Dallah Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan

An enforcing court considering a challenge under section 103(2)(b) of the Arbitration Act 1996 must determine for itself, on the evidence, whether a valid arbitration agreement existed. It conducts a full rehearing, not a deferential review of the arbitral tribunal’s jurisdictional ruling.

The New York Convention does not require a party to challenge an award in the supervisory court before resisting enforcement elsewhere. A failure to do so does not create an estoppel. Any residual discretion to enforce despite a proved Convention defence is narrow and will rarely, if ever, justify enforcement against a person who did not consent to arbitrate.

Dallah sought to enforce in England a Paris ICC award against the Ministry of Religious Affairs of the Government of Pakistan. The written project agreement was made between Dallah and the Awami Hajj Trust. The Government was neither named as a party nor a signatory, although it had been closely involved in the project.

The arbitral tribunal held that the Government was bound by the arbitration clause and later awarded Dallah damages and costs. Aikens J set aside permission to enforce the final award, holding under French law that the Government was not party to a valid arbitration agreement: [2008] EWHC 1901 (Comm).

The appeal raised whether section 103(2)(b) required a rehearing or review, whether French law bound the Government, whether the award created an estoppel, and whether enforcement remained discretionary.

1. Appeal dismissed. Lord Justice Moore-Bick gave the principal judgment, with which Lord Justice Rix agreed subject to further reasons. Lord Justice Ward agreed with both judgments.

2. Under section 103(2)(b) of the Arbitration Act 1996, which reflects article V.1 of the New York Convention, the party resisting enforcement must prove the specified ground in the ordinary manner. Where validity of the arbitration agreement is disputed, the enforcing court must decide that issue for itself on a full rehearing of fact and foreign law. The tribunal’s reasons may be persuasive, but neither the Convention nor comity requires the court to defer to its conclusions.

3. The Convention gives the supervisory court power to annul an award, but does not give it primacy requiring other Convention courts to presume the award valid until annulled. A party may resist enforcement in England without first challenging the award in the court of the seat.

4. French law required the court to ascertain, from the parties’ objective conduct throughout the transaction, whether they shared an actual common intention that the Government should be bound. The evidence showed continuing governmental involvement, but not that Dallah, the Trust and the Government had a common intention that the Government would be party to the agreement or its arbitration clause. The Government’s absence as a named party or signatory was especially significant. Good faith could not create consent to arbitrate where that common intention was absent.

5. No issue estoppel arose. An arbitral tribunal derives jurisdiction from consent, so its ruling could not preclude the very issue whether the Government had agreed to arbitrate. The Government’s decision not to challenge the award in France was an option preserved by the Convention. It neither waived the English enforcement defence nor made the award final and conclusive. The tribunal had also applied transnational principles rather than French law.

6. Any discretion under section 103(2) is narrow and governed by legal principle. It could not properly be exercised to enforce an award against a person proved never to have consented to the arbitration agreement. The court left open whether article VII.1 might, in another context, support enforcement of an award set aside by the supervisory court.

• Court of Appeal (Civil Division) — dismissed Dallah’s appeal and upheld the refusal of enforcement.

• High Court (Commercial Court) — Aikens J set aside the without-notice order permitting enforcement, holding that there was no valid arbitration agreement between Dallah and the Government: [2008] EWHC 1901 (Comm) .

• High Court (Commercial Court) — Christopher Clarke J had granted Dallah permission without notice to enforce the ICC final award under section 101(2) of the Arbitration Act 1996.