Asymmetric dispute resolution clauses are widely used in cross-border commercial agreements, but their enforceability under Indian law remains unsettled. This article analyses three types of asymmetric clauses, examines how the Singapore and EU Courts have treated them and analysis the conflicting judicial approach in India.
Key Takeaways
- Asymmetric clauses come in three distinct forms- jurisdiction clauses, arbitration clauses and arbitrator appointment clauses and each of them raises a different legal question.
- Singapore Courts in the case of Wilson Taylor v. Dyna-Jet decided that a clause giving only one party the right to elect arbitration was held to be a valid arbitration agreement
- Indian High Courts are split, with Delhi striking such a clause down in Emmsons International under Section 28 of the Contract Act, and Calcutta upholding a similar clause in New India Assurance on the basis of advance consent.
- Unilateral appointment of arbitrators is now a separate question to which Indian law gives a strict answer, while asymmetric choice of forum remains open.
- Until the Supreme Court settles the position, parties drafting under Indian law should treat asymmetry as a litigation risk and draft accordingly.
Introduction
Cross-border commercial contracts often give lenders, investors or multinational companies greater flexibility in choosing dispute resolution forums. While such asymmetric clauses are common internationally, their enforceability under Indian law remains uncertain. This uncertainty creates significant drafting and litigation risks for businesses entering high-value commercial agreements. Asymmetric clauses, whether in jurisdiction or arbitration, have increasingly emerged as a common issue before courts, particularly in the realm of commercial contracts. These clauses typically grant one party broader rights, such as the option to choose between arbitration and court proceedings, while limiting the other party’s options. These clauses, though common in global jurisdictions, raise complex questions when it comes to enforceability and validity under Indian law. This article delves into asymmetric jurisdiction, arbitration and arbitrator appointment clauses, examines the legal issues they present in India, and explores key case laws that have shaped the understanding of these clauses in Indian jurisprudence.
What Are Asymmetric Clauses? The Three Types
An asymmetric clause is one that gives one of the parties a procedural right that the other party does not have. Three distinct clauses travel under that label and are often treated as though they were one, although each raises a different legal question and attracts a different line of authority.
(a) Asymmetric Jurisdiction clauses
Asymmetric jurisdiction clauses are provisions in agreements that allow one party to choose between multiple forums for resolving disputes, while the other party is bound exclusively to a predetermined jurisdiction. Such clauses create a risk of parallel proceedings and may therefore give rise to numerous legal challenges at the stage of enforcement of the agreement.
For illustration, a facility agreement may provide that the borrower can sue only in England while the lender can sue in England or wherever the borrower's assets happen to be located.
(b) Asymmetric arbitration clauses (unilateral option or hybrid clauses)
An asymmetric arbitration clause gives one party a choice of process rather than a choice of court, so that it may refer a dispute to arbitration or take it to court while its counterparty enjoys no corresponding election. Such clauses are also described as unilateral option clauses, unilateral arbitration clauses or hybrid clauses, and they take two broad forms:
- Only one party has the authority to refer the disputes arising out of the agreement to arbitration.
- Both parties may refer the disputes arising out of the agreement to arbitration, but only one party may instead choose any alternative form, such as litigation or mediation.
In both these types of agreements, one party is entitled to refer the dispute to arbitration as a mode of dispute resolution, while the other party’s rights are restricted.
These types of clauses are found in commercial contracts, especially in employer-employee agreements, lender-borrower agreements as well as international agreements between parties from different jurisdictions. In all such situations one party typically holds a dominant position over the other.
For illustration: A foreign bank lending to an Indian borrower may reserve the right to sue either before English courts or commence arbitration, while the borrower is restricted to arbitration alone.
(c) Asymmetric arbitrator appointment clauses (unilateral appointment clauses)
The third category is different in kind, because here both parties are bound to arbitrate and the forum is common to them, while what is one-sided is the constitution of the arbitral itself. The clause usually The clause usually takes one of three forms: one party names the sole arbitrator, or one party maintains a panel from which the other must make its choice, or one party's own employee or nominee sits as arbitrator or appoints him. The Hon’ble Supreme Court in the case of Central Organisation for Railway Electrification vs M/s ECI SPIC SMO MCML[1] held that unilateral appointment of arbitrators in public- private contracts violate the principles of equality under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and that Public Sector Undertakings (“PSU”) are not prohibited from curating a panel of arbitrators, however, an arbitration clause cannot mandate that the other party selects its arbitrator from the panel curated by the PSU.
