English Courts Encouraging Arbitration In London: And Discouraging Pakistani Parties

Even though the headquarters of International Chamber of Commerce (ICC) is located in Paris, London has, in recent times, become a center for arbitration where various law firms have established their offices from all across the globe. While laws are made and become eternally classic instruments, the struggle to both revise and review them presents itself to be the real challenge. It is a difficult task to ensure an internationally recognized harmonious approach in today’s world yet every jurisdiction has its own unique interpretation and code they follow when it comes to arbitration. Most courts encourage arbitration to be used as an alternative dispute resolution and it generally is a good thing; but not if you are the party who wishes to use the domestic court as a means to settle the dispute. Our Senior Partner, Mr. Jawad Hassan, of the law firm I am currently working in, Hassan Qureshi and Mamdot (HQM), assisted various Queen’s Counsel (QC) in London and through recent events, we have observed that English courts are not inclined towards giving any finding against arbitration held in London and on two separate occasions UK courts favored the arbitration mechanism being held in London rather than staying the proceedings of arbitration in Court.

Not a single lawyer is stranger to the word ‘arbitration’. Though it was a mechanism introduced to help circumvent the expense and load of the traditional legal process, one of the consequences of arbitration is that one party is aggrieved by the award given and once the award is given, the final decision of an arbitrator is not easy to overturn. The arbitration clause, now a part of nearly all the contracts and agreements, allows either party to invoke the clause and settle the dispute among the parties through an entity of their choosing. However, not all parties are willing to settle the matter through arbitration as they feel their grievance might be better settled in the domestic courts instead of an international forum.

Oil and Gas Arbitration:

One of the cases where our law firm assisted the QC was, Hashwani and others vs. OMV Maurice Energy Limited Case No. 2015 Folio 121, where the judgment was given by Justice Michael Burton in the High Court of Justice Queen’s Bench Division, Commercial Court. In this case though litigation was already pending between parties, yet one party filed for arbitration in Pakistan but subsequently rushed to UK to file for arbitration there. The decision to go to arbitration was challenged by our party and later an application was also filed by us to stay the arbitration but this was not granted by the Queen’s Bench Division and they were requested to go and use International Court of Arbitration London as a forum to address their grievances for arbitration, including a local company, ZPCL Petroleum Corporation Limited which wasn’t even a part of the arbitration agreement.

Dispute on investment between Ismaili Hotel Owners:

In the other case Jivraj v. Hashwani [2010] EWCA Civ. 712, UK Court of Appeal ruled that the requirement that arbitrators must be members of the Ismaili community was not severable from the rest of the agreement for arbitration, and for this reason the said agreement was null and void in its entirety. This worked in favour of our party where the UK Court of Appeal made a decision to rule on a matter of arbitration and declared it to be invalid.

However, the Court of Appeal’s decision was reversed by the Supreme Court of the United Kingdom in Hashwani v Jivraj (2011) UKSC 40, where Lord Clarke in his judgment held that Jivraj’s application which requested the court to strike out Mr. Hashwani’s arbitration claim form shall succeed; and the agreement was not held to be invalid. This case has gained so much popularity that it is now included in various textbooks.

Finally, the matter came to a stop in Hashwani v Jivraj [2015] EWHC 998 (Comm), where Mr. Sadruddin, aggrieved by the decision of the Supreme Court, filed a fresh application in March 2013, but the claim was struck out by Walker J of the English Commercial Court stating that the fresh proceedings involved unjust harassment.

Such proceedings have strained our belief in the UK court system and made us strongly object to the way the UK courts refer the case to arbitration wherever they possibly can.  London has now become a focal point for arbitration where courts are critical and encourage arbitration regardless of the fact that there has been a palpable reluctance on their end to take on the case and add excessive burden to an ever increasing pile of pending cases. But is this fair to the other party who genuinely believes that their grievances lie in the courts rather than arbitration? The entire sanctity of law can be called to question where courts fail to recognize the arbitrary right of the parties.

It is axiomatic that alternative dispute resolution is rapidly growing and expanding. Nevertheless, it is pertinent to note here that arbitration can also lead to other forms of litigation, which occur even before the arbitration commences. Therefore, courts are frequently required to rule on the arbitrability of a dispute or the enforceability of the agreement to adjudicate. The avoidance of litigation, which is the whole purpose of arbitration, is thereby frustrated.

Overall, several challenges for UK courts shall always remain but that should not make them back down from hearing cases that are regarding arbitration proceedings and although it is good they are on the pro-arbitration bandwagon, they must steer clear of the road they are currently following so that it will not end up adversely affecting the rights of the parties involved to avoid a clash of two ends.

A copy of the judgment Hashwani and others vs. OMV Maurice Energy Limited Case No. 2015 Folio 121 is available on request.

Shahbano Masud

Author: Shahbano Masud

The writer has done her LLB Hons. from University of London and is currently working as an associate at HQM Barristers, Advocates & Legal Consultants assisting the partners on international arbitration, oil and gas matters, as well as various other corporate and commercial matters.