Newcastle United FC Takeover: NUFC v The Premier League
On 5 March 2021 two judgments from HHJ Pelling QC were handed down that concerned the ongoing arbitral proceedings between Newcastle United FC (“NUFC”) (correctly, the corporate entity behind NUFC: Newcastle United Football Company Limited) and the FA Premier League Limited (“FAPL”). One of those judgments concerned whether the other judgment:
‘should be published un-anonymised and unredacted ([NUFC’s] preferred position) or not published at all or at any rate not published until after publication of the Final award in the pending arbitration between [NUFC] and the [FAPL]’.[1]
HHJ Pelling QC decided that that other judgment, referred to as the ‘substantive judgment’, should be published, adopting NUFC’s preferred position referred to above.[2]
This article will (i) summarise and explain that substantive judgment; and (ii) consider how the substantive judgment fits in with the ongoing arbitral proceedings between NUFC and the FAPL generally.
For those wanting to understand the background to the proposed takeover of NUFC, please see Football Law’s article ‘NUFC Takeover and the Owners’ and Directors’ Test’.
The substantive judgment – Newcastle United Football Company Limited v The Football Association Premier League Limited & ors [2021] EWHC 349 (Comm)
The substantive judgment concerned two linked applications made by NUFC in respect of the ongoing arbitral proceedings between NUFC and the FAPL:
An application made pursuant to the Arbitration Act 1996 (“AA 1996”), s. 24(1)(a) for the removal of one of the arbitrators appointed to deal with the arbitral proceedings between NUFC and the FAPL (“the AA 1996, s. 24 Application”); and
An application made pursuant to the Civil Procedure Rules (CPR), r. 62.10(1) for an order that the AA 1996, s. 24 Application be heard in public (“the Public Hearing Application”).
The Public Hearing Application
HHJ Pelling QC dismissed the Public Hearing Application on the basis that (i) the default position is that such hearings will be in private (CPR, r. 62.10(3)(b)); and (ii) simply because the crux of NUFC’s and the FAPL’s dispute / ongoing arbitral proceedings is in the public domain is insufficient to deviate from that default position.[3] When elaborating on point (ii), it is notable – more so from a purely sports law perspective more so than anything in particular to the arbitral proceedings between NUFC and the FAPL – that HHJ Pelling QC stated:
‘[The FAPL] is a limited liability company that owns or controls its league or at least that part of its league’s activities with which this dispute is concerned. NUFC is a shareholder in [the FAPL] and [the FAPL’s] Rules apply both to [the FAPL] and to each of its members including NUFC as if the Rules were a contract between them both by express provision and as a matter of legal analysis… Thus as I said in paragraph 9 of my skeletal reasons for directing a private hearing, “... This is from beginning to end a private dispute between private parties in relation to private contractual arrangements, powers and duties and is not and never has been a public law dispute ...” It is simply incorrect to suggest that PLL performs a regulatory function in any public law sense. Its relationships with its members are entirely contractual’.[4]
The AA 1996, s. 24 Application
In this article by Mark Douglas for ChronicleLive this author provided an explanation of the relevant parts of the FAPL’s Rules (see rules X.6-X.40) that apply to the arbitral proceedings between NUFC and the FAPL.
One of the particular points this author explained was the process of appointing the members of the tribunal to deal with the arbitration. The panel will usually be a tribunal of three members, each of whom will satisfy the criteria of ‘Suitably Qualified Persons’ (i.e. a solicitor of no less than 10 years’ admission or a barrister of no less than 10 years’ call, and in either event independent of the appointing party). Each party to the arbitral proceedings, NUFC and the FAPL, will appoint one member of the tribunal. Within 14 days of the appointment of those two appointed members, those two appointed members will then choose the third member of the tribunal. The third member of the tribunal so chosen will sit as the chair of the tribunal.
