HomepageCommercial LawPrivate LawPublic Law & Human RightsCriminal LawEU & International LawCareers

Accessibility

Have Irlen Syndrome, or need different contrast? Click the button below for options.

Background Colours

Subscribe

Enter you email address below to subscribe to free customisable article notifications.

Alternatively, click the button below for our various RSS Feeds (available journal wide, or per section).

Forced Arbitration in Sport: A Knock-Out Blow?

Article Cover Image

About The Author

Ben Cisneros (Regular Writer)

Ben is a third-year law student at Selwyn College, Cambridge, currently spending this year studying law at the Universidad Autónoma de Madrid as part of the Erasmus scheme. He has a keen interest in Sports law, and is a future trainee of boutique firm, Morgan Sports Law. Outside of academia, Ben is a keen singer and actor with a unflinching love of Wasps and England rugby.

[Read More]

Do I believe in arbitration? I do. But not in arbitration between the lion and the lamb, in which the lamb is in the morning found inside the lion.

Samuel Gompers

The last twenty years have seen huge growth in sports arbitration. Rather than allowing disputes to be settled in ordinary domestic courts, most Sports Governing Bodies (SGBs) now provide for all disputes under their regulations to be settled exclusively by way of arbitration. Indeed, many provide for a final appeal to the Court of Arbitration for Sport (CAS).

Arbitration is a non-judicial process for the settlement of disputes whereby an independent third party – an arbitrator – makes a decision that is binding. In English law, this procedure is governed by the Arbitration Act 1996 (AA 1996).

Usually, parties will pre-emptively include an arbitration clause in their contract or, once a dispute arises, enter an agreement to arbitrate (as opposed to litigating in the ordinary domestic courts). Yet in sport, this ‘agreement’ is forced: the regulations of SGBs are rarely negotiated in any meaningful sense, so athletes (and all other participants) must either accept them or choose a different career.

Though arbitration has become an almost quintessential part of sports law, it recently faced a legal challenge in the Belgian case of RFC Seraing and Doyen Sports Company v FIFA and Others [2018]. This article will discuss the judgment of the Brussels Court of Appeal in this case, and consider whether sport’s use of "forced arbitration" is satisfactory.

RFC Seraing v FIFA and Others

The Facts

RFC Seraing is a football club in the Belgian Second Division. In September 2015, it was sanctioned by FIFA for breaching its rules on "third party ownership" of players. The club received a CHF 150,000 fine, and a four-transfer-window player recruitment ban. The sanctions were upheld by CAS, albeit with a slight reduction to three transfer windows.

However, the club launched a parallel challenge in the Belgian civil courts arguing (among other things) that the "forced arbitration" clause in FIFA's statutes was unlawful and, thus, invalid. The clause in question (Article 59 of the FIFA Statutes) states that all member countries:

[S]hall agree to recognise CAS as an independent judicial authority [and that r]ecourse to ordinary courts of law is prohibited unless specifically provided for in the FIFA regulations... The association shall [ensure] that it is prohibited to take disputes to courts of law, unless the FIFA regulations or binding legal provisions specifically provide for or stipulate recourse to ordinary courts of law. Instead of recourse to ordinary courts of law, provision shall be made for arbitration. Such disputes shall be taken to an independent and duly constituted arbitration tribunal recognised under the rules of the association or confederation or to CAS.

The effect of RFC Seraing succeeding in its legal challenge would be as follows: if they could show that the obligation to submit to the jurisdiction of CAS was invalid, the club would then be able to mount a challenge in the ordinary domestic courts against FIFA’s TPO rules, or – at least – their application in this case.

Decision

In RFC Seraing [2018], the Brussels Court of Appeal stated that the obligation on football clubs to resolve all disputes exclusively by way of arbitration before CAS (to the exclusion of the ordinary courts’ jurisdiction) was invalid under Belgian law.

Though the decision may have wider implications, the primary focus of the court was on the conditions of validity of an arbitration agreement under Belgium’s Code Judiciare (the Code). Examining the arbitration clause in FIFA’s regulations, the court pointed to Article 1681 of the Code, which requires there to be a “specific legal relationship”, in line with the 1966 European Convention providing a Uniform Law on Arbitration (1966). It held that a clause as general as that in Article 59 of the FIFA Statutes did not satisfy this requirement.

In making this finding, the court considered various European and international instruments which give substance to the fundamental condition. In particular, the court pointed to Article 6 of the European Convention on Human Rights (ECHR), which guarantees the right to a ‘fair and public hearing… by an independent and impartial tribunal established by law’ and cannot be waived lightly. It also noted the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which emphasises the importance of the parties’ true consent to arbitration proceedings, and the concern to avoid the party in a position of greater economic power imposing on the other party a general clause.

