The Supreme Court handed down judgment in the case of Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 on 3rd November 2010. The case concerned the enforcement in the UK of an arbitration agreement made under French law.

The appellant was a member of a group providing services for holy places in Saudi Arabia. A proposal was submitted to the respondent for housing for pilgrims, which was accepted; a memorandum of understanding was concluded in July 1995. In January 1996, a Trust was established by the government for purpose and continued by various ordinances. Alterations to the memorandum resulted in further negotiations and an agreement was signed between the appellant and the Trust in September 1996. The agreement contained an arbitration clause providing for arbitration in the event of a dispute to be settled according to rules of the International Chamber of Commerce, Paris. In December 1996, the ordinances lapsed and the trust ceased to exist.

The appellant brought arbitral proceedings against the respondent in May 1998. Throughout, the respondent denied being a party to the arbitration agreement, maintained a jurisdictional reservation and neither submitted to the tribunal nor waived its sovereign immunity. A final award of US$20,588,040 was made in favour of the appellant.

S.103 of the Arbitration Act 1996 (the 1996 Act), which reflects Art.V(1)(a) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, sets out that enforcement is not possible where a person against whom enforcement is sought is not a party to the agreement.

Leave to enforce the award was given in 2006. An application by the respondent to set aside the award was granted by the High Court in 2008, which held the government was not a party to proceedings. This was upheld by the Court of Appeal.

The Supreme Court highlighted that the particular form of arbitration being consensual, the jurisdiction of the tribunal could not be founded except where all parties had submitted. The central issue was whether the respondent could prove it was not a party to the agreement. French law principles required that the respondent prove there was no common intention to make the respondent party to the agreement.

Having regard to the history of the case, the court drew on several factors which demonstrated that there was no common intention. Agreeing with the courts below, the fact that the respondent had been a party to the earlier memorandum of understanding and had remained interested in the proceedings was not sufficient to render it a party to the later agreement.

Secondly, the structure of the agreement was clearly and deliberately between the appellant and the Trust, advice having been received from lawyers. The only role played by the respondent was as guarantor.

Thirdly, the Trust was a body corporate. This established that it was capable of suing and being sued. Further evidence of the capacity of the Trust can be seen in its bringing suit against the appellant in Pakistan in 1997.

Finding in view of the history of events that no common intention to join the respondent as a party had been made out, the court considered the argument for the appellants that it utilise its discretion to nonetheless enforce the award. Considering the term “may” in the provision “recognition and enforcement of the award may be refused" comprised in s. 103(2) of the 1996 Act, the court referred to an earlier decision in Dardana Ltd v Yukos Oil Company [2002] 1 All ER (Comm) 819. Finding that this case highlighted the need to enable the court to consider other circumstances which affect the right to have enforcement or recognition refused, the court found no fresh points had been put forward for the appellant.

Dismissing the appeal, the court held that no agreement existed to which the respondent was party, and the award was not enforceable.