Last year, Saudi Arabia's Public Investment Fund walked away from a high-profile purchase of Newcastle United FC (NUFC), citing the “prolonged process”[1] they faced from the Premier League, with concerns revolving around the influence that the Kingdom of Saudi Arabia would have on running the club. Newcastle sought to challenge this matter via the Premier League’s arbitration procedure; however, the case ended up in the High Court after Newcastle discovered evidence that brought the impartiality of the arbitration panel’s Chairman into question.
The High Court published its judgment on 5 March 2021. The article examines the decision and asks whether, in light of events, the Premier League should amend its arbitration rules – particularly those relating to the way arbitrators are appointed and challenged – to avoid similar occurrences in the future. Specifically, it looks at:
Facts of the Newcastle United case
The proposed sale
The Premier League’s determination, and the disputed arbitration
The High Court decisions
How the Premier League arbitration procedure compares to other independent arbitration bodies
How other independent arbitration bodies would have have managed the matters in this case:
The International Chamber of Commerce
London Court of International Arbitration
The Court of Arbitration for Sport
English Football League
What should be done to improve the Premier League arbitration procedure?
The Newcastle United Case
The Football Association Premier League (Premier League) is a major sporting and entertainment business with global reach. It consistently generates the highest revenue of all the ‘Big Five’ Football Leagues in Europe[2]. In its Annual Review of Football Finance 2020[3], Deloitte estimated that in the 2018/19 season the combined revenue of the Premier League’s 20 clubs increased by 7% to €5.9 billion, driven by commercial revenue growth of 9% and clubs competing in UEFA competitions benefiting from increased distributions. In that season, the average revenue per Premier League club rose to £258 million. The revenue recorded for NUFC in that report was of the order of £176 million.
NUFC was founded in 1892 and has been a member of the Premier League for all but three years of the competition’s history. Historically, it has been a leading revenue producing club in England and the world. It is well-known for its large and loyal fanbase. As a result, in 2020 NUFC was the target of an acquisition by investors led by a prominent sovereign wealth fund, which required the approval of the Premier League, of which NUFC is a member.
Each of the 20 clubs playing in the Premier League is a shareholder with equal voting rights in The Football Association Premier League Ltd, the company owning and managing the Premier League, and is therefore a direct stakeholder in the league.
The Proposed Sale, The Premier League’s Determination, And The Disputed Arbitration
In 2020, the current owners of the shares in NUFC wished to sell their shares to a company ultimately owned by the Public Investment Fund[4] (PIF), a Saudi Arabian sovereign wealth fund. In a decision in June 2020, the Premier League determined that PIF was controlled by the government of the Kingdom of Saudi Arabia (KSA) and that, on acquisition of NUFC, the KSA would become a Director as that term is defined under Section A of the Premier League Arbitration Rules (the PL Arbitration Rules).
The PL’s determination did not decide that the KSA had been or would be disqualified from being a Director or that the PL would refuse to approve the proposed change of control. The PL’s decision did however potentially engage Section F (Owners’ and Directors’ Test[5]) of the PL Arbitration Rules. Section F requires the Premier League to disqualify individuals and entities from acting as a Director of a member club in certain defined circumstances and to refuse to agree to a change of control of that club.
NUFC challenged the PL’s decision in arbitration proceedings under Section X of the Premier League Arbitration Rules set out in the Premier League Handbook[6].
The arbitration therefore comprises a very significant commercial dispute, with an international dimension, concerning the transfer of ownership of a high-profile sporting and entertainment business. It also involves the activities of an alleged state sponsored foreign actor and investor. The importance of the dispute is reflected by the parties’ appointment of two highly respected former Supreme Court judges – Lord Dyson and Lord Neuberger - as their party appointed arbitrators.
The Issues Before The High Court
The issue that came before the High Court and was decided in the Premier League’s favour was whether NUFC was entitled to an order under s24(1)(a) Arbitration Act 1996[7] removing the chairman – Michael Beloff QC – of the arbitration panel on the ground that “circumstances exist that give rise to justifiable doubts as to his impartiality”.
In accordance with the PL Arbitration Rules, the chairman was appointed by the two party-appointed arbitrators. The arbitrators had first asked the parties whether they objected to his appointment. Both parties stated they had no objections. The chairman provided a statement of impartiality certifying there were no circumstances that give rise to justifiable doubts as to his impartiality in that role.
A fortnight later the PL’s solicitors disclosed to NUFC’s solicitors that:
in the previous three years they had been involved in twelve arbitrations in which the chairman had been an arbitrator, in three of which they had appointed him as arbitrator, two of which appointments being after he had accepted his appointment in the NUFC arbitration, and;
the chairman had advised the PL (and English Football League (EFL)) on four occasions, all more than two years before his appointment in the NUFC arbitration, when he had advised on a potential amendment to Section F of the PL Arbitration Rules.
