Sports Arbitration: Munich Court Finds Arbitration Clause Invalid in Pechstein Case

The Munich District Court (Landgericht München I) issued a judgment today which, if confirmed upon appeal, could have a significant impact on sports arbitration in Germany. Today’s decision came in proceedings brought by German speed skater Claudia Pechstein against the International Skating Union (ISU) und its German member, Deutsche Eisschnelllauf-Gemeinschaft (DESG) for damages suffered as a result of a doping ban. Pechstein’s damages claim was dismissed, but the Munich court found the arbitration clause contained in the athletes’ agreement between Pechstein and both the ISU and DESG to be invalid.

Here is the background: Claudia Pechstein, a five-time Olympic gold medallist, was banned from all competitions for two years, between 2009 and 2011. After the World Championships in 2009, the ISU had accused Pechstein of blood doping and issued the ban, which was based on irregular levels of reticulocytes in her blood. Pechstein denied the doping allegations and legal proceedings before the Court of Arbitration for Sport (CAS) and the Swiss Federal Supreme Court followed. The ban was ultimately upheld; apparently, Pechstein’s case was the first doping ban to be based on circumstantial evidence alone.

The Munich court said that at the time the athletes‘ agreements with ISU and DESG were entered into, a structural disbalance (strukturelles Ungleichgewicht) existed between Pechstein and the sport federations, who formed a monopoly. Pechstein did not enter into the agreement voluntarily, but only because she had no choice. Had she not signed the agreements, she would not have been able to enter competitions and hence, unable to pursue her career as a professional athlete.

On that basis, the court found that it had jurisdiction to hear the damages claims, and the defendants could not invoke the arbitration clauses. However, the court held that it could not revisit and review the legality of the ban. As it was bound by the CAS findings that the ban was legal, the damages Claims were unfounded.

On the issue of the legality of the ban, the arbitral award of the CAS was final, and its finality was to be respected by the Munich court. Pechstein could have, and should have challenged the jurisdiction of the CAS during the arbitral proceedings. At the time she appealed the ban to the CAS, the structural disbalance did no longer play a role. Still, Pechstein, in full knowlegde of all the circumstances, did appeal to the CAS. At that point in time, she should have invoked that she did not enter into the arbitration agreement voluntarily. The same was true for other procedural challenges to the CAS proceedings. The fact that the arbitration agreement is void (Nichtigkeit der Schiedsvereinbarung) does not preclude the recognition of the arbitral award in the Munich proceedings.

So far, only the court’s press release has been published. The citation for the judgment is Landgericht München, judgment dated February 26, 2014, file no. 37 O 28331/12.

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