[LU] Arbitration decision in full (Longest ever list post)

[John Boocock]

IN THE MATTER OF AN FA RULE K ARBITRATION BETWEEN:

(1) LEEDS UNITED 2007 LIMITED

(2) THE ROTHERHAM UNITED FOOTBALL CLUB LIMITED
(acting by its administrator)

Claimants

-And –

THE FOOTBALL LEAGUE LIMITED

Respondents

THE AWARD

INTRODUCTION

1. This is an Arbitration pursuant to Regulation K of The Rules of The
Football Association Ltd.

2. The Parties are:

Leeds United 2007 Limited – ‘Claimant’
The Football League Limited – ‘Respondents’.

The Rotherham United Football Club Limited is seeking to join in the
Arbitration as a Claimant.

3. The Claimant seeks a Declaration that the imposition of 15 points
deduction for the 2007-8 season in League One (L1) was unlawful, void
and of no effect.

BACKGROUND

4. On 4 May 2007, the day before the last weekend of the League football
season 2006/7, Leeds United (the Club) went into administration and KPMG
LLP were appointed Administrators. On the same day KPMG hived down the
assets of the Club to Leeds 2007 and agreed to sell the entire issued
share capital of Leeds 2007 (‘Leeds OldCo’) to a new company, Leeds
United Football Club Limited (‘Leeds NewCo’).

5. When a Club goes into administration the Football League’s Articles,
Regulations and Insolvency Policy are engaged. The Insolvency Policy
enables the Football League to establish a degree of control over the
situation. The Policy’s primary purpose is to protect the integrity of
its competition and the image of the League by pursuing three basic
objectives:

(1) Survival of the club in membership of the League, where possible;

(2) Satisfaction of the Football Creditors, by preventing the Club
defaulting on their contractual obligations to their players even in
insolvency;

(3) Protecting the interests of other creditors, giving them the
opportunity to determine their own financial settlement, by requiring
the approval of creditors to a formal CVA or Scheme of Arrangement, save
in the most exceptional circumstances.
Thus the protection of unsecured creditors by the requirement of a CVA
is very important to the public perception and credibility of the League.

6. The Administrators proposed a Company Voluntary Agreement (‘CVA’).At
the Creditors meeting held on 1 June 2007 Her Majesty’s Revenue and
Customs (HMRC) an unsecured creditor and the League (the Respondent)
voted against the CVA. However, the meeting approved the CVA by the
required majority.

7. On 3 July 2007 (the last day for the commencement of such
proceedings) HMRC commenced proceedings in the Leeds District Registry
of the High Court of Justice challenging the approval of the CVA. The
challenge was based on the decision of the Chairman of the creditor’s
meeting as to the voting rights of three creditors, Astor Investment
Holdings Ltd, Mark Taylor and Co. and Yorkshire Radio Ltd (‘the Claims’).

8. Directions were given for the determination of the proceedings. The
substantive hearing was fixed for hearing on 3 September 2007 for five
days. The Administrators decided to bring the CVA to an end on 6 July
2007 notwithstanding the approval of the creditors for the following
reasons:

“The listing of the trial was three weeks after the 2007/2008 football
season commences and our expectation was that the judgment might not be
handed down until late September / early October 2007 and could be
subject to appeal. The challenge by HMRC meant the Club could not
complete the existing CVA given the constraints of time and funding. In
essence, the Administrators were not confident that sufficient funding
could be generated from the sale of players to trade the Club through to
a conclusion of the Court process. Therefore the Administrators
concluded that embarking on such a process which would put realisations
available for creditors at risk, was not appropriate.”

9. The Administrators also indicated that it would not be appropriate to
propose another CVA – for reasons which are not relevant to these
proceedings. On the same day (Friday) the Administrators re-offered the
business of Leeds OldCo for sale on an unconditional basis with a
deadline for offers and proof of funding by 5p.m. on 9 July 2007
(Monday). The reasons given for the short timescale included that a
substantial offer for the business from one potential purchaser (the
‘Bates Consortium’ led by Mr Ken Bates) was due to expire by 5p.m. on9
July 2007, and that the majority of the Leeds players had not been paid
since June 2007.

