Factual and Procedural Background
The Claimant and Defendant are football clubs, with the Claimant in League One of the Sky Bet Football League and the Defendant in the Vanarama National League North. The Defendant entered into two written employment contracts with a professional footballer ("the Player") but failed to register the second contract with the Football Association ("the FA") or the National League ("NL"). During the term of this contract, the Claimant engaged the Player, leading to a dispute in which the Defendant alleged the Player committed a repudiatory breach and the Claimant wrongfully procured this breach, seeking damages at common law.
The Defendant referred the dispute to arbitration under Rule K1 of the FA Rules. The Defendant amended its claim to include compensation under Article 17 of the FIFA Regulations on the Status and Transfer of Players ("RSTP"), which provides for compensation where a contract is terminated without just cause and makes the player and new club jointly liable. The Arbitrator found for the Defendant under Article 17 but not on the common law claim.
The Claimant challenged the arbitration award, initially on grounds of lack of substantive jurisdiction and excess of powers under the Arbitration Act 1996. Subsequently, it amended its claim to allege a serious irregularity due to undisclosed communications ("the Contentious Emails") between the Arbitrator and the FA shortly before the award, contending this breached the Arbitrator’s duty to act fairly and allow parties a reasonable opportunity to present their case.
Legal Issues Presented
- Whether the Arbitrator had substantive jurisdiction to make the award under Section 67(1)(a) of the Arbitration Act 1996.
- Whether the Arbitrator exceeded his powers within the meaning of Section 68(2)(b) of the Arbitration Act 1996.
- Whether the Arbitrator committed a serious irregularity under Section 68(2)(a) of the Arbitration Act 1996 by engaging in undisclosed communications with the FA, breaching his duty to act fairly and give the parties a reasonable opportunity to present their case.
- Whether Article 17 of the FIFA RSTP was incorporated into the FA Rules and binding on the parties.
- The appropriate remedy for any established irregularity.
Arguments of the Parties
Claimant's Arguments
- The Arbitrator lacked substantive jurisdiction or exceeded his powers by applying Article 17 of the RSTP, which was not incorporated into the FA Rules.
- The Arbitrator committed a serious irregularity by communicating with the FA without notifying the parties or allowing them to make representations, breaching his duties under Section 33(1) of the Arbitration Act 1996.
- The Contentious Emails revealed that the Arbitrator sought and received evidence extraneous to the arbitration process, which was not disclosed to the parties.
- The Claimant contended that the FA had not incorporated Article 17 into the FA Rules and that the Arbitrator’s conclusions to the contrary were incorrect in law.
Defendant's Arguments
- The FA Rules incorporate the FIFA RSTP, including Article 17, both mandatory and discretionary provisions, binding the parties.
- The Arbitrator’s award correctly applied Article 17, and the FA Rules require clubs to comply with FIFA statutes without derogation.
- The communications between the Arbitrator and the FA were appropriate inquiries to ascertain the correct regulatory framework.
