JUDGMENT
Jivraj (Respondent) v Hashwani (Appellant)
Jivraj (Appellant) v Hashwani (Respondent)
before
Lord Phillips, President
Lord Walker
Lord Mance
Lord Clarke
Lord Dyson
JUDGMENT GIVEN ON
27 July 2011
Heard on 6 and 7 April 2011
Appellant Respondent
Michael Brindle QC Rhodri Davies QC
Brian Dye Schona Jolly
(Instructed by Zaiwalla
and Co)
(Instructed by Hill
Dickinson LLP)
Appellant Respondent
Rhodri Davies QC Michael Brindle QC
Schona Jolly Brian Dye
(Instructed by Hill
Dickinson LLP)
(Instructed by Zaiwalla
and Co)
Intervener (The London
Court of International
Arbitration)
Intervener (The
International Chamber of
Commerce)
Laurence Rabinowitz QC Thomas Linden QC
Christopher Style QC
Christopher McCrudden
Toby Landau QC
Paul Key
David Craig
(Instructed by Linklaters
LLP)
(Instructed by Allen &
Overy LLP)
Intervener (His Highness
Prince Aga Khan Shia
Imami Ismaili,
International Conciliation
and Arbitration Board)
Rabinder Singh QC
Aileen McColgan
(Instructed by Clifford
Chance LLP)
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LORD CLARKE, with whom Lord Phillips, Lord Walker and Lord Dyson
agree
Introduction
1. On 29 January 1981 Mr Jivraj and Mr Hashwani entered into a joint venture
agreement (“the JVA”), containing an arbitration clause which provided that, in
the event of a dispute between them which they were unable to resolve, that
dispute should be resolved by arbitration before three arbitrators, each of whom
should be a respected member of the Ismaili community, of which they were both
members. The principal question in this appeal is whether that arbitration
agreement became void with effect from 2 December 2003 under the Employment
Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) (“the Regulations”)
on the ground that it constituted an unlawful arrangement to discriminate on
grounds of religion when choosing between persons offering personal services.
The JVA
2. The JVA was established to make investments in real estate around the
world. By article 9 it is expressly governed by English law. Article 8 provides, so
far as material, as follows:
“(1) If any dispute difference or question shall at any time hereafter
arise between the investors with respect to the construction of this
agreement or concerning anything herein contained or arising out of
this agreement or as to the rights liabilities or duties of the investors
or either of them or arising out of (without limitation) any of the
businesses or activities of the joint venture herein agreed the same
(subject to sub-clause 8(5) below) shall be referred to three
arbitrators (acting by a majority) one to be appointed by each party
and the third arbitrator to be the President of the HH Aga Khan
National Council for the United Kingdom for the time being. All
arbitrators shall be respected members of the Ismaili community and
holders of high office within the community.
(2) The arbitration shall take place in London and the arbitrators’
award shall be final and binding on both parties.”
The Ismaili community comprises Shia Imami Ismaili Muslims. It is led by the
Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.
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The disputes
3. During the 1980s the joint venture came to comprise substantial business
interests, first in Canada and later in the United States, Pakistan and the United
Kingdom, with investments in properties, hotels and the oil industry. By late 1988
Mr Jivraj and Mr Hashwani had agreed to part company. On 30 October 1988 they
entered into an agreement under which they appointed a three man conciliation
panel (“the panel”) for the purpose of the division of the joint venture assets. Each
member of the panel was a respected member of the Ismaili community. The panel
operated between October 1988 and February 1990 and many of the assets were
divided between the parties in accordance with its directions. It was however
unable to resolve all the issues between the parties. The parties then agreed to
submit the remaining issues to arbitration or conciliation by a single member of the
Ismaili community, namely Mr Zaher Ahamed. He issued a determination in
December 1993, whereafter he had further exchanges with the parties until 1995,
when he declared himself defeated.
4. The principal matters which remained in dispute were, on the one hand, a
claim by Mr Hashwani that there remained a balance due to him and, on the other
hand, a claim by Mr Jivraj that Mr Hashwani had failed to declare certain tax
liabilities which left Mr Jivraj with a potential for secondary liability. These
matters remained in dispute for some years. Then, on 31 July 2008, Messrs
Zaiwalla & Co, acting on behalf of Mr Hashwani, wrote to Mr Jivraj asserting a
claim for US$1,412,494, together with interest, compounded quarterly from 1994,
making a total of US$4,403,817. The letter gave notice that Mr Hashwani had
appointed Sir Anthony Colman as an arbitrator under article 8 of the JVA and that,
if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken
to appoint Sir Anthony as sole arbitrator. The letter added that Mr Hashwani did
not regard himself as bound by the provision that the arbitrators should be
members of the Ismaili community because such a requirement “would now
amount to religious discrimination which would violate the Human Rights Act
1998 and therefore must be regarded as void”. It is common ground, on the one
hand, that Sir Anthony Colman is not a member of the Ismaili community and, on
the other hand, that he is a retired judge of the Commercial Court with substantial
experience of the resolution of commercial disputes, both as a judge and as an
arbitrator.
5. Mr Jivraj’s response to the letter was to start proceedings in the Commercial
Court seeking a declaration that the appointment of Sir Anthony was invalid
because he is not a member of the Ismaili community. Mr Hashwani subsequently
issued an arbitration claim form seeking an order that Sir Anthony be appointed
sole arbitrator pursuant to section 18(2) of the Arbitration Act 1996 (“the 1996
Act”). The application was made on the basis that the requirement that the
arbitrators be members of the Ismaili community, although lawful when the
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agreement was made, had been rendered unlawful and was void because it
contravened the Regulations.
The Regulations
6. The Regulations were made in the exercise of powers conferred by the
European Communities Act 1972 following the making of the Council Framework
Directive 2000/78/EC of 27 November 2000 (OJ 2000 L303, p 16) (“the
Directive”) which, by article 1, was itself made for the purpose of establishing:
“a general framework for combating discrimination on the grounds
of religion or belief, disability, age or sexual orientation as regards
employment and occupation, with a view to putting into effect in the
member states the principle of equal treatment.”
7. The Regulations (as amended by section 77(2) of the Equality Act 2006)
provide, so far as material, as follows:
“2 Interpretation …
(3) In these Regulations … references to ‘employer’, in their
application to a person at any time seeking to employ another,
include a person who has no employees at that time; ‘employment’
means employment under a contract of service or of apprenticeship
or a contract personally to do any work, and related expressions shall
be construed accordingly …;
3 Discrimination on grounds of religion or belief
(1) For the purposes of these Regulations, a person (‘A’)
discriminates against another person (‘B’) if –
(a) on the grounds of the religion or belief of B or of any
other person except A (whether or not it is also A’s
religion or belief), A treats B less favourably than he
treats or would treat other persons;
6 Applicants and employees
(1) It is unlawful for an employer, in relation to employment by
him at an establishment in Great Britain, to discriminate against a
person –
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(a) in the arrangements he makes for the purpose of
determining to whom he should offer employment;
(b) in the terms on which he offers that person
employment; or
(c) by refusing to offer, or deliberately not offering, him
employment.
7 Exception for genuine occupational requirement
(1) In relation to discrimination falling within regulation 3
(discrimination on grounds of religion or belief) –
(a) regulation 6(1)(a) or (c) does not apply to any
employment … where paragraph (2) or (3) applies.
(2) This paragraph applies where, having regard to the nature of
the employment or the context in which it is carried out –
(a) being of a particular religion or belief is a genuine and
determining occupational requirement;
(b) it is proportionate to apply that requirement in the
particular case; and
(c) either – (i) the person to whom that requirement is
applied does not meet it, or (ii) the employer is not satisfied,
and in all the circumstances it is reasonable for him not to be
satisfied, that that person meets it,
and this paragraph applies whether or not the employer has an
ethos based on religion or belief.
(3) This paragraph applies where an employer has an ethos based
on religion or belief and, having regard to that ethos and to the nature
of the employment or the context in which it is carried out –
(a) being of a particular religion or belief is a genuine
occupational requirement for the job;
(b) it is proportionate to apply that requirement in the
particular case; and
(c) either – (i) the person to whom that requirement is
applied does not meet it, or (ii) the employer is not
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satisfied, and in all the circumstances it is reasonable
for him not to be satisfied, that that person meets it.”
