Mercato Sports (UK) Ltd & Anor v The Everton Football Club Company Ltd

The claimants sought payment for services said to have led to the defendant engaging a professional footballer; the claim was pleaded as an implied retainer or in unjust enrichment. The defendant applied under CPR Parts 11 and 62.8 for a stay pursuant to section 9 of the Arbitration Act 1996, relying on Rule K of The Football Association's Rules (the Rules) as constituting an arbitration agreement.

The court applied the burden and approach in Aeroflot: the defendant bore the burden of proving that Rule K bound the First Claimant. The judge held that mere participation in football activities does not automatically bind a person to the Rules; instead the court must determine (fact-sensitively) whether there was accession to the Rules (a vertical contract with the FA) which could give rise to a horizontal contract between participants.

On the facts the First Claimant was found to have been registered with the Football Association (evidenced by a registration number on its invoice and FA confirmations) and to have adopted or ratified that registration; by invoicing as a registered intermediary it invoked its intermediary capacity when dealing with the defendant. Consequently the First Claimant had acceded to the Rules, and that accession gave rise to an implied horizontal contract between it and the defendant incorporating Rule K. The claim (for both claimants) was stayed and referred to arbitration under Rule K. The defendant's alternative arguments ("inextricably linked" or mere participation) were rejected.

This was a first instance application by the defendant under CPR Parts 11 and 62.8 seeking a stay of court proceedings under section 9 of the Arbitration Act 1996 on the basis that the Football Association's Rules (in particular Rule K) formed an arbitration agreement between the parties.

Background and parties:

• The claimants (Mercato Sports (UK) Ltd and Mark McKay) assert they brought a player (AB) to the defendant club's attention and so are entitled to payment for services either under an implied contract of retainer or on an unjust enrichment basis.
• The defendant sought a stay, relying on Rule K which provides that disputes between "Participants" shall be referred to arbitration. It was common ground that the Second Claimant (McKay) was a registered intermediary bound by the Rules; the key issue was whether the First Claimant (a company) was bound.

Procedural posture and issues:

• Nature of relief sought: a stay of the High Court proceedings and referral to arbitration under section 9 Arbitration Act 1996.
• Primary issues: (i) whether Rule K operated as an arbitration agreement between the First Claimant and the defendant; (ii) whether the First Claimant had acceded to or was bound by the Rules (vertical contract); and (iii) whether that vertical contract gave rise to an implied horizontal contract between the First Claimant and the defendant incorporating Rule K.

Court's reasoning:

• The judge applied the Aeroflot approach on burden: the defendant must prove that an arbitration agreement exists between the litigants. If the court can decide the matter on the written evidence it must do so on the balance of probabilities.
• Drawing on The Satanita and subsequent authorities, the court explained the two-stage, fact-sensitive test: (a) did the claimant accede to the governing body's rules (vertical contract)? and (b) if so, did that accession give rise to a horizontal contract with the other party incorporating the rules?
• The court rejected arguments that mere participation in football activities or the parties being "inextricably linked" alone creates an arbitration agreement inter se.
• On the facts the First Claimant had been registered by the FA (registration number IMSC000572 appeared on its invoice); FA correspondence confirmed company registration; the First Claimant used the registration number in invoicing and did not seek to rescind or repudiate the registration. The judge found that the First Claimant had acceded to the Rules and that by invoicing and invoking intermediary status it was dealing with the defendant as a registered intermediary.
• Accordingly the First Claimant and the defendant were bound inter se by the Rules and the dispute fell within Rule K. The court stayed the proceedings and referred the dispute to arbitration. The Second Claimant's claim was also stayed (he was indisputably bound).

Other matters: The court considered publication and confidentiality. Balancing the public interest in open justice and the confidentiality of arbitration, the judge ordered the judgment to be published but anonymised the player's name and omitted the amount claimed.

The court ordered a stay of the proceedings and referred the dispute to arbitration under Rule K of The Football Association's Rules. Rationale: the First Claimant was found to have been registered with the Football Association, thereby acceding to the Rules; by invoicing and invoking its registered intermediary number it dealt with the defendant as an intermediary, giving rise to an implied horizontal contract with the defendant incorporating Rule K. The defendant therefore established an arbitration agreement binding the claimants and a stay was mandatory under section 9 Arbitration Act 1996.