The Pechstein Decision – The End of Sports Jurisdiction As We Know It?
By Dr. Lucien W. Valloni Froriep Law Firm Switzerland
When the Oberlandesgericht Munich (Higher Regional Court) announced its decision in the Pechstein case on 15 January 2015, the well-established pyramid of sports jurisdiction with the Court of Arbitration for Sport (CAS) in Lausanne at its peak was shaking. Could this decision bring about the end of sports jurisdiction as we know it?
Claudia Pechstein and the Courts
The Oberlandesgericht decided to allow Pechstein‘s claim against the International Skating Union (ISU); the first win for the 42-year old speed skating Olympic Gold Medalist and World Champion in her ongoing legal odyssey against a doping ban in 2009. Pechstein always protested her innocence, and doctors later diagnosed her with a genetic defect explaining the test results.
At the 2009 World Speed Skating Championships, Pechstein was tested positive for doping and subsequently banned from all ISU competitions for two years. She contested that ban before a tribunal of the CAS based on an arbitration clause in the registration form of the World Championships but lost the case (CAS 2009/A/1912 & 1913 and CAS OG 10/04). Pechstein contested that award twice in front of the Swiss Federal Court (BGer 4A_612/2009 & 4A_144/2010)*, but without success. Whilst there is currently a complaint pending before the European Court of Human Rights against the decisions of the Federal Court (pending case 67474/10, Pechstein c. Suisse), Pechstein also took the matter to the Landesgericht Munich (Regional Court) and claimed damages from the ISU.
The Landesgericht rejected Pechstein’s claims based on the res iudicata principle with respect to the CAS award. The Oberlandesgericht has now overturned that decision and allowed Pechstein’s claim for damages in an interim decision. The Court considered the arbitration agreement between Pechstein and the ISU to be contrary to mandatory German (and maybe European) competition law and therefore a violation of the ordre public.
The Decision of the Oberlandesgericht Munich
The decision of the Oberlandesgericht is straightforward and well-argued. The Judges start off by pointing out a fact about international sports federations: they are monopolists. German doctrine refers to this as the Ein- Platz-Prinzip, which stipulates that in each sport there can be only one federation per geographical level. At least in speed skating, if an athlete wants to make a living from this sport, there is no alternative to the international competitions organised by the governing bodies. This puts the ISU, organiser of the World Speed Skating Championships, in a dominant position pursuant to the German Act against Restraints of Competition. If athletes want to compete at the international level, they have no other choice but to put up with an arbitration clause that the organising federations include in their registration forms. Having athletes sign a compulsory arbitration agreement is not per se an abuse of a dominant position because there are good reasons for such an agreement.
* Claudia Pechstein was represented in these proceedings before the Swiss Federal Supreme Court by Dr. Lucien W. Valloni.
The Court held, however, that the problem lies in a structural imbalance of the CAS. In 2009, when Pechstein signed the arbitration agreement, the CAS Code then in force provided that 3 out of 5 arbitrators were chosen by the sport’s governing bodies, with only two among those persons independent from those bodies. Furthermore, the court noted that in disputes in which the parties don’t agree on a name, the president of an arbitral tribunal is directly nominated by the president of the CAS Appeals Division, who is himself nominated by the International Council of Arbitration for Sport (ICAS), a body highly dependent on sports associations. Forcing an athlete to accept an imbalanced arbitral court’s jurisdiction is what constitutes an abuse of market power (and not the arbitration agreement itself).
Accordingly, the Oberlandesgericht refused to recognise the CAS award based on Art. V (2) (b) New York Convention because it violates German cartel law, which is part of the ordre public. Hence, no res iudicata effect of the CAS award hinders Pechstein from bringing forward claims for damages before German state courts.
To sum up, the Oberlandesgericht Munich held that the arbitration agreement was void and the arbitral award could not be recognized.
The decision is currently under appeal to the German Bundesgerichtshof (Federal Supreme Court).
Towards a CAS Reform
The Oberlandesgericht’s decision is not one against sports arbitration in general, quite the contrary.
However it reveals some apparent flaws in the CAS set up that need to be addressed. This decision could also potentially be used as a blueprint for other cases in which an athlete does not want to accept a CAS decision in any part of the world, or wants to sue a federation for damages.
Thus, to answer the question from the beginning of this article, the system of sports arbitration will stay in place, which is a good thing for achieving harmonisation in sports law. However, the ICAS/CAS will have to undergo an internal restructuring and to sit together with all stakeholders to find an acceptable well balanced solution.
