Editor's note (13 July 2015): We (Ben Van Rompuy and I) have just published on SSRN an article on the Pechstein ruling of the OLG. It is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2621983. Feel free to download it and to share any feedback with us!
On 15 January 2015, the earth must
have been shaking under the offices of the Court of Arbitration for Sport (CAS)
in Lausanne when the Oberlandesgericht München announced its decision in the
Pechstein case. If not entirely unpredictable, the decision went very far
(further than the first instance) in eroding the legal foundations on which
sports arbitration rests. It is improbable (though not impossible) that the
highest German civil court, the Bundesgerichtshof (BGH), which will most likely
be called to pronounce itself in the matter, will entirely dismiss the
reasoning of the Oberlandesgericht. This blogpost is a first examination of the
legal arguments used (Disclaimer: it is based only on the official press release, the full text of the ruling will be published in
the coming months).
The Pechstein Saga
Few are able to remember the start
of Claudia Pechstein’s legal crusade through all available jurisdictions in the
northern hemisphere[1].
Thus, a concise summary of the previous episodes is in order. Claudia Pechstein
is a German Speed-Skater, multiple Olympic Gold Medallist and World Champion. In
2009, she was one of the first athletes caught for doping on the basis of the
blood profiling system introduced by the International Skating Union (ISU)[2].
Henceforth, the ISU banned her from all competitions for two years. This
triggered a long and embroiled legal saga. She appealed the ban in front of the
Court of Arbitration for Sport (CAS), based on an arbitration agreement
included in her license with the national and international federations. The
CAS dismissed (CAS 2009/A/1912 & 1913 and CAS OG 10/04) her claims and
confirmed the two-year ban. Subsequently, she contested (twice!) the award in
front of the Swiss Federal Tribunal (Case 4A_612/2009, 10 February 2010 and Case 4A_144/2010, 28 September 2010), but was both
times unsuccessful. Her case is also pending before the European Court of Human Rights. Meanwhile,
she started an action for damages (around € 4 Million) in front of the local
Court of Munich (Landesgericht München). This Court released its judgment on 26 February
2014, despite recognizing the invalidity of the arbitration clause, it
considered that the award���s res judicata
effect was to be recognized because Pechstein did not contest the competence of
CAS when she appealed the ISU’s decision to it. Pechstein decided to appeal the
judgment to the Oberlandesgericht München, which in its decision from 15
January 2015 embraced her claims.
The Decision of the
Oberlandesgericht München
The overall position of the
Oberlandesgericht concerning the CAS award is straightforward. The court
considers the arbitration clause between the ISU and Claudia Pechstein as
contrary to German (and maybe European) antitrust law, which is part of German public
policy, and, therefore, refuses on the basis of Article V (2) (b) New York Convention of 1958 to recognize the validity in
Germany of the CAS awards rendered in the Pechstein case. But, why is it so?
First of all, the judges point out a
typical (but often overlooked) fact about International Sports Governing
bodies: they are monopolists. In other words, they control the market(s) for
international sports competitions and nowadays (at least in speed-skating)
no professional athlete can afford, if he is to live from his sport, to miss
those competitions. Yet, German antitrust law bans an undertaking placed in a
dominant position from imposing contractual conditions that differ from what
they would be in a normal competitive environment. Hence, the Court held that
the ISU was unlawfully imposing onto Claudia Pechstein the signing of a CAS
arbitration clause. But, is a forced arbitration clause per se constitutive of an antitrust violation? The Court is subtler.
In fact, it acknowledges that an arbitration clause imposed by a Sports
Governing Body does not constitute per se
an antitrust violation. To the contrary, the Court clearly states that there are
good reasons (for example the uniform application of anti-doping regulations)
to subject the resolution of sporting disputes between athletes and Sports
Governing Bodies to a unique world court for sport. What is the problem then?
In the eyes of the German court, the
problem lies with CAS and its institutional set-up. First of all, the Sports
Governing Bodies (International federations, NOCs and IOC) have a decisive
influence on who is potentially called to be an arbitrator in CAS arbitration.
Here, without clearly alluding to it in the press release, the Court has the
closed list of CAS arbitrators in mind. In short, only a predefined number of
people can act as arbitrators before CAS. Those arbitrators are appointed on
the CAS list by ICAS, the CAS code in force at the time of the case foresaw
that 3/5 of the arbitrators were appointed upon proposals made by the Sports
Governing Bodies[3].
This has changed. As from the 1 January 2014 the ICAS is free to appoint whomever
it deems appropriate on the list[4].
