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Since Shell UK Ltd & Ors v Total UK Ltd & Or (a case concerning the Buncefield oil terminal fire, which was due to be heard from 5 to 7 April 2011) has now been settled, the Supreme Court will instead hear the appeal in Jivraj v Hashwani on 6 and 7 April 2011. The question for the Court to decide is whether arbitrators are employees for the purposes of anti-discrimination legislation and whether a term in an arbitration agreement providing that all arbitrators must be of a certain religious belief, if unlawful, renders the whole of the arbitration agreement void. This is another case in which law encounters religion (see here and here for previous posts from Aidan O’Neill QC and Oliver Gayner on this topic) and, in this instance, may impact on existing and future arbitration agreements as well as institutional arbitration rules.

Facts

The parties stipulated in a joint venture agreement that, in the case of dispute, the arbitrators should be members of the Ismaili community. When disputes arose, the defendant notified the claimant of the appointment of an arbitrator not from the Ismaili community and the claimant sought a declaration by the court that such appointment was invalid. The defendant then sought a judgment validating the appointment on the basis that such a requirement, although lawful at the time the agreement was made, now constituted religious discrimination in the context of an employer determining to whom he should offer employment under the Employment Equality (Religion or Belief) Regulations 2003 (the “Regulations“).

The Court of Appeal decision

Reversing the decision of the High Court, the Court of Appeal held that the Regulations applied on the grounds that the appointment of the arbitrator fell within the definition of “employment” for the purposes of the Regulations as a person contracted personally to carry out any work. Furthermore, the Court of Appeal decided that the exemption from the general prohibition against such discrimination could not be invoked as being a member of the Ismaili community was not a genuine occupational requirement for discharging the arbitrator’s functions under this agreement which stipulated that the arbitrator is to determine the dispute between the parties in accordance with the principles of English law.

In relation to severance, the Court of Appeal decided that the choice to restrict the appointment to persons of a particular religious belief was an integral part of the agreement and that, applying Marshall v NM Financial Management Ltd [1995] 1 WLR 1461, severance was therefore not possible as the remaining part would be substantially different from that which the parties originally intended, rendering the entire arbitration agreement void.

Effect on arbitration

Whilst such arbitration agreements seeking to determine the composition of a tribunal based on religious belief are rare, what is of far greater concern to UK arbitral practitioners is the effect this judgment may have on any agreement which fetters the choice of arbitrator on the grounds of nationality, as is the case with agreements incorporating institutional arbitration rules. Would such an agreement be unlawful under The Equality Act 2010, which came into force on 1 October 2010? Arbitration practitioners will be hoping for clear guidance from the Court. Up until now, legal practitioners have been advising their clients to disapply bespoke and institutional rules relating to the nationality of arbitrators in future arbitration agreements but have suggested waiting for this issue to be resolved by the Supreme Court before dealing with any existing arrangements. The ICC International Court of Arbitration (ICC) and the London Court of International Arbitration (LCIA) have been granted leave to intervene in the hearing, highlighting the importance of this case for the arbitration community.

The appeal is due to be heard by Lords Phillips, Rodger, Walker, Mance and Clarke.