Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Aikens,THE HONOURABLE MR JUSTICE AIKENS |
| Judgment Date | 01 August 2008 |
| Neutral Citation | [2008] EWHC 1901 (Comm) |
| Docket Number | Case No: 2006686 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 01 August 2008 |
[2008] EWHC 1901 (Comm)
The Honourable Mr Justice Aikens
Case No: 2006686
In the High Court of Justice
Commercial Court
Queen'S Bench Division
Hilary Heilbron QC and Klaus Reichert (instructed by Kearns & Co, Solicitors, London) for the Claimant
Toby Landau QC and Patrick Angénieux (instructed by Watson Farley & Williams, Solicitors, London) for the Defendant
Hearing dates: 8 th, 9 th and 10 th July 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On 9 October 2007, Christopher Clarke J made an ex parte order, pursuant to section 101 of the Arbitration Act 1996 (“the Act”) and CPR Part 62.18, giving the Claimant (“Dallah”) leave to enforce an ICC arbitration award made in Paris, France, and dated 23 June 2006 (“the Final Award”) in the same manner as a judgment of the court. This Final Award of a distinguished tribunal consisting of Lord Mustill, Mr Justice Dr Nassim Shah and Dr Ghaleb Mahmassani, ruled that the Respondent (“the GoP”), must pay compensation to Dallah of US$18,907,603 and costs, making a total of US$ 20,588,040. The order of Christopher Clarke J. gave the GoP a period of 2 months and 23 days after service of the order to apply to the court to set the order aside.
On 23 March 2008, 1 the GoP issued an Arbitration Application to set aside Christopher Clarke J's order on two grounds. First, that the GoP, as a State entity, is immune from the enforcement proceedings. Secondly, that enforcement of the Final Award should be refused because the arbitration agreement on which it was based was “not valid under the law to which the parties subjected it, or failing any indication thereon, under the law of the country where the award was made”, pursuant to section 103(2)(b) of the Act.
The hearing of this application took place before me on 9, 10 and 11 July 2008. The first ground was not specifically argued, but Mr Landau QC, appearing for the GoP, made it clear that his client is a state entity and it reserved all its arguments that it was entitled to plead state immunity and strike out Dallah's action on that basis. On the second ground, the argument of the GoP was that it was not a party to the arbitration agreement and so, as between the GoP and Dallah, there was no valid arbitration agreement that could found the tribunal's jurisdiction to make the Final Award. It was common ground at the hearing that, for the purposes of section 103(2)(b) of the Act, there was no clear “indication” as to which law the parties had “subjected the arbitration agreement”. Therefore the issue of the “validity” of the arbitration agreement had to be determined according to French law, that being the law of the country where the Final Award was made.
At the hearing there was no oral evidence from witnesses of fact. There were three witness statements in evidence, however. First, I had two witness statements of Mr Patrick Angénieux, a solicitor with Watson, Farley and Williams, (“WFW”), solicitors for the GoP. They were largely formal. Secondly, there was a witness statement that had been adduced as evidence in the course of the ICC arbitration proceedings. This is an undated witness statement from Mr Shezi Nackvi, a director of a company related to Dallah.
I heard oral evidence from two experts in French law, M. Le Bâtonnier Bernard Vatier, on behalf of the GoP, and M. Yves Derains on behalf of Dallah. The arguments of the parties also raised issues on the law of Pakistan. I heard evidence from two experts on Pakistani laws: Mr Mehmood Mandviwalla, on behalf of the GoP; and Dr Abdul Hafeez Pirzada on behalf of Dallah. Prior to the hearing all the experts had served reports and each pair of experts had prepared a Joint Memorandum
on agreed and contested issues. All the expert witnesses were very helpful in dealing with the issues put to them by counsel and by me.Mr Landau QC, for the GoP, and Miss Heilbron QC, for Dallah, had submitted comprehensive Outline Submissions before the start of the hearing. Miss Heilbron also very helpfully produced a written summary of her submissions on various documents and an Outline of her submissions on the evidence. I was much assisted by both the written and the oral submissions of both counsel. I reserved judgment.
