Dallah Real Estate and Tourism Holding Company v Ministry of Religious Affairs, Government of Pakistan [SC]

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLORD HOPE,LORD MANCE,LORD SAVILLE,LORD COLLINS,LORD CLARKE
Judgment Date03 Nov 2010
Neutral Citation[2010] UKSC 46

[2010] UKSC 46

THE SUPREME COURT

Michaelmas Term

On appeal from: 2009 EWCA Civ 755

before

Lord Hope, Deputy President

Lord Saville

Lord Mance

Lord Collins

Lord Clarke

Dallah Real Estate and Tourism Holding Company
(Appellant)
and
The Ministry of Religious Affairs, Government of Pakistan
(Respondent)

Appellant

Hilary Heilbron QC

Klaus Reichert

(Instructed by Kearns & Co)

Respondent

Toby Landau QC

(Instructed by Watson, Farley & Williams)

LORD MANCE

Introduction

1

This appeal arises from steps taken by the appellant, Dallah Real Estate and Tourism Holding Company ("Dallah"), to enforce in England a final award dated 23 June 2006 made in its favour in the sum of US$20,588,040 against the Government of Pakistan ("the Government") by an International Chamber of Commerce ("ICC") arbitral tribunal sitting in Paris. The Government has hitherto succeeded in resisting enforcement on the ground that "the arbitration agreement was not valid ….. under the law of the country where the award was made" (Arbitration Act 1996, s.103(2)(b), reflecting Article V(I)(a) of the New York Convention), that is under French law. Dallah now appeals.

2

The award was made against the Government on the basis that it was "a true party" to an Agreement dated 10 September 1996 expressed to be made between and signed on behalf of Dallah and Awami Hajj Trust ("the Trust"). The Agreement contains an arbitration clause referring disputes or differences between Dallah and the Trust to ICC arbitration. The tribunal in a first partial award dated 26 June 2001 concluded that the Government was a true party to the Agreement and as such bound by the arbitration clause, and so that the tribunal had jurisdiction to determine Dallah's claim against the Government. The central issue before the English courts is whether the Government can establish that, applying French law principles, there was no such "common intention" on the part of the Government and Dallah as would make the Government a party.

3

Dallah is a member of a group providing services for the Holy Places in Saudi Arabia. It had had long-standing commercial relations with the Government. By letter dated 15 February 1995, Mr Shezi Nackvi, a senior director in the Dallah group, made a proposal to the Government to provide housing for pilgrims on a 55-year lease with associated financing. The Government approved the proposal in principle, and a Memorandum of Understanding ("MOU") was concluded on 24 July 1995. Land was to be purchased and housing facilities were to be constructed at a total cost not exceeding US$242 million and the Government was to take a 99-year lease subject to Dallah arranging the necessary financing to be "secured by the Borrower designated by THE GOVERNMENT under the Sovereign Guarantee of THE GOVERNMENT". The lease and financing terms were to be communicated to the Government within 30 days for approval, and Dallah was to supply detailed specifications within 60 days of the date of such approval.

4

In the event, Dallah in November 1995 acquired a larger and more expensive plot of land than the MOU contemplated, and the timetable was also not maintained. Further, on 21 January 1996 the President of Pakistan promulgated Ordinance No VII establishing the Trust with effect from 14 February 1996. Under article 89(2) of the Constitution of Pakistan, an Ordinance so promulgated "shall stand repealed at the expiration of four months from its promulgation", although, under the same article, it should before then have been laid before Parliament, upon which it would have taken effect as a bill. In the event, Parliament appears never to have been involved, but further Ordinances were promulgated to recreate and continue the Trust, viz Ordinance No XLIX of 1996 on a date unknown (presumably prior to 21 May 1996) and No LXXXI of 1996 on 12 August 1996.

5

Under each Ordinance the Trust was to maintain a fund with a trustee bank, to be financed from contributions and savings by pilgrims (Hujjaj) and philanthropists, as well as by any income from investments or property. The Ordinances also assigned functions within the Trust to various public officers. They prescribed, in particular, that the secretary of the Ministry of Religious Affairs ("MORA") should act as secretary of the Board of Trustees and (unless some other person of integrity was appointed) as Managing Trustee of the Trust.

