In 2010, the Court of Appeal held that an arbitration clause in an English law governed joint venture agreement, which required the arbitrators appointed by the parties to be members of the Ismaili community, was void because it violated UK anti-discrimination legislation in relation to religion and belief (the Employment Equality (Religion or Belief) Regulations 2003 (the Regulations)). The Court held that arbitrators were "in employment" for the purposes of the Regulations and therefore protected by the relevant anti-discrimination provisions.
This decision has been the subject of considerable debate within the arbitration community because, by treating arbitrators as employees, the whole range of anti-discrimination legislation would be likely to apply to them, including discrimination on the grounds of nationality. Since many arbitration agreements and institutional rules, including the ICC and LCIA rules of arbitration, seek to maintain the neutrality of the arbitral tribunal by restricting the appointment of a chair or sole arbitrator of the same nationality as one the parties, the decision called into question the validity of arbitration agreements containing such restrictions.
Following the Court of Appeal decision, it had become common practice for commercial parties to amend their arbitration agreements to remove reference to nationality provisions in any relevant institutional rules. The Supreme Court's decision means that this practice no longer needs to continue. After hearing submissions from the parties and the ICC (represented by Allen & Overy) and the LCIA (as interveners), Lord Clarke (with whom the rest of the Supreme Court agreed) held that arbitrators are not "in employment" for the purposes of the Regulations and therefore fall outside their scope.
In light of this decision, parties negotiating arbitration agreements no longer need to consider disapplying the nationality restrictions contained in any institutional rules. It also removes the uncertainty surrounding the validity of existing arbitration agreements which contain such restrictions and which were entered into before the Court of Appeal decision.
Richard Smith
Partner
Litigation – Arbitration
Contact
Tel +44 (0)20 3088 3734
richard.smith@allenovery.com
Mark Mansell
Partner
Litigation – Employment
Contact
Tel +44 (0)20 3088 3663
mark.mansell@allenovery.com