10. The Administrators received a number of enquiries from potential
purchasers. Four offers were received. The respective potential dividend
that each offer would make available to the creditors were: Leeds United
Football Club Ltd (the Claimants, i.e. the ‘Bates Consortium’) increased
that offer to 52.9p (in the £); Offer ‘B’ 26.7p; Offer ‘C’ 32.3p; Offer
D 15.0p.

11. KPMG in a letter stated:

“in the absence of any certainty as to whether the League would agree to
the transfer of the football share without a CVA, the Administrators
accepted the offer for the sale on an unconditional basis to [Leeds
NewCo] of the issued share capital of [Leeds OldCo]. (Emphasis added)

12. Thus, on 11 July 2007 the contract entered into on 4 May 2007 was
varied to provide for the sale to Leeds NewCo of the issued capital of
Leeds OldCo on an unconditional basis.

13. The Football League was faced with a novel situation: how to protect
the interests of the unsecured creditors in the absence of a CVA? The
completion of a CVA is not an absolute requirement of the Football
League. The Board retained the discretion to waive the requirement in
exceptional circumstances and to fashion a situation to preserve the
integrity of the competition, to protect Football Creditors, without
letting down unsecured creditors. In doing so it had to be astute not to
set a precedent that put the principle underlying the Insolvency Policy
at risk.

14. Normally Regulation 11 requires that a new Member (i.e. Leeds NewCo)
should start the following season in a lower League (here L2). Leeds
NewCo wanted to avoid this ‘relegation’ and to ensure Leeds stayed inL1
it was prepared to pay a price to achieve this. The Football League was
receptive to the idea and indicated that it might be prepared to
exercise its discretion to permit this to happen.

15. On 27 July 2007, at an extraordinary meeting of the Board of the
Football League it was decided that:

(i) Efforts should continue to achieve a CVA or equivalent to satisfy
the requirements of the Football League’s Insolvency Policy; BUT

(ii) If notwithstanding those efforts, the Board should conclude that a
CVA was not a feasible option, the Board would exercise its discretion
to agree to a transfer of the ‘League Share’ to Leeds NewCo, so that
Leeds NewCo could start the 2007-8 season in League 1, on various terms
and conditions to be accepted by Leeds NewCo, including the Condition
that Leeds NewCo would be deducted 15 points from the commencement of
the next season.

16. On 31 July 2007 a meeting was held between representatives of the
League, Leeds NewCo (Mr Shaun Harvey, Chief Executive and Mr Mark
Taylor) and the Administrators of Leeds OldCo to explain the Board’s
decision, including the proposed

15 point deduction. Mr Mark Taylor, a Director of the Claimant, enquired
whether Leeds NewCo could make written representations to the Football
League about the level of points deduction and this was agreed to.

17. Mr Nicholas Craig, the League’s in-house Solicitor, later spoke to
Mr Shaun Harvey and specifically mentioned that in the absence of a CVA
or other method of demonstrating the agreement of secured creditors, the
League would be imposing a deduction of 15 points as a condition of the
transfer of the League Share to NewCo.
18. Mr Ken Bates telephoned Lord Mawhinney expressing his surprise and
concern about the idea of points deduction ‘in blunt and direct terms’.
Lord Mawhinney’s response was that the waiver of the CVA requirement was
exceptional and ‘therefore might come with strings attached’.

19. On 2 August 2007 the Administrators informed the Club that there was
no prospect of the CVA proceeding and that they intended to abort the
CVA and resign their positions. Mr Taylor wrote to the Football League
but did not mention the points deduction nor make any representations as
to why it should be varied or waived. Mr Bates rang Lord Mawhinney. We
accept Lord Mawhinney’s account that Mr Bates asked that if the 15 point
deduction was imposed he could appeal against it. Lord Mawhinney
suggested that he would be prepared to recommend that to the Board but
the appeal should be to the member clubs because it was the member clubs
that the Board was supposed to be representing. Mr Bates agreed to this
suggestion and Lord Mawhinney agreed to put his proposal to the Board
which he did on the following day.

