In Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan – Butterworths Law Direct 4.8.08 the Commercial Court had to determine the following issues, which it did as set out below:
(1) The correct construction of s 103(2)(b) of the Arbitration Act 1996;
S 103(2)(b) provides that ‘Recognition or enforcement of the award (under the New York Convention) may be refused if the person against whom it is invoked proves …… (b) that the arbitration agreement 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;…’
It held that the sense of ‘arbitration agreement’ in s 103(2)(a) had to be taken from the rest of that section and the meaning given to it in the NY Convention. Therefore it was to be contrasted with the phrase 'submission to arbitration' in s 103(2)(d), which encompassed the individual reference of a present dispute. Assuming that s 103(2)(b) covered issues of whether an entity was bound by an arbitration agreement, the focus had to be on the agreement to refer future disputes to arbitration, not the individual reference.
(2) The scope of the enquiry that the court had to undertake when a party challenged the recognition and enforcement of a New York Convention award under s 103(2)(b);
The wording of the Act reflected faithfully that of the Convention. A party who wished to persuade a court to refuse recognition or enforcement of a Convention award had to prove one of the matters set out in paragraphs (a) to (f) of s 103(2). Those paragraphs were definitive of what a party could prove in order that a court 'may' refuse recognition or enforcement of a Convention award. If a party had to prove a matter that had to mean, in the context of English civil proceedings, prove the existence of the relevant matters on a balance of probabilities. s 103(2) required that the party wishing to challenge the recognition and enforcement of a Convention award had to be entitled to ask the court to reconsider all relevant evidence on the facts (including foreign law), as well as applying relevant English law. The court had (1) to decide whether the non–signatory party was 'implicated in the performance of the contract'; and (2) to see if it accepted the terms of the arbitration clause.
(3) Whether the Defendant in this case was bound by the arbitration clause in the agreement;
On the evidence, it had not been the subjective intention of all the parties that the Defendant should be bound by the agreement or the arbitration clause.
(4) Whether the government had satisfied the burden of proving that the arbitration agreement was not valid;
Once the Defendant had demonstrated that it was not bound by the agreement or the arbitration clause, then there was nothing more it needed to prove to the English standard of proof, in order to satisfy the test in s 103(2)(b) of the Act. Accordingly, the final award would not be recognised or enforced since the arbitration agreement was not valid.