The Directive
8. It is common ground that the Regulations must, so far as possible, be
construed to give effect to the objective of the Directive which they were designed
to implement: see eg Marleasing SA v La Comercial Internacional de
Alimentacion SA (Case C-106/89) [1990] ECR I-4135 and Litster v Forth Dry
Dock & Engineering Co Ltd [1990] 1 AC 546. It is also common ground that,
although the arbitration agreement was on any view lawful when it was made, it
became subject to the provisions of the Regulations, insofar as they applied to it.
9. The Directive provides, so far as material, as follows:
“Article 1
Purpose
The purpose of this Directive is to lay down a general framework for
combating discrimination on the grounds of religion or belief,
disability, age or sexual orientation as regards employment and
occupation, with a view to putting into effect in the member states
the principle of equal treatment.
Article 2
Concept of discrimination
(1) For the purposes of this Directive, the ‘principle of equal
treatment’ shall mean that there shall be no direct or indirect
discrimination whatsoever on any of the grounds referred to in article
1.
…
Article 3
Scope
(1) Within the limits of the areas of competence conferred on the
Community, this Directive shall apply to all persons, as regards both
the public and private sectors, including public bodies, in relation to-
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(a) conditions for access to employment, to self-employment
or to occupation, including selection criteria and recruitment
conditions, whatever the branch of activity and at all levels of
the professional hierarchy, including promotion;
(b) access to all types and to all levels of vocational guidance,
vocational training, advanced vocational training and
retraining, including practical work experience;
(c) employment and working conditions, including dismissals
and pay;
(d) membership of, and involvement in, an organisation of
workers or employers, or any organisation whose members
carry on a particular profession, including the benefits
provided for by such organisations.”
10. As Moore-Bick LJ, giving the judgment of the Court of Appeal, observed at
para 8, the Directive is concerned with discrimination on the grounds of religion or
belief, disability, age and sexual orientation. It is therefore much wider in its scope
than the Regulations, which are concerned only with discrimination on the grounds
of religion or belief. The explanation lies in the fact that the United Kingdom had
already introduced legislation dealing with discrimination on most of the other
grounds covered by the Directive in connection with employment and occupation.
Discrimination on the grounds of sex was rendered unlawful by the Sex
Discrimination Act 1975 (“the SDA 1975”), discrimination on the grounds of race
by the Race Relations Acts 1968 and 1976, discrimination on the grounds of
disability by the Disability Discrimination Act 1995. Legislation dealing with
discrimination on the grounds of age, sexual orientation and religion or belief was
still required to ensure compliance with the Directive. The Regulations deal with
discrimination on the grounds of religion or belief. The Employment Equality
(Sexual Orientation) Regulations 2003 (SI 2003/1661) provided for discrimination
on the grounds of sexual orientation, and discrimination on the grounds of age was
subsequently covered by the Employment Equality (Age) Regulations 2006.
11. Again as observed by the Court of Appeal (at para 9), the form of the
Regulations follows closely that of the earlier legislation, in particular in defining
“employment” as including a contract personally to do work of any kind.
Moreover, the language of regulation 6 is identical to, or differs in no significant
respect from, that used in the other legislation dealing with discrimination. It
follows that the Regulations must be understood as complementing all the other
legislation prohibiting discrimination.
Page 8
12. This uniformity of the law relating to the areas in which discrimination is
forbidden has now been reinforced by the Equality Act 2010 (“the EA”), which
applies to all of the cases protected by the earlier legislation. The EA is, among
other things, an Act “to reform and harmonise equality law and restate the greater
part of the enactments relating to discrimination”. The Regulations were amongst
those enactments restated by the EA. They were revoked by section 211 and
Schedule 27, Part 2. The revocation took effect on 1 October 2010. The current
law is therefore as stated in the Act rather than the Regulations. It was not however
suggested in the course of the argument that any of the issues in this appeal is
affected by the revocation of the Regulations.
First instance
13. Both parties’ applications were determined by David Steel J (“the judge”)
on 26 June 2009: see [2009] EWHC 1364 (Comm), [2010] 1 All ER 302. In the
meantime on 11 March 2009, which was before the applications were heard, the
solicitors for Mr Jivraj wrote an open letter to the solicitors for Mr Hashwani
offering him the option of pursuing his claim in the High Court on the basis that
Mr Jivraj would not seek a stay on the basis of the arbitration clause. Mr Hashwani
did not accept the offer.
14. It was submitted before the judge on behalf of Mr Hashwani that the term
requiring arbitrators to be members of the Ismaili community was invalid by
reason of one or more of the following: the Regulations, the Human Rights Act
1998 (“the HRA”), or public policy at common law. The judge held (i) that the
term did not constitute unlawful discrimination on any of those bases and,
specifically, that arbitrators were not “employed” within the meaning of the
Regulations; (ii) that if, nonetheless, appointment of arbitrators fell within the
scope of the Regulations, it was demonstrated that one of the more significant
characteristics of the Ismaili sect was an enthusiasm for dispute resolution within
the Ismaili community, that this was an “ethos based on religion” within the
meaning of the Regulations and that the requirement for the arbitrators to be
members of the Ismaili community constituted a genuine occupational requirement
which it was proportionate to apply within regulation 7(3); and (iii) that, if that
was also wrong, the requirement was not severable from the arbitration provision
as a whole, so that the whole arbitration clause would be void. The judge ordered
Mr Hashwani to pay Mr Jivraj’s costs and refused Mr Hashwani’s application for
permission to appeal.
Page 9
The Court of Appeal
15. On 7 October 2009 Sir Richard Buxton granted permission to appeal
limited to the issues on the Regulations and on severance. Permission was refused
on the HRA and public policy issues. The issues in the Court of Appeal were
therefore these:
i) Are arbitrators persons who are under a contract to do work so as to
fall within the Regulations and, if so, do parties who make an
arbitration agreement specifying religious qualifications for eligible
arbitrators thereby make an arrangement for the purpose of
determining to whom they should offer employment or do they agree
to offer, or deliberately not to offer, employment within the meaning
of the Regulations?
ii) If so, in the circumstances, did the requirement for all the arbitrators
to be members of the Ismaili community constitute a genuine
occupational requirement (“GOR”) which it was proportionate to
apply within regulation 7(3)?
iii) If not, did the whole arbitration agreement fail or was only the
discriminatory provision void?
16. The unanimous judgment of the Court of Appeal, which comprised MooreBick and Aikens LJJ and Sir Richard Buxton, was handed down on 22 June 2010:
see [2010] EWCA Civ 712, [2010] ICR 1435. The Court of Appeal reached a
different conclusion from the judge on the principal points. It held that the
appointment of an arbitrator involved a contract for the provision of services which
constituted “a contract personally to do any work”, and therefore satisfied the
definition of “employment” in regulation 2(3). It followed that the appointor was
an “employer” within the meaning of regulation 6(1) and that the restriction of
eligibility for appointment as an arbitrator to members of the Ismaili community
constituted unlawful discrimination on religious grounds, both in making
“arrangements … for the purpose of determining to whom he should offer
employment” contrary to regulation 6(1)(a), and by “refusing to offer, or
deliberately not offering” employment contrary to regulation 6(1)(c). The Court of
Appeal further held that being a member of the Ismaili community was not “a
genuine occupational requirement for the job” within the meaning of the exception
in regulation 7(3). It is submitted on behalf of Mr Jivraj that both those
conclusions were wrong.
Page 10
17. Finally the Court of Appeal held that, although there would be no difficulty
in operating the agreement if the offending requirement was struck out, so doing
would render the agreement substantially different from that originally intended,
the term was void in its entirety under paragraph 1(1) of Schedule 4 to the
Regulations and Mr Hashwani’s nomination of an arbitrator was invalid. It is
submitted on behalf of Mr Hashwani that both the judge and the Court of Appeal
were wrong on this point, which I will call “the severance issue”.
18. A further point arises out of the Court of Appeal’s order on costs if its
judgment is upheld on each of the above points.
Employment
19. The reasoning of the Court of Appeal was straightforward: see paras 15-17.
In short the Court of Appeal drew attention to the wide terms of articles 1 and 3 of
the Directive. In particular it noted at para 15 that the recitals to the Directive and
the structure and language of article 3(1) as a whole indicate that it is concerned
with discrimination affecting access to the means of economic activity, whether
through employment, self-employment or some other basis of occupation, access
to vocational guidance and training (which can be expected to provide a means of
access to economic activity), conditions of employment (which affect those who
have gained access to a means of economic activity) and membership of bodies
whose purpose is to affect conditions of recruitment or employment or to regulate
access to a particular form of economic activity, such as professional bodies that
directly or indirectly control access to the profession or a significant means of
obtaining work.
