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

An enforcing court asked to refuse enforcement of a foreign arbitral award because no arbitration agreement existed must determine jurisdiction independently. The tribunal's jurisdictional ruling neither binds nor restricts the court, although its reasoning may assist. The party resisting enforcement bears the burden of proof.

Competence-competence permits a tribunal to rule initially on its jurisdiction. It does not make that ruling final unless the parties specifically agreed to arbitrate arbitrability. Under French law, a non-signatory is bound only where the parties' common intention, established from their objective conduct, was to accept the contract and arbitration clause. Although refusal under section 103(2) of the Arbitration Act 1996 is expressed as discretionary, enforcement without jurisdiction requires some recognised legal basis, such as estoppel or a fresh agreement.

Dallah obtained an ICC award in Paris for US$20,588,040 against the Government of Pakistan. The underlying agreement and its arbitration clause named only Dallah and the Awami Hajj Trust. The tribunal nevertheless held that the Government was a true party. The Government consistently denied consent to arbitration.

Aikens J set aside permission to enforce the award in [2008] EWHC 1901 (Comm). The Court of Appeal dismissed Dallah's appeal in [2009] EWCA Civ 755. Before the Supreme Court, the principal questions were whether an enforcing court must decide jurisdiction independently, whether French law bound the non-signatory Government through the parties' common intention, and whether the award could nevertheless be enforced as a matter of discretion.

Appeal dismissed unanimously.

1. Lord Mance and Lord Collins delivered the principal judgments. Lord Hope, Lord Saville and Lord Clarke agreed that the enforcing court had to decide for itself whether the Government consented to arbitration. Competence-competence permits arbitrators to examine their jurisdiction, but does not allow them to create authority by their own ruling. Unless the parties specifically submitted arbitrability itself to arbitration, the tribunal's ruling has no binding or evidential status. The court may nevertheless find its reasoning useful. The Government bore the burden under section 103(2)(b) of the Arbitration Act 1996 and article V(1)(a) of the New York Convention: paras 12, 24–31, 84–104 and 148–161.

2. French law governed because France was the country where the award was made. French transnational rules concerning international arbitration form part of French law; applying them was not renvoi. A non-signatory becomes bound only if the parties had a common intention, express or implied, that it should accept the agreement and arbitration clause. The court ascertains each party's subjective intention from objective conduct, considering the whole course of negotiation, performance and termination, together with good faith and knowledge of the clause's existence and scope: paras 14–19 and 110–125.

3. The Government proved that no common intention existed. The transaction had deliberately changed from a memorandum with the Government to an agreement between Dallah and the separate Trust. The agreement identified only those parties, confined arbitration to their disputes, treated the Government as guarantor, and allowed later assignment to it. The post-dissolution letter and Pakistani proceedings did not show that the Government or Dallah intended the Government to be an original party. The tribunal had applied an insufficiently exacting approach and had failed adequately to examine Dallah's intention: paras 39–66 and 132–146.

4. The word “may” in section 103(2) and article V(1) leaves a principled discretion, not an arbitrary power. A recognised legal circumstance, such as another agreement or estoppel, may affect the prima facie right to resist enforcement. None existed here. Failure to challenge the award at the seat rarely, if ever, justifies enforcing an award made without jurisdiction: paras 67–70, 126–131 and 147.

1. United Kingdom Supreme Court: Dismissed Dallah's appeal in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 , affirming the refusal of enforcement.
2. Court of Appeal: Dismissed Dallah's appeal from Aikens J on 20 July 2009: [2009] EWCA Civ 755 ; [2010] 2 WLR 805 .
3. Commercial Court: Aikens J set aside the without-notice order granting leave to enforce: [2008] EWHC 1901 (Comm) ; [2009] 1 All ER (Comm) 505.
4. Commercial Court: Christopher Clarke J granted leave to enforce the final award without notice on 9 October 2006.