Arbitrator's independent inquiries amount to a serious irregularity – English court remits award back to arbitrator

The English High Court has upheld a challenge to an arbitration award on the grounds of serious irregularity, in Fleetwood Wanderers Ltd (t/a Fleetwood Town Football Club) v AFC Fylde Ltd [2018] EWHC 3318 (Comm). The Court held that the sole arbitrator's conduct in making independent investigations after the substantive hearing, without notifying the parties and without giving them an opportunity to respond, breached the tribunal's general duty under s33 of the UK Arbitration Act 1996 (the "Act"), and amounted to a serious irregularity under s68 of Act. The award was remitted back to the arbitrator for reconsideration.

Background

The dispute between the Claimant ("Fleetwood Town") and the Defendant ("Flyde"), both football clubs, arose from the termination of a professional footballer's contract of employment. Flyde initially contracted Dion Charles (the "Footballer"), but failed to register his contract with the Football Association ("FA") or the National League, as it was required to do.

During the currency of his initial contract with Flyde, the Footballer left and joined Fleetwood Town. Flyde claimed that this constituted a repudiatory breach of the Footballer's initial contract, that Fleetwood Town wrongly procured such a breach, and that it was therefore entitled to common law damages, plus damages under Article 17 of the Regulations on the Status and Transfer of Players, issued by the Federation International de Football Association (FIFA).

Mr Craig Moore (the "Arbitrator") was appointed as sole arbitrator, and made an award on 24 July 2017, in which he rejected Flyde's common law damages claim, but allowed the claim under Article 17 on the basis that the FA had incorporated Article 17 into its rules.

However, it subsequently came to light that, shortly before he rendered the award (and after the hearing), the Arbitrator had communicated with the FA and made independent inquiries about whether the FA had incorporated Article 17. The Arbitrator did so without notifying the parties or giving them an opportunity to make representations on this communication. It also appeared that the Arbitrator carried out some extrinsic research himself, which included viewing the FA's website.

When Fleetwood Town was notified of this conduct by the FA's solicitors, it sought to challenge the award under s68(2)(a) of the Act, contending that the Arbitrator's conduct amounted to a "serious irregularity", owing to a breach of the Arbitrator's statutory duties to act fairly and give the parties a reasonable opportunity to put their case.

The s68 challenge

The Court explained that the s68 challenge was a two stage test: (1) was the Arbitrator's conduct an "irregularity", which it would be if he failed to comply with his general duties under s33; and (2) was the irregularity a "serious" irregularity, which it would be if it "has caused or will cause substantial injustice to the Claimant".

The Court was easily satisfied that the Arbitrator failed to comply with his general duties under s33 of the Act and that this amounted to an irregularity within the meaning of s68(2). The Arbitrator's conduct was contrary to the principle that the tribunal should, as part of its duty to act fairly, give the parties an opportunity to deal with any issue that may be relied upon by it as the basis of its findings. A tribunal should not decide a case against a party on an issue which had not been raised in the case without drawing the point to the party's attention so that they may have an opportunity of dealing with it.

The more difficult question was whether this irregularity caused "substantial injustice". The Court held that if the Arbitrator had copied the parties into his inquiries and provided them with a copy of the FA's replies, "both parties would have sought to make [additional] representations." It was realistically possible that information could have been adduced within those additional representations to persuade the Arbitrator that, contrary to the conclusions in the award, Article 17 was not incorporated into the FA's rules and applicable on the facts. Therefore, there was a real prospect that the arbitrator would have reached a different conclusion. The court therefore upheld the s68 challenge.

Award remitted back to Arbitrator

S68(3) of the Act confers powers on the Court to remit, set aside or declare the award to be of no effect. Here, the Court decided to remit the award back to the Arbitrator for reconsideration. The Court reached this decision for four reasons:

• First, s68(3) expressly provides that the Court must not set aside or declare the award to be invalid unless satisfied that it would be inappropriate to remit to the Arbitrator for consideration. This is consistent with the principle that the courts should generally do the minimum to interfere in the arbitral process. Here, there was no convincing reason why it would be inappropriate to remit the award back to the Arbitrator.
• Second, the material irregularity in the case related to a discrete aspect of the claim. Therefore, it was possible to remit the issue for further consideration without reopening the rest of the Arbitrator's conclusions.
• Third, the material irregularity in the case was itself within a narrow compass. The irregularities could be met with tailored directions providing for the parties to make representations on the additional information and to adduce such further evidence as might be considered necessary.
• Fourth, there was no suggestion of bias, whether actual or apparent, on the part of the Arbitrator, nor was there any good reason to challenge his professionalism.

Comment

This rare example of a successful s68 challenge demonstrates that English Courts will intervene in the outcome of arbitral proceedings where there is clear and serious irregularity causing substantial injustice. The case shows that the threshold for such a challenge is very high, and serves as a reminder to tribunals that if they wish to make independent inquiries in arbitral proceedings, the s33 duty to act fairly requires that they notify the parties and give them a reasonable opportunity to address such inquiries.

This case also serves as a reminder of the reluctance of the English Courts to set aside or invalidate an arbitral award, even where there has been a substantial procedural irregularity. The Courts will always look to remit the award back to the arbitrator where possible, consistent with the principle that English Courts do the minimum to interfere in the arbitral process.

For more information, please contact Chris Parker, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.