Will the Nordics Make an Appearance?
THE AUTHORS:
Malte Frank, Counsel at Hengeler Mueller
Jake Lowther, Specialist Counsel at SCC Arbitration Institute
This article offers a comprehensive examination of the current state of sports arbitration. In the wake of the judgment rendered by the European Court of Justice (“ECJ”) in the decade-long controversy between the International Skating Union (“ISU”) and the European Commission, and in light of the sweeping developments in the pending litigation between the Royal Football Club Seraing (“RFC Seraing”) and the Fédération Internationale de Football Association (“FIFA”), this article provides an analysis of and outlook for the future of international sports arbitration and the role the Nordics might play.
First Quarter
Defining Sports Arbitration in the Modern Legal Landscape
Sports arbitration may involve all kinds of disputes arising in the sporting world. These disputes may be of a commercial nature, such as a dispute relating to a sponsorship contract, or of a disciplinary nature following a sanction by a sports federation, notably in doping matters. The sporting world has set up a special institution for this type of litigation, the Court of Arbitration for Sport (“CAS”). Disputes are submitted to the CAS under the corresponding express provisions in sports contracts of various kinds, or regulations of the sports federations.
Why Sports Arbitration Serves More Than Reputational Interests
Textbooks often provide a somewhat nebulous explanation that only sports arbitration can guarantee the expertise that is required to solve sports disputes. An example may illustrate what that means:
In 2008, the Danes dominated the Olympic mixed 49er sailing events. They were on course for the gold medal, but on the way to the start of the final medal race their mast broke in the fierce gusts and choppy waters of the Chinese Sea. The Croatian team, which had not qualified for the medal race, rushed to the harbor and lent their boat to the Danes. Despite all odds, the Danes arrived in time back to the start and secured the gold medal with the Croatian boat. The Spaniards and Italians, who would have won the gold and bronze medal if the Croatians had not helped the Danes, appealed against the decision accepting the replacement of the boat. To their credit, in formal terms, the rules required a disqualification of the Danes. The boat did not carry the right identification insignias on the hull and the sail, was about 2 kilograms lighter as it did not carry an on-board TV camera and had not been kept in overnight quarantine before the medal race. Moreover, the Danes had not only replaced the damaged mast but the entire boat.
The CAS did not follow these objections but instead determined that the formal rules need to be interpreted in light of the specific nature and spirit of the sport. By clarifying that legal moves based on formalistic views must not lead to victory, it preserved the heroic story about true sportsmanship. Such decisions require foresight, which in turn requires expertise. There is a concern that state courts may not in all instances have this expertise and that trusting them would result in decisions that undermine the social credibility and educational relevance of sport, which is the intrinsic motive for us following these events and in turn the commercial foundation of sport.
Second Quarter
The Rationale for CAS: When General Commercial Arbitration Falls Short in Sports Disputes?
Arguably, the sporting community has not effectively communicated the need for the CAS. However, there is a particular need for consistent case law in sports disputes. This necessity may also exist in other sectors, but in the sports sector, it is particularly pronounced. Whilst diverging standards are certainly not ideal, other industries can cope with fragmented case law between jurisdictions if the case law is consistent within a certain jurisdiction. The sporting world cannot. It requires consistent principles worldwide. This is because sport is, by nature, transnational. Consider anti-doping regulation; you cannot have fair competition among athletes from all over the world if they are subject to different rules or interpretations of these laws. The requirements must be universal, meaning that a uniform body must decide on these questions.
If the CAS Has So Many Advantages, Why Has it Been Questioned By the ECJ in the ISU Case?
In its ISU judgement (judgement of 21 December 2023, Case C-124/21 P), the ECJ took the view that the current framework of the CAS is incompatible with an effective judicial review as enshrined by the Charter of Fundamental Rights of the European Union (“EU”). The ECJ assumes that the system carries the risk of depriving individuals of the rights arising from EU law, in particular EU competition law, as it does not allow for referrals to the ECJ itself. This tension stems from the founding fathers’ choice of Lausanne as the seat of the CAS, which seemed appropriate since the International Olympic Committee (“IOC”) is based there, and numerous sports federations have their headquarters in Switzerland. As a result, CAS awards are always reviewed by the Swiss Supreme Court, a tribunal located outside of the EU. This Court may, but is not required to, examine the awards for compatibility with EU law and cannot refer questions to the ECJ for a preliminary ruling.