Significance

The potential impact of RFC Seraing [2018] is significant – at least in Belgium. Though there is a chance that the decision could be appealed to Belgium’s Supreme Court, the decision as it stands largely undermines the position of CAS as FIFA’s ultimate dispute resolution chamber and raises questions about the future of sports arbitration.

Indeed, there are several other SGBs (such as the International Olympic Committee) who include arbitration clauses in the "forced" and "general" manner that were found by the court in RFC Seraing [2018] to be unlawful. The exception to this may occur when it is in regards to jurisdiction over a limited and sufficiently specific area such as doping disputes. However, many SGBs designate arbitration as being the means to resolving any regulatory dispute. As such – for the time being at least – the consequence of RFC Seraing [2018] is that Belgian athletes, clubs, or other sporting participants may be able to avoid the jurisdiction of CAS, or similar arbitral bodies.

Reacting to the RFC Seraing [2018] decision, the International Council of Arbitration for Sport released a statement arguing that the decision should be interpreted narrowly. In their view:

[T]he problem lies only with the wording of the CAS clause in the FIFA Statutes; such drafting issue does not affect the jurisdiction of CAS globally. The [Belgian] Court neither expressed any objection nor reservation towards sports arbitration as a dispute resolution mechanism globally, nor criticised the CAS system.

Furthermore, no CAS arbitration clauses have been declared “illegal” in the [Belgian court’s] judgment. Such judgment also does not revisit the reasons expressed by the German Federal Tribunal in the [Pechstein] case, whose decision confirmed the status of CAS as a genuine independent arbitration tribunal.

However, it is possible to read a wider significance into the judgment, given the references that were made to fundamental principles. For example, the concerns raised about Article 6 of the ECHR, consent and the power differential in arbitration clauses are of particular relevance in sport; their mention may therefore reflect a deeper apprehension about their use across the board. The existence of a “specific legal relationship” protects against these issues, as it (impliedly) suggests that the position has been specifically negotiated and delimited. The finding of a lack of such a relationship is influenced by these concerns.

If such clauses are rejected in Belgium, it may not be long before other jurisdictions follow, particularly if the monopolistic position of CAS is weakened.

Is "Forced Arbitration" Satisfactory?

The Importance of Consent

The very concept of "forced arbitration" is questionable. All international conventions and domestic legislation, including the AA 1996, consider the consent of the parties to the arbitration vital. There is no arbitration unless both parties agree to it.

In sport, as Antonio Rigozzi and Fabrice Robert-Tissot have explained, this consent is artificial. The arbitration clause is never negotiated or the product of a bargain in any real sense; it is imposed on a ‘take it or leave it’ basis. If a football player did not want to submit to arbitration, their only option would be to not play football at all. This is no choice and, as such, consent to such a clause is not ‘real’. This is even more significant when – as was held in Modahl v British Athletics Federation [2001] – it is remembered that obligations under SGB regulations can be implied merely by participation.

Such an argument was accepted by the Spanish Supreme Court in the Roberto Heras [2012] case, where a cyclist’s two-year doping ban was overturned by the ordinary domestic courts. The Tribunal Supremo held that there was no ‘free and voluntary submission to CAS’, which was sufficient to reject CAS’s jurisdiction.

Consent is of particular importance in arbitration, because the process explicitly ousts the jurisdiction of the ordinary domestic courts. Indeed, while Lord Denning MR in Enderby Town FC v The Football Association [1971] Ch 59 rejected the idea that SGBs could explicitly oust the courts’ jurisdiction, it is actually the case that these arbitration clauses do just that. Access to the courts is a fundamental part of Article 6 of the ECHR, and the rule of law. Though courts can perform a limited reviewing function of the arbitration award, the parties – by agreeing to arbitration – ultimately waive these rights.

Arbitration vs Litigation

The exclusion of the ordinary domestic courts is also significant in a substantive sense, as arbitration is not governed by the same enforcement procedures and there is no formal evidence process. Though there are measures in place to promote the enforcement of arbitral awards, they are not as watertight as court orders and rely heavily on the parties’ good faith. The lack of evidential procedures means no “discovery” and a reliance on the arbitrator’s skill in determining what is admissible. Court proceedings are also public, while arbitration is private. For these reasons, a party may prefer the jurisdiction of the ordinary domestic courts.

