The Civil division of the Court of Appeal handed down judgment in the case of Jivraj v Hashwani [2010] EWCA Civ 712. The case concerned whether parties to a dispute could stipulate that arbitrators be drawn from the Ismaili community.

The parties had entered into a joint venture agreement for investment in real estate. Clause 8(1) of the contract provided that arbitrators be respected holders of high office within the Ismaili community. Upon termination of the venture in 1988, three members of the Ismaili community were appointed and numerous matters were resolved. Outstanding matters were left unaddressed, until 1994 when the respondent put forward a claim for £1,412,494 and notified the appellant of the appointment of a new arbitrator.

The appellant sought a declaration of invalidity on the ground that the appointed arbitrator was not a member of the Ismaili community. Arguing that this requirement was no longer lawful on the basis that it contravened the Employment Equality (Religion and Belief) Regulations 2003 (SI 2003/1660) (the Regulations), the respondent applied for an order confirming its chosen arbitrator as the sole arbitrator. In support of his argument the respondent also submitted the clause violated the Human Rights Act and public policy.

The regulations provide for protection from discrimination on the grounds of religion or belief against employees, with an exception in regulation 7 where genuine occupational requirements exist.

The High Court determined that as arbitrators could not be said to be employees and therefore the Regulations were not applicable. Nothing relating to the Human Rights Act or issues of public policy could void the clause or render it unenforceable. Further, the provision was not severable from the clause and thus if it was determined to be void, the arbitration clause was void in its entirety.

The Court of Appeal considered whether arbitrators were employees for the purposes of regulation 6(1) of the Regulations, the applicability of the regulation 7 exception, and whether the requirement was severable.

Considering the applicability of the Regulations, the court held that arbitrators were employees and therefore within the scope of the Regulations as the appointment represented the employment of another to provide a service. The recognition of arbitrators as such had been established in von Hoffmann v Finanzamt Trier (Case C-145/96). That the process was private did not prevent the application of the Regulations.

Assessing the application of regulation 6(1), the court looked at the language of the contractual clause. Finding that ensuring compliance with clause 8(1) would require the parties to refuse or fail to offer employment to persons who are not members of the Ismaili community, the court determined that regulation 6(1)(c) had been breached.

Reviewing the applicability of regulation 7, the court found that the contract only provided that the dispute be conducted in accordance with English law and not with the values and principles of the Ismaili community. Thus being of that community could not be held to be a genuine occupational requirement.

Having determined the requirement to be void, the court, applying Marshall v NM Financial Management Ltd [1995] 1 WLR 1461 decided that the requirement could not be severed as it would render the remaining part substantially different and so clause 8(1) was void in its entirety.

Allowing the appeal in part the court reversed the decision of the lower court on the application of the Regulations, and affirmed the declaration that the appointment of the arbitrator from outside the community was invalid.