Authored By: Hagar Ahmed Rizk
Tanta University , Faculty of Law
Introduction:
The unilateral arbitration clause stands as one of the most debated issues in international commercial arbitration, occupying a gray area between contractual autonomy and procedural fairness. On one hand, it is defended as an extension of party autonomy, allowing contracting parties to structure dispute resolution mechanisms that align with their commercial interests. On the other hand, it faces significant criticism for allegedly violating the principle of equality between parties, as it grants one party exclusive authority to elect arbitration as the forum for dispute resolution.
Amid this legal debate, the study provides a comprehensive analysis of the divergent legal and judicial perspectives on challenging unilateral arbitration clauses. It examines the reasoning behind both positions—those upholding its validity based on the doctrine of freedom of contract and those opposing it on grounds of procedural imbalance. Furthermore, the study proposes innovative mechanisms to harmonize these conflicting views, ensuring a balance between preserving arbitration’s flexibility and safeguarding procedural fairness.
1. Legal Foundations for the Validity of Unilateral Arbitration Clauses
A) The Principle of Party Autonomy in International Commercial Arbitration
This principle presupposes that the parties enjoy substantial autonomy in designing their own dispute resolution mechanism and tailoring the applicable rules to their specific needs, including their freedom to draft arbitration clauses. The UNCITRAL Model Law has endorsed this principle, as stated in Article 19, which provides: ” Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings”.
Accordingly, unilateral or asymmetrical clauses do not, in themselves, invalidate an arbitration clause, as such an agreement constitutes a contractual mechanism through which the parties determine the procedural framework of arbitration. In standard arbitration clauses, the parties typically agree to refer disputes to arbitration upon the occurrence of certain predefined events, such as the emergence of a dispute between them. The same rationale applies to unilateral arbitration clauses, except that the activation of the clause is contingent upon the discretion of one of the parties, a choice explicitly agreed upon by both parties within the scope of their contractual autonomy.
The Italian Court of Cassation has upheld the validity of unilateral arbitration clauses based on the principle of party autonomy, ruling that: ” As a matter of principle, parties must be free to agree on how their disputes should be resolved, including granting only one party the option to refer the dispute to arbitration”.([1])
It is well established that the validity of an arbitration clause hinges on the parties’ express consent to arbitrate, even if such consent is conditional upon the discretion of one party. This is because such an arrangement represents a legitimate contractual mechanism for resorting to arbitration. As long as the parties have willingly agreed to this framework, there is no legal restriction limiting their right to determine the dispute resolution mechanism in accordance with the principle of party autonomy.
In this regard, Professor Deyan Draguiev has argued that: ” The combination of arbitration and litigation options can be justified based on the principle of party autonomy.”([2])
B) The Binding Nature of Asymmetrical Arbitration Clauses on Contracting Parties
Dr. Mohamed Abu El-Soud asserts that:” Since contracting parties have the power to exclude recourse to litigation by agreeing to arbitration, then, according to the fundamental principle that ‘he who has the power over the whole has the power over its parts,’ it follows that if they have the right to exclude the jurisdiction of state courts altogether, they also— a fortiori— have the right to grant one party the option to exclude it”.([3])
Accordingly, the asymmetrical nature of an arbitration clause does not, in itself, invalidate or undermine its enforceability, provided that the parties have agreed to it voluntarily and contractually. Just as other contractual provisions that may confer an advantage to one party over the other do not render a contract invalid, an arbitration clause cannot be deemed unenforceable solely because it grants a unilateral right to one party.
Judicial Precedents on the Enforceability of Asymmetrical Arbitration Clauses
Upon reviewing the jurisprudence of the English Court of Appeal ([4]), it has been established that: ” There is no basis for annulling an arbitration agreement merely because it grants only one party the right to refer the dispute to arbitration”.
The court further clarified that:” A unilateral arbitration clause is, in essence, merely a procedural mechanism, and the fact that it may confer an advantage on one party does not render it invalid or unenforceable”.
