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Media Coverage

UK: The overshadowed issues arising from Jivraj v. Hashwani

30 November 2012
Global Arbitration Review

Jivraj v. Hashwani provides an example of a long-established practice in England of different faiths setting up arbitration schemes under the Arbitration Act 1996 based on their own religious laws. The case centres on an agreement under which all arbitrators would be drawn from the Ismaili faith; parties of Jewish and Muslim religions have been known to enter similar arrangements.

The former Archbishop of Canterbury, Rowan Williams, speaking in 2008, drew attention to this practice when he referred to the unavoidable introduction of some aspects of sharia law in Britain. He was supported by the then Lord Chief Justice Phillips, who said that there is no reason why principles of sharia law, or any other religious code, should not be the basis for mediation or other forms of alternative dispute resolution.
These statements were followed by somewhat alarmist media reports on the prospect of sharia courts operating in Britain, as well as campaigns to ban religious tribunals from operating under the Arbitration Act.
This controversy may be coming to a head with the Arbitration and Mediation Services (Equality) Bill, a private bill recently introduced into the House of Lords by Baroness Cox, and the referral of the Supreme Court's ruling in Jivraj to the European Commission.

One law for all?
The liberal-democratic principle of one law for all or equality under law is a bedrock of British and other Western societies. The orthodox view is that it is the law of a particular country to which we are all subject. The laws of Great Britain are comprised of the common law and those laws that our parliaments enact. These matters are considered to be of such fundamental importance that perhaps the controversy surrounding the existence of a limited exception, in the form of an agreement to arbitrate, should not be surprising.

Section 46(1) of the 1996 Arbitration Act provides that an arbitral tribunal shall decide the dispute referred to it in accordance with the law chosen by the parties or, if the parties so agree, in accordance with such other considerations as are agreed by them. By entering an agreement to arbitrate, private citizens can agree that other bodies of rules, such as the halakha, or Jewish law, and Islamic or sharia law, should be applied to the contract that they have entered into or the dispute that has arisen between them.

This right has been recognised by the Court of Appeal in the 2004 case of Beximico Pharmaceuticals v. Shamil Bank of Bahrain (concerned with sharia law). In that case, Lord Justice Potter stated that the incorporation of a body of rules such as sharia law into an agreement could be effective only where the parties had, by the terms of the contract, sufficiently identified specific, black letter provisions of a set of rules that was apt to be included.

In a subsequent 2005 Court of Appeal decision in Halpern v. Halpern, Lord Justice Waller appeared to take a less rigid approach, commenting that Potter LJ's dictum seemed to be another way of saying that there must be certainty about what is being incorporated – meaning a clear body of rules may be effectively incorporated even if the contract does not expressly refer to such provisions.

Religious tribunals under the 1996 act
The 1996 act also gives parties the freedom to appoint anyone they may choose as their arbitrator or as the members of their arbitral tribunal. There are no special qualifications needed to accept such an appointment, save as specified by the parties in their agreement. The parties are, therefore, free to appoint a so-called “religious court”, such as a Beth Din or sharia tribunal, or to appoint members of a certain community, to hear and determine their dispute.

When functioning as arbitral tribunals, the jurisdiction of these religious bodies is limited to matters that are capable of being determined by arbitration. Only civil disputes, such as contractual disputes, claims in tort, intellectual property disputes and certain statutory claims, are arbitrable. Family law and criminal matters cannot be determined lawfully by these religious bodies.
The freedom and right to consult a religious body, or a member of a certain community, rather than a court of law, in civil disputes arises out of another fundamental principle underlying our society: the right to individual freedom in the private sphere.

There are some who would argue that the 1996 act, in giving effect to the principle of personal liberty, ignores the issue of how society should balance the right to individual freedom in the private sphere and potentially conflicting collective values, such as freedom under the law from all forms of discrimination. The bill and the referral of Jivraj to the European Commission both seek to address this issue.

Jivraj v Hashwani
In Jivraj, Pakistanti businessman Sadruddin Hashwani has complained to the European Commission about the UK Supreme Court's decision that nationality and religion can be used as criteria in the appointment of arbitrators, if that is in accordance with the agreement to arbitrate. He and his counterparty, Tanzanian-British businessman Nurdin Jivraj, agreed that any dispute arising in respect of their hotel joint venture would be determined by three arbitrators, all of whom were to be respected members of the Ismaili community and holders of high office within that community.

The Ismaili community, of which both Jivraj and Hashwani are members, comprises Shia Imami Ismaili Muslims and is led by the Aga Khan.

