Persepolis Athletic and Cultural Company v Konfederasi Bola Sepak Asia (Asian Football Confederation) (WA-22NCC-20-01/2024)

The Defendant moves this Court, by way of a Notice of Application, for the following reliefs, pursuant to Section 10 of the Arbitration Act 2005 (“the Act”), Order 69 Rule 10 of the Rules of Court 2012 and/or the inherent jurisdiction of the Court: i. that all further proceedings in this action be stayed and be referred to arbitration pursuant to Section 10 of the Act; and S/N 4Cduufj0eUiSoHR8/iVvaw ii. that all actions required to be taken by the Defendant, including the filing of the Defence, shall be stayed pending final disposal of the application herein.

Football is loved across nations. It draws crowds, loyalty, and no small measure of passion. It is also a sport where success on the field carries real financial consequence. It is a very lucrative sport, both for the players and the clubs. The prize money involved can be astronomical. One such prize money is the source of the dispute between the Plaintiff and the Defendant, with the former being a notable governing body of this well-loved sport. The parties have kicked the proverbial ball into this Court for a resolution of the dispute. This is how the dispute came about.

The Plaintiff, Persepolis Athletic and Cultural Company, is an Iranian professional football club. It is affiliated with the Football Federation of the Islamic Republic of Iran. The Plaintiff participated in the 2020 and 2021 AFC Champions League. The Defendant, as the governing body of football in Asia, organised the tournament.

The Plaintiff qualified for the finals of the tournament. It finished as runner-up. It was entitled to prize money payable by the Defendant. The amount payable as prize money to the Plaintiff was USD 2,000,000.00. There were also other payments due in the form of subsidies and expenses payable. The total came to USD 3,443,462.26 (“the Outstanding Sum”). It was, without doubt, a most attractive amount of money for a runner-up.

The Plaintiff sought payment of the Outstanding Sum from the Defendant.

The Defendant, through its General Secretary, issued a letter dated 12 November 2021. A Statement of Account of even date was attached to this letter. The Outstanding Sum was accurately reflected on the Statement of Account. It can safely be said that this letter issued on the Defendant’s letterhead by no less than the General Secretary will amount to an admission of the Outstanding Sum due and payable to the Plaintiff.

The Outstanding Sum remained unpaid for a prolonged period of approximately three years following the issuance of the Statement of Account.

The Plaintiff, through its solicitors, then issued a letter of demand to the Defendant on 29 November 2023. Payment of the Outstanding Sum was sought from the Defendant. The Plaintiff asserted that the prolonged non-payment had caused adverse consequences to the Plaintiff, including regulatory and competition-related difficulties.

The Defendant replied on 11 December 2023. The Defendant did not dispute that the Outstanding Sum was owed to the Plaintiff. The Defendant stated that it had been unable to remit payment due to alleged difficulties arising from banking compliance requirements and concerns relating to unilateral extraterritorial United States sanctions, rather than any dispute as to liability or quantum.

As such, the position is that the money is due, the amount is crystallised, but the Plaintiff cannot have the money because of third-party sanctions. So while the Plaintiff has scored as runner-up, it is not entitled to the prize money. In football terms, the Plaintiff scored. The goal was allowed. Yet the prize money never followed.

Given the stand taken by the Defendant, the Plaintiff commenced the present proceedings seeking recovery of the Outstanding Sum.

The Defendant then filed a notice of application seeking a stay of the proceedings and to refer the dispute to arbitration.

The Defendant submits that the Plaintiff’s participation in the AFC Champions League 2020 and 2021 is governed by the Participating Team Agreements dated 12 November 2019 and 1 November 2020 (“PTAs”). The Plaintiff is a party to these agreements. By executing the PTAs and participating in the competitions, the Plaintiff expressly agreed to be bound not only by the PTAs but also by the applicable AFC Champions League Competition Regulations and the AFC Statutes, together with all directives, circulars and decisions issued by the AFC.

The PTAs, Competition Regulations and AFC Statutes each contain provisions requiring that any dispute arising from or in connection with the Competitions or the PTAs be resolved through arbitration, culminating in referral to the Court of Arbitration for Sport (“CAS”), to the exclusion of ordinary courts.

