Hashwani v Jivraj

JurisdictionEngland & Wales
JudgeDavid Steel J.
Judgment Date26 June 2009
Neutral Citation[2009] EWHC 1364 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: 2008 FOLIO 1028 & 1182
Date26 June 2009

[2009] EWHC 1364 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Before:

Mr Justice David Steel

Case No: 2008 FOLIO 1028 & 1182

Between
Nurdin Jivraj
Claimant
and
Sadruddin Hashwani
Defendant
and
Sadruddin Hashwani
Claimant
and
Nurdin Jivraj
Defendant

Rhodri Davies Q.C. & Schona Jolly (instructed by Hill Dickinson) for Mr Jivraj

Stephen Nathan Q.C. & Tom Hickman (instructed by Zaiwalla & Co) for Mr Hashwani

Hearing dates: 6—8 April 2009

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.

Mr JUSTICE DAVID STEEL Mr Justice David Steel

Mr Justice David Steel:

1

The issue that arises in these applications is whether the requirement in an arbitration clause for all the arbitrators to be members of the Ismaili community is unlawful.

2

Mr Hashwani (“Mr H”) contends that the requirement constitutes religious discrimination and this falls foul of:

i) the Employment Equality (Religion or Belief) Regulations;

ii) the Human Rights Act;

iii) Public policy.

3

The clause is contained in a Joint Venture Agreement dated 19 January 1981 between Mr H and Mr Jivraj (“Mr J”). It provides as follows:

“8. If any dispute difference or question shall at any time hereafter arise between the investors [Mr H and Mr J] with respect to the construction of this agreement or concerning anything herein contained or arising out of this agreement or as to the rights liabilities or duties of the investors or either of them or arising out of (without limitation) any of the businesses or activities of the joint venture herein agreed the same (subject to sub-clause 8(5) below) shall be referred to three arbitrators (acting by a majority) one to be appointed by each party and the third arbitrator to be the President of the H.H. Aga Khan National Council for the United Kingdom for the time being. All arbitrators shall be respected members of the Ismaili community and holders of high office within the community.”

4

Mr H claims that he is at liberty to appoint an arbitrator who is not a member of the community. Mr J contends that the clause is valid and enforceable. Alternatively he contends that if the requirement as to the status of the arbitrators is illegal the whole clause is invalidated.

The background

5

Mr J and Mr H live in London. They are members of the Ismaili community which forms part of the Shia branch of Islam and is headed by the Aga Khan. In 1981 they established a joint venture to make investments in real estate, particularly in Canada, Pakistan, the United States and the United Kingdom.

6

In late 1988 Mr J and Mr H agreed to part company. Between them they selected three members of the Ismaili community to act as a conciliation panel for the purpose of the division of joint venture assets. Despite acting in this capacity through to February 1990, the panel was unable to resolve all the issues.

7

Mr J and Mr H then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community. The selected individual appointed Messrs Clifford Chance and Coopers & Lybrand Deloitte to assist him. He issued a 'determination' in December 1993 (although he continued to be concerned with further exchanges between the parties until 1995) and then declared himself as “defeated”.

8

The principal matters which remained outstanding were on the one hand a claim by Mr H that there remained a balance due to him on the capital accounts and a claim on the other hand by Mr J that Mr H had failed to pay certain tax liabilities which exposed him (Mr J) to secondary liability.

9

Matters remained unresolved over the next 8 years. On 31 July 2008 solicitors for Mr H suddenly wrote to Mr J asserting a claim for £1,412,494 together with interest compounded quarterly from 31 May 1994, recording the appointment on behalf of Mr H of Sir Anthony Colman as an arbitrator under Art. 8 of the 1981 JVA and calling on Mr J to appoint an arbitrator within 7 days.

10

Not surprisingly it is Mr. J's case that the claim is clearly time barred. However, that is an issue for another day. For present purposes Mr H seeks an order for the appointment of Sir Anthony as sole arbitrator whilst Mr J seeks a declaration that the appointment of Sir Anthony was invalid (it being common ground that he is not a member of the Ismaili community).