20. On 3 August 2007 a Board meeting was held when the 15 point
deduction was confirmed and an appeal to the League was agreed to. Later
that day Mr Taylor wrote to the Football League objecting to the points
deduction on the basis that it was outside the powers of the Board or
was an improper exercise of its discretion. However Mr Bates by
telephone informed the Football League that this letter had been sent
without his authority and that it should be withdrawn. Mr Taylor wrote a
second letter acknowledging the receipt of the proposed Agreement (which
included Clause 4) asking that his earlier letter should be disregarded
and confirming that:
“the conditions set out in your letter are acceptable to *the Claimants+
save that the Company will appeal against the 15 point deduction ...
with a view to the penalty being either withdrawn or reduced.” He told
us that he wrote the second letter because it did not accurately reflect
what had been agreed.

21. Later that day Mr Taylor signed the Agreement on behalf of the
Claimants. What did he put his signature to?

THE COMPROMISE AGREEMENT

22. This was a carefully drafted and formal legal document (a copy is
attached). The Recitals set the scene and describe the scope of the
Agreement. Recitals ‘E’ and ‘F’ refer to the Board’s discretion. Recital
‘G’ records that the Board had agreed to facilitate a transfer under
‘Option Three’ (as distinct from ‘Option Two’, a L2 start under
Regulation II),’ subject to the terms of this agreement, including the
conditions (emphasis added).

23. Under the heading ‘Acknowledgement and Agreement’ Clauses 1.1.1 and
1.1.2 Leeds NewCo recognised that the requirement of a CVA was “a
reasonable and proportionate requirement of the Insolvency Policy having
regard to the public perception of the League, the credit worthiness if
the member clubs, the credibility of the League and the integrity of the
League’s competition and that no approval of the unsecured creditors had
been secured.” In Clauses 1.1.3, 1.1.4 and 1.1.5 Leeds NewCo expressly
confirmed the Board’s absolute discretion under Articles 4 and 6 to
refuse or accept the transfer to Leeds NewCo.

24. Clause 1 concludes with Leeds NewCo acknowledging and agreeing the
crucial Condition which is central to this Arbitration:

“The Board has determined that the appropriate sanction should be the
imposition of a penalty points deduction of fifteen championship points
in Season 2007/8 subject to an appeal to the member clubs of the League
as outlined in Clause 3 below”.

25. Clause 4 is headed “Waiver of Claims” and provides as follows:

“4.1 Leeds hereby release the League, any of its directors, officers,
employees and any member club of the League (past, present or future)
(the “Released Parties”) from all claims, whether known or unknown to
Leeds, which Leeds has or may have against the Released Parties arising
out of or connected, whether directly or indirectly with the service of
the Notice, the conduct of the League with regards to OldCo, the
Conditions and the imposition of the sanction or, if passed, the Appeal
Sanction (the “Claims”).

4.2 Except for the obligations created by this Agreement Leeds hereby
covenants that it shall not, and will procure that its directors,
associated companies ..., shareholders, officers or other employees
shall not commence, or threaten to commence, any proceedings in any
jurisdiction before any court, arbitration panel or other similar
judicial body against the Released Parties (including by way of third
party claims in any other action) arising out of or connected, whether
directly or indirectly with any of the Claims.”

26. Mr David Philips QC on behalf of the Claimants submitted that the
Clause should be construed strictly against the League. Furthermore the
Clause is invalid as its effect is to oust the jurisdiction of the
Courts and therefore contrary to public policy.

27. The Tribunal is unable to understand or accede to the Claimants
argument that the condition should be strictly construed against the
League. No alternative more benign construction has been suggested. This
was a commercial bargain, at arms length between a powerful and rich
Consortium of businessmen and a responsible professional Sports
Governing Body. No authority has been cited to support the proposition
that special rules of interpretation apply to general release or waiver
clauses.

