Jivraj V Hashwani - Impact On Arbitration Agreements

Permission to appeal has recently been granted by the Supreme Court in Jivraj v Hashwani [2010] EWCA Civ 712, a case that has caused concern over whether arbitration agreements which place restrictions on the nationality of arbitrators are valid.

The Court of Appeal decision

In Jivraj, the Court of Appeal held (reversing the original decision of the Commercial Court) that arbitrators are "employees" for the purposes of the Employment Equality (Religion or Belief) Regulations 2003 (the "Regulations"), and that the arbitration agreement in question was void on the basis that it violated those Regulations by stipulating that all the arbitrators must be of a particular religious belief.

Impact of the Court of Appeal decision

Whilst, in the commercial sphere, arbitration agreements which prescribe the religious qualifications of arbitrators may not be common, the implications of the case extend beyond its own narrow circumstances by bringing arbitrators within the scope of all UK anti-discrimination legislation.

As a result, the decision potentially has an impact on arbitration agreements which, either directly or by way of incorporation of institutional arbitration rules (such as the ICC or LCIA Rules), seek to impose certain restrictions on individuals who may be appointed as arbitrators.

One of the more common restrictions to be incorporated in arbitration agreements is that of nationality: the rationale being to ensure that arbitration is an entirely neutral process. For example, by incorporating the Rules of the ICC, the parties automatically agree that the ICC will "consider the prospective arbitrator's nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals" when appointing arbitrators. Similarly, by incorporating the Rules of the LCIA, the parties automatically agree that the LCIA will give consideration to "the nationality, location and languages of the parties" when selecting arbitrators. Given the decision in Jivraj, such restrictions may fall foul of the Equality Act 2010 (which has consolidated all UK antidiscrimination legislation) and, if so, may render the entire arbitration agreement unenforceable. That would result in jurisdiction reverting to the relevant courts, which is not what the parties had originally bargained for (and in some cases the applicable jurisdiction may be unclear and/or may not have been what one or both of the parties had wanted).

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