[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | ||
England and Wales High Court (Commercial Court) Decisions |
||
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Dallah Real Estate and Tourism Holding Co v The Ministry of Religious Affairs, Government of Pakistan (Rev 1) [2008] EWHC 1901 (Comm) (01 August 2008) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2008/1901.html Cite as: 121 Con LR 138, [2009] 1 All ER (Comm) 505, [2008] 2 Lloyd's Rep 535, [2008] EWHC 1901 (Comm) |
[New search] [Context] [View without highlighting] [Printable RTF version] [Help]
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
DALLAH REAL ESTATE AND TOURISM HOLDING COMPANY |
Claimant |
|
- and - |
||
THE MINISTRY OF RELIGIOUS AFFAIRS, GOVERNMENT OF PAKISTAN |
Defendant |
____________________
Toby Landau QC and Patrick Angénieux (instructed by Watson Farley & Williams, Solicitors, London) for the Defendant
Hearing dates: 8th, 9th and 10th July 2008
____________________
Crown Copyright ©
Mr Justice Aikens:
A. The parties and the background to the relevant contracts
"Any dispute or difference of any kind whatsoever between the Trust and Dallah arising out of or in connection with this Agreement shall be settled by arbitration held under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris, by three arbitrators appointed under such Rules".
B. The Dispute, the subsequent litigation in Pakistan and the ICC arbitration
"However, since you have failed to submit the specifications and drawings for the approval of the Trust to date you are in breach of a fundamental term of the Agreement which tantamounts (sic) to a repudiation of the whole Agreement which repudiation is hereby accepted.
Moreover, the effectiveness of the Agreement was conditional upon your arranging the requisite financing facility amounting to US$ 100,000,000,00 within 30 days of the execution of the Agreement and your failure to do so has prevented the Agreement from becoming effective and as such there is no Agreement in law.
This is without prejudice to the rights and remedies which may be available to us under the law".
"Moreover the things done during the Ordinance can be sued and can sue by the parent department for whom this Ordinance was issued by the government and that was ministry for religious affairs. Suit should have been filed by the Ministry of religious affairs…..
But before parting with this Order, I observe that the liabilities and duties against the present defendant can be agitated by the Ministry of Religious affairs government of Pakistan if any. Since the suit has not been filed by the legal person, the present plaintiff is no more a plaintiff in the eye of [the] law. Suit is dismissed. File be consigned to the record room".
"18. On 19.01.97 the Secretary, Ministry of Religious Affairs of the Respondent [ie. the MORA], acting on behalf of itself as principal and on behalf of the Trust, purported to repudiate the Agreement….
19. The letter of 19.01.97 amounted to an unlawful repudiation of the Agreement and evinced an intention on the part of the Respondent [ie. the MORA] not to be bound by its terms. The Respondent continues to refuse to implement the Agreement. Accordingly the Claimant has accepted the Respondent's repudiation".
"That the cause of action accrued to the plaintiff against the defendant at Islamabad firstly when the defendant entered into the Agreement and thereafter when it defaulted in fulfilling the pre-conditions of the Agreement and the same was repudiated and finally in January 1997 when it refused to treat the Agreement as repudiated".
The claim was verified by Mr Lutfallah Mufti, this time in his capacity as Secretary, MORA.
"I therefore do find that the learned trial judge has very correctly found that the petitioner GoP is neither a party to the said agreement nor it claims under any of the parties to the same. This being so the petitioner cannot be proceeded against under the said arbitration agreement which forms part of the said agreement dated 10.9.1996".
"Does an agreement to arbitrate under the ICC Rules exist between the Claimant [ie. Dallah] and the Defendant [ie. the GoP] and does the Arbitral Tribunal have jurisdiction in respect to the Defendant over the claims submitted by the claimant in the present case?".
C. The ICC First and Second Partial Awards and the Final Award
"Arbitral as well as judicial case-law has widely recognised that, in international arbitration, the effects of the arbitration clause may extend to parties that did not actually sign the main contract but were directly involved in the negotiation and performance of such contract, such involvement raising the presumption that the common intention of all parties was that the non – signatory party would be a true party to such contract and would be bound by the arbitration agreement".[15]
"13. Certainly, many of the above mentioned factual elements, if isolated and taken into a fragmented way, may not be construed as sufficiently conclusive for the purpose of this section.
However, Dr Mahmassani believes that when all the relevant factual elements are looked into globally as a whole, such elements constitute a comprehensive set of evidence that may be relied upon to conclude that the Defendant is a true party to the Agreement with the Claimant and therefore a proper party to the dispute that has arisen with the Claimant under the present arbitration proceedings.
Whilst joining in this conclusion Dr Shah and Lord Mustill note that they do so with some hesitation, considering that the case lies very close to the line."
D. The proceedings for recognition and enforcement of the Final Award and the application of the GoP to set them aside
"A successful challenge to the award(s) in France would have provided the [GoP] with a ground to resist enforcement in England on the basis of section 103(2)(f)[20] of the Arbitration Act 1996. This process in itself took a substantial amount of time….Having carefully considered the advice provided by its French lawyers, [the GoP] has decided not to challenge the award(s) in France".
E. The Provisions of the New York Convention 1958 and the Act
"…the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made".