Why are Asymmetric Clauses challenged under Indian Law?
In India, the enforceability of asymmetric clauses, particularly in arbitration agreements, is faced with several issues. One significant issue is their compatibility with Section 28 of the Indian Contract Act, 18722 (“Contract Act”). The relevant portion of this section is reproduced here for ease of reference:
“28. Agreements in restraint of legal proceedings, void. - [Every agreement,-
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, …is void to that extent.”
On a plain reading, Section 28 (a) of the Contract Act only invalidates those agreements which ‘absolutely restrict’ a party’s right to initiate legal proceedings. Since asymmetrical arbitration agreements do not ‘absolutely’ bar the other party’s right to approach arbitration, they do not squarely fall within this prohibition. Nevertheless, certain High Courts in India have adopted a broader interpretation of Section 28 of the Contract Act, holding asymmetrical clauses to be invalid. These cases have been dealt with under the heading “Case Law Analysis”.
Despite challenges, the principle of party autonomy enshrined within the Arbitration Act presents the strongest argument for upholding asymmetric arbitration and jurisdiction clauses. It is settled that the parties are entitled to define their rights and liabilities by agreement, with minimal judicial intervention. Indian Courts have consistently held that the principle of party autonomy is cardinal to arbitration, even though it is not absolute. The real test of this principle lies in the freedom of parties to determine the key aspects of their agreement, including the right to choose the governing law, substantive laws, the arbitral seat and the composition of the Arbitral Tribunal. These considerations carry particular weight in international commercial arbitration, where sophisticated parties routinely negotiate asymmetric dispute resolution structures.
How Have Courts Treated Asymmetric Clauses? A Comparative Case Law Analysis
- Singapore
Wilson Taylor Asia Pacific Pte. Ltd vs Dyna-Jet Pte Ltd. (2017 SGCA32) (Court of Appeal Singapore)
Clause in challenge
The dispute resolution agreement, reproduced at Para 4 of the judgment, was in the following terms:
“Dyna-Jet [which is the Respondent] and the Client [which is the Appellant] agree to cooperate in good faith to resolve any disputes arising in connection with the interpretation, implementation and operation of the Contract. Disputes relating to services performed under the Contract shall be noted to Dyna-Jet within three (3) days of the issue arising, thereafter the period for raising such dispute shall expire. Any claim or dispute or breach of terms of the Contract shall be settled amicably between the parties by mutual consultation. If no amicable settlement is reached through discussions, at the election of Dyna-Jet, the dispute may be referred to and personally settled by means of arbitration proceedings, which will be conducted under English Law; and held in Singapore.” (emphasis supplied)
The operative words were “at the election of Dyna-Jet”, which meant that only the respondent could elect arbitration and that the appellant could not.
Reasoning of the Court
The respondent had commenced a suit in the Singapore High Court and thereby elected not to arbitrate, and the appellant sought a stay of that suit under Section 6 of the International Arbitration Act3. The Court applied the three requirements laid down in the case of Tomolugen[4], namely a valid arbitration agreement, a dispute falling within its scope, and an agreement that is not null, void, inoperative or incapable of being performed, each assessed on a prima facie standard (Paras 11–12). It held that the clause was a valid arbitration agreement notwithstanding its asymmetric character, since neither the lack of mutuality nor the element of optionality prevented that conclusion (Para 13), but that the dispute fell outside its scope, because the clause gave rise to an arbitration agreement only if and when the respondent elected to arbitrate and the respondent had by then elected to litigate instead (Paras 15 and 24). The stay was accordingly refused and the appeal was dismissed with costs (Para 26).
