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ICC Award against PCB: A failure to interpret English Law of contract?


Hassan Aslam Shad |

Pakistan and India never shy away from trading barbs or from taking their disputes to newer battlegrounds. This time around, the casualty of the two countries’ never-ending rivalry has been cricket – a game passionately followed on both sides of the border.  However, instead of fighting it out in a cricket ground, the rivalry between the two countries has played out in the form of a legal dispute before the International Cricket Council’s (ICC) Dispute Resolution Committee (DRC).

Interestingly, it is contract interpretation that has taken center stage. The DRC’s 26 pages long Award is no less thrilling – and unpredictable in its outcome – than a typical game of cricket played out between India and Pakistan which promises nerve-wracking unpredictability till the last ball has been bowled. There is always heartbreak in the end on one side of the border. This time it is Pakistan’s turn to lick its wounds.

Claim

It all started when the Pakistan Cricket Board (PCB) alleged against the Board of Control for Cricket in India (BCCI) had reneged on its commitment to play a bilateral series agreed in a document signed by the representatives of both boards. Consequently, on 27 November 2017, the PCB filed a claim against the BCCI before the DRC claiming that BCCI either adheres to its contractual commitment or pay $63 million in compensation to the PCB.

Award

On 20 November 2018, a three-member Panel of the DRC rendered an award dismissing the PCB’s claim (Award). Notably, the Award only concerns itself with issues of liability (of the PCB and the BCCI towards one another) and not with the quantum of PCB’s claim.

To add insult to injury, on 12 December 2018, the DRC ordered the PCB to pay 60% of the costs incurred by the BCCI as well as the administrative costs incurred by the ICC during the dispute. The Award, as per the ICC’s terms of reference, is binding and non-appealable and the PCB has been left with no legal recourse against the BCCI save for narrowly construed grounds of procedural irregularity under the English Arbitration Act.

The April Letter was signed by both Mr. Patel and Mr. Sethi. However, the Future Tours Program (FTP) Agreement (FTP Agreement) referred in the April Letter was not agreed; hence none of the tours specified in the April Letter took place.

It would be an understatement to say that the PCB would have been left bewildered as to how it failed to convince the DRC to render a favorable Award in the face of an unequivocally clear contractual document relied upon by the PCB namely the 9th April 2014 letter (April Letter). The PCB has claimed throughout that the April Letter contains BCCI’s unequivocal contractual commitment with the PCB concerning future international cricket matches between India and Pakistan.

Alas, if only the PCB wished matters of contractual interpretation were that simple! Did the PCB fall victim to the DRC’s unorthodox interpretative approach of viewing the PCB’s claim through a “telescope” as opposed to a “microscope”? More on the DRC’s telescope versus microscope approach later, but first let’s have a look at the April Letter.

9th April 2014 Letter

The April Letter, the main contractual document relied upon by the PCB, was sent by the BCCI’s Hon. Secretary Sanjay Patel to Najam Sethi, the then Chairman of the PCB. The text of the April Letter is verbatim reproduced below (with its grammatical mistakes):

Re: Future Tour Program 2014-2023

Further to our meetings and discussions over the past few weeks regarding the Bi-lateral tours between India and Pakistan, the Board of Control for Cricket in India (BCCI) and Pakistan Cricket Board (PCB) hereby agree that the Senior men’s cricket teams of India and Pakistan will play each other as per the schedule in the formats set out below. Indian team’s tour of Pakistan will be at UAE or at the mutually agreed venue:

Dates                                                    Tour                                                  Format

Dec 2015                                              India tour to Pak                              2 Tests, 5 ODIs, 2T20

Nov-Dec2017                                     Pak tour to India                              3 Tests, 5 ODIS, 2 T20

Dec 2019                                              India tour to Pak                              2 tests, 5 ODIS, 2 T20

August 2020                                       India tour to Pak                              2 tests, 5 ODIs 3 T20

Nov-Dec 2021                                    Pak tour to India                              3 tests, 5 ODIs, 3 T20 5 ODIs

Nov-Dec 2022                                    India tour to Pak                              5 ODIs

BCCI will make all efforts to engage in a limited over format short tour to Pakistan in November of 2014 based on the availability of possible dates

(together “Future Tours”)

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BCCI and PCB agree that the rights for the tour will be assigned to a fit and proper person and will be detailed in the Master FTP agreement.

