On 4 September 2017, the High Court determined an appeal in the case of Wilfried Guemiand Bony v Gilbert Francis Kacou & Ors  EWHC 2146 (Ch). The primary question before the court was whether the proceedings brought by Mr Bony, a professional footballer, should be stayed to allow the matter to be decided under the Football Association’s Rule K arbitration procedure.
Mr Bony brought conventional litigation proceedings against several parties including his former agents. The primary factual allegation made by Mr Bony is that his former agents received over £8 million of secret commissions from Swansea City FC whilst they were ostensibly negotiating a playing contract with Swansea on Mr Bony’s behalf.
Defendants 1-4 consisted of Mr Bony’s two former agents and corporate entities under their respective control. Whilst there were various express agreements between Mr Bony and his two former agents, there were no express agreements (or any relationship at all) between Mr Bony and his former agents’ corporate entities. Their role, it is alleged, was simply to receive the secret commissions on behalf of the agents.
Following the commencement of the action, an application was made by the Defendants seeking a stay of the substantive court proceedings pursuant to section 9 of the Arbitration Act 1996. This provides that the jurisdiction of the court may be challenged, and proceedings stayed, on the basis that the parties’ relationship is governed by a binding agreement to arbitrate.
There was no express contractual provision in any agreement between Mr Bony and his former agents referring disputes to arbitration in England. However, as a football related dispute, the Defendants argued that the matter should be resolved through arbitration under the rules of the Football Association (“the FA Rules”).
Section K of the FA Rules (more commonly referred to as “Rule K”) provides that any dispute between two or more “Participants” shall automatically be referred to and resolved by arbitration under the FA Rules. “Participant” is widely defined and includes, amongst others:
• Authorised Agents/ Licensed Agents (as at the relevant time in this case – these have now been replaced by the defined term “Intermediaries” under current rules);
• Players; and
• All such persons who are from time to time participating in any activity sanctioned either directly or indirectly by the FA.
The Defendants submitted that each of the parties fell within the definitions of Player, Agent and Club respectively. They further argued that professional football is a highly regulated sport and disputes between “members of the football family” should be resolved through arbitration in accordance with the sport’s governing rules.
Notwithstanding the Defendants’ submissions, the first instance court found in favour of the Claimant and the Defendants’ application for a stay of the proceedings was dismissed. The District Judge held that a party cannot be bound by the FA Rules “just by taking part in the game of football”. She went on to add that for the FA Rules to apply, they had to be validly incorporated into a contract between the parties. In this case, there was no contract between Mr Bony and each of the Defendants that expressly referred to the FA Rules.
The Defendants appealed.
The Decision on Appeal
The basis of the Defendants’ appeal was that an implied contract existed between Mr Bony and each Defendant that incorporated the Rule K arbitration procedure. The Defendants asserted that, as a matter of law, a contract is implied between participants in organised sports based on the governing rules of the relevant sport.
In its judgment, the appeal court first discussed Rule K and whether the parties to the dispute fell within the definition of a “Participant” as contended by the Defendants at the first hearing.
Whilst Mr Bony and Swansea City clearly fell within the definition of “Participant” being a Player and Club respectively, the court felt the same could not easily be said for Defendants 1 to 4. The First Defendant was classed as an “Unauthorised Agent”, having never been an FA licensed agent or an overseas agent registered with the FA. Similarly, the Third Defendant had ceased being an Authorised Agent prior to the relevant time and was therefore also an “Unauthorised Agent”. The Second and Fourth Defendants did not carry out any agency activity at all. Accordingly, in order to be classed as a “Participant” they would need to fall into the wide category of persons participating in an FA sanctioned activity.
The appeal court expressed doubts that the activities of Defendants 1-4 could be deemed “sanctioned” by the FA, given that dealings with unauthorised agents are unsanctioned by definition (and are in fact prohibited by the FA Rules and Intermediary Regulations). The court also highlighted the difficulty in determining such a question without the substantive facts of the underlying dispute first being fully examined.
The court was therefore unconvinced that the Defendants could be classed as Participants in any event. Nevertheless, the court proceeded to consider the Defendants’ primary submission, namely that a contract would be implied as a matter of law between participants of an organised sport, incorporating the governing rules of that sport.
Ultimately, the appeal court rejected the Defendants’ submissions and dismissed the appeal. It was held that a contract incorporating the FA Rules would not be implied automatically as a matter of law. General principles of contract law would need to be applied to the facts of each individual case to determine if an implied contract could be justified. The court cited Baird Textile Holdings Limited v Marks & Spencer plc  EWCA Civ 274 and concluded that there must be an element of necessity that a contract be implied.
In the present case, the court considered there was no such necessity. The relationship between the Claimant and Defendants 1 and 3 was already sufficiently governed by express contracts, none of which referred to the FA Rules or the Rule K arbitration procedure. The Claimant never entered into a contract with Defendants 2 and 4 but no such contract was ever necessary because neither provided any services to the Claimant. Their only role was to receive the alleged secret commissions.
As there was no necessity to imply a contract between the parties incorporating the FA Rules, there was no binding agreement to arbitrate by reference to the Rule K procedure. Consequently, there was no basis upon which to stay the proceedings under the Arbitration Act 1996. Mr Bony was permitted to continue the proceedings in court against the Defendants.
Arbitration holds obvious appeal for those involved in the football industry. Whereas court proceedings are generally a matter of public record, arbitrations are primarily held in private with the outcome kept confidential.
In the absence of an express arbitration clause in football related contracts, it will not always be immediately apparent whether a potential claim should be made through arbitration or conventional litigation. An assessment will need to be made on the facts as to whether a contract incorporating an agreement to arbitrate can be implied.
The decision of the court in the Bony case makes clear that the court will not imply a contract between participants of a sport, incorporating the governing rules of that sport, unless it is necessary to do so.
Where all parties to a football dispute are clearly “Participants” for the purposes of Rule K, whether by being a registered player, club or authorised intermediary, it is anticipated that the court would find it necessary in most circumstances to imply a contract incorporating the FA rules. In such situations, an implied contract between parties would seemingly be necessary to give effect to the FA Rules that each party has separately agreed to be bound by.
However, where a relationship involving a non-Participant is already governed by contractual agreements, it appears unlikely that a court will deem it necessary to imply a new contract incorporating the FA rules or Rule K arbitration procedure. In such circumstances, aggrieved parties in football disputes will be within their rights to seek redress through the courts.
When coming to its decision in the Bony case, the court may also have had in mind the severity and the nature of the allegations against the Defendants. The issue of the alleged secret commissions received by Mr Bony’s former agents arguably takes the matter outside the usual course of a football dispute.
Nevertheless, for many parties to football related agreements it is often a matter of considerable importance that any disputes are resolved in a confidential setting. If so, and in order to avoid high profile court applications contesting jurisdiction, such parties should ensure that their contractual documentation expressly incorporates the FA Rules and the Rule K arbitration procedure.
For more information on this topic, please contact Simon Boschat, Raj Pabla or David Salisbury of our Sports Law team.