- European Union
Societa Italiana Lastre SpA (SIL) v. Agora SARL, Case C‑537/23 (Court of Justice of the European Union, First Chamber)[5]
Clause in challenge
The agreement conferring jurisdiction, reproduced at Para 17 of the judgment, stipulated:
“the court of Brescia [(Italy)] will have jurisdiction over any dispute arising from or related to this contract. [SIL] reserves the right to bring proceedings against the purchaser before another competent court in Italy or elsewhere”. (emphasis supplied)
Reasoning of the Court
The Court held that a jurisdiction agreement is imprecise or asymmetric is to be tested not against national law under the “null and void as to its substantive validity” limb, but against autonomous criteria derived from Article 25 of the Brussels Ia Regulation[6] itself (Para 53). The Court further held that a clause under which one party may sue only in the court designated while the other may sue there or in any other competent court is valid, provided that it designates the courts of EU Member States or of States party to the Lugano II Convention[7], that it identifies objective factors precise enough for the court seized to ascertain whether it has jurisdiction, and that it does not offend Articles Brussels Ia Regulation. The Court also noted that the parties need not designate the courts of a single Member State, since such a limit would be contrary to their freedom of choice (Paras 55–58), but a clause read as designating the courts of a third State outside the European Union and outside Lugano would be contrary to the Regulation, because EU law cannot itself identify such courts and the resulting risk of conflicting jurisdiction would defeat legal certainty (Paras 60–61).
- India
Indian courts have taken conflicting views on the validity of asymmetric arbitration of jurisdiction clauses in agreements. For instance, Hon’ble Delhi High Court in the case of Spicejet Ltd vs Team France 01SAS8 referred to an extract from Professor Fentiman’s Book to discuss what constitutes an asymmetric jurisdiction clause. It has been reproduced here for ease of reference:
“Arguably, the solution is to draw a distinction between a jurisdiction clause and the distinct agreements it may comprise. It is coherent to say that asymmetric clauses are to be classified as non-exclusive, in so far as they do not confine proceedings to a single court. However, such clauses contain separate exclusive and non-exclusive jurisdiction agreements, whereby the counterparty's agreement to sue in the designated court is exclusive, and the "beneficiary's" agreement to sue in that court is non-exclusive." (emphasis supplied)
Thus, it can be validly inferred that asymmetric jurisdiction clauses are not by default exclusive jurisdiction clauses as they have both exclusive and non-exclusive covenants attached to it.
- Spicejet Ltd. vs. Team France 01SAS, 2024 SCC Online Del 6363
Clause in challenge
The lessee relied on Clause 24.2 of the engine lease agreements, read with the definition of “Courts” in Clause 1.1:
“24.2. The courts shall have exclusive jurisdiction to settle any disputes arising out of or in connection with, and any non-contractual obligations arising out of or in connection with, This agreement. For such purposes each party irrevocably submits to the jurisdiction of the courts and waives any objection to the exercise of such jurisdiction.” “1. Definitions.—‘Courts’ means the courts of competent jurisdiction of England.”
The lessors relied on Clause 20.1(a), which dealt with the lessor's rights following a termination event:
“20.1. At any time after the occurrence and continuation of any termination event the lessor may, by notice to the lessee, immediately terminate the lease period … and the lessor shall be entitled to: (a) Repossess the engine and export the engine from the relevant jurisdiction in which the engine is located, to the extent permitted by applicable law, … and the lessee waives any right it may have under applicable law to any hearing or rights it may have to bring any proceedings of whatever nature prior to repossession of the engine.” (emphasis supplied)
Reasoning of the Court
A harmonious reading Clause 24.2 and 20.1(a) revealed that the parties had forged an asymmetric jurisdiction clause, under which the lessee was confined to the courts of competent jurisdiction in England while the lessors could sue both there and in the courts of the relevant jurisdiction where the leased engines were located, that is, India (Para 33). The applicable law for repossession and export was accordingly the law prevailing in the jurisdiction where the engines were located (Para 35), and the objection to jurisdiction was rejected. The Division Bench varied the impugned order only to clarify that the lessee remained free to take all defences in the suit, including objections to jurisdiction and governing law, when its written statement was filed (Paras 38 and 51).
