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In Fleetwood Wanderers Limited (t/a Fleetwood Town Football Club) v AFC Fylde Limited  EWHC 3318 (Comm), the High Court upheld a challenge to an arbitral award on the grounds of serious irregularity under section 68(2)(a) of the Arbitration Act 1996 (AA 1996). The Arbitrator had failed to inform the parties that, following the hearing, he had been in communication with The Football Association (The FA) as to the scope and content of its rules, and had in turn failed to provide either party with the opportunity to make representations on the issues raised in that correspondence.
A battle of the Titans it was not. This case is nonetheless a useful reminder as to the circumstances in which the Courts will uphold a challenge to an arbitral award and is a cautionary tale to all those who arbitrate disputes in the tight-knit sports law community.
At the relevant time, the claimant, Fleetwood Town Football Club (Fleetwood), was a professional football club in League One of the Sky Bet Football League. The defendant, AFC Fylde (AFC), competed in the Vanarama National League North.
AFC had entered into two consecutive employment contracts with a professional football player, Dion Charles (the Player). It had, however, failed to register the second contract with The FA or National League, as it was required to do.
During the term of the second employment contract, the Player was also engaged by Fleetwood. AFC commenced arbitral proceedings under Rule K of the FA’s rules, seeking damages at common law for the Player’s alleged repudiatory breach of contract. AFC subsequently amended its claim, to include a claim for compensation under Article 17.2 of the FIFA Regulations on the Status and Transfer of Players (FIFA RSTP), which provides that “… if a professional is required to pay compensation, the professional and his new club should be jointly and severally liable for its payment”.
The Arbitrator found that, while AFC had failed to make out its common law claim, it succeeded under Article 17.2 FIFA RSTP. That provision was said to have been incorporated into The FA Rules, and thus to apply as a matter of English law, in circumstances where Rule A1(b) of The FA Rules required the parties to play and/or administer football in conformity with the statutes and regulations of FIFA (amongst other governing bodies).
Grounds of challenge
Fleetwood originally sought to challenge the arbitral award on the ground that the Arbitrator lacked substantive jurisdiction to make the award (under section 67(1)(a) of the AA 1996), alternatively, that he had exceeded his powers within the meaning of section 68(2)(b).
After Fleetwood commenced its claim in the High Court, solicitors for The FA drew the Club’s attention to various communications between the Arbitrator and the Judicial Services Manager at The FA, which had taken place between 17 and 21 July 2017 - nearly a month after the proceedings had been heard, and shortly before the Arbitrator had made his award.
Specifically, on 17 July 2017, the Arbitrator emailed The FA, seeking to “ascertain whether The FA has adopted, and incorporated into its Rules, the [FIFA RSTP]”. The Arbitrator set out his own preliminary view that, “in the absence of any conflicting provisions in the FA Rules, it is arguable that [Rule A.1(b) of The FA Rules] incorporates FIFA Statutes en masse.” He also sought information as to whether the issue had been considered in previous cases involving The FA.
There was further communication between the Arbitrator and The FA and on 20 July 2017, the former sent a further email to the latter stating as follows.
“… As I was carrying out some research a couple of days ago, I looked at the Irish FA’s website and saw that they have expressly incorporated FIFA’s RSTP into their domestic rules via the Professional Game Player Regulations…
The first question that I have to resolve is whether the RSTP are incorporated into FA Rules. Subject to that, the second question is whether Article 17.2 of the RSTP… should ‘trump’ English law…
I do not expect an answer to either of these questions. I will have to resolve them myself. It is really some help with The FA’s understanding of the position regarding the incorporation of FIFA’s RSTP into FA Rules (and whether I am missing something), and whether Article 17 has ever been considered by a Regulatory Commission or a Rule K Tribunal.”
The FA’s Judicial Services Manager replied on 21 July 2017, confirming the Arbitrator’s view that Rule A1(b) of The FA’s Rules required all clubs and affiliated associations to comply with the statutes and regulations of FIFA. The email went on to state that while “[t]he Association does not usually get involved directly in disputes…. [i]f such a case was before a FIFA Single Judge of the Players’ Status Committee, the Association would be notified of such proceedings for information purposes only”. The FA’s representative concluded by stating that he had “been informed Art. 17.2 of RSTP would only come into scope where involving an international transfer”, such that “with domestic only disputes English law should supersede other regulation”.
The Arbitrator replied to that email on the same date, setting out his preliminary conclusion that “a Rule K arbitrator would have jurisdiction to consider the RSTP in a domestic dispute between two clubs [who] are members of the same national association”, but noting that he would “have to reconsider all of that” in light of what he had been told.
Upon disclosure of the above, Fleetwood applied to amend its claim, challenging the arbitral award on the ground of serious irregularity under section 68(2)(a) of the AA 1996.
Finding of the Court
His Honour Judge Halliwell, sitting in the Circuit Commercial Court, upheld the challenge on the ground that the Arbitrator’s communications with The FA, as outlined above, gave rise to “serious irregularity” contrary to section 68(2)(a) of the 1996 Act.
