The reported judgements relating to the Dallah arbitration award have created international interest in the field of commercial arbitration. The judgements of the English and French Courts concern the enforcement of an arbitration award made by an ICC arbitral tribunal sitting in Paris. The award required the Government of Pakistan to pay Dallah US$20,588,040.
A Saudi construction company, Dallah, signed an agreement with a Pakistani trust for the financing and construction of a centre in Mecca for Pakistani pilgrims. The contract provided for ICC Arbitration in Paris. The trust ceased to exist shortly after the contract had been executed. A presidential order issued by the Pakistani Government had lapsed, which meant that the trust no longer had any powers. The minister of religious affairs then sent a letter to Dallah claiming contractual breaches and repudiation by Dallah. The minister was a Government official, but also before the demise of the trust he was the trust's secretary.
As the trust no longer existed, Dallah commenced arbitration against the Government of Pakistan. Dallah argued that the Government had been deeply involved in the negotiations and therefore had a sufficient interest in the contract to have standing in the arbitration as respondent. The arbitral tribunal decided that the Government of Pakistan was effectively the controlling party of the trust. This was based on;
"trans-national general principals and usages reflecting the fundamental requirements of justice and international trade and the concept of good faith in business". The arbitral tribunal found that the Government of Pakistan was liable and ordered it to pay damages of around US$18 million. The Government refused to honour the award and Dallah sought enforcement.
Enforcement in England
Initially, Dallah sought enforcement of the final award in England. In the High Court, at first instance, enforcement was denied. It was also denied by the Court of Appeal and the Supreme Court. This is a rare case of the English Courts refusing enforcement of an international arbitral award. The Supreme Court judgment of 3 November 2010 considered that the application of the New York Convention would require strict compliance with the law of the contract. Section 103(2)b of the Arbitration Act 1996 repeats Article V(I)(a) of the New York Convention, which sets out one of the circumstances when an arbitration agreement is not valid: