Intro
Fulham FC’s unfair prejudice petition, seeking to remove Premier League Chairman Sir Dave Richards from the Board as well as an injunction preventing him from participating in future transfer dealings, was stayed by High Court Judge Mr Justice Vos on 1st December 2010. Instead, the Judge ordered that the dispute should proceed by way of arbitration, pursuant to the Football Association (FA) and Premier League Rules, rather than through the courts.
Fulham’s complaint concerns Sir Dave Richards’ involvement in the transfer of Peter Crouch from Portsmouth FC to Tottenham Hotspur FC in 2009. Fulham allege that Sir Dave Richards hampered Fulham’s attempt to sign Crouch by executing Crouch’s transfer to Tottenham instead.
In addition to the factual allegations made by Fulham, the case explores the provisions within the Premier League and FA Rules that stipulate how disputes involving parties within the game should be conducted.
Facts
In July 2009, Portsmouth, who were in severe financial difficulty, took steps to cash in on one of their major assets by selling Peter Crouch. Fulham and Tottenham were both keen on signing Crouch and therefore entered into negotiations with Portsmouth.
Fulham claim that they had offered £9 million for Crouch and that Portsmouth were informed of their willingness to increase that offer if necessary. It appeared though that Crouch preferred to sign for Tottenham but they had supposedly offered less than £9 million, leading to their offer being rejected.
According to Fulham, as a result of Crouch’s preference to sign for Tottenham, Portsmouth sought Sir Dave Richards’ assistance in attempting to procure Crouch's transfer to Tottenham. Fulham allege that Sir Dave Richards spoke to Tottenham Chairman Daniel Levy and, as a result of their discussion, Tottenham decided to match Fulham’s existing offer of £9 million. More importantly, Tottenham also agreed to pay the £9 million immediately in contrast to Fulham who only agreed to make payment by instalments. Tottenham’s offer to pay immediately obviously appealed greatly to Portsmouth bearing in mind their financial plight and so Tottenham’s offer was subsequently accepted by Portsmouth and Crouch signed for Tottenham in July 2009.
On 10th August 2009, Fulham, who were obviously aggrieved at missing out on Crouch, complained to the Premier League about Sir Dave Richards’ conduct relating to the transfer believing that he had played a key role in securing the Crouch’s move to Tottenham. The Premier League subsequently appointed Mr Peter McCormick, a legal advisor to the Premier League, to investigate the circumstances surrounding the transfer and the role that Sir Dave Richards had played. Around 6 months later, Mr McCormick produced his final report where he concluded that the transfer had not been brokered by Sir Dave Richards. Following the production of the report, the Premier League concluded that:
“The Chairman’s actions had not been detrimental to Fulham, and that it was not inappropriate for the Chairman to assist in such matters when requested to do so by a club,” (Richard Scudamore, Chief Executive of The Premier League).
Following the Premier League’s conclusions, Fulham's solicitors, Lewis Silkin LLP, wrote to the Premier League alleging that Sir Dave Richards had acted "so unfairly as to prejudice the interests of Fulham as a Member" of the Premier League. In response, the Premier League rejected these submissions and suggested to Fulham that it should ask the Board to address the issue at the next shareholders' meeting whereby the Board would then follow the wishes of the majority of the members. The Premier League also pointed out to Fulham that they were bound by the Premier League Rules, which provided for disputes to proceed by way of arbitration. However, despite this, Fulham presented an unfair prejudice petition at the Companies Court on 27th April 2010 pursuant to the Companies Act 2006.
Firstly, Fulham believe that Sir Dave Richards acted in breach of the Football Association Football Agents Regulations by acting as an unauthorised agent for Portsmouth in obtaining a more favourable offer for Crouch from Tottenham.
Secondly, Fulham claim that Sir Dave Richards failed to act fairly between the members of the Premier League by promoting the interests of one club i.e. Portsmouth over another. Each of the 20 member clubs of the Premier League hold one share in The Football Association Premier League Limited (The Company), together with the FA, who hold a non-voting share. The Board of Directors of the Company consists of Mr Richard Scudamore, the Chief Executive, and Sir Dave Richards as Chairman. As with a Director of any other company, Richard Scudamore and Sir Dave Richards must fulfil their duties as Directors of the Company, as set out in the Companies Act 2006.
Section 172 of the Companies Act 2006 sets out the duty of a director to act in the way most likely to promote the success of the company for the benefit of its members as a whole having regard (amongst other things) to:
“the need to act fairly as between members of the company.”
Fulham clearly believe that Sir Dave Richards failed to act fairly between the members of the Premier League by favouring Portsmouth over their own interests.
Fulham’s Complaint Against The Premier League
Fulham are also aggrieved at the Premier League’s handling of the matter. They allege that the Premier League failed to take sufficient action to rectify its Chairman’s conduct meaning the affairs of the Premier League have been conducted in a manner, which is unfairly prejudicial to Fulham's interests as one of the 20 club members of the Premier League.
