Editor's note: Björn Hessert is a research assistant at the
University of Zurich and a lawyer admitted to the German bar.
The discussion revolving around the invalidity of
arbitration clauses in organised sport in favour of national and international
sports arbitral tribunals has been at the centre of the discussion in German courtrooms.[1] After the decisions of the
German Federal Tribunal[2] (“BGH”) and the European
Court of Human Rights[3] (“ECtHR”) in the infamous
Pechstein case, this discussion seemed to have finally come to an end. Well…not
according to the District Court (LG) of Frankfurt.[4] On 7 October 2020, the District
Court rendered a press release in which the court confirmed its jurisdiction
due to the invalidity of the arbitration clause contained in the contracts
between two beach volleyball players and the German Volleyball Federation[5] (“DVV”) – but one step at
a time.
1. Arbitration
clauses in organised sport
Over the past few decades, the Olympic movement has
created its own judicial system in its endeavour to create and maintain a
uniform judicial level playing field outside national courts. This is
important, because athletes participating in international sports competitions
need to be subject to the same sanctioning regime in the light of fairness and
equality in sport.[6]
In this regard, the jurisdiction of national courts threatens the uniform
application of rules and regulations of international sports federations
insofar as they could apply them differently. This could lead to the
unsatisfying result that, for example, an athlete from Germany is punished for
an anti-doping rule violation with a 2-year ineligibility sanction while a
Swedish athlete is subject to a lifetime ban for the same misconduct.
In order to preserve the uniform application of
sporting rules and – ultimately – a legal level playing field, the rules and
regulations of the respective sports federation or individual contracts,
including employment contracts or athlete agreements and licence agreements
(“entry forms”), generally contain arbitration clauses in favour of private
sports arbitral tribunals, e.g. the Court of Arbitration for Sport (“CAS”). As
a result, the arbitration agreement between the parties to membership contracts
or entry forms ousts the jurisdiction of national courts.[7] Due to the fact that
athletes are not generally direct members of national and international sports
federations, contractual clauses in their employment contracts or entry forms
make reference to arbitration clauses set out in the rules and regulations of
said sports federations. For example, international football players are
generally bound by the regulations of the Fédération
Internationale the Football Association (“FIFA”), including its statutes.
Article 58(1) of the FIFA Statutes (2020 edition) provides that “[a]ppeals against final decisions passed by
FIFA’s legal bodies against decisions passed by confederations, member
associations or leagues shall be lodged with CAS […]”. References in
individual contracts of sportspersons contained in the rules and regulations of
sports federations, so-called “arbitration agreements by reference”, have been
considered to be valid. In this respect, the Swiss Federal Tribunal (“SFT”)
held that
“in sporting matters the Swiss Federal Tribunal examines arbitration
agreements between parties with a certain goodwill in order to promote the fast
resolution of disputes by specialised courts, which as the CAS, offer
comprehensive guarantees of independence and neutrality.”[8]
Athletes are generally forced to accept such arbitration
agreements in favour of sports arbitral tribunals due to the monopolistic
structure in organised sport, meaning that only one national and international
sports federation governs each sport on the basis of the pyramidal European
Model of Sport (so-called Ein-Platz-Prinzip).[9] In other words, athletes can
only choose between accepting such arbitration agreements (by reference) or renouncing
their calling as professional athletes.[10] Against this background,
it appears to be questionable whether mandatory arbitration agreements in
organised sport concluded between monopolistic sports federations and athletes
are valid, taking into account that arbitration as a mechanism of alternative
dispute resolution generally finds its basis in the free and voluntary will of
the parties to the dispute concerned. The validity of mandatory arbitration
agreements was at the heart of the Pechstein[11]
case and has now been addressed in the recent decision rendered by the District
Court of Frankfurt[12].
2. The
decisions of the BGH and the ECtHR in the Pechstein case
Claudia Pechstein is a professional speed-skater.
