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Supreme Court Jivraj v Hashwani decision

On 27 July 2011, the UK Supreme Court handed down a judgment which clarified concerns raised by the earlier Court of Appeal decision regarding the ability of parties to exclude certain categories of person from appointment as arbitrators. The decision in Jivraj v Hashwani [2011] UKSC 40, in fact dealt with discrimination on grounds of belief or religion.

The reason for such a great degree of concern about the Court of Appeal decision was that arbitration agreements often contain restrictions on the nationality of arbitrators; strictly speaking therefore the case should not be an issue, but the concerns arise by analogy. The Court of Appeal decision, in restricting the ability of parties to exclude certain persons from appointment as arbitrators, appeared to threaten this practice. Such restrictions are designed to ensure the neutrality of the arbitrators and therefore the impartiality of the arbitral process, so the Court of Appeal decision appears to be counter-intuitive. Indeed some arbitral bodies, for example the ICC, have provisions which run directly contrary to the Court of Appeal decision, in barring nationals of the parties involved in the arbitration from sitting as arbitrators.

The specific concern that the Court was considering arose from the Employment Equality (Religion or Belief) Regulations 2003 (“the Regulations”), which made unlawful any arrangement to discriminate on grounds of (amongst other things) religion when choosing persons offering personal services.

The parties entered into a joint venture agreement in 1981. This included an arbitration clause which required the resolution of any dispute by reference to three arbitrators, each of whom was to be a respected member of the Ismaili community. The joint venture ended in 1998 and 10 years later there was a dispute regarding the division of the joint venture assets. Mr Hashwani’s solicitors claimed he was owed a balance of over US$4 million and gave notice of his intention to appoint a retired Judge of the Commercial Court as Arbitrator (Sir Anthony Coleman). Sir Anthony was not a member of the Ismaili community. Mr Jivraj commenced proceedings seeking a declaration that this appointment was void because it was in breach of the relevant clause in the arbitration agreement. Mr Haswani sought an order that Sir Anthony Coleman should be appointed as sole Arbitrator.

When the matter first came before the High Court, it found in favour of Mr Jivraj. This was on the basis that arbitrators were not employed and so the Regulations did not apply. The Court of Appeal thought otherwise and reversed the decision. It held that the appointment of an arbitrator involved a contract for the provision of services which constituted “a contract personally to do any work” and therefore satisfied the definition of “employment” in the Regulations.

The Supreme Court unanimously agreed with the High Court Judge that the arbitrators were not employed within the context of the Regulations. Various case law regarding what amounted to “employment” was analysed including some European decisions. It held that there was a clear distinction between those who are employed and those who are “independent providers of services who are not in a relationship of subordination with the person who receives the services”. The objective of the relevant EC legislation was to give protection against inequality and discrimination to those who might be vulnerable to exploitation. On the contrary, arbitrators are not in a relationship of insubordination with the parties who appoint them and receive their services.

This decision is one that was only ever applicable by analogy and so perhaps was always only limited cause for concern. Nevertheless, the Supreme Court decision has helped to allay any residual fears amongst the arbitration community that London may have lost some of its appeal as a centre for the resolution of international business disputes.

For more information, please contact Damian Honey, Partner, on +44 (0)20 7264 8354 or damian.honey@hfw.com, or Charles Caney, Associate, on +44 (0)20 7264 8234 or charles.caney@hfw.com, or your usual contact at HFW.

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