Arguably more important, however, is the fact that the judiciary – as part of the state – is typically subject to the ECHR. In English law, courts are liable as public bodies under the Human Rights Act 1998. Parties are therefore afforded greater protection in the ordinary courts than they are in arbitration, in which the arbitrators are simply private individuals.

There has also been concern over the independence of sports arbitration tribunals, as they are often established by SGBs themselves and – though there are measures to guarantee independence – they maintain an obvious link. Independence, though always essential, is of particular concern where an athlete (or other participant) wishes to challenge the rules of an SGB per se, rather than just their application.

Indeed, the independence of CAS was famously questioned in the Pechstein case, where the Munich Court of Appeal ruled that a “forced arbitration” clause was invalid as an abuse of the International Skating Union's dominant position. This saw the CAS award set aside as contrary to public policy, and the arbitration system held to be biased in favour of SGBs.

Though the Munich Court of Appeal’s decision was subsequently overturned by German Federal Court of Justice (the BGH) in DESG and ISU v Pechstein [2016], its impact was nonetheless felt: CAS undertook a process of reform in an attempt to make itself more independent from the International Olympic Committee.

Broad Arbitration Clauses

Though arbitral tribunals have made efforts to become more independent, it remains true that the arbitration clauses of some SGBs are particularly broad. Of course, this was the reason FIFA’s arbitration clause was found invalid in RFC Seraing [2018]. When the powers are so broad, it becomes even more important that the consent of the parties is as real as possible.

A series of recent English High Court decisions demonstrate how broad, and thus unpredictable, these clauses can be. Davies v Nottingham Forest Football Club Limited [2017] EWHC 2095, Bony v Kacou [2017], and Mercato Sports v The Everton Football Club Company Ltd [2018] all involved debate over the true scope of an arbitration clause included in the Football Association’s rules, which applies to ‘any dispute or difference’ arising between ‘Participants’.

Regrettably for legal certainty, each case provides a different answer. Even more regrettable was the conclusion in Mercato Sports [2018] that there is a possibility that an arbitration agreement can be implied; this is a long way from the express written agreement envisioned by the AA 1996.

A Human Rights Violation?

Given the important rights at stake – namely, those guaranteed by Article 6 of the ECHR– the European Court of Human Rights (ECtHR) found in Tabanne v Switzerland [2012] that it is essential that an agreement to arbitrate is made voluntarily.

However, the ECtHR also made clear that a waiver would only be involuntary where it is ‘compulsory’; a term it defined as meaning “required by law”. It was primarily for this reason that the English Court of Appeal in Stretford v Football Association [2007] held that the Football Association’s arbitration clause, known as Rule K, was compliant with Article 6 of the ECHR:

Clauses like Rule K have to be agreed to by anyone… who wishes to have a players’ licence, but it does not follow that the arbitration agreement contained in them was required by law or compulsory. To strike down clauses of this kind because they were incompatible with article 6 on that basis would have a far-reaching and, in our opinion, undesirable effect on the use of arbitration in the context of sport generally.

Notwithstanding this decision, it is argued that accepting such a low degree of voluntariness is unsatisfactory. An agreement can be involuntary without being required by law. A more fact-sensitive approach should be adopted, considering the reality of the consent in the circumstances. Such an approach would be consistent with English law’s protection against unfair terms under the Unfair Contract Terms Act 1977.

For this reason, it is submitted that “forced arbitration” clauses in SGB regulations are prima facie incompatible with Article 6 of the ECHR. However, that is not to say SGBs are violating Article 6 of the ECHR – there will be no violation if the incompatibility can be justified as proportionate in pursuit of a legitimate aim. This is where it is argued that the reasoning in Stretford [2007] is problematic. Rather than find “forced arbitration” clauses compatible with Article 6 of the ECHR– partly due to concerns about the impact of a decision to the contrary – the Court of Appeal should have noted their incompatibility before explaining why a violation had nonetheless not been committed.

Indeed, this seems to be the common consensus. “Forced arbitration” clauses in sport are justified as they bring advantages for the parties and for the administration of justice. As Nick de Marco QC has observed, they are a ‘necessity’. Arbitration is quicker and cheaper than going to court and can be conducted in private. This regularly provides advantages to both sides: most athletes cannot afford the legal costs involved in litigation, and benefit from having their disputes resolved as quickly as possible. Moreover, where an athlete is accused of doping, for example, the greater privacy is also appreciated.