28. The Tribunal is not persuaded that the Clause is an ouster clause.
As already stated this was a commercial agreement; it contained
legitimate release and waiver provisions. The Football League consists
of its Member Clubs and is the Governing Body. The agreement was between
an Applicant and the League in respect of a dispute between them. The
compromise was reached in order to resolve the parties’ differences
without resorting to the Courts. Such a negotiated settlement does not
oust the jurisdiction of the Courts. Either party can seek to enforce
the other party’s obligations before the Courts or by Arbitration. In
short, the agreement is not a procedural bar. Contrary to the Claimants
contention public policy is firmly in favour of enforcing compromises
and releases in the interests of avoiding or minimising litigation.

29. Leading Counsel also contended that the resort to arbitration is
simply ‘to enforce the obligations created by the Agreement’. These
words merely mean that Leeds can enforce the Compromise Agreement should
the League default (which it has not). They do not mean that Leeds can
impugn the Agreement or its Conditions. Moreover the parties expressly
provide in Clause 3.1 that:

“The Club shall have a right to appeal against the *15 point Condition]
in accordance with the terms of this Clause 3, but not otherwise.
(Emphasis added) We reject this contention.

30. In reaching our conclusion on the meaning and effect of this
Agreement and in particular Clause 4 we have taken account of the
circumstances in which the Compromise Agreement came into existence.
Leeds OldCo went into administration. In accordance with its undisputed
powers the League issued a Compulsory Transfer Notice

in respect of the League Share (which entitles it to membership of the
League) in the name of Leeds OldCo requiring it to transfer the League
Share at par value to the Secretary of the League. Leeds NewCo wished to
succeed Leeds OldCo as owner of Leeds United FC, by becoming a Member
Club and securing a transfer of the League share to enable them to do
so. By Regulation 11, a new Member Club is required to leave League 1
(L1) and start the following season in League 2 (L2). Leeds NewCo wished
the League to exercise its discretion so that it could succeed as new
owners with the Club playing in L1 from the start of the 2007-8 season.

31. The Board was receptive to the idea. Article 4 and the Insolvency
Policy allowed the Board to agree to withdraw the CTN and to register a
transfer free of the CTN in circumstances, including on such terms as
the Board “in its absolute discretion determines.”

32. As already described Leeds NewCo (and in particular Mr Bates and Mr
Mark Taylor) were well aware that in order to secure this indulgence the
Board was stipulating that in order to remain in L1 the Club would have
to start the new season with a 15 point deficit. This had been agreed by
Mr Bates on behalf of the consortium, as the price which had to be paid
for the indulgence and they were prepared to pay it – subject only to an
Appeal to the League.

33. We are satisfied that Mr Taylor, in his capacity of Director of
Leeds NewCo and their solicitor, was fully aware of the content and
effect of what he was signing. Earlier that day he had received a letter
from Mr Craig in which he had stated there was to be ‘a legally binding
agreement’ in which the Claimants would undertake to observe and perform
each of the conditions set out, and “waive any and all claims against
the League regarding the sanction of matters arising out of the
administration generally.” Mr Craig told us that it was not standard
practice for him to include release and waiver clauses in agreements
between the League and insolvent Member Clubs. He consulted the League
Solicitors, and included Clauses 4.1 and 4.2 because the Board had made
it clear in its 27 July meeting that the terms of the agreement with
Leeds NewCo had to “obviate anyone taking legal action once the process
had been completed,” and the Board re-affirmed at its 3 August meeting
that they required “an assurance by the club that it would accept the
decision of the meeting as final.” As he put it: “it was a crucial part
of the deal that Leeds NewCo accept the points deduction and not seek to
challenge it or have it overturned other than by means of the appeal to
its fellow Member Clubs, as permitted by Clause 3.”

34. We conclude that it is inherently improbable that Mr Taylor, as a
solicitor of longstanding experience, would have put his signature to
the document if he had intended to reserve the position that it is now
adopted by the Claimants that the points deduction was outside the
powers of the Board or was an improper exercise of its discretion. A
simple ‘save as to the legality of the Condition’ phrase could have been
proposed. We are satisfied that if he had attempted to do so, it would
undoubtedly have been rejected by the Board, the deal would have been
aborted and, in all probability the Club would have gone into
liquidation, or at best, been relegated to League 2.