NUFC’s response was that it would not have consented to the chairman’s appointment had it known of these matters, which had not been disclosed by the chairman. It invited the chairman to recuse himself.
The chairman refused to recuse himself and entered into an email correspondence with the PL’s solicitors, not copied to NUFC’s solicitors (unilateral communications), regarding the matters they had disclosed. The chain of communications included the chairman asking whether the PL wished him to recuse himself. Several days later the PL’s solicitors disclosed the chain of unilateral communications to NUFC’s solicitors who then made the application to the court to remove the chairman.
In a judgment handed down on 5 March 2021[8] the London Circuit Commercial Court dismissed that application. The court held that the legal test for removal was in substance one of apparent bias. It accepted the PL’s argument that the arbitration concerned only the PL’s decision under Section A of the PL Arbitration Rules and Section F was not involved, either directly or indirectly. It found further that, according to the objective “fair minded and informed observer test”, the chairman’s arbitral appointments and non-disclosure of the unilateral communications did not raise an inference of apparent bias. It concluded that the unilateral communications were “for the most part” concerned only with obtaining the consent of the PL (and the EFL) as to what the chairman could say to NUFC about his legal advice on Section F and that “disclosure would or might have resulted in the breach of confidence [he] was attempting to avoid”. In relation to the chairman’s request in the unilateral communications that the PL confirm whether it wished him to continue or recuse himself, the court found only that this was “an error of judgment” and did not satisfy the apparent bias test.
Due to the specific provision of Section 24(6) of the Arbitration Act 1996, an appeal from the High Court’s decision is permitted only with the permission of the High Court itself, which appears to have been refused. NUFC has no further right to apply to the Court of Appeal for permission to appeal. The result is that the arbitration will now proceed before the arbitration panel under the chairmanship of Michael Beloff QC.
In a separate judgment[9] the Court accepted, against the Premier League’s submissions, NUFC’s arguments that the judgment should be published in a non-anonymised and non-redacted form.
The purpose of this article is not to set out the case for and against the merits of the Court’s decision on the facts. S24(1)(a) has been interpreted as requiring proof by the applicant of apparent bias; HalliburtonCo v Chubb Bermuda Insurance Ltd[10], Porter v Magill[11]. While very different from actual bias, this remains a challenging standard, in particular following the recent decision and guidance given by the Supreme Court in Halliburton. Rather, the purpose is to take the welcome opportunity afforded by the decision to publish the judgment to discuss better procedures in the PL Arbitration Rules for:
the appointment of arbitrators;
how the disputed appointment of the chair of an arbitration panel should be managed to the satisfaction of all stakeholders; and
how a public dispute may be avoided.
How The PL Arbitration Procedure Compares With Independent Arbitration Bodies
The PL Arbitration Rules provide that the appointment of the chair shall be made by the party appointed arbitrators. Rule X.9 states that each party to the arbitration shall appoint its chosen arbitrator within 14 days of the service of the Request for Arbitration and
“within 14 days of their appointment … the two arbitrators so appointed shall appoint another Suitably Qualified Person …… as the third arbitrator who shall sit as chair. If the two arbitrators fail to agree on the appointment of the third arbitrator the [Premier League] Board (or The Football Association if the League is a party) shall make the appointment giving notice in writing to that effect to each party.”
Arbitration under the PL Arbitration Rules is not administered by an independent body. This position is in contrast with arbitration in many, but not all, other sports and with all commercial disputes. There is therefore no provision for an independent body, with experience in the nomination, confirmation and appointment of arbitrators, to manage the process in the event that the appointment of an arbitrator is challenged by a party for failure to disclose a conflict of interest or otherwise. There is no procedure to ensure full disclosures are made or buffer between the parties and the arbitrators for communications. This is all the starker where, as here, the appointment is made by the two party-appointed arbitrators and the Premier League is itself a party to the arbitration.
A consequence of this position is the absence of a nomination and confirmation procedure. Each party appoints its arbitrator without any procedure for prior disclosure of interest or reasoned opposition by the counterparty. The party appointed arbitrators then appoint the chair, again without any procedure for disclosure of interest or reasoned opposition by the parties.
