The Struggle to Uphold Common Sense

JIVRAJ v JIVRAJ v. HASHWANI*: THE STRUGGLE TO UPHOLD COMMON SENSE By Naima Ahmed, Advocate High Court, Lahore This research paper will focus on three main issues that arise out of this decision. Firstly, whether the determination that an arbitrator is not an employee justifiable. Secondly, where do the limits lie, if any, on party autonomy when selecting an arbitrator and how far this decision has been able to reconcile this with other forms of discrimination such as race, sex, caste and creed. Finally this paper will consider the wider public policy implications that arise as a result of this decision. The status of an arbitrator had been in debate for decades. Mustill and Boyd have been of the view that "appointment of arbitrator is not like anything else at all". The appointment of an arbitrator is different from that of an accountant, lawyer or architect. However, the Supreme Court in Jivraj has finally laid to rest that the relationship between the arbitrator and the disputing parties 'naturally'1 does not fall within the definition of employment therefore an arbitrator is protected from anti-discrimination laws such as Equality Act 2010. The Supreme Court specifically drew a distinction between a person who offers a service under the direction of someone and gets remunerated in return and a person who is an independent provider of services and gets his fees as well though not under the parties' direction.2 An arbitrator falls under the latter. As Lew, Mistellis and Kroll highlighted an arbitrator is not just being remunerated for his experience and qualification but also for his ability to remain independent and impartial3. Arbitrator is classified as a quasi-judicial adjudicator4. It is true that an arbitrator's role only begins when he is selected by the parties to determine the dispute referred to him. Therefore the rights and obligation of the arbitrator flow from the contract. This is in line with the contract theory that represents the legal nature of the legal dispute between the parties and arbitrators.5 Fouchard, Gaillard and Goldman on International Commercial Arbitration have argued that the relationship between the disputing parties and the arbitrator stems out of a contract. Klaus Lionett sees the arbitrators being appointed by the parties and being remunerated by them instead of the state. Thus the existing relationship between the parties and arbitrator has a contractual foundation.6 It may be argued that the party autonomy of choosing an arbitrator then ends up shaping initially the arbitrators role which entails some subordination similar to that in an employee-employer relationship. Arbitrators may not have agreed to work under direction of the parties in practice yet they have agreed to work due to the selection of the parties. In those terms some form of subordination can be seen to exist. Yet in light of Jivraj, this is not sufficient enough to label an arbitrator as an employee of the parties under the contract. Under contract theory the fact that an arbitrator derives his powers from a contract also entails that the parties (if it is an institution) can remove the arbitrator or terminate his mandate. Also section 24 Arbitration Act 1996 allows parties to remove the arbitrator on certain grounds. Here the parties' autonomy shows that arbitrator is in fact subjected to the will of the parties and therefore under some control of the parties. However many commentators have argued that the fact arbitrator can be removed only in exceptional circumstances shows that he is different from an employee. The Supreme Court avoiding this debate only focused on the "employment under..." which can be one of the manners to avoid an arbitrator from falling under the legal realm of anti-discrimination law. In comparison of the role of arbitrator with that of Judge the latter is considered the servant of the state and gets remunerated by it, while the arbitrator rises above all of this, keeps into account interest of both the parties and delivers his award. Though both are said to eventually perform the same judicial function.7 Gary Born essentially treats the arbitrator as having an "adjudicative character" which makes the arbitrator unique from any other service provider such as an accountant in a commercial relationship. Therefore, an arbitrator has a hybrid form of agreement with the parties. In my view this makes the role of the arbitrator unique yet at the same time worrisome for its wider implications as will be discussed in the following paragraphs. It will be fair to ask that why the labeling of an arbitrator as an 'employee' is considered to be demeaning as it appears from the Supreme Courts decision. It raises a doubt as to whether the Supreme Court in Jivraj actually