Dallah Estate and Tourism Holding Company v Ministry of Religious Affairs, Government of Pakistan
| Jurisdiction | England & Wales |
| Judge | Ward,Rix,Moore-Bick L JJ |
| Judgment Date | 20 July 2009 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 July 2009 |
Court of Appeal (Civil Division).
Ward, Rix and Moore-Bick L JJ.
Hilary Heilbron QC and Klaus Reichert (instructed by Kearns & Co) for the appellant.
Toby Landau QC and Patrick Angénieux (solicitor) (instructed by Watson Farley & Williams) for the respondent.
The following cases were referred to in the judgments:
Azov Shipping Co v Baltic Shipping Co [1998] CLC 1240.
Carl Zeiss Stiftung v Rayner & Keeler Ltd (No. 2)ELR [1967] 1 AC 853.
China Agribusiness Development Corp v Balli Trading [1997] CLC 1437.
Dardana Ltd v Yukos Oil CoUNK [2002] EWCA Civ 543; [2002] CLC 1120.
IPCO (Nigeria) Ltd v Nigerian National Petroleum CorpUNK [2005] EWHC 726 (Comm); [2005] 1 CLC 613.
Kanoria v GuinnessUNK [2006] EWCA Civ 222; [2006] 1 Ll Rep 701.
Paklito Investment Ltd v Klockner East Asia Ltd [1993] HKLR 39.
Peterson Farms Inc v C&M Farming LtdUNK [2004] EWHC 121 (Comm); [2004] 1 Ll Rep 603.
Sennar, The (No.2)WLR [1985] 1 WLR 490.
Svenska Petroleum Exploration AB v LithuaniaUNK [2005] EWHC 9 (Comm); [2005] 1 Ll Rep 515.
Svenska Petroleum Exploration AB v Lithuania (No. 2)UNK [2006] EWCA Civ 1529; [2006] 2 CLC 797; [2007] QB 886.
Watt v AshanUNK [2007] UKHL 51; [2008] 1 AC 696.
Arbitration — Recognition and enforcement of award — Jurisdiction — Estoppel — New York Convention — Saudi company contracted with trust established by Government of Pakistan — Whether Government party to arbitration agreement — Arbitrators applying “transnational” Legal Principles Found Government party to agreement and awarded substantial damages — Judge entitled to reconsider arbitrators' jurisdiction by way of re-hearing and to Conclude that Government not party to agreement — Judge correctly applied principles of French law as law of country where award made — Government not estopped from denying validity of award — No obligation to challenge validity in France — Not appropriate for court to exercise discretion to allow enforcement of award once it had concluded that Government not party to arbitration agreement — Arbitration Act 1996, s. 103(2)(b) — New York Convention, art. V.1.
This was an appeal against the setting aside of a without notice order giving leave to enforce a New York Convention arbitration award.
The appellant, Dallah, was a member of a substantial group of Saudi companies. Dallah and the Government of Pakistan signed a memorandum of understanding under which Dallah agreed to acquire land in Mecca, build accommodation suitable for pilgrims and lease it to the Government for 99 years. Dallah then acquired the land with a view to implementing the agreement. The Government established a Trust as the vehicle for the project. An agreement was then entered into between Dallah and the Trust. The Government was not expressed to be a party to the Agreement, nor did it sign it in any capacity. The agreement provided for disputes to be settled by arbitration held under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris.
After a change of government in Pakistan the relationship between the Government, the Trust and Dallah broke down. The Trust issued proceedings in Pakistan seeking a declaration that Dallah had repudiated the agreement. Dallah commenced arbitration against the Ministry of Religious Affairs of the Government under the rules of the ICC claiming damages for breach of the agreement. The Government challenged the jurisdiction of the tribunal on the ground that it was not a party to the agreement. The tribunal held that the Government was bound by the agreement to arbitrate and that it therefore had jurisdiction to determine Dallah's claim. The tribunal went on to hold that the Government had repudiated the agreement and awarded Dallah damages in the sum of US$18,907,603 and costs of US$1,680,437.
Dallah obtained an order without notice giving it permission to enforce the award. The Government successfully applied to set aside that order on the ground that the arbitration agreement on which the award was based was not valid within the meaning of s. 103(2)(b) of the Arbitration Act 1996, applying French law as the law of the country where the award was made.
