Friday, 22 July 2011

UK: England and Wales: arbitration and unfair prejudice proceedings

The Court of Appeal gave judgment yesterday in Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855. At first instance - see [2010] EWHC 3111 (Ch) - the trial judge, faced with conflicting authorities (Re Vocam Europe Ltd. [1998] BCC 396 and Exeter City Association Football Club Ltd. v Football Conference Ltd. [2004] EWHC 831 (Ch)), granted an application under Section 9 ("stay of legal proceedings") of the Arbitration Act (1996) to stay a petition brought under Section 994 of the Companies Act (2006), in circumstances where rules had been agreed under which disputes would be referred to and resolved by arbitration.

On appeal it was argued that the petition should not have been stayed and that the trial judge should have followed Exeter City in which HHJ Weeks QC held that the shareholder's right to petition for relief under (what is now) Section 994 was inalienable and could not be "diminished or removed by contract or otherwise" (para. [23]). The Court of Appeal unanimously rejected this argument and upheld the trial judge's decision to stay the petition. Lord Justice Patten, delivering the leading opinion, held that Exeter City had been wrongly decided and observed, amongst other things, that Section 994 gave shareholders "an optional right to invoke the assistance of the court in cases of unfair prejudice ... there is nothing in the scheme of these provisions which, in my view, makes the resolution of the underlying dispute inherently unsuitable for determination by arbitration on grounds of public policy" (para. [78]).

The ICLR has provided a summary of the decision here.

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