Supreme Court of Victoria scrutinises hybrid arbitration clause for the first time

This remains the case even where the arbitration clause adopts a hybrid structure, requiring one arbitral institution to conduct an arbitration under another institution’s rules. Drawing on international case law, the Supreme Court confirmed that hybrid arbitration clauses should be upheld whenever a workable interpretation is possible.

As a result, parties should ensure that arbitration clauses are drafted to ensure that the intended rules and forums for any potential disputes are clearly defined.

Pinsent Masons acted for Murra Warra Asset Co Pty Ltd as trustee for the Murra Warra Asset Trust (Squadron), whose construction of the hybrid arbitration clause the Supreme Court ultimately preferred. Dr Christopher Ward SC and Dr Callista Harris appeared for Squadron at the hearing, with Duncan Miller SC also advising on the matter.

The judgment is now the leading Australian authority on the enforceability of hybrid arbitration agreements. It reflects Australia’s position alongside other arbitration-friendly countries by confirming that courts should respect party autonomy, even if it results in procedural complications.

Background

The proceedings arose out of the Murra Warra Wind Farm Stage 1 project, involving the construction of wind turbine generators and associated infrastructure.

In September 2018, under an engineering, procurement and construction contract (EPC contract), Squadron had engaged a Downer Group entity and Senvion GmbH, a German wind turbine manufacturer, as joint contractors.

In April 2019, Senvion entered into administration in Germany. Later that year, the Federal Court of Australia recognised Senvion’s German insolvency proceedings under the Cross-Border Insolvency Act 2008 (Cth).

The EPC contract included a multitiered dispute resolution process which culminated in arbitration, which stated 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.”

When a dispute later emerged, on 28 August 2025, Squadron commenced arbitration against Downer with the Resolution Institute. The following day, Downer purported to commence a separate arbitration with the ICC, against Squadron, Senvion and Senvion’s insolvency administrator.

The central question before the Supreme Court of Victoria was which of the two arbitrations had been properly commenced under the arbitration agreement.

Decision 

The Supreme Court was satisfied that the EPC contract contained a ‘hybrid arbitration’ clause which directed that the arbitration rules of one arbitral institution, the ICC, were to be utilised by another arbitral institution, the Resolution Institute, in the conduct of an arbitration. 

The Supreme Court found that on a “plain and intelligible reading” of the clause, there was no ambiguity about the parties’ intention to deliberately choose a mechanism where the Resolution Institute would conduct the arbitration while applying those ICC rules, which do not involve administration by the ICC. The ICC rules involving administration by the ICC were said to have been effectively culled from the arbitration agreement. This would include the ICC rules relating to joinder and consolidation, in which the ICC Court plays an intimate role.

Downer’s argument, that sophisticated commercial parties were unlikely to have specified the ICC rules if they intended to leave determination of the applicable procedural rules to the arbitral tribunal, was rejected.

The Supreme Court held it was “inconceivable” that commercially experienced parties with legal advice were unaware of the structural differences between the ICC and the Resolution Institute and the correct view was that the drafting demonstrated a conscious decision to give the Resolution Institute a central role, applying the ICC rules with necessary modifications.

In reaching its decision, the Supreme Court drew on international case law concerning hybrid arbitration clauses, noting that a consistent theme is that although such clauses may create practical difficulties, the autonomy of commercial parties to adopt them must be respected.

The Supreme Court declined to read down or sever references to the Resolution Institute, noting that doing so would “rewrite their agreement” in a way inconsistent with party autonomy, and also refused to replace the parties’ chosen mechanism merely because it might create procedural difficulties.

While the Resolution Institute had suggested in correspondence that it did not mirror the ICC’s institutional structure and would instead limit its role to nominating and appointing arbitrators, the Supreme Court held that this did not amount to a refusal to conduct the arbitration. 

Ultimately, the Resolution Institute’s willingness or unwillingness to administer the arbitration was not a determinative factor and the Supreme Court found no reason why the Resolution Institute could not conduct an arbitration in accordance with appropriately modified ICC rules. This included even if many of the ICC rules could not be applied because there is no functional equivalent to ICC bodies within the Resolution Institute.

The Supreme Court found that this is what the parties objectively contemplated when they agreed to the drafting of the hybrid arbitration clause.

Ultimately, the Supreme Court ruled that Squadron had validly commenced its arbitration with the Resolution Institute, whereas Downer’s arbitration with the ICC was contrary to the parties’ arbitration agreement.

Remaining issues relating to whether the arbitrations were domestic or international arbitrations, the impact of Senvion’s insolvency, and issues of proportionate liability under the Wrongs Act 1958 (Vic), were left for determination by the arbitral tribunal under the principle of ‘Kompetenz-Kompetenz’, under which an arbitral tribunal has authority to rule on its own jurisdiction.

The Supreme Court of Victoria has now recognised hybrid arbitration clauses in Australia, while candidly acknowledging the “procedural gymnastics” which may follow. In this case, the hybrid arrangement has resulted in substantial aspects of the institutional rules being carved out from the parties’ arbitration agreement. It stands as a reminder of the court’s willingness to uphold the parties’ bargain, even if it is unconventional or procedurally awkward.