In a decision handed down this week, the Full Court of the Federal Court of Australia held, unanimously, that an arbitration clause contained in a standard form online contract for the trading of contracts for difference (CFDs) was an unfair contract term under sections 12BF and 12BG of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The decision in Plus500AU Pty Ltd v AghaeiRad [2026] FCAFC 125 has significant implications for businesses operating consumer-facing platforms that rely on click-wrap agreements containing arbitration clauses. The upholding of the primary judge’s finding that the arbitration clause was void means that the Plus500 entities could not stay a class action commenced under Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and refer the dispute to arbitration.
Key takeaways
This is a significant decision for businesses that include arbitration clauses in their standard form consumer contracts, particularly in the financial services sector. While the Full Court was careful to note that its reasoning should not be understood as suggesting that an agreement to arbitrate is void merely because it prevents participation in a class action, the practical message is stark: where claims are individually modest, the availability of class actions as a forum for seeking redress may make the difference between rights that are capable of being pursued in practical terms and those that would never sensibly be pursued.
Businesses should review their standard form consumer contracts to consider whether arbitration clauses meet the transparency requirements articulated in this decision, in particular, whether the practical consequences of arbitration, including the loss of access to courts and class action procedures, are brought squarely to the consumer's attention. The decision also underscores the need to consider the economics of the arbitral process from the consumer's perspective and whether alternative dispute resolution mechanisms adequately address the range of claims that may arise.
Background: click-wrap arbitration in a CFD trading platform
Plus500AU operates an online platform on which customers trade over-the-counter CFDs. Advertised broadly to non-professional investors and consumers, customers could open trading accounts with deposits as small as $100.[1]
Mr AghaeiRad began trading in August 2020. Before he could trade, he completed an online registration process in which he was presented with links to several documents – including a 50-page User Agreement - and checked a box confirming that he had read, understood and agreed to their terms. He did not open or read the User Agreement.[2]
The User Agreement contained a staged dispute resolution clause providing for dispute resolution, referral to senior officers, mediation and, if unresolved after 30 days, mandatory arbitration. The right to access an external dispute resolution scheme, including AFCA, was preserved.[3]
By June 2021, Mr AghaeiRad had lost the $111,948 he had deposited.[4] In November 2023, he commenced a class action alleging misleading or deceptive conduct, unconscionable conduct and breach of contract.[5] Plus500AU and Plus500 Limited applied for a stay and orders referring the dispute to arbitration. The primary judge dismissed the applications, finding the arbitration agreement was "null and void, inoperative or incapable of being performed" within the proviso to s 8(1) of the Commercial Arbitration Act 2010 (NSW) on two independent bases: first, the term was void as an unfair contract term; and secondly, its enforcement would constitute unconscionable conduct.[6]
Unfair: the Full Court’s analysis
The Full Court unanimously rejected the appellants’ challenge to the primary judge’s finding that the arbitration clause was an unfair contract term, assessing each element of the unfairness test, which requires the court to consider whether the term:
- would cause a significant imbalance in the parties' rights and obligations arising under the contract;
- was not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term;
- would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on – noting that the primary judge’s finding of detriment was not challenged on appeal; and
- was transparent.
Justice Lee (with whom Justices Banks-Smith and Stewart agreed) addressed each element of unfairness in turn.
At [16].
At [17].
At [18].
At [17].
At [20].
At [4].
The Full Court found no error in the primary judge’s approach to transparency. Lee J said that the inquiry “is not conducted in an artificial world in which a reasonable consumer is assumed to read every word of a lengthy standard form electronic contract merely because the consumer has clicked a box asserting that this has occurred”.[7] Rather, the question is whether the term was presented clearly and expressed in reasonably plain language when considered in its contractual setting, with the length of the User Agreement, the material selected for particular prominence, the location and drafting of the arbitration clause and how the contract was presented to consumers each being matters which can be taken into account.[8] A distinction can also be made between the statement of the arbitral mechanism and its consequences.
Lee J observed that there was "an air of fairyland about an approach to transparency which assumes that an ordinary consumer, by clicking a box recording agreement to lengthy standard terms, will ordinarily have read those terms and appreciated consequences which may be apparent to a lawyer”.[9] His Honour referred to empirical research, including a finding that 98% of participants failed to identify deliberately inserted "gotcha clauses" in terms of service, spending an average of 51 seconds on terms estimated to take 15 to 17 minutes to read.[10]
At [90].
At [90].
At [114].
At [114].