From the substantive judgment, it can be identified that NUFC appointed Lord Neuberger as their member of the tribunal and the FAPL appointed Lord Dyson as their member of the tribunal.[5] It can also be identified that Lord Neuberger and Lord Dyson then appointed Michael Beloff QC (“MBQC”), who accepted the appointment, as the third member and chair of the tribunal.[6]
Once an arbitrator has been appointed to a tribunal the arbitrator is required to sign a statement of impartiality (the FAPL Rules, rule X.12). On 9 October 2020 MBQC provided his statement of impartiality, which confirmed, inter alia, that ‘there are no circumstances which exist that give rise to justifiable doubts as to my impartiality in that role’.[7]
However, on 23 October 2020 MBQC the FAPL’s solicitors, Bird & Bird LLP (“BB”), informed NUFC’s solicitors, Dentons UK and Middle East LLP (“Dentons”), that:
Over the last three years BB had been involved in 12 arbitral proceedings in which MBQC had been an arbitrator, including three where BB had appointed MBQC as an arbitrator (“the BB Appointments Issue”). However, of BB’s three appointments of MBQC as an arbitrator two of those appointments had occurred after MBQC had been appointed as an arbitrator in the arbitral proceedings between NUFC and the FAPL.[8]
MBQC had advised the FAPL on four occasions over two years before his appointment as an arbitrator in the arbitral proceedings between NUFC and the FAPL. In particular, MBQC had advised the FAPL in March 2017 (“the Advice”) in respect of an amendment to the FAPL Rules, Section F: Owners’ and Directors’ Test (“the 2017 Advice Issue”).[9] The FAPL had asserted privilege in respect of the Advice, as it is fully entitled to do so, and therefore the advice could not be materially considered.[10]
Consequently NUFC, and later Dentons, invited MBQC to recuse himself from his appointment as arbitrator in the arbitral proceedings between NUFC and the FAPL.[11] MBQC declined to do so and maintained that position.[12] Significantly, MBQC explained that (i) he had no recollection of the Advice; and (ii) that although the Advice related to the FAPL Rules, Section F, the matter to be determined between NUFC and the FAPL by way of arbitration did not concern the FAPL Rules, Section F per se but concerned the definitions of ‘Director’ and ‘Control’ found in the FAPL Rules, Section A: Definitions and Interpretation.[13]
The AA 1996 applies to the arbitral proceedings between NUFC and the FAPL as the ‘seat’ of the arbitration is in England and Wales.[14] Pursuant to the AA 1996, s. 24(1)(a), a party to arbitral proceedings can apply to court for the removal of an arbitrator on the ground that ‘circumstances exist that give rise to justifiable doubts as to his impartiality’ to justify his removal from the tribunal.
Following NUFC’s requests and MBQC’s declinations, NUFC made the AA 1996, s. 24 Application in respect of MBQC on the basis of, inter alia, the BB Appointments Issue and the 2017 Advice Issue.[15]
When considering an application under the AA 1996, s. 24(1)(a) the applicable test is ‘whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased’.[16] HHJ Pelling QC summarised the applicable test as follows:
‘Ultimately, a court is required to evaluate on the whole of the evidence at the hearing of the application whether a real (as opposed to a fanciful) possibility of bias has been made out, assessed by reference to the circumstances known at the time the section 24 application is heard’.[17]
Further, subject to an arbitrator’s duty of privacy and confidentiality, an arbitrator has a duty to disclose to the parties to an arbitration matters that ‘could lead a fair minded and informed observer to conclude that there was a real possibility that the arbitrator was biased because such disclosure demonstrates impartiality from the beginning’.[18]
HHJ Pelling QC dismissed the AA 1996, s. 24 Application.
In respect of the BB Appointments Issue, HHJ Pelling QC stated, inter alia:
‘… none of these appointments would of themselves cause the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility that the second defendant was biased, nor would such an observer infer bias on the part of the second defendant from his failure to disclose them’.[19]
Particular reliance was put upon the fact that (i) only three of the 12 appointments relied upon were made by BB; and (ii) only one of those two appointments by BB had been made before MBQC was appointed to the tribunal in the arbitral proceedings between NUFC and the FAPL.[20] Further, it was noted that MBQC is not ‘financially dependent on work from either [FAPL] or [BB]’.[21]
In respect of the 2017 Advice Issue, HHJ Pelling QC stated, inter alia:
The issue to be determined in the arbitral proceedings between NUFC and the FAPL concerns the definitions of ‘Director’ and ‘Control’ found in the FAPL Rules, Section A: Definitions and Interpretation, not an application of the FAPL Rules, Section F: Owners’ and Directors’ Test. The Advice provided by MBQC to FAPL concerned the FAPL Rules, Section F: Owners’ and Directors’ Test only. As HHJ Pelling QC put it, the arbitral proceedings between NUFC and the FAPL are concerned with:
‘the logically prior and separate issue of whether [the Kingdom of Saudi Arabia (“KSA”)] satisfies the test for being a “Director”, which is concerned exclusively with the effect of Section A of [the FAPL’s]Rules. It is fanciful to suggest that the tribunal will undertake any wider investigation given the terms of the decision letter…
No allegation of breach of Section F by KSA is to be found in the decision letter. It is only if KSA is found to be a Director that such an issue could arise. That requires a further decision and any challenge to any adverse decision that is reached will be by another and separate reference to a different tribunal’ (emphasis added).[22]
HHJ Pelling QC also stated that the 2017 Advice Issue did not result in an inference that MBQC had considered and come to a conclusion on the meaning of ‘Control’ and ‘Director’ in the FAPL Rules, Section A. In particular, HHJ Pelling noted that there ‘is nothing within [FAPL Rules, Section F] that varies or augments the definition of any of “Director”, “Control” or “Person” within Section A’.[23] This supports the ‘logically prior and separate issue’ approach above. Further, evidence before HHJ Pelling QC was unequivocal in explaining:
‘The Section F Advice did not address, or relate to, whether an individual or entity would fall within the definition of ‘Director’ in Section A of the Rules or be considered as exercising ‘Control’ (as defined in the Section A of the Rules)’.[24]
Insofar as an arbitrator’s disclosure obligations are concerned, HHJ Pelling QC did not consider it was appropriate to make an inference of bias in a situation where (i) MBQC had merely forgotten about the Advice; (ii) there is no ongoing relationship between MBQC and FAPL; and (iii) where the Advice dealt with an issue that is distinct from that being dealt with in the arbitral proceedings between NUFC and the FAPL.
The arbitral proceedings between NUFC and the FAPL
In this author’s opinion, both judgments demonstrate NUFC’s full commitment to seeking a resolution to its dispute with the FAPL and which will see the takeover of NUFC by the KSA’s Public Investment Fund (“KSA PIF”) take place. NUFC’s statement released on 5 March 2021 in respect of both judgments heavily indicates that KSA PIF are still involved with the proposed takeover of NUFC.
It is noted from NUFC’s statement that NUFC are ‘considering whether or not to pursue an appeal’ against the ‘substantive judgment’. In this author’s opinion, NUFC should not appeal. Firstly, HHJ Pelling QC’s decision does not indicate that it is ‘wrong’ for any error of law, fact or in the exercise of the court’s discretion, or that it is ‘unjust because of a serious procedural or other irregularity’ (CPR, r. 52.21(3)). Secondly, the arbitral proceedings between NUFC and the FAPL commenced in September 2020 yet the parties are seemingly yet to deal with the directions stage of the arbitral proceedings (FAPL Rules, rule X.18). While not expecting alacrity, timeliness is necessary if NUFC wish to obtain a ‘speedy’ resolution ‘that does not prevent the substantial investment into English football, and the North East region, that the proposed takeover would bring’. Thirdly, at the very least, the AA 1996, s. 24 Application would have achieved its ultimate purpose: putting the spotlight on impartiality (not that this author really doubts that MBQC, an established and well-respected legal professional practitioner, would have acted any other way).
Generally, HHJ Pelling QC’s decisions do not address any substantive issues to be determined in the arbitral proceedings between NUFC and the FAPL. However, it is noted from the ‘substantive judgment’ that there is now available the material part of a letter from the FAPL’s Board dated 12 June 2020 (“the Decision Letter”). The arbitral proceedings between NUFC and the FAPL ‘[concern] and can only concern the issues decided by the [Decision Letter]’.[25] The Decision Letter identifies:
The proposed takeover of NUFC would see PZ Newco Limited (CRN: 12388231) acquire the shares in NUFC. PZ Newco Ltd is ultimately owned by the KSA PIF. (Although, it is noted that upon information currently available from Companies House that PZ Newco Ltd is wholly owned by Cantervale Limited (CRN 11128634) and that Cantervale Ltd is wholly owned by Amanda Staveley.)
KSA PIF ‘expressly recognises that it will fall within the definition of ‘Director’ under [the FAPL’s] Rules, even though it would not be formally appointed as a director of [NUFC]. [FAPL] agrees’. This much has never really been in doubt, and is something this author considered in this earlier Football Law article (albeit reference was made to the KSA PIF using a different company to acquire the shares in NUFC).
Crucially, the Decision Letter also states:
‘From the Information you have provided, [FAPL] is provisionally minded to conclude that KSA satisfies both elements in the test for “Control” over [NUFC] through its control over [KSA] PIF (which, as noted, recognises it will be a Director). In summary:
1. As to management… [KSA] PIF’s directors are appointed by Royal Decree, and its current board is almost exclusively composed of KSA Government Ministers. The [KSA] PIF Law puts [it] expressly under the direction of... a KSA Government Ministry. Its function is to serve the national interest of KSA.
2. As to ownership, it would appear that [KSA] PIF is state-owned, and that it manages only state-owned assets.
Again, if you disagree with either of these provisional conclusions, we would welcome your reasoned response.
Following receipt of any submissions, [FAPL] will fully consider them before reaching a final decision’ (sic).[26]
Further, as is confirmed in the ‘substantive judgment’, the dispute between NUFC and the FAPL arising from the Decision Letter is a ‘Board Dispute’.[27] A ‘Board Dispute’ has limited grounds upon which the Letter Decision can be reviewed by way of arbitral proceedings:
It was reached outside the jurisdiction of the FAPL Board;
It could not have been reached by any reasonable FAPL Board which had applied its mind properly to the issues to be decided;
It was reached as a result of fraud, malice or bad faith; or
It was contrary to the law of England and Wales; and
It ‘directly and foreseeably prejudices the interests of a Person or Persons who were in the contemplation of the Board at the time that the decision was made as being directly affected by it and who suffer loss as a result of that decision’ (see FAPL Rule, rules X.3.2 and X.5).
Whether or not NUFC will satisfy one or more of those grounds is outside the scope of this article, and indeed it is difficult to provide commentary on the same in the absence of a full consideration of all the evidence available. At the most it can be stated that the FAPL are unlikely to have acted outside of its jurisdiction considering that the FAPL Rules, rule F.25 (formerly FAPL Rules, rule E.17 in the version of the FAPL rules in force at the relevant time) permitted the FAPL to request the further information of the type requested in the Decision Letter to ensure compliance with the FAPL Rules, Section F: Owners’ and Directors’ Test.
Nevertheless, considering the definition of ‘Control’ in the FAPL Rules, rule A.1.52, it is this author’s opinion, based upon available information, that the KSA cannot reasonably be deemed to have ‘Control’ of NUFC if the proposed takeover of NUFC occurs as provisionally concluded by the FAPL in the Decision Letter:[28]
While the KSA may fall within the definition of a ‘Person’ provided in the FAPL Rules, A.1.147, it cannot reasonably be decided that KSA will be a ‘Person’ with the power ‘to exercise, or to be able to exercise or acquire, direct or indirect control over the policies, affairs and/or management of a Club’.
Firstly, notwithstanding those two points identified by the FAPL in the Decision Letter as to the composition and ownership of the KSA PIF, there is no suggestion that the KSA itself, either directly or indirectly, will control the policies, affairs and/or management of NUFC if the proposed takeover of NUFC occurs.
There is no suggestion in the Decision Letter that the KSA PIF is not a separate legal entity to the KSA. This author stands by the conclusions reached in this earlier Football Law article on that point.
Further, while the KSA PIF reports to KSA’s Council of Economic and Development Affairs (“CEDA”), as explained in this earlier Football Law article, the KSA PIF Law, article 2 states expressly that the KSA PIF ‘shall have a public legal personality as well as financial and administrative independence’ (emphasis added).
Further again, the KSA PIF Law, article 6 states expressly that the KSA PIF’s board ‘shall supervise the Fund, including its management and affairs, and shall ensure its objectives are achieved and its powers—as stipulated in this Law—are exercised. To this end, the Board shall have all necessary authorities and powers’. While members of the KSA PIF board may concurrently be governmental ministers of the KSA, those ministerial positions are distinct from and separate to those ministers’ positions on the KSA PIF’s board.
Secondly, again notwithstanding those two points identified by the FAPL in the Decision Letter as to the composition and ownership of the KSA PIF, it cannot reasonably be decided that the KSA will have the power directly or indirectly to ‘appoint and/or remove all or such of the members of the board of directors of [NUFC] as are able to cast a majority of the votes capable of being cast by the members of that board’ (FAPL Rules, rule A.1.52(a)).
