The arena for sports disputes – arbitration vs litigation

Arbitration and sport have long been viewed as an ideal doubles pairing. Sports disputes commonly possess many of the characteristics which favour resolution through arbitration rather than litigation. They may be of a highly technical character, best resolved by experts with a deep knowledge and understanding of the industry and its practices. They may be very sensitive, and best resolved through proceedings which offer confidentiality. They may also be time-pressured, and arbitration may offer the best prospect of customising procedures to resolve the dispute as efficiently as possible. Finally, they may have a cross-border dimension which renders them unsuitable for resolution by national judicial institutions strictly applying national law. For these reasons among others, it has become commonplace for sports governing bodies to require athletes to agree that any disputes which arise concerning governing body decisions will be subject solely to arbitration, commonly (although not invariably) at the highly successful Court of Arbitration for Sport (CAS) – a practice analysed in a recently published book on ‘Challenging Sports Governing Bodies’. Courts will generally refuse to hear a case where the dispute between the parties is covered by a valid arbitration agreement – as required by the New York Convention 1958. A dispute resolution process established in the rules of a sports governing body is likely to be considered ‘arbitration’ if it satisfies requirements of independence and impartiality, and leads to a binding decision based on the law and the facts in accordance with a proper procedure.

The question of whether sports dispute resolution processes satisfy these conditions, and thus limit recourse to the courts, has recently come under the spotlight as a result of the Pechstein v International Skating Union litigation in Germany. The German speed skater, Claudia Pechstein, challenged a doping ban which had been imposed by the International Skating Union (ISU) and confirmed by the CAS. In January 2015, the Munich Court of Appeals determined that the arbitration clause in the ISU rules was invalid, because the CAS procedures for the appointment of arbitrators did not meet procedural fairness requirements. This was particularly because CAS arbitrators must be appointed from a closed list, which is itself produced largely at the direction of sports governing bodies. The concern was that in disputes between athletes and governing bodies this created at least the perception of institutionalised bias. This decision was overturned on appeal by the Federal Court of Justice in June 2016, essentially on the basis that CAS procedures provided sufficient safeguards to ensure lack of bias and that the system also operated to the benefit of athletes. However, Pechstein has indicated an intention to appeal to the Federal Constitutional Court, and in any case the litigation has brought certain important issues irreversibly into the spotlight.

There are two points particularly highlighted by this litigation. The first is that there is something of a tension between the idea of arbitration as founded in the consent of the parties, and the practical reality of the way sports governing body rules function. For many sports, any professional participant is required to consent to arbitration – the clause is not open to negotiation, and the only alternative is to find a different career. The asymmetrical position of the parties means that the arbitration clause is not a freely negotiated agreement between commercial parties acting at arms length. In Pechstein the Federal Court of Justice held that there was, nevertheless, genuine consent to the arbitration agreement, and correctly noted that sports arbitration benefits athletes as well as governing bodies, but these concerns are likely to mean greater scrutiny of the fairness of arbitration procedures. The CAS itself reacted to Pechstein by addressing some of these procedural concerns, although it remains to be seen whether the changes introduced will be considered sufficient to allay criticism.

The second point is that arbitration clauses are in fact never entirely effective to oust the jurisdiction of the courts. This is in part because proceedings may be brought before a court seeking to invalidate the arbitration agreement. In some contexts, the court is likely to give the arbitral tribunal the first opportunity to rule on questions of the validity of the arbitration agreement, pursuant to the well-known doctrine of ‘negative competence-competence’. This does not, however, mean that the court will not review such questions itself, but rather that it will only consider them once the arbitral tribunal has reached its own view – for example, if proceedings are brought to set aside an award rendered after the tribunal has decided the arbitration agreement is valid. An arbitration clause may be effective to remove scrutiny of the merits of the case from the courts, but whether or not a clause does so successfully is itself a question which may be reviewed by the courts.

The relationship between courts and arbitral tribunals has sometimes been viewed as one of competition – each striving to attract business (with courts closely scrutinising arbitral processes and the genuineness of consent to them), leading to mutual increases in efficiency. It is not only in sport that a great rivalry can spur on the greatest improvements. The relationship between courts and arbitral tribunals can equally be viewed, however, as one of partnership, acting cooperatively to give effect to arbitration agreements, striking a balance between the public and private interests in efficiency and fairness. The degree of scrutiny which the courts give to sports arbitration will no doubt continue to be an important point of tension between these different perspectives.

Dr Mills bases this article on a chapter of Challenging Sports Governing Bodies. This title can also be accessed as part of the Sports Law module on Bloomsbury Law Online.

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