6

On 29 February 1996 Dallah wrote to the secretary of MORA with a revised proposal, increasing the cost to US$345 million to take account of the larger plot purchased, setting out options for a new legal and financial structure and stating:

"Legal issues

In order to comply with the legal requirements of the various entities involved, the structure will be as follows:

a) Government of Pakistan to set up AW AMI HAJJ TRUST

b) Trust will borrow the US$100 Million from Dallah Albaraka

c) Trust will make a down payment of US$100 million to Albaraka

d) Trust will enter into a lease to use these buildings during the Hajj period"

Annex A detailed the financial structure:

"Loan terms for down payment of US $ 100 Million – Approx 30% of project cost

Amount: US $ 100 Million

Borrower: Awami Hajj Trust

Guarantor: Government of Pakistan"

7

On 3 April 1996 Dallah instructed its lawyers, Orr, Dignam & Co. that "the current shape of the transaction" involved an agreement to be entered into between Dallah and the Trust on terms which it described. Further negotiations with the Government led to the signing of the Agreement between Dallah and the Trust on 10 September 1996. The Agreement reflected the increased cost of $345 million, out of which it provided that:

"the Trust shall pay a lump sum of U.S. $ 100 [million] …. to Dallah by way of advance ….. subject to (i) Dallah arranging through one of its affiliates a U.S. Dollar 100 [million] Financing Facility for the Trust against a guarantee of the Government of Pakistan, ….. (iii) A counter guarantee issued by the Trust and Al-Baraka Islamic Investment Bank, E.C., Bahrain, …. appointed by the Board of Trustees pursuant to Section 8 of the Awami Hajj Trust Ordinance, 1996 in favour of the Government of Pakistan."

Clause 27 provided that:

"The Trust may assign or transfer its rights and obligations under this Agreement to the Government of Pakistan without the prior consent in writing of Dallah."

The Agreement made no other references to the Government and was in terms introducing and setting out mutual obligations on the part of Dallah and the Trust. These included the arbitration clause:

"23. Any dispute or difference of any kind whatsoever between the Trust and Dallah arising out of or in connection with this Agreement shall be settled by arbitration held under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris, by three arbitrators appointed under such Rules."

8

On 6 November 1996 Ms Benazir Bhutto's government fell from power, and was replaced by that of Mr Nawaz Sharif. No further Ordinance was promulgated, and the Trust accordingly ceased to exist as a legal entity at midnight on 11 December 1996. It will be necessary to look in detail at correspondence as well as three sets of proceedings in Pakistan which took place during the following years.

9

Dallah invoked ICC arbitration against the Government on 19 May 1998, nominating Lord Mustill as its arbitrator. It is common ground that the Government has throughout the arbitration denied being party to any arbitration agreement, maintained a jurisdictional reservation and not done anything to submit to the jurisdiction of the tribunal or waive its sovereign immunity. The ICC under its Rules appointed Justice Dr Nassim Hasan Shah to act as the Government's arbitrator and Dr Ghaleb Mahmassani to chair the tribunal. Terms of Reference, in which the Government refused to join, were signed by the arbitrators and Dallah in March 1999 and approved by the ICC in April 1999. The tribunal issued its first partial award on its own jurisdiction on 26 June 2001. A second partial award on liability was issued on 19 January 2004 and the final award on 23 June 2006.

10

Leave to enforce the final award in England was given by Order of Christopher Clarke J dated 9 October 2006 on a without notice application by Dallah. The Government's application to set aside the leave led to a three day hearing with oral evidence before Aikens J in July 2008. His judgment setting aside the Order is dated 1 August 2008: [2008] EWHC 1901 (Comm); [2009] 1 All ER (Comm) 505. A further three day hearing led to the Court of Appeal's dismissal of Dallah's appeal on 20 July 2009 ( [2009] EWCA Civ 755; [2010] 1 AER 592), against which the present appeal lies. On 19 August 2009, Dallah filed an application in the French courts for enforcement of the final award, and, on 12 January 2010, it sought a stay of the present appeal pending the outcome of its French application. On 25 January 2010, the Supreme Court refused such a stay. On 21 December 2009, the Government applied in France to set aside all three awards. It was in time to do this, since, under French law, the limitation period for doing so only starts to run one month after "official notification of the award bearing an enforcement order".

The issue and the principles governing its resolution

11

The "validity" of the arbitration agreement depends in the present case upon whether there existed between Dallah and the Government any relevant arbitration agreement at all. Dallah's case is that the Government has at all times been an unnamed party to the Agreement containing the arbitration clause. Before the English courts, this case has been founded on a submission that it was the common intention of the parties that the Government should be such a party to the Agreement. Before the arbitral tribunal Dallah put the matter differently. It argued that either the Trust was the alter...

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