F. The Issues raised on the application and the parties' positions on them.
G. Issue One: The correct construction of section 103(2)(b) of the Act.
As I have already pointed out, under English law, if parties have agreed to submit future disputes to arbitration, then when a dispute arises and they submit that particular dispute to specific arbitrators, it gives rise to a further arbitration agreement, commonly called "the reference to arbitration".[33] This is sometimes called the doctrine of "double separability". Although other systems of law draw a distinction between the underlying arbitration agreement and the individual reference, unlike English law they do not analyse it in terms of separate contracts which might have distinct governing laws. Article V of the Convention expressly distinguishes between the underlying arbitration agreement and the individual reference. Article V(a) speaks of "the agreement referred to in Article II" and "the said agreement is not valid". The cross – reference to Article II indicates clearly that the "arbitration agreement" being referred to in Article V(a) is the underlying arbitration agreement. In contrast, Article V(c) refers to "the submission to arbitration", which is clearly intended to point to the individual reference of the present dispute between the parties. This analysis of the Convention is supported by the authoritative commentary on the Convention by Van den Berg, published in 1981.[34]
Imagine party A is the party against whom an award is invoked. The question is: if party A succeeds in the argument that it is not bound by the arbitration agreement, then does it follow that, for the purposes of section 103(2)(b), the relevant arbitration agreement is therefore "not valid" as between the party wishing to enforce the award and party A? I was initially a little sceptical of Mr Landau's submission that this type of argument was covered by section 103(2)(b). My first reaction would be to interpret the phrase "the arbitration agreement is not valid" as giving rise, not to questions of who is bound by it, but to issues concerning formal validity, such as whether, under the applicable law of the arbitration agreement, it had to be in a certain form, or signed by the parties and such like matters.[36] However, once Mr Landau referred me to the analysis of Mance LJ in Dardana Ltd v Yukos Oil Co and Petroalliance Services Co Ltd,[37] I accepted that I must be wrong and was, in any case, bound by Court of Appeal authority. I will not therefore set out here my own analysis. I have done so in Annex 6 to this judgment for anyone who is interested.
On this issue, counsel agree that the part of Article V(1)(a) of the Convention which is dealing with the validity of the arbitration agreement establishes two conflict of laws rules. The first is the primary rule of party autonomy; the parties can choose the law that governs the validity of the arbitration agreement. In default of that agreement, the law by which to test validity is that of the country where the award to be enforced was made. Van den Berg, in his authoritative commentary on the Convention[38] states that it has never been questioned that these are to be treated as "uniform" conflict of laws rules. Therefore, logically, the reference to "the law of the country where the award was made" in Article V(1)(a) of the Convention and the same words in section 103(2)(b) of the Act, must be directed at that country's substantive law rules, rather than its conflicts of law rules.[39] In this case, it means I must have regard to French substantive law and not its conflict of laws rules. In this regard, I note that paragraph 2.6 of the Joint Memorandum of the French Law experts states the following:
"Where a French court is called upon to decide the challenge of an arbitral award rendered by a tribunal seated in France, it has not to apply French conflict of laws in order to determine whether the arbitral tribunal has jurisdiction".
H. Issue Two: When a party challenges the recognition and enforcement of a Convention award under section 103(2)(b), what is the scope of the enquiry that the court has to undertake?
I. Issue Three: What are the principles of French law by which to decide whether the GoP was and is bound by the arbitration agreement in clause 23 of the Agreement?
"Under French law, in order to determine whether an arbitration clause upon which the jurisdiction of an arbitral tribunal is founded extends to a person who is neither a named party nor a signatory to the underlying agreement containing that clause, it is necessary to find out whether all the parties to the arbitration proceedings, including that person, had the common intention (whether express or implied) to be bound by the said agreement and, as a result, by the arbitration clause therein. The existence of a common intention of the parties is determined in the light of the facts of the case. To this effect, the courts will consider the involvement and behaviour of all the parties during the negotiation, performance and, if applicable, termination of the underlying agreement."
"When a French court has to determine the existence and effectiveness of an arbitration agreement over the parties to an arbitration which is founded upon that agreement, and when for these purposes it must decide whether the said agreement extends to a party who was neither a signatory nor a named party thereto, it examines all the factual elements necessary to decide whether that agreement is binding upon that person".
"According to international usage, an arbitration clause inserted in an international contract has a validity and an effectiveness of its own, such that the clause must be extended to parties directly implicated in the performance of the contract and in any disputes arising out of the contract, provided that it has been established that their respective contractual situations and existing usual commercial relations raise the presumption that they accepted the arbitration clause of whose existence and scope they were aware, irrespective of the fact that they did not sign the contract containing the arbitration agreement." [49]
"Under French law, the existence, validity and effectiveness of an arbitration agreement in an international arbitration need not be assessed on the basis of national law, be it the law applicable to the main contract or any other law and can be determined according to rules of transnational law. To this extent, it is open to an international arbitral tribunal the seat of which is in Paris to find that the arbitration agreement is governed by transnational law".
J. Issue Four: Pakistani law: does Article 173 of the Pakistan Constitution state a mandatory rule that the State of Pakistan can only validly enter into and be bound by an agreement provided that such agreement is made in the name of the President of Pakistan and is executed on his behalf?
"CONSTITUTION OF PAKISTAN
CHAPTER 3 – THE FEDERAL GOVERNMENT
99. (1) All executive actions of the Federal Government shall be expressed to be taken in the name of the President.
(2) The President shall by rules specify the manner in which orders and other instruments made and executed in his name shall be authenticated and the validity of any order or instrument so authenticated shall not be questioned in any court on the ground that it was not made or executed by the President.
CHAPTER 3 - PROPERTY, CONTRACTS LIABILITIES AND SUITS
173. …….
(3) All contracts made in the exercise of the executive authority of the Federation or of a Province shall be expressed to be made in the name of the President, or, as the case may be, the Governor of the Province, and all such contracts and all assurances of property made in the exercise of that authority shall be executed on behalf of the President or Governor by such persons and in such manner as he may direct or authorize."
