Briefing

Hybrid arbitration clauses: Courts uphold “bad choices”

The Victorian Supreme Court has determined Australia’s first judgment on the validity and proper construction of a “hybrid” arbitration clause.

A hybrid arbitration clause is one that nominates an arbitral institution to conduct or administer the arbitration but directs that institution to apply the rules of an entirely different institution. For example, a Singapore International Arbitration Centre administered arbitration under the International Chamber of Commerce Arbitration Rules.

The case provides guidance for commercial parties that have chosen arbitration as their dispute resolution mechanism and may, whether wittingly or otherwise, find themselves bound by similarly problematically drafted dispute resolution clauses.

Background: The Murra Warra Wind Farm dispute

The dispute arose in connection with Stage 1 of the Murra Warra Wind Farm Project in Victoria, involving the construction of wind turbine generators and associated infrastructure under an EPC Contract dated 21 December 2017.

Following completion of the works on 30 June 2020, a dispute subsequently arose between one of the contractors, Downer, and the principal, Squadron. The immediate question before the court was which of two separately commenced arbitrations had been validly initiated under clause 42.5 of the EPC Contract. Squadron commenced arbitration proceedings with the Resolution Institute (RI) on 28 August 2025, while Downer commenced arbitration with the International Chamber of Commerce (ICC) the following day.

The hybrid arbitration clause

The relevant clause of the EPC Contract provided that: “Arbitration pursuant to this clause 42.5 will be conducted by the Resolution Institute in accordance with the ICC Rules of Arbitration current at the time of the reference to arbitration and as otherwise set out in this clause.”

As Justice Croft noted, hybrid arbitration clauses are agreements which state that the arbitration rules of one arbitral institution are to be administered by another arbitral institution. Such clauses present well-documented practical difficulties, including likely jurisdictional disputes and associated costs; procedural uncertainty from compelling an institution to act within an unfamiliar framework; a “patchwork” of rules reflecting the institution’s best efforts rather than the parties’ true choice; and dependence on the institution’s willingness to act.

Justice Croft quoted a commentator observing that virtually all cases considering hybrid arbitration regard it as a bad idea, creating problems of certainty and litigiousness, though parties remain entitled to make bad choices.

Trends in other jurisdictions

Since this is the first time an Australian court has been asked to opine on the validity and construction of a hybrid arbitration clause, both parties and the judge placed significant weight on a body of case law from other leading arbitral jurisdictions. At the time of the decision, there were “mercifully” (in Justice Croft’s words) few cases considering hybrid arbitration clauses globally, and none from Australia. A common theme emerging from the international case law is that such clauses are upheld wherever possible on the basis of party autonomy, coupled with an acknowledgement that they present practical, but not insurmountable, difficulties when a dispute arises. These cases include:

Jay-Tech Marine (Singapore, 2005): A subcontract clause provided for appointment by the Singapore Institute of Architects but arbitration under the SIAC Rules. While noting the drafting was “perhaps not a very wise piece of drafting”, the court upheld the clause, emphasising that there is no rule of law preventing parties from making such a choice.
Insigma (Singapore Court of Appeal, 2009): The leading authority. The court upheld a clause providing for arbitration before the SIAC in accordance with ICC Rules, holding that the parties’ intention to arbitrate must be given effect wherever possible. A key factor was the SIAC’s willingness to adapt the ICC Rules to the hybrid context.
HKL Group (Singapore, 2013): A clause referred disputes to a non-existent “Arbitration Committee at Singapore” under the ICC Rules. The court upheld the clause and, critically, held that Article 1(2) of the ICC Rules – purporting to reserve administration of ICC arbitrations exclusively to the ICC – cannot override the contractual freedom of parties who have agreed to a hybrid mechanism.
Badprim (Svea Court of Appeal, Sweden, 2015): A construction contract designated the SCC as administrator but specified ICC Rules. Noting the “contradictory” nature of the clause, the court upheld it on the basis that the parties’ overriding intention was to arbitrate in Stockholm, and the SCC’s willingness to administer confirmed the agreement was enforceable.

Value Advisory Services (Delhi High Court, 2017): The arbitration clause designated the SIAC as administrator but specified ICC Rules. Value Advisory filed its Request for Arbitration directly with the ICC Secretariat. ZTE challenged enforcement on the basis that the clause required submission to the SIAC. Both institutions declined to participate in a hybrid arrangement (whereas in Insigma, the SIAC had been willing to adapt to the ICC Rules): the SIAC confirmed it would not administer under the ICC Rules, and the ICC asserted that only it could administer its own rules. Faced with this impasse, the arbitral tribunal severed the reference to the SIAC, assumed jurisdiction and applied the ICC Rules itself without any institutional administration. The Delhi High Court upheld the tribunal’s decision, affirming the court’s duty to make a seemingly unworkable clause workable within the limits of the law.

