Arbitration- United Kingdom

In two cases heard together, the Court of Appeal has confirmed that arbitration is not contrary to Article 6 of the European Convention on Human Rights 1950, unless the agreement to arbitrate was entered into as a result of duress, undue influence or mistake, or included onerous or unusual terms that should have been brought to the attention of the other party, but were not.

Article 6 of the convention provides that "in the determination of his civil rights and obligations… everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".

Paul Stretford v Football Association Ltd

Paul Stretford was a football agent. All football agents are required to hold a licence and Stretford had been issued with such a licence by the English Football Association (FA) in 2002. The licence expressly stated that the holder agreed to abide by the FA's rules and regulations. The rules included an arbitration clause in Rule K.

In 2005 the FA issued disciplinary proceedings against Stretford under Rule G in relation to the circumstances surrounding the acquisition of the right to represent Manchester United footballer Wayne Rooney. Stretford commenced court proceedings against the FA, alleging that the disciplinary proceedings were unjustified. The FA applied for a mandatory stay in favour of arbitration under Rule K for the determination of Stretford's challenge to the Rule G proceedings.

Section 9(1) of the Arbitration Act provides that the court shall grant a stay unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. Stretford argued that Rule K was in conflict with Article 6 and the principles of natural justice, and was therefore null and void or inoperative.

It was not in dispute that the arbitrators would be determining Stretford's civil rights; therefore, Article 6 applied. As to whether he would receive a fair hearing before an independent and impartial tribunal, the court considered(1) that this entitlement was satisfied by the provisions of the act, which require that an arbitrator be impartial and conduct the proceedings properly, and the mandatory provisions which ensure that the court has the power to correct any want of impartiality or procedural impropriety.

As to having a public hearing by a tribunal established by law, the court concluded that, as a matter of English law, these requirements could be waived (unless the party had entered into the arbitration agreement as a result of duress, undue influence or mistake, or the terms were so onerous or unusual that they should have been brought to the party's attention, but were not). The court concluded that there was no evidence of the arbitration agreement being entered into under duress or of it containing onerous terms, and that the additional requirements in Article 6 had been waived by Stretford.

The court then considered whether there was any principle adopted by the European Court of Human Rights (ECHR) which would lead to a different conclusion. After reviewing the ECHR's jurisprudence, the court held that the cases supported the general proposition that, where the parties have voluntarily entered into an arbitration agreement, they are to be treated as having waived their rights under Article 6. Although Stretford had to agree to Rule K in order to become a licensed agent, it did not follow that the arbitration agreement was compulsory in such a way as to contravene Article 6.

The court noted that arbitration clauses have become standard in the rules of sporting organizations and that to strike down such clauses would have a far-reaching and undesirable effect on the use of arbitration in sport generally. Therefore, Stretford's application failed and a stay was granted.

Sumukan Ltd v Commonwealth Secretariat

Pursuant to an arbitration clause in a contract between AMS (the predecessor in title to Sumukan) and the Commonwealth Secretariat, an arbitral tribunal made an award in favour of the secretariat. AMS applied to appeal the award on a point of law under Section 69 of the act, but leave to appeal was denied on the ground that the parties, in the words of Section 69(1), had "otherwise agreed" to exclude the jurisdiction of the court. AMS appealed that decision, arguing that the clause excluding an appeal on a point of law had not been incorporated into the arbitration agreement, and that such a clause would infringe AMS's rights under Article 6.

Regarding the issue of incorporation, the contract provided for disputes to be settled by arbitration "in accordance with the statute which forms part of this contract and is available on request". The statute stated that the judgment of the tribunal "shall be final and binding on the parties and shall not be subject to appeal". The court concluded(2) that this wording was sufficient to incorporate the words of the statue into the arbitration agreement.

However, as the statute amounted to an exclusion clause (ie, a clause excluding the jurisdiction of the court), a party seeking to enforce such a clause would have to show that any particularly onerous or unusual conditions, or conditions attempting to exclude or take away statutory rights, were fairly brought to the attention of the other party. AMS argued that the waiver of its Article 6 rights had not been drawn to its attention sufficiently and that the waiver had not been made voluntarily.

The court referred to its decision in Stretford and its findings derived from the ECHR's jurisprudence that an arbitration agreement, when freely entered into, constitutes a valid waiver of Article 6.

The court concluded that an exclusion of a right of appeal could validly be agreed as being to the advantage of both parties, and that mandatory provisions in the act safeguard a party against partiality of the arbitrators or some serious irregularity.

It was not alleged that AMS had entered into the agreement under duress. The court found that the exclusion of the right of appeal was validly incorporated and that Article 6 did not render the clause so onerous or unusual that the Commonwealth Secretariat was required to do more than it had done to bring the clause to AMS's attention, as the arbitration clause referred expressly to the statute and, if AMS had wished to read what was in the statute, it could have done so and would not have been surprised to find an exclusion of the right to appeal an award.

Comment

The statements of principle in these two cases reflect the ECHR's jurisprudence that has held that private arbitration is not inconsistent with Article 6, such as Deweer v Belgium.(3) The court further confirmed that a waiver of Article 6 rights must be voluntary, but indicated in these two decisions that the English courts will not readily decline to give effect to arbitration provisions found within an agreement which is freely entered into by competent parties.

International Law Office