20. The Court of Appeal then said at para 16:
“The paradigm case of appointing an arbitrator involves obtaining
the services of a particular person to determine a dispute in
accordance with the agreement between the parties and the rules of
law, including those to be found in the legislation governing
arbitration. In that respect it is no different from instructing a
solicitor to deal with a particular piece of legal business, such as
drafting a will, or consulting a doctor about a particular ailment or an
accountant about a tax return. Since an arbitrator (or any professional
person) contracts to do work personally, the provision of his services
falls within the definition of ‘employment’, and it follows that his
appointor must be an employer within the meaning of regulation
6(1)…”
Page 11
21. In paras 16 and 17 it placed reliance on three cases. It relied upon von
Hoffmann v Finanzamt Trier (Case C-145/96) [1997] All ER (EC) 852 as showing
that arbitrators had been treated as providing services for VAT purposes. It also
referred to domestic regulations relating to goods and services. It further derived
support from Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and
from Percy v Board of National Mission of the Church of Scotland [2005] UKHL
73, [2006] 2 AC 28. It recognised that those cases were addressing slightly
different points but concluded that they illustrate the width of the expression “a
contract personally to do any work” in the various discrimination statutes. It
concluded thus in para 17:
“They confirm our view that the expression is apt to encompass the
position of a person who provides services as an arbitrator, and why
we think the judge was wrong to hold that the nature of the
arbitrator’s function takes his appointment outside the scope of the
2003 Regulations. Moreover, a contract of that kind, once made, is a
contract of employment within the meaning of the 2003 Regulations.
It follows, therefore, that for the purposes of the 2003 Regulations a
person who has entered into a contract under which he is to obtain
such services is an employer and the person engaged to provide them
is an employee.”
22. The critical question under this head is whether the Court of Appeal was
correct to form a different view from the judge on this point. In my opinion it was
not. As the Court of Appeal correctly observed at para 15, the meaning of article 3
of the Directive has not been considered by the Court of Justice, and is to be
interpreted in the light of the recitals and given its natural meaning consistent with
the EC Treaty and the existing case law of the court.
23. It is common ground, at any rate in this class of case, that there is a contract
between the parties and the arbitrator or arbitrators appointed under a contract and
that his or their services are rendered pursuant to that contract. It is not suggested
that such a contract provides for “employment under a contract of service or of
apprenticeship”. The question is whether it provides for “employment under … a
contract personally to do any work”. There is in my opinion some significance in
the fact that the definition does not simply refer to a contract to do work but to
“employment under” such a contract. I would answer the question in the negative
on the ground that the role of an arbitrator is not naturally described as
employment under a contract personally to do work. That is because his role is not
naturally described as one of employment at all. I appreciate that there is an
element of circularity in that approach but the definition is of “employment” and
this approach is consistent with the decided cases.
Page 12
24. Given the provenance of the Regulations, it is appropriate to consider first
the decisions of the Court of Justice. The most important of these is perhaps
Allonby v Accrington and Rossendale College (Case C-256/01) [2004] ICR 1328,
where the Court of Justice followed the principles laid down in Lawrie-Blum v
Land Baden-Wurttemberg (Case C-66/85) [1987] ICR 483 and in Kurz v Land
Baden-Wurttemberg (Case C-188/00) [2002] ECR I-10691. In Lawrie-Blum,
which was concerned with the free movement of “workers” under what was then
article 48 of the Treaty, Advocate General Lenz said at para III 2(b) of his opinion
that the term worker covers any employed person who is not self-employed. The
court said at para 17:
“That concept [ie of ‘worker’] must be defined with objective criteria
which distinguish the employment relationship by reference to the
rights and duties of the persons concerned. The essential feature of
an employment relationship, however, is that for a certain period of
time a person performs services for and under the direction of
another person in return for which he receives remuneration.”
25. In Kurz the court said at para 32 that it was settled case law that the concept
of worker has a specific Community meaning and must not be interpreted
narrowly. The court then repeated the essential feature of the relationship
identified in the above passage from Lawrie-Blum.
26. In Allonby the court addressed an equal pay claim by a college lecturer who
had been dismissed by the college and then re-engaged, ostensibly as a selfemployed sub-contractor supplied by an agency. For the purposes of article 141(1)
of the EC Treaty, the court drew a clear distinction between “workers” and
“independent suppliers of services”. It discussed the concept of worker within the
meaning of article 141(1) between paras 62 and 72, which included the following:
“62. The criterion on which article 141(1) EC is based is the
comparability of the work done by workers of each sex: see, to that
effect, Defrenne v Sabena (No 2) (Case 149/77) [1978] ECR 1365,
1377, para 22. Accordingly, for the purpose of the comparison
provided for by article 141(1) EC, only women and men who are
workers within the meaning of that article can be taken into
consideration.
63. In that connection, it must be pointed out that there is no
single definition of worker in Community law: it varies according to
the area in which the definition is to be applied: Martinez Sala v
Freistaat Bayern (Case C-85/96) [1998] ECRI-2691, 2719, para 31.
Page 13
64. The term ‘worker’’ within the meaning of article 141(1) EC is
not expressly defined in the EC Treaty. It is therefore necessary, in
order to determine its meaning, to apply the generally recognised
principles of interpretation, having regard to its context and to the
objectives of the Treaty.
65. According to article 2 EC, the Community is to have as its
task to promote, among other things, equality between men and
women. Article 141(1) EC constitutes a specific expression of the
principle of equality for men and women, which forms part of the
fundamental principles protected by the Community legal order: see,
to that effect, Deutsche Post AG v Sievers (Cases C-270 and 271/97)
[2000] ECR I-929, 952, para 57. As the court held in Defrenne v
Sabena (Case 43/75) [1976] ICR 547, 566, para 12, the principle of
equal pay forms part of the foundations of the Community.
66. Accordingly, the term ‘worker’ used in article 141(1) EC
cannot be defined by reference to the legislation of the member
states but has a Community meaning. Moreover, it cannot be
interpreted restrictively.
67. For the purposes of that provision, there must be considered
as a worker a person who, for a certain period of time, performs
services for and under the direction of another person in return for
which he receives remuneration see, in relation to free movement of
workers, in particular Lawrie-Blum … para 17, and Martinez Sala,
para 32.
68. Pursuant to the first paragraph of article 141(2) EC, for the
purpose of that article, ‘pay’ means the ordinary basic or minimum
wage or salary and any other consideration, whether in cash or in
kind, which the worker receives directly or indirectly, in respect of
his employment, from his employer. It is clear from that definition
that the authors of the Treaty did not intend that the term ‘worker’,
within the meaning of article 141(1) EC, should include independent
providers of services who are not in a relationship of subordination
with the person who receives the services (see also, in the context of
free movement of workers, Meeusen v Hoofddirectie van de
Informatie Beheer Groep (Case C-337/97) [1999] ECR I-3289, 3311,
para 15).
69. The question whether such a relationship exists must be
answered in each particular case having regard to all the factors and
circumstances by which the relationship between the parties is
characterised.
70. Provided that a person is a worker within the meaning of
article 141(1) EC, the nature of his legal relationship with the other
Page 14
party to the employment relationship is of no consequence in regard
to the application of that article: …
71. The formal classification of a self-employed person under
national law does not exclude the possibility that a person must be
classified as a worker within the meaning of article 141(1) EC if his
independence is merely notional, thereby disguising an employment
relationship within the meaning of that article.”
27. On the basis of those materials I would accept Mr Davies’ submission that
the Court of Justice draws a clear distinction between those who are, in substance,
employed and those who are “independent providers of services who are not in a
relationship of subordination with the person who receives the services”. I see no
reason why the same distinction should not be drawn for the purposes of the
Regulations between those who are employed and those who are not notionally but
genuinely self-employed. In the light of Allonby, there can be no doubt that that
would be the correct approach to the near identical definition in section 1(6) of the
Equal Pay Act 1970 and must remain the correct approach to the definition of
employment in section 83(2) of the EA, which provides, so far as relevant:
“‘Employment’ means – (a) employment under a contract of
employment, a contract of apprenticeship or a contract personally to
do work; …”
That definition is almost identical to the definition in regulation 2(3) of the
Regulations and, since it applies to equal pay issues by virtue of sections 83(4),
80(2) and 64 of the EA, it must equally apply to the Regulations.
