Sports Arbitration: Federal Supreme Court Finds Against Pechstein, Upholds CAS Arbitration Agreement

220px-Claudia_Pechstein_2008The revolution in sports arbitration has been called off, at least for now: Today, the Federal Supreme Court (Bundesgerichtshof) reversed the much discussed judgment of the Munich Court of Appeals (Oberlandesgericht) in the case of Claudia Pechstein. Pechstein, the speed skater and five-time Olympic gold medalist, had sued the governing body of her sport, the International Skating Union (ISU) for damages suffered as a result of a doping ban Pechstein believes to be unlawful.The Federal Supreme Court ruled that the action was inadmissible in light of the arbitration agreement between the athlete and the ISU.

As previously discussed here, the Munich Court of Appeals had held that Claudia Pechstein’s damages case against the ISU could go ahead in the state courts, the arbitration agreement that Claudia Pechstein had entered into with the ISU notwithstanding. The Court of Appeals had found the arbitration agreement to be invalid, because it constituted an abuse of a dominant market position within the meaning of Section 19 German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB). The Munich court relied, in its reasons, heavily on an alleged “structural imbalance” (strukturelles Ungleichgewicht) between sports associations on the one hand and athletes on the other hand under the existing system of sports arbitration, the Court of Arbitration for Sport (CAS).

The Federal Supreme Court agreed with the starting point that the ISU does have a dominant market position, given that has a monopoly on the organization of international speed skating events, such as world championships. However, looking at the various factors that need to be taken into account, the Federal Supreme Court finds that on balance, the ISU did not abuse that dominant market position by requiring athletes to enter into an arbitration agreement.

Delivering the Court’s judgment, Bettina Limperg, the Court”s president said: “Looking at the overall picture, CAS is independent and neutral. It is a true arbitral tribunal. (Im Gesamtbild ist der Internationale Sportgerichtshof CAS unabhängig und neutral. Er ist ein echtes Schiedsgericht).” Neither the CAS itself, nor the individual arbitral tribunals are part of an overall organization, unlike other arbitral bodies that are integrated into club and association structures (Verbands- und Vereinsgerichte). Neither the fact that arbitrators must be chosen from a list of arbitrators, nor the fact that this list is being drawn up by a body in which the sports associations and the olympic committees have a dominant position changes that assessment. These provisions in the arbitral rules do not create a structural imbalance when it comes to appointing the arbitrators for the individual arbitral tribunal. The court points out that the associations on the one hand and the athletes on the other hand do not form two separate blocks with fundamentally opposed interests. In particular, to fight doping is both in the interest of the associations and the athletes.

The advantages of a uniform international system of sports arbitration, such as uniform standards and the speed of decision are relevant not only for the associations, but also for the athletes. To the extent that the associations still dominate the process of pre-selecting arbitrators, this is neutralized by the rules of the CAS, which guarantee the independents and neutrality of the individual arbitrators. It appears to be relevant to the Court that there are more than 200 potential arbitrators on the list from which the athletes and the associations can choose. Individual arbitrators can be challenged, if a party deems them to be partial. In addition, the aggrieved party has recourse to the Swiss Federal Court (Bundesgericht) and an arbitral award by the CAS is subject to the scrutiny of the Swiss Federal Court. Perhaps the most controversial statement of the Court is the finding that Pechstein entered into the arbitration agreement voluntarily, even though this was a prerequisit for her to be able to compete in ISU events.

So much for my summary of the arguments of the Federal Supreme Court, based on today’s press release. We will follow up as soon as the full judgment is available. With today’s judgment, Claudia Pechstein’s challenge the German courts has come to an end, as far as the ordinary courts are concerned. According to press reports, Pechstein plans to bring a constitutional complaint (Verfassungsbeschwerde) and take her challenge to the Federal Constitutional Court (Bundesverfassungsgericht).

Today’s decision thus did not confirm the Munich judgment, and did not trigger the revolution that many commentators has expected – today’s judgment had been hyped by some as the biggest thing in sports law since the ECJ’s Bosman case. The Federal Minister of the Interior welcomed the judgment and claimed that the Court’s support for sports arbitration confirmed the government’s approach to the topic in the anti-doping legislation (see here fore more on the topic). The minister cautioned, however, that the CAS rules still needed modernization.

But there may still be a revolution of sports arbitration in the pipeline: The Federal Supreme Court has a further case on international sports arbitration pending, which it will hear shortly: The case of the German football club SV Wilhelmshaven is scheduled for a hearing on July 5, 2016. In this case, the Bremen Court of Appeals has refused to recognise sanctions of the German Football Association (Deutscher Fussballbund, DFB) against the club, which implemented a CAS decision. The Bremen judgment was based on arguments similar to those of the Munich court. The facts and legal issues (see here for my previous post on the matter) before the Court in the Wilhelmshaven case are, however, different, so watch this space for further developments!

The photo was taken by Bjarte Hetland at the 2008 World Cup in Hamar, Norway.

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