The mere fact that an arbitration agreement excludes recourse to a court does not make it unfair (particularly noting the legislative recognition and encouragement of that dispute resolution mechanism). However, the way in which an arbitration agreement came into being may impact the inquiry, with Lee J distinguishing between one formed “from considered negotiation between sophisticated commercial parties” and one forming part of a standard form contract. The statutory inquiry also requires consideration of the practical operation of the term, with symmetry on the face of a provision not being dispositive as such a provision can have different impacts on different parties. The primary judge was entitled to have regard to “the cost of the dispute resolution mechanism relative to claims likely to arise, the availability of other mechanisms, the effect upon the respective contractual positions of the parties and the inability to invoke a representative procedure”.[11]
At [94].
While Lee J recognised that interests in “finality, efficiency, procedural flexibility, confidentiality and a degree of procedural and forensic consistency in the resolution of disputes” are legitimate,[12] the statutory question is whether a term is reasonably necessary to protect those interests. The primary judge found that Plus500 had not discharged the onus of showing that it was, and the Full Court agreed.
At [106].
One of the Plus500 entities argued that the unfair contract terms regime must be informed by legislative choices in cognate areas, including the uniform arbitration legislation and the AFCA scheme.[13] The Full Court accepted this "but only to a point".[14] Lee J said that:
“[T]here is no incoherence in applying the unfair contract terms provisions to an arbitration agreement according to their terms, including by considering the practical operation and consequences of the particular term where the statute requires those matters to be assessed. Legislative support for arbitration does not immunise every arbitration clause from generally applicable statutory protections concerning the circumstances and contractual setting in which the clause operates. Nor does the absence of a procedure analogous to Pt IVA from the uniform arbitration legislation amount to a legislative direction that the practical consequences of an arbitration term are irrelevant to the separate statutory inquiry required by s 12BG.”[15]
At [87].
At [109].
At [110].
Lee J indicated that, even apart from his Honour’s conclusion on the unfair contracts ground, he would have refused the orders sought by the appellants. This was on the basis that the form of relief (staying the whole of the proceeding rather than the individual representative applicant’s claim) could not have been granted consistently with the protective and supervisory role of the Court in a class action in relation to absent group members.[16]
At [143].
Other appeal points
The Full Court considered it unnecessary to determine further appeal grounds concerning the primary judge's alternative finding of statutory unconscionability under s 12CB of the ASIC Act, given the conclusion on unfair contract terms was sufficient to dispose of the appeals. The Court did, however, observe that there was "some force" in the criticism of the primary judge's distinction between instituting an arbitration and invoking an arbitration agreement defensively - a question left undecided.[17]
Mr AghaeiRad's notice of contention did not find favour with Lee J. His Honour indicated he would not have been persuaded that the proposed arbitration was not "commercial" or that the representative character of the proceeding rendered the claims incapable of settlement by arbitration.
At [130].
Payward, Inc. and other companies v Chechetkin [2023] EWHC 1780 (Comm). Also see Soleymani v Nifty Gateway LLC [2022] EWCA Civ 1297 in which the stay of court proceedings (in favour of arbitration) was refused as the Court of Appeal held that whether the arbitration clause in the standard terms was valid and binding on a UK consumer was a question for the English courts.
Lochan v Binance Holdings Limited 2024 ONCA 784
Beltran v Terraform Labs Pte Ltd and others [2023] SGHC 340
While consumer arbitration clauses are enforced in the United States of America, with American arbitral institutions having specific rules to provide for class arbitrations, courts in other jurisdictions have also found that arbitration clauses in standard consumer contracts for electronic platforms are unfair.
In Payward, Inc. and other companies v Chechetkin[18] the English High Court refused to enforce an arbitration award obtained by Payward, a cryptoasset exchange, against Mr Chechetkin who held an online trading account. The terms for the trading account were set out in a clickwrap agreement and included an arbitration clause requiring arbitration in California. The judge refused to enforce the award on the basis of public policy, as requiring an English consumer contracting with a company incorporated in England to participate in arbitration in California was unfair, due to both the practical disadvantages and because the arbitrator would not be competent to apply English law, including consumer and financial services legislation.
Similarly in Canada, the Ontario Superior Court and Court of Appeal refused to stay a class action against Binance Holdings Limited.[19] The user agreement for the Binance cryptocurrency trading platform provided for arbitration in Hong Kong. The Court of Appeal found that the arbitration agreement was void for being contrary to public policy and unconscionable because its practical effect was to prevent Binance’s customers from bringing a claim due to the costs of doing so.
By contrast, in Singapore the Court in Beltran v Terraform Labs Pte Ltd and others[20] was prepared to find on a prima facie basis that the arbitration clause found in the terms of use on the website was binding on the consumer but held on other grounds that Terraform had waived its right to stay the litigation in favour of arbitration.
