, lack of bargaining skill, etc. may constitute grounds to avoid a contract.51 Several judicial decisions have also given such reasoning. In one such case, Arnold v. United Companies Lending Corporation (1998), an American court held that an arbitration clause in a loan agreement that substantially curtailed the borrowers' rights was void and unenforceable.52 Consistent with such an approach, rather than focusing on 'consideration', it might be more advisable to have regard for whether the overall situation is one where one party is taking advantage of the other.

Nature of the Parties

As mentioned above, UOCs must also be examined in context of the nature of the parties and the relationship between them. On this point, the Indian jurisprudence around employer-employee disputes and consumer disputes can be helpful.

Labour disputes were dealt with by the Bombay HC in the case of Kingfisher Airlines v. Captain Prithvi Malhotra (2012), wherein the employer, Kingfisher Airlines, had filed a Section 8 application to oust the jurisdiction of the labour court and put an end to the ongoing proceedings.53 Guided by the SC's decision in Booz-Allen & Hamilton Inc vs SBI Home Finance Ltd. (2011),54 the Court ruled that the presence of an arbitration clause in the employment agreement could not override the Industrial Disputes Act, 1947.55 This was upheld by the Karnataka HC in Rajesh Korat v. Innoviti (2017).56 Similarly, the SC in Emaar MGF Land Ltd. v. Aftab Singh (2018) unambiguously held that consumers could not be forced to arbitrate their claims,57 as the Consumer Protection Act, 1986 preserved the jurisdiction of the National Consumer Disputes Redressal Commission.

In the realm of both employment and consumer arbitration, the courts did not mechanically reject arbitration just because there was a special law prevailing over the Arbitration Act. Rather, they reasoned that the both these statutes conferred exclusive jurisdiction on specialized courts on the basis of strong public policy considerations viz. protecting a vulnerable class of persons. This became clear in Vidya Drolia v. Durga Trading Corporation  (2020), when the SC held the jurisdiction of the arbitral tribunal would always be displaced by such specialized laws.58

There are two things that can be inferred from this discussion. First, practically speaking, a number of situations where one party obviously has an excessive advantage are already covered by special statutes. As per Vidya Drolia, they cannot be arbitrated at all. Examples include not only employees59 and consumers60, but also trustees61 and tenants.62 Even if they are not covered by a law, one of the other categories specified in Vidya Drolia (disputes involving a right in rem, having an erga omnes effect, and/or involving a sovereign function of the State) may end up rendering the dispute inarbitrable.63Second, from a theoretical perspective, the Indian judiciary through these decisions has consistently demonstrated a proclivity to safeguard the weaker party. Therefore, its approach to UOCs should incorporate such principles.

Access to Justice

Many decisions have also held UOCs to be in breach of Section 28 of the Indian Contract Act, which stipulates that agreements in restraint of legal proceedings are void.64 In other words, no party can give away his rights under law. However, if this interpretation is correct, then all arbitration agreements are void – which is why Exception 1 to Section 28 explicitly saves arbitration agreements from falling within its purview.65 Moreover, arbitration agreements do not completely oust the jurisdiction of courts, as litigation can be commenced at any point on procedural grounds, and after the passing of the award on substantive grounds.

Ambiguous Phrasing

Another issue that came up in Bharat Engineering was the phrasing of the impugned dispute-resolution clause, which stated that one party "may demand" a reference to arbitration (no such right was expressly given to the other party.)66 The Court itself noted that clause was an "ill-drafted" one that exhibited "signs of ambivalence."67 Still, the presence of "may" strengthened the Court's belief that there was no binding arbitration agreement. Similarly, Lucent Technologies held UOCs lacked the certainty to be enforced.68

By way of context, arbitration agreements usually contain one of the four following operative words: (i) shall; (ii) will; (iii) may; or (iv) can. In this regard, Indian courts seem to have been guided by the principle that two parties who agree that future disputes "may/can be referred to arbitration" have consciously eschewed stronger terms like 'shall' or 'will.' Therefore, the reference to arbitration is optional, and not mandatory.