Similarly, English courts have consistently upheld the binding nature of arbitration clauses, regardless of any perceived imbalance in their terms. Justice Colman affirmed this principle, stating that: ” English courts have consistently taken the view that as long as a contract clearly indicates that arbitration has been stipulated as a dispute resolution mechanism by both parties, they will be treated as bound to refer disputes to arbitration, even if the clause is not expressed in strictly mandatory terms”.( [5])
The Principle of “Pacta Sunt Servanda” and the Enforceability of Arbitration Clauses
It is essential to recognize the fundamental principle of contract law, pacta sunt servanda (“agreements must be honored”), which dictates that the arbitration agreement functions as a “constitutional framework” governing the parties’ obligations and rights. Consequently, both parties are legally bound to uphold and execute the terms of their agreement, including those related to arbitration, regardless of any perceived disparity in the distribution of rights and obligations.
C) The Principle of Giving Effect to Contractual Provisions
Article (4/5) of the Unidroit Principles provides that : ” Contractual terms shall be interpreted in a manner that ensures all provisions have effect, rather than in a way that deprives some of them of any effect”.
Accordingly, arbitration clauses must be interpreted effectively, rather than in a manner that renders them meaningless. If the arbitral tribunal adopts a narrow interpretation of the present arbitration clause, leading to its annulment, this would deprive the clause of its primary effect, which is the parties’ clear intent to resolve their disputes through arbitration. The mere reference to arbitration in the contract demonstrates that, at the time of concluding the principal agreement, the parties contemplated the possibility of resorting to arbitration, thereby affirming their contractual commitment to it.
Moreover, considering the commercial nature of the present dispute, the primary advantage sought by both parties in agreeing to arbitration was expedited dispute resolution. This objective can only be achieved through arbitration, as refusing to recognize the tribunal’s jurisdiction would significantly prolong proceedings, thereby undermining the parties’ right to a fair and efficient resolution of their disputes.
2. Challenging Unilateral Arbitration Clauses: Legal and Judicial Justifications
A) Non-Compliance of the Arbitration Clause with Legal Requirements
The arbitration clause in question fails to meet two essential legal requirements for a valid arbitration agreement:
The “Intention to Arbitrate” Requirement
A valid arbitration clause must explicitly and unequivocally express the parties’ mutual intent to resolve disputes through arbitration rather than litigation. This intent must be clear, definitive, and free from any ambiguity or uncertainty—it cannot be assumed or implied.
The Turkish Court of Cassation([6]) has reinforced this principle, ruling that: ” A clause that grants only one party the right to initiate either litigation or arbitration, while limiting the other party solely to litigation, is null and void”.
The court reasoned that: ” The intention to arbitrate is neither clear nor absolute, as the agreement allows one party to choose between arbitration and litigation at their discretion”.
Similarly, the Bahrain Court of Cassation held that([7]): ” An arbitration agreement cannot be presumed; it must clearly reflect the parties’ definitive intent to submit disputes to arbitration. The will of the contracting parties is what establishes arbitration as a dispute resolution mechanism”.
Legal scholars also affirm this principle, stating that: ” The intention to arbitrate must be absolute and unequivocal. If the clause merely suggests the possibility of resorting to arbitration at one party’s discretion, it does not constitute a valid arbitration agreement ” ([8])
In the case of unilateral arbitration clauses, the decision to arbitrate is contingent upon the discretionary will of one party, which contradicts the fundamental requirement of mutual and unequivocal consent to arbitration. Consequently, such clauses fail to meet a core condition of arbitration agreements and are subject to nullity.
“Exclusion of State Courts” Requirement
Arbitration is an exceptional dispute resolution mechanism that derives its legitimacy from removing the jurisdiction of state courts over the disputes it covers. For an arbitration clause to be valid, it must clearly and explicitly exclude the jurisdiction of national courts over the agreed-upon disputes.
The Ras Al Khaimah Court of Cassation ruled that ([9]):” If an arbitration clause is vague, lacks clarity, or is drafted in general terms without demonstrating a firm intent by the contracting parties to regulate the arbitration process exclusively, it cannot be deemed a valid arbitration agreement. Arbitration cannot be presumed or inferred implicitly”.
Furthermore, the court emphasized that: ” The legal framework of arbitration, as recognized by legislators, is based on the explicit exclusion of state courts’ jurisdiction over disputes that would normally fall within their competence. The parties’ consent to arbitration signifies their acceptance of an alternative dispute resolution method, thereby relinquishing their right to litigate before national courts”.