The BCCI and PCB will enter into a long-form FTP Agreement in respect of the above Future Tours.

The BCCI and PCB acknowledge that this letter has arisen in the context of the resolutions which have been tabled at the ICC Executive Board Meeting on 8 Feb 2014 relating to a new financial model and governance structure for the ICC, including the third in a series of six resolutions relating to all Full members entering into a series of agreements with one another providing for agreed FTP content between 2015-2023 and, as such, if those resolutions are not passed at the ICC Annual Conference in June 2014 by directors nominated by Full Members of the ICC at that meeting and the representatives of Associate Members and the 4 ICC Zonal representatives, then this letter shall be of no effect.

Please, counter-sign this letter where indicated below to confirm your agreement to, and acceptance of, the terms of this letter.

…..”

The April Letter was signed by both Mr. Patel and Mr. Sethi. However, the Future Tours Program (FTP) Agreement (FTP Agreement) referred in the April Letter was not agreed; hence none of the tours specified in the April Letter took place. Consequently, the PCB approached the DRC alleging breach of contract by the BCCI.

Big 3 Concerns

The Award provides background facts that explain how things came to a head between the two boards. It narrates both what transpired before the April Letter as well as the events that occurred thereafter. Let’s sift through the facts to get a further perspective on matters.

On 29 January 2014, seven of the Full Members of the ICC wrote a letter to the ICC in which they expressed support for the Big 3 Resolutions and requested for them to be tabled at the ICC Executive Board Meeting in February 2018.

During 2012-13, discussions were underway between Members of the ICC regarding the ICC’s commercial cycle scheduled for 2015-23 as well as the reorganization of the governance structure of the ICC to give the Big 3 namely BCCI, ECB and CA (Big 3) a greater share in the ICC revenue and say in decision making.

Historically, Big 3 earned substantial revenues from bilateral tours with one another. The consequence of agreeing to participate in ICC events for the Big 3 was to forego the greater revenue share generated from bilateral tours with one another. Mindful of this, ICC created a Working Group that was tasked with preparing a Position Paper to address, amongst other things, reforms of the ICC’s governance model and bilateral cricketing arrangements. The Working Group adopted a standard form letter “covering agreements between members to organize bilateral tours between them”. The April Letter from the BCCI to the PCB was the adoption of this standard form letter.

On 9 January 2014, the Position Paper was presented at an ICC Board Meeting in Dubai together with financial and governance proposals to “alter the balance of power within the ICC and address the financial concerns of the Big 3, a proposal that mutually agreed and binding bilateral agreements (i.e. FTP Agreements) would be executed between respective Member Boards in relation to bilateral tours.”

Simple Majority Adoption of Big 3 Resolutions

On 29 January 2014, seven of the Full Members of the ICC wrote a letter to the ICC in which they expressed support for the Big 3 Resolutions and requested for them to be tabled at the ICC Executive Board Meeting in February 2018. At that time, this letter was not signed by Cricket South Africa, Sri Lanka Cricket, and the PCB.

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In the ICC Board Meeting on 8 February 2014 held in Singapore, the Big 3 Resolutions (Big 3 Resolutions) were adopted by seven out of ten directors (i.e. by requisite majority) with three directors abstaining including the then Chairman of the PCB. The Big 3 Resolutions contained an Appendix C which provided as follows:

“FTP Arrangement Changes

  1. “That all Full Members will enter into a series of pro forma, contractually binding bi-lateral agreements with other Full Members they wish to play against (“the FTP Agreement”) that will aim to include previously agreed series”.
  1. “That…the BCCI, the ECB and CA committing to enter into FTP Agreements from 2015-2023”
  1. “That the FTP Agreement obligations are to be legally binding in an agreed jurisdiction between the Members, subject to:
  1. Force Majeure events to be defined in the FTP Agreements;
  1. No Material breach by the other party; and
  • The agreement being reached by the parties on any changes to the applicable ICC playing conditions made after the date of the FTP Agreement”.
19 February Email from ICC