Prior to the speed-skating world championships, organised by the International
Skating Union (“ISU”), she signed an entry form, including an arbitration
agreement in favour of the CAS.[13] During her proceedings
before German courts and the ECtHR, Pechstein argued that the arbitration
agreement concluded between her and the ISU had not been accepted freely and
voluntarily, because otherwise she would not have been eligible to participate
in professional speed-skating competitions.
After the Higher Regional Court (OLG) of Munich had
decided that the arbitration agreement signed by Ms Pechstein was invalid under
German competition law as a result of ISU’s abuse of a dominant position[14], the BGH overruled this
decision.[15]
In the view of the BGH, the ISU is a monopoly within the meaning of sec. 19(1)
of the German Competition Act (“GWB”).[16] However, the BGH took the
view that the dominant position of a party to the arbitration agreement does
not automatically revoke the voluntary nature of the consent to an arbitration
agreement in favour of private sports arbitral tribunals.[17] Instead, the examination
of the validity of the arbitration agreement is subject to a balancing process
in consideration of the interests of both parties, i.e. sports federations and
individual athletes.[18] In consideration of the
legal protection of athletes and the specificity of sport, particularly in
ensuring fair competitions and uniform case law in organised sport, which
“would be seriously jeopardised”[19] by the invalidity of the
arbitration agreement, the court came to the conclusion that the interests of
the ISU prevail in this regard.[20] The CAS is a genuine
arbitration court and guarantees legal protections for athletes equivalent to
national courts.[21]
Furthermore, the consistent application of the rules and regulations of sports
federations by a specialised arbitration institution is not only in the
interest of sports federations, but also in the interest of athletes.[22]
The ECtHR indirectly confirmed the validity of the
arbitration agreement concluded between Ms Pechstein and the ISU. However, in
determining the free will of athletes when entering into an arbitration
agreement with a monopolistic sports federation, the court held that the
arbitration clause is generally not based on the free consent of the athlete
and thus has a forced nature.[23] In case the athlete is
compelled to accept an arbitration agreement, Article 6(1) of the ECHR is
applicable to the sports arbitration proceedings in protection of the
procedural rights of the athlete.[24]
However, arbitration agreements in organised sport are
not compulsory per se if the
applicable sports rules and regulations leave it to the sports federation and
the athlete to freely and voluntarily agree on an arbitration agreement. In
this case, athletes are not in the same predicament and may therefore choose
between different clubs before signing an arbitration agreement.[25]Furthermore, the complaining
athlete must provide evidence that “other
professional football clubs, which perhaps have more modest financial means,
would have refused to hire him on the basis of a contract providing for dispute
settlement in ordinary courts.”[26]
According to the BGH, the validity of arbitration
agreements in organised sport is subject to a balancing process between the
competing interests of the parties to it. However, if an athlete was compelled
to accept arbitration clauses of monopolistic sports federations, the ECtHR
concluded that Article 6(1) of the ECHR is applicable to the arbitration
proceedings concerned. Both courts therefore set the benchmark against which
the validity of arbitration agreements and proceedings in organised sport is
measured.
3. Decision
of the District Court of Frankfurt (based on the press release)
The decision of the District Court of Frankfurt is
insofar remarkable as the court was in the position to consider both the
decision of the BGH and the ECtHR in its decision-making process. With regard
to the validity of the arbitration agreement concluded between two volleyball
players and the DVV, the court stated in its press release of 7 October 2020[27] as follows:
“Die
Streitigkeit habe nicht vorrangig vor einem Schiedsgericht ausgetragen werden
müssen. Zwar enthielten die Verträge der Klägerinnen mit dem Beklagten jeweils
eine Schiedsvereinbarung. Dieser sei aber unwirksam, «weil die Klägerin sich
ihr nicht freiwillig unterworfen habe», so die Richter. Seit der Entscheidung
des Europäischen Gerichtshofs für Menschenrechte (EGMR) im Fall Pechstein sei
bei professionellen Leistungssportlern von einer unfreiwilligen Unterwerfung
unter einer Schiedsgerichtsbarkeit auszugehen, wenn die Profisportler «vor der
Wahl stehen, eine Schiedsklausel anzunehmen, um durch die Ausübung ihres Sports
ihren Lebensunterhalt bestreiten zu können, oder sie nicht zu akzeptieren und
damit vollständig auf ihren Lebensunterhalt durch Ausübung des Sports zu
verzichten.» Es sei nicht belegt, dass die Klägerinnen seinerzeit tatsächlich
die Wahl hatten, die Schiedsklauseln abzuschliessen oder nicht. Deswegen sei
von einer Unfreiwilligkeit auch dann auszugehen, wenn die Volleyballerinnen die
Klauseln kritiklos unterzeichnet hätten.”