The specialist nature of sports arbitration tribunals is also significant. The arbitrators usually have extensive experience of sport and/or sports law, allowing for better and more consistent decision-making – the development of the lex sportiva through CAS jurisprudence is the greatest example of this. It was these policy reasons which saw the BGH in Pechstein [2016] overturn the Munich Court of Appeal’s decision.

Therefore, though “forced arbitration” may be incompatible with Article 6 of the ECHR, there is nevertheless no clear ECHR violation given the use of arbitration can be justified. That said, there is still room to argue that such clauses should be invalid in private law, as they stray a long way from what is envisioned by international arbitration conventions and domestic legislation.

Reform

Clearly, the use of “forced arbitration” in sport is unsatisfactory, and there is a strong case for reform. The RFC Seraing [2018] decision is a step in the right direction. Narrower, more specific clauses restrict the power wielded by SGBs and are more in keeping with the in-built safeguards of arbitration legislation. Furthermore, SGBs should continually ensure that their arbitration procedures provide for a fair process and have all the necessary guarantees, in protection of fundamental rights.

However, it is argued that reforms should go further still. In order to give greater legitimacy to the arbitration process, “forced arbitration” clauses should include a right of refusal for athletes (typically the weakest parties in sports disputes). This would allow for arbitration to be based on true consent – it would only be used where it is genuinely advantageous for both. Where the weaker party considers litigation to be more advantageous, it is far harder to justify an SGB forcing them to arbitrate.

Alternatively, sports arbitration clauses should only be upheld where they are the result of a genuine bargain between the parties, whether this takes the form of an express contract between an athlete and their agent, say, or an agreement between athletes and SGBs resulting from collective bargaining. This would lend far greater legitimacy to sports arbitration and, in the absence of a right of refusal, would make it far more satisfactory.

Conclusion

“Forced arbitration” should not be as widely accepted as it is in sport. Though it does not constitute a violation of human rights law, it is nonetheless unsatisfactory as it is based on an artificial construction of ‘consent’. The RFC Seraing [2018] decision is a positive step which affords protection to the weaker parties in sports arbitration, albeit that its significance is confined to the Belgian jurisdiction for the time being – CAS is not on the brink of collapse.

However, it should serve as a wake-up call to SGBs and their administrators to review their arbitration clauses and consider what is in the best interests of athletes. Whether RFC Seraing [2018] will be the catalyst for further legal action remains to be seen, but it is hoped that, like the Pechstein case, it at least acts as a vehicle for reform.

For the latest articles straight to your inbox, you can subscribe for free. Alternatively, follow @KeepCalmTalkLaw on Twitter or Like us on Facebook.

Tagged: Alternative Dispute Resolution (ADR), Contract Law, Regulators, Sport Law, Trade

Comment / Show Comments (0)

You May Also Be Interested In...

Sports Arbitration Revisited Pt II: Mutu and Pechstein v Switzerland

16th Oct 2018 by Ben Cisneros

Sports Arbitration Revisited Pt I: Mutu and Pechstein v Switzerland

9th Oct 2018 by Ben Cisneros

Fixed-Term Contracts in Football: Foul Play or Fair Game?

9th Feb 2018 by Ben Cisneros

Challenging the Call: Sporting Governing Bodies and Judicial Review

20th Oct 2017 by Ben Cisneros

The Consumer Rights Bill: Progression or Regression?

27th Nov 2013 by Georgia Mitchell

OfWhat? Are Regulators Protecting Consumers Sufficiently?

12th Nov 2013 by Georgia Mitchell

Section Pick November

Scotch Whiskey v Lord Advocate: A Neat Solution or The Law on the Rocks?

Editors' Pick Image

View More

KCTL News

Changing of the Guard: Moving Keep Calm Talk Law Forward

12th Aug 2018

An Anniversary or Two: Four Years of Keep Calm Talk Law

11th Nov 2017

Rising from the Ashes: The Return of Keep Calm Talk Law

18th Nov 2016

Two Years On, Keep Calm Talk Law’s Legacy is Expanding

11th Nov 2015

Keep Calm Talk Law's First Birthday

11th Nov 2014

Twitter

Javascript must be enabled for the Twitter plugin to function. Click below to visit us on Twitter.

Free Email Subscription

Subscribe to Keep Calm Talk Law for email updates, and/or weekly roundups. You can tailor your subscription on activation. Both fields are required.

Your occupation / Career stage is used to tailor your subscription and for readership monitoring.

Uncheck this box if you do not want to receive our monthly newsletter.

By clicking the Subscribe button, you agree to our privacy policy and terms of service. Please ensure you read these in full.

Free Subscription