Jivraj v. Hashwani - judgment of the Supreme Court

Monday 1st August 2011

Click here to download a copy of the judgment

The judgment of the Supreme Court in Jivraj v. Hashwani [2011] UKSC 40 was handed down on 27th July 2011: see attached.  ICA lawyers will be relieved to hear that the commercial good sense of David Steel J's judgment at first instance has been restored.

The Court of Appeal had found that the appointment of an arbitrator was ‘employment' for the purposes of the Employment Equality (Religion or Belief) Regulations 2003 (‘the Regulations'), so that the arbitration agreement in the original JVA between the parties could not discriminate in requiring an arbitrator to be Ismaili, and that the requirement of an Ismaili arbitrator was not a ‘genuine occupational requirement' (‘GOR') for the purposes of Regulation 7.

Appeal allowed

Lord Clarke (with whom all agreed) concurred with the Judge in finding that an arbitrator was not ‘employed' within the meaning of the Regulations.  He found that: ‘...it is in my opinion plain that the arbitrators' role is not one of employment under a contract personally to do work': para 40.

The Supreme Court considered closely various ECJ decisions relating to the distinction between ‘workers' and ‘independent suppliers of services': paras 24-27.  In particular, in Allonby [2004] ICR 1328, the ECJ had found that the Treaty did not intend ‘worker' to include ‘independent providers of services who are not in a relationship of subordination with the person who receives the services'.

Although the contractual relationship needs to be considered on the facts of each case, it will be very hard to show that an arbitrator is ‘in a relationship of subordination' with his or her client.  In English Employment law cases, the test has been reduced even more effectively to a distinction between ‘those who work for themselves and those who work for others': para 30.  The reason for this is that the relevant EU legislation is intended to give protection against inequality and discrimination to those who might be vulnerable to exploitation'.  It appears this does not extend to arbitrators.

To this extent, there is a valid distinction with judges.  Judicial office has some of the characteristics of employment, not least in some organisation and defined times and periods of work, whereas arbitrators are closer to being free agents, for example because under the English Arbitration Act, the UNCITRAL Model Law, and the LCIA Rules, they can decide on their own procedure, require the parties to comply with their orders, and be removed only in exceptional circumstances: para 42.

Accordingly, the arbitration agreement in the original JVA was found to be valid.

Genuine occupational requirement

The Court confirmed that a rigorous, strict and objective approach must be adopted to the question of whether the exception in Regulation 7 (and now Sch 9 to the EA 2010) would apply to particular discrimination by reason of its being a genuine occupational requirement: paras 53 and 59.

However, arbitration was found to be more than simply applying a given national law to the facts of a dispute.  The arbitrators have not only a very wide discretion as to the process of the arbitration, but may also be required to exercise sensitivity as to the parties' culture and perspectives.  Under s. 34 of the English Arbitration Act, they have complete power over all procedural and evidential matters.  They are ‘the sole judges of the evidence, including the assessment of the probabilities and resolving issues of credibility': para 62.  

Lord Clarke referred to the extensive discussion in the judge's judgment as to the particular history and characteristics of Ismaili arbitration, which is served by volunteers in seeking to uphold a communitarian ethic of conciliation.  He endorsed the judge's finding that there was a significant ‘ethos based on religion' running through Ismaili arbitration: para 67.  The approach taken by the Court in applying a test of necessity was described as being too legalistic and technical: para 70.

It should be noted that Lord Mance showed some concerns as to the extent to which there could be religious discrimination in other arrangements, for example the engagement of lawyers by the Ismaili community or other religious organisations.  This would be much harder restriction to justify, not least as non-Ismaili lawyers are also trained in techniques of mediation, conciliation and arbitration.  He was making clear that the section of the judgment dealing with GORs would not apply more broadly than arbitrators themselves.

Lurking danger

As has been discussed at recent Wilberforce Chambers seminars in Dubai , there remains some danger that other EU Courts will take the Court of Appeal's view of arbitration, which may affect (i) the willingness of the Courts in another EU member state to intervene against ‘non-compliant' arbitration clauses where there is a sufficient connection to that jurisdiction or (ii) the MENA enforcement of ‘compliant' awards coming from such a member state.

That danger is real because Article 3 of the underlying directive, Council Framework Directive 2000/78/EC, still has not been considered by the ECJ itself, and is unlikely now to be so considered by any reference of an English Court.

I hope this assists in allaying some of the fears that the Court of Appeal raised in the MENA region region by its decision of last June!

This commentary was written by Rupert Reed, Wilberforce Chambers