As early as 1964, the SC in The Labour Commissioner, Madhya Pradesh v. Burhanpur Tapti Mills Ltd. had ruled that word 'may' could never give rise to an obligation.69 This was reaffirmed in its subsequent judgements.70 Conversely, according to the Court, the word 'shall' would always give rise to an obligation.71

Guided by these pronouncements, the SC in Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd.  v. Jade Elevator Components (2018) considered whether the dispute-resolution clause of the parties' contract constituted a binding arbitration agreement.72 The clause stated that a dispute that arose "shall be referred to adjudication." This adjudication could be done by either an arbitrator or the courts. The Court felt that the choice between arbitration and litigation, though present in the contract, was extinguished as soon as one party invoked arbitration. In other words, the presence of 'shall' evidenced the parties' mutual consent to submit to the jurisdiction of whichever forum was selected first. This decision was relied on by the Bombay HC in the recent case of Quick Heal Technologies Ltd. v. NCS Computech Pvt. Ltd. (2020) to strike down an arbitration clause which used 'may' in one place, but 'shall' at all other places.73

This discussion shows that judiciary is hesitant to refer parties to arbitration unless it is absolutely certain they intended to do so. Given that it already has concerns about UOCs, even stating that one party "may refer the dispute to arbitration" can suggest the choice of one party into a mere possibility, requiring the consent of the parties anew. However, as Zhejiang Bonly demonstrates, in the presence of an option within the arbitration agreement couched in sufficiently unambiguous language, the Court will no longer void the arbitration agreement for want of legal certainty, particularly when doing so will bring about delay and equivocation.

Illegality of Other Unilateral Arbitration Agreements

The invalidity of other kinds of unilateral arbitration agreements also sometimes weighs against UOCs. For example, in Lucent Technologies, Justice Mittal held that "...unilateral appointment of arbitrators and unilateral reference – both will be illegal."74

However, the distinction between pre-procedural and procedural rights readily demonstrates that unilateral arbitrator appointments contravene a basic principle of procedural fairness – that no man shall be a judge in his own cause, even by proxy. As the SC stated in Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019), "the right to natural justice cannot ...[be] waived only on the basis of a "prior" agreement between the parties at the time of the contract and before arising of the disputes."75 Practically, too, the 'repeat-player' effect demonstrates that arbitrators hired by corporations are incentivized to pass awards in their favour to secure future appointments.76

Regarding a different kind of unilateral agreement, the Delhi HC Tata Capital Finance Ltd. v. Shri Chand Construction and Apartment Pvt. Ltd (2021), once again cited Bharat Engineering and Bhartia Cutler to find that arbitration agreements required mutuality.77 However, the impugned clause was, in some ways, the opposite of a UOC - it allowed one party to exit the arbitration, and pursue remedies under the SARFAESI Act instead. As the Court itself observed, this would have the illogical consequence of allowing fresh proceedings to commence in respect of the same cause of action.

These cases demonstrate that not all unilateral arbitration agreements are the same. A clause that interferes with the procedural rights of the parties is distinct from one that merely creates a unilateral option to arbitrate, and it is important for the judiciary to treat UOCs with the nuance they deserve.

Public Policy

Lastly, both Indian78 and foreign79 cases have cited 'public policy' to invalidate UOCs. However, on the domestic front, it can be seen that most anti-UOC judgements were passed before the 2015 Amendment to the Arbitration Act. Even though it remains to be seen how the 2015 Amendment will affect the courts' attitude towards UOCs, given its strongly pro-arbitration character, as well as the insertion of Explanation 2 in Section 34(2) to significantly curtail the courts' use of 'public policy' to set aside arbitral awards,80 this development is likely to weigh in favour of such clauses. This view is bolstered by the Supreme Court's consistently narrow construction of 'public policy' after the 2015 Amendment.81 As Draguiev highlights, the notion of 'public policy' is intended to safeguard natural persons, and its zealous application to commercial transactions can substantially curtail the freedom to contract.82

Part IV: The Way Forward

In view of the foregoing discussion, this paper proposes that the validity of a UOC may be determined by asking the following questions:

  1. Did the parties form a valid arbitration agreement?
  2. Does the dispute correlate to the arbitration agreement?
  3. Does the UOC unambiguously give one party the right to arbitrate?
  4. Is access to justice completely curtailed for one party?
  5. Is public policy contravened in any other way?
  6. What is the nature of and relationship between the parties?