28. In my opinion there is nothing in the domestic authorities which requires
the court to come to any different conclusion. The problem with some of them is
that they do not refer to the jurisprudence of the Court of Justice. However, the
most recent decision of the House of Lords does. In Percy v Board of National
Mission of the Church of Scotland [2006] 2 AC 28 the House of Lords considered
a sex discrimination claim brought by a woman who was a minister of the Church
of Scotland. The issue was whether she was employed within the meaning of
section 82(1) of the SDA 1975. The House held that she was. Lord Hoffmann
dissented on the basis that she was the holder of an office but had no doubt (at para
66) that, if the arrangement had been contractual, it would plainly have been a
contract of service.
29. Lord Hoffmann said at para 73 that the term “workers” is a term of art in
Community law which was defined by the Court of Justice in the passage from
para 17 of Lawrie-Blum quoted at para 24 above. Lord Hope of Craighead said
Page 15
much the same at para 126, where he also noted that the same approach was taken
in Allonby.
30. Baroness Hale of Richmond referred at para 141 to para A[4] of Harvey on
Industrial Relations and Employment Law, which stated that:
“the distinction is between those who work for themselves and those
who work for others, regardless of the nature of the contract under
which they are employed.”
She then referred at para 143 to the decision of the Court of Appeal in Northern
Ireland in Perceval-Price v Department of Economic Development [2000] IRLR
380, where it was held that three full-time judicial office holders, namely a fulltime chairman of industrial tribunals, a full-time chairman of social security appeal
tribunals and a social security commissioner were workers for the purposes of
almost identical provisions.
31. In para 145, after quoting the definition of an employment relationship in
Lawrie-Blum, Baroness Hale noted that, in giving the judgment of the court in
Perceval-Price, Sir Robert Carswell LCJ said that the objective of the relevant EC
legislation was to give protection against inequality and discrimination to those
who might be vulnerable to exploitation. He also said that the concept of a worker
should be construed purposively by reference to this objective. Baroness Hale then
quoted this extract from the judgment of Sir Robert Carswell:
“All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from
any source, which the respondents quite rightly defended as an
essential part of their work. They all need some organisation of their
sittings, whether it be prescribed by the president of the industrial
tribunals or the court service, or more loosely arranged in collegiate
fashion between the judges of a particular court. They are all
expected to work during defined times and periods, whether they be
rigidly laid down or managed by the judges themselves with a
greater degree of flexibility. They are not free agents to work as and
when they choose, as are self-employed persons. Their office
accordingly partakes of some of the characteristics of employment . .
.”
32. At para 146 Baroness Hale continued:
Page 16
“I have quoted those words at length because they illustrate how the
essential distinction is, as Harvey says, between the employed and
the self-employed. The fact that the worker has very considerable
freedom and independence in how she performs the duties of her
office does not take her outside the definition. Judges are servants of
the law, in the sense that the law governs all that they do and decide,
just as clergy are servants of God, in the sense that God’s word, as
interpreted in the doctrines of their faith, governs all that they
practise, preach and teach. This does not mean that they cannot be
‘workers’ or in the ‘employment’ of those who decide how their
ministry should be put to the service of the Church.”
33. Some consideration was recently given to the position of part-time judges
by this court in O’Brien v Ministry of Justice (Note) [2010] UKSC 34, [2010] 4 All
ER 62 where the court considered Percy in some detail in a judgment of the court
given by Lord Walker. At para 25 it referred to the same passage in Lawrie-Blum
as having laid down the relevant principle and at para 26 it referred to the speech
of Baroness Hale and approved the passage quoted above from the judgment of Sir
Robert Carswell in Perceval-Price.
34. As I read Percy, it sought to apply the principles identified by the Court of
Justice, as indeed did this court in O’Brien [2010] 4 All ER 62. The essential
questions in each case are therefore those identified in paras 67 and 68 of Allonby
[2004] ICR 1328, namely whether, on the one hand, the person concerned
performs services for and under the direction of another person in return for which
he or she receives remuneration or, on the other hand, he or she is an independent
provider of services who is not in a relationship of subordination with the person
who receives the services. Those are broad questions which depend upon the
circumstances of the particular case. They depend upon a detailed consideration of
the relationship between the parties. As I see it, that is what Baroness Hale meant
when she said that the essential difference is between the employed and the selfemployed. The answer will depend upon an analysis of the substance of the matter
having regard to all the circumstances of the case. I would not accept the Court of
Appeal’s analysis (at para 21) of Baroness Hale’s speech in this regard.
35. There have been a number of domestic cases which say that the question is
whether the dominant purpose of the contract is the execution of personal work or
labour: see eg Quinnen v Hovells [1984] ICR 525, Mirror Group Newspapers Ltd
v Gunning [1986] 1 WLR 546, especially per Oliver LJ at 551H and Balcombe LJ
at 556H; Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and Percy
[2006] 2 AC 28 per Lord Hope at para 113, where he referred to two other cases in
the Court of Appeal, namely Patterson v Legal Services Commission [2004] ICR
312 and Mingeley v Pennock (trading as Amber Cars) [2004] ICR 727. Mr
Michael Brindle QC also referred on behalf of the respondent to two earlier cases
Page 17
which focus on the question whether a contract is one “personally to execute any
work or labour”: see Tanna v Post Office [1981] ICR 374 and Hugh-Jones v St
John’s College, Cambridge [1979] ICR 848. However, none of these cases
considered the approach in the decisions of the Court of Justice referred to above.
36. In particular, the cases did not focus on the fact that the “employment” must
be employment under a contract of employment, a contract of apprenticeship or a
contract personally to do work. (My emphasis). Given the importance of the EC
perspective in construing the legislation, including the Regulations, the cases must
now be read in the light of those decisions. They show that it is not sufficient to
ask simply whether the contract was a contract personally to do work. They also
show that dominant purpose is not the test, or at any rate not the sole test.
37. That is not to say that the question of purpose is irrelevant but the focus is
on the contract and relationship between the parties rather than exclusively on
purpose. Elias J, sitting as President of the Employment Appeal Tribunal,
recognised some of the difficulties in James v Redcats (Brands) Ltd [2007] ICR
1006. He discussed the relevance of dominant purpose in this context by reference
to the cases at paras 53 to 68. At para 59, after quoting from the judgment of
Balcombe LJ in Gunning [1986] 1 WLR 546, he said that the dominant purpose
test is really an attempt to identify the essential nature of the contract. In the
context of the case he was considering he posed the question whether it was in
essence to be located in the field of dependent work relationships or whether it was
in essence a contract between two independent business undertakings.
38. At paras 67 and 68, after referring to a number of cases and observing at
para 65 that the description of the test as one of identifying the dominant purpose
was perhaps not an altogether happy one, he said this:
“67. An alternative way of putting it may be to say that the courts
are seeking to discover whether the obligation for personal service is
the dominant feature of the contractual arrangement or not. If it is,
then the contract lies in the employment field; if it is not – if, for
example, the dominant feature of the contract is a particular outcome
or objective – and the obligation to provide personal service is an
incidental or secondary consideration, it will lie in the business field.
68. This is not to suggest that a tribunal will be in error in failing
specifically to apply the ‘dominant purpose’ or indeed any other test.
The appropriate classification will in every case depend upon a
careful analysis of all the elements of the relationship, as Mr
Recorder Underhill QC pointed out in Byrne Bros (Formwork) Ltd v
Page 18
Baird [2002] ICR 667. It is a fact sensitive issue, and there is no
shortcut to a considered assessment of all relevant factors. However,
in some cases the application of the ‘dominant purpose’ test may
help tribunals to decide which side of the boundary a particular case
lies.”
39. It is noteworthy that the European cases were not cited in many of the
cases, including that before Elias J. In the light of the European cases, dominant
purpose cannot be the sole test, although it may well be relevant in arriving at the
correct conclusion on the facts of a particular case. After all, if the dominant
purpose of the contract is the execution of personal work, it seems likely that the
relationship will be, in the words of Allonby [2004] ICR 1328, para 67, a case in
which the person concerned performs services for and under the direction of the
other party to the contract in return for remuneration as opposed to an independent
provider of services who is not in a relationship of subordination with him or it.
