Pechstein v International Skating Union OLG Munchen, U 1110/14 Kart (15 January 2015)

The German case of Pechstein v ISU has thrown some doubt over the validity and enforceability of arbitral awards rendered by the Court of Arbitration for Sport, the arbitral tribunal established to determine international sporting disputes. Pechstein may provide a future avenue for challenging sports arbitral awards globally, and in Australia.

The Court of Arbitration for Sport (CAS) is the arbitral body established to determine most international Olympic (and some non-Olympic) sporting disputes.

However, a recent decision of a German court in Pechstein v ISU has thrown some doubt over the validity and enforceability of awards rendered by the CAS. This note considers briefly the creation of the CAS, the Pechstein decision, and issues which arise out of the decision.

THE CAS AND INTERNATIONAL SPORTS DISPUTE RESOLUTION

To enable fast and cost effective forum for resolving international sporting disputes, and having regard to the jurisdictional issues faced by athletes in bringing disputes with international sporting bodies before national courts, the CAS was created.

Contrary to its name, the CAS is not an international court of law, but rather an arbitral tribunal. Its jurisdiction to decide Olympic (and some non-Olympic) sporting disputes derives from various sporting rules and regulations. For example, the Olympic Charter and the World Anti-Doping Code confer jurisdiction on the CAS to determine certain disputes.

International arbitral awards rendered by the CAS may be recognised and enforced by national courts under the New York Convention 1958. In Australia, they are recognised and enforced under section 8 of the International Arbitration Act 1974 (Cth) (“IAA 1974”).

With its “seat” in Switzerland, any proceedings to set aside a CAS award must be brought before the Swiss Federal Tribunal (see, eg, Raguz v Sullivan [2000] NSWCA 240).

Notwithstanding this, national courts may (pursuant to s8(7)-(7A) IAA 1974) refuse to enforce CAS awards if to do so would be contrary to “public policy”. This is what occurred in Pechstein.

PECHSTEIN V ISU

In 2009, Olympic Gold medallist skater Claudia Pechstein tested positive for a banned substance. The International Skating Union (“ISU”) banned her from competing for two years.

Pursuant to an arbitration clause in her athlete agreement, appeals against ISU decisions must be brought before the CAS. In two CAS appeals, she was unsuccessful, the CAS upholding her two year suspension (see CAS 2009/A/1912 & 1913 and CAS OG 10/04).

Pechstein applied for judicial review to the Swiss Federal Tribunal, but those appeals were dismissed (see Case 4A_612/2009 and Case 4A_144/2010).

Subsequently, Pechstein brought a damages proceeding against the ISU in a German civil court – the Landesgericht of Munich. The Landesgericht held that the arbitration clause was invalid, however Pechstein was precluded (res judicata) from challenging the CAS’ jurisdiction.

Pechstein appealed to the Oberlandesgericht of Munich. Here, however, the Court allowed the appeal, determining that the CAS awards were invalid on public policy grounds under Article V(2) New York Convention. The Court’s reasons were as follows:

  1. The ISU is a monopolist in the market for organising speed-skating competitions worldwide, and therefore holds a dominant position in that market. It noted that professional skaters must compete in all ISU-organised competitions to earn a living;
  2. By sporting associations offering their services in the sports competition market, this constitutes an undertaking in the provision of goods and services from a dominant position;
  3. However, the imposition of a CAS arbitration clause by the ISU is not, per se, an abuse of the ISU’s dominant position. To the contrary, there are “sound and weighty” reasons for allowing international disputes between athletes and international sporting federations to be determined by a sporting tribunal rather than national courts. Those reasons include harmonisation and uniformity of global sports dispute decision making and procedure.
  4. The CAS was not a, however, “neutral arbitral tribunal”, but rather there was a “one-sided designation of the potential arbitrators [which] favour the [sporting] associations”. It noted that, under the CAS rules, sporting associations had a “decisive influence” over the selection, composition and nomination of CAS arbitrators. Those factors embedded a “structural imbalance” that threatened the CAS’ neutrality, which created a risk that such arbitrators “predominantly or even entirely favour” the sporting associations over athletes in determining their disputes.
  5. Therefore, the imposition of a CAS arbitration clause in the circumstances, was an abuse of the ISU’s dominant position, violated antitrust law, and therefore was invalid under Article V(2) New York Convention 1958.

THE CAS AND INTERNATIONAL SPORTS DISPUTE RESOLUTION

Pechstein was decided on a breach of German (and possibly European) competition law regarding abuse of market power. So what relevance does it have for us?

First, from a global sport dispute resolution perspective, the decision (potentially) undermines the standing of the CAS as the “Supreme Court for World Sport”. The author notes that the rules for nomination and addition to the CAS list of arbitrators have been amended in recent years. Therefore, any jurisprudential value to derive from the Pechstein case (as to the validity of CAS awards rendered since those amendments) is questionable.

Second, on a pure competition law analysis, persuasive analogies can be drawn from European competition law (as is often done with §2 of the US Sherman Act), when considering the proper interpretation and application of the equivalent Australian provision found at s46 Competition and Consumer Act 2010 (Cth) (CCA). Therefore, any case law dealing with, for example, Article 102 on the Treaty of the Functioning of the EU, may guide the application of s46 CCA 2010.

Third, as Australian athletes are often required to sign mandatory arbitration agreements, to either the CAS or another sporting arbitral tribunal, Pechstein serves as a useful reminder to consider the composition of any such arbitral body to determine whether or not the members hearing the dispute are sufficiently neutral and impartial to provide a fair hearing to the athlete.

Finally, similar public policy arguments based on misuse of market power by sporting bodies over athletes in imposing mandatory arbitration clauses were not raised nor considered by the Victorian Supreme Court nor the Court of Appeal in the recent case of Van Der Garde v Sauber Motorsport. Therefore, in the author’s opinion, such arguments may be open to consideration in future similar cases.