15 September 2016

Case Report: German Supreme Court upholds CAS arbitration agreement and award

In a landmark decision dated 7 June 2016 (file no. KZR 6/15) the German Supreme Court has confirmed that the Court of Arbitration for Sport in Lausanne (CAS) is a properly constituted arbitral tribunal and that an arbitration clause included in agreements between an athlete and a monopolistic international sports association referring all disputes to the CAS was generally valid.

Procedure in the lower courts

In 2009, the International Skating Union (ISU) decided to suspend Ms Claudia Pechstein, a highly honoured German speed skater and multi-olympic-medalist, because of an alleged doping infringement, when blood tests taken prior to the World Championship revealed an unusually high quantity of so called Reikulozyten in her blood. After unsuccessfully challenging the decision in arbitration proceedings before the CAS, as well as before the courts of the seat in Switzerland, Pechstein initiated further litigation in the German courts applying for a declaratory judgment that the CAS tribunal’s decision to suspend her was illegal. Pechstein also filed a claim for compensation for the loss suffered during the suspension, including compensation for pain and suffering.

The first instance German court dismissed Pechstein’s claims. She appealed and the second instance court ruled that the arbitration clause was invalid and that the German courts had jurisdiction over her compensation claim. The second instance court found that ISU was a monopolistic association which had abused its power when imposing on the athlete an arbitration clause referring all disputes to the CAS. The court determined that the arbitration proceedings with the CAS constituted an imbalance of power between the athletes and the sport associations as the lists of CAS arbitrators were mostly composed of persons closely connected to sport associations and not to athletes. For these reasons, the arbitration award rendered by the CAS constituted a violation of German public policy and was found to be null and void.

The Supreme Court’s decision and its reasoning

The Supreme Court ruled held that the arbitration clause referring all disputes to CAS and the CAS arbitration award itself were valid. The Supreme Court found that CAS arbitral tribunals were “proper” (echte) arbitral tribunals: they are independent, as CAS was not integrated in any sport association, as well as impartial. The fact that there was a potential imbalance in the CAS’s arbitrator list did not affect the impartiality of CAS tribunals. The Supreme Court refused to draw any conclusion regarding the partiality or impartiality of an arbitration tribunal by simply counting the arbitrators for each “side” of the institution’s arbitrator list, noting that CAS arbitrators have, in any event, an obligation to disclose all relevant circumstances that might potentially jeopardize their impartiality.

To further support its decision, the Supreme Court weighed the constitutional rights of Pechstein (to have full access to justice and a due process of law) against the constitutional rights of ISU (to constitute itself as an association). It found that the athlete’s constitutional rights had been affected by the CAS arbitration clause but had not been violated. Additionally, the Supreme Court held that Pechstein’s rights under Article 6 of the European Convention on Human Rights had not been infringed.

The Supreme Court concluded that (i) even though ISU was a monopolistic association, it did not abuse of its position and (ii) that the CAS arbitration clause was validly made in accordance with Sec. 1025 para 2, 1032 para 1 of the German Code of Civil Procedure (ZPO).

Significance of the decision

This decision of the German Supreme Court establishes a solid basis for the arbitrability of international disputes between athletes and monopolistic sports associations and should reduce the number of such disputes brought before domestic courts. For monopolistic international sports association this is a highly welcome result. For athletes, this decision could be a disappointment because CAS arbitrations involve the shifting of the burden of proof requiring the athlete to prove that he or she has not committed any doping infringement. However, with a global sports industry composed of athletes competing internationally and being organized in international associations, it seems a reasonable and indeed necessary step not to leave the question of jurisdiction to domestic courts.

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