The UK Supreme Court Speaks to International Arbitration: Learning from the Dallah Case - Chapter 09 - International Arbitration and the Courts

Author(s):

George A. Bermann

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26 pages

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September, 2015

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Originally from International Arbitration and the Courts

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I. INTRODUCTION

Rarely, over the decades following its entry into force, was the 1958

United Nations Convention on the Recognition and Enforcement of

Foreign Arbitral Awards, or New York Convention,1 the subject of a

judgment of the UK House of Lords.2 Yet, within barely over a year

after its succession to the House of Lords in October 2009, the United

Kingdom Supreme Court delivered a judgment that may not make up for

all that lost time, but is deeply instructive nonetheless. The decision in

Dallah Real Estate and Tourism Holding Company v. Ministry of

Religious Affairs, Government of Pakistan3 became the vehicle for the

Court to lay down important markers not only for arbitration with

sovereign entities, but for the judicial role in the enforcement of foreign

awards generally.

On the facts, Dallah looks very much like just another entry in a long

series of arbitral awards tackling the issue of the separateness of States

from their agencies and instrumentalities. The issue has been a recurrent

one because, by the time a dispute arises and an arbitration ensues, the

instrumentality that is the signatory party is often no longer an attractive

respondent. It may lack assets to pay an award, and it may not even any

longer exist. After briefly setting out the facts of the case and its

procedural history in Part II of this article, I explore in Part III Dallah’s

significance in this first respect.

As will be seen, the UK Supreme Court in Dallah denied

enforcement against the Government of Pakistan of an arbitral award

rendered in France, on the ground that the Government – a non-signatory

to the underlying arbitration agreement signed by one of its

instrumentalities – was never bound by that agreement and therefore not

liable for the award. The UK decision is all the more revealing in this

respect since, only a few months later and in full awareness of the UK

judgment, the Cour d’appel of Paris rejected the Government of

Pakistan’s attempt to have the award annulled in France on that very

ground.4 The UK Court’s apparent misapprehension of French law – the

law that according to all parties governed the arbitral tribunal’s

jurisdiction over the Government – in itself raises intriguing questions.

Although the French Cour d’appel’s rejection of the UK Supreme

Court’s reasoning and result lends the Dallah case its special

resonance in international arbitration circles, the UK ruling is also of

interest insofar as it addresses issues of broader significance to the

recognition and enforcement of foreign arbitral awards. One of these

issues is the difference, if any, between the standard of review over

the existence and validity of an arbitration agreement exercised by the

courts of the place of arbitration, on the one hand, and a foreign court

at the time of enforcement, on the other. A second and closely related

issue is the weight, if any, that the enforcing court should give to the

findings of the tribunal on those questions. These are the subjects of

Part IV.

II. THE FACTS

The dispute in Dallah had its origins in a 1996 contract between

Dallah and an entity (“the Trust”) created for purposes of the contract by