The Award refers to an email dated 19 February 2014 sent by ICC to Member Boards requesting them to send through their respective schedules of agreed tours from 2014-23 which contemplated a “de facto” three-step process:

The PCB also argued that it’s voting in favor of the Big 3 Resolutions in June 2014 (further to the ICC’s desired or preferred unanimity amongst ICC Members) was in exchange for the BCCI agreeing to the April Letter.

  • Members proposing periods for proposed tour series against one another.
  • Multilateral discussions to arrive at an agreed FTP Schedule for all Members to arrive at an agreed FTP Schedule; and
  • Members entering into bilateral FTP Agreements.
ICC’s Desire for a United Front

Notably, Paragraph 3 of the Big 3 Resolutions reads:

“The Board agreed it would be preferable if there could be unanimity on the content of the Proposed Resolutions by the time of April Board meeting, at which point they could be reconfirmed and a unanimous front presented to the public. It was suggested that those directors that had abstained should work with their stakeholders to try to make good progress in that respect”.

Najam Sethi’s Support for Big 3 in Exchange for a Multilateral Agreement with the BCCI

Come to the ICC Board Meeting on 9 April 2014 in Dubai (April Meeting) by which time it became evident to the PCB that it did not have the clout to block the adoption of the Big 3 Resolutions. By this time, the other Boards who had not voted in favor of the Big 3 Resolutions had been offered bilateral tours by the Big 3 and hence been given an incentive to change their minds. The then Chairman of the PCB, Najam Sethi, struck a similar deal with the BCCI to support the Big 3 Resolutions in exchange for the BCCI and the PCB agreeing to an FTP.

On 26 and 27 June 2014, an ICC Board Meeting and Full Council meeting (June Meeting) were held whereby the Big 3 Resolutions were unanimously adopted after the PCB voted in their favor.

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The Award notes that on 26 June 2014, the PCB sent the BCCI a draft long-form FTP Agreement which referred to a 2015 but not a 2014 tour. Interestingly, this FTP Agreement contained a force majeure clause which provided that nongrant of governmental approval could justify a Member opting out of an agreed tour. The definition of the force majeure clause included the wording: “any written instruction by a government…not granting… an approval”.

Dialogues and discussions occurred afterward between the two boards, however, the 2014 or 2015 tours did not take place and the PCB filed its claim before the DRC.

The Crux of the Dispute

The PCB argued that the April Letter was a stand-alone contractually binding document independent of any future agreement, hence it obliged BCCI to undertake the tours stipulated therein. The PCB also argued that it’s voting in favor of the Big 3 Resolutions in June 2014 (further to the ICC’s desired or preferred unanimity amongst ICC Members) was in exchange for the BCCI agreeing to the April Letter. In contrast, the BCCI argued that the April Letter was the first in a series of three steps with the latter two steps being the parties agreeing to the FTP and entering into the FTP Agreement containing a force majeure clause. The BCCI also invoked that the force majeure clause under the long FTP Agreement was known to the PCB throughout i.e. the PCB knew the tours required the Indian Government’s consent.

Legal Issues Framed by DRC

The DRC framed the legal issues arising out of the PCB’s claims as follows:

  • Whether the April Letter signed by the BCCI and the PCB was a legally binding agreement?
  • The extent to which the April Letter is to be interpreted in the context of the Big 3 Resolutions?
  • If the April Letter was a legally binding Agreement, was the BCCI in breach by not touring Pakistan in November 2014 and/or December 2015?
  • If the April Letter was contractual, was it subject to a condition subsequent i.e. the parties entering into the FTP Agreement?

The DRC reasoned that the passing of the Big 3 Resolutions did not require unanimity and any desire of expression by the parties was for “presentational reasons” i.e. optics.

