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Arbitrators cannot be selected on the grounds of religion

29 June 2010

Arbitrators are employees and cannot be selected on the grounds of 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 Haswani [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 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 said it would be a “very rare case” when the relationship between the arbitrator and the parties to the dispute was not supported by a contract of some kind.

“It has been said that members of the Ismaili community do not seek or accept remuneration for acting as arbitrators, but, even if that is correct, we doubt whether it means that there is no contract of any kind between the arbitrator and the parties,” he said.

“Arbitration rests fundamentally on agreement, both agreement between the parties themselves and agreement between the parties and the arbitrator.”

Moore-Bick LJ also rejected the argument that arbitrators were self-employed.

“Judges, for example, are to be regarded as employees in that broad sense because their pattern of working is dictated to a considerable degree by others, although in nearly all other respects their position is very similar to that of the self-employed.”

Moore-Bick LJ said that people in that position, although not employees by ordinary standards, were engaged under a contract personally to carry out work of a particular kind.

He 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.

This, the lord justice said, meant that the whole arbitration clause was void. He rejected a claim by Jivraj’s counsel that, under regulation 7 of the employment regulations, being Ismaili was a “genuine occupational requirement” for appointment.

Moore-Bick LJ said the function of the arbitrators under the clause in the joint venture agreement was to determine the dispute in accordance with the principles of English law.

“That requires some knowledge of the law itself, including the provisions of the Arbitration Act 1996, and an ability to conduct the proceedings fairly in accordance with the rules of natural justice, but it does not call for any particular ethos,” he said.

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

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