This may not be so however because, although the dominant purpose of the
contract may be personal work, it may not be personal work under the direction of
the other party to the contract. All will depend upon the applications of the
principles in Allonby to the circumstances of the particular case.
40. If the approach in Allonby is applied to a contract between the parties to an
arbitration and the arbitrator (or arbitrators), it is in my opinion plain that the
arbitrators’ role is not one of employment under a contract personally to do work.
Although an arbitrator may be providing services for the purposes of VAT and he
of course receives fees for his work, and although he renders personal services
which he cannot delegate, he does not perform those services or earn his fees for
and under the direction of the parties as contemplated in para 67 of Allonby. He is
rather in the category of an independent provider of services who is not in a
relationship of subordination with the parties who receive his services, as
described in para 68.
41. The arbitrator is in critical respects independent of the parties. His functions
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. As the
International Chamber of Commerce (“the ICC”) puts it, he must determine how to
resolve their competing interests. He is in no sense in a position of subordination
to the parties; rather the contrary. He is in effect a “quasi-judicial adjudicator”:
K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1992] QB 863, 885.
42. In England his role is spelled out in the 1996 Act. By section 33, he has a
duty to act fairly and impartially as between the parties and to adopt procedures
suitable to the circumstances of the particular case so as to provide a fair means of
determination of the issues between the parties. Section 34 provides that, subject
Page 19
to the right of the parties to agree any matter, it is for the arbitrator to decide all
procedural matters. Examples of the width of those powers can be seen in the
particular examples in section 34(2). Section 40 provides that the parties shall do
all things necessary for the proper and expeditious conduct of the arbitration,
which includes complying with any order of the arbitrator, whether procedural or
otherwise. Once an arbitrator has been appointed, at any rate in the absence of
agreement between them, the parties effectively have no control over him. Unless
the parties agree, an arbitrator may only be removed in exceptional circumstances:
see sections 23 and 24. The court was referred to many other statutory provisions
in other parts of the world and indeed many other international codes, including
the UNCITRAL (United Nations Commission on International Trade Law) Model
Law on International Commercial Arbitration 1985, the ICC Rules and the London
Court of International Arbitration (“the LCIA”) Rules to similar effect.
43. The Regulations themselves include provisions which would be wholly
inappropriate as between the parties and the arbitrator or arbitrators. For example,
regulation 22(1) provides:
“Anything done by a person in the course of his employment shall be
treated for the purposes of these Regulations as done by his
employer as well as by him, whether or not it was done with the
employer’s knowledge or approval.”
It is evident that such a provision could not apply to an arbitrator.
44. In this regard an arbitrator is in a very different position from a judge. The
precise status of a judge was left open by this court in O’Brien [2010] 4 All ER 62,
in which the court referred particular questions to the Court of Justice: see para 41.
However, as Sir Robert Carswell said in Perceval-Price [2000] IRLR 380 and
Lord Walker said in O’Brien (at para 27), judges, including both recorders and all
judges at every level are subject to terms of service of various kinds. As Sir Robert
put it, although judges must enjoy independence of decision without direction from
any source, they are in other respects not free agents to work as and when they
choose, as are self-employed persons.
45. In both those cases the court was considering the relationship between the
relevant department of state and the judges concerned. It was not considering the
relationship between the judges and the litigants who appear before them. Here,
by contrast, the court is considering the relationship between the parties to the
arbitration on the one hand and the arbitrator or arbitrators on the other. As I see
it, there is no basis upon which it could properly be held that the arbitrators agreed
to work under the direction of the parties as contemplated in para 67 of Allonby
Page 20
[2004] ICR 1328. Further, in so far as dominant purpose is relevant, I would hold
that the dominant purpose of appointing an arbitrator or arbitrators is the impartial
resolution of the dispute between the parties in accordance with the terms of the
agreement and, although the contract between the parties and the arbitrators would
be a contract for the provision of personal services, they were not personal services
under the direction of the parties.
46. In reaching this conclusion it is not necessary to speculate upon what the
position might be in other factual contexts. It was submitted that the effect of the
decision of the Court of Appeal is that a customer who engages a person on a oneoff contract as, say, a plumber, would be subject to the whole gamut of
discrimination legislation. It would indeed be surprising if that were the case,
especially given the fact that the travaux préparatoires contained no such
suggestion: see the impact assessment in the Commission’s Proposal for the
Directive 1999/0225 (CNS), Brussels 1999, which was concerned solely with the
position of enterprises of various types. There was no consideration of the effect
on individual choice by customers. See also a memorandum from the
Commission’s Director General for Employment and Social Affairs to the EU
Committee of the House of Lords dated 9 February 2000 to much the same effect.
This is not to say that the Regulations may not apply in the case of the plumber,
solicitor, accountant or doctor referred to by the Court of Appeal in para 16. As
already stated, all will depend upon the application of the principles in Allonby to
the particular case. As I see it, the problem with the approach adopted by the Court
of Appeal is that it focuses only on the question whether there is a contract to do
work personally, whereas it is necessary to ask the more nuanced questions
identified in Allonby.
47. In para 19 the Court of Appeal relied in support of its more general
approach upon the opinion of Advocate General Maduro in Centrum voor
Gelijkheid van Kansen en voor Racismebestrijding v Firma Feryn NV (Case C54/07) [2008] ICR 1390. It said this in paras 19 and 20:
“19. That the choice of a solicitor, plumber or arbitrator, whether
on religious, racial or any other grounds, should fall foul of
regulation 6(1) of the 2003 Regulations, even if made entirely
privately, may strike some people as surprising. However, in [the
Firma Feryn case] Advocate General Maduro expressed the opinion,
at para 14, that the Directive must be understood in the framework of
a wider policy to foster conditions for a socially inclusive labour
market and to ensure the development of democratic and tolerant
societies which allow the participation of all persons irrespective of
racial or ethnic origin. That case arose out of a statement by a
company that supplied and fitted up-and-over garage doors that it
would not employ immigrants as fitters because its customers were
Page 21
unwilling to have them in their homes. One can well see why a
public statement of that kind might be regarded as discriminatory: it
was liable to deter potential applicants for employment and thereby
militate against a socially inclusive labour market. The court itself
did not expressly adopt the Advocate General’s expression of
opinion; rather it confined itself to holding, at para 25, that a general
statement of the kind under consideration constituted direct
discrimination because it was likely to deter some potential
applicants and thus hinder their access to the labour market. None
the less, the Advocate General’s view of the broad policy objective of
the Directive is in our opinion supported by the recitals. It is also one
which is essentially incompatible with an acceptance of the right to
discriminate between any providers of services on the basis of race,
sex, religion or any of the other grounds covered by the Directive.
20. Mr. Davies sought to meet that broad analysis by saying that
the primary concern of the Directive is access to employment and
economic activity, not private choices by consumers between those
who have already gained access to the market. The language of
article 3 could be construed in that more limited way, but the
expression ‘access to employment, to self-employment or to
occupation’ is capable of a broader interpretation consistent with the
policy objectives we have described. In any event, we are concerned
with the language of domestic legislation, which is not restricted by
the scope of the Directive and which is underpinned by broadly the
same policy considerations as those identified by Advocate General
Maduro in the Firma Feryn case, whether it was introduced before or
after the publication of the Directive.”
48. I would not accept that analysis. The Firma Feryn case was not relied upon
in the course of the oral argument in the Court of Appeal. It was referred to in
answer to a letter from the Court of Appeal asking questions on the assumption
that an engagement to provide services gave rise to an employment relationship
under the Regulations. The case concerned conventional employment relationships
and did not discuss at all the extension of discrimination law to one-off contracts
for services. The Court of Justice held that a racially discriminatory statement by
an employer as to its recruitment policy could constitute direct discrimination even
if there was no actual “victim”. There was no actual victim because there was no
evidence that anyone who might have lost out as a result of the policy had actually
applied, or would have applied, for a position with that employer. The Advocate
General thus expressed his opinion in a case which was squarely concerned with
employment and not with the boundary between employment and self-employment
and in which no reference was made to Lawrie-Blum [1987] ICR 483, Kurz [2002]
ECR I-10691 or Allonby [2004] ICR 1328.
