The UK Supreme Court has unanimously allowed the appeal in Jivraj v Hashwani, finding that arbitrators are not employees within the meaning of UK anti-discrimination legislation.  Accordingly, an arbitration clause requiring arbitrators to be chosen from a particular religious community is neither discriminatory nor void.  This decision is important in commercial arbitrations where parties make specific provision for arbitrators’ nationality.

Background

The parties entered into a joint venture agreement that contained an arbitration clause providing for three arbitrators, each of whom was required to be a respected member of the Ismaili community (the Requirement).  Mr Hashwani, believing that the Requirement had become an unlawful arrangement to discriminate on grounds of religion following the implementation of the Employment Equality (Religion or Belief) Regulations 2003 (the Regulations) appointed a non-Ismaili arbitrator.  Mr Jivraj commenced proceedings for a declaration that the appointment of a non-Ismaili arbitrator was void as a breach of the Requirement and Mr Hashwani sought confirmation of the appointment of his arbitrator.

This is an important case because it affected not only religious arbitrations, but also the issue of arbitrators’ nationality.  Many arbitration institutions require that the nationality of the sole arbitrator or chairman cannot be the same nationality as any of the parties.  Nationality was not a protected characteristic under the Regulations, but is protected under the Equality Act 2010, which came into force on 1 October 2010 and superseded the Regulations.  Accordingly, the nationality requirement in the institutions' rules may have been discriminatory. 

Issues

The three main issues for decision by the Supreme Court were:

  • whether arbitrators were employees for the purposes of the Regulations and, therefore, whether the Requirement was discriminatory;
  • if so, whether religious belief was a “genuine occupational requirement” in the circumstances, so as to provide a defence to the discrimination issue; and
  • if this defence was not available, whether the court could sever the Requirement so as to leave the arbitration clause standing or whether the entire arbitration clause was void.

Decision

The Supreme Court, preferring the reasoning of the first instance judge to that of the Court of Appeal, held that an arbitrator was not an employee within the meaning of the Regulations.  An arbitrator fell outside the definition of a “worker” laid down by ECJ case law.  Instead, an arbitrator was an independent provider of services and furthermore was not in a relationship of subordination with the person who received the services.  An arbitrator was a quasi-judicial adjudicator whose duty was not to act in the particular interests of either party.  Accordingly, the Regulations did not apply and the Requirement was not invalid as unlawful religious discrimination.

In view of this decision, the question of genuine occupational requirement did not strictly arise, but as it was fully argued, the Supreme Court went on to deal with the issue.  The question to be answered objectively by the court is whether, in all the circumstances of the case, the requirement in question is a genuine, legitimate and justified requirement of an occupation.  In this case, the majority held that the Requirement would have fallen within the exception for genuine occupational requirement if the Regulations had applied.

Their Lordships declined to rule on the severability issue.

Comment

Following the Court of Appeal decision, there was concern within the English arbitration community that London would become a less attractive arbitral seat if parties could not require their arbitrators to be of neutral nationality.  Parties entering into arbitration agreements recently have also chosen to disapply the nationality restriction in arbitral rules for fear that the restriction would render the arbitration agreement invalid.  England sees a higher proportion of cases that test the limits of arbitration law than possibly any other jurisdiction, probably because of the sheer volume of arbitration work in London.  The Supreme Court decision will come as a relief to the English arbitration community.

Case reference: Jivraj v Hashwani [2011] UKSC 40.

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