Further, due to its Chairman allegedly acting as an unauthorised agent, contrary to the Football Association Football Agents Regulations, the Premier League has apparently breached its Articles of Association as well as the Premier League Rules.
Section 33 of the Companies Act 2006 provides that a company's constitution ( laid down in the articles of association) "bind the company and its members”. Section 171 of the Companies Act 2006 also provides that:
“a director of a company must—
(a) act in accordance with the company's constitution”
Article 79 of the Premier League’s Article of Association says “the Company shall adhere to and comply with the Football Association Rules.”
The FA Rules referred to above include “the rules and regulations for the time being of the Football Association”. It is therefore Fulham’s contention that because its Chairman and Director have supposedly acted in breach of the Football Association Football Agents Regulations, the Premier League has breached Article 79 by failing to comply with the FA Rules.
In addition, Rule B12 of the Premier League Rules states:
“Membership of the League shall constitute an agreement between the Company and Clubs and between each Club to be bound by and comply with:
12.2 the Football Association Rules;
12.3 the Articles”
It is also believed that the Premier League have breached this rule due to its Chairman allegedly acting in breach of the Football Association Football Agents Regulations and the Company’s apparent breach of its Articles of Association, as referred to above.
Unfair Prejudice Petition
Fulham issued the unfair prejudice petition against Sir Dave Richards and the Premier League pursuant to the Companies Act 2006.
Section 994 of the Companies Act 2006 states that:
"(1) a member of a company may apply to the court by petition for an order under this Part on the ground—
(a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial".
As a member of the Premier League, Fulham believe that the Premier League’s affairs have been conducted in manner which is unfairly prejudicial to their interests thereby entitling them to present the petition in question.
Fulham therefore seek an injunction restraining Sir Dave Richards from acting in further breach of the regulations i.e. participating in future player transfer negotiations and an order that Sir Dave Richards ceases to be the Chairman or a director of the Premier League.
Section 996 of the Companies Act 2006 provides for the remedies that Fulham seek:
"(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
(2) Without prejudice to the generality of subsection (1), the court's order may -
(a) regulate the conduct of the company's affairs in the future;
(b) require the company –
(i) to refrain from doing or continuing an act complained of"
However, despite Fulham’s apparent right to present the unfair prejudice petition to the court, the right is not as straightforward as it appears. This is due to the various provisions contained within the Premier League Rules and FA Rules which require that any disputes arising within the game to be dealt with by arbitration rather than through the courts.
Rule S2 of the Premier League Rules states:
“Membership of the League shall constitute an agreement in writing between the Company and Clubs and between each Club … in the following terms:
2.1 to submit all disputes which arise between them … whether arising out of these Rules or otherwise, to final and binding arbitration”
Rules S21 gives the arbitral tribunal board power to issue directions to the parties in respect of evidence and Rule S22 gives the arbitral tribunal board further general powers in respect of evidence and directions. In respect of remedies, Rule S28 gives the arbitral tribunal board a range of options including the power to "order a party to do or refrain from doing anything". Their powers are therefore similar to the courts powers.
Rule K1 of the FA Rules also includes a provision for disputes to be dealt with by arbitration and states:
"(a) … any dispute or difference between any two or more Participants (which shall include, for the purposes of this section of the Rules, The FA) including but not limited to a dispute arising out of or in connection with (including any question regarding the existence or validity of):
(i) the Rules and regulations of the FA which are in force from time to time;
(ii) the rules and regulations of an Affiliated Association or Competition which are in force from time to time;
shall be referred to and finally resolved by arbitration under these Rules.”
"Participant" is defined by Rule A2 of the FA Rules as including any Club, Competition or Official and "all such persons who are from time to time participating in any activity sanctioned either directly or indirectly by the FA". An "Official" is defined by Rule A2 as "any official, director, secretary, servant or representative of an Affiliated Association or Competition". "Competition" is defined by Rule A2 as "any competition (whether a league or knock-out competition or otherwise) sanctioned by the FA".
It is therefore clear that Rule K1 of the FA Rules does apply to the dispute between Fulham, Sir Dave Richards and the Premier League.
Rule K7 provides for the arbitral tribunal to have the same remedial powers as the Premier League Rules including the power to "order a party to do or refrain from doing anything". The tribunal also has similar broad general powers to those of the PL tribunal.
Other Provisions
The Premier League Chairman's charter also states that the Premier League will ensure that the member clubs “will seek to resolve differences between each other without recourse to law”.
Article 64 of the FIFA Statutes prohibits recourse to ordinary courts of law, and provides for arbitration by the Court of Arbitration for Sport. Articles 59-63 of UEFA's Statutes also make similar provisions.
Sir Dave Richards’ And Premier League’s Response
It is not currently known what Sir Dave Richards’ and the Premier League’s responses to the actual allegations against them are. However, procedurally speaking, due to the various provisions concerning arbitration mentioned above, Sir Dave Richards and the Premier League believe that the dispute should not be handled by the courts but should instead proceed by an independent arbitration board. On 21st June 2010, Sir Dave Richards and the Premier League issued an application at court, pursuant to the Arbitration Act 1996, seeking a stay of the unfair prejudice proceedings initiated by Fulham.
