ENGLISH HIGH COURT REJECTS CHALLENGES BROUGHT UNDER S67 AND 68 OF THE ENGLISH ARBITRATION ACT

In Manchester City Football Club Ltd v Football Association Premier League Ltd and others [2021] EWHC 628 (Comm), the English High Court considered Manchester City Football Club's challenge to an arbitral award under sections 67 and 68 of the English Arbitration Act. In rejecting the challenge, the English Court provided useful guidance on construing arbitration clauses in light of rival interpretations. The judgment is also another helpful example of the practical application of the principles laid down by the UK Supreme Court in the Halliburton case (see our blog post here).

Background

In December 2018, the Premier League (PL) commenced a disciplinary investigation into Manchester City Football Club (MCFC) after confidential documents obtained from a hack of the club's servers suggested potential breaches of the Rules of the PL (Rules) concerning financial fair play.

The PL subsequently commenced an arbitration against MCFC seeking a declaration and/or determination that MCFC was obliged to provide the PL with requested documents and information and an order for specific performance of MCFC's contractual obligation to deliver up documents and information which were being withheld.

In accordance with the Rules, the PL provided MCFC with a list of panel members from which the arbitrators were to be appointed (the Panel). Each party chose an individual from the panel, with those arbitrators choosing the Chair of the Tribunal, again from the panel list.

During the arbitral proceedings, MCFC subsequently challenged the jurisdiction of the arbitrators and also submitted that the tribunal did not have the appearance of impartiality. The tribunal rejected both of these challenges in an award of June 2020.

MCFC then commenced an arbitration claim in the English Commercial Court raising the following challenges to the award:

• That the Rules did not permit the PL to commence arbitral proceedings in relation to the issues raised (i.e. that on a proper construction of the Rules, the PL had no power to commence arbitral proceedings. This challenge was brought under section 67 of the Act).
• That the process for appointment of arbitrators from the PL's Panel meant that the arbitrators were in breach of the principles of impartiality and independence and rendered the proceedings unfair (under Section 68 of the Act).

Section 67 challenge – construction of the arbitration clause

MCFC argued that the issues raised against it by the PL were disciplinary in nature and were therefore a separate category of disputes which could not be resolved through the arbitration procedure agreed to resolve all other disputes. As a consequence, MCFC argued that the PL was not permitted to commence arbitral proceedings and the Tribunal had no jurisdiction.

The PL responded that this interpretation would exclude the PL from ever seeking specific performance and would be contrary to the principle in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] A.C. 689 that there should be no presumption that rights have been excluded without the use of clear language. There was good reason why the PL might want to pursue contractual remedies instead of or alongside disciplinary action, for example in circumstances where a club was leaving the Premier League.

Applying the principles of contractual construction laid down in Wood v Capita [2017] UKSC 24 and related case law, the Court confirmed that the starting point for any challenge based on the scope of an arbitration agreement was to consider the express terms of the arbitration agreement. Where there were rival meanings, the Court could reach a view as to which construction was more consistent with business common sense.

The Court disagreed with MCFC's position. Clear and express words would be required to evidence that the parties intended the PL to abandon its remedies for breach of contract. If MCFC were correct, any club would be able to seek declaratory relief that it had not breached the Rules, whereas the PL would not be able to do so, which would result in an asymmetry.

Ultimately, the Court concluded that MCFC was seeking to imply a term into the PL Rules which was not there. In circumstances where the Court was faced with a choice between two different dispute resolution mechanisms expressly provided for under the contract to deal with a particular type of breach, the objective meaning of the arbitration clause was that any and all disputes could be submitted to arbitration. The specific form of breach in question was therefore capable of being submitted to arbitration. Accordingly the Tribunal did not err in concluding that it had the jurisdiction to hear the arbitration.

Section 68 challenge - bias

MCFC complained that:

• the PL proposed and appointed people to the Panel and there was no written policy governing the process or any selection criteria; it was an informal process based on word of mouth and personal connections;
• the members lacked security of tenure, being appointed for renewable terms of three years and as a result were in a "subordinate position" to the PL for both appointment and reappointment; and
• the remuneration paid was significant and even if it was not sufficient of itself to give rise to the real possibility of bias, there were reputational benefits to being on the Panel.

MCFC therefore challenged the Award under Section 68 of the Act on the basis that by participating in the Panel process, the Tribunal had failed to comply with Section 33 of the Act which sets out the general duty of the tribunal to, inter alia, "act fairly and impartially as between the parties". This resulted in a serious irregularity affecting the Tribunal within the meaning of section 68(2)(a) of the Act.

In response, the PL argued that the arbitrators were very experienced practitioners with an impeccable reputation and that MCFC's case presupposed that those arbitrators would breach professional obligations as lawyers and risk their reputation by finding in favour of the PL on the merits.

The Court confirmed that the relevant test was whether an informed observer would conclude that there was a real possibility that the tribunal was biased. Applying the principles set out in the Halliburton case (see our blog post here), it was important to bear in mind the relevant context and also the differences in nature and circumstances between the determination of disputes by judges as opposed to arbitrators. In particular, it was a feature of arbitrations that arbitrators will often be nominated by one of the parties to the arbitration, and the Halliburton case acknowledged that this did not of itself preclude an arbitrator from meeting the standards of fairness and impartiality. Importantly, in this case, the parties had agreed to the procedure in the PL Rules and MCFC was able to exercise its rights in relation to the approval of individual appointments. Moreover, the fact that the pool of potential candidates was small did not mean that the duties of fairness and impartiality were compromised.

Accordingly, the judge determined that a fair minded and informed observer would not conclude that there was a real possibility of bias. The judge also concluded that MCFC had waived its right to object to the process by which individuals would be appointed to the tribunal as there had been a voluntary, informed and unequivocal election by MCFC to the disciplinary and dispute process.

Comment

This judgment is another welcome example of the robust approach of the English Court when faced with challenges to arbitral awards.

The judgment also provides useful guidance on the Court's approach to the construction of arbitration clauses – in particular, that a party will not be assumed to have abandoned its rights to address a breach of contract – instead, an express contractual exclusion is required. Where there are rival constructions of an arbitration clause, the Court will favour the construction that is most consistent with business common sense.

This judgment also provides another good example of the application of the principles laid down by the English Supreme Court in Halliburton on arbitrator conflicts, and the differences between the appointment of arbitrators and judges. In this case, even though the arbitrators were nominated by one of the parties and there was no "open" competition, the Court determined that the informed observer would not conclude that there was a real possibility of bias in this case.

Finally, this judgment provides helpful commentary on the circumstances in which a party that has agreed to the arbitrator appointment process in an arbitration clause may have waived its right to raise a subsequent objection to that agreed process.

For more information, please contact Andrew Cannon, Partner, Elizabeth Kantor, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.