"Article 99 and 173(1)(3) of the Constitution require all the executive actions, including contracts made on behalf of Federal Government to be expressed in the name of the President. Any executive action, contract or rescission thereof, not so expressed in the name of the President, would be void. Appellants have neither referred to any letter by the President, equipping appellant No 2 with the authority to pass any such order nor have they produced any document of authority before the learned Single Judge in Chamber or during the course of he hearing of this appeal, as such we are unable to attach any kind of regularity or presumption as urged by learned counsel for the appellants…..This brings us to conclude that original contract having been expressed in the name of the President, could be rescinded only by the President and by no one else, below his rank, without authority from him".
K. Issue Five: Applying the relevant principles of French law, including any relevant principles of "transnational law" and Pakistani law, what is the answer to whether the GoP is bound by the arbitration clause in the Agreement?
"Such letter is very significant because it confirmed in the clearest way possible, that [the GoP] after the elapse of the Trust, regarded the Agreement with [Dallah] as its own and considered itself as a party to such Agreement, and as such, was entitled to exercise all rights and assume all responsibilities provided for under such Agreement".
L. Issue Six: Has the GoP satisfied the burden of proving, for the purposes of section 103(2)(b), that the arbitration agreement in clause 23 is not valid?
M. Issue Seven: Is there an issue estoppel arising out of the First Partial Award that prevents the GoP from being able to argue that the arbitration agreement is not valid for the purposes of section 103(2)(b) of the Act?
"However, the question that must now concern us is not whether the arbitrators were right, but whether the first award finally disposed of the issue as far as these parties are concerned. In our view it did. Under Lithuanian law an arbitration clause is regarded as an autonomous agreement which gives rise to rights and obligations which exist independently of the contact within which it is found, and an agreement to arbitrate under the ICC rules confers on the arbitrators jurisdiction to decide whether they have jurisdiction in any given case. In the present case by agreeing to ICC arbitration the parties conferred on the arbitrators jurisdiction to determine that question and are therefore bound by their award".
N. Issue Eight: Is there a residuary discretion under section 103 of the Act to recognise and enforce the Final Award, even if the ground in section 103(2)(b) is proved and there is no issue estoppel operating against the GoP?
O. Overall Conclusions
ANNEX 1
"MEMORANDUM of UNDERSTANDING
THIS Memorandum of Understanding is made this 24 July 1995, between the President of the Islamic Republic of Pakistan through the Ministry of Religious Affairs Government of Pakistan. ………. Of the first part and Dallah Real Estate & Tourism Holding Company, a Company duly organized and existing under the laws of the Kingdom of Saudi Arabia,…… of the second part.
WHEREAS GOP is interested in taking on lease reliable housing facilities in the holy city of Makkah, Kingdom of Saudi Arabia, for Pakistani pilgrims whilst performing Hajj and Umra; and
WHEREAS Dallah has agreed to acquire the necessary real estate, construct the required structures and buildings for the purpose and lease the same to GOP.
NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the parties hereto agree as follows:
1. Dallah shall acquire within the holy city of Makkah the lands necessary for the development and construction of housing facilities sought by GOP for Pakistani pilgrims whilst performing Hajj and Umra, as more specifically described in the Schedule A attached hereto, and develop, construct and complete said housing facilities thereon.
2. That the total cost of the lands and the housing facilities to be constructed thereon by Dallah shall not exceed U.S.$ 242 million ($ 242,000,000.00), as itemized in the Schedule-B attached hereto.
3. Upon completion of the housing facilities Dallah shall demise and lease them to the GOP along with the land and GOP shall take the said facilities and land on such lease for a term of ninety-nine (99) years subject to Dallah arranging the necessary financing for GOP on terms approved by GOP in accordance with the provisions of this Agreement ("Lease Financing").
4. Within thirty (30) days of the execution hereof, Dallah shall prepare and submit to GOP for its approval, the terms and conditions of the proposed lease ("the Lease") and the detailed plan for financing of the same ("the Financial Plan"). Approval and acceptance of the Lease and the Financial Plan by GOP will be communicated in writing to Dallah. The date of receipt of such approval by Dallah will be the Approval Date. Where such approval and acceptance is not conveyed by GOP within ninety days of submission of terms and conditions of the proposed lease and detailed financing plan by Dallah to GOP or GOP conveys its disapproval or non-acceptance of such terms and conditions of lease and financing plan, no liability or claim shall be incurred by either party.
5. The Lease Financing to be arranged and organized by Dallah as per the approved Financial Plan will be secured by the Borrower designated by GOP under the Sovereign Guarantee of GOP.
6. Within sixty (60) days of the Approval Date, Dallah shall prepare and submit to GOP detailed specifications and drawings of the housing facilities based upon the requirements of GOP as contained in Schedule A. Within twenty-four (24) months from the date that GOP approves in writing said specifications and drawings, Dallah shall develop, construct, complete in all respects and hand over vacant possession of the housing facilities to GOP upon execution and registration of the lease.
………..
19. This Agreement shall be binding upon and shall enure to the benefit of the parties hereto and to the benefit of their successors and permitted assigns to the extent that such enurement does not violate any specific provisions of the Lease and applicable Saudi Arabian and Pakistani laws.
………..
23. This Agreement shall be governed by the applicable laws and regulations of the Kingdom of Saudi Arabia.
24. Any dispute between the parties hereto as to the interpretation of this Agreement or in respect of any matter arising under, out of or in connection with this Agreement shall be resolved in accordance with the Saudi laws and regulations for the time being in force relating to arbitration through an arbitration committee composed of three arbitrators, GOP shall appoint one arbitrator and Dallah shall appoint one arbitrator and the two arbitrators so appointed shall appoint the third arbitrator who shall preside over the arbitration committee. The arbitration proceedings shall be held in Jeddah or such other place as the parties may agree and the decision of the arbitration committee shall be final and binding upon the parties hereto.
