Clifford Chance: Unilateral Option Clauses Survey 2024

Unilateral option clauses are a common feature in many transaction documents. These clauses grant one party the exclusive right to decide between arbitration or litigation as the forum to resolve a dispute.

This means a party can choose the forum for their dispute at the time the dispute arises, rather than at the time of negotiating the agreement. Parties should exercise care when considering whether to include unilateral option clauses in their agreements. Treatment of these clauses varies significantly between jurisdictions. The consequences of including unilateral option clauses in agreements that are connected with a jurisdiction that considers them to be invalid can be severe.

Clifford Chance has updated and expanded its 2021 Survey on the current effectiveness of unilateral option clauses across the world. The 2024 Survey now covers 120 jurisdictions, including Estonia, Latvia and Lithuania.

To access the Survey, click here.

UNILATERAL OPTION CLAUSES JURISDICTION BY JURISDICTION

Estonia

While the Estonian courts have not examined the validity of unilateral option clauses per se, it is thought that they would be held to be valid in the case of non-consumer contracts, based on principles of freedom of contract. It is likely that an arbitral award rendered based on a unilateral option clause in the case of non-consumer contracts would also be enforceable in Estonia. However, the Estonian courts may have reservations about upholding such a clause if one party were being treated extremely unequally. In the case of consumer contracts, it is more likely that the court would, in certain circumstances, consider a unilateral option clause to be void.

Contributors: Kristina Schotter and Anna-Riin Brett

Latvia

Although the Latvian courts have not examined the validity of unilateral option clauses per se, it cannot be excluded that Latvian courts would consider unilateral option clauses as being contrary to the principle of equal treatment and therefore invalid and unenforceable. In a commercial context, Latvian courts have recognised as valid and enforceable option clauses that allow either party to choose between national courts and arbitration. Arbitral awards rendered on the basis of such clauses have been held enforceable in Latvia. Conversely, in a consumer context, such clauses have been considered as unfair by Latvian courts, and therefore as invalid and unenforceable.

Contributor: Dr. Toms Krūmiņš

Lithuania

While the Lithuanian courts have not examined the validity of unilateral option clauses per se, it is thought that they would be held to be valid. The Lithuanian courts have held that a unilateral option clause which contains an exclusive right for one party to refer a dispute to any competent court is valid. The courts have also held that an arbitration clause which grants both parties the option to refer a dispute to a court or to arbitration is valid. There is also no reason to believe that an arbitral award rendered on the basis of a unilateral option clause would not be enforceable in Lithuania.

Contributors: Dr. Rimantas Simaitis and Donatas Ramanauskas