The Legality of the Arbitration Agreements in favour of CAS (Pechstein) Part 2

In this two part article Despina Mavromati, the Head of Research and Mediation at the Court of Arbitration for Sport (CAS), reviews the German Federal Tribunal (Bundesgerichtshof, BGH) decision in the long-awaited Pechstein case which was handed down on the June 7, 2016 (“BGH Ruling”).¹

Part one provides a background to the case and reviewed the BHG Ruling focusing on the finality of arbitral awards, the qualification of CAS as a genuine court of arbitration and the scope of the arbitration agreement between the Athlete and the International Skating Union (ISU).

Part two provides a reviews the BHG Ruling's findings in regards to the compatibility of the arbitration agreement with German anti-trust laws by examining, in particular, the athlete’s right to a fair trial; the constitutional rights of the athlete and the federation; the status of the Swiss Federal Tribunal and the issue of human rights in sports arbitration; the compatibility of sports arbitration clauses with European competition law; and finally the conformity of CAS sports arbitration clauses with Swiss Law.

All views expressed in this article are her own personal views.

The compatibility of the arbitration agreement with German anti-trust laws (Art. 19 GWB)

In the third part of the decision, the BGH examined the compatibility of the arbitration agreement between the Athlete and the ISU with the relevant provisions of German anti-trust law (Art. 19 GWB).² The BGH upheld the Munich Court of Appeals (OLG) ruling that the ISU falls within the scope of application of Art. 19 GWB: ISU has a dominant position in the relevant market, as the organization of sports events constitutes an economic activity and ISU has a monopoly organizing the world championships in speed skating. In order to establish the prohibition of Art. 19 GWB, an abuse of dominant position has to be established: siding with the OLG München ruling, the BGH found that the imposition of an arbitration clause by a sports association is not per se an abuse of a dominant position.³ The BGH took issue with the OLG München’s ruling finding that ISU does not abuse its dominant position, thereby confirming the validity of the arbitration agreement between the parties under Article 134 BGB (Bürgerliches Gesetzbuch, German Civil Code).⁴

The BGH applied a balance of interest test (under Art. 19 par. 1 and par. 4 BWG) and divided its findings into five categories:

1. It concluded that ISU did not abuse its dominant position in the market based on the parties’ shared interests (under (aa));
2. that the imposition of the arbitration agreement by the ISU did not contradict the Athlete’s right to access to justice;
3. her right to exercise her profession (Art. 12 GG) (under (bb)); and
4. her right to a fair trial under Art. 6 ECHR (under (cc)).
5. The conformity of ISU with Art. 102 (competition rules applying to undertakings) of the Treaty on the functioning of the European Union (TFEU) (under dd)) and the validity of the arbitration agreement under Swiss law (under ee)).⁵

The Right To A Fair Trial

More specifically, in its first line of arguments (aa), the BGH juxtaposed the Athlete’s interest in a fair trial by an independent (arbitral) tribunal to ISU’s interest in efficient and international sports arbitration procedures. The BGH concluded that both parties shared the interest in having an efficient dispute resolution mechanism, as this ensures uniform standards and equal treatment of all athletes across the world in doping matters.⁶ The BGH went on to stress the important advantages and the necessity of having uniform anti-doping rules through the adoption of the WADA Code, concluding that it would not be feasible to completely detach sports arbitration from its links to sports federations and the IOC.⁷ In this respect, the BGH followed the argumentation adopted by scholars that both athletes and sports federations share the interest in the swift resolution of disputes and that the federations do not impose the arbitration agreements simply in order to abuse their dominant position in the market.⁸

Balancing Constitutional Rights Of The Athlete And Federation

In its second line of arguments (under bb)), the BGH juxtaposed the constitutional rights of the Athlete to the constitutional rights of the federation, finding that both parties’ rights deserve equal protection.⁹ As to the constitutional right of access to justice under Art. 2 par. 1 GG, the BGH held that it is possible to agree to have recourse to arbitration to the extent that this is the expression of the free will of the parties to the agreement (“freiwilllig”).¹⁰ In a much criticized part of the decision,¹¹ the BGH concluded that the Athlete entered into the arbitration agreement voluntarily.¹² It then justified this finding by adopting a wide interpretation of what constitutes a voluntary acceptance of arbitration. The BGH referred to its consistent case-law accepting an “involuntary” waiver of the exercise of fundamental rights (like the waiver of Art. 2 par. 1 GG) in cases of “physical” or “mental” violence against one of the parties; of fraud; or in cases of lack of declaration of intent. In the case of an arbitration agreement signed by both parties, whereby both contractual parties define the terms, none of the parties appears to have accepted to waive its human rights against its free will.¹³

More specifically, the Athlete signed the arbitration agreement in January 2, 2009, in order to be able to participate in the World Championships. However, in the BGH’s view, this precise instance does not meet the aforementioned conditions of threat, fraud or mental constraint as interpreted by the BGH and The Federal Constitutional Court ("Bundesverfassungsgericht"). Most importantly, the fact that the Athlete did not wish to sign the arbitration agreement does not mean that the athlete was “forced” to sign it, all the more because, within the context of a contractual agreement, both parties to the contract undertake mutual obligations.¹⁴

Having confirmed that the arbitration agreement is, in fact, a contract signed by both contractual parties whereby they undertake mutual rights and obligations, the BGH acknowledged ISU’s bargaining power in this contractual relationship. Recalling that ISU has the monopoly of organizing the world ice speed-skating championships, the BGH noted that the signing of the arbitration agreement by the Athlete was in essence defined unilaterally by the ISU (“fremdbestimmt”).¹⁵