35. Finally, returning to Clause 4 the operative parts for our
consideration are:
“4.1 Leeds hereby release the League ... from all claims, whether known
or unknown to Leeds, which Leeds has or may have against [the League]
arising out of or connected, whether directly or indirectly with ... the
conduct of the League with regards to OldCo, the Conditions and the
imposition of the sanction or, if passed, the Appeal Sanction (the
“Claims”). (Emphasis added) 4.2 Except for the obligations created by
this Agreement Leeds hereby covenants that it shall not ... commence, or
threaten to commence any proceedings in any jurisdiction before any
court, arbitration body ... against [the League] ... arising out of or
connected, whether directly or indirectly with any of the Claims”.
(Emphasis added) The effect of this Clause is that Leeds NewCo agreed to
release the League from the claims now advanced and waived any right to
do so. They also covenanted not to bring the claims it now seeks to
bring. CONCLUSION

36. We are satisfied that the Claimants case begins and ends with the
Compromise Agreement which clearly embodied the intention of both
parties. Taking the Agreement as a whole and in particular Clause 4
Leeds NewCo agreed to the imposition of the 15 points and to release the
League from the claims which have now been advanced and to waive any
rights to do so. Leeds NewCo specifically covenanted not to bring the
claims it has now sought to assert and there is no basis to allow it not
to honour that covenant.

The Tribunal dismisses the Claim on this ground alone.

DELAY AND THE EFFECT ON OTHER CLUBS

A. Delay between 9 August and 12 February 2008

37. Even if the Claimants could avoid the effect of the release and
waiver they still faced a formidable obstacle. On 9 August 2007, the
League’s member clubs by the requisite majority dismissed NewCo’s Appeal
and confirmed the Board’s decision to transfer of the League membership
to the First Claimant with the Condition.

38. The First Claimant first tried to get The Football Association (FA)
to hold an inquiry into the validity of the League’s decision to impose
the Condition. The Football Association declined to hold an inquiry
based (among other things) on its clear view that the imposition of the
Condition as a condition of consent to transfer of membership to the
First Claimant was within the League’s powers and was a proportionate
exercise of those powers. Correspondence covered the period 30 August
and 5 December 2007. Even so, Leeds NewCo filed a Football Association
Rule K arbitration proceedings purporting to challenge the legality of
The FA’s decision not to hold such an inquiry.

39. Subsequently, on 4 February 2008, the League received from Mark
Taylor, the solicitor acting for the First Claimant, what purported to
be a letter before action in the High Court on behalf of the First
Claimant in relation to the Condition. That letter did not meet the
requirements of the CPR and the Football League directors rejected the
letter on that ground.

B. Delay in the High Court Proceedings

40. On 12 February 2008, proceedings were issued in the High Court on
behalf of the First Claimant and Barnsley Football Club 2002 Limited
against the League. The Claim Form and Particulars of Claim were deemed
served on Bird & Bird (FL’s solicitors) on 13 February 2008. The
covering letter accompanying these documents asked the League to consent
to an application for an expedited hearing.

41. On 20 February 2008, Bird & Bird wrote to Mark Taylor & Co.,
pointing out that the parties were subject to a valid pre-existing
agreement to submit any disputes between them to arbitration and
therefore asking them to agree to a stay of the proceedings in favour of
a FA Rule K arbitration. No reply was received to that letter by the
stated deadline and therefore Bird & Bird sent a chaser letter on the
evening of 25 February 2008.

42. In response, NewCo’s solicitor accepted that the dispute was covered
by FA Rule K, and, despite some delay, signed a Consent Order on behalf
of the First Claimant, providing for the mandatory stay of the
proceedings in favour of a FA Rule K arbitration. Mark Taylor agreed to
conduct the arbitration on an expedited basis, because of the potential
impact on 2007/08 final League standings. The full hearing on the merits
was therefore provisionally scheduled for 16-18 April 2008.