Nevertheless, the Court finds that, at least for the time Pechstein was facing
the CAS, the Sports Governing Bodies were in a structurally favourable position
regarding the composition of the arbitral panel. In practice, athletes were forced
to ratify this disequilibrium due to the monopoly of Sports Governing Bodies on
the access to international sporting competitions.
Furthermore, the German judges
consider that this imbalance plagues also the nomination process of a president
of an arbitral panel. Indeed, under article R54 of the CAS Code, the president
of the CAS Appeals Arbitration Division is responsible to nominate the
presidents of the panels[5].
However, the president of the CAS appeals division is himself nominated by the
ICAS[6],
which consists mainly of representatives of the Sports governing bodies[7],
and is often a personality close to them[8].
Currently, the ICAS has 20 members, of which 14 have (or had) direct ties with
Sports Governing bodies and none is connected to the existing athlete’s unions.
This institutional bias entrenches the structural imbalance in favour of the
Sports Governing Bodies already identified by the Court apropos the closed list
of arbitrators. Thus, the independence of the panel cannot be guaranteed and
the fairness of the arbitral process safeguarded. Therefore, in light of the
monopolistic position of the ISU and the lack of independence of CAS panels,
the imposition of an arbitration clause depriving the athlete of her
constitutional right to a judge constitutes a breach of German antitrust law.
Consequently, and contrary to the
first instance Landesgericht[9],
the Oberlandesgericht refuses to recognize, on the basis of Article 5 par. 2 b) of the 1958
New York Convention, the validity of the CAS awards invoked by ISU to oppose the damage
claims raised by Pechstein. The Court leaves open the question of the damage
claims, the partial ruling on the jurisdiction being susceptible to an appeal
to the highest German civil Court, the BGH.
Towards a Gundel 2.0 for CAS: Reform
or die!
The Pechstein Saga is not finished yet;
an appeal to the BGH by ISU is to be expected. However, one should not
underestimate the symbolic value of the Oberlandesgericht’s ruling and the
threat it constitutes to the work of CAS. Indeed, if the ruling were to be
confirmed by the BGH it would basically imply that CAS awards are unenforceable
in German courts and that athletes may therefore (successfully or not) claim
damages against the Sports Governing Bodies imposing sanctions on the basis of
these awards. From the press release it remains unclear whether the decision is
based solely on German antitrust law or also on EU antitrust law. Nonetheless,
this decision might also be constructed as an abuse of a dominant position in
the sense of article 102 TFEU and could gain validity in the EU as a whole.
This would be a dramatic setback for sports arbitration, nothing short than the
death of CAS.
But, it need not come to such
extremity. As recognized by the Oberlandesgericht, the CAS fulfils an important
function in the sporting world. It is a necessary institution to provide a
level legal playing field when issues of doping or transfers are leading to acrimonious
transnational disputes. Additionally, it also has advantages for the athletes,
as it is usually perceived as cheaper and faster than state justice[10].
All of this is duly acknowledged in the decision. In short, what the German
Court is asking for is an institutional reform of CAS. This restructuring would
entail a fundamental reshuffling of the internal functioning of the CAS.
Indeed, the German judges have identified the two main weak points of CAS, the
forced arbitration coupled with its lack of independence[11].
The forced arbitration can be accepted if, and only if, the structural
independence of CAS from the Sports Governing Bodies is warranted[12].
The challenge to CAS can be formulated as follows: cut the ties that bind you
to the Sports Governing Bodies or we will not accept the validity of the
arbitration clause underpinning your competence.
In fact, the CAS was at a fairly
similar (less dramatic) crossroad after the Gundel case of the Swiss Federal
Tribunal in 1993[13].
In the Gundel case, the SFT recognized the independence of CAS but also clearly
indicated that it would not do so if the IOC were a party to a dispute in front
of CAS. This led to what is known as the Paris agreement, an in depth
structural reform of CAS[14].
Mainly, the ICAS was created to separate the management of CAS from the IOC.
The SFT expressed its satisfaction with the reforms in its famous Lazutina case
and blessed the CAS with the full recognition of its independence[15].
This, however, did not mean that the recognition of the independence of CAS was
legally a given beyond Switzerland. To the contrary, it was (and is) still
hotly debated in the literature[16].
Now, the German court basically says the Paris agreement is not enough, we need
a new one, ensuring that athletes (and other stakeholders like clubs or
supporters) get a true say in the ICAS. It is time for the CAS’s institutional
structure to better reflect the diversity of actors affected by its decisions.
If not, CAS awards will not be recognized in Germany and, by extension, the
entire territory of the EU, thus leading the sports justice into a profound
crisis.