It is a not uncommon feature of arbitration that an arbitral tribunal will from time to time take “judicial notice” of notorious facts without requiring the parties to adduce specific evidence to prove those facts. Furthermore, arbitrators are almost always appointed because of their particular expertise or experience of particular types of disputes.
Further, many users of arbitration would regard it as a good thing to have a pro-active tribunal, using its initiative positively to manage the reference and setting down procedures and taking steps to assist the parties with the resolution of their dispute.
The case of Fleetwood Wanderers Limited v AFC Fylde Limited is a vivid illustration of a well-meaning and pro-active arbitrator going well beyond what is permissible. In particular, it is a striking example of an arbitrator straying beyond the legitimate functions of evaluating evidence adduced by the parties or making use of his own expertise in assessing the parties’ evidence or, indeed, having regard to matters sufficiently notorious that they attract “judicial notice”.
The case concerned a challenge under section 68(2)(a) of the English Arbitration Act 1996 (AA 1996) to the award of a sole arbitrator. The challenge was on the basis of his failure to comply with his obligations under section 33 of the AA 1996 to act fairly and impartially between the parties, and to give each party a reasonable opportunity of putting his case and dealing with that of his opponent.
The underlying dispute arose from the world of lower league football.
A professional football club (Fleetwood) signed a player who was already contracted to a non-league club (AFC Fylde). AFC Fylde argued that by signing the contract with Fleetwood, the player had repudiated his contract of employment and, further, that Fleetwood had procured the breach of contract.
AFC Fylde therefore brought a claim against Fleetwood. The claim was put on two bases. Firstly, a common law claim for damages for inducing a breach of contract and, secondly, a claim for compensation under regulations promulgated by FIFA, the governing body of the worldwide game, which contained a principle for the payment of compensation where a relevant contract was terminated without just cause (the article 17 principle).
The key question which arose in respect of the claim for compensation under the FIFA regulations was whether they were applicable in England under the rules of the Football Association Limited (FA), which was the governing body of football in England.
The arbitrator rejected the common law claim on causation grounds.
However, he accepted the alternative claim under the FIFA regulations on the basis that the FA rules had operated to incorporate the article 17 principle without derogation. Yet the circumstances in which that claim was accepted were unusual and led to the successful challenge to the award.
The sole arbitrator took it upon himself, without advising the parties of his intention to do so (or even notifying them after the event), to seek to find out from the FA whether it had done anything to apply the FIFA regulations. He did so by emailing the FA. Fleetwood only became aware of these communications when they were brought to its attention by the FA’s solicitors after the arbitration claim form had been issued.
In addition, the arbitrator carried out his own research without advising the parties including looking at the Irish FA’s website.
The challenge under section 68(2)(a) required Fleetwood to demonstrate both that the conduct of the arbitrator was in breach of his duties under section 33 of the AA 1996 and, as such, was a serious irregularity and, furthermore, that the breach of those duties caused Fleetwood “substantial injustice”.
As to the first question, HHJ Halliwell, sitting as a High Court judge, held at paragraph 39 that “by making the relevant enquiries and eliciting information without at least sharing the information with the parties and giving them an opportunity to make representations”, the arbitrator had breached his duties under section 33 of the AA 1996.
Whilst the conclusion that there was a breach by the arbitrator of his duties was hardly surprising, it is questionable whether (as the judge suggested) there would have been no breach of section 33 of the AA 1996 had the arbitrator made the enquiries that he did but then offered the parties the opportunity to make representations about the result of those enquiries.
Firstly, the arbitrator had essentially adopted an inquisitorial approach to establishing the relevant facts and evidence. This approach is not routinely adopted in arbitrations seated in England. Whilst it is possible for a tribunal to adopt such an approach by reason of section 34(2)(g) of the AA 1996, which entitles a tribunal to decide “whether and to what extent the tribunal should itself take the initiative in ascertaining the facts and the law”, it is clear from the judgment that the arbitrator had not adopted those procedures.
Secondly, there are a number of authorities which consider whether and, if so, when, a tribunal may be entitled to rely on its own expert knowledge and experience in deciding a case. In that line of authorities, a distinction has been drawn between an arbitrator using his or her existing knowledge and expertise to evaluate the evidence adduced by the parties (which may be permissible especially where the contract requires an arbitrator from a particular trade or with particular experience to be appointed) and an arbitrator supplying new evidence by using his or her own knowledge (which is not permissible). For example, in the Court of Appeal in Checkpoint Ltd v Strathclyde Pension Fund, Ward LJ offered this is as a possible test of distinguishing the permitted from the prohibited:
“… was the arbitrator supplying evidence… or was he adjudicating upon it? Was he evaluating the evidence before him or introducing new and different evidence?”
Applying that test in the slightly different context of the Fleetwood case, it is self-evident that what the arbitrator was doing was supplying new and different evidence from that adduced by the parties; he was not drawing on his own expertise or experience to evaluate the evidence of the parties.
Having concluded that the arbitrator’s conduct was in breach of section 33, HHJ Halliwell proceeded to determine whether the irregularity had caused Fleetwood substantial injustice by reference to the test set out in Maass v Musion Events Limited. The judge at paragraph 41 concluded that the test was satisfied.
Finally, the judge considered what relief was appropriate. Specifically, he considered whether the matter should be remitted to the arbitrator to re-consider his award in the light of further submissions (and possibly evidence) from the parties, in respect of the arbitrator’s enquiries of the FA, or whether the award should be set aside or declared to be of no effect. Remission was ordered for the reasons set out at paragraph 47. The judge appears to have been heavily influenced by the fact that there was no suggestion of bias and the arbitrator’s conduct was “driven by his anxiety to achieve the correct outcome, as he perceived it”.