In reaching that conclusion the Court reasoned that Clause 24.2 could not be read in isolation, and that when the lease agreements were read as a whole the lessors had been given two strings to their bow so far as repossession was concerned (Para 33). Clause 25.1 supported that reading, since it permitted the lessors to bring the agreements into India in connection with the commencement of original legal proceedings or enforcement proceedings before a court in India, which would have been meaningless had Indian courts been wholly excluded (Para 36).
- Emmsons International Ltd. vs Metal Distributors (Delhi High Court)[9]
Clause in challenge
Clause 13 of the contract, reproduced at Para 4 of the judgment, read as follows:
“Governing Law and Forum for resolution of Disputes—This contract shall be construed in accordance with and governed by English law. Sellers shall be entitled at their opinion, to refer any dispute arising under this contract to arbitration in accordance with the rules and regulations of the London Metal Exchange or to institute proceedings against buyers in any Courts of competent jurisdiction.” (emphasis supplied)
It is pertinent to note that the above-mentioned clause gave the seller two options, being arbitration under the London Metal Exchange rules or proceedings against the buyer in any court of competent jurisdiction, while giving the buyer neither, so that the buyer was left with no route to arbitration and no court of its own.
Reasoning of the Court
Clause 13, being in the nature of a unilateral covenant depriving the plaintiff of the right to enforce its rights either through the ordinary tribunals set up by the State or through the alternate dispute resolution mechanism, was held to be void and incapable of enforcement in India, with the result that the suit before the Delhi High Court was maintainable and the application was dismissed (Paras 15–16).
The seller had contended that the three limbs of Clause 13, namely the governing law, the arbitration option and the litigation option, were independent and separable, so that the clause could not be characterised as unilateral (Paras 13–14). The Court rejected that contention, beginning from the principle underlying Section 28 that no man can exclude himself from the protection of the courts by contract, subject only to two exceptions, namely a valid and binding arbitration clause and an agreement as to the jurisdiction to which disputes under the contract shall be referred. Clause 13 fell within neither exception, since it imposed an absolute bar on the buyer, who could approach neither the ordinary tribunals nor the alternate dispute resolution mechanism, and such an absolute restriction was clearly hit by Section 28 besides being against public policy (Para 15). The Court drew support from A.V.N. Tubes Ltd. v. Bhartia Cutler Hammer Ltd.10, where a clause reserving arbitration to one company, exercisable only on its own notice and with the arbitrator to be appointed by that company alone, was held cumulatively unilateral and unenforceable (Paras 11–12).
The Court expressly said that had the restriction merely required the buyer to sue in one of several ordinary tribunals in which the suit would otherwise lie, the defendant would have been within its rights to enforce it (Para 15). Emmsons therefore does not condemn asymmetry as such but condemns a clause that leaves the counterparty with no forum at all.
- New India Assurance Co. Ltd. vs. Central Bank of India, 1985 Cal 76 (Calcutta High Court)[11]
Clause in challenge
Two clauses were in issue. Clause 12 of the policy, set out in the opening part of the judgment, contained the arbitration agreement:
“If any dispute shall arise as to whether the company is liable under this policy or as to the amount of its liability the matter shall, if required by the company be referred to the decision of two neutral persons as Arbitrators one of whom shall be named by each party or of an umpire who shall be appointed by the said Arbitrators before entering on the reference; and in case the Insured or his legal personal representatives shall neglect or refuse for the space of two calendar months after request in writing from the company so to do to name an Arbitrator the Arbitrator of the company may proceed alone and no action or proceeding shall be brought or prosecuted on the policy until the award of the Arbitrator, Arbitrators or umpire has been first obtained.” (emphasis supplied)
The policy also contained the agreed Bank Clause No. 4, set out at Para 3:
“That any adjustment, settlement, compromise or reference to arbitration in connection with any dispute between the company and the insured or any of them arising under or in connection, with the policy if made by the Bank shall be valid and binding on all parties insured hereunder, but not so as to impair the right of the Bank to recover the full amount of any claim it may have on other parties insured hereunder…” (emphasis supplied)
Reasoning of the Court
A clause conferring on one party alone the right to refer a dispute to arbitration is a valid and subsisting arbitration agreement, the counterparty's consent having been given in advance and recorded in the agreed term of the contract, and the unilateral option does not negative the existence of the arbitration agreement but restricts only its enforceability (Para 13). The Court accordingly declared that Clause 12 of the policies contained a valid and subsisting arbitration agreement and that the reference made by the Bank under the agreed Bank Clause invested the arbitrators with jurisdiction, and the insurer's application under Sections 33, 5 and 12 of the Arbitration Act, 194012 was dismissed (Paras 14–15).
