Arbitration clause held to be an unfair term and void

Plus500AU Pty Ltd v AghaeiRad [2026] FCAFC 125

Plus500AU Pty Ltd v AghaeiRad is likely to become a leading authority on unfair contract terms and dispute resolution clauses. The decision confirms that mandatory arbitration clauses in standard form contracts may be vulnerable if they effectively restrict access to justice or render claims uneconomic to pursue.

The case is an important reminder for businesses to review their standard form agreements to ensure dispute resolution provisions are appropriately tailored, transparent and capable of surviving scrutiny under the unfair contract terms (UCT) regime.

This case concerned a retail investor (AghaeiRad) who opened an online CFD (Contract for Difference) trading account with Plus500AU Pty Ltd by accepting a standard form electronic user agreement.

Following trading losses of approximately $112,000, the investor commenced a Federal Court class action against Plus500AU alleging misleading and unconscionable conduct.

In response, Plus500AU sought to have the dispute referred to arbitration pursuant to a mandatory arbitration clause contained in the online user agreement.

The investor challenged that clause as an unfair contract term under the ASIC Act 2001 (Cth). The Full Federal Court upheld the trial judge’s decision that the clause was unfair and therefore void, finding that its practical effect was to impede consumers from pursuing Court proceedings and participating in representative actions.

For many years, businesses have relied on arbitration clauses as an effective mechanism for resolving disputes privately, rather than through Court proceedings. This decision demonstrates that, if an arbitration clause appears in a standard form contract and operates unfairly in practice, it may be struck down under the UCT legislation, despite the generally pro-arbitration policy reflected in Australian law.

The significance of the decision extends well beyond financial services. The Court’s reasoning is relevant to any consumer or small business contract containing mandatory arbitration provisions, class action waivers, exclusive dispute resolution mechanisms or other clauses restricting access to Courts.

The Court held that the arbitration clause was unfair because:

• It was contained within a standard form electronic ‘click-wrap’ agreement accepted by consumers
• It lacked sufficient transparency as it did not explain the practical consequences of requiring disputes to be arbitrated rather than litigated in Court
• It created a significant imbalance because arbitration was economically impractical for the types of claims likely to be brought by consumers, and
• The business failed to establish that the clause was reasonably necessary to protect its legitimate interests, particularly given the existence of alternative dispute resolution mechanisms.

Importantly, the Court emphasised that an arbitration clause is not necessarily fair simply because it applies equally to both parties. A clause may be drafted symmetrically but still operate asymmetrically in practice if consumers are effectively prevented from vindicating their rights.

Businesses that use standard form contracts should undertake an urgent review of dispute resolution provisions, particularly if those provisions:

• Require mandatory arbitration
• Prohibit or effectively prevent participation in class actions
• Impose substantial upfront costs on customers seeking to pursue claims
• Require proceedings to be conducted in distant jurisdictions, or
• Are buried in lengthy online terms without clear explanation of their practical effect.

The decision also highlights a broader lesson. Courts will look beyond the wording of a clause and examine its real-world operation. Even a clause that appears balanced on its face may be unfair if, as a practical matter, it disproportionately advantages the stronger contracting party.

Since November 2023, unfair contract terms are not merely void. The inclusion of unfair terms in standard form consumer and small business contracts can expose businesses to significant regulatory consequences and civil penalties. A Court may declare the term void and unenforceable, while regulators may seek penalties and other orders.

Accordingly, businesses should not assume that arbitration clauses, class action waivers or other dispute resolution restrictions in standard form contracts will be upheld simply because they are common commercial drafting tools. Their enforceability will depend upon whether they are transparent, reasonably necessary to protect legitimate interests and fair in their practical operation.

For many organisations, the decision will justify a comprehensive review of all standard form consumer and small business contracts, not just arbitration provisions. The broader message from this decision is that Australian Courts are increasingly focused on whether contractual rights are practically exercisable, not merely theoretically available.

Should you wish to discuss this decision, unfair terms in standard form contracts, and consumer law rights and obligations, please do not hesitate to contact us. We also deliver presentations and training to our clients on consumer laws and the implications of consumer law reforms.