Although not specified in the April Letter, both the PCB and the BCCI agreed that the dispute would be governed by English Law.

Principles of Law Relied upon by DRC

Amongst others, the following English Law principles (crystallized in English Court judgments and juristic works) were relied upon by DRC:

  • “The meaning of a contract is not ascertained by the parties’ subjective intentions but by what a reasonable person with the background knowledge available to the parties would have understood it to mean.”
  • “The context (or factual matrix as it is often known) must also be viewed objectively as referring only to what a reasonable person in the position of both parties would have known”.
  • “The primary focus of the objective inquiry is upon the language used by the partiesthe so-called golden rule”, is that “the words of a contract should be interpreted in their grammatical and ordinary sense in context, except to the extent that some modification is necessary in order to avoid absurdity, inconsistency or repugnancy”.
  • “Where a document, said to be contractual, contemplates the execution of a further contract between the parties, it is a question of construction as to whether the execution of the further contract is a term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will, in fact, proceed. In the former case, there is no enforceable contract, in the latter case there is…”

(vii)  “Where, in a commercial setting, parties enter into an agreement which in other respects conforms to the rules of law as to the formation of contracts, the Courts will ordinarily infer that the parties intended to enter into legal obligations. It is therefore not normally necessary to prove that the parties to such an agreement in fact intended to create legal relations…”.

The DRC determined that the threshold question before it was: “…not what the April Letter meant but whether it amounted to a binding contract at all”.

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It is starting from this point onwards that the Award undertook a rather unorthodox interpretative trajectory.

DRC’s Analysis

Rejection of the PCB’s quid pro quo argument

The DRC rejected the PCB’s argument that the April Letter was a stand-alone binding agreement and that the FTP was a mere “routine matter”.

DRC termed as “wishful thinking the ”PCB’s contention that “the April Letter was quid pro quo for its agreement to make unanimous in April” the Big 3 Resolutions. The DRC reasoned that the passing of the Big 3 Resolutions did not require unanimity and any desire of expression by the parties was for “presentational reasons” i.e. optics. The DRC referred to the PCB’s need as “suppliant” to reach out to the BCCI by seeking to convince it to agree on future matches with the PCB.

Acknowledging April Letter as a Contract

 Interesting, the Award accepts that the April Letter “on its face bore all emblems of a contract” for the following reasons: (a) the identified tours had been “agreed”, (b) the word “will’  recurring throughout in the April Letter suggests an agreement), (c) it contains “best efforts” obligation of the BCCI in respect of the 2014 tour and an “unqualified obligation in respect of the later tours”, (d) it contains a provision in the form of a condition subsequent i.e. if the Full Council accepted the February / April Resolutions, then the April Letter would take effect, (e) there was no “express provision negating contractual intention”, (e) the “consideration was supplied by the mutual obligation of the host (the PCB) and the guest (the BCCI) in respect of the scheduled tours” and (f): “The letter was said to be the product of ‘previous meetings and discussions’ which is more consistent with it being a final as opposed to a merely provisional arrangement”. In concluding remarks, the DRC noted:

“There is, in the Panel’s view, considerable force in the PCB’s concluding submission that ‘presented with a copy of the PCB/BCCI letter on 9 April 2014, the reasonable person would quickly have discerned that this was a binding and enforceable agreement.’ (Though it rejects the ancillary PCB submission that the April Letter was itself any form of FTP Agreement as being wholly inconsistent with its language, which itself unambiguously differentiates between the two).”

The Award’s mention of the fact that the adoption of Big 3 Resolutions did not require unanimity amongst Member Boards is therefore irrelevant in the face of the clear contractual bargain arrived at by the Parties.

The BCCI’s final position in the closing submissions before the DRC was that if the April Letter is deemed to be binding, a term should be implied into the April Letter that: “The BCCI would not be in breach for failing to participate in an agreed tour, if, Indian Government consent for such a tour being required, it was sought by the BCCI and not obtained”.

Telescopic v Microscopic View

Here onwards, by adopting a rather unorthodox approach of interpretation, the DRC took the proverbial telescopic view of the dispute to conclude:

“…looking at the April Letter, in isolation, as it were through a microscope, the PCB’s argument that it was a contractually binding document burns bright. If, however, a telescope is deployed, which brings into perspective the circumstances out of which that letter arose, the argument is extinguished. In the Panel’s view, the reasonable observer apprised of all the facts would conclude that the April Letter was no more than a declaration of intent, albeit an intent sincerely held by the BCCI (and of course by the PCB) at most, as Mr. Manohar (President of the BCCI from October 2015 to May 2016) put it, creating a “moral obligation” but not a legal one. Context trumps text. It follows inexorably that the PCB’s claim must fail. If there was no obligation on the BCCI to engage in the tours in either 2014 or 2015, its omission to do so was no breach and gave rise to no damages claim.”

The Award gives the following reasons for reaching the above conclusion:

  • The February Resolutions imposed no legal obligation on the BCCI to tour Pakistan and the same could only result from the parties agreeing to an FTP
  • The April Letter was not in itself binding. It was the first in a series of the three-step process (the last being the FTP Agreement) and the April Letter was a “precursor” to the second and third steps i.e. the ICC Members agreeing on the FTP Schedule and entering into binding FTP Agreements, respectively.
  • The three-step process was “inherent” in the Big 3 Resolutions which bound both the PCB and the BCCI and “unambiguously envisaged that it was only a signed FTP Agreement… which could be legally binding upon the signatories”.
  • The reference in the April Letter to the FTP Agreement was a reference to that expression as used in the Big 3 Resolutions.
  • The FTP Agreement is not a “mere formalization of an agreement already reached”.
  • In a parting shot, the DRC noted: “…the notion of an arrangement, susceptible to continuous amendment, and whose destiny depends upon the attitude of persons not parties to it cannot sit with the concept of a binding contract”.
Analysis: Post Mortem of the Award
Interpretative Approach

If the DRC had opted for a microscopic view, one would assume DRC would have more closely examined the specimen to find out the real ingredients. The DRC instead chose to view, and interpret, the April Letter from the proverbial telescope (a term of art employed by the DRC). This is commonly referred in law as contextual interpretation i.e. an interpretative approach that takes into account the overall context of a dispute as opposed to a textual approach that is confined to interpreting the plain text of a contract. All is well and good with contextual interpretation – a canon of interpretation followed in judicial systems around the world. However, even there DRC employed flawed reasoning in examining the dispute.  

Widen the Telescopic Lens, Sire!

First, the material facts preceding the April Letter i.e. circumstances that led the two boards to agree to the April Letter in the first place were overlooked. Essentially, the DRC failed to accomplish what it set out to achieve: appreciate the nuances of the parties’ bargain or the entire contextual matrix preceding the April Letter.

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The context relating to the Big 3 Resolutions stands out in the following statement in the April Letter: “further to our meetings and discussions over the past few weeks”. Whilst the DRC acknowledges that from 9 January 2014 onwards, the PCB made efforts to agree future matches with the BCCI, DRC’s usage of the adage “Bankrupts cannot be choosers” to describe the PCB’s reaching out to the BCCI in desperation, as if the PCB had no option but to convince the BCCI to agree to tours, misses the point. It was the PCB’s then Chairman Najam Sethi’s decision calculus: he had to balance the benefit of getting India to agree to the tours through the April Letter against the disadvantage of voting in favor of the Big 3 Resolutions. He had known throughout that the Big 3 Resolutions would pass regardless of the PCB’s position in the matter. The only leverage left for him was to make the BCCI agree to the April Letter and thus extract some commercial benefit for the PCB. A binding legal contract came into being there and then.

Ironically, the DRC instead concluded that the exchange of consideration – or quid pro quo – forming part of the parties’ commercial bargain was missing. The quid pro quo is spelled out loud and clear in the condition subsequent stated in the April Letter: if the Big 3 Resolutions are not passed, the April Letter would be of no effect. The flip side of this is: if the Big 3 Resolutions are passed (as they were in June 2014), the April Letter would constitute a binding contract. This condition was fulfilled when the Big 3 Resolutions were unanimously adopted in June 2014.