11

The issues that arise can be summarised as follows:

i) Do the Employment Equality (Religion or Belief) Regulations 2003 apply to the arbitration agreement in Art. 8 of the JVA?

ii) If so, is Art. 8 discriminatory in the grounds of religion or belief?

iii) If so, is that discrimination justified?

iv) If the 2003 regulations do not apply, is Art. 8 invalid under the Human Rights Act 1998(or otherwise at common law as contrary to public policy)?

v) If Art. 8 is invalid, is the whole arbitration agreement invalid or does there remain an effective arbitration agreement?

Employment Regulations

12

The Employment Equality (Religion or Belief) Regulations 2003 are directed at discrimination in the field of employment. They were promulgated pursuant to the UK's obligations under Section 2 of the European Communities Act 1972 by reference to the EU Employment Directive 2000/78.

13

It is well established that the Regulations fall to be interpreted in accordance with European Law: Marleasing SA v La Comercial Internacional de Alimentacion SA (C-106/89) [1990] E.C.R. I-4135, Perceval-Price v Dept. of Economic Development [2000] IRLR 380.

14

It was submitted on behalf of Mr H that the Directive was wide in scope and expressly encompassed all forms of contractual “employment” whether or not under a contract of service, an independent contractual engagement, self-employment or otherwise. In particular it was emphasised that the Recitals of the Directive referred to the need for protection against discrimination in the field of “employment and occupation”.

15

The scope of the Directive is set out in Article 3:

“1. Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to:

(a) conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion;

(b) ….;

(c) employment and working conditions, including dismissals and pay;

(d)….. ”

16

Notably this draws a distinction between conditions for access to employment, self-employment and occupation on the one hand and employment as such on the other. There is nothing in the Directive which prohibits discrimination (direct or indirect) in the engagement of personal services or work otherwise than as an employer.

17

The Regulations provide as follows:

2. (3) In these Regulations:

references to “employer”, in their application to a person at any time seeking to employ another, include a person who has no employees at that time;

“employment” means employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions shall be construed accordingly;”

“Discrimination on grounds of religion or belief

3.—(1) For the purposes of these Regulations, a person (“A”) discriminates against another person (“B”) if —

(a) on grounds of religion or belief, A treats B less favourably than he treats or would treat other persons; or

(b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same religion or belief as B, but —

(i) which puts or would put persons of the same religion or belief as B at a particular disadvantage when compared with other persons,

(ii) which puts B at that disadvantage, and

(iii) which A cannot show to be a proportionate means of achieving a legitimate aim

Applicants and employees

6. (1) It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to discriminate against a person –

(a) in the arrangements he makes for the purpose of determining to whom he should offer employment; or (b) in the terms on which he offers that person employment…”

18

Despite the submissions of Mr Nathan QC on behalf of Mr H, I do not detect any conflict between the scope of those provisions and the Directive.

19

The Regulations operate in this way. Paragraph 35 of the Regulations gives effect to Schedule 4 which provides that a term of contract is void where “the making of the contract is, by reason of the inclusion of the term, unlawful by virtue of these Regulations”. 1

20

It is Mr H's case that the appointment of an arbitrator constitutes “employment under … a contract personally to do any work” and thus constitutes either an arrangement for the purpose of determining to whom the parties should offer employment (within 6(i)(a)) or an agreement not to offer employment to certain persons (within 6(i)(b)).

21

This leads immediately to the question whether the appointment of an arbitrator is susceptible to contractual analysis or simply reflects a matter of status. It is a topic considered in some detail in Commercial Arbitration: Mustill and Boyd: 2 Ed: p220 ff together with its companion volume at p60ff.

22

I do not propose to enter into the complexities of this issue which has been the subject of extensive academic debate. In K/s Norjarl A/s v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyd's Law Rep. 524, in the context of dispute about the arbitrators' proposals for commitment fees, Leggatt LJ noted at p.531:

“I doubt whether analysis of an arbitrator's position in terms of contract...

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    ...Defendant/Appellant and Between Sadruddin Hashwani Claimant/Appellant and Nurdin Jivraj Defendant/Respondent [2010] EWCA Civ 712 [2009] EWHC 1364 (Comm) (Mr. Justice David Before: Lord Justice Moore-bick Lord Justice Aikens and Sir Richard Buxton Case No: A2/2009/1963 IN THE COURT OF APPEAL......
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