A. The parties and the background to the relevant contracts
Dallah is a Saudi Arabian company, which is engaged in the provision of services to Muslims who perform Hajj at Mecca. Dallah is one of a number of companies in the Dallah Group of Companies, which are ultimately owned by Albaraka Investment and Development Trading (“Albaraka”). That is the trading name of a Saudi Arabian partnership between the Chairman of the Dallah Group, Sheikh Salleh Al Kamel, and his family members. Albaraka is based in Jeddah. The Dallah Group as a whole is involved in the provision of services, such as accommodation, transportation and medical facilities, for pilgrims visiting Mecca. It is the largest provider of such services in Saudi Arabia.
The Ministry of Religious Affairs, Government of Pakistan, (“the MORA”) is one of the ministries of the Federal Government of Pakistan, as defined by the Rules of Business 1973. Those Rules were promulgated under Articles 90 and 99 of the Constitution of the Islamic Republic of Pakistan of 1973. 2 The full name of the ministry is “Ministry of Religious Affairs and Zakat and Ushr”. The ministry is divided into two divisions, one of which is the Religious Affairs Division. Amongst the subjects that are within the work of the ministry are “pilgrimage beyond Pakistan”, “the welfare and safety of pilgrims” and “donations for religious purposes”.
The start of the project: In December 1994, the Pakistani cabinet approved in principle a proposal to establish the “Awami Hajj Trust” (“the Trust”) for the purpose of mobilising savings from intending Hajj pilgrims and for the investment of those savings in Shariah approved schemes. A cabinet committee was set up under the chairmanship of the Minister of State for Finance to work out the details. It was decided that the Trust should take the form of a corporate body which would have four principal objectives. These were: (i) to mobilise savings from intended pilgrims; (ii) to invest such savings in Shariah approved modes of investment; (iii) to meet the cost of performance of Hajj by members out of the balances in their accounts; and (iv) to take steps to facilitate the performance of Hajj by members. 3
In 1995, Mr Shezi Nackvi, a director of Samaha Holdings Limited, which is also ultimately owned by Albaraka, proposed to the MORA that the Dallah Group be permitted to provide to the GoP a housing complex in Mecca or Medina on a long
term lease for use by Pakistani pilgrims. Discussions with the MORA followed in March and April 1995. An announcement was made by the GoP in May 1995.The Memorandum of Understanding: On 24 July 1995 a Memorandum of Understanding (the “MOU”) was concluded between Dallah and the President of the Islamic Republic of Pakistan “through the Ministry of Religious Affairs”. The relevant terms of the MOU are set out in Annex 1 to this judgment. I will only summarise the effects of its terms here. Under clause 1, Dallah agreed to acquire land within Mecca for the construction of housing facilities for Pakistani pilgrims “whilst performing Hajj and Umra”. Dallah would construct the housing on that land. The total cost of the land and housing would not exceed US$ 242 million: clause 2. Under clause 3, the parties agreed that Dallah would lease the houses and the land to the GoP on a 99 year lease, “subject to Dallah arranging the necessary Financing for [the GoP] on terms approved by [the GoP] in accordance with the provisions of this Agreement”. Clause 4 stipulated that Dallah must, within 30 days of the execution of the MOU, prepare and submit to the GoP the terms and conditions of the proposed lease. By clause 5, within 60 days of the approval of the lease by the GoP, Dallah must prepare and submit to the GoP detailed specifications and drawings for the housing.
Clause 23 states that the MOU will be governed by Saudi Arabian law. By clause 24, disputes would be resolved by arbitration under Saudi laws and regulations, with any arbitration taking place in Jeddah. The wording of clause 25 appears to be mangled. (I suspect there was a word – processing error or proof – reading failure). It is attempting to deal with the issue of immunity of the GoP, but it seems that part of the paragraph is missing, so it is impossible to determine its meaning. However, clause 27 states that the GoP consents to proceedings arising in connection with the MOU, including those concerning the “making, enforcement or execution against any award, order or judgment which ma be made or given in such proceedings”. Although, strictly speaking, the correct interpretation of that clause is a matter of Saudi Arabian law, it appears to me to be a waiver by the GoP of immunity from suit and execution.
On 17 August 1995, (ie. within 30 days of the MOU), Mr Nackvi, on behalf of Dallah, sent to Mr Lutfallah Mufti Dallah's proposals in respect of the lease and financing of the project. On 18 November 1995, Dallah acquired 43,000 square metres of land in Mecca. 4 However, the GoP did not approve the financing and lease proposals within the period of 90 days after they were sent to the GoP on 17 August 1995.
The Ordinance: On 31 January 1996, the President of Pakistan promulgated Ordinance No. VII of...
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