The insurer's case was that the reference lay only at its option, that until the option was exercised no arbitration agreement came into existence, that the clause was therefore a contingent agreement or an agreement to agree, and that it lacked mutuality because Section 2(a) of the 1940 Act required an arbitration agreement to confer mutual rights to refer. The Hon’ble Court further noted that There is valid arbitration agreement between the parties but both the parties have agreed that when future disputes will arise it is only the privileged party who will have the right to make the reference, but the privileged party can also render the arbitration agreement infructuous by not exercising its option. This 'option' does not negative the existence of the arbitration agreement but only restricts its enforceability. 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 recorded in the agreement that the reference would be by the privileged party alone. This unilateral right to make the reference flows from the agreed term in the contract. (Para 13) The court upheld the validity of the clause in question as there was no lack of mutuality.
Key Takeaway: Singapore upholds asymmetric arbitration clauses at the level of validity, the EU upholds asymmetric jurisdiction clauses subject to conditions while the courts in India have no settled answer to the same.
Conclusion
Courts across jurisdictions have wrestled with these clauses, and the pattern is now reasonably clear outside India, where Singapore uphold them and the EU upholds them within limits. Indian High Courts remain inconsistent, with Delhi striking them down under Section 28 of the Contract Act, Calcutta upholding them on the basis of advance consent.
Judicial caution about one-sided procedural arrangements is understandable, but commercial reality often requires parties to allocate procedural flexibility unevenly, and they ordinarily do so with full knowledge of what they are agreeing to. Indian Courts will probably turn on balancing party autonomy against procedural fairness, rather than on any blanket prohibition.
Key Points to keep in mind for legal consultants drafting arbitration clause
Until that happens, a few practical points follow for drafting. The three types of asymmetry should be kept separate, since a unilateral appointment clause is now plainly vulnerable while a unilateral option as to forum is merely uncertain. The counterparty should never be left without any forum at all, which is what defeated the clause in Emmsons, and its consent to the asymmetry should be recorded expressly, which is what saved the clause in New India Assurance. The alternative forums should be identified by objective criteria rather than by open-ended words such as “any court of competent jurisdiction”, which is the discipline the CJEU insisted on. Party autonomy remains the cornerstone of Indian arbitration law, but it is not absolute, and a clause drafted with these limits in mind is far more likely to survive.
Footnotes
1 Central Organisation for Railway Electrification vs M/s ECI SPIC SMO MCML, 2024 SCC OnLine SC 3219
2 Section 28, Indian Contract Act 1872, No.9 of 1872
3 Section 6, International Arbitration Act (Singpore)
4 Tomolugen Holdings Ltd. v. Silica Investors Ltd., [2016] 1 SLR 373
5 Societa Italiana Lastre SpA (SIL) v Agora SARL, (Case C-537/23)
6 Article 25, Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 (“Brussels Ia Regulation”)
7 Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, signed on 30 October 2007 (“Lugano II Convention”)
8 Spicejet Ltd vs Team France 01SAS, 2024 SCC OnLine Del 6363
9 Emmsons International Ltd. vs Metal Distributors, AIR 2005 (NOC) 280 (DEL)
10 A.V.N. Tubes Ltd. v. Bhartia Cutler Hammer Ltd., (1992) 2 Arb. LR 8
11 New India Assurance vs Central Bank of India, AIR 1985 CAL 76
12 Sections 5, 12 and 33, Arbitration Act, 1940, No. 10 of 1940
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