European challenge to Supreme Court arbitration ruling

Sadruddin Hashwani, a leading Pakistani businessman, has lodged a complaint with the European Commission against a Supreme Court ruling on arbitration, his solicitor has said.

The Supreme Court ruled last summer in Jivraj vHashwani [2011] UKSC 40 that arbitrators are not employees and can be selected on the grounds of religion. The ruling was welcomed by many commercial lawyers, concerned that classifying arbitrators as self-employed could threaten London's status as an international centre.

The dispute arose over a clause in a joint venture agreement which specified the use of Ismaili arbitrators. After the joint venture collapsed, Hashwani wanted to appoint a non-Ismaili arbitrator, retired judge Sir Anthony Colman.

Sarosh Zaiwalla (pictured), senior partner of Zaiwalla & Co, acted for Hashwani. He said Hashwani, who was refused leave by the Supreme Court to appeal to the European Court of Justice, lodged the complaint with the Commission last month.

'The Supreme Court argued that because arbitrators were self-employed, the discrimination directive did not apply to them,' Zaiwalla said.

'The client believes that there are no such exceptions to European law.

'If the European Commission finds that the Supreme Court has not applied the law correctly, it could start proceedings against the UK government before the ECJ.'

Zaiwalla said he expected to find out the Commission's response 'very shortly'.

Delivering the judgment of the majority in Jivraj v Hashwani, 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, and 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'.