The parties’ competing arguments

Downer argued that the arbitration clause embodied two irreconcilable concepts – arbitration conducted by the Resolution Institute and arbitration in accordance with the ICC Rules. Given that the ICC Rules require the exclusive involvement of the ICC in certain respects, Downer contended that the clause could not sensibly require ICC‑specific functions to be performed by the Resolution Institute. Critically, Downer pointed out that the Resolution Institute had confirmed it would not undertake those ICC‑specific tasks and had confined its role to the nomination and appointment of the arbitral tribunal. This, Downer argued, distinguished the case from the Singapore decision in Insigma, as the ICC Rules had since been mended to provide that only the ICC itself may administer an arbitration under the ICC Rules.

Downer’s position was that the reference to the Resolution Institute in clause 42.5(a) should either be read down to refer only to the appointment process, or severed entirely, with the result that a proper ICC arbitration should proceed. Squadron, by contrast, submitted that the clause was not pathological: an arbitration is commenced by service of an Arbitration Notice on the other party, not by filing a Request for Arbitration with the ICC Secretariat.

Squadron’s position was that the arbitral tribunal, appointed with the assistance of the Resolution Institute, would then conduct the arbitration utilising the ICC Rules with such modifications as were necessary to remove functions that could only be performed by the ICC itself.

The court’s decision

Croft J upheld the hybrid clause and found in favour of Squadron. His Honour held that the terms of clause 42.5(a) made abundantly clear the parties’ intention to arbitrate, and that the arbitration agreement lay substantially within the provisions of the arbitration clause of the EPC Contract.

The broader mechanics of the arbitration agreement were significant. Under the arbitration clause, arbitration is commenced by written notice; the Resolution Institute then assists the parties in appointing an arbitrator by providing a list of candidates, ultimately selecting one if necessary; and the Resolution Institute (or the appointed tribunal) then conducts the arbitration in accordance with the ICC Rules – setting aside those rules that require ICC administration, and utilising the procedural steps otherwise set out in clause 42.5.

Croft J rejected the argument that the 2012 amendments to the ICC Rules – particularly the introduction of Articles 1(2) and 6(2), which provide that only the ICC itself may administer an ICC arbitration – were sufficient to override the parties’ agreement. Following the reasoning in HKL Group (No 2), his Honour held that the power of arbitral rules to bind the parties emanates from the consent of the parties themselves, and that Articles 1(2) and 6(2) cannot and do not usurp the contractual freedom of the parties to be bound by an arbitration conducted by a non-ICC institution adopting such of the ICC Rules as it can.

Croft J also declined to read down or sever clause 42.5, finding that to do so would be to usurp the parties’ autonomy and rewrite their agreement.

Therefore, Squadron’s arbitration proceeding with the Resolution Institute was upheld.

Key takeaways for commercial parties

Hybrid clauses will be upheld if workable. Australian courts, consistent with courts in other jurisdictions, will endeavour to give effect to a hybrid arbitration clause where the parties’ intention to arbitrate is clear, even if aspects of the clause create practical difficulties. The pro-arbitration policy of Australian arbitration legislation weighs heavily in this direction.
At least in pro-arbitration jurisdictions such as Australia and Singapore, the ICC’s self exclusive rules do not override party autonomy. The ICC’s own rules purporting to limit administration of its rules to the ICC itself do not trump the contractual freedom of parties who have agreed to a hybrid mechanism.
The administering institution’s willingness is not determinative. Even where the nominated institution confirms it will limit itself to an appointing function, the clause will not necessarily fail. The appointed tribunal may apply such of the ICC Rules as are compatible with a non-ICC administered arbitration.
Drafting matters enormously. The inclusion of a hybrid clause – whether deliberate or the result of inattentive drafting – can generate significant litigation before a single line of arbitration evidence is heard. Parties and their advisers should ensure their arbitration clauses clearly identify a single institution and the rules of that same institution. Engaging experienced dispute resolution counsel at the drafting stage – or simply adopting the model clauses published by the relevant arbitral institution – can avoid this problem entirely.
The parties remain free to resolve the matter practically, avoiding the “procedural gymnastics” of conducting a hybrid arbitration – for example, by agreeing to submit to a straightforward arbitration before the relevant institution under its own consistent rules.