November 16, 2017

Don't Rely on the Courts to Score at Arbitration

In the recent football case of Bony v Kacou & Ors [2017 EWHC 2146 (Ch)], the High Court was asked to consider whether an arbitration agreement would be implied into a contract.

The FA Rules of Association

The Football Association (the FA) is the governing body of association football in England. Rule K of the FA Rules of the Association (FA Rules) states that any dispute between two or more “Participants” (the FA's catch-all definition for many of the parties operating within the scope of English football including players, managers, clubs and agents) shall be resolved by arbitration under the FA Rules.

Despite the simplistic concept of Rule K, there has been much difficulty with its implementation. The FA Rules provide that the governing law of arbitration is English law and the seat of any arbitration is England and Wales. This means any arbitration under the FA rules is covered by the Arbitration Act 1996 (the Act). The Act provides that an arbitration agreement must be in writing, albeit a mere exchange of communications or evidence in writing will suffice. This means that if there is no arbitration agreement between the parties in writing, even if they all satisfy the definition of Participants, Rule K will not apply to a dispute between those parties.

Where Participants refer to the FA Rules in their contracts, it may be relatively easy to demonstrate that they intended Rule K to apply as it is incorporated into their agreement by reference. However, the issue in the Bony case is whether a contract can be implied between the parties on the basis that those parties have agreed separately to follow the FA Rules.

Case Facts

Mr Wilfried Bony, a professional footballer, issued proceedings to recover over £8 million of secret commissions received by his former agents and their corporate vehicles (the Agents) during contract negotiations with Swansea City Football Club.

The Agents applied to stay the court proceedings to allow the dispute to be determined by arbitration under Rule K of the FA Rules. They argued that the court should imply a contract between participants in a sport based on the rules of that sport, whether or not the participants were actually aware of them.

The High Court accepted that there was a 'vertical' contract, between the individual Participants (i.e., Mr Bony and the Agents) and the FA to adhere to Rule K, but found that there was no implicit 'horizontal' contract between the Participants themselves. Furthermore, while the court can imply a contract between Participants in an organised sport based on the specific rules governing that sport, given the existence of express agreements between Mr Bony and the Agents, there was no need to imply a contract. As a result, it was determined that there was no express binding arbitration agreement between the parties and it was not necessary to imply one so no stay of proceedings was appropriate.

Wider Implications

Although this case deals with football specifically, it illustrates the importance of having an express arbitration agreement where arbitration is intended to be the primary route to resolve conflict. Many trade associations will require that any disputes between their members should be resolved by arbitration. This case shows that simply being a member of an association does not necessarily mean that arbitration will be the natural recourse.

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