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Unilateral Agreement In India

(Last Updated On: December 19, 2020)

The decision of the Court of Justice in the Pittalis/. Shorefetti[1] referred to a unilateral option arbitration clause in a tenancy case and the element of reciprocity was interpreted. The clause giving the tenant the right to refer the dispute to an independent expert was indeed bilateral since both parties had accepted the agreement. The fact that only one of the contestants had such a right did not matter. In addition, there was no lack of reciprocity in the clause. What are the unilateral option clauses and why are they controversial? In Perkins Eastman Architecture Dpc V. HSCC (India) Ltd[11] (“Perkins case”), HSCC appointed a single arbitrator who designated disputes within the meaning of a unilateral compromise clause and in a request from Perkins, u/s 11 (b) r/w 11(12) of the Act. Supreme Court, citing TRF Ltd, stated that “in the event that only one party has the right to appoint a single arbitrator, its choice will always have an element of exclusivity in determining or determining the conduct of the arbitration and, therefore, the person who has an interest in the outcome or decision of the dispute cannot have the power to appoint the arbitrator.” “The courts and commentators agree that an arbitration agreement is a “submission to arbitration” within the meaning of Article V, paragraph 1, point c). Therefore, where an arbitral tribunal has awarded an arbitration award beyond the scope of the arbitration agreement, a section V, paragraph 1, point c) arbitration award should be refused. Given the above considerations, the authors are optimistic about the validity of unilateral option clauses under Indian law.

The fact that the Delhi HC – which has systematically invalidated these clauses – has taken a step towards adopting these clauses in Denerste Day Lawson is a sign of a positive change in attitude. Moreover, the recent reluctance of the Delhi HC to allow the attribution of public political challenges in two of its decisions after the amendment weakens the likelihood of a successful public political challenge of unilateral option clauses. Despite these positive developments, it would be wise for the parties to avoid the introduction of unilateral option clauses where it is possible for Indian courts to be involved. In the meantime, one can only hope that the Supreme Court will examine in depth the three grounds of challenge mentioned above and bet on a position most representative of Indian law and the parties. The above decisions show that the three reasons why unilateral clauses have been successfully challenged in Indian courts are lack of reciprocity, public order and limitation of a party`s right to a trial. However, Madras HC`s decision to impose these clauses requires further consideration of these grounds. If the Indian Supreme Court were to consider the validity of unilateral option clauses under Indian law, it could take into account some of the counter-reasons it might consider: the Clifford Chance Unilateral Option Clauses – 2017 Survey indicates that the courts in the United Kingdom and several other Common Law jurisdictions have upheld unilateral option clauses, as they are the good business of the parties, regardless of the advantage the clause grants on the one hand. On the other hand, some jurisdictions, such as Russia and Poland, have found that such clauses violate the equality of arms and the procedural rights of the parties and have read them as “bilateral” and not “unilateral” option clauses. There were other jurisdictions, such as Bulgaria, China and some U.S. state courts, which totally invalidated these clauses on the grounds of “good faith,” “fairness” and “unacceptable.”

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Nabeel Tirmazi

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