Dallah appealed submitting that: (i) the Judge adopted the wrong approach to deciding whether the government of Pakistan had proved that the arbitration agreement on which Dallah relied was not valid; (ii) although the judge's findings of the relevant principles of French law were open to him on the evidence, he failed to apply them correctly to the material before him; (iii) the Government of Pakistan was estopped from denying that the arbitration agreement was valid; and (iv) even if the award was not valid, the judge erred in not exercising his discretion in favour of enforcing It.
Held, dismissing the appeal:
1. The judge was right that, as a matter of interpretation of the statute, the nature of proceedings under s. 103(2) was a rehearing, not a review.
2. The judge concluded that it was not the subjective intention of all the parties that the Government should be bound by the agreement or the arbitration clause. There was no evidence that the Government acted in bad faith at any stage. Even if it did, that could not make it a party to the arbitration agreement. The judge correctly applied the principles of French law to the evidence before him and his conclusion on that issue was not open to criticism.
3. The Government was not estopped by the tribunal's decision on jurisdiction from denying that it was a party to the agreement. Under the ICC Rules the tribunal had jurisdiction to determine its own jurisdiction. Its decision on that point was final, in the sense that it could not be re-opened by the arbitrators themselves, who on publication of their award became functus officio in relation to that issue. It was not final in every sense, however, because it was subject to review by the French court exercising its supervisory jurisdiction and by enforcing courts under Article V of the Convention. Accordingly, whether the tribunal represented a court of competent jurisdiction in the sense necessary to create an issue estoppel depended on whether the parties to the award had agreed to confer jurisdiction upon it, since the arbitrators' jurisdiction was derived from the consent of the parties. If the Government and Dallah were not parties to an agreement providing for ICC arbitration, the arbitrators had no jurisdiction over them, and the award was a nullity. As a matter of French law the award had not become invulnerable to challenge in the French courts. However, even if it could not be challenged in France, that would not prevent the Government from challenging its recognition and enforcement in England on the grounds set out in s. 103(2)(b) of the Act.
4. It would not be a proper exercise of the court's discretion to allow enforcement of the award once it had reached the conclusion that there was no valid arbitration agreement between Dallah and the Government of Pakistan.
Moore-Bick LJ:
1. This is an appeal against an order of Aikens J setting aside an order made without notice by Christopher Clarke J giving leave to the appellant, Dallah Real Estate and Tourism Holding Company (“Dallah”), to enforce an arbitration award made under the auspices of the International Chamber of Commerce in Paris against the Ministry of Religious Affairs of the Government of Pakistan. It raises an important question relating to the recognition and enforcement of international arbitration awards under sections 100–103 of the Arbitration Act 1996 which give effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards usually known as the New York Convention (“the Convention”).
2. The background to these proceedings can be described quite shortly. Dallah is a member of a substantial group of Saudi companies which has interests in many fields, including the provision of accommodation, transport and other services to Muslims who wish to undertake the Hajj. The Ministry of Religious Affairs is part of the Government of Pakistan which has responsibility for, among other things, the welfare and safety of pilgrims from Pakistan who wish to perform the Hajj. In February 1995 Mr Shezi Nackvi of Samaha Holdings Ltd, another company in the group which includes Dallah, approached the Ministry with a proposal that Dallah should make available to pilgrims from Pakistan a substantial amount of accommodation which it proposed to build on a site it was able to acquire for development situated about a mile from the centre of Mecca. Following negotiations Dallah and the Government of Pakistan signed a Memorandum of Understanding on 24 July 1995 under which Dallah agreed to acquire the land, build accommodation suitable for pilgrims and lease it to the Government for 99 years. The arrangements for financing the project, the terms of the lease and the details of the accommodation were among the many matters that still had to be settled. On 18 November 1995 Dallah acquired some 43,000 square metres of land in Mecca with a view to implementing the agreement.
3. Some time before, in December 1994, the Government of Pakistan had approved in principle a proposal to establish a body to be known as the Awami Hajj Trust for the purpose of accepting deposits from prospective pilgrims and investing them in Shariah-compliant schemes in order to help them meet the costs of the Hajj. It appears that as negotiations with Dallah proceeded the Government decided that the Trust would provide a convenient vehicle for the project. At all events, on 31 January 1996 the President of Pakistan promulgated Ordinance No. VII of 1996 providing for the establishment of the Trust as a body corporate with legal personality, whose objects included mobilising the savings of members, investing them...
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