Arbitration – Arbitration clause that arbitrators belonging to Ismaili community – Whether requirement void under Employment Equality (Religion or Belief) Regulations 2003 – Whether arbitrators employed by parties within meaning of regulation 2(3) – Appeal allowed
A joint venture agreement between the appellant and the respondent contained an arbitration clause that provided for disputes to be resolved by three arbitrators who had to be respected members of the Ismaili community. That community, to which the parties belonged, comprised Shia Imami Ismaili Muslims. Each party was to appoint one arbitrator while the third was to be the Aga Khan, as the imam of the community.
The joint venture ended in 1988 and various issues were resolved as to the division of the venture’s assets. In 2008, the respondent purported to appoint an arbitrator in connection with an outstanding claim that he asserted for more than US $1.412m.
In proceedings between the parties, the respondent contended that the requirement for arbitrators to be Ismaili had, since December 2003, been unlawful and void under the Employment Equality (Religion or Belief) Regulations 2003 (implementing Council Framework Directive 2000/78/EC). At first instance, that argument was rejected and it was held that arbitrators were not “employed” within the meaning of the 2003 Regulations: see [2009] EWHC 1364 (Comm); [2010] 1 All ER 302.
Determining the respondent’s appeal against that decision, the Court of Appeal held that: (i) the appointment of an arbitrator involved a contract to provide services, which constituted “a contract personally to do any work” so as to satisfy the definition of “employment” in regulation 2(3); and (ii) the restriction on eligibility to members of the Ismaili community constituted unlawful discrimination on religious grounds contrary to regulation 6(1) since being a member of that community was not a “genuine occupational requirement for the job” within the exception in regulation 7(3): see [2010] EWCA Civ 712; [2011] 1 All ER 50. However, it also found that the offending requirement was not severable and that, accordingly, the relevant contractual provision was void and his nomination of an arbitrator was invalid. The appellant appealed.
Held: The appeal was allowed.
An arbitrator was not appointed by way of “employment under… a contract personally to do any work”, within the meaning of regulation 2(3) of the 2003 Regulations. The definition did not merely refer to a contact to do work but to “employment under” such a contract. The role of an arbitrator was not properly described as one of employment: Allonby v Accrington and Rossendale College C-256/01 [2005] All ER (EC) 289, Lawrie-Blum v Land Baden-Wurtemberg C-66/85 [1987] ICR 483 and Kurz v Land Baden-Wurtemberg C-188/00 [2002] ECR I-10691 applied.
The case law of the Court of Justice and the domestic courts distinguished between those who were employed, in the sense of performing services for and under the direction of another for remuneration and independent providers of services who were not in a relationship of subordination with the party that received the services: Percy v Church of Scotland Board of National Mission [2005] UKHL 73; [2006] 2 AC 28 and O’Brien v Ministry of Justice [2010] UKSC 34; [2010] 4 All ER 62 applied. All would depend on the circumstances of the particular case and a detailed consideration of the relationship between the parties. Domestic cases that applied a different test, focusing on the dominant purpose of the contract as being for the execution of personal work rather than on the relationship between the parties, should be construed in the light of the European cases.
Although arbitrators might be providing personal services that they could not delegate and received fees for their work, they did not perform those services or earn those fees for and under the direction of the parties but were independent providers. Arbitrators were independent of the parties in critical respects. Their functions and duties required them to rise above the partisan interests of the parties and resolve their competing interests; they were not in a position of subordination to the parties but acted as “quasi-judicial adjudicators” between them: K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1992] QB 863 applied. Accordingly, as between the parties to an arbitration and the arbitrator or arbitrators, the arbitrators’ role was not employment under a contract personally to do work.
Per curiam: Had it been found that an arbitrator was employed by the parties, the requirement in the instant case for the arbitrators to belong to the Ismaili community would have been held to be a genuine occupational requirement within the exception in regulation 7(3). That exception applied where the requirement was not only genuine, but also legitimate and justified on an objective approach. Arbitration gave a wide discretion to the parties and the arbitrator to structure the process for the resolution of the dispute. The stipulation that an arbitrator be of a particular religion could be relevant to that aspect of arbitration. The test was not one of necessity. In the instant case, the parties could regard arbitration before three Ismailis as likely to involve a procedure, and lead to conclusions of fact, in which they could have confidence. Their requirement as to the nature of the arbitrators was legitimate and justified.
Rhodri Davies QC and Schona Jolly (instructed by Hill Dickinson LLP, of Liverpool) appeared for the appellant; Michael Brindle QC and Brian Dye (instructed by Zaiwalla & Co) appeared for the respondent; Laurence Rabinowitz QC, Christopher Style QC and Christopher McCrudden (instructed by Linklaters LLP) appeared for the first intervener, the London Court of International Arbitration; Rabinder Singh QC and Aileen McColgan (instructed by Clifford Chance LLP) appeared for the second intervener, His Highness Prince Aga Khan Shia Imami Ismaili, of the International Conciliation and Arbitration Board.
Sally Dobson, barrister