tried to eliminate the subordination factor and retain independence of arbitrator or was it just to uphold the commercially bright picture of London as a seat of arbitration. I believe it is the latter. Perhaps one of the major advantages of arbitration is the breadth of discretion available to the parties when choosing the arbitral tribunal or arbitrator. The Supreme Court has upheld this advantage available to parties which otherwise would have been rendered discriminatory under the Employment Regulations now harmonized under Equality Act 2010. Many commentators have pointed in the case of Jivraj that parties want arbitrators from specific religion who understand them socially and culturally so that they have confidence in the entire process. The Court of Appeals decision restricted the parties' ability to appoint arbitrator solely on grounds of "Ismaili religion". In my view this did not attack the neutrality principle embedded in the International Arbitration Rules. Instead it may be argued that this very specifically tailored requirement of an arbitrator being an Ismaili in fact infringed upon the right to be treated equally. Tweedale and Tweedale state that when selecting an arbitrator, disputing parties need to decide whether the arbitrator is technical or a legal. However in Jivraj the requirement of arbitrator being an Ismaili fell neither under any legal nor any technical requirement. Most commentators have used words such as "unique" and "special" when describing the arbitrator's relationship with the parties. In this manner same notion ought to apply to an accountant or a doctor whom the parties cannot direct or order to conduct his duty as only he is aware of the technicalities involved in his profession. Arbitrators render their service and agree to do so for which they too in turn get awarded by a fee. In my view the mere rendering of a service should not be molded into subordination. As Sarosh Zaiwalla Senior Partner of Zaiwalla and Co. in his article8 rightly pointed out that it appears from the Courts decision that the status of the arbitrator is demeaned by the word 'employee'. Therefore the Supreme Court has evaded it as much as possible. The Court of Appeals approach has been labeled as being too "legalistic" and "technical"9. This is unsettling since the entire process of arbitration is based on network of Conventions and Treaties that eventually have a legal premise. Arbitration is a private mechanism yet is not informal to such an extent that no structure of rules or procedure will be followed. The "legitimate" aim of the arbitration ought to be able to amicably resolve the disputes between the parties so as to leave the relationship between the parties unharmed10. Undoubtedly it is a private mechanism whereby the main point is to decide on the dispute rather than the issue at hand. Many have ignored this and have declared the big point11 to have arbitrators in whom they have confidence in. In my view this sets a very subjective standard. It appears in Jivraj that intention of the parties was not to solve a dispute by any arbitrator but in fact restrict the specifications of an arbitrator to being an Ismaili even though he may not be as purely qualified, experienced and not aware of the steps involved in a proper arbitral procedure. The aim of such a clause did in fact discriminate against those excluded for selection. Thus is discriminatory. Indeed as some commentators have noticed, this is a price to be paid for party's autonomy12. Composition of tribunal is of fundamental importance for the parties. As a matter of general practice an arbitrator having experience of different legal cultures, skills, qualification and diversity of background would be the criteria for a neutral composition of a tribunal.13 This however was not seen in Jivraj when all arbitrators were confined to a certain religious community. Neutrality and diversity of cultures would have been retained with one English arbitrator while the rest remained Ismaili arbitrators. The fixation of the Supreme Court that the entire panel of arbitrators ought to be from a certain religion and/or cultural removes us from the actual legitimate aim of the process that is, to settle the dispute justly and fairly for the parties which is the primary reason why the arbitration is being conducted in the first place. Furthermore such restriction will not only impinge on the other parties right to chose any arbitrator but will also inevitably alienate the neutrality option available to the other party which in this case was Hashwani. The Supreme Court's decision has therefore failed to create an even level playing field when choosing a legally diverse arbitrator. One may also criticize the Court for not upholding the spirit of legislation now