The result is that challenges to a party-appointed arbitrator or the chair are necessarily channeled into the courts and into the public domain and determined by the restrictive test to which s24(1)(a) of the Arbitration Act 1996 is subject – a test all the more restrictive after Halliburton in cases where the arbitrator has a strong and established professional reputation. In Halliburton, a case concerning the disclosure of multiple appointments of a well-known arbitrator in related insurance arbitrations, the Supreme Court found that under the Arbitration Act 1996 an arbitrator has a legal duty to make disclosures of facts and circumstances which would or might reasonably give rise to the appearance of bias. The court held at paragraph 67 that
“The professional reputation and experience of an individual arbitrator is a relevant consideration for the objective observer when assessing whether there is apparent bias as an established reputation for integrity and wide experience in arbitration may make any doubts harder to justify.”
If the arbitration in the present case had been independently administered, the unilateral disclosure correspondence between the chairman and the solicitors representing the Premier League in the arbitration would not have taken place. The communications would have taken place between the chairman and the independent body as part of a nomination, confirmation and appointment process in which NUFC would have been involved.
How Would An Independent Arbitration Body Have Managed The Matters As They Arose In This Case?
The International Chamber Of Commerce (ICC)
The ICC 2021 Arbitration Rules[12] deal with the appointment of an arbitral tribunal in Articles 11-13. The position of each member of the arbitral tribunal is treated in the same way. An arbitrator is not party appointed. S/he is party nominated (Rule 12(4)). The provisions incorporate a procedure for confirmation and appointment. By Art 11(2),
“Before appointment or confirmation, a prospective arbitrator, shall sign a statement of acceptance, availability, impartiality and independence. The prospective arbitrator shall disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality.”
The inclusion of a wider subjective test is a well-known feature of arbitration under the ICC Rules, as was observed by the Supreme Court at paragraph 72 in Halliburton. By Art 11(4) “The decisions of the[ICC] Court as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final.”
In relation to three arbitrator panels, the third arbitrator is appointed by the ICC Court, “unless the parties have agreed upon another procedure for such appointment, in which case the nomination will be subject to confirmation pursuant to Article 13”.
The procedure for challenge to arbitrators in Rule 14 permits challenges within 30 days from notification of the appointment or confirmation of an arbitrator or within 30 days “from the date when the party making the challenge was informed of the facts and circumstances on which the challenge is based if such date is subsequent to the receipt of such notification”.
London Court Of International Arbitration (LCIA)
The London Court of International Arbitration (LCIA) 2020 Arbitration Rules approach the appointment of arbitrators in a similar way. Article 5.4 provides that
“….. before appointment by the LCIA Court, each arbitrator shall ……. sign a written declaration stating (i) whether there are any circumstances currently known to the candidate which are likely to give rise in the mind of any party to any justifiable doubts as to his or her impartiality or independence and, if so, specifying in full such circumstances in the declaration…”
Article 7.1 provides that
“If the parties have agreed howsoever that any arbitrator is to be appointed by one or more of them …… that agreement shall be treated under the Arbitration Agreement as an agreement to nominate an arbitrator for all purposes. Such nominee shall only be appointed by the LCIA Court as arbitrator subject to that nominee’s compliance with Articles 5.3 to 5.5; and the LCIA Court shall refuse to appoint any nominee if it determines that the nominee is not so compliant or otherwise unsuitable.”
By Article 10, the LCIA Court retains the power to revoke any arbitrator’s appointment upon its own initiative or upon the written challenge of any party if, amongst other matters, “circumstances exist that give rise to justifiable doubts as to that arbitrator’s impartiality or independence.”
The Court Of Arbitration For Sport (CAS)
The statutes of the International Council of Arbitration for Sport (ICAS)[13] include the establishment of the Court of Arbitration for Sport (CAS). The functions of the ICAS include the appointment of the arbitrators who constitute the list of CAS arbitrators and the resolution of challenges to and removal of arbitrators. The ICAS discharges the latter duties by its Challenge Commission The composition of the Challenge Commission, set out in the ICAs Statutes (S2(c)), is not independent of the ICAS. It is composed of an ICAS member acting as chair and the three Division Presidents and their Deputies (excluding the President and Deputy President of the Division concerned by the specific procedure for challenge).
The procedural rules of CAS provide[14]:
Independence and Qualifications of Arbitrators
“Every arbitrator shall be and remain impartial and independent of the parties and shall immediately disclose any circumstances which may affect her/his independence with respect to any of the parties……(R33)
Challenge
“An arbitrator may be challenged if the circumstances give rise to legitimate doubts over his/her independence or over his/her impartiality. The challenge shall be brought within seven days after the ground for the challenge has become known.