Under section 33(1) of the AA 1996, the Arbitrator was under a duty to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent. That duty required the Arbitrator to give the parties an opportunity to deal with any issue that may be relied upon by him as the basis of his findings. The parties were thus “entitled to assume that the [Arbitrator would] base [his] decision solely on the evidence and argument presented by them prior to the making of the award and if the [Arbitrator was] minded to decide the dispute on some other point, [he] must give notice of it to the parties to enable them to address the point ” (Russell on Arbitration, para. 5-049, cited with approval in Pascol v Rossakhar  1 Lloyd’s Rep 109, at ). See further: Fox v Wellfair Limited  2 Lloyd’s Rep 514; Interbulk Limited v Aiden Shipping Co Ltd  2 Lloyd’s Rep 66; and, most recently, Brockton Capital LLP v Atlantic-Pacific Capital Inc  EWHC 1459.
The Arbitrator’s correspondence with The FA, after the conclusion of the hearing, was in breach of his duties under section 33 of the AA 1996 and thus amounted to an irregularity within the meaning of section 68(2) thereof (para. 39 of the judgment). The Arbitrator had, for example, “implicitly sought to ascertain whether [the] FA had done anything to incorporate the RSTP without notifying the parties of his intention to do so” (para. 36) and had also carried out his own extrinsic research into the issues (para. 38).
Such irregularities will give rise to substantial injustice where they cause an arbitrator to reach a conclusion which he might not otherwise have reached, as long as the alternative was reasonably arguable: Merkin on Arbitraton Law, cited with approval by Mr Justice Andrew Smith in Alfred Uwe Maass v Musion Events Limited  EWHC 1346. Applying that test, the Judge concluded that the Arbitrator’s own investigations and communications with The FA gave rise to substantial injustice to Fleetwood. By failing to copy the parties to the proceedings into his correspondence, the Arbitrator had denied them the opportunity to provide submissions and evidence on his further lines of inquiry and on the information he had in turn received from The FA.
The case was thus remitted to the Arbitrator to consider the limited issue of the incorporation of Article 17 of the RSTP into The FA Rules and its applicability to a dispute between two domestic clubs. While The FA Rules expressly exclude an appeal on a point of law, the Judge nonetheless noted that, in his view, it was reasonably arguable that this was not the case. Whereas certain of the provisions of the FIFA RSTP were binding at national level (see further FIFA RSTP, Article 1(3)(a)), in the Judge’s view, The FA was only required to consider the principles under Regulation 17 of the FIFA RSTP, which were thus discretionary.
Mr Justice Halliwell nonetheless rejected Fleetwood’s other grounds of challenge, under sections 67 and 68(2)(b) of the AA 1996 as “misconceived from the outset” (para. 42). While the Club’s arguments had been dressed up as a challenge to jurisdiction, alternatively as an excess of powers claim, they were in fact based on allegations that the Arbitrator had erred in law. In any event, Fleetwood has lost its right to bring a challenge on those grounds by failing to raise its objections promptly during the course of the hearing (AA 1996, section 73(1)).
Despite the very high threshold applied to cases under section 68(2) of the AA 1996, this case remains a clear example of irregularity in circumstances where the Arbitrator decided a central issue without giving any notice to the parties to the proceedings: see further Russell on Arbitration, para. 8-089; Alfred Uwe Maass, above at . While the Arbitrator’s inquiries were undoubtedly well-intentioned, they strayed far beyond that which is permissible. Thus the Arbitrator did not only apply his expertise to the evidence before him but essentially sought to introduce new evidence to the dispute.
It is less clear, however, whether the Judge was correct to conclude that the Arbitrator could remedy his errors simply by inviting the parties to make representations on the contentious correspondence. Arbitral tribunals are entitled to determine the extent to which they may adopt an inquisitorial approach to the proceedings under section 34(2) of the AA 1996, but there is no evidence that any such approach was adopted in this case.
Subject to that concern, the decision not to set aside the award and instead to remit only a limited issue to the Arbitrator for reconsideration appears to be in line with existing principles. Remission is the default option and the court should not set aside an award unless it would be inappropriate to remit the matter to the arbitrator (see further, AA 1996, sections 68(3) and 69(7)). As the Court recognised remission was appropriate in this case where: (1) the irregularity applied to a discrete aspect of the claim, upon which very little evidence had been directed; (2) the irregularity could be remedied by allowing further submissions and evidence; and (3) there was no suggestion of bias or reason to challenge the professionalism of the Arbitrator, in circumstances where his communications with The FA had been driven by his “anxiety to achieve the correct outcome, as he perceived it”.
While many sporting disputes are resolved by way of arbitration, examples of successful challenges to any resulting arbitral award remain uncommon. In those circumstances, while the principles applied in this decision will (for the most part) be familiar to every seasoned arbitrator, the case remains a useful reminder of the dangers of being over-familiar in the discharge of one’s duties, particularly in the closely integrated sports law community.
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