Unilateral option clauses—an introduction
Produced in partnership with Latham & Watkins LLP
Unilateral option clauses—an introduction

The following Arbitration guidance note Produced in partnership with Latham & Watkins LLP provides comprehensive and up to date legal information covering:

  • Unilateral option clauses—an introduction
  • Unilateral option clauses defined
  • Why provide a unilateral option to arbitrate or litigate?
  • Enforcing unilateral option clauses
  • Legal pitfalls—certainty
  • Legal pitfalls—mutuality
  • Legal pitfalls—unconscionability
  • A review of selected jurisdictions
  • Drafting pitfalls
  • Practical steps

Unilateral option clauses defined

Unilateral option clauses are dispute resolution clauses in agreements that grant one party or a group of parties the right to elect between arbitration or litigation to resolve a dispute. These clauses also are called one-sided, non-mutual, asymmetrical, or sole option clauses. A unilateral option clause provides flexibility to select the dispute resolution method most appropriate to the case at hand. They are commonly used in finance contracts, where a lender wishes to retain flexibility to recover a debt and otherwise enforce its rights against a buyer who breaches its obligations.

Unilateral option clauses are a type of hybrid dispute resolution clause—see Practice Note: Types of dispute resolution clauses—ADR, multi-tier, hybrid and carve-out clauses for more information.

Note: judgments from non-UK jurisdictions referred to in this Practice Note are not reported by LexisNexis® UK.

Why provide a unilateral option to arbitrate or litigate?

There are a number of reasons a party, such as a lender, may choose arbitration over litigation as the preferred means of dispute resolution, and vice versa.

For an introduction to the key features of arbitration, an overview of civil litigation in England and Wales, and guidance on the differences between litigation and arbitration, see Practice Notes: Arbitration—an introduction to the key features of arbitration, Overview of the litigation process in England