The Defendant asserts that the Plaintiff itself pleads breaches of specific provisions of the AFC Champions League Competition Regulations as the foundation of its claim, thereby anchoring the dispute squarely within the contractual and regulatory framework that mandates arbitration. Hence, the present dispute is one that must be referred to the CAS.

The Defendant further relies on factual correspondence exchanged between the parties over several years in which the Plaintiff allegedly acknowledged the existence of international sanctions and banking restrictions affecting international remittances involving Iranian entities. The Defendant says that this demonstrates an ongoing disagreement between the parties concerning payment.

The Plaintiff disagrees.

The Plaintiff contends that the stay ought not to be granted because, on the undisputed facts, there was no genuine dispute capable of being referred to arbitration at the time these proceedings were commenced.

The Defendant had since acknowledged owing the sum due to the Plaintiff. Neither the liability nor the quantum is in dispute. The Defendant too never once raised nor relied on the PTAs or Competition Regulations to resist payment. The difficulty in remitting payment, if any, was premised on alleged banking and compliance difficulties linked to unilateral extraterritorial sanctions. Hence, there was no bona fide dispute falling within the arbitration clauses and therefore nothing warranting a stay of the proceedings.

In brief, the Plaintiff contends that there is no “dispute” between the Plaintiff and Defendant regarding the Plaintiff’s claims in the present action. Hence, the Defendant is precluded from referring the Plaintiff’s claim to arbitration.

Section 10 of the Act provides as follows:

A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

The court, in granting a stay of proceedings pursuant to subsection (1), may impose any conditions as it deems fit.

It is settled that the court hearing a stay application must not delve into or investigate whether there exists a dispute warranting referral to arbitration (see: Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd & Another Appeal [2020] 3 MLJ 545).

In the present case, there is a valid arbitration agreement, and the Defendant has not taken any steps in the proceedings.

It used to be the case under Section 10(1)(b) of the old Arbitration Act 2005 that the Court had a discretion to not refer the proceedings to arbitration in the event the Court finds that there is in fact no dispute between the parties. This provision has since been repealed after the 2011 amendments to the Act (see: Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417).

Given the factual matrix of the matter before me, the only issue for determination is whether the dispute between the parties is one that is subject to the arbitration clause in question.

In Lysaght Corrugated Pipe Sdn Bhd & Anor v Popeye Resources Sdn Bhd & Anor [2022] 1 LNS 191, which has been affirmed on appeal in Macsteel International Far East Ltd v Lysaght Corrugated Pipe Sdn Bhd and other appeals [2023] 4 MLJ 551, it was observed that the test to determine the scope of an arbitration agreement is the “Full Merits Test”. What this means is that Courts take a more thorough approach in assessing the evidence to determine if the dispute in question is one that falls within the ambit of the arbitration clause.

The Court in Lysaght Corrugated Pipe Sdn Bhd further observed that Section 10 and 18 of the Act must be given a harmonious interpretation and held that the Court has jurisdiction to determine the scope of an arbitration agreement and whether it can be invoked: S/N 4Cduufj0eUiSoHR8/iVvaw “On the earlier issue of reconciling the jurisdictional issue of an arbitral tribunal and the Court and the doctrine of kompetenz-konpetenz, Justice Lightman in Albon (supra) had this to say: I would answer the first and second submissions as follows. Whilst the doctrine of 'Kompetenz-Kompetenz' (which is given effect in a domestic d arbitration by s. 30 of the 1996 Act) provides that the arbitral tribunal shall have jurisdiction to determine whether the arbitration agreement was ever concluded, it does not preclude the court itself from determining that question. There are two reasons why the court must have jurisdiction to rule on whether the arbitration agreement was concluded. The first is that the rule of law in general and subject only to limited exceptions requires that a party should not be barred from access to the court for the resolution of disputes unless the grounds for such bar are established. A bar on the ground of the alleged conclusion of an arbitration agreement (in general and subject only to limited exceptions) is not established unless and until the court has ruled on the issue whether it has been concluded. The second is that, unless and until it is held that the arbitration agreement has been concluded, the compelling factors requiring respect for the terms agreed regarding arbitration do not come into play or at any rate do not come into play with their full force and effect."