25. To the extent that GOP may be entitled in any jurisdiction to claim for itself immunity in respect of its obligations under this Agreement itself from any proceedings, suit, award, execution, attachment (whether in aid of execution, before award, judgment or otherwise) or other legal process or to the extent that in any jurisdiction there may be attributed such immunity (whether or not claimed).
26. GOP hereby irrevocably waives any objection now or hereafter to the siting of the venue of any arbitration, action, suit or proceeding in any such place or court as is referred to in Article 24 and any claim that any such action, suit or arbitration proceedings have been brought in an inconvenient forum under such proceedings are brought outside Saudi Arabia.
27. GOP also hereby consents generally in respect of any proceedings arising out of or in connection with this Agreement to the giving of any relief related thereto or the issue of any process in connection with such proceedings including, without limitation, the making, enforcement or execution against any award, order or judgment which may be made or given in such proceedings.
………….."
"PART 1
Acts, Ordinances, President's Orders and Regulations
GOVERNMENT OF PAKISTAN
MINISTRY OF LAW, JUSTICE AND PARLIAMENTARY AFFAIRS
(Law and Justice Division)
Islamabad, the 31st January 1996
No. F. 2(1)/96-Pub. – The following Ordinance made by the President is hereby published for general information:-
ORDINANCE NO. VII OF 1996
AN
ORDINANCE
To provide for the establishment of an Awami Hajj Trust
WHEREAS it is expedient to provide for the establishment of an Awami Hajj Trust to mobilize savings from the pilgrims desirous of performing Hajj and investment thereof in the Islamic modes of investment and for facilitating Hajj operations and matters connected therewith and incidental thereto:
AND WHEREAS the National Assembly is not in session and the President is satisfied that circumstances exist which render it necessary to take immediate action:
(67)
……
68 THE GAZETTE OF PAKISTAN, EXTRA, JA:
NOW THEREFORE, exercise of the powers conferred by clause (1) of Article 89 of the Constitution of the Islamic Republic of Pakistan, the President is pleased to make and promulgate the following Ordinance:-
1. Short title, extent and commencement. –
(1) This Ordinance may be called the Awami Hajj Trust Ordinance, 1996.
………
2. Definitions – In this Ordinance unless there is anything repugnant in the subject or context:
(a) "Board" means the Board of Trustees of the Awami Hajj Trust constituted under section 5;
(b) "Fund" means the Awami Hajj Savings, and Investment Fund established under section 10;
(c) "Haji" or "Hujjaj" means a person or persons who have performed, or are intending to proceed to perform Hajj;
(d) "Hajj" means performance of Hajj by visiting Makkah and Madina in Saudi Arabia in accordance with the Injunctions of Islam as laid down in Holy Quran and Sunnah of the Holy Prophet (peace be upon him):
(e) "Managing Trustee" means the Secretary, Religious Affairs Division, Government of Pakistan, or such other person of integrity having a good record of fiduciary conduct and expertise in financial management and knowledge of Shariah as the Federal Government may appoint to perform the functions of the Managing Trustee;
(f) "member" means an intending Haji who wishes to save and finance the Hajj expenses by becoming a member of the Fund;
(g) "Trust" means the Awami Hajj Trust established under section 3; and
(h) "Trustee Bank" means a bank or financial institution appointed by the Board to collect deposits from embers, maintain their accounts in the Fund and make investment thereof in accordance with the directions of the Board.
3. Establishment of the Trust –
(1) As soon as may be, after the commencement of this Ordinance, the Federal Government shall, by notification in the Official Gazette, establish a trust to be known as the Awami Hajj Trust.
(2) The Trust shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property, and may by its name, sue and be sued.
(3) The headquarters of the Trust shall be at Islamabad and it may establish its regional offices in such other places as the Federal Government may determine.
4. Purposes and objects of the Trust – The purposes and objects of the Trust shall be to:
(a) mobilize savings from members;
(b) invest savings of the members in appropriate schemes yielding maximum returns and credit profits accrued therefrom in the members' accounts;
(c) defray the expenses of Hajj and individual members out of their savings and profit accrued thereon; and
(d) adopt measures for facilitating the performance of Hajj by members.
5. Board of Trustees –
(1) The general direction and administration of the Trust and its affairs shall vest in the Board of Trustees consisting of -
(i) Federal Minister for Religious Affair …. Chairman
(ii) Federal Minister for France …………….. Member
(iii) Chairman, Council of Islamic Ideology … Member
(iv) Deputy Chairman, Planning Commission ... Member
(v) Secretary, Ministry of Finance ………….. Member
(vi) Secretary, Religious Affairs Division, Government of Pakistan, if he is not Appointed as the Managing Trustee ….... Member
(vii) Chairman, Pakistan Banking Council …… Member
(viii) Managing Trustee ……………………….. Member
(2) The Secretary, Religious Affairs Division, Government of Pakistan shall act as Secretary of the Board.
6. Powers and function of the Board - The powers and functions of the Board shall be to –
(a) provide guidelines to the Managing Trustee for managing Hajj savings and investment operations in an efficient and productive manner;
(b) approve the budget of the Managing Trustee relating to the Fund;
(c) review and approve the audited income and expenditure of the Fund;
(d) approve implementation plans for functions assigned to the Trustees bank;
(e) adopt measures for promotion and welfare of the Hujjaj during Hajj operations; and
(f) perform such other functions as may be assigned to it by the Federal Government for the purposes of this Ordinance.
…………
11. Reports – The Managing Trustee shall, by the end of each financial year or as and when the Federal Government may direct, submit annual audited report of Fund to the Board and such other reports about its activities as the Board or the Federal Government may direct.