The Court must start its analysis by checking if an arbitration agreement is present in the parties' contract. Such an agreement must meet the legal requirements of both the Arbitration and Contract Act; further, as held by the SC in DLF Home Developers Ltd. v Rajapura Homes Private Ltd. (2018), the dispute must be covered by the scope of the arbitration agreement.83 It must also be checked if the arbitration agreement is in fact a UOC – not only insofar it gives one party the right to arbitrate, but also that the same is expressed in sufficiently precise language. Further, Courts must examine if the unilateral right to invoke arbitration is clubbed with other one-sided procedural rights, which may result in the clause contravening 'public policy.' Though it is the prerogative of the Court to quash the entire clause, both international84 and municipal85 practice suggest it may be preferable to adapt the clause in order to bring it in line with the reasonable commercial standards of dealing. Lastly, the Court may have regard for the nature of the parties – are both parties commercial? If so, has one party had an excessive advantage? These sorts of questions can shed light on the circumstances under which the parties have concluded a UOC.

Simply put, if a Court finds that in a transaction between two roughly equally positioned parties, they have expressly agreed upon the inclusion of a UOC to restrict the right to invoke arbitration to one party, it ought to prioritize their consent to uphold this right.

Part V: Conclusion

What the limited jurisprudence on UOCs demonstrates is that Indian courts have had valid concerns about one party abusing its power to include unconscionable terms in the agreement. This is not unjustified; at the same time, there are situations where UOCs best serve the contracting parties' needs. A particularly pertinent example is financial agreements, where UOCs help dilute litigation risk and allow the lender to select the forum that has the best chance of guaranteeing asset recovery.86

Moreover, as Castrol India highlights, recognition of UOCs is consistent with not only Indian jurisprudence, but common-law jurisprudence globally.87 For instance, in the six decades since Baron, England itself has gradually moved towards an approach where right of the privileged party to commence arbitration is protected. For example, in the English case of NB Three Shipping v. Harebell Shipping (2004), the Court stayed the judicial proceedings because the defendant had exercised its unilateral right to refer the dispute to arbitration.88 In Law Debenture Trust Corp v Elektrim Finance BV (2005), it even passed an anti-arbitration injunction to ensure the UOC was adhered to.89 India must endeavour to keep step with such a pro-arbitration approach.

In light of the foregoing discussion, this paper argues that Indian courts can employ a circumstantial or case-to-case approach (viz. checking for the existence of the arbitration agreement, access to justice, the nature and relationship of the parties, and public policy) when considering UOCs. This sixfold test will eliminate a number of cases; however, in the remainder of cases, party autonomy can be prioritized to validate the arbitration agreement.

Footnotes

1. Tata Capital Finance Ltd. v. Shri Chand Construction and Apartment Pvt. Ltd, 2021 SCC OnLine Del 5091.

2. Union of India v. Bharat Engineering Corporation, 1977 SCC OnLine Del 45.

3. Bhartia Cutler Hammer v. AVN Tubes, 1991 SCC OnLine Del 322, ¶4.

4. Unilateral Option Clauses Survey – 2021, Clifford Chance LLP (Singapore at p. 24, England & Wales at p. 18, Israel at p. 20). Available at: https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2021/02/clifford-chance-unilateral-option-clauses-survey-2021.pdf [Hereinafter "Unilateral Option Clauses Survey"]

5. Unilateral Option Clauses Survey (Russia at p. 23, France at p. 18, Turkey at p. 25)

6. Hans Smit, The Unilateral Arbitration Clause: A Comparative Analysis, Volume 20, Issue 3 American Review of International Arbitration, p. 391 (2009) p. 394; Unilateral option clauses may theoretically restrict the other party to arbitration; however, litigation may still be commenced, additionally entailing a review of the arbitration clause by the court. See India Related Commercial Contracts: Dispute Resolution & Governing Law Clauses – Legal Guide (Sixth Edition, August 2021), Herbert Smith Freehills LLP, p. 3. Available at: https://www.herbertsmithfreehills.com/file/21846/download?token=Kh2iLgp2

7. Simon Nesbitt and Henry Quinlan, The Status and Operation of Unilateral or Optional Arbitration Clauses, Vol. 22 Arbitration International, p. 133 (2006), p. 134.