43. However, no such agreement was forthcoming on behalf of Barnsley.
Instead, it became apparent that Mark Taylor did not have authority to
act on behalf of Barnsley. On 25 February 2008, the League received a
letter by fax from Brabners Chaffe Street LLP, acting “on behalf of
Barnsley Football Club Limited”. The letter states:
“... We understand that our client has telephoned your Lord Mawhinney to
inform you that our client did not agree to lend its name to the above
proceedings and that it had not approved the Particulars of Claim before
they were filed at Court (or indeed since). We are investigating the
position on behalf of our client but wish to set the record straight at
this earliest opportunity ...”

44. On 25 February 2008, Bird & Bird sent a letter by fax asking Mark
Taylor for his urgent comments on the suggestion in Brabners’ letter
that the proceedings had been brought without Barnsley’s authority. No
such comments were received. Over the following days, Bird & Bird sought
(without success) clarification on the position of Barnsley from Mark
Taylor.

45. On 7 March Bird & Bird called Mark Taylor to clarify, as a matter of
urgency, whether or not he was authorised to act for Barnsley in
relation to the proceedings.

46. On 11 March Bird & Bird received an email sent on behalf of Mark
Taylor attaching a copy of the Notice of Discontinuance signed on behalf
of Barnsley. On the same day Bird & Bird filed at Court the signed
Consent Order and a copy of the Notice of Discontinuance.

47. Thus there was a delay of about 5 weeks primarily due to the
misconceived High Court proceedings commenced by NewCo’s solicitors and
their conduct of them.

C. Delay in the Arbitration Proceedings

48. On 4 March 2008, Bird & Bird sent Mark Taylor a letter by fax
confirming that the League agreed to the First Claimant’s request that
Arbitration be conducted in an expedited manner and set out some
practical measures for achieving this. They included that (i) the First
Claimant serve a Notice of Arbitration, as required pursuant to FA Rule
K2(a)(i), in order to commence the Arbitration proceedings; and (ii)
Leeds serve a Points of Claim in order to assist the tribunal to define
and identify the true issues for the tribunal. The letter invited Mark
Taylor to serve the Points of Claim by 10 March 2008.

49. On 7 March 2008, Bird & Bird received a letter from Mark Taylor sent
by fax, in which he agreed to serve a Notice of Arbitration but stated
that the Points of Claim would consist of the Particulars of Claim
issued in the High Court.

50. On Saturday 8 March, Jonathan Taylor of Bird & Bird sent a letter by
email to Mark Taylor requesting (among other things) that the Notice of
Arbitration be served during the morning of 10 March 2008 at the latest
and that a hearing of the tribunal be convened at short notice for the
purpose of making directions on 11, 12 or 13 March 2008.

51. On 9 March 2008, Jonathan Taylor received an email from Mark Taylor
confirming that the Notice of Arbitration would be served on 10 March
2008. In fact, the Notice of Arbitration was not served until 19 March
2008. Thereafter there may have been some dilatoriness on behalf of the
Claimant but we do not regard it as critical or significant.

52. Leeds NewCo has neither tendered a credible explanation nor
convincing excuse for their delay.

CONCLUSION

53. It is inescapable that if the appropriate Arbitration proceedings
had been commenced in August or September or even October 2007 they
would have been capable of resolution before the end of 2007. Given the
date when these proceedings were started (19 March) and the first day of
the Hearing before this Tribunal (16 April) it is obvious that our
decision could have been given comfortably before the end of 2007.

54. With this history of events we are satisfied that there has been
unreasonable and inexcusable delay on the part of Leeds NewCo. It is
plain that Leeds NewCo was in the same position in August as it was in
March when it finally got around to commencing these Arbitral
Proceedings. It was imperative that the appropriate action was taken
expeditiously. When the High Court proceedings were commenced they were
in breach of the Arbitration Clause in the Regulations. Even before the
arbitration proceedings were finally commenced, the Claimants were
dilatory in initiating them.

55. There was no reason, if Leeds NewCo were genuinely concerned and
disgruntled with the outcome of the League Members decision on 9 July,
why they should not or could not commence Regulation K arbitration
proceedings soon thereafter. This step could have been taken
simultaneously with the Regulation K proceedings against the Football
Association. They then held back and commenced the misconceived and
abortive High Court proceedings. By delaying seven months before
commencing these proceedings (August – March) they were in danger of
prejudicing the other Clubs in League 1 who were also fighting for
promotion.

56. The resolution of this present challenge has been left to the
eleventh hour. If the points were now to be restored a number of clubs
eligible for automatic promotion and the play off positions might have
been affected. As at 5 April 2008 there were two clubs entitled to
automatic promotion and four other clubs entitled to a place in the
play-off for the third promotion spot, with Leeds in sixth position. On
1 May the position is still the same.

57. If the 15 points were now to be restored it would place Leeds
comfortably in second position (88 points) and with assured promotion.
This would prejudice the second placed Club (currently Doncaster) by
depriving it of its automatic promotion place, forcing it to compete for
promotion through the play off process. This situation is worthy of our
particular and sympathetic consideration. Thus the delayed restoration
of points would, inevitably, and fundamentally alter the rights that
would otherwise accrue to another club.

58. We have no doubt that if this dispute had been promptly and properly
brought, then the other clubs vying for promotion might have addressed
their season in a different way. Until 19 March they will have proceeded
on the legitimate assumption that there was to be no challenge and that
the 15 points would not be restored. This late challenge brought
uncertainty to the League near the end of the season at a time when
other clubs had an understandable hope and expectation that they would
enjoy automatic promotion, or the opportunity to compete for promotion
through the play-off. In Stevenage Borough Football Club v The Football
League Ltd CH [1996] 5 No 3043 Carnwath J was dealing with a similar
case of delay and dismissed the proceedings. We see no reason to depart
from his approach and apply it to the instant case.

59. We also dismiss the Claimant’s Claim on the ground of Leeds NewCo’s
unreasonable and inexcusable delay in bringing the claim to this
Arbitration.

THE CLAIMANT’S ALTERNATIVE CASE

60. As the Tribunal has already decided to dismiss the Claim on the two
grounds specified above it is not necessary to undertake a detailed
analysis of the alternative Case. We merely record in summary form what
our conclusions would have been.

61. Mr David Phillips QC submitted that Clause 4 of the Compromise
Agreement was entered into under a mutual mistake of law common to both
parties and is consequently ‘void ab initio’. The parties were mistaken
as to the League’s power to impose the 15 point Condition. It was a
penalty which the League had no power to impose.

62. We are satisfied that by virtue of Article 41, Article 4 and Article
6 the Board had all the requisite authority to exercise its powers and
discretion to impose a Condition of a 15 point deduction. Moreover, the
Insolvency Policy (in particular G5), properly construed, did not
prevent the Board imposing the Condition. The assertion that the Board
lacked the power to impose the Condition is unsustainable.

63. Mr Phillips also contended that the Board and the League in reaching
their decisions acted unfairly and unreasonably. We have no hesitation
in rejecting this argument. The Board came to the conclusion that the
point’s deduction should be made a Condition of consent to the
Cancellation of Withdrawal and Transfer as the most reasonable and
proportionate way of protecting the legitimate needs underlying the
Insolvency Policy. In doing so it rejected the other options open to the
Board which included

(i) Simply expelling Leeds OldCo, so that Leeds United FC ceased to exist;

(ii) Allowing Leeds NewCo to join the Football League in L2, pursuant to
regulation 11.

64. Given the absolute discretion afforded to the Board in this respect
by the Memorandum, Articles of Association and the Insolvency Policy and
having regard to the margin of appreciation afforded to a sport’s
governing body, the Claimant would have failed to establish that the
Board’s decision (or the League’s) to include the points Condition was a
decision that no rational decision maker in their position could make.
As to the amount of points deducted it carefully carried out a balancing
exercise between 0 to 20 and arrived at a decision that, in all the
circumstances of this particular case (which we do not need to recite)
was well within the range of decision reasonably open to it to make.