Section 1 of the Arbitration Act 1996 includes the following principles:
"(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided in this Part".
Section 9(1) of the Arbitration Act 1996 provides that:
“A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.”
Further Section 9(4) of the Arbitration Act 1996 provides that:
“On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.”
It is therefore Sir Dave Richards’ and the Premier League’s contention that the court should not handle the dispute because the parties have agreed, pursuant to Rule S2 of the Premier League Rules, to settle all disputes by arbitration. As a result, Sir Dave Richards and the Premier League sought a stay of the court proceedings pursuant to Section 9 Arbitration Act 1996 on the basis that they relate to a matter which is subject to an arbitration agreement.
The first issue that the court needed to consider was whether Fulham’s complaints were within the scope of the arbitration provisions contained in the Premier League and FA Rules. This was a relatively simple matter for the court to decide upon as both the Premier League and FA Rules refer to “all disputes” and “any dispute or difference” to be referred to arbitration.
Secondly, the court needed to consider whether the arbitral tribunal board could award the relief that Fulham sought as provided for by section 996 of the Companies Act 2006. Fulham believed that the arbitral tribunal board could not grant the relief they sought. However, due to Rule S28 of the Premier League rules allowing the arbitral tribunal board to order a party “to do or refrain from doing anything”, the Judge was satisfied that the arbitral tribunal board could order the relief sought by Fulham. Further, Section 48 of the Arbitration Act 1996 provides that the arbitral tribunal board “has the same powers as the court” and can “order a party to do or refrain from doing anything.” The Judge also pointed out that the parties had chosen to settle disputes by arbitration and understood that there would be advantages and disadvantages in doing so.
The final issue that the court needed to consider was whether the statutory right of a member of a company to present an unfair prejudice petition, under section 994 of the Companies Act 2006, could be removed or diminished by contract, or whether it was an inalienable right.
In order to do so, the Judge had to resolve two conflicting decisions namely, Re Vocam Europe Ltd [1998] BCC 396 and Exeter City Association Football Club Ltd v Football Conference Ltd [2004] 1 WLR 2910.
In Re Vocam Europe Ltd [1998] BCC 396, a group of majority shareholders also applied for a stay of an unfair prejudice petition under section 9 of the Arbitration Act 1996 on the grounds that the members of the company had agreed in a shareholders' agreement to refer all disputes to arbitration. The Judge in that case decided to grant the stay on the basis that the claims in the petition related to matters of dispute arising under the shareholders' agreement.
In Exeter City Association Football Club Ltd v Football Conference Ltd [2004] 1 WLR 2910, Exeter City, who were in the conference at the time, presented an unfair prejudice petition as a member of Football Conference Ltd. As with the Premier League, The Football Conference applied for a stay of proceedings on the basis of the arbitration clause contained in the FA Rules. However, in contrast to Vocam, the High Court judge refused to grant the stay, stating that the statutory rights conferred on shareholders to apply for relief at any stage were inalienable and could not be diminished or removed by contract or otherwise.
When presented with two conflicting decisions, normally the later decision, in this case Exeter City, should be regarded as settled law unless the Judge believed that the second case should have followed the first case. After considering the authorities, the Judge concluded that the decision in Exeter City was wrong and therefore should not be followed. The Judge believed that there was no basis for a finding that statutory rights conferred on shareholders to apply for relief at any stage are inalienable and cannot be diminished or removed by contract or otherwise. The Judge accepted that the types of remedies that arbitrators can award are limited in that they cannot make orders that are binding on third parties or which affect the general public as a whole. However, Fulham were not requesting an order that would bind third parties or affect the general public as a whole. The Judge therefore granted the stay in favour of Sir Dave Richards and the Premier League.
Conclusion
The case confirms that disputes between the Premier League/FA, clubs and players should proceed by way of arbitration in accordance with the Premier League and FA Rules rather than through the courts. However, this is subject to third parties not being bound by any arbitration award, the public as a whole not being affected by any arbitration decision and the arbitral board having the power to grant the remedies that any complainant seeks.
It must be noted that the Judge granted Fulham leave to appeal the decision to the Court of Appeal. Fulham confirmed that the High Court gave them “…permission to appeal to the Court of Appeal, recognising that there was a previous High Court decision in another case that came to a different conclusion on similar issues, and that an important point of law was involved. Fulham intends to take its case to the Court of Appeal so that this important issue can be resolved in its favour."
Presumably, Fulham are of the opinion that the court should not have dismissed the case of Exeter City Association Football Club Ltd v Football Conference Ltd and that the statutory rights of a member to present an unfair prejudice petition under Section 994 of the Companies Act 2006 are inalienable and can not be diminished or removed by contract. Time will tell what the Court of Appeal makes of Fulham’s case.
On a wider note, it would certainly be interesting to see what the outcome of the case as a whole will be and whether Sir Dave Richards and/or the Premier League are held accountable in any way.