8. Unilateral Option Clauses Survey (England & Wales at p. 18).

9. Baron v. Sunderland Corporation, (1965) EWCA Civ J1210-1.

10. Baron v. Sunderland Corporation, (1965) EWCA Civ J1210-1, ¶2.

11. Baron v. Sunderland Corporation, (1965) EWCA Civ J1210-1, ¶9.

12. Baron v. Sunderland Corporation, (1965) EWCA Civ J1210-1, ¶9.

13. Pittalis v. Sherefettin, (1986) 2 All ER 227.

14. Pittalis v. Sherefettin, (1986) 2 All ER 227, ¶231.

15. Kedarnath Atmaram v. Kesoram Cotton Mills Ltd., 1956 SCC OnLine Cal 188.

16. Kedarnath Atmaram v. Kesoram Cotton Mills Ltd., 1956 SCC OnLine Cal 188.

17. Jyoti Brothers vs Shree Durga Mining Co., AIR 1956 Cal 280.

18. Union of India v. Ratilal R. Taunk, ILR 1966 (2) Calcutta 527.

19. Union of India v. Bharat Engineering Corporation, 1977 SCC OnLine Del 45, ¶26.

20. New India Assurance Co. Ltd. v. Central Bank of India, 1984 SCC OnLine Cal 166, ¶13.

21. Bhartia Cutler Hammer v. AVN Tubes, 1991 SCC OnLine Del 322.

22. Bhartia Cutler Hammer v. AVN Tubes, 1991 SCC OnLine Del 322, ¶5.

23. Bhartia Cutler Hammer v. AVN Tubes, 1991 SCC OnLine Del 322, ¶5.

24. S&D Securities v. Union of India, 2003 SCC OnLine Cal 637.

25. Emmsons International Ltd. v. Metal Distributors, 2005 SCC OnLine Del 17.

26. Lucent Technologies Inc. v. ICICI Bank Ltd., 2009 SCC OnLine Del 3213, ¶17.

27. Lucent Technologies Inc. v. ICICI Bank Ltd., 2009 SCC OnLine Del 3213, ¶296.

28. Tote Bookmakers Ltd. v Development and Property Holding Co. Ltd., (1985) 2 WLR 603.

29. Pittalis v. Sherefettin, (1986) 2 All ER 227. See also: Siddharth S. Aatreya, Navigating the Labyrinth: Indian Courts on One-Way Arbitration Clauses, Kluwer Arbitration Blog (Aug 30, 2017). Available at https://arbitrationblog.kluwerarbitration.com/2017/08/30/navigating-labyrinth-indian-courts-one-way-arbitration-clauses/.

30. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd, 2009 SCC OnLine Del 4061.

31. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd, 2009 SCC OnLine Del 4061,

32. Castrol India Ltd. v. Apex Tooling Solutions, 2015 SCC OnLine Mad 2095.

33. Castrol India Ltd. v. Apex Tooling Solutions, 2015 SCC OnLine Mad 2095, ¶26.

34. Arbitration and Conciliation Act, No. 26 of 1996, Preamble (India).

35. Castrol India Ltd. v. Apex Tooling Solutions, 2015 SCC OnLine Mad 2095, ¶26.

36. Arbitration and Conciliation Act, No. 26 of 1996, §7 (India).

37. Jagdish Chander v. Ramesh Chander, 2007 SCC OnLine 570, ¶10.

38. Bhartia Cutler Hammer v. AVN Tubes, 1991 SCC OnLine Del 322; Lucent Technologies Inc. v. ICICI Bank Ltd., 2009 SCC OnLine Del 3213

39. Examples include Bulgaria, France, Poland, Romania, and Russia. See Raluca Papadima, Asymmetrical Arbitration Clauses: Global Overview, Volume 51 Issue 4 Romanian Arbitration Journal (2020); Vasily Bakumenko, Asymmetric Jurisdiction Clauses: Grounds for Validity within Different Jurisdictions, Volume 8 Issue 3 Russia Law Journal (2020).

