On 27 July, the Supreme Court overturned the Court of Appeal’s decision in Nurdin Jivraj v Sadruddin Hashwani, holding that arbitrators, because of their unique, non-subordinate, relationship with the parties, are not “employees” for the purposes of Equality Act 2010 (the Act) and therefore anti-discrimination legislation does not apply to the appointment of arbitrators. This removed a serious threat to London’s position as a major seat for international arbitrations.
The Court of Appeal decision and its implications
The Court of Appeal’s decision in Jivraj had seismic repercussions for the arbitration community. It held that, when applying the Employment Equality (Religion and Belief) Regulations 2003 (SI 2003/1660) (“the Regulations”), which put into effect an EU Directive prohibiting a refusal to employ on the grounds of religion or belief, “employment” had to be given a wide meaning, which included “a contract personally to do any work”. As the appointment of an arbitrator was such a contract, an arbitrator was “employed” for the purposes of the Regulations. This meant that an arbitration agreement requiring an arbitrator to be a “respected member of the Ismaili community” was void.
The implications were considerable (as I commented at the time). The Act, which replaced the Regulations in October 2010, prohibits discrimination in employment on the grounds of a variety of “protected characteristics”, including race and nationality. Most of the major arbitration institutions’ rules, including the ICC and the LCIA, provide that where the parties to an arbitration are of different nationalities and a sole arbitrator or a chairman of a three-person tribunal is to be appointed, that person will not be of the same nationality as either of the parties. Had the Supreme Court upheld the Court of Appeal, these arbitral rules could have been challenged as breaching the Act.
Although the Act gives effect to various EU Directives, I am not aware of any other EU states applying anti-discrimination employment laws to arbitrators. Moreover, while the UK has interpreted EU anti-race discrimination rules as applying to nationality, in some other EU jurisdictions this is not the case. London would therefore have been at a competitive disadvantage when compared to other potential arbitral seats such as Paris, Stockholm or Geneva.
The Supreme Court’s decision
The Supreme Court overturned the Court of Appeal’s decision and found unanimously that arbitrators are not “employees” for the purposes of the Act. The Supreme Court pointed out that “employment” is actually defined as “employment under…a contract personally to do any work” [emphasis added], and the role of an arbitrator is not “employment” at all.
The Court cited Allonby v Accrington and Rossendale College, in which the European Court of Justice drew a distinction between:
- those who perform services for and under the direction of another person (in return for remuneration); and
- independent providers of services not in a relationship of subordination with the person receiving the services.
The Supreme Court held that an arbitrator falls into the latter category. Lord Clarke (giving the leading judgment) noted that an arbitrator is:
“…independent of the parties. His function and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party. […] He is in no sense in a position of subordination to the parties; rather the contrary. He is in effect a ‘quasi-judicial adjudicator’.”
Four of the five Justices of the Supreme Court also observed obiter that, even if the arbitrator were an employee, and therefore protected under the Act, there would have been an exception under s.7(3) of the Regulations (now Schedule 9 of the Act), which permits an otherwise offending requirement if it is a “genuine occupational requirement”. The Supreme Court noted that this was an objective question for the court in each case, but considered that it may be relevant to stipulate that an arbitrator be of a particular religion or belief, to give the parties confidence in the arbitral process.
The Supreme Court has recognised the special relationship between an arbitrator and the parties to a dispute, which is not one of employer and employee. Parliament clearly never intended the Act to apply to the appointment of an arbitrator, and as such, the decision is a triumph for common sense. London’s position as a major seat for international arbitrations has been safeguarded, at least from this attack, which is welcome given the recent setbacks in cases such as Allianz SpA v West Tankers.