Page 22
49. Some reliance was placed upon the reference to the “conditions for access
to employment, to self-employment or to occupation, including selection criteria
and recruitment conditions” in article 3(1)(a) of the Directive. In para 20 the Court
of Appeal gave a wide construction to that provision, rejecting the submission
made by Mr Davies that it related to barriers to entry to trades, professions and
occupations. It did so on the same footing as before, namely that a wide meaning
should be given to the terms of the Directive and, in any event, to the Regulations.
However, I would accept Mr Davies’ submission that the expression “access … to
self-employment or to occupation” means what it says and is concerned with
preventing discrimination from qualifying or setting up as a solicitor, plumber,
greengrocer or arbitrator. It is not concerned with discrimination by a customer
who prefers to contract with one of their competitors once they have set up in
business. That would not be denying them “access … to self-employment or to
occupation”. I see no reason to give a different meaning to the Regulations from
that given to the Directive.
50. For these reasons I prefer the conclusion of the judge to that of the Court of
Appeal. I agree with the judge that the Regulations are not applicable to the
selection, engagement or appointment of arbitrators. It follows that I would hold
that no part of clause 8 of the JVA is invalid by reason of the Regulations and
would allow the appeal on this ground.
Genuine occupational requirement
51. If the above conclusion is correct, this point does not arise but it was fully
argued and I will briefly consider it. The question considered by the judge was
whether, if regulation 6(1)(a) or (c) would otherwise apply, it is prevented from
applying by regulation 7(1) and (3). It will be recalled that, by regulation 7(1),
regulations 6(1)(a) and (c) do not apply where regulation 7(3) applies and that
regulation 7(3) provides:
“This paragraph applies where an employer has an ethos based on
religion or belief and, having regard to that ethos and to the nature of
the employment or the context in which it is carried out—
(a) being of a particular religion or belief is a genuine
occupational requirement for the job;
(b) it is proportionate to apply that requirement in the
particular case; and
(c) either—
Page 23
(i) the person to whom that requirement is
applied does not meet it, or
(ii) the employer is not satisfied, and in all the
circumstances it is reasonable for him not to be
satisfied, that that person meets it.”
52. Those provisions were made in accordance with the exceptions in relation
to occupational requirements made by article 4 of the Directive, which provides:
“1. Notwithstanding article 2(1) and (2), member states may
provide that a difference of treatment which is based on a
characteristic related to any of the grounds referred to in article 1
shall not constitute discrimination where, by reason of the nature of
the particular occupational activities concerned or of the context in
which they are carried out, such a characteristic constitutes a genuine
and determining occupational requirement, provided that the
objective is legitimate and the requirement is proportionate.”
2. Member states may maintain national legislation in force at
the date of adoption of this Directive or provide for future legislation
incorporating national practices existing at the date of adoption of
this Directive pursuant to which, in the case of occupational
activities within churches and other public or private organisations
the ethos of which is based on religion or belief, a difference of
treatment based on a person’s religion or belief shall not constitute
discrimination where, by reason of the nature of these activities or of
the context in which they are carried out, a person’s religion or belief
constitute a genuine, legitimate and justified occupational
requirement, having regard to the organisation’s ethos. This
difference of treatment shall be implemented taking account of
members states’ constitutional provisions and principles, as well as
the general principles of Community law, and should not justify
discrimination on another ground.
….”
53. It is common ground that, as the judge said at para 40, a rigorous and strict
approach must be adopted to the question whether the particular exception applies:
Stadt Halle v Arbeitgemeinschaft Thermische Restabfall-und
Energieverwertungsanlage TREA Leuna (Case C-26/03) [2005] ECR I-1 and
Marleasing [1990] ECR I-4135.
Page 24
54. Although some reliance was placed in the course of argument on regulation
7(2), I shall focus first on paragraph (3). Since 1 October 2010 the provisions of
regulation 7 have been replaced by those of Schedule 9 of the EA. Regulation 7(3)
has been replaced by paragraph (3) of that Schedule, which provides:
“A person (A) with an ethos based on religion or belief does not
contravene a provision mentioned in paragraph 1(2) by applying in
relation to work a requirement to be of a particular religion or belief
if A shows that, having regard to that ethos and the nature or context
of the work –
(a) it is an occupational requirement,
(b) the application of the requirement is a proportionate
means of achieving a legitimate aim, and
the person to whom A applies the requirement does not meet
it (or A has reasonable grounds for not being satisfied that the
person meets it). ”
It was not suggested that there is any significant difference between that paragraph
and regulation 7(3).
55. There are four relevant requirements under regulation 7(3). The issue
between the parties centres upon whether the second requirement is satisfied. The
requirements are (1) that the employer should have an ethos based on religion or
belief; (2) that, having regard to that ethos and to the nature of the employment or
the context in which it is carried out, being of a particular religion or belief is a
genuine requirement for the job; (3) that, having regard to that ethos and to the
nature of the employment or the context in which it is carried out, it is
proportionate to apply that requirement on the facts; and (4) that the person to
whom the requirement is applied, who here must be Sir Anthony Colman, does not
meet the requirement.
56. As to (1) it is not (and could not be) suggested here that Mr Jivraj and Mr
Hashwani did not have such an ethos. As to (3), it is not in dispute that, if
requirement (2) is satisfied, so that being an Ismaili is a genuine occupational
requirement, it is or would be proportionate to apply it. As to (4), it is plain that Sir
Anthony Colman does not meet the requirement in the JVA that the arbitrators
should be members of the Ismaili community. The essential issue between the
parties is whether requirement (2) is satisfied. The question is therefore whether,
having regard to the Ismaili ethos and to the nature of the employment or the
context in which it is carried out, being of the Ismaili religion or belief is a genuine
requirement for the job. The judge held that this requirement was satisfied whereas
the Court of Appeal held that it was not.
Page 25
57. Our attention was drawn on behalf of Mr Jivraj to what is said to be an
important difference between paragraphs (2) and (3) of regulation 7. Paragraph (2)
is concerned with the case where the employer does not have a particular ethos
based on religion or belief but wishes to recruit a worker who does have such an
ethos. In that event, for the exception to apply, being of the particular ethos or
belief must be a “genuine and determining occupational requirement”. By contrast,
where (as here) the employer has an ethos based on religion or belief, it is
sufficient under paragraph (3) that being of a particular religion or belief is “a
genuine occupational requirement for the job.”
58. Mr Davies submits that the difference between the two cases is this. In the
first case the question is whether being of a particular religion or belief is a
“genuine and determining occupational requirement”. That is to say it must be an
essential requirement for the job. Whether it is or not is an objective question
which the court can readily decide. In the second case, on the other hand, the
question for the court is subjective, namely whether it is a genuine requirement for
the job in the eyes of the employer or employers. This, Mr Davies suggests,
reflects the sensible principle that it is not for the court to sit in judgment over
matters of religion or belief. By contrast, Mr Brindle disputes the idea that the test
is entirely subjective. Regulation 7(3) requires that being of a particular religion or
belief is not only genuine but also, as paragraph 2 of article 4 of the Directive
shows, “legitimate and justified”. It follows that it is not sufficient that the
employer has a genuine belief that the particular religion or belief is required. The
requirement must also be legitimate and justified. It would be remarkable, in his
submission, if the justification could be found in the personal opinions of the prima
facie discriminator.
59. I agree with Mr Davies that it is not for the court to sit in judgment on
matters of religion or belief. However, I also agree with Mr Brindle that the test
for justifying prima facie discrimination cannot be entirely subjective. This is
because the Regulations must be construed consistently with the Directive. It
seems to me to be reasonably clear that paragraph 1 of article 4 of the Directive is
the source of paragraph (2) of regulation 7 because they both refer to a genuine
and determining occupational requirement. In these circumstances paragraph 2
must be the source of paragraph (3) of the regulation, with the result that the
expression “genuine occupational requirement” must (either alone or together with
proportionality in requirement (3)) have been intended to reflect the expression
“genuine, legitimate and justified occupational requirement” in paragraph 2 of
article 4 of the Directive. If the legitimacy or justification of a requirement were
assessed purely by reference to the subjective view of the employer, they would
add nothing to the stipulation that a requirement be genuine. In my view, whether
or not a particular religion or belief is a legitimate and justified requirement of an
occupation is an objective question for the court. This is not however as strict a test
as that applied under regulation 7(2), namely that a particular religion or belief is
Page 26
an essential requirement for the job. As I see it, the question is simply whether in
all the circumstances of the case the requirement that the arbitrators should be
respected members of the Ismaili community was, not only genuine, but legitimate
and justified.