Assessing the Severity of ECJ Criticisms: Is the CAS Facing an Existential Crisis?
The ECJ’s view is a challenge, but it does not necessarily pose a threat to the existence of the CAS. The CAS will need to undergo reforms, but the past has shown that it is reformable.
In the early 1990s, the Swiss Supreme Court expressed considerable doubts as to the impartiality of the CAS, given the links between the CAS and the International Olympic Committee. In response, the CAS was reformed and became organizationally and financially independent from the IOC. It is anticipated that the International Council of Arbitration for Sport, which has replaced the IOC and administers the CAS, will find a way to implement the necessary structural reforms to comply with the requirement to allow for preliminary rulings of the ECJ.
It remains uncertain whether the CAS is sufficiently prepared to bear the consequences of these reforms. CAS awards are rarely overturned, which has contributed to its reputation and legitimacy in the sports world. If a path to the ECJ is now opened, this might change. At least at the beginning, an ECJ’s competence over EU law aspects of CAS awards may result in successful appeals. This may question the CAS as an institution and contribute to a decline.
Third Quarter
What Might the Reforms of the CAS Entail?
The CAS needs to raise the bar and establish an alternative seat in an EU Member State. Therefore, it would enable a review of its awards in accordance with EU public policy before a court within the EU and, if required, a referral from that court to the ECJ for a preliminary ruling.
In addition to the amendments to the statutes and the establishment of a second seat, the CAS must, above all, build up further EU expertise to prepare for the ECJ’s scrutiny by reconsidering the criteria for the eligibility of arbitrators or by offering panels support by EU experts in the coming years.
Jurisdictional Alternatives: Evaluating Stockholm as a Potential CAS Seat
Unlike many other locations, Stockholm benefits from its reputation as a respected venue for arbitration. However, it also presents a significant drawback: the language of the Swedish judicial system. Appeals against awards rendered by the CAS at its seat in Stockholm must be filed in Swedish. Moreover, if such appeals lead to a referral to the ECJ, the referral proceedings would also have to be conducted in Swedish. This increases the complexity of legal disputes and results in additional costs. Given that around 70% of all CAS proceedings involve football-related disputes, any venue that does not permit appeals in one of the official languages of FIFA or the Union of European Football Associations (“UEFA”), particularly English, French, or German, is likely to face challenges in being accepted. The significance of language in this context has already been underscored by UEFA, the only association to have implemented the ECJ’s requirements following the ISU decision. UEFA has designated Dublin as an alternative seat of the CAS for disputes arising under its statutes, prioritizing the ability to conduct appeals in English over the transition from a civil law system of the Swiss Supreme Court to a common law regime. Ultimately, the viability of Stockholm as an alternative CAS seat will depend on Sweden’s willingness to implement targeted judicial reforms, at a minimum, enabling appeals against CAS awards to be conducted in English.
Final Quarter
Understanding the Slow Pace of Post-ISU Reforms
The sporting world is waiting for the ECJ’s ruling in the case of the Belgian football club RFC Seraing v. Fifa, which is expected before the summer. That case may have even more fundamental implications than the ISU judgement, and it could make the establishment of an alternative seat of the CAS in an EU Member State obsolete.
The case goes back to a fine and four-year transfer ban imposed by FIFA over the RFC Seraing for concluding agreements which were deemed to violate FIFA’s ban of investors taking ownership over football players’ economic rights. The CAS confirmed FIFA’s sanction, and the Swiss Supreme Court rejected RFC Seraing’s appeal (judgment of 20 February 2018, Case 4A_260/2017). When the Belgian football association proceeded to enforce the sanction, RFC Seraing requested a full review of the CAS award. It took the view that the mandatory CAS jurisdiction that sporting federations impose on athletes and clubs falls outside the scope of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“NY Convention”) and that, accordingly, CAS awards cannot be treated as res judicata. The Belgian Supreme Court requested that the ECJ issue a preliminary ruling (Case C-600/23). If the ECJ, like the Advocate General, follows RFC Seraing’s position, CAS awards will not be treated as res judicata anymore and will become subject to full judicial review if enforced within the EU.