enshrined in the Equality Act, 2012 that lays down race, disability, sexual orientation and age as discriminatory. Other countries such as in Pakistan Articles 25, 26, 27 of the Pakistan Constitution, 1973 completely bans the discrimination on the basis of race, religion, caste, sex, residence or place of birth. In Hong Kong, the Racial Discrimination Ordinance applies to discrimination on the grounds of national origin, rather than nationality. In Australia, each State and Territory has legislation which prohibits discrimination on the grounds of nationality. In the past cases where parties require an arbitrator from a certain religion have been rare but not unknown to the Court. An arbitration agreement providing for religion to be criteria for appointment of arbitrator came in front of the Court in Virdee v. Virdi [2003] All ER (D)46) where three arbitrators had to be members of the Sikh Community. The Judge in this case decided that it was not important for arbitrators to be members of Sikh community. There were no reasons available in the decision as to why the Judge decided otherwise. This was in clear contradiction of the agreement between the brothers. Also section 19 of the Arbitration Act 1996 was ignored by the Court. In my view a fallacy exists where parties are given ample discretion to choose an arbitrator to an extent that it actually leads them to restrict it to particular "close knit" community or religion. This inherent contradiction has left certain loopholes which may be exploited in the future if not answered by the future Courts. Another critique of this decision is that Supreme Court has failed to ensure a "socially inclusive labor market"14. The decision has failed to uphold the internationality aspect of the arbitration which is essential not just to maintain neutrality but intermingling of arbitrators from diverse jurisdictions and backgrounds. Selection of arbitrators from certain religious sect only restricts the process, losing on its way the international aspect of commercial arbitration. A basic non -professional skill that is desirable of an arbitrator is to possess common sense and ability to think outside the box, trustworthiness and exposure to diversity of cultures which was ignored by Jivraj. In my opinion the party autonomy has actually restricted the internationality aspect of the arbitration. A very important point to note here is that while this decision may have excluded self-employed arbitrators from the protection of discrimination law yet at the same this protection will and can act has a barrier for women who as a generally accepted norm continue to face barriers in the professional life. This decision has remained silent on matters of sexual discrimination's15. Another point that had not paid much attention by the Supreme Court was that the clause 8 of the arbitration agreement between Jivraj and Hashwani stated that arbitrator's jurisdiction is to decide the dispute between parties in accordance with 'English law'. This did not require any ethos based on religion. Therefore the 'genuine occupational requirement' laid down in the law would not have been satisfied. If the case were to be decided as per the Sharia or Ismaili law, then the requirement to have an Ismaili arbitrator would deem plausible but Sir Anthony Coleman despite being highly well versed and experienced in English law was not qualified because of a mere religious barrier fell under blatant discrimination. Furthermore, the case has failed to place any "enlightened restrictions"16 on the discretion available to parties to choose an arbitrator. Jivraj has not properly created an even level field in what will and will not be tolerated in terms of discrimination. It indeed does not answer the question of where do the limits to party autonomy lie.17 An insertion of clause in the arbitration agreement that an arbitrator ought to be of a particular skin color or ought to be male and not a female are obvious scenarios of discrimination that ought not to be tolerated in today's time and age. No doubt decision of Jivraj has placed limitation on the discrimination law and only time will tell how such limitation operates in practice. An interesting observation was made in one of the articles it was that "Would the court's decision have been different if the selection criteria had been: 'No blacks or Jews shall be appointed as arbitrator'?"18 Another leading commentator Gray Born ponders over the point whether the Supreme Court's decision been any different if the parties had asked for appointing only male arbitrators. This would not just be contentious but clearly against public policy. The Supreme Court further laid down that even if an arbitrator was considered an 'employee', there was a 'genuine occupational