40. Mme X v. Banque Privée Edmond de Rothschild Europe, Cass. 1st civ., (26 Sept. 2012), No. 11–26.022. (Cour de Cassation, France); According to Article 1170 of the French Civil Code, a potestative clause "makes the execution of the agreement depend upon an event that one or the other of the contracting parties has the power to bring about or to prevent," and is void ab initio.

41. First held in Russian Telephone Company CJSC v. Sony Ericsson Mobile Communications Rus LLC, Case No. VAS-1831/12, 19 June 2012 (Presidium of the Supreme Arbitrazh Court, Russia). Confirmed by the Economic Disputes Chamber in Case No. 310-ES14-5919, 27 May 2015, and the Presidium of the Russian Supreme Court in Digest of Case Law Involving Judicial Assistance and Oversight in Relation to Domestic and International Arbitration (December 2018).

42. Article 6, European Convention for the Protection of Human Rights and Fundamental Freedoms, 1950 (as amended by Protocols Nos. 11 and 14).

43. Article 18, UNCITRAL Model Law on International Commercial Arbitration, 1985 (Annexure I to U.N. Doc. A/40/17): The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.

44. Mauritius Commercial Bank Ltd v Hestia Holdings Ltd & Anr. 2013 EWHC 1328 (Comm).

45. See Indian Steel & Wire Products Ltd vs State Of Madras, 1968 AIR 478; Andhra Sugars Ltd. & Anr. Etc vs State Of Andhra Pradesh, 1968 AIR 599.

46. Indian Contract Act, 1872, §10: All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void; Indian Contract Act, 1872, §25: Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.

47. Union of India v. Bharat Engineering Corporation, 1977 SCC OnLine Del 45, ¶19.

48. Hans Smit, The Unilateral Arbitration Clause: A Comparative Analysis, Volume 20, Issue 3 American Review of International Arbitration, p. 391 (2009), p. 401.

49. Article 29(1), Convention on Contracts for the International Sale of Goods (1980) 1489 UNTS 3.

50. Article 3.2.1, UNIDROIT Principles of International Commercial Contracts (2016).

51. Article 3.2.7, UNIDROIT Principles of International Commercial Contracts (2016).

52. Orville Arnold and Maxine Arnold v. United Companies Lending Corporation, 204 W.Va. 229,511 S.E.2d 854 (Supreme Court of West Virginia, USA). See also: Armendariz v. Foundation Health Psychcare Services, Inc., 99 Cal. Rptr. 2d. 745 2000 (Supreme Court of California, USA); Iwen v. U.S. West Direct, 1999 MT 63 (Supreme Court of Montana, USA).

53. Kingfisher Airlines v. Captain Prithvi Malhotra, 2011 SCC Online Bom 1999.

54. Booz-Allen & Hamilton Inc vs SBI Home Finance Ltd., 2011 SCC Online SC 636.

55. Kingfisher Airlines v. Captain Prithvi Malhotra, 2011 SCC Online Bom 1999.

56. Rajesh Korat v. Innoviti, 2017 SCC Online Kar 4975.

57. Emaar MGF Land Ltd. v. Aftab Singh, 2018 SCC Online SC 2945.

58. Vidya Drolia v. Durga Trading Corporation, 2020 SCC OnLine SC 1018

59. Industrial Disputes Act, 1947.

60. Consumer Protection Act, 1986.

61. Natraj Studios (P) Ltd v Navrang Studios & Anr, 1981 1 SCC 523; As per Vidya Drolia v. Durga Trading Corporation, 2020 SCC OnLine SC 1018, disputes covered by rent control laws cannot be arbitrated.