12. Rules – (1) The Board may, with the prior approval of the Federal Government, make rules for carrying out the purposes of this Ordinance.
(2) Without prejudice to the foregoing powers, such rules may provide for –
(a) the procedure for deposit of amounts in the Fund and its utilization for defraying Hajj expenses of the members;
(b) determination of Hajj expenses; and
(c) such other activities as may facilitate the performance of Hajj in conformity with the purposes of the Trust.
……… "
"AGREEMENT
THIS AGREEMENT is made this tenth day of September, 1996 between the AWAMI HAJJ TRUST, established under section 3 of the Awami Hajj Trust Ordinance, 1996 (Ordinance No. VII of 1996)…….of the first part and Dallah Real Estate and Tourism Holding Company, a Company duly organised and existing under the laws of the Kingdom of Saudi Arabia,…… of the second part.
WITNESSETH
WHEREAS the Trust is interested in leasing reliable housing facilities in the holy city of Makkah, Kingdom of Saudi Arabia, for Pakistani pilgrims whilst performing Hajj and Umra; and
WHEREAS Dallah owns adequate and appropriate real estate at a distance of 1500 metres from the Haram, and has agreed to construct the required structures and buildings on the same for the purpose and to lease them to the Trust.
NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the parties hereto agree as follows:
1. Dallah shall undertake, within the holy city of Makkah, development and construction necessary for the accommodation of 45,000 Pakistani pilgrims (on the basis of 2.5 cu. Metres per person) whilst performing Hajj and Umra on a part of the plot of land owned by Dallah in the Al-Misfalah district of Makkah comprising an area of 22,000 square metres which is at a distance of 1500 metres from the Haram as identified and described in Schedule "A" attached hereto (referred to as "the Housing").
2. The total leased value of the said land area of 22,000 square metres and the total construction cost of the Housing is computed at US$210,000,000 and US$135,000,000 respectively aggregating US$345,000,000 (U.S.$ Three Hundred and Forty-five Million only), out of which the Trust shall pay a lump sum of U.S.$100,000,000 (U.S. Dollars One Hundred Million only) to Dallah by way of advance ("the Advance Lease Payment") within thirty (30) days from the date of execution of this Agreement by the Parties, subject to (i) Dallah arranging through one of its affiliates a U.S. Dollars 100,000,000 (U.S.$ One Hundred Million only) Financing Facility for the Trust against a guarantee of the Government of Pakistan, (ii) Dallah submitting to the Trust a Performance Bond covering the Advance Lease Payment in the format attached as Schedule "B" to this Agreement. (iii) A counter guarantee issued by the Trust and Al-Baraka Islamic Investment Bank, E.C., Bahrain, (Hereinafter referred to as the (Trustee Bank") appointed by the Board of Trustees pursuant to Section 8 of the Awami Hajj Trust Ordinance, 1996 in favour of the Government of Pakistan.
3. This Agreement shall come into effect on the date that Dallah receives from the Trust the Advance Lease Payment and submits the aforesaid Performance Bond to the Trust ("Date of Effectiveness").
4. Dallah shall develop, construct and complete the Housing in accordance with such detailed specifications and drawings that shall be approved by the Trust within ninety (90) days of the execution of this Agreement. Upon such approval they will be signed by both parties. Such signed documents will be referred to herein as "the Approved Specifications". Within twenty-four (24) months from the Date of Effectiveness hereof Dallah shall make available to the Trust the Housing, subject to execution and registration of the Lease Agreement specified in Clause 5(a) below, for occupation by Pakistani pilgrims, complete in all respects, and prior to Dhul-qa'da 1, 1420 HIJRA.
5(a) The Trust irrevocably and unconditionally agrees to take on lease the Housing for a term of ninety-nine (99) years in terms of the draft lease contained in Schedule "C" hereto ("the Lease Agreement") for which entire term the Lease Payments shall be made in strict accordance with either of the two options specified in the attached Schedule "D" hereto. On the completion of the Housing as aforesaid the Lease Agreement shall be executed by and between the parties, which will be governed by the provisions of this Agreement insofar as applicable.
………..
19. This Agreement shall be binding upon and shall enure to the benefit of the parties hereto and to the benefit of their successors and permitted assigns to the extent that such enurement does not violate any specific provision of the Lease Agreement and applicable law.
………..
23. Any dispute or difference of any kind whatsoever between the Trust and Dallah arising out of or in connection with this Agreement shall be settled by arbitration held under the Rules of the Conciliation and Arbitration of the International Chamber ofCommerce, Paris, by three arbitrators appointed under such Rules.
24. To the extent that the Trust may be entitled in any jurisdiction to claim for itself immunity in respect of its obligations under this Agreement from any proceedings, suit, award, execution, attachment (whether in aid of execution, before award, judgment or otherwise) or other legal process or to the extent that in any jurisdiction there may be attributed such immunity (whether or not claimed), the Trust hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the fullest extent permitted by the law of such jurisdiction.
25. The Trust hereby irrevocably waive any objection now or hereafter to the siting of the venue of any arbitration, action, suit or proceeding in any such place or court as is referred to in Clause 23 and any claim that any action, suit or arbitration proceedings have been brought in an inconvenient forum.
26. The Trust also hereby consents generally in respect of any proceedings arising out of or in connection with this Agreement to the giving of any relief related thereto or the issue of any process in connection with such proceedings including, without limitation, the making, enforcement or execution against any award, order or judgment which may be made or given in such proceedings.
27. The Trust may assign or transfer its rights andobligations under this Agreement to the Government of Pakistan without the prior consent in writing of Dallah.
………".
ANNEX 4
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958
…………..
