Implied Horizontal Contract Prompts Stay Of Proceedings S9 AA 1996

In Mercato Sports v Everton1, the English High Court found that two parties were bound by an implied horizontal contract containing an arbitration clause. Accordingly, it granted a stay of proceedings under section 9 of the Arbitration Act 1996 ('S9 AA 1996'). In this case, a football agent (the Claimant) 2 sought payment for bringing a player to the attention of Everton (the Defendant) and by doing so, it enabled them to sign the player. While Claimant and Defendant had no direct contractual relationship, the Court established that both were bound by the Football Association's Rules ('FA Rules'), in particular by the arbitration agreement therein. While the Court emphasized that such arrangements would not always automatically lead to an implied horizontal contract, the parties' dealings in this case did lead to an implied contractual relationship, governed by the FA Rules.

  1. Background

    The Claimant brought a claim against the Defendant in the English High Court for payment for their services after it had brought AB, a professional football player, to the attention of the Defendant who then entered into an employment contract with AB. The Defendant sought to stay the proceedings pursuant to S9 AA 1996. The Defendant invoked the arbitration clause contained in the FA Rules and claimed that this clause operated as an arbitration agreement between the Claimant and Defendant. The Claimant argued that it was not a FA registered intermediary and thus claimed not to be bound by the FA Rules. However, during the hearing it came to light that the Claimant's invoice bore a FA registered intermediary membership number, giving a strong indication that the Claimant did act as such.

  2. Issues

    First, the Court followed the approach set out in Joint Stock Company Aeroflot Russian Airlines v Berezovsky3; the burden of proof is with the party that asserts that there is (i) a concluded arbitration agreement, and (ii) that it covers the disputes that are the subject of the court proceedings. This approach was undisputed by the parties. Nor did any of the parties contest the scope or validity of the arbitration agreement. Thus, the Court's judgement was limited to determining whether the parties were bound by the arbitration clause.

    For there to be an arbitration agreement, there must be a contract between those parties. An implied contract between two parties who have not engaged directly with each other ("a horizontal contract") can arise where each of those...

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