REUTERS | Kai Pfaffenbach

Arbitrators escape the red card in Manchester City case

What, I hear you ask, am I doing writing about football? Well, despite the title of this blog, it’s actually about an arbitration and subsequent court proceedings that just happen to involve a football club. I think it’s interesting for a number of reasons, not least because it applies the Supreme Court’s findings in Halliburton Company v Chubb Bermuda Insurance Ltd, which I blogged about last year. 

Manchester City Football Club Ltd v The Football Association Premier League Ltd and others

It’s fair to say that Manchester City aren’t shy when it comes to spending on big name players. Just this summer they spent £100 million on Jack Grealish, and they could have ended up spending well in excess of that on Harry Kane had the Tottenham Hotspur chairman, Daniel Levy, not dug his heals in and spoilt the party.

However, European football clubs are subject to Financial Fair Play Regulations that are aimed at preventing them from spending more than they can earn and, in 2018, Manchester City’s servers were hacked and documents leaked that suggested that they had breached the regulations. The Premier League commenced an investigation, and subsequently commenced at arbitration seeking a declaration that City disclose various documents and information, and a related order for specific performance.

In accordance with the Rules of the Premier League, the League provided a list of individuals who were members of the League’s arbitration panel – each party appointed an arbitrator from the panel and then the two panel members appointed a chair. However, City challenged the jurisdiction of the tribunal to hear the dispute in question under the Rules, and also argued that the tribunal did not have the appearance of impartiality. The tribunal rejected these challenges and so City commenced an arbitration claim in the High Court seeking an order under:

High Court proceedings

The case was heard by Moulder J in March 2021. She concluded that the Premier League had the power to institute the arbitral proceedings and therefore dismissed the section 67 challenge.

However, in my view the most interesting part of the judgment concerns the impartiality challenge.

City claimed that the proceedings were unfair and in breach of the principles of independence and impartiality due to the method of appointing and reappointing potential arbitrators to the panel and that, as a consequence, the tribunal members had failed to comply with section 33 (the duty of the tribunal to, among other things, “act fairly and impartially as between the parties”).

City argued that:

  • The Premier League 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 League for both appointment and reappointment.
  • 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.

In response, the Premier League contended that the arbitrators were very experienced practitioners with impeccable reputations, and that they would not risk those reputations or a breach of their professional obligations by finding for the Premier League against the merits.

In a very clear and well written judgment, Moulder J confirmed that the test was whether there was a real possibility that the tribunal was biased and, applying Halliburton v Chubb, she noted that the informed observer appreciates the importance of context when applying the test. Relevant factors in the context of this case included the remuneration of the arbitrators, the process by which individuals were appointed and reappointed to the panel, their professional reputation and experience of the arbitrators in question and the possibility that this was a technical challenge to delay production of the documents.

In respect of the remuneration of the arbitrators, Moulder J referred to Lord Hodge’s findings at paragraph 59 of the Supreme Court’s judgment in Halliburton v Chubb concerning the fact that arbitrators are paid for their services, unlike judges, and that:

“… if arbitral work is a significant part of the arbitrator’s professional practice, he or she has a financial interest in obtaining further appointments as arbitrator. Nomination as an arbitrator gives the arbitrator a financial benefit. There are many practitioners whose livelihood depends to a significant degree on acting as arbitrators.”

The judge found that none of the arbitrators in question derived their livelihood from acting as arbitrators but, even if this was material, she said that Lord Hodge was simply recognising that this was a difference in the arbitral process, and not that it was a concern in assessing impartiality.

In regard to the process by which individuals were appointed and reappointed, Moulder J again referred to Halliburton v Chubb and the fact that the Supreme Court acknowledged that in arbitrations there may be a party appointed arbitrator but that this does not in itself preclude the arbitrator from meeting the standards of fairness and impartiality because:

“… once appointed they have a duty to act independently of the appointing party and not promote that party’s interests.”

Moulder J did not consider that anything turned on the informal nature of the appointment process to the panel, and noted that City had agreed to this process and was able to exercise its rights in relation to approval of individual appointments.

Ultimately, the judge found that the fair minded and informed observer, having considered the facts, would not conclude that there was a real possibility that the arbitrators were biased. She also concluded that City had waived its right to object to the process by which individuals were appointed to the panel because there had been a voluntary, informed and unequivocal election by City to the dispute process set out in the Rules. As such the judge did not ‘red card’ the arbitrators under Section 24.

Court of appeal proceedings

The High Court proceedings were not the end of the matter, and indeed we may not have known of the outcome of those proceedings were it not for the Court of Appeal.

Let me explain.

When Moulder J sent her draft judgment to the parties, she said that she was minded to publish it. Both parties opposed this but the judge decided that the merits judgment should be published. City appealed.

I will not go into the Court of Appeal’s judgment in any detail, but they obviously dismissed the appeal in its entirety (otherwise I would not have been able to write this blog!). The Court found that publication would not lead to the disclosure of significant confidential information but rather the existence of the dispute and the arbitration in circumstances where it was already public knowledge that the Premier League’s investigation was taking place. The Court also found that the judgment was of public interest and significance because it confirmed the entitlement of the Premier League to claim specific performance against member clubs.

My thoughts

Moulder J’s judgment is of great interest as it applies the Supreme Court’s findings in Halliburton v Chubb, and reinforces the importance of accounting for the context in which arbitral appointments are made. It is also a further demonstration of the courts’ support for arbitration and ADR more widely.

However, taking a step back there could have been far reaching implications if the court had accepted City’s case on the impartiality point. There are many examples of similar arbitral panels that are established by organisations which will be a party to proceedings, including in construction, and an opposite finding could have brought the future of such panels into question. It could also have affected the panels of adjudicators seen in some sub-contracts, although in my experience such panels are now much less common than they were.

Turning to the Court of Appeal’s judgment, as many readers will be aware, confidentiality of the process is one of key advantages of arbitration espoused by arbitral institutions, and some readers may therefore have difficulty with the Court of Appeal’s conclusions.  However, there are limits on the principles of confidentiality, particularly where there are issues in the public interest and there can be publication without disclosing significant confidential information. In this case it was also clearly relevant that the dispute had already been widely reported by media outlets, and that the judgment created an important precedent for future disputes involving the Premier League and clubs. Therefore, the Court of Appeal’s judgment arguably turns on its facts, and it certainly does not mean that we’ll be seeing more High Court arbitration claims reported in the future.

Finally, I wonder what City’s most famous fans would make of this case? Perhaps don’t look back in anger?

2 thoughts on “Arbitrators escape the red card in Manchester City case

  1. It is very difficult to show that arbitrators are not angels and are biased or lazy, or do not decide according to facts put before them.

    Courts should give them red cards more often. Parties do not like to appeal knowing that they will be the recipients of red cards, as only in gross cases do arbitrator awards get overturned.

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