"Article II
1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Article III
Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
Article IV
1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in article II or a duly certified copy thereof.
2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.
"Article V
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
………. "
ANNEX 5
"101 Recognition and enforcement of awards
(1) A New York Convention award shall be recognized as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.
(2) A New York Convention award may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
As to the meaning of "the court" see section 105.
…………….
102 Evidence to be produced by party seeking recognition or enforcement
(1) A party seeking the recognition or enforcement of a New York Convention award must produce—
(a) the duly authenticated original award or a duly certified copy of it, and
(b) the original arbitration agreement or a duly certified copy of it.
(2) If the award or agreement is in a foreign language, the party must also produce a translation of it certified by an official or sworn translator or by a diplomatic or consular agent.
103 Refusal of recognition or enforcement
(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.
(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves—
(a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity;
(b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made;
…………………
(3) Recognition or enforcement of the award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognize or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be recognized or enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted.
(5) Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2)(f), the court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award.
It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security
……….."
Note 1 The reason for the delay is explained below. [Back] Note 2 The 1973 Constitution has been modified from time to time since then. I was shown the details of the Constitution as amended up to 31 December 2003. [Back] Note 3 Letter of Mr Lutfullah Mufti, Secretary of the MORA, to Mr Hussain Luwai, President of the Muslim Commercial Bank Ltd in Karachi, dated 18 July 1995. It is clear from the context of the letter that “members” means members of the proposed Trust. [Back] Note 4 This was, in fact, much larger than the area contemplated in the MOU. [Back] Note 5 I made it clear to counsel for the parties at an early stage in the hearing that I found this a puzzling conclusion, given the wording of the Ordinance (particularly article 3(2)) and the fact that the Trust had been created long before the last Ordinance “stood repealed”. I put the point to both experts on Pakistani law, but they both insisted that, as a matter of Pakistani law, once the Ordinance “stood repealed” because it had not been presented to Parliament in time, the statutory corporation that had been created by the Ordinance, as notified on 14 February 1996, then automatically ceased to exist. It was also the conclusion of the Civil Judge First Class in the first set of proceedings in Pakistan, to which I refer below. As this is an issue of Pakistani law, which I have to receive as a fact, it is therefore effectively an agreed fact, which it seems to me I have to accept. [Back] Note 6 It will be recalled that he was Secretary of the MORA and Secretary of the Board of Trustees of the Trust. He was also, by this time, Secretary of the Managing Trustee, the Al – Baraka Islamic Investment Bank. [Back] Note 7 I say “purported” because it is agreed by the Pakistani law experts that by this time the Trust had ceased to exist as a legal entity under Pakistani law. [Back] Note 8 When passed, that Act would have applied to both what is now India and Pakistan. [Back] Note 9 This provides that “Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavit…”. [Back] Note 10 See in particular para 17 of the judgment. [Back] Note 11 See para 17 of the tribunal’s First Partial Award. [Back] Note 12 FPA: Section III first para, page 19. [Back] Note 13 In English law, although perhaps not in other laws, a distinction must be drawn between two arbitration agreements. The first is an agreement of parties to submit future disputes to arbitration; the second is the reference, ie. the agreement to refer a particular dispute to arbitration: see: Black Clawson International Ltd v Papierwerk Waldhof-Aschaffenburg AG [1981] 2 Lloyd’s Rep 446; Mustill & Boyd on Commercial Arbitration (2nd Ed. 1989 page 61). The definition of “arbitration agreement” in section 6 of the Act covers both. I will have to consider this question further: see below. [Back] Note 14 FPA: Section III, para 4 (bis), page 20. Lord Mustill and Dr Justice Shah expressed doubts as to whether there could be a "transnational procedural law independent of all national laws”, in an arbitration, but appear to have accepted that the applicable law for the purposes of deciding the issue of who was bound by the “Arbitration Agreement” was not the procedural or “curial” law, but the applicable law of the “Arbitration Agreement”, viz. clause 23 of the Agreement. [Back] Note 15 FPA: Section III, para 6, page 26. [Back] Note 16 FPA : Section III, para 14, page 35. [Back] Note 17 See CPR Pt 62.18(7)(a). [Back] Note 18 Section 12(2) of the State Immunity Act 1978 provides that the time for entering an appearance to proceedings against a state shall begin to run two months after the judgment has been received at the Ministry of Foreign Affairs of the state concerned. Paragraph 2 of the order of Gloster J gave the GoP only 31 days after service of the order. [Back] Note 19 As France was the “seat” of the ICC Arbitration, the French courts would be the “supervising” courts. The French law experts agreed that the Paris Cour d’appel was the court with jurisdiction over any challenge to the awards: Joint Memorandum paragraph 2.2. [Back] Note 20 That provides that a New York Convention award may be refused if the person against whom it is invoked proves “that