In Lobb Partnership Limited v Aintree Racecourse Company Limited [2000] 1 Building Law Reports 65, Colman J stated that “[t]he English courts have consistently taken the view that, providing that the contract gives a reasonably clear indication that arbitration is envisaged by both parties as means of dispute resolution, they will treat both parties as bound to refer disputes to arbitration even though the clause is not express in mandatory terms”.

In NB Three Shipping Ltd. v Harebell Shipping Ltd [2004] EWHC 2001 (Comm), it was held the mutuality was no longer a requirement and asymmetric clause has to be one that has been freely negotiated by the parties.

The recent English case Aiteo Eastern E&P Company Limited v Shell Western Supply and Trading Limited [2022] EEWHC 2912 (Comm) just affirmed the above position.  In this case, the facility agreements in question were governed by English law and contained hybrid jurisdiction clauses providing disputes to be settled by way of arbitration or, at the lenders’ exclusive option, in the courts of England or Nigeria respectively; one of the facility agreements also provide that the parties to “elect to refer” any dispute to arbitration.

The borrower commenced proceedings against the lenders before the Federal High Court of Nigeria and obtained a without notice interim injunction restraining the lenders from taking enforcement steps.  The lenders subsequently entered a conditional appearance before the Federal High Court of Nigeria, filing a notice of appeal and an application to stay the Nigerian proceedings, and served a Request for Arbitration on the borrower and sought an anti-suit injunction from the court (which was granted).

Eventually, the arbitration tribunal handed down two awards, one rejecting the jurisdictional challenge raised by the borrower, one consolidating the arbitrations under the multiple facility agreements.  The borrower challenged both awards, alleging lack of substantive jurisdiction under Section 67 Arbitration Act 1996.

In reaching the judgment, Mr. Justice Foxton relied on the Privy Council’s decision in Hermes One Ltd v Everbread Holdings Ltd and others [2016] UKPC 1 to conclude that as a matter of general principle, an option to arbitrate can be exercise either by commencing arbitration itself or by requiring the other party which had commenced litigation to submit the dispute to arbitration by making an unequivocal request to that effect and/or by applying for a corresponding stay.

On the facts of the case, Mr Justice Foxton found that the Notice of Arbitration by the lenders was sufficient to exercise the option and therefore constitute the inchoate arbitration agreement. The lenders did not need to commence arbitration, seek a stay of the litigation in Nigeria, or provide an unequivocal and irrevocable commitment to arbitrate the disputes without delay. He also did not find that there was a time limit for exercise of the option to arbitrate. 

On the other hand, Article 14 of Provisions of the Supreme People’s Court on Several Issues concerning Deciding Cases of Arbitration-Related Judicial Review provides that where, absent the parties’ choice of the governing law, a PRC court is to ascertain the law governing the validity of a foreign-related arbitration agreement in accordance with Article 18 of the Law of People’s Republic of China on the Application of Laws to Foreign-related Civil Relations, and where application of the law in the place of the arbitral institution and the law in the place of arbitration will bring about different results in respect of the validity of the arbitration agreement, then the PRC court shall apply the law that renders the arbitration agreement valid.  Therefore, if the asymmetric arbitration clause involves foreign-related matters, PRC courts may be inclined to determine that the asymmetric arbitration clause is valid based by applying the law that renders the same valid.

In practice, we have observed inconsistent decisions of PRC courts in respect of the validity of asymmetric arbitration clauses.  In (2016) Jing 02 Min Te No. 93, the Beijing No. 2 Intermediate Court held that an arbitration clause which allowed the lender to choose either arbitration or litigation was invalid pursuant to Article 7 of the SPC Interpretation on Arbitration Law.  In the recent case (2022) Jing 74 Min Te No. 4, the Beijing Financial Court upheld the validity of an asymmetric arbitration clause, determining that it did not constitute an impermissible “either arbitration or litigation” clause under the law of RRC.