Accordingly, an arbitration clause that fails to unequivocally exclude the jurisdiction of state courts over the dispute in question lacks a fundamental requirement of a valid arbitration agreement, rendering it legally defective and unenforceable.
B) The Violation of the Principle of Equality and Standards of Justice and Fairness by Unilateral Arbitration Clauses
Article 18 of the UNCITRAL Model Law establishes a fundamental principle in international commercial arbitration, namely the principle of equal treatment of the parties, stating that: ” The parties shall be treated with equality and each party shall be given a full opportunity to present its case”.
However, a unilateral arbitration clause constitutes a blatant violation of this principle, as it grants one party—exclusively—the right to refer the dispute to arbitration, thereby creating an imbalance between the parties and undermining the principles of justice, fairness, and good faith. Such clauses confer an unjustified advantage to one party while limiting the other party’s freedom to present its claims and defend its rights on equal footing.
The Supreme Arbitrazh Court of Russia ruled on the invalidity of unilateral arbitration clauses due to their unfair nature, stating: ” For a fair dispute resolution process, it is essential that both parties enjoy equal rights in presenting their case before arbitral tribunals and even before arbitration courts. Such clauses contradict the principles of procedural equality between the parties, undermine the integrity of the dispute resolution process, and disrupt the balance between the contracting parties”. ([10] )
Accordingly, asymmetrical arbitration clauses not only violate the principle of equality but also compromise the fairness and impartiality of arbitral proceedings, potentially leading to their non-recognition or annulment by certain national courts.
C) The Principle of Interpreting Ambiguous Terms Against the Drafter
The UNIDROIT Principles have recognized this principle in Article 4.6, which states: “If contract terms that have been drafted by one party are unclear, they should be interpreted against that party’s interest”.
Since unilateral arbitration clauses are often drafted exclusively by the benefiting party—who is granted an advantage or preference—this principle mandates that any ambiguity in such a clause should be construed against the party that unilaterally drafted it.
Several judicial decisions have upheld this principle. For instance, in a dispute brought before the Arbitration Tribunal of the Chamber of Commerce, concerning an arbitration clause where the parties sought to “preserve” an alternative allowing them to choose between consular and arbitral jurisdiction, the tribunal ruled that any doubt regarding the content of a jurisdiction clause should be interpreted against the interest of the party that drafted it.
In this case, since the arbitration agreement drafted by the claimant was ambiguous, the tribunal held that it lacked jurisdiction to settle the dispute in question.(11 )
3. Balanced Governance of Unilateral Arbitration Clauses: Ensuring Fairness and Equity
Unilateral arbitration clauses have sparked significant debate regarding their fairness and enforceability. To reconcile party autonomy with procedural fairness, the following mechanisms offer innovative solutions for balancing interests and mitigating potential inequities:
A) Conditional Reciprocal Arbitration
Instead of granting only one party the right to initiate arbitration, this approach ensures that both parties retain the option, contingent on predefined conditions. These conditions may include specific contractual breaches, monetary thresholds, or time-bound triggers. By structuring arbitration rights in a balanced manner, the clause avoids undue advantage and ensures mutual recourse to arbitration.
B) Compensatory Balancing Mechanisms
To offset any procedural imbalance, compensatory measures can be introduced. These may include:
- Financial Compensation: The party disadvantaged by the unilateral clause may receive a financial adjustment or cost reimbursement.
- Extended Preparation Periods: The non-benefiting party may be granted additional time to prepare for arbitration proceedings.
- Safeguard Provisions: Independent oversight or review mechanisms can be implemented to assess fairness before arbitration is triggered.
- Procedural Review Mechanisms: Courts or arbitral institutions may be empowered to scrutinize the fairness of unilateral activation before enforcement.
C) Mandatory Pre-Arbitration Negotiation Clause
This clause obliges the benefiting party to engage in structured negotiations before invoking the arbitration provision. A mandatory negotiation period allows the disadvantaged party to present its case and potentially reach an amicable settlement. This mechanism encourages good faith discussions and minimizes the risk of strategic abuse of arbitration rights.
Under this principle, if one party unilaterally triggers arbitration, the other party automatically acquires the same right for future disputes arising from the same contract. This creates a selfcorrecting mechanism that discourages exploitative use of unilateral clauses, ensuring longterm fairness in dispute resolution.