Challenges shall be determined by the Challenge Commission, which has the discretion to refer a case to ICAS. The challenge of an arbitrator shall be lodged by the party raising it, in the form of a petition setting forth the facts giving rise to the challenge,,,,,, The Challenge Commission or ICAS shall rule on the challenge after the other party (or parties), the challenged arbitrator and the other arbitrators, if any, have been invited to submit written comments. Such comments shall be communicated by the CAS Court Office …. to the parties and to the other arbitrators, if any. The Challenge Commission or ICAS shall give brief reasons for its decision and may decide to publish it.” (R34)
Formation of the Panel Appointment of the Arbitrators
“The parties may agree on the method of appointment of the arbitrators from the CAS list. In the absence of an agreement, the arbitrators shall be appointed in accordance with the following paragraphs.
….
If, by virtue of the arbitration agreement, or a decision of the President of the Division, three arbitrators are to be appointed, the Claimant shall nominate its arbitrator in the request or within the time limit set in the decision on the number of arbitrators, failing which the request for arbitration is deemed to have been withdrawn. The Respondent shall nominate its arbitrator within the time limit set by the CAS Court Office upon receipt of the request. In the absence of such appointment, the President of the Division shall proceed with the appointment in lieu of the Respondent. The two arbitrators so appointed shall select the President of the Panel by mutual agreement within a time limit set by the CAS Court Office. Failing agreement within that time limit, the President of the Division shall appoint the President of the Panel.” (Rule 40.2)
Like the PL Arbitration Rules, under the CAS Rules the party appointed arbitrators appoint the third arbitrator (President) and the appointment of all arbitrators is not administered by an independent arbitration body.
English Football League (EFL)
In non-disciplinary proceedings under the Football League’s Regulations[15] (EFL Regulations), by Regulation 98.2 each party has the right to nominate its arbitrator. By Regulation 98.3 the EFL has the right to appoint the third arbitrator. In both cases, the appointment is made by an independent arbitration body with internal procedures requiring disclosure by prospective arbitrators and to resolve challenges.
Procedural Rule 3.3 states that
“any member of an Applicable Tribunal (Tribunal Member) may be challenged if circumstances exist that give rise to justifiable doubts as to their impartiality or independence. A party who intends to challenge any Tribunal Member shall send to the other party or parties notice of challenge setting out the reasons for its challenge within 7 days after notification of the appointment of the challenged Tribunal Member, or within 7 days from the date when the party making the challenge is informed or any facts and circumstances which may give rise to such a challenge (if such date is subsequent to the receipt of notification of appointment).”
What Should Be Done To Improve The Premier League Arbitration Process?
In the author’s view, the PL Arbitration Rules like CAS, should learn from the rules of independent arbitration institutions, such as the ICC and LCIA, and amend its procedure on the appointment and challenge of arbitrators. The EFL has started to move in the right direction.
The NUFC – Premier League dispute is a sports arbitration but it is also a significant commercial arbitration with an international dimension. The PL Arbitration Rules are not fit for purpose in relation to arbitrator appointment – party appointed and chair. Premier League arbitration should be administered by an independent arbitration body. This is clearly so where the Premier League is a party.
The PL Arbitration Rules should be amended to provide that each party has the right, not to appoint an arbitrator, but to nominate an arbitrator subject to confirmation and appointment by an independent arbitration body. The independent body should appoint the chair after s/he provides an impartiality statement and the parties have had an opportunity to challenge the nomination. It should require full disclosure of interests before appointment and accept or dismiss a challenge to an arbitrator on the merits without fear of influence from the Premier League or a member club.
This change would introduce a transparent process, involving all parties, to permit challenge to a nominated arbitrator before appointment. This would avoid the problem that arises when an arbitrator is appointed and may only be challenged in court under the restrictive test in s24(1)(a) Arbitration Act 1996.
The appointment of the panel chair should be taken away from the jurisdiction of the party appointed arbitrators. It is likely these arbitrators would welcome this release. They are appointed for their legal and decision-making skills and not as ad hoc appointing bodies with no secretariat. This change would also widen the pool of chairmen, promote inclusion and diversity, and respond positively to criticism that senior arbitrators are a self-perpetuating clique. In short, this change would avoid a dispute like the current one entering the public arena with all the attendant delay and legal cost to the parties.
The High Court judgment raises numerous other questions. For example, what is the sanction for unilateral communications between an appointed arbitrator and a party? PL Arbitration Rule X.16 states that “… communications addressed by the arbitrators to one party shall be copied to the other and to the Board”. However, no sanction was imposed here, even though the High Court judgment indicated this was the most troubling aspect of the chairman’s conduct in the unliteral communications.
The key point is that an independent arbitration body would manage the appointment of Premier League arbitrators, and their communications with the parties, and resolve challenges when they arise within the arbitration process. In the final analysis, this change would meet the legitimate concerns of the parties, preserve integrity and confidence in the process and ensure that Premier League sports arbitration keeps pace with modern international commercial arbitration procedures.