The Award’s mention of the fact that the adoption of Big 3 Resolutions did not require unanimity amongst Member Boards is therefore irrelevant in the face of the clear contractual bargain arrived at by the Parties.

Misapplication or Selective Application of English Law

Although cited in the Award, English Law was misapplied or selectively invoked by the DRC.

English Law recognizes that an agreement can be complete even though the details have not been determined and even where it calls for some further agreement between the parties.

This has left the PCB suffering a double whammy: losing a legal battle despite having the better of the argument and being left with no further recourse at a higher forum to challenge the Award.

Notably, under English Law, it is possible for parties to reach an immediately binding agreement even though it is later to be superseded by a formal contract. Moreover, English courts give effect to those terms of a contract that are complete, even where the agreement provides for further terms to be agreed. In RTS Flexible Systems Ltd. v Molkerei Alois Muller GmbH & Co KG (2010), the U.K. Supreme Court held that the question to be assessed under English Law is whether the parties “intended to create legal relations and had agreed upon all terms which they regard or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement”.

In view of the DRC’s determination that the April Letter was non-legally binding, the Indian governmental approval issue was declared as moot and the debate surrounding it termed as having an “aroma of artificiality”. Notably, during hearings, BCCI submitted that the tours could be organized only after clearance from the Indian Government, although notably there is no express reference in the April Letter to any Indian governmental clearance. At one stage, when the counsel representing BCCI was asked to explain what the BCCI’s request to the DRC to “imply” Indian governmental consent meant, his reply was: “I don’t need to go out and say what else it [the implied term] is going to include, it just needs to cover this situation [Governmental approval]”. This statement is suggestive of the BCCI’s intentions.

Though it was a battle off the field, the PCB’s legal encounter was aimed at ensuring that cricket was the victor. Simply put, the PCB’s war cry was “pay or play”. If the PCB won, the world would either witness Pakistan playing India in bilateral tours after a hiatus of more than a decade or the PCB would be entitled to compensation which it would (true to its aims and objectives) plough back into the development of Pakistan cricket.

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Some other oddities of notable concern in the Award were, inter alia, the stark contrasts between the DRC’s understanding of the facts leading up to the contentious situation and its conclusion in trying to justify such anomalies. For instance, when attempting to dissect the matter pertaining to government approvals purportedly “required” by the BCCI even after declaring them ‘moot’, the DRC accepts that there was no prevalent law or explicit government directive imposing a mandatory requirement on the BCCI to seek government approval, let alone a sanction/punishment that they would have been subjected to for non-compliance with such a requirement. In fact, the DRC acknowledges that there was no uniformity in the record in terms of seeking and procuring the said government approvals and classified it a “more a patchwork quilt than a seamless robe”. In spite of this observation, the DRC then proceeded to establish the requirement for the Indian Government’s approval through an unorthodox source of law i.e. ‘oral tradition’.

Perhaps another article should be forthcoming on the merits of whether a law can be introduced and forced upon a private entity through ‘oral tradition’, especially when such oral tradition is being claimed by the private entity itself to escape contractual liability and the government has nothing to say about it. The cherry on top, however, was how the DRC extended its reach and chose to put itself in the shoes of the Indian Government and predict that even if the BCCI had sought government approval (which it had not) such approval would not have been granted due to the prevailing political climate. This prediction was made by the DRC despite being presented with evidence that Pakistan vs India matches have taken place in one format or another every year for the past 15 years no matter what the political temperature at the relevant time was.

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At the end of the day, this much is clear, that the BCCI engaged in evasive conduct and reneged on its contractual commitment contrary to the April Letter and these facts were not captured by the DRC’s telescopic lens. This has left the PCB suffering a double whammy: losing a legal battle despite having the better of the argument and being left with no further recourse at a higher forum to challenge the Award.

Hassan Aslam Shad is a practicing international lawyer and LL.M. Harvard Law School, U.S.A. He can be reached at veritas@post.harvard.edu. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space

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