It is clear then that whilst it is trite that the Court should be slow to interfere with the jurisdiction of an arbitral tribunal, this does not mean that the Court should readily grant a stay application without evaluating the facts and evidence for itself based on the Full Merits S/N 4Cduufj0eUiSoHR8/iVvaw Test. By doing so it would be tantamount to removing the Court's own jurisdiction to determine this issue.

In the case before me, while the Court does not need to delve into whether there is a dispute, as with any other agreements governing the relationship between the parties, the Court must ask what the clauses mean when it comes to the reference of disputes in connection with the AFC Champions League Competition. One must not lose sight of the opening words of Section 10 of the Act which states that; “A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement…”.

It follows that what is to be arbitrated are disputes relating to the AFC Champions League Competition. The interpretative task is that of the Court. The question to ask is this: is there a dispute here in connection with the AFC Champions League Competition that must be referred to arbitration?

The starting point is to look at the relevant regulation, namely the AFC Champions League 2021 Competition Regulations (“the Regulations”). The arbitration clause is in Regulation 64, which reads:

Arbitration

64.1. Any dispute in connection with the Competition shall be promptly settled by negotiation.

64.2. In compliance with the AFC Statutes, Participating Clubs, Member Associations, Participating Players and Participating Officials are prohibited from initiating disputes in an ordinary court of law and must submit to the exclusive jurisdiction of the AFC.

64.3. Participating Clubs, Member Associations, Participating layers and Participating Officials acknowledge and accept that once all internal channels have been exhausted at the AFC, their sole recourse shall be to the Court of Arbitration for Sport (CAS). The Code of Sports-related Arbitration shall be applicable. The language of arbitration shall be English. Any hearing, if required, shall take place at the CAS Alternate Hearing Centre in Kuala Lumpur, Malaysia.

Competition is defined in the Regulations as; “The AFC Champions League 2021™. This includes, without limitation, all Matches as set out in the Match Schedule, including all Preliminary Stage and Playoff Stage Matches, all activities on the Field of Play (other than Matches), opening ceremonies, presentation or closing ceremonies, press conferences or Official Functions connected therewith.”

I take note that the word dispute was carefully phrased in open and close quotes by the Defendant in the Defendant’s affidavit. I do not find anywhere in the affidavits by the Defendant an outright denial of the sums owing which may give a semblance of credibility that there is in fact a dispute; much less a dispute in relation to the Competition as defined in the Regulation. As I mentioned earlier, I note that the regulation in question does not say “any dispute in S/N 4Cduufj0eUiSoHR8/iVvaw relation to this regulation”; rather, it says any dispute in relation to the Competition.

The term “Competition” has been clearly defined, and I have set it out in full. At the risk of repetition, “Competition” is all “Matches as set out in the Match Schedule, including all Preliminary Stage and Playoff Stage Matches, all activities on the Field of play (other than Matches), opening ceremonies, presentation or closing ceremonies, press conferences or Official Functions connected therewith”.

The Plaintiff here is seeking redress for a matter concerning payments due to the Plaintiff. The Plaintiff is NOT seeking redress on a matter concerning or related to, “Matches as set out in the Match Schedule, including all Preliminary Stage and Playoff Stage Matches, all activities on the Field of Play (other than Matches), opening ceremonies, presentation or closing ceremonies, press conferences or Official Functions connected therewith”.

The computation of the amount sought in the dispute before me is clearly provided for in the Regulations. The computation, as it presently stands, is not in dispute. Hence, the “dispute” as contended by the Defendant cannot, by any stretch of the language, come within the meaning of the word Competition as defined in the Regulations concerned.

In this regard, I find that given the clear terms of the Regulations, the matter before me is not “a matter which is the subject of an arbitration agreement.”

