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Supreme Court defends ‘independent’ arbitrators

Religion can be ‘genuine occupational requirement’

1 August 2011

Arbitrators are not employees and can be selected on the grounds of religion, the Supreme Court has ruled.

The case concerned a commercial dispute between two members of the Ismaili community, Shia Muslims, whose spiritual leader is the Aga Khan. The Aga Khan intervened in the case, with the help of Clifford Chance and Rabinder Singh.

The dispute arose over a clause in a joint venture agreement which specified the use of Ismaili arbitrators. Years after the joint venture collapsed, one of the parties attempted to appoint a non-Ismaili arbitrator (see, 29 June 2010).

Delivering the judgment of the majority in Jivraj v Hashwani [2011] UKSC 40, Lord Clarke said an arbitrator was in “critical respects independent of the parties”.

He went on: “His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party.

“As the International Chamber of Commerce puts it, he must determine how to resolve their competing interests. He is in no sense in a position of subordination to the parties; rather the contrary.”

Lord Clarke said arbitrators were in a different position to judges. He said that although judges “must enjoy independence of decision without direction from any source, they are in other respects not free agents to work as when they choose, as are self-employed persons”.

He concluded that arbitrators were not employees and so not covered by the Employment Equality (Religion or Belief) Regulations 2003. He upheld the clause in the joint venture agreement specifying the use of Ismaili arbitrators.

Even if the regulations applied, Lord Clarke said the clause fell within the exception for ‘genuine occupational requirements’.

He said the argument that “an English law dispute in London under English curial law does not require an Ismaili arbitrator takes a very narrow view of the function of arbitration proceedings.

“This characterisation reduces arbitration to no more than the application of a given national law to a dispute.

“One of the distinguishing features of arbitration that sets it apart from proceedings in national courts is the breadth of discretion left to the parties and the arbitrator to structure the process for resolution of the dispute.”

Lord Clarke said the requirement that an arbitrator be of a particular religion or belief could be relevant to this aspect of arbitration.

“The question is whether in all the circumstances the provision that all the arbitrators should be respected members of the Ismaili community was legitimate and justified. In my opinion it was. The approach of the Court of Appeal seems to me to be too legalistic and technical.

“The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which the parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence.”

Lord Clarke allowed the appeal by Jivraj. Lords Phillips, Walker and Dyson agreed.

Lord Mance agreed that arbitrators were not employees, but questioned whether the requirement that an arbitrator came from the Ismaili community or any other religious organisation could amount to a ‘genuine occupational requirement’. (See feature on page 9.)

Categorised in:

Company, Consumer, and Contract Discrimination