In this case, the sporting world would have to fundamentally reform its judicial system. It would need to grant athletes and clubs a choice of whether to refer their litigation to the CAS or seek judicial review before a state court within the EU. Only by dissolving the mandatory CAS jurisprudence could it ensure that whenever the athletes and clubs choose the CAS, the respective judgement would be treated as res judicata within the EU. The only advantage of this reform would be that the sporting community would not be required to create an alternative seat for the CAS. The requirement established by ISU to allow for preliminary rulings by the ECJ would be ensured by state courts, to which athletes and clubs could appeal, rather than the CAS.
Enforcement Vulnerabilities: ECJ Threats to New York Convention Application
The ECJ is not bound by the Advocate General’s opinion, and it is hoped that the ECJ will take international comity and the need for compromises between jurisdictions into account in its analysis. The involvement of all the EU Member States that intervened in the proceeding, advocating for the application of the New York Convention to CAS awards, gives some confidence that the ECJ will act accordingly. However, it remains uncertain. There is a tendency, both at the European and national levels, to give preference to their own jurisdiction over an international committee. That is particularly apparent in sports matters. Take the litigation over FIFA’s agent regulation, where the Higher Regional Court of Düsseldorf, in defiance of a CAS award and state court rulings confirming the legality of these rules, has forced FIFA to suspend the regulation worldwide. It appears that Europe is in a phase in which it only trusts its own standards and courts and is willing to question the established equilibrium between jurisdictions.
Is the Sporting Community at Risk of Losing CAS’s Essential Benefits?
This ruling could ultimately reshape the balance between international sports governance and judicial scrutiny, potentially leading to new complexities for global sports competitions and federations. Such a development could indeed challenge existing arbitration norms and stakeholder confidence in the system, but it may not necessarily be the case. If the ECJ follows the Advocate General’s opinion, it is expected that the federations will agree on the establishment of a single legal venue to ensure consistency of the case law. Moreover, the venue will most likely be chosen based on assurances from the respective EU Member State that it will invest and build up the necessary expertise for sports litigation. It is highly likely that the sporting community will be able to get these assurances. EU Member States will start a race to secure the venue. Unlike in sporting events, fair play cannot be guaranteed in that competition. Sweden should start warming up.
ABOUT THE AUTHORS
Dr. Malte Frank is Counsel at Hengeler Mueller, specializing in competition and European law, with a focus on cross-border and strategic matters. His practice encompasses complex litigation, arbitration, and regulatory investigations, particularly in the digital, media, and sports sectors. He has represented clients before European and national courts, including the German Federal Court of Justice and the Belgian Constitutional Court, as well as before the European Commission, competition authorities in various EU Member States, and the U.S. Department of Justice. In addition to his client work, Malte serves as an arbitrator in sports-related disputes and is a permanent member of the arbitration tribunal of the Baden Football Association.
Jake Lowther refers to himself as a “civilized common law lawyer”, having first qualified in Australia and then in Sweden. He is currently Specialist Counsel at the SCC Arbitration Institute (“SCC”) in Stockholm. Prior to joining the SCC, Jake was an Associate in the M&A and dispute resolution teams at Nordic-Baltic law firm Magnusson. Before this Jake worked in Seoul, Korea as Foreign Legal Specialist at the Korean Commercial Arbitration Board’s international division, KCAB INTERNATIONAL. Jake also has experience of arbitration practice in Germany, which he obtained alongside completing the International Dispute Resolution LL.M. program at Humboldt-University of Berlin. Jake began his legal career at Ashurst in Australia, where he worked in the employment, M&A, and infrastructure teams.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