62. Indian Trusts Act, 1882; reaffirmed in Shri Vimal Kishor Shah & Ors v Mr. Jayesh Dinesh Shah & Ors, 2016 8 SCC 788.

63. Vidya Drolia v. Durga Trading Corporation, 2020 SCC OnLine SC 1018.

64. Indian Contract Act, 1872, § 28

65. Indian Contract Act, 1872, § 28.

66. Union of India v. Bharat Engineering Corporation, 1977 SCC OnLine Del 45, ¶7.

67. Union of India v. Bharat Engineering Corporation, 1977 SCC OnLine Del 45, ¶8.

68. Lucent Technologies Inc. v. ICICI Bank Ltd., 2009 SCC OnLine Del 3213, ¶168.

69. Labour Commissioner v. Burhanpur Tapti Mills Ltd., 1964 7 SCR 484.

70. See Jamatraj Kewalji Govani vs The State Of Maharashtra, 1967 SCR (3) 415; Official Liquidator vs Dharti Dhan, 1977 SCR (2) 964; Dinesh Chandra Pandey v. High Court of Madhya Pradesh, AIR 2010 SC 3055.

71. See Mohan Singh v. International Airport Authority of India, 1997 9 SCC 132. Mansukhlal Vithaldas Chauhan v. State Of Gujarat, 1997 7 SCC 622.

72. Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd v. M/s Jade Elevator Components, 2018 SCC Online SC 1503.

73. Quick Heal Technologies Ltd. v. NCS Computech (P) Ltd., 2020 SCC OnLine Bom 693.

74. Lucent Technologies Inc. v. ICICI Bank Ltd., 2009 SCC OnLine Del 3213, ¶258.

75. Perkins Eastman Architects DPC v. HSCC (India) Ltd., 2019 SCC OnLine SC 1517, ¶18.

76. See Lisa Blomgren Amsler, Employment Arbitration: The Repeat Player Effect, Volume 1 Employee Rights and Employment Policy Journal, p. 189 (1997).

77. Tata Capital Finance Ltd. v. Shri Chand Construction and Apartment Pvt. Ltd, 2021 SCC OnLine Del 5091.

78. Emmsons International Ltd. v. Metal Distributors, 2005 SCC OnLine Del 17, ¶11 & ¶15.

79. Examples include Commercial Case No. 1193/2010, Judgment No. 71 (2 September 2011, Supreme Court of Cassation, Second Commercial Chamber, Bulgaria); Jiangmen Jiangci Electrician Co., Ltd. v. Yunnan Copper Co., Ltd. (2013, Supreme People's Court, China)

80. Arbitration and Conciliation Act, No. 26 of 1996, §18 (India).

81. See Venture Global Engineering LLC and Ors v Tech Mahindra Ltd. and Ors, 2018 1 SCC 656; MMTC Ltd. v. Vedanta Ltd., 2019 4 SCC 163; Government of India v. Vedanta Ltd., 2020 SCC Online SC 749.

82. Deyan Draguiev, Unilateral Jurisdiction Clauses: The Case for Invalidity, Severability or Enforceability, 31(1) J. of Intl. Arb. 19, 31 (2014).

83. DLF Home Developers Ltd. v Rajapura Homes Private Ltd, 2021 SCC OnLine SC 781.

84. Article 3.2.7.2, UNIDROIT Principles of International Commercial Contracts (2016).

85. The Presidium of the Russian Supreme Court in Digest of Case Law Involving Judicial Assistance and Oversight in Relation to Domestic and International Arbitration (December 2018)

86. See Peter Ashford, Is an Asymmetric Disputes Clause Valid and Enforceable? Volume 86 No. 2 Arbitration: The International Journal of Arbitration, Mediation, and Dispute Management, p. 347 (2020) p. 348.

87. From Unilateral Option Clauses Survey. Examples include Bermuda (at p. 15), England & Wales (at p. 18), Hong Kong (at p. 19), New Zealand (at p. 22), Nigeria (at p.22) and Singapore (at p. 24). Examples of jurisdictions with a substantial common law legal tradition include Botswana (at p. 16), Israel (at p. 20), and Malaysia (at p. 21).

88. NB Three Shipping v. Harebell Shipping, (2004) EWHC 2001 (Comm).

89. Law Debenture Trust Corp v Elektrim Finance BV, (2005) EWHC 1412 (Ch).

Natasha is a student of NALSAR University of Law, Hyderabad and Winner of the 1st Prize of the 9th Ed. of Arb Excel Essay Writing Competition.

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