- The Defendant disputed that the Arbitrator’s conduct amounted to a serious irregularity causing substantial injustice.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Mercato Sports (UK) Limited v the Everton Football Club Company Limited [2018] EWHC 1567 |
Binding effect of the FA Rules as contractual obligations on clubs and players. |
The court accepted that the parties were bound by the FA Rules as a matter of contract. |
| Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 |
Principles of contractual interpretation considering the background knowledge reasonably available to the parties. |
The court applied the classical test for interpreting the FA Rules, including admissibility of surrounding circumstances. |
| Chartbrook Limited v Persimmon Homes Limited [2009] 1 AC 1101 |
Limits on admissible evidence in contractual interpretation, excluding direct evidence of intention. |
The court noted that internal deliberations of the FA and PFNCC are generally not admissible as background knowledge. |
| Vee Networks Limited v Econet Wireless International Limited [2004] EWHC 2909 |
Inappropriateness of courts re-hearing substantive issues in challenges to arbitration awards. |
The court acknowledged that errors of law by an arbitrator are generally not grounds for setting aside an award. |
| Pacol v Rossakhar [2000] 1 Lloyds Rep 109 |
Arbitrator’s duty to give parties notice and opportunity to respond to issues relied upon in findings. |
The court emphasized the requirement of fairness and opportunity in arbitration proceedings. |
| Fox v Wellfair Limited [1981] 2 Lloyds Rep 514 |
Arbitrator must not use own knowledge to derogate from evidence without giving parties chance to respond. |
Supported the principle that parties must have opportunity to address all evidence and arguments. |
| Interbulk Limited v Aiden Shipping Co Ltd [1984] 2 Lloyds Rep 66 |
It is unfair to decide a case on an issue not raised without giving the party an opportunity to deal with it. |
Reinforced the duty of fairness in arbitration procedures. |
| Brockton Capital LLP v Atlantic-Pacific Capital Inc [2014] EWHC 1459 |
Tribunal breached duty by deciding an issue without notice to the party. |
The court found a breach of Section 33(1)(a) of the Arbitration Act 1996. |
| Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 31 |
Definition of excess of powers by an arbitral tribunal. |
Referenced in relation to the Claimant’s alternative challenge under Section 68(2)(b). |
| Alfred Uwe Maass v Musion Events Limited [2015] EWHC 1346 |
Test for substantial injustice caused by procedural irregularity in arbitration. |
The court applied the two-stage test for serious irregularity and substantial injustice. |
Court's Reasoning and Analysis
The court carefully analyzed the incorporation of the FIFA RSTP into the FA Rules. It noted that while mandatory provisions of the RSTP (Articles 2-8, 10, 11, and 18) are incorporated without modification, the discretionary principles in Articles 13-17, including Article 17, are not expressly incorporated as binding rules. The court found it reasonably arguable that the FA Rules do not elevate these discretionary principles to binding national rules.
The Arbitrator’s conclusion that Article 17 was incorporated wholesale into the FA Rules was challenged as potentially incorrect in law. However, the court emphasized that errors of law alone do not justify setting aside an arbitration award.
Regarding the Contentious Emails, the court found that the Arbitrator breached his duties under Section 33(1) of the Arbitration Act 1996 by making inquiries and receiving information from the FA without notifying the parties or affording them an opportunity to respond. This procedural irregularity amounted to a serious irregularity under Section 68(2)(a) because it deprived the parties of a fair hearing and could have caused substantial injustice.
The court applied established principles from arbitration law requiring tribunals to give parties notice and opportunity to address any issues or evidence that may affect the outcome. The Arbitrator’s undisclosed communications were inconsistent with these duties.
The court rejected the Claimant’s alternative challenges based on lack of jurisdiction or excess of powers, finding these claims misconceived as they were based on errors of law rather than jurisdictional defects. The Claimant had also lost the right to raise these grounds by failing to object promptly.
In remedy, the court determined that the award should be remitted to the Arbitrator for reconsideration of the Article 17 issue, allowing the parties to make representations regarding the content and implications of the Contentious Emails. This approach aligns with the principle of minimal interference in arbitration and addresses the narrow procedural irregularity without reopening the entire arbitration.
The court noted no evidence of bias or lack of professionalism by the Arbitrator and found no reason to doubt his future conduct upon remission.
Holding and Implications
The court allowed the Claimant's challenge under Section 68(2)(a) of the Arbitration Act 1996 on the basis of a serious irregularity arising from the Arbitrator's undisclosed communications with the FA.
The award was not set aside but remitted to the Arbitrator for reconsideration of whether Article 17 of the FIFA RSTP applies, with directions to disclose the relevant communications to the parties and permit representations. This remedy preserves the integrity of the arbitration process while addressing the procedural unfairness identified.
The court rejected the Claimant’s alternative jurisdictional and excess of power challenges as unfounded and/or waived.
No new legal precedent was established beyond clarifying the application of procedural fairness obligations on arbitrators under the Arbitration Act 1996 in the context of undisclosed communications.