## Facts

- In July 1995, Dallah Real Estate and Tourism Holding Company (a Saudi company) and Pakistan’s Ministry of Religious Affairs signed a memorandum concerning housing for Pakistani pilgrims in Saudi Arabia.
- Pakistan later created the Awami Hajj Trust by presidential ordinance as a statutory body described as legally and financially independent from the government.
- On September 10, 1996, Dallah entered into a written agreement with the Trust alone; it replaced the 1995 memorandum and contained an ICC arbitration clause providing for arbitration seated in Paris.
- After the 1996 agreement, Ministry officials (not formally connected to the Trust) sent letters to Dallah regarding performance.
- On January 19, 1997, a Ministry official sent a letter on Ministry letterhead treating Dallah’s alleged nonperformance as repudiation of the 1996 agreement.
- The Trust ceased to exist in January 1997 when its enabling ordinance was not renewed.
- In 1998, Dallah commenced ICC arbitration in Paris against the Government of Pakistan alone, asserting Pakistan was a “true party” to the 1996 agreement and arbitration clause.
- The tribunal issued a partial award on jurisdiction (2001) and later awards on liability and quantum, culminating in a 2006 final award of approximately US$20.6 million for Dallah.
- Pakistan sought annulment before the Paris Court of Appeal at the seat, arguing it was not bound by the 1996 contract’s arbitration agreement because it did not sign the contract.

## Issues

1. Whether, under French international arbitration law, Pakistan was bound by the arbitration clause in the 1996 contract between Dallah and the Trust despite Pakistan’s non-signature.
2. Whether the “substantive rules” applied by French courts in international arbitration showed a common intention, based on the factual matrix, for Pakistan to be treated as a party to the arbitration agreement.
3. Whether the Ministry’s involvement in performance and termination-related communications evidenced acceptance of the 1996 contract and its arbitration clause.

## Decision

- The Paris Court of Appeal dismissed Pakistan’s application to annul the ICC award.
- The court held that Pakistan was bound by the arbitration clause in the 1996 agreement despite the lack of signature.
- Applying French substantive rules for international arbitration, the court found the circumstances showed Pakistan’s direct involvement and acceptance of the contractual relationship.
- The court upheld the tribunal’s jurisdiction and refused to set aside the award at the seat.

## Legal Principles

- In French international arbitration, the existence and scope of an arbitration agreement may be assessed under substantive rules developed by the courts, rather than through ordinary conflict-of-laws analysis.
- Under these substantive rules, an arbitration clause can bind a non-signatory when the facts show the non-signatory’s direct involvement in negotiation, performance, or termination of the contract and a common intention to be bound by the clause.
- In annulment proceedings at the seat, French courts may review arbitral jurisdiction de novo and determine for themselves whether a valid arbitration agreement binds the party challenging the award.
- Evidence of state participation and control—such as initiating the project, creating an instrumentality to implement it, and acting as though authorized to manage or terminate the contract—may support treating the state as a party to the arbitration agreement.

## Conclusion

The Paris Court of Appeal refused to annul the ICC award, concluding that Pakistan—though not a signatory to the 1996 contract—was bound by its arbitration clause because the surrounding facts and the Ministry’s conduct showed Pakistan’s direct involvement and acceptance under French international arbitration law.


Ministry of Religious Affs. (Pak.) v. Dallah Real Estate & Tourism Holding Co., Case No. 09/28533 (Paris Ct. App. Feb. 17, 2011)