60. I do not agree with Mr Brindle that the requirement that arbitrators be
Ismailis cannot be objectively justified. His submission that an English law dispute
in London under English curial law does not require an Ismaili arbitrator takes a
very narrow view of the function of arbitration proceedings. This characterisation
reduces arbitration to no more than the application of a given national law to a
dispute.
61. One of the distinguishing features of arbitration that sets it apart from
proceedings in national courts is the breadth of discretion left to the parties and the
arbitrator to structure the process for resolution of the dispute. This is reflected in
section 1 of the 1996 Act which provides that: “the parties should be free to agree
how their disputes are resolved, subject only to such safeguards as are necessary in
the public interest”. The stipulation that an arbitrator be of a particular religion or
belief can be relevant to this aspect of arbitration. As the ICC puts in its written
argument:
“The raison d’être of arbitration is that it provides for final and
binding dispute resolution by a tribunal with a procedure that is
acceptable to all parties, in circumstances where other fora (in
particular national courts) are deemed inappropriate (eg because
neither party will submit to the courts or their counterpart; or
because the available courts are considered insufficiently expert for
the particular dispute, or insufficiently sensitive to the parties’
positions, culture, or perspectives).”
62. Under section 34 of the 1996 Act (referred to above) the arbitrators have
complete power over all procedural and evidential matters, including how far the
proceedings should be oral or in writing, whether or not to apply the strict rules of
evidence, whether the proceedings should be wholly or partly adversarial or
whether and to what extent they should make their own inquiries. They are the
sole judges of the evidence, including the assessment of the probabilities and
resolving issues of credibility.
63. In paras 41 to 44 of his judgment [2010] 1 All ER 302 the judge made
detailed findings which seem to me to be relevant to this question. I refer to only
some of them. In para 41 he described the history and development of the Ismaili
Community. He noted from the summary on the website of the Aga Khan
Page 27
Development Network that in the early part of the 20th century Aga Khan III
introduced a range of “organisational forms that gave Ismaili communities the
means to structure and regulate their own affairs”. He added that those forms were
established against the background of “the Muslim tradition of a communitarian
ethic on the one hand, and responsible individual conscience with freedom to
negotiate one’s own moral commitment and destiny on the other”.
64. At para 42 the judge quoted extensively from the same summary which
included this:
“Spiritual allegiance to the Imam and adherence to the Shia Imami
Ismaili tariqah (persuasion) of Islam according to the guidance of the
Imam of the time, have engendered in the Ismaili community an
ethos of self-reliance, unity, and a common identity.”
He noted that in 1986 the present Aga Khan:
“promulgated a Constitution that, for the first time, brought the
social governance of the world-wide Ismaili community into a single
structure with built-in flexibility to account for diverse circumstances
of different regions. Served by volunteers appointed by and
accountable to the Imam, the Constitution functions as an enabler to
harness the best in individual creativity in an ethos of group
responsibility to promote the common well-being.
Like its predecessors, the present constitution is founded on each
Ismaili’s spiritual allegiance to the Imam of the time, which is
separate from the secular allegiance that all Ismailis owe as citizens
to their national entities. The guidance of the present Imam and his
predecessor emphasised the Ismaili’s allegiance to his or her country
as a fundamental obligation. These obligations discharged not by
passive affirmation but through responsible engagement and active
commitment to uphold national integrity and contribute to peaceful
development.”
65. In para 43 the judge quoted from a paper presented to the Council of Europe
in March 2009 by the Director of International Training with the secretariat of the
Aga Khan which included the following:
“Under the Constitution, the Imam has also established … National
and International Conciliation and Arbitration Boards to encourage
Page 28
amicable resolution of conflicts through impartial conciliation,
mediation and arbitration, a service which is being increasingly used,
in some countries, even by non-Ismailis. In fulfilling the mandate to
sustain social, economic, cultural and civil society development, the
Imamat collaborates with national governments, regional and
international institutions as well as civil society organisations. This
paper highlights the work of the Conciliation and Arbitration Boards
established under the Ismaili Constitution and more particularly the
training programmes that have been conducted for them over the last
decade, indicating some of the best practices.
Over the centuries, Ismaili communities in various parts of the
world, have been conducting their own ADR processes based on the
ethics of the faith as guided by the Imams of the Time. … [The Aga
Khan] was concerned about the massive costs of litigation faced by
members of the Ismaili community in various parts of the world. Not
only were the legal costs very high, but the legal procedures, in many
countries, were particularly lengthy and did not always result in
outcomes that conformed with the principles of natural justice. The
Aga Khan was concerned about compliance with the ethics of the
faith which promote a non-adversarial approach to dispute resolution
in keeping with the principles of negotiated settlement (sulh)
enshrined in the Holy Qur’an.
The study indicated that a majority of the cases were in the field of
family disputes and that the national courts in the countries, where
the disputants were settled, were not always able to comprehend the
inter-generational attitudinal issues involved, let alone being able to
resolve them. This syndrome is very much in keeping with the notion
of the “limited remedial imagination” that Menkel-Meadow
attributes to the adversarial system which focuses on a zero-sum
numbers game where the “winner takes all”. It was therefore decided
by the Imam, in consultation with the leaders of the various Ismaili
communities worldwide, to build on the community’s existing
tradition of settling disputes amicably within the ethics of Islam and
to establish Conciliation and Arbitration Boards at various levels of
social governance in the Ismaili communities throughout the world.
It was also felt that the system should be such that the first
submission of an issue to an arbitrational or mediational body should
ensure the highest degree of proficiency, probity and fairness so that
the number of cases which go for appeal would be minimal and that
the process would be seen as being equitable, fair and cost effective.
The Aga Khan’s advice was that such a system should endeavour to
resolve disputes within the community without the disputants having
to resort to unnecessary litigation which is time consuming,
expensive and destructive. The Aga Khan saw the amicable
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resolution of disputes, without resorting to a court of law and within
the ethics of the faith, as an important aspect of the improvement of
the quality of life of the Ismailis globally. Consequently, the Ismaili
Constitution of 1986 made provision for the establishment of the
Conciliation and Arbitration Boards.”
66. The judge then in para 44 set out part of article XIII of the Constitution
which set up a National Conciliation and Arbitration Board for all types of dispute,
which provided by article 13.5:
“Each National Conciliation and Arbitration Board shall upon the
application of any Ismaili assist him to settle any differences or
disputes with another party residing in the area of jurisdiction of the
National Conciliation and Arbitration Board in relation to any of the
matters mentioned in article 13.1(a).”
Article 13.1(a) provided that the Board was:
“to assist in the conciliation process between parties in differences or
disputes arising from commercial, business and other civil liability
matters, domestic and family matters, including those relating to
matrimony, children of a marriage, matrimonial property, and testate
and intestate succession;”
67. In these circumstances the judge held that the provision in the JVA which
provided that the arbitrators should be respected members of the Ismaili
community and holders of high office within the community was a GOR within
regulation 7(3). He did so on the basis that the material set out above showed that,
as he put it at para 45, one of the more significant and characteristic spirits of the
Ismaili sect was an enthusiasm for dispute resolution contained within the Ismaili
community. He said that he had no difficulty in determining this spirit to be an
“ethos based on religion”. He also relied upon the terms of the arbitration clause
itself and the engagement by both sides of members of the Ismaili community to
perform mediation and conciliation services from 1988 until 1994.
68. In my opinion the judge was justified in concluding that the requirement of
an Ismaili arbitrator can be regarded as a genuine occupational requirement on the
basis that it was not only genuine but both legitimate and justified, so that
requirement (2) was satisfied. As to requirement (3), the judge said at para 46 that,
had proportionality been a live issue, having regard to the parties’ freedom in
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section 1 of the 1996 Act (quoted above) he would have held that article 8 of the
JVA was proportionate.
69. The reasoning of the Court of Appeal [2010] ICR 1435 is set out in their
para 29 as follows:
“The judge’s findings about the nature and ethos of the Ismaili
community were not challenged, but in our view he failed to pay
sufficient regard to the other requirements of regulation 7(3), in
particular, to whether, having regard to the ethos of that community
and the nature of the arbitrator’s function, being an Ismaili was a
genuine occupational requirement for its proper discharge. If the
arbitration clause had empowered the tribunal to act ex aequo et
bono it might have been possible to show that only an Ismaili could
be expected to apply the moral principles and understanding of
justice and fairness that are generally recognised within that
community as applicable between its members, but the arbitrators’
function under clause 8 of the joint venture agreement is to
determine the dispute between the parties in accordance with the
principles of English law. That requires some knowledge of the law
itself, including the provisions of the Arbitration Act 1996, and an
ability to conduct the proceedings fairly in accordance with the rules
of natural justice, but it does not call for any particular ethos.
Membership of the Ismaili community is clearly not necessary for
the discharge of the arbitrator’s functions under an agreement of this
kind and we are unable to accept, therefore, that the exception
provided in regulation 7 of the 2003 Regulations can be invoked in
this case.”
70. I prefer the approach of the judge. For the reasons given earlier, I am not
persuaded that the test is one of necessity. The question is whether, in all the
circumstances the provision that all the arbitrators should be respected members of
the Ismaili community was legitimate and justified. In my opinion it was. The
approach of the Court of Appeal seems to me to be too legalistic and technical.
The parties could properly regard arbitration before three Ismailis as likely to
involve a procedure in which the parties could have confidence and as likely to
lead to conclusions of fact in which they could have particular confidence.
71. For these reasons I would, if necessary, have allowed the appeal on the
basis that article 8 was a GOR within regulation 7(3). This conclusion makes it
unnecessary to consider whether it also satisfied regulation 7(2).
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Severance and costs
72. In these circumstances, neither the severance issue raised by Mr Hashwani
nor the appeal on costs advanced by Mr Jivraj arises and I say nothing about them.
Reference to the Court of Justice
73. I would not refer any of the questions which arise in this appeal to the Court
of Justice. On the first question, the only questions of EC law which arise relate to
the true construction of the Directive. The Court of Justice has resolved those
issues in a number of cases, notably Allonby [2004] ICR 1328. To my mind the
principles are now acte clair. On the second question, the principal issue between
the parties relates to the application of the relevant principles to the facts. As to the
correct construction of regulation 7(3), I have accepted Mr Brindle’s submission
that it does not involve a wholly subjective question on the ground that the relevant
provision must be not only genuine, but also legitimate and justifiable. In these
circumstances, I see no basis for a reference in relation to GOR, which was in any
event not determinative of the appeal.
CONCLUSION
74. I would allow the appeal.
LORD MANCE
The first point
75. I have read and agree entirely with the judgment of Lord Clarke on the first
point: that is, whether the arbitrators contemplated by article 8 of the Joint
Venture Agreement are persons who would be engaged in “employment under …
a contract personally to do work” within the meaning of regulation 2 of the
Employment Equality (Religion or Belief) Regulations 2003, interpreted in the
light of Council Directive 2000/78/EC to which the Regulations aim to give effect.
76. The conclusion that they would not be is, I think, unsurprising for all the
reasons that Lord Clarke gives. I note that as long ago as 1904 (RGZ 59, 247), the
German Reichsgericht identified the particular nature of an arbitral contract, in
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terms which I think have a relevance to arbitration generally, when it said (in
translation), that:
“It does not seem permissible to treat the arbitrator as equivalent to a
representative or an employee or an entrepreneur. His office has ….
an entirely special character, which distinguishes him from other
persons handling the affairs of third parties. He has to decide a legal
dispute in the same way as and instead of a judge, identifying the law
by matching the relevant facts to the relevant legal provisions. The
performance expected from him is the award, which constitutes the
goal and outcome of his activity. It is true that the extent of his
powers depends on the arbitration agreement, which can to a greater
or lesser extent prescribe the way to that goal for him. But, apart
from this restriction, his position is entirely free, freer than that of an
ordinary judge”.
77. A more modern source, Gary B Born’s authoritative work on International
Commercial Arbitration (2009), convincingly discusses the general international
legal understanding of the nature of an arbitrator’s engagement in the following
passage (Vol I, pp 1607-1609):
“There is also debate about how to characterize the arbitrator’s
contract, particularly in civil law jurisdictions where the
characterization of contracts is often essential to determining their
effects. Some commentators consider the arbitrator’s contract to be
an agency agreement, where the arbitrator serves as the parties’
agent. Other authorities have suggested treating the arbitrator’s
contract as an agreement for the provision of services. A third
approach has been to regard the arbitrator’s contract as a sui generis
or hybrid form of agreement, not being categorizable in conventional
terms and instead giving rise to a unique set of right and duties.
The proper analysis is to treat the arbitrator’s contract as a sui
generis agreement. That is in part because this characterization
accords with the specialized and distinct nature of the arbitrator’s
mandate: as noted above, that mandate differs in fundamental ways
from the provision of many other services and consists in the
performance of a relatively sui generis adjudicatory function. It is
therefore appropriate, and in fact necessary, that the arbitrator’s
contract be regarded as sui generis.
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At the same time, there are no other satisfactory characterizations of
an arbitrator’s contract. It makes no sense to treat the arbitrator’s
contract as an agency agreement. Under most legal systems, that
characterization would require the arbitrator to follow the parties’
directions and to provide the parties with information and an
accounting – all of which can only with difficulty, if at all, be
assimilated to the adjudicative role of an arbitrator.
Moreover, the role of an agent is inconsistent with the arbitrator’s
adjudicative function – which is precisely to be independent of the
parties. This was underscored by a French appellate decision, which
held that an agreement for the parties’ ‘representatives’ to resolve
their dispute could not be an arbitration agreement:
‘A stipulation of that kind is incompatible with the actual concept of
arbitration, since the arbitrators, though appointed by the parties, can
under no circumstances become their representatives. That would
imply, in particular, that they represent the parties and account for
their functions. Such a role, and the obligations it entails, are alien to
the functions of an arbitrator, which are judicial in nature.’
Equally, regarding the arbitrator as a service provider, like an
accountant, investment banker, lawyer, or other professional, ignores
the essential adjudicative character of his or her mandate. Arbitrators
do not merely provide the parties with a service, but also serve a
public, adjudicatory function that cannot be entirely equated with the
provision of service in a commercial relationship. The proper
analysis is therefore to regard the arbitrator’s contract as a sui
generis agreement specifying the terms on which this adjudicative
function is to be exercised vis-à-vis particular parties and on
particular terms.”
78. Both these citations catch and support the essence of Lord Clarke’s
distinction between persons under the direction of another and arbitrators who
perform an independent role, free of such control.
The second point
79. As Lord Clarke notes at para 51, the second point does not in these
circumstances arise, since the whole situation falls outside the scope of regulation
2. To ask how the exception permitted by regulation 7(3) and article 4(2) of the
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Directive might apply, when by definition it cannot, may risk giving a slightly
false impression about the scope of the exception in situations to which it is
potentially applicable.
80. The reasons which can, as Lord Clarke demonstrates, be given for
concluding that the exception would not apply to a considerable extent duplicate
those given for concluding that regulation 2 does not apply. They are in particular
that the arbitrators would not be under the direction of the parties: see paras 61 et
seq. Accordingly, it may be appropriate to say a few words about the application of
the exception in a situation in which the regulation would apply.
81. If one takes a situation which is within regulation 2, say the engagement by
the Ismaili community, or by any other organisation whose ethos is based on
religion or belief, of an employed lawyer to undertake English law work, I would
expect it to be much more difficult to maintain as valid a restriction to members of
the Ismaili community or of the other religious or faith-based organisation.
82. Many English as well as other lawyers believe in, are trained in and are
familiar with techniques for the amicable resolution of disputes, including
conciliation, mediation and arbitration. The value of alternative dispute resolution,
particularly mediation, is also recognised at the European legal level (see eg
Directive 2008/52/EC of 21 May 2008 on certain aspects of mediation in civil and
commercial matters and Council of Europe Recommendation No R(2002)10 on
civil mediation). A religious or faith-based community’s or organisation’s power
first to select and then to direct its own employed lawyers would be a secure
means of ensuring that its employed lawyers valued, understood and prioritised the
handling of English law work so far as possible on a non-confrontational basis,
using alternative dispute resolution procedures wherever possible. A refusal to
employ anyone other than a member of the particular religion or faith would in that
context seem unlikely to be justified or proportionate.