Conclusion
Unilateral arbitration clauses remain one of the most contentious issues in international commercial arbitration, highlighting the inherent tension between contractual autonomy and procedural fairness. While one party seeks greater flexibility and independence in dispute resolution, the other may face legal constraints that undermine the principle of equal treatment.
This study has demonstrated that the legal validity of such clauses is far from settled. Jurisdictions diverge between full acceptance, outright rejection, and interpretative approaches that strive to balance the interests of both parties. The future of these clauses does not lie in their absolute prohibition or unrestricted enforcement but rather in their restructuring within a more balanced framework that preserves party autonomy without compromising procedural justice.
Innovative legal mechanisms, such as conditional reciprocal arbitration, compensatory balancing measures, and mandatory pre-condition negotiation clauses, could pave the way for a fairer and more equitable approach. Ultimately, the real challenge for the legal community is to devise solutions that transcend the traditional dichotomy between legality and exploitation, ensuring that arbitration remains an effective and balanced mechanism for resolving commercial disputes within a fair and sustainable legal environment.
[1] ) According to Simon Nesbitt and Henry Quinlan in their study on “The Status and Operation of Unilateral or
Optional Arbitration Clauses,” the Milan Court of Appeal has upheld the validity of such clauses, referencing the
Italian Supreme Court’s judgment No. 2096 of 22 October 1970, published in Giustizia Civile Mass. (Nesbitt & Quinlan, 2006, p. 144).
[2] ) Draguiev, Deyan. “Unilateral Jurisdiction Clauses: The Case of Invalidity, Severability, or Enforceability.” Journal of International Arbitration, vol. 31, issue 1, 2014, p. 28.
[3] ) Abou El-Soud, M. (2018). Prevalence of the Arbitration Clause Over the Jurisdiction Clause: A Commentary. Global Arbitration Journal, (39-40), p. 762.
[4] ) Pittalis v. Sherefettin [1966] QB 686, cited in: Anu Srivastava, “Unilateral Clauses in Arbitration: Validity and Enforcement,” p. 302.
[5] ) Lobb Partnership Limited v. Aintree Racecourse Company Limited [2000], Building Law Reports, vol. 65, cited on pp. 46-47 of Russell on Arbitration.
[6] ) Court of Cassation, 19th Civil Law Division, Decision No. 3257/2009, referred to in: Dr. Raluca Papadima, “Asymmetrical Arbitration Clauses: A Global Overview,” Campbell University School of Law, 2019, p. 22.
[7] ) Bahrain Court of Cassation, Appeals No. 23 & 32/2023, Judgment of August 21, 2023.
[8] ) Wali, F. (2007). The Law of Arbitration in Theory and Practice. Al Maaref Establishment, Alexandria (1st ed.), p. 106. Referenced in: Cairo Court of Appeal, Judgment of November 29, 2004, in Arbitration Case No. 59/121 Q, Arbitration. Cited in: El-Nemr, A. A. A. (n.d.). The Applicable Law on Procedural Matters in Arbitration. Dar Al-Nahda Al-Arabia, Faculty of Law, Ain Shams University (1st ed.), p. 112.
[9] ) Ras Al Khaimah Court of Cassation, Judgment of September 10, 2024, in Commercial Cassation Case No. 56/2024.
[10] ) Russkaya Telephonnaya Kompaniya v. Sony Ericsson Mobile Communications, Rus Ltd Liability Co., Decision No. 1831/12 (2012), Supreme Arbitration (Commercial) Court of the Russian Federation, referred to in: Anu Srivastava, “Unilateral Clauses in Arbitration: Validity and Enforcement,” Nulu Law School, p. 312. 11 ) See Partial Judgment from 2006 from ICC File No. 13921, in Charles Kaplan, Alexis Mourre (eds.), The Paris Journal of International Arbitration (Les Cahiers de l’Arbitrage), L.G.D.J. Publishing House, Paris, May 2010, pp. 91-93. Referred to in: Paul Comsa, “At a Crossroads: The Case of Pathological Arbitration Clauses Which Determine a Jurisdictional Fight,” Challenges of the Knowledge Society – Private Law, p. 221.
