Monday, December 2, 2024

CJEU ruling heralds clash between EU law and sports arbitration

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Practitioners have been reacting to a decision by the Court of Justice of the European Union that mandatory CAS arbitration provisions in the rules of an international sports federation may clash with EU competition law.

On 21 December, the CJEU rejected an appeal by the International Skating Union (ISU) over a decision by the European Commission that found the ISU in breach of EU competition law.

Two Dutch skaters brought a complaint to the European Commission in 2014, contesting rules set out by the ISU which governed prior authorisation and eligibility to compete, saying they infringed EU competition rules.

In its 2017 decision, the Commission deemed that the ISU carried out an economic activity, consisting of organising international skating events and related activities, and insofar as its members were national skating organisations, it was an “association of undertakings” for the purposes of EU competition law.

It also found that through its rules, the ISU could restrict competition in the EU market. The Commission therefore considered that the ISU had a strong position in the market and the ability to influence competition in the market.

The Commission also found that provisions in the rules requiring disputes to be heard at the Court of Arbitration for Sport (CAS) in Lausanne, while not in themselves a restriction of competition, reinforced the restriction of competition resulting from the ISU rules.

The ISU appealed the Commission’s decision, leading to a ruling by the General Court of the EU in 2020 that upheld the Commission’s decision as regards the ISU rules but not as regards the CAS arbitration provisions.

The ISU brought a further appeal to the CJEU, while the skaters and the European Elite Athletics Association brought a cross-appeal to challenge the General Court’s findings on the CAS provisions. They argued that athletes affected by the ISU’s ineligibility decisions are only able to take their grievances to CAS and are required to accept the provisions to take part in skating competitions.

Since CAS is an arbitration body established outside of the EU, they argued that EU competition law was excluded by the body that hears appeals of CAS awards (the Swiss Federal Supreme Court). They said that while EU national courts could play a role in enforcement of CAS awards, it would be costly and usually ineffective, since the rulings would be delivered after the competitions.

The CJEU agreed that the mandatory CAS arbitration provision reinforced the infringement of EU competition law “by making judicial review, in the light of EU competition law, of CAS arbitral awards…  more difficult”.

It said the General Court erred in law in finding that the arbitration provisions may be justified by legitimate interests linked to the specific nature of the sport without seeking to ensure they allow for an effective review of EU competition rules.

The CJEU also said the General Court was wrong to find that the effectiveness of EU law was ensured in full because recipients of a decision barring them from a competition could seek damages for the harm caused to them before national courts and could bring complaints before the Commission or a national competition authority.

The ISU was represented before the CJEU by Van Bael & Bellis, which declined to comment.

The two skaters were represented by Antoine Duval and Ben Van Rompuy of the Asser Institute’s Sports Law Centre in the Netherlands.

Duval tells GAR that the decision “will affect all sports governing bodies, based in the EU or not”, saying that the seat of the body is irrelevant so long as it has an impact on the single market.  He says they will “risk facing more challenges in the national courts of EU member states on the basis of EU law – be it free movement, competition rules or even secondary legislation”.

“In my view, the right to access national courts of member states in EU law disputes can only be closed if CAS is moved to a member state (or if Switzerland becomes a member state), where the reviewing court can control the compatibility of CAS awards with EU law and refer preliminary references to the CJEU in case of doubt on the interpretation of EU law.”

Hogan Lovells partner Markus Burgstaller says the CJEU has found that CAS awards, which are subject to review by the Swiss Federal Supreme Court, “are not capable of allowing effective compliance with the public policy provisions of EU law and in that case are incompatible with the EU judicial system.”

He says that the effect of the decision is arguably that “a court of an EU member state asked to decide a sports dispute affecting EU competition law will not be prevented from adjudicating the dispute even in the presence of a CAS arbitration clause.”

Paschalis Paschalidis of Arendt & Medernach in Luxembourg describes the decision as “extremely pragmatic”, saying the CJEU “put an end to the de facto state of impunity vis-à-vis EU competition law that the ISU had created for itself by – systematically and without exception – requiring EU athletes to pursue their EU law-based rights before manifestly inappropriate fora” such as CAS and the Swiss courts.

Paschalidis also calls the judgment “remarkable”, since it is “imbued with the spirit of the principle of autonomy of EU law as interpreted in Achmea” – referring to the CJEU’s landmark 2018 judgment finding that investor-state arbitration clauses in intra-EU BITs violated that principle.

He notes that the CJEU does not seem to consider CAS proceedings to fall within the exception the Achmea judgment made for commercial arbitration, even though the ISU and the skaters are private entities.

He suggests that the ISU could remedy the situation by ending the “systematic submission of all disputes to CAS arbitration” and – where disputes regard skating as an economic activity – offer competitors and athletes the right to choose between CAS proceedings in Switzerland or other arbitrations in EU jurisdictions.

Paschalidis does not think that the ruling is likely to force CAS to move to the EU, but wonders if CAS should consider amending its rules to allow for arbitration panels to fix their seats outside of Switzerland.

Sports arbitration specialist Antonio Rigozzi of Lévy Kaufman-Kohler has downplayed the significance of the CJEU ruling, saying it is “less revolutionary” than the court’s press releases might suggest since “competition law is a very technical field and the actual relevance and impact remain to be seen”.

“The most interesting aspect for my academic research and practice is the limb of the decision about the validity of mandatory CAS arbitration agreements in sport. I still believe that the advantages that CAS offers to athletes justify the imposition of CAS arbitration agreements in sports regulations.”

“Should the CJEU’s ruling be interpreted as leaving athletes with a choice to accept CAS arbitration or seek relief in national courts, my view is that any well-advised athlete would opt for CAS arbitration.”  

In a comment on the judgment posted on LinkedIn, Clyde & Co’s global arbitration practice chair Ben Knowles proffered a “controversial thought for Christmas”, questioning: “To what extent does the EU remain a pro-arbitration jurisdiction?”

He added: “There is more than a trifling argument to say that it isn’t. Probably the best counter to that would be that there are other jurisdictions that also interfere in the arbitration process (various US states for example).”

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