[free translation: The
dispute did not have to be settled primarily before an arbitration tribunal. It
is true that the plaintiffs' contracts with the defendant each contained an
arbitration agreement. However, this was invalid ‘because the plaintiff did not
voluntarily submit to it’, the judges said. Since the decision of the European
Court of Human Rights (ECtHR) in the Pechstein case, professional athletes must
be presumed to have involuntarily submitted to arbitration if the professional
athletes ‘are faced with the choice of accepting an arbitration clause in order
to be able to earn their living by practising their sport or not accepting it
and thus refrain completely from earning a living from their sport’. There is
no evidence that the plaintiffs at the material time actually had the choice of
whether or not to accept the arbitration clauses. Therefore, it can be assumed
that the arbitration was involuntary even if the volleyball players had signed
the clauses without criticism/objection.]
Based on the wording of the press release – and in
absence of the full judgement – it appears that the court sided with the
findings of the ECtHR insofar as it qualified the arbitration agreement
contained in entry forms of athletes as mandatory in nature.
Furthermore, it can only be speculated why the court
stated in its press release that the athletes had not objected to the signing
of an arbitration clause. The court may have considered that the volleyball
players were in a similar position than Ms Pechstein. This approach would be
consequent, because beach volleyball players, like the plaintiffs in the
proceedings before the District Court Frankfurt, are generally faced with the
same dilemma as Ms Pechstein was. They cannot choose between different national
federations for the sport of volleyball. In this case, it is not necessary for
the athletes to show that they could not conclude a contract with the DVV
without an arbitration agreement in favour of a sports arbitral tribunal.
Be it as it may, it is – with the BGH decision in the Pechstein
case in mind – difficult to
understand how the District Court of Frankfurt came to the conclusion that the
arbitration agreement between the beach volleyball players and the DVV is
invalid. It appears that the court deduces this invalidity from the compulsory
nature of arbitration clauses in organised sport, as highlighted by the ECtHR. This
would contradict the BGH’s view that forced arbitration can be justified in the
sporting context and that the validity of particular clause must be determined
on the basis of a balancing process.[28] If the District Court of Frankfurt
applied such a balancing process between the competing interests of the parties
to the dispute, it will be interesting to see why the court arrived at the
conclusion that the arbitration agreement is invalid. In light of the above,
the specificity of sport, particularly the consistent and uniform application
of rules and regulations of sports federations, is a strong argument in favour
of forced arbitration. Indeed, the legal level playing field and ultimately the
sporting level playing field would be jeopardised if national courts would
decide on sporting cases instead of national sports arbitral tribunals, such as
the German Court of Arbitration for Sport (“DIS”) or the CAS. The interest of
sports federations also prevails in domestic disputes. Otherwise, there is a
risk that the national courts will interpret the sporting rules of a particular
sports federation inconsistently.
On balance, it will be important to carefully analyse how
the Frankfurt court substantiated its departure from the BGH decision in the
Pechstein case. In my view, the press release indicates that the court was
apparently unable to strike a fair balance between the competing interests
involved, bearing in mind the specificities of sport.