NUFC’s Articles of Association (which adopt Table A of the Companies (Tables A to F) Regulations 1985 (“Table A”)) subject to amendments as stated in NUFC’s Articles of Association (“NUFC AOA”), provide the procedure for appointing members of the board of directors of NUFC. NUFC AOA, article 19 states that the directors of NUFC ‘shall have the power at any time, and from time to time, to appoint any person to be a Director’. Further, NUFC AOA, article 20 states that the majority shareholder of NUFC shall ‘have the power… to appoint any person or persons as a Director or Directors’.
In addition to general provisions in Table A, regulation 81, NUFC’s AOA also provide a procedure for removing members of the board of directors of NUFC. NUFC AOA, article 20 states that the majority shareholder of NUFC shall ‘have the power… to remove from office any Director’. Further, pursuant to the Companies Act 2006, s. 168 a director of NUFC can be removed by an ordinary resolution.
Further, Table A, regulation 88, dealing with directors’ meetings, states that ‘[questions] arising at a meeting shall be decided by a majority of votes’.
KSA PIF could therefore appoint and/or remove directors in a manner envisaged by the FAPL Rules, rule A.1.52(a) through its ultimate ownership of PZ Newco Ltd (if that is the proposed corporate structure). However, going back to the KSA PIF Law mentioned above, it is the KSA PIF, not the KSA, that, inter alia, ‘shall have the powers to achieve its objectives and carry out its functions’.[29] More particularly, the KSA PIF Law, article 6(1) states expressly that the KSA PIF board – again, not the KSA itself – shall approve and issue ‘investment strategies, policies and procedures’. While the KSA PIF Law, article 7 states that the CEDA ‘may… direct the [KSA PIF] Board to make any amendments to the Bylaws and Policies’ in respect of, inter alia, KSA PIF Law, article 6(1), there is nothing to indicate that such a direction must be implemented by the KSA PIF board and indeed that would go against the independence of the KSA PIF otherwise provided for in the KSA PIF Law.
Thirdly, again notwithstanding those two points identified by the FAPL in the Decision Letter as to the composition and ownership of the KSA PIF, it cannot reasonably be decided that the KSA will ‘[hold or possess] the beneficial interest in, and/or [have] the ability to exercise the voting rights applicable to, Shares in [NUFC] (whether directly, indirectly…) … which confer in aggregate on the holder(s) thereof 30 per cent or more of the total voting rights exercisable at general meetings of [NUFC]’ (FAPL Rules, rule A.1.52(b)). The analysis of the KSA PIF Law provided in respect in FAPL Rules, rule A.1.52(a) is repeated.
What next?
As noted above, the parties are seemingly yet to deal with the directions stage of the arbitral proceedings (FAPL Rules, rule X.18). Further, as this author also explained in November 2020, without knowing the directions made in respect of the arbitral proceedings between NUFC and FAPL it is not possible to say how long it will be until the arbitration hearing takes place and the tribunal reaches a decision.
Footnotes
[1] Newcastle United Football Company Limited v The Football Association Premier League Limited & ors [2021] EWHC 450 (Comm), [1].
[2] Ibid, [21].
[3] Newcastle United Football Company Limited v The Football Association Premier League Limited & ors [2021] EWHC 349 (Comm), [16]-[25].
[4] Ibid, [24].
[5] Ibid, [7].
[6] Ibid, [7]-[8].
[7] Ibid [7].
[8] Ibid, [8].
[9] Ibid, [8].
[10] Ibid, [14], [38] and [43].
[11] Ibid, [9].
[12] Ibid, [9]-[14].
[13] Ibid, [11]; see also [4], [32(i)] and [33].
[14] FAPL Rules, X.2.2; AA 1996, s. 2(1).
[15] (n3), [31].
[16] Porter v Magill [2002] 2 AC 357 (Lord Hope),[103]; (n3), [26].
[17] (n3), [26]; cf. International Bar Association Guidelines on Conflicts of Interest in International Arbitration (10 August 2015).
[18] (n3), [27]-[28].
[19] Ibid, [52].
[20] Ibid, [53].
[21] Ibid, [55].
[22] Ibid, [38]-[39].
[23] Ibid, [42].
[24] Ibid, [44].
[25] Ibid, [37].
[26] Ibid, [4].
[27] Ibid, [6].
[28] Sport: Law and Practice (Bloomsbury 2014, 3rd edn.), Chapter D1, para. D1.74, and Chapter D2, para. D2.6 and D2.49.
[29] KSA PIF Law, article 4.
8 March 2021