the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made”. [Back] Note 21 There are two related issues of Pakistani law which remained in dispute, on which counsel agreed that both sides would not adduce argument in these proceedings but would reserve their position in case there were further proceedings in this or other jurisdictions. These were: (a) whether the Trust was the “alter ego” of the GoP; and (b) whether the corporate veil of the Trust could be lifted and, if so, what it would reveal. [Back] Note 22 As I note below, there remain issues about what is meant by the “arbitration agreement” and what is comprised within the phrase “the law of the country where the award was made”, in particular does it permit the application of that country’s conflict of laws rules or any reference to “transnational” law or the laws of any other country, such as Pakistan. [Back] Note 23 See footnote 13 above. [Back] Note 24 See paragraphs 78 – 79. [Back] Note 25 I confess that all these points were raised by me in the course of argument. [Back] Note 26 That is not because, as a matter of construction of section 103(2)(b), the English court should take account of the conflicts of law rules of the law of the country where the award was made, but because the French courts would engage in a “broad factual enquiry”, including issues of foreign law. [Back] Note 27 Mr Landau was prepared to accept for this application that Article 173 does not stipulate that the agreement must be in writing, in the narrow sense of that phrase. (Compare the definition of “agreement in writing” in section 5(2) of the Act). [Back] Note 29 Joint Memorandum of French Law Experts: paragraph 2.4. [Back] Note 30 The relevant part of Article 264 of the Constitution provides: “Where a law is repealed, or is deemed to have been repealed, by, under, or by virtue of the Constitution, the repeal shall not, except as otherwise provided in the Constitution – (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the law”. [Back] Note 31 See Transcript for Day 3/page 36 line 19 to page 37 line 22. [Back] Note 32 Miss Heilbron reserves her position on any arguments on this point that might be made in any other action in this or any other jurisdiction. [Back] Note 33 See the references given at footnote 13 above. [Back] Note 34 Albert Jan van den Berg “The New York Arbitration Convention 1958” at pages 295 – 6 and 314 – 6. [Back] Note 35 See also section 103(2)(e), which refers to “the agreement of the parties”, which must refer to the individual reference. [Back] Note 36 Compare, eg. Dallal v Bank Mellat [1986] 1 QB 441 at 455 – 6 per Hobhouse J. [Back] Note 37 [2002] 2 Lloyd’s Rep 326 at paragraphs 8 – 15. [Back] Note 38 Albert Jan van den Berg “The New York Convention of 1958 – Towards a Uniform Judicial Interpretation” (Kluwer 1981) page 291. [Back] Note 39 So far as the Act is concerned, further support for this conclusion might be found in section 46(2) of the Act, which defines “the law chosen by the parties” as “the substantive laws of that country and not its conflict of laws rules”. That provision is, of course in Part 1 of the Act. It is said that this provision was specifically inserted to avoid the problems of renvoi: Mustill & Boyd on Commercial Arbitration (2001 Companion), page 328. See also Dicey, Morris & Collins, The Conflict of Laws (14th Ed. 2006) at para 4.034, in Vol 1 page 89 – 90. But it must be likely that the same approach is intended for section 103(2)(b) in Part III of the Act. [Back] Note 40 Republique arabe d’Egypte/Southern Pacific Properties Ltd et Southern Pacific Properties (Middle East). [Back] Note 41 There are a number of decisions of the Commercial Court at first instance all to this effect, following the decision of Rix J in Azov Shipping Co v Baltic Shipping Co (No 1) [1999] 1 Lloyd’s Rep 68. In Peterson Farms Inc v C&M Farming Ltd [2004] 1 Lloyd’s Rep 603 at para 18, Langley J refers to the many cases that have followed Rix J’s decision. Langley J states that he would follow it even if he did not agree with it, which he did. [Back] Note 42 For what is required to establish an issue estoppel see Issue Seven below. [Back] Note 43 FPA Section III, paragraph 6, quoted at para 49 above. [Back] Note 44 Vatier XX: Day 2/page 53 lines 5 – 15. [Back] Note 45 Joint Memorandum, paragraphs 2.9 and 2.10. [Back] Note 46 Clause 2.11 of the Joint Memorandum. I have assumed that this extends to emanations of the State, such as the GoP. [Back] Note 47 Transcript of M. Vatier’s evidence: Day 2/page 48 line 24 to page 49 line 19. M. Derains agreed: Day 2/page 71 lines 6-7; page 77 line 13. [Back] Note 48 M. Derains XX: Day 2/page 81 line 22 to page 82 line 8. [Back] Note 49 I have amended very slightly the translation given by M. Derains in his report at paragraph 19, which he wrote in English. The decisions of the Paris Cour d’appel referred to are: decision of 30 November 1988 (Société Korsnas Marma/ société Durand – Auzias); decision of 14 February 1989 (Société Ofer Brothers/The Tokyo Marine and Fire Insurance Co Ltd et autres) ; decision of 28 November 1989 (Compagnie tunisienne de navigation (Cotunav)/; Société Comptoir commercial André); decision of 11 January 1990 (Orri/ Société des Lubrificant Elf Acquitaine). See also to the like effect the decision of the Paris Cour d’appel of 21 October 1983 (Société Isover Saint – Gobain/ Sociétés Dow Chemicals). [Back] Note 50 Day 2/page 81 lines 5 – 7. [Back] Note 51 M. Vatier XX: Day 2 page 63 lines 18 – 21; M. Derains Re – X: Day 2 page 99 line 25 to page 100 line 1. [Back] Note 52 Clause 2.12 of the Joint Memorandum. Strictly speaking, as I read the leading decision of the Cour de cassation of 6 July 2000 (Société Creighton/Ministry of Finance of the State of Qatar), it decides that it is consistent with ordre publique for a state entity to renounce its right to immunity from execution by entering into an arbitration clause, but it depends on the intention of the party and the terms of the clause. In that case it was held that the Ministry of Finance had renounced its right to immunity from