The Awami Hajj Trust was founded by the Pakistani government in 1996 to help pilgrims make travel arrangements to Mecca. The Trust, not the government, then signed a contract with Dallah Real Estate to build housing close to Mecca, which included a Paris-based ICC arbitration clause but no governing law clause. Dallah was not included as a direct party in the final deal, despite having previously signed a Memorandum of Understanding with the Government. Conflicts over contractual responsibilities emerged when Benazir Bhutto’s administration collapsed politically and the Trust was dissolved.

Dallah started arbitration against the Government, which declined to take part and denied any legally enforceable arrangement. Nevertheless, the tribunal claimed jurisdiction under the Kompetenz–Kompetenz principle and granted damages totalling more than $20 million. The Government successfully opposed Dallah’s request for enforcement in England under Section 103(2)(b) of the Arbitration Act 1996. Courts at all levels, including the UK Supreme Court, ruled that there was no joint intent to bind the Government to the arbitration agreement under French law, thus denying enforcement.

ISSUES BEFORE THE COURT

• Whether the Pakistani government was bound by a legitimate arbitration agreement?
• Whether French law could bind the Government of Pakistan, a non-signatory, on the basis of common intention?
• Whether the Pakistani government was under the arbitral tribunal’s jurisdiction?
• Whether the enforcing court was bound by the tribunal’s ruling on jurisdiction under the Kompetenz-Kompetenz concept?
• Whether the enforcing court ought to examine the tribunal’s jurisdiction in its entirety or in part
• Whether in spite of the arbitral award enforcement could be denied under Section 103(2) of the Arbitration Act 1996?

RULE

• Section 103(2)(b) of the Arbitration Act of 1996 states that if the arbitration agreement is void under the relevant law, enforcement of a foreign arbitral ruling may be denied.
• Article V of the New York Convention lists a few reasons why enforcement may be refused, such as the absence of jurisdiction and a valid arbitration agreement.

• Kompetenz-Kompetenz Principle: Arbitral tribunals are empowered to establish their own jurisdiction.
• Courts in the enforcement stage, however, are not constrained by these rulings and are free to examine jurisdiction on their own.
• According to French law, an arbitration agreement can only bind a non-signatory if there is a clear shared desire to do so.
• Courts continue to have ultimate supervisory power, particularly in cases involving consent and jurisdiction.

APPLICATION

Because the arbitration agreement was only signed between Dallah and the Awami Hajj Trust and there was no explicit mutual purpose to bind the Government under French law, the Supreme Court applied the law and found that the Government of Pakistan was not a party to the arrangement. It concluded that enforcement courts, who have the right to carry out a thorough and independent evaluation of jurisdiction, were not bound by the arbitral tribunal’s ruling on jurisdiction under the Kompetenz–Kompetenz concept. The Court determined that the award was granted without jurisdiction and that enforcement was appropriately rejected under Section 103(2)(b) of the Arbitration Act 1996 since the tribunal’s decision had no legal or evidential value and the Government had continuously refused permission.

CONCLUSION

In summary, the ruling confirms that the doctrine of separability under the Arbitration Act 1996 and the principle of Kompetenz–Kompetenz ensure both effectiveness and equity in arbitral proceedings by limiting dilatory tactics while maintaining essential judicial oversight. As part of a system of checks and balances, the case shows that while though arbitral tribunals have the right to make decisions within their own jurisdiction, this power is not unqualified and is
still subject to judicial review. In the end, the decision shows that Dallah was not harmed; rather, the Government of Pakistan had carefully planned its transactions, and the Kompetenz– Kompetenz doctrine successfully upheld the fundamental need of consent in arbitration, producing a fair result.