Party autonomy prevails: Hybrid arbitration clause survives
The Victorian Supreme Court has upheld a hybrid arbitration clause in a construction contract despite procedural complexities, endorsing party autonomy and workability over perfection
Summary and Key Takeaways
Hybrid arbitration clauses (where one institution administers arbitration under the rules of another institution) can give rise to procedural complexities, uncertainty, and challenges to enforceability. A recent Australian decision reinforces that courts will strive to give effect to the party's intentions, even if this might reflect "bad choices" or may be procedurally challenging but warns that parties would be better advised to avoid this issue in the first place.1
- Courts continue to show strong support for arbitration, generally upholding agreed contractual mechanisms and enforcing a tribunal's jurisdiction to determine questions of its own authority.
- Australian courts will strive to uphold hybrid arbitration clauses if they unambiguously reflect the parties’ intentions, even if the chosen rules and administering body are not readily compatible or this creates practical and procedural difficulties.
- However, parties are warned against arbitration agreements that create "problems in terms of certainty and litigiousness".2 Hybrid arbitration agreements continue to cause concern. It is important to ensure parties understand the consequences of their choice of rules, institutions, and seats.
Background
The dispute concerned the construction of 61 wind turbine generators by Germany-based company Senvion and related infrastructure by Downer for Stage 1 of the 1800 GWh Murra Warra Wind Farm in Victoria, one of Australia's largest wind farms. The Amended and Restated EPC Contract (EPC Contract) was between the principal, Murra Warra Asset Co Pty Ltd as trustee for Murra Warra Asset Trust (Squadron), Senvion GmbH (Senvion) and Downer Utilities Australia Pty Ltd (Downer) as joint contractors, dated 5 September 2018. In April 2019, Senvion entered insolvency in Germany (recognised in Australia under cross-border insolvency laws) and in September 2019, ceased performance under the EPC Contract. Following completion of the project on 30 June 2020, disputes arose leading to invocation of the arbitration clause (clause 42.5).
Clause 42.5 was a hybrid arbitration clause, whereby the parties (advised by their lawyers) nominated the rules of one arbitral institution (the ICC Rules) to be administered by a different arbitral body (the Resolution Institute).3 As such, Squadron commenced arbitration on 28 August 2025 with the Resolution Institute and the following day, Downer commenced arbitration with the International Chamber of Commerce (ICC).
Squadron sought declarations that the Resolution Institute arbitration was properly commenced and the ICC arbitration was not. Downer sought to stay or restrain the Resolution Institute arbitration, arguing only the ICC arbitration was valid. The parties sought court determination of the proper construction of the arbitration agreement.
Key Issue in Dispute
There were four key issues in dispute:
- First, whether the two arbitrations are domestic arbitrations to which the Commercial Arbitration Act 2011 (Vic) applies or international arbitrations to which the International Arbitration Act 1974 (Cth) applies (Jurisdiction Issue).
- Second, the proper construction of the arbitration agreement in clause 42.5(a) of the EPC Contract (Construction Issue).
- Third, whether the Resolution Institute arbitration ought to be stayed as argued by Downer (Stay Issue).
- Fourth, whether various documents in the proceedings are confidential (Confidentiality Issue).
Outcome
The Court found clause 42.5 to be a valid hybrid arbitration clause, with arbitration to be conducted/administered by the Resolution Institute under the ICC Rules as validly commenced by Squadron. The ICC arbitration brought by Downer was not validly commenced under the contract and was "contrary to the agreement of the parties" 4 (Construction Issue).
The Court declined to rule on the Jurisdictional Issue or the Stay Issue, leaving these questions for the arbitral tribunal to decide once appointed.5 However, the Court made confidentiality orders to protect information disclosed in Downer's affidavits relating to the underlying dispute the subject of the arbitration (Confidentiality Issue).6
The Court found the arbitration clause unambiguously provided for the Resolution Institute to conduct the arbitration using the ICC Rules, modified as necessary to exclude ICC-specific administrative functions. 7 The Court found that "a reasonable person in the position of Squadron or Downer would have understood clause 42.5(a) to be the selection of a hybrid mechanism by which arbitration is to be conducted by the Resolution Institute". 8 The Court further highlighted that, "It is simply inconceivable that sophisticated commercial parties, advised by well-resourced lawyers, would have been unaware of the fact that the ICC Rules and the ICC’s associated unique functions would be incapable of exact adoption and replication by the Resolution Institute." 9
The Court specifically highlighted that there are "mercifully few" cases considering hybrid arbitration clauses and at present, none from Australia.10 The Court referred to leading cases in other jurisdictions for guidance, 11 noting that they all stressed party autonomy, with the crucial issue being whether there is a clear agreement to arbitrate, in which event, the courts will endeavour to make the parties' agreement work.13
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1 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 14.
2 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 14.
3 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 83. See clause 42.5(a): "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."
4 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 111(d).
5 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 110: "It would, as stated earlier, be inappropriate for the Court to express any views on matters which are appropriately within the remit of the arbitral tribunal."
6 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 108.
7 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 87: "…despite the addition of Arts 1(2) and 6(2) to the ICC Rules, I am not satisfied that an arbitral institute such as the ICC can so restrict party autonomy as to prevent the parties from agreeing to conduct hybrid arbitration if they are so inclined, despite the inherent limitations to such a method and the self-evident procedural issues, amongst many other things, that may arise from their choosing to do so."
8 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 85.
9 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 85.
10 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 13.
11 See for example, Bovis Lend Lease Pte Ltd v Jay-Tech Marine & Projects Pte Ltd [2005] SGHC 91; Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR(R) 936; HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5; Government of the Russian Federation v I.M. Badprim S.R.L. Svea Court of Appeal, T 2454–14, 23 January 2015 and Value Advisory Services v ZTE Corporation 3 July 2017, Delhi High Court, 2017 DHC 3217.
12 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 15.
13 Downer Utilities Australia Pty Ltd v Murra Warra Asset Co Pty Ltd [2026] VSC 48 at para 14 quoting Carlos Molina Esteban, ‘Hybrid (institutional) arbitration clauses: party autonomy gone wild’ (2020) 36(4) Arbitration International 475, 489.