execution by virtue of agreeing to Article 24 of the ICC Rules of Arbitration. [Back] Note 53 Vatier XX: Day 2 page 60 line 1 to page 61 line 10. [Back] Note 54 Report, paragraph 23; decision of the Cour de cassation of 8 February 2000 (Société Taurus Films/Les Films de Jeudi). [Back] Note 55 Derains: XX Day 2 page 90 line 1 to page 92 line 1. [Back] Note 56 Joint Memorandum paragraph 2.4. [Back] Note 58 These were decided at the time when Pakistan also consisted of what was East Pakistan, now Bangladesh. Dr Pirzada explained that in those days West and East Pakistan were “provinces” of Pakistan and each had a High Court. After 1971, what had been West Pakistan became one federated state, but with four provinces, each of which had a High Court; that remains the position today: Day 3/page 22 line 3 to page 23 line 18. [Back] Note 59 See: Azim Khan v State Bank of Pakistan (PLD 1957 (WP) Karichi 892); Pakistan v Amin Agencies Ltd (PLD 1962 (WP) Karichi 467). [Back] Note 60 Day 3/page 24 lines 1 – 7. [Back] Note 61 PLD 1957(WP) Karachi 285. [Back] Note 62 See: In re the Duke of Wellington [1947] 1 Ch 506 at 520 per Wynn – Parry J. [Back] Note 63 See: Bundle B/pp 46 – 48; 51, 73; 78. [Back] Note 64 FPA Section III, paragraphs 8.3 and 8.4. [Back] Note 65 Statement paras 27 to 38. [Back] Note 66 Clause 2 of the Agreement. [Back] Note 67 Clause 27 of the Agreement. [Back] Note 68 The arbitrators held (para 9.2 of Section III the FPA) that the GoP was “bound” by Article 2 to give its guarantee to the facility to be raised by the affiliate of Dallah. This is difficult to understand, at least as a matter of English law. If the GoP is not a party to the Agreement, it cannot therefore be contractually bound by its terms. One cannot start out with the a priori proposition that it is a party, therefore it is bound, therefore it is bound by the arbitration agreement. That is starting with what is to be demonstrated. The position may be different in Saudi Arabian law, but there is no evidence that this is so, nor was there before the arbitrators. [Back] Note 69 Article 23 of the draft Transport and Maintenance Agreement which is at Schedule E to the Agreement also gives the Trust the right to assign or transfer its rights and obligations under that agreement to the GoP without the prior consent of Dallah. [Back] Note 70 B/page 113. It stated: “Dallah….will enter into an Agreement with the Awami Hajj Trust “Trust” for the following…”. The fax then set out the key matters which were later reproduced in the Agreement. [Back] Note 71 Repayment was, of course, guaranteed by the GoP. [Back] Note 72 Letters of 26 September 1996 and 4 November 1996. [Back] Note 73 FPA Section III paragraph 10.2. [Back] Note 74 FPA Section III paragraph 10.3. [Back] Note 75 The government of the late Mrs Benazir Bhutto was replaced by that of Mr Nawaz Sharif: Nackvi witness statement para 69. [Back] Note 76 FPA paragraph 11.1. [Back] Note 77 FPA: Section III paragraph 11.2. [Back] Note 78 [1983] 1 Lloyd’s Rep 424 at 426 and 428 – 9. [Back] Note 79 FPA Section III paragraph 11.2 [Back] Note 80 FPA Section III para 4 (bis). [Back] Note 82 It was agreed between counsel that the question of whether or not an issue estoppel binds the GoP must be decided according to English law principles, even though the findings said to give rise to the issue estoppel were made by an arbitral tribunal that was not purporting to apply English law. [Back] Note 83 Nor is it suggested that this would be inconsistent with French ordre publique. [Back] Note 85 Joint Memorandum of French law experts: para 2.7. [Back] Note 86 Article 1476 of the French New Code of Civil Procedure, as applied to international arbitration pursuant to Article 1500 of the NCCP, quoted in the report of M. Derains, para 10. This is not in dispute. [Back] Note 87 Cf. DSV Silo – Und Verwaltungs-gesellschaft MBH v Owners of the “Sennar” and 13 other ships (The “Sennar”) (No2) [1985] 1 WLR 490, particularly at 499, per Lord Brandon of Oakbrook. [Back] Note 88 There were interlocutory proceedings before Mr Nigel Teare QC, sitting as a Deputy Judge in the Commercial Court, but I do not need to refer to those in detail here. [Back] Note 89 Section 9(1) provides: “Where a State has agreed in writing to submit a dispute which has arisen or may arise, to arbitration the state is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration”. [Back] Note 94 As defined by Lord Brandon of Oakbrook in the “Sennar” No 2, (supra) at page 499 E – G: “…a decision on the merits is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned” [Back] Note 95 Paragraph 103 of the judgment. [Back] Note 96 Paragraph 104 of the judgment. [Back] Note 97 Paragraph 104 and also 105 of the judgment. [Back] Note 98 In relation to the Final Award, see the argument under Issue Eight. [Back] Note 99 Paragraph 109 of the judgment, citing Arnold v National Westminster Bank plc [1991] 2 AC 93. [Back] Note 100 The French law experts agree that it is the Paris Cour d’appel that would have had jurisdiction to determine any challenge to the FPA: Joint Memorandum paragraph 2.2. [Back] Note 101 [2002] 2 Lloyd’s Rep 326 [Back] Note 102 [2006] 1 Lloyd’s Rep 701. [Back] Note 103 See paragraph 30 of the report. [Back] Note 104 I am using “French law” here as a shorthand for French law in the extended way that has been discussed under Issue Three. [Back] Note 105 That is: “…an agreement in writing under which the parties undertake to submit to arbitration all or any difference which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration”. [Back] Note 106 [2002] 2 Lloyd’s Rep 326 at paragraphs 8 – 15. [Back] Note 107 See paragraphs 11 and 12 of the judgment. [Back] Note 108 [2002] 2 Lloyd’s Rep 326. [Back] Note 109 That is, it relied on section 103(2)(b) of the Act. [Back] Note 110 This provides that where an application to set aside an award has been made to a “competent authority”, then the court in which recognition or enforcement is sought can adjourn the decision on recognition or enforcement. [Back] Note 111 Paragraphs 10 and 12 of the judgment. [Back]