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Supreme Court Decides UK Anti-discrimination Laws Do Not Apply to the Appointment of Arbitrators

27 July 2011

LONDON, 27 July 2011 – Today, the UK Supreme Court has overturned the Court of Appeal's decision in the case of Jivraj v Hashwani, deciding that UK anti-discrimination laws do not apply to the appointment of arbitrators.

The court's pro-arbitration ruling dispels concerns raised by the June 2010 judgment of the Court of Appeal.

The Jivraj v Hashwani case related to a £1.5m dispute over a joint venture, with investments in real estate projects worldwide.

Kieron O'Callaghan, a partner in Hogan Lovells' international arbitration practice, said:

"The Supreme Court's decision means that parties to arbitration agreements incorporating arbitrator nationality restrictions can rest assured that such restrictions will not cause their agreements to fall foul of UK anti-discrimination legislation. 

"The principal concerns arising from the Court of Appeal's decision were that the validity of arbitration agreements contained in many existing commercial contracts would be called into question, and that the parties' ability to have an arbitrator from a 'neutral' country would be restricted. 

"These concerns have been dispelled by the Supreme Court's ruling and clients will breathe a sigh of relief that common-sense has prevailed.
This reaffirms London's position as a pre-eminent venue for international arbitration." 

The arbitration agreement contained in the parties' joint venture agreement stipulated that all arbitrators appointed to resolve any dispute "shall be respected members of the Ismaili community and holders of high office within the community". Ismailism is a branch of the Shia denomination of Islam and is headed by the Aga Khan.

When Mr Hashwani launched his claim against former business partner Mr Jivraj, he applied to the Commercial Court to have Sir Anthony Colman appointed as an arbitrator. In response, Mr Jivraj applied to the Commercial Court for a declaration that the appointment was invalid, as Sir Anthony was not a member of the Ismaili community.  Mr Hashwani subsequently argued that the arbitration agreement contravened the Employment Equality (Religion and Belief) Regulations 2003 (now repealed).

In June 2010 the Court of Appeal ruled that the relationship between parties to arbitral proceedings and arbitrators is one of employment and therefore subject to UK anti-discrimination laws.  The arbitration agreement in question was found to contravene those laws and so was held to be invalid.

It was widely feared that this ruling would result in the invalidation of arbitration agreements that prohibit the appointment of arbitrators who share the nationality of any of the parties to the arbitration.  Such arbitration agreements, which reflect a desire for neutrality – considered by users of international arbitration to be one of its key advantages – are very common in commercial contracts.  This led many users of international arbitration to seek advice as to whether they should amend their standard arbitration clauses to remove arbitrator nationality restrictions.

Such was the significance of the Court of Appeal's decision, two of the world's leading international arbitration institutions (the International Chamber of Commerce and the London Court of International Arbitration) intervened in an appeal to the Supreme Court, in order to highlight the negative effects that were likely to result in the event of the Court of Appeal's decision being upheld.

Overturning the decision of the Court of Appeal, the Supreme Court held that the nature of the relationship between parties to arbitral proceedings and arbitrators is not one of employment, on the basis that:

"…although [an arbitrator] renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties… He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services."

International arbitration is a dispute resolution process conducted in private (rather than in national courts), which results in a binding decision that can be enforced in many countries worldwide under the widely-adopted New York Convention.  London is one of the world's most popular venues for international arbitration.

ENDS

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