By Jonathan Copping, Lawyer, Stone King, London, UK
In the case of (1) Mercato Sports (UK) Limited (2) Mark McKay and Everton Football Club Company Limited (Everton), the High Court has ruled that the parties to a contract, can be bound to arbitrate disputes between them under the English Football Association (FA) Rule K as a result of being subject to the FA rules.
The claimants (Mercato & Mark McKay) said that they brought a footballer, referred to in the proceedings as AB, to the attention of Everton and that, as a result, Everton signed AB and offered him an employment contract. In the light of the introduction of AB to Everton, the claimants claimed that they were entitled to be paid for their services.
In the Court proceedings, Everton applied to stay them, in accordance with section 9 of the UK Arbitration Act 1996. Everton sought to rely on the fact that the parties were bound by the FA Rules of the Football Association Ltd 2017-2018 (the Rules) and that, in accordance with the Rules, the parties were bound by Rule K, requiring the parties to submit their dispute to arbitration.
The Court stated that it was possible for an implied contract (a horizontal contract) between two persons, who had not engaged directly with each other, to exist where each of those persons had a separate contract (a vertical contract) with the same third party committing them to abide by particular rules laid down by the third party. The Court further stated that a vertical contract can arise where a person’s actions amount to an accession to the rules laid down by the relevant third party.
Whether a series of vertical contracts can give rise to a horizontal contract between parties that are subject to vertical contracts will require a careful and fact sensitive analysis of the particular circumstances of each case.
Based on the facts before the Court, it was found that Mercato had acceded to be bound in contract by the Football Association’s Rules applicable to registered intermediaries, as a result of Mercato registering itself as an intermediary and failing to rescind that registration.
After establishing that Mercato was bound by a vertical contract with the Football Association, the Court considered that a horizontal contract arose between Mercato and Everton on the basis that Mercato had included its FA registration number on an invoice sent to Everton for its services.
It seems peculiar that the Court’s decision to determine a horizontal contract existed between Mercato and Everton turned on the existence of a FA registration number on an invoice, because the registration number could have been included on the invoice for a number of reasons.
The Court did state, however, that it is possible for parties to contract out of any obligations that might exist between themselves in respect of the FA Rules.
It will be interesting to see how this jurisdictional area develops in the future, and whether parties seek to contract out of a sports governing body’s rules, which require arbitration for the settlement of disputes.
Jonathan Copping may be contacted by e-mail at ‘JonathanCopping@stoneking.co.uk’