Hashwani v Jivraj

LORD CLARKE, with whom Lord Phillips, Lord Walker and Lord Dyson agree

Introduction

On 29 January 1981 Mr Jivraj and Mr Hashwani entered into a joint venture agreement ("the JVA"), containing an arbitration clause which provided that, in the event of a dispute between them which they were unable to resolve, that dispute should be resolved by arbitration before three arbitrators, each of whom should be a respected member of the Ismaili community, of which they were both members. The principal question in this appeal is whether that arbitration agreement became void with effect from 2 December 2003 under the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) ("the Regulations") on the ground that it constituted an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.

The JVA

The JVA was established to make investments in real estate around the world. By article 9 it is expressly governed by English law. Article 8 provides, so far as material, as follows:

"(1) If any dispute difference or question shall at any time hereafter arise between the investors 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 HH 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.

(2) The arbitration shall take place in London and the arbitrators' award shall be final and binding on both parties."

The Ismaili community comprises Shia Imami Ismaili Muslims. It is led by the Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.

The disputes

During the 1980s the joint venture came to comprise substantial business interests, first in Canada and later in the United States, Pakistan and the United Kingdom, with investments in properties, hotels and the oil industry. By late 1988 Mr Jivraj and Mr Hashwani had agreed to part company. On 30 October 1988 they entered into an agreement under which they appointed a three man conciliation panel ("the panel") for the purpose of the division of the joint venture assets. Each member of the panel was a respected member of the Ismaili community. The panel operated between October 1988 and February 1990 and many of the assets were divided between the parties in accordance with its directions. It was however unable to resolve all the issues between the parties. The parties then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community, namely Mr Zaher Ahamed. He issued a determination in December 1993, whereafter he had further exchanges with the parties until 1995, when he declared himself defeated.

The principal matters which remained in dispute were, on the one hand, a claim by Mr Hashwani that there remained a balance due to him and, on the other hand, a claim by Mr Jivraj that Mr Hashwani had failed to declare certain tax liabilities which left Mr Jivraj with a potential for secondary liability. These matters remained in dispute for some years. Then, on 31 July 2008, Messrs Zaiwalla & Co, acting on behalf of Mr Hashwani, wrote to Mr Jivraj asserting a claim for US$1,412,494, together with interest, compounded quarterly from 1994, making a total of US$4,403,817. The letter gave notice that Mr Hashwani had appointed Sir Anthony Colman as an arbitrator under article 8 of the JVA and that, if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken to appoint Sir Anthony as sole arbitrator. The letter added that Mr Hashwani did not regard himself as bound by the provision that the arbitrators should be members of the Ismaili community because such a requirement "would now amount to religious discrimination which would violate the Human Rights Act 1998 and therefore must be regarded as void". It is common ground, on the one hand, that Sir Anthony Colman is not a member of the Ismaili community and, on the other hand, that he is a retired judge of the Commercial Court with substantial experience of the resolution of commercial disputes, both as a judge and as an arbitrator.

Mr Jivraj's response to the letter was to start proceedings in the Commercial Court seeking a declaration that the appointment of Sir Anthony was invalid because he is not a member of the Ismaili community. Mr Hashwani subsequently issued an arbitration claim form seeking an order that Sir Anthony be appointed sole arbitrator pursuant to section 18(2) of the Arbitration Act 1996 ("the 1996 Act"). The application was made on the basis that the requirement that the arbitrators be members of the Ismaili community, although lawful when the agreement was made, had been rendered unlawful and was void because it contravened the Regulations.

The Regulations

The Regulations were made in the exercise of powers conferred by the European Communities Act 1972 following the making of the Council Framework Directive 2000/78/EC of 27 November 2000 ( OJ 2000 L303, p 16) ("the Directive") which, by article 1, was itself made for the purpose of establishing:

"a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment."

The Regulations (as amended by section 77(2) of the Equality Act 2006) provide, so far as material, as follows:

"2 Interpretation…

(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 …;

3 Discrimination on grounds of religion or belief

(1) For the purposes of these Regulations, a person ('A') discriminates against another person ('B') if –

(a) on the grounds of the religion or belief of B or of any other person except A (whether or not it is also A's religion or belief), A treats B less favourably than he treats or would treat other persons;

6 Applicants and employees

(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;

• (b) in the terms on which he offers that person employment; or

• (c) by refusing to offer, or deliberately not offering, him employment.

7 Exception for genuine occupational requirement

(1) In relation to discrimination falling within regulation 3 (discrimination on grounds of religion or belief) –

(a) regulation 6(1)(a) or (c) does not apply to any employment… where paragraph ( 2) or (3) applies.

(2) This paragraph applies where, having regard to the nature of the employment or the context in which it is carried out -

(a) being of a particular religion or belief is a genuine and determining occupational requirement;

(b) it is proportionate to apply that requirement in the particular case; and

(c) either – (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it,

and this paragraph applies whether or not the employer has an ethos based on religion or belief.

(3) This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out -

• (a) being of a particular religion or belief is a genuine occupational requirement for the job;

• (b) it is proportionate to apply that requirement in the particular case; and

• (c) either – (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it."

The Directive

It is common ground that the Regulations must, so far as possible, be construed to give effect to the objective of the Directive which they were designed to implement: see eg Marleasing SA v La Comercial Internacional de Alimentacion SA ( Case C-106/89) [1990] ECR I-4135 and Litster...