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Arbitrators are employees, judges rule

5 July 2010

Arbitrators are employees and cannot be selected on the basis of their religion, the Court of Appeal has ruled. The case involved a commercial dispute between two members of the Ismaili community – Shia muslims whose spiritual leader is the Aga Khan.

Giving judgment on behalf of the Court of Appeal in Jivraj v Hashwani [2010] EWCA Civ 712, Lord Justice Moore-Bick said the two men entered into a joint venture agreement in 1981.

A clause in the agreement specified that, in the case of a dispute, arbitrators should be appointed who were “respected members of the Ismaili community”.

Moore-Bick LJ said the joint venture was terminated in 1988 and that some of the assets were divided, but differences remained and in 2008 Hashwani wrote to Jivraj, putting forward a claim for £1.4m.

Hashwani stated in the letter that Sir Anthony Colman, a former Commercial Court judge, had been appointed as arbitrator. By this time, the Employment Equality (Religion and Belief) Regulations 2003 had been implemented, preventing discrimination on the grounds of religion.

Reversing the decision of the High Court, Lord Justice Moore-Bick said that arbitrators were employees and covered by the regulations. He rejected the argument they were self-employed and compared their status to judges, who were also employed.

Moore-Bick LJ said that the clause in the joint venture agreement providing for Ismaili-only arbitrators was contrary to employment regulation 6(1)c, which prevents people from “refusing to offer or deliberately not offering” employment on the grounds of religion.

The Court of Appeal ruled that the arbitration clause was void in its entirety.

Sarosh Zaiwalla, senior partner of Zaiwalla & Co, acted for Hashwani.

“This is an enlightened judgment,” he said. “It makes clear that, as far as EU law is concerned, you can’t discriminate as to who to appoint as an arbitrator on the grounds of race, sex or creed.”

Zaiwalla said counsel were currently making written submissions to the court for further directions and costs.

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Regulators Company, Consumer, and Contract Discrimination