I find that my findings here are consistent with what the Federal Court held in the case of Press Metal: “An arbitration agreement or clause is a written submission, agreed to by the parties, and like other written submissions, must be construed according to its language and in the light of the circumstances in which it is made (see Heyman & Anor v Darwins Ltd [1942] AC 356, per Viscount Simon LC at p 366).The question whether a given dispute comes within the provisions of an arbitration clause or not, primarily depends on the wording of the clause itself (see Heyman & Anor v Darwins Ltd per Lord Porter at p 392). The parties must be held to what they have agreed to in an agreement. Therefore, it is essential to consider the wordings of the clause specifically and determine what they have agreed to. Whether a dispute falls within an arbitration clause must depend on (a) what is the dispute or difference between the parties and (b) what disputes the arbitration clause covers (see Heyman & Anor v Darwins Ltd per Viscount Simon LC at p 360). The court must see what the matters as found in the proceedings before the court are, and then consider whether they are within the scope of the submissions in the arbitration clause (see Monro v Bognor Urban DistrictCouncil [1915] 3 KB 167 per Bankes LJ at p 172). An applicant for a stay under s 10(1) of the 2005 Act must therefore establish that the matters in question are within the scope of the arbitration submission. S/N 4Cduufj0eUiSoHR8/iVvaw The law on the issue of whether a dispute or difference comes within the scope or ambit of an arbitration clause is clear and well-settled. The existence of a valid arbitration clause in an agreement between the parties does not automatically make it operative; the arbitration clause will only be operative when the given dispute or difference falls within the ambit of the arbitration clause.

That is exactly what I have attempted to do in the present case before me. I make no determination on the merits of any potential defence that the Defendant may plead in due course. My decision is based on a plain reading of Section 10 of the Act and the Regulations which are the subject matter of the claim before me, the failure of the Defendant presently to deny the obligation attributed to it in the affidavits as well as the fact that there is no link between the payment sought and the meaning of the term Competition in the arbitration clause.

In fact, even in Tindak Murni, the Federal Court held that the Court before which a stay is sought must ascertain whether there is an agreement to arbitrate the dispute. Read with the opening paragraphs of Regulation 64.1, which is the prelude to the reference to arbitration, where is the dispute in connection with the Competition as defined in the Regulations? Surely the mere utterance of the word “dispute” and “arbitration clause” by itself cannot be sufficient for the Court to refuse to give effect to the overall clear words of Section 10, which is this: that “proceedings are brought in respect of a matter which is the subject of an arbitration agreement”. The issue in the present proceedings is not in relation to the Competition as defined in the Regulations and the S/N 4Cduufj0eUiSoHR8/iVvaw arbitration clause, and it follows that they are not a matter which is the subject of the arbitration agreement in question.

The Defendant asked this Court to wave the red card and halt the match by staying the proceedings in favour of arbitration. But this Court is the referee. No foul was committed by the Plaintiff. The game remains properly before this Court for adjudication.

For the reasons given, the stay application fails. It must be refused. I dismissed the application with costs to the Plaintiff. Dated the 2nd day of January 2026 -sgd- ……………………………………………………………………… MUHAMMAD ADAM @ EDWARD BIN ABDULLAH Judicial Commissioner High Court (Commercial Division NCC 4) High Court of Kuala Lumpur In the Federal Territory, Malaysia S/N 4Cduufj0eUiSoHR8/iVvaw Counsel for the Plaintiff : Oon Thian Seng together with Rahul Farhan Menon Messrs. TS Oon & Partners Counsel for the Defendant : Lai Wai Fong together with Haseena Kaur Messrs. Shearn Delamore & Co.

Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd & Another Appeal [2020] 3 MLJ 545 2. Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417 3. Lysaght Corrugated Pipe Sdn Bhd & Anor v Popeye Resources Sdn Bhd & Anor [2022] 1 LNS 191 4. Macsteel International Far East Ltd v Lysaght Corrugated Pipe Sdn Bhd and other appeals [2023] 4 MLJ 551

Section 10 and 18 of the Arbitration Act 2005 2. Section 10(1)(b) of the old Arbitration Act 2005 3.