Hybrid arbitration clauses - the good, the bad and the pathological

Party autonomy has long been the overriding gestalt of arbitration. Providing they are lawful, parties to an arbitration agreement are free to agree on matters both wise and unwise.

An example is the use of hybrid arbitration clauses. The term 'hybrid' captures several species of arbitration clause including a 'mutual' options clause where both parties have a choice of mechanism and/or forum. Here the parties have vested themselves with the luxury of a choice exercisable once a dispute has crystallised. For example, parties may have agreed to submit disputes to arbitration, but each party also has the option to commence proceedings in the courts of a specified jurisdiction.

Conversely, under an 'asymmetric' options clause one party has the unilateral choice of mechanism and/or forum (common in banking and financial transactions). Asymmetric clauses are not universally accepted and are often attacked on the grounds of lack of mutuality. Subject, of course, to the wording of the provision in question, asymmetric clauses have been upheld in England and Wales (Mauritius Commercial Bank Ltd v Hestia Holdings Ltd [2013] EWHC 1328), France - providing the alternative forums are objectively clear and certain on the face of the clause (Cass. l'ere Civ. 7 October 2015 No. 14-16.898), Russia - at least in principle (Russian Commercial Supreme Court Case No. A32-8964/2006) and Singapore (Wilson Taylor Asia Pacific Pte Ltd v Dyna Jet Pte Ltd [2017] SGCA 32).

Other jurisdictions have been less willing to embrace asymmetric clauses. For example, in the UAE doubt has been cast on the use of asymmetric clauses in Commercial Appeal No. 753 of 2024 (29 October 2024). There, the (onshore) Dubai Court of Cassation held that a unilateral option to arbitrate did not satisfy the mutual consent requirement taking issue with both the unilateral and non-exclusive nature of the option to arbitrate.

Hybrid arbitration clauses that are beset with fatal problems are often referred to as a 'pathological clauses' or 'clauses pathologique'. That (somewhat dramatic) phrase was coined by the former Secretary General to the ICC, Mr Frederic Eisemann, in his 1974 paper La clause d'arbitrage pathologique U.T.E.T. 1974. One example of such a clause simply provided: 'English law – arbitration, if any, London according to ICC Rules' (Arab-African Energy Corp Ltd v Olieprodukten Nederland BV [1983] 2 Lloyd's Rep 419).

Added to 'mutual' and 'asymmetric' hybrid clauses is the species of hybrid arbitration clause whereby the parties have agreed that the arbitration rules of one arbitral institution are to be administered by another arbitral institution. What could go wrong?

A recent Victorian Supreme Court decision is the first Australian case to consider this style of hybrid clause. In Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd & Ors [2026] VSC 48, the Victorian Supreme Court (Croft J) observed the well documented practical difficulties of such provisions including predictable jurisdictional disputes, operating within a patchwork of rules reflecting the best efforts of the institution rather than the parties' choice, and reliance on an institution's preparedness to act within an unfamiliar procedural framework. The decision is noteworthy as the first Australian decision on this style of hybrid clause.

The works concerned an EPC contract dated 21 December 2017 for the construction of wind turbine generators as part of Stage 1 of the Murra Warra Wind Farm Project in Victoria. Disputes arose between the employer (Squadron) and one of the contractors (Downer).

Clause 42.5(a) of the EPC contract required 'Arbitration ... conducted by the Resolution Institute in accordance with the ICC Rules of Arbitration ...'. The Resolution Institute is a dispute resolution organisation operating throughout Australia, New Zealand and the Asia-Pacific region.

On 28 August 2025, Squadron commenced arbitration proceedings with the Resolution Institute. The following day, Downer commenced ICC arbitration. The Resolution Institute subsequently confirmed that it would not undertake any ICC specific tasks and that its role would be confined to assisting with the appointment of the arbitral tribunal. The question therefore arose as to which of the two arbitration proceedings was validly commenced under Clause 42.5(a).

In seeking to demonstrate that the reference to the Resolution Institute in Clause 42.5(a) was pathological, Downer's submissions focussed on certain provisions of the ICC Rules that required the ICC's exclusive involvement such that those functions could not, it was submitted, be performed by the Resolution Institute. These included Article 1(2): 'The [ICC] Court is the only body authorised to administer arbitrations under the Rules ...' and Article 6(2): 'By agreeing to arbitration under the Rules, the parties have accepted that the arbitration shall be administered by the [ICC] Court.' Downer submitted that the reference to the Resolution Institute in Clause 42.5(a) should be either read down to be confined to the arbitral tribunal appointment process only (being the Resolution Institute's stated position) or 'blue pencilled' and severed such that the dispute should proceed as an ICC arbitration.

On the other hand, Squadron submitted the clause was not pathological and that the roles of the two arbitral institutions could coexist as contemplated by the parties but with any necessary modifications.

In reviewing the leading authorities, Croft J noted that there were 'mercifully few' cases on this species of hybrid clause. They include Bovis Lend Lease Pte Ltd v Jay-Tech Marine & Projects Pte Ltd [2005] SGHC 91; Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR(R) 936; HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5; Government of the Russian Federation v I.M. Badprim S.R.L. Svea Court of Appeal, T 2454–14, 23 January 2015 and Value Advisory Services v ZTE Corporation 3 July 2017, Delhi High Court, 2017 DHC 3217.

Croft J further noted the theme that emerges from the limited body of case law, perhaps not surprisingly, is that hybrid clauses of this type are upheld as often as possible - practical difficulties are not to be equated with insurmountable difficulties. If there is a clear agreement to arbitrate the Courts will do their utmost to uphold that outcome. And in finding in favour of Squadron and upholding Clause 42.5(a), Croft J did just that. Croft J held (at paragraph 85) that 'a reasonable person in the position of Squadron or Downer would have understood clause 42.5(a) to be the selection of a hybrid mechanism by which arbitration is to be conducted by the Resolution Institute. ... It is simply inconceivable that sophisticated commercial parties, advised by well-resourced lawyers, would have been unaware of the fact that the ICC Rules and the ICC’s associated unique functions would be incapable of exact adoption and replication by the Resolution Institute.'

In relation to Downer's argument that Articles 1(2) and 6(2) of the ICC Rules prevented the consensual involvement of another arbitral institution Croft J (at paragraph 87) held: '…despite the addition of Arts 1(2) and 6(2) to the ICC Rules, I am not satisfied that an arbitral institute such as the ICC can so restrict party autonomy as to prevent the parties from agreeing to conduct hybrid arbitration if they are so inclined, despite the inherent limitations to such a method and the self-evident procedural issues, amongst many other things, that may arise from their choosing to do so.'

The arbitration could proceed under Clause 42.5(a) with the Resolution Institute assisting with the appointment of the arbitral tribunal and then conducting the arbitration in accordance with the ICC Rules but setting aside any specific rules, as necessary.

What does all that mean?

• consistent with the almost universal pro-arbitration bias, where the parties' intention to arbitrate is clear a hybrid arbitration clause will be upheld if at all possible.
• the rules of an arbitral institution will not necessarily override or trump party autonomy.
• ultimately, drafting matters. One suspects many cases arise inadvertently.  If deliberate, there needs to be good reason to go down the hybrid clause road and invite the associated risks. Often the simplest approach is the best approach - an arbitration clause providing institutional arbitration in accordance with that institution’s rules.