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

1. Facts of the Case

The Claimant, Dallah Real Estate and Tourism Holding Company “Dallah” is a Saudi Arabian company providing services for the Holy Places. In 1995 the Claimant and the Pakistani Government signed a memorandum of understanding to provide housing for Pakistani Hajj pilgrims in Mecca. The Pakistani Government set up a trust which would enter into a long-term agreement with Dallah. The contract was established between the Awami Hajj Trust (the “Trust”) and Dallah, was signed in September 1996. The contract included an arbitration clause providing for ICC arbitration in Paris in the event of a dispute. The Government appeared in the Contract as guarantor of a loan to the benefit of the Trust and the Trust had the right to assign its rights and obligations under the Contract to the Government. After 6 November 1996, the Trust ceased to exist after a new Pakistani Government not promulgating the necessary Ordinance under Pakistani law to allow the Trust to continue.

 In 1998, Dallah commenced arbitration proceedings against the Government under ICC rules in Paris seeking damages for breach of contract. The Government refused to take part in the proceedings on the basis that it was not a party to the Contract and it did not consent to arbitration under the arbitration clause in the Contract. The arbitral tribunal had held in a first partial Award on 26 June 2001, that as a non signatory, the Government of Pakistan was bound by the arbitration agreement. The decision of the Tribunal relied on transnational principles and usages, factual circumstances of the case with particular regard to the parties conduct and intention. The Tribunal held a second partial award on liability in 19 January 2004 and the final award against the Government of Pakistan on 23 June 2006, with damages in the amount of USD 20,588,040. Dallah tried to enforce the Award in England. The Government opposed enforcement in England, Aikens J decline to enforce the Award on the grounds of section 103 (2) (b) of the English Arbitration Act 1996, because of the non existence of a arbitration agreement between the parties. Subsequently, the Court of Appeal dismissed Dallah's appeal on 20 July 2009 and the issue came before the Supreme Court. The Government also made an application to the French Courts to set aside the Award. Dallah asked the Supreme Court to stay its proceedings pending a decision in France. The Supreme Court denied the stay and in the judgment, declined to enforce the arbitral award in favor of Dallah Real Estate and Tourism Holding Company. The Paris Court of Appeal, in February 2011, decided that the Government of Pakistan is a party to the arbitration agreement, rejecting the annulment proceedings.