World unions, especially of the different sports, should have a direct and equal say in respect of ICAS/CAS rules involving athletes and the nomination and composition of the CAS list of arbitrators. Furthermore, a mechanism has to be found for the nomination of the president of each arbitration panel in order to guarantee independence.
The CAS has recently issued the following Statement in relation to the Claudia Pechstein/ISU Case.
Dr. Lucien W. Valloni
STATEMENT OF THE COURT OF ARBITRATION FOR SPORT (CAS)
ON THE DECISION MADE BY THE OBERLANDESGERICHT MÜNCHEN
IN THE CASE BETWEEN CLAUDIA PECHSTEIN AND THE INTERNATIONAL SKATING UNION (ISU)
Lausanne, 27 March 2015
The Court of Arbitration for Sport (CAS) has noted the ruling of the Appeals Court of Munich/Germany in relation to the case between Claudia Pechstein and the ISU. It has noted that, according to the Appeals Court, the fact that the decisions of the CAS and of the Swiss Federal Tribunal (SFT) were final in Switzerland did not prevent the athlete from bringing a claim for damages before the German courts, in the light of the principles of German competition law which forms part of German public policy. However, the CAS has also noted that the Appeals Court did not consider that making the athletes’ participation in competitions contingent on their agreement to arbitration in general was an abuse of a dominant position. The Appeals Court also mentioned that CAS arbitration does not breach Article 6 para. 1 of the European Convention for Human Rights and recognized the need to have a specialized international tribunal, instead of state courts, ensuring the uniform adjudication of sports-related disputes.
Claudia Pechstein had a fair trial, not only before the CAS Panel but also before the SFT, and the judgment of the SFT, which remains in force, should have settled this matter definitively in 2010.
Claudia Pechstein, who was represented by a team of lawyers, decided voluntarily to refer her case to CAS and neither challenged the CAS jurisdiction, nor the President of the CAS Appeals Division, nor the arbitrators comprising the arbitral Panel, although she could have done it if she had any doubt about the independence of the CAS or its arbitrators at that time. Later, as she was unhappy with the outcome of the arbitration, she appealed twice before the SFT which confirmed the validity of the CAS award. Proper procedures were applied and followed at all times.
The CAS notes that the findings of the Munich Appeals Court are based on the CAS rules and organization in force in 2009, when Claudia Pechstein appealed before CAS, and do not take into account the changes leading to the current organization, with amended procedural rules regarding the nomination of arbitrators, development of the legal aid program and the appointment of new ICAS Members not active in or connected to sports-bodies.
If, like in the Pechstein/ISU case, arbitration agreements were to be considered as invalid by state courts, even when not challenged at any stage during the arbitration, then the basic principles of international arbitration would be compromised.
The CAS and international arbitration generally provide for the only system capable of international applicability and consistency for international sport. The CAS is the body identified by the World Anti-doping Agency (WADA) for the final resolution of anti-doping disputes. The fact that State courts would reopen cases involving their national athletes endangers the international effectiveness and the harmony of the decisions rendered in disciplinary matters related to sport. Decisions related to disciplinary matters could take many years after the actual competition to become final, while all the numerous legal remedies are being exhausted. The risk of contradictory decisions would be also higher with athletes being able to compete in certain countries but not in others. This would affect the credibility of sport more generally. It must be emphasized that, also in Germany, various state courts have previously recognized and upheld the jurisdiction of the CAS.
The CAS was created to answer a need of all the stakeholders of international sport. It handles more than 400 cases per year. It has its seat in Switzerland and has performed the necessary work to make CAS arbitration compatible with the requirements of the Swiss Constitution and of the jurisprudence of the SFT. In Switzerland and other countries, the CAS is officially recognized as a true independent and impartial arbitral tribunal, after several reforms over the years. However, the CAS cannot prevent a foreign court contradicting the decisions of the Swiss Supreme Court.
The CAS is active in almost all countries around the world and adapting its system and procedures to accommodate each national jurisdiction is not feasible. It is always prepared to listen and analyze the requests and suggestions of its potential users i.e. the athletes, sports federations and other sports entities, in order to continue its development with appropriate reforms. However, such consultation must be independent of individual interests related to an existing dispute. The CAS will continue to improve and evolve with changes in international sport and best practices in international arbitration law.
In Germany, the CAS has started discussions with the Deutsche Olympische Sportbund (DOSB, the National Olympic Committee of Germany) and has contacted the representatives of its athletes’ commission in order to explain the CAS operation and procedures. On 18 March 2015, the CAS Secretary General presented the CAS system to the Sports Commission (Sportausschuss) of the German Parliament (Bundestag) in connection to the discussion related to the draft anti-doping law in Germany which currently provides that the resolution of disputes occur through arbitration.