requirement' within Employment Regulation 7(3)(a) that an arbitrator may be of a certain religion; this was because, if parties desired arbitrators of a certain religion, then by ensuring that this requirement was met, the parties would have a heightened confidence in the decision of the arbitrators. However in my view the Court failed to actually lay down the breadth of such discretion available in selection. Conclusion Many have argued that the judgment is a commercially sensible one which respects and upholds the principle of party autonomy in arbitration.19 The Judgment in Jivraj lays to rest the uncertainty that the arbitrators can be appointed from a certain nationality and of certain religion without the arbitration clause being rendered void. While London may have become a commercially desirable centre for arbitration20 it has failed to draw a line between what is discriminatory and what is not in arbitration. It has failed to provide an answer as to where do limits to party autonomy lie. Renowned lawyer Sarosh Zaiwalla recommends the anti-discrimination law need to be applied on a broader scale and select an arbitrator on basis of religion or sex or nationality when it falls genuinely under genuine occupational requirement. This may lead to reconciliation in terms of providing a balanced approach. However it can be a solution only if arbitrator is considered an employee. The aim of Court of Appeals decision was to eliminate any form of discrimination. Such laws then have to be promulgated that cover self-employed/independent service providers like the arbitrators who can fall under the anti-discriminatory laws. Perhaps section 1(b) of the Arbitration Act 1996 that includes a public interest limitation21 will be signified in future cases where the Courts will have to face the issues discussed above and provide workable solutions and limits as mentioned earlier. It is known that the parties are allowed to decide on the characteristics of the arbitrators expressly or through institutional rules however following Jivraj it is worth raising the question as to how far can those requirements go?22 The pro-arbitration stance taken by English Courts to maintain London as a commercially appealing seat for arbitration has led them to ignore major forms of discrimination which will have serious wider implication in the long-run. Indeed this is the price to pay for preserving London as the hub of Arbitration. In a nutshell the UK Supreme Court in Jivraj has failed to uphold the notions of equality and justice. Bibliography Primary Source Statutes Arbitration Act 1996 Equality Act 2010 Employment Equality (Religion or Belief) Regulations 2003 Council Framework Directive 2000/78/EC of 27 November, 2000 Judicial decisions Jivraj v. Hashwani (2011 UKSC 40) Allonby v. Accrington and Rossendale College (2004 ECR 1-873) Virdee v. Virdi [2003] All ER (D)46) Secondary Source Books Onyema, Emilia (2010) International Commercial Arbitration and the Arbitrator's Contract. London and New York: Routledge, Taylor & Francis Group. Redfern & Hunter (2009) 5th Edition, chapters 4 & 5 Tweeddale & Tweeddale, (2007) Arbitration of Commercial Disputes, Oxford University Press Russell on Arbitration (2009) 23rd Edition, Sweet and Maxwell Gary Born, International Commercial Arbitration (2009), Volume 1, Other Sources Article Richard Buxton, Discrimination in Employment: the Supreme Court Draws a Line 128 (2012) LQR 1, 2. Hussain Rashid -Resolving Commercial dispute through Arbitration and ADR in Pakistan 161 NLJ 1248 -16 September 2011- A victory for common sense Sarosh Ziawalla: Are Arbitrators not human? Are they from Mars? Why should Arbitrators be treated differently? Piero Bernardini-LCIA Journal Volume 20 Number 2 2004 -Role of International Arbitrator Karthik Mittal Ziawalla and Co Solicitors, An Arbitrator is an Employee within meaning of Employment Regulations (Religion or Belief) Regulations 2003 White & Case 27 July 2011, Jivraj v. Hashwani- England's highest court supports autonomy and flexibility in arbitration. David Owen; Rebecca Podd (Clyde & Co) Reed Elsevier (UK) Ltd. 2011: Arbitrators are not employees Berwin Leighton Paisner on 27th July 2011: Jivraj: Sanity Prevails Richard Smith; Angeline Welsh; Manish Aggarwal -International Arbitration Law Review 2011 Jivraj v. Hashwani - the UK Supreme Court overturns a controversial Court of Appeal ruling on arbitration clauses Philippe Fouchard, "Relationships Between the Arbitrator and the Parties and the Arbitral Institution", ICC Bull Special Suppl on the Status of the Arbitrator 12 (1995) Hew R Dundas, 'The Return of Normality: the UK Supreme Court decides Jivraj' (2011) Arbitration 467, 472. Christopher Style; Philomena Cleobury, Jivraj v. 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