ROTHERHAM

65. The position of Rotherham can be dealt with summarily. This Club was
also insolvent and went into Administration on 18 March 2008. It is
likely that it will not be able to exit administration via a CVA and the
Administrators will be obliged to sell the Club. The Club fears that if
the League’s decision to deduct 15 points from Leeds is a precedent,
then the same condition will be applied to them. They therefore wish to
support the Claimant’s case and seek similar declaratory relief.

66. Mr Stephen Davies QC on behalf of the League submitted that
Rotherham has no status (locus) in these proceedings. There is no
dispute between Rotherham and the League. Rotherham cannot attempt to
support Leeds in its challenge to the Compromise Agreement in an attempt
to get round the fact Leeds NewCo has compromised its Claim.

67. The tribunal considered that the answer is to be found in Rule K
which provides that the jurisdiction of the Arbitration Tribunal is
confined to:
“any dispute or difference between any two or more participants ...
shall be referred to arbitration and finally resolved by arbitration
under these Rules.”
The only dispute is between Leeds NewCo and the League. There is no
dispute between Rotherham and the League. The fear that they may be
deducted 15 (or indeed, any) points is not sufficient to amount to a
‘dispute’. The League has not yet reached a determination of its casein
the light of all the relevant circumstances.

68. Thus Rotherham have no right to declaratory relief in respect of the
claim to such relief by Leeds, nor in respect of a decision which has
not yet been, and might not even be, taken against Rotherham itself.

69. Accordingly the Tribunal has declined jurisdiction and dismissed
Rotherham’s purported claim.

THE AWARD

The Award of the Tribunal is that the Claims of both Claimants are
dismissed.

Sir Philip Otton Chairman ....................................
Peter Leaver QC Arbitrator ...................................
Peter Cadman Arbitrator ...................................

POSTSCRIPT

1. During the four days of the Hearing we heard other evidence,
arguments, submissions from both parties and certain ideas and
suggestions were exchanged between Counsel and the Tribunal. In view of
the two principle decisions in the Award it is not necessary to take
such matters further.

2. However these proceedings have brought to light the necessity for a
review of the Insolvency Policy. We were told that there are 40 or more
current or anticipated insolvencies. In many cases (e.g. Rotherham,
Luton Town and Bournemouth?) it will prove impossible to exit
Administration via a CVA. The League in the course of the Hearing
appeared to recognise the need to amend the Policy to make specific
provisions where there is no CVA. It is to be hoped that this can be
achieved during the coming close season. The Clubs should be entitled to
clear guidelines, objectives and procedures.

3. The Board should be astute not to think in terms of ‘penalty’ or a
‘norm’ as a starting point of whatever Condition is to be imposed. We
are concerned that the Condition was described by the Board as a
‘penalty’ and was understandably perceived to be so.

4. We accept that the imposition of the 15 points in the instant case
was not (and was not intended to be) a precedent, i.e. an automatic
sanction in the absence of a CVA. Each case has to be assessed by the
League having regard to the Club’s individual circumstances leading up
to and of the insolvency itself. Such Conditions as the League considers
are required will reflect these circumstances and any merits the Club
can establish.

5. We feel obliged to record that we consider an Appeal to Members of
the League to be unsatisfactory. Some Clubs in the same League may not
readily agree to reduce a points sanction in the understandable
self-interest of their Clubs. We recommend:

1. That there should be an appeal to an Independent Tribunal;
2. In order to reduce uncertainty for the Club and other Clubs the
Appeal process should be determined without delay. We suggest an Appeal
should be lodged within 7 days of the decision and the decision of the
Appeal body should be given within 21 days thereafter.

6. We hope that these suggestions will be helpful to all concerned.

Sir Philip Otton Chairman ....................................
Peter Leaver QC Arbitrator ...................................
Peter Cadman Arbitrator ...................................