Schona Jolly in Jivraj v Hashwani Supreme Court hearing

5 April 2011

A landmark case which will determine whether it is lawful to restrict the choice of arbitrators only to people of a certain religious belief within the context of a commercial contract will be heard by the Supreme Court this week (6th & 7th April).

Cloisters' barrister, Schona Jolly, will act as Junior Counsel in the case, Jivraj v Hashwani, acting for Mr Jivraj.

Robin Allen QC, Head of Cloisters said:

"The implications of this case are immense. If the Supreme Court upholds the Court of Appeal decision that arbitrators are 'employed' by the parties who instruct them, and furthermore that religious or nationality requirements cannot be defended as an "occupational requirement", then arbitration agreements which include proscriptions about the religion or nationality of the arbitrator will be void. This has a dramatic impact on the arbitration community as a whole, hence the number of interveners in the case including the ICC and the LCIA. It also has the potential to affect any community arbitration scheme.

"In addition, this case could have far wider consequences. If the Court of Appeal are correct, employment discrimination law has been expanded to include most self-employed tradesmen and professionals who provide services. The 2003 Regulations gave effect to European Law (Directive 2000/78/EC) and it is possible that the European Court of Justice could be called on to consider the scope of employment discrimination law, which could affect the ordinary individual, a businessman or employers as are commonly understood."

 

Case background

Mr Jivraj and Mr Hashwani are businessmen who entered into a joint commercial venture in 1981. They are both members of the community of Shia Imami Ismaili Muslims, led by the Aga Khan. Under a Joint Venture Agreement made in 1981, they agreed a clause which stipulated that in the event of arbitration, the arbitrators should be respected members of the Ismaili community and holders of high office within the community.

By late 1988, Messrs Jivraj and Hashwani had agreed to part company. They entered into an agreement by which they appointed three gentlemen to act as a conciliation panel for the purpose of the division of the joint venture assets, each member being a respected members of the Ismaili community.  However, not all issues were resolved and in 1990 the parties then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community. In 2008, Mr Hashwani asserted a new claim pursuant to the agreement and attempted to appoint Sir Anthony Coleman, who is not an Ismaili, to arbitrate.

Mr Hashwani  contended that the requirement for all arbitrators to come from the Ismaili community constituted discrimination on religious grounds, which h said was unlawful under the 2003 Employment Equality (Religion and Belief) Regulations, the Human Rights Act 1998 and public policy at common law.

In the Commercial Court, Mr Justice Steel accepted Mr Jivraj's view that the arbitrator was not employed and therefore was not subject to the Regulations. The Judge dismissed the claims under the Human Rights Act and public policy grounds and no permission to appeal was granted on those points. The Court also agreed with Mr Jivraj that the requirement for all the arbitrators to come from the Ismali community could not be severed from the arbitration clause as a whole.

The Court of Appeal, however, determined that arbitrators are employees and so are covered by the Regulations. The Regulations would prohibit selecting an arbitrator according to his religion since arbitrators are engaged under contracts personally to do work within the meaning of the Regulations, and that parties who make an arbitration agreement specifying religious qualifications for eligible arbitrators thereby make arrangements for the purpose of determining to whom they should offer 'employment' within the meaning of the Regulations. The Court did not consider that the genuine occupational requirement provided for by the Regulations could be invoked.

Mr Jivraj challenges that decision before the Supreme Court, whilst Mr Hashwani challenges the Court's agreement with Mr Justice Steel that the arbitration clause could not be severed.

The Regulations now have been superseded by the Equality Act 2010, but the same arguments apply to all protected characteristics within the discrimination legislation, including race and nationality.