The Supreme Court upheld the validity of this agreement, which it said fell outside the scope of anti-discrimination legislation, on the basis that arbitrators are not employees of the parties but independent service providers, who are not in a relationship of subordination to the parties. Even had this not been the case, a majority held that the parties' requirement that their dispute be resolved by members of the Ismaili community would have fallen within an exception allowing employers to specify an employee's religion or belief if it is a genuine occupational requirement.

Hashwani maintains that the Supreme Court's decision is wrong because it allows parties to discriminate on the grounds of gender, race, sexual orientation and religion when selecting their providers of professional services. He is seeking to have his case re-heard by the European Court of Justice on the basis that the decision is in breach of EU law.

The right balance?
The Supreme Court's decision supports the comments of Lord Chief Justice Phillips in 2008, by preserving the ability of private parties to appoint arbitrators drawn from their own particular community, presumably with the intention that they will determine the dispute in accordance with the rules and principles of that community. Seen from one point of view, the decision is supportive of the important principle of personal freedom in the private sphere.

Hashwani makes a good point, however. Does the decision strike the right balance between this right and the right to freedom under the law from all forms of discrimination? Would we as a society feel comfortable with a decision which upheld the right of parties to agree to appoint arbitrators, so long as they were not Asian or black or white, or so long as they were heterosexual? What about a situation in which a Muslim man and woman agree to appoint an arbitrator drawn from the Islamic community; would we feel comfortable that the consent of the woman was genuine?

It may be that the court, in exercising its supervisory jurisdiction, could find its way around such issues to achieve an outcome that does not undermine the right to freedom under law from discrimination, but that presupposes the issue is referred to the court by one of the parties. There is a sense in which the Supreme Court's decision in Jivraj challenges rather than upholds what we as a society believe to be the rights and freedoms of the individual and our concept of equality under law.

The Arbitration and Mediation Services (Equality) Bill
Baroness Cox is seeking to address some of these concerns through her bill, proposing various amendments to the Arbitration Act. . The primary amendments proposed in the bill are as follows.

  • A person must not, in providing a service in relation to arbitration, do anything that constitutes discrimination, harassment or victimisation on the grounds of sex.
  • Any term by which parties agree that rules shall apply to one or more matters shall be unenforceable in so far as those rules constitute, promote or provide for treatment of that or another person of a description prohibited on grounds of sex.
  • No part of an arbitration agreement or process shall provide (a) that the evidence of a man is worth more than the evidence of a woman, or vice versa, (b) that the division of an estate between male and female children on intestacy must be unequal, (c) that women should have fewer property rights than men, or vice versa, or (d) for any other term that constitutes discrimination on the grounds of sex.
  • It also aims to create a new criminal offence of purporting to determine in arbitration proceedings a matter which is not arbitrable, that is a family law or criminal matter.

Sufficient safeguards?
As will be apparent, Baroness Cox is largely concerned with sex discrimination and providing protection to women and children in the domestic sphere. She is also concerned with certain aspects of sharia law that are considered to be discriminatory against women. A similar debate focusing on these concerns emerged in Ontario, Canada in 2005, leading to an amendment to the arbitration act in that province.

There are good arguments to the effect that the 1996 act does not require amendment and that it already contains adequate safeguards to protect against the sorts of abuse with which the bill is concerned. The act is founded on the principles that the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal and that parties should be free to agree how their disputes are to be resolved, subject to such safeguards as are necessary in the public interest. Arbitration must be voluntary for both parties and is limited to civil cases. A party can apply to the court for the removal of an arbitrator if there are justifiable doubts as to that arbitrator's impartiality and may also apply to the court to challenge an award on the ground of serious irregularity affecting the tribunal, the proceedings or the award. Serious irregularity means an irregularity of a kind which the court considers has caused or will cause substantial injustice to the applicant and includes the award being procured in a way that is contrary to public policy.

Nevertheless, such safeguards depend for the most part on the tribunal conscientiously complying with its general duty to act fairly and impartially and for parties to an arbitration to be aware of their rights under the 1996 act and to have the support and means by which to pursue an application to court in the event of a potential injustice. The bill, while narrow in its focus on sex discrimination and certain aspects of sharia law, seeks to provide clear guidance on certain practices which, if they are present in an arbitration, are almost certainly contrary to public policy and the principles underlying the 1996 act.

The intersection between arbitration and equality legislation is complex. There are those that would argue that the 1996 Arbitration Act, in its current form, allows different communities to undermine the law of this country and the freedoms that all British citizens are entitled to enjoy, whilst there are others who argue that it facilitates a modern, tolerant and pluralistic society. This is an interesting and important debate, which has been overshadowed in part by the focus of the arbitration community on the implications of Jivraj for London-seated ICC and LCIA arbitrations. It is a debate that is being re-ignited with the referral of this case to the European Commission and the potential for the 1996 act to be amended.

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