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The Munich Court of Appeal (“OLG”) has determined that a decision by the Court of Arbitration for Sport (“CAS”) is void, and that its arbitration award should not be recognised, in a startling decision which will shake the foundations of the sports’ international dispute resolution provider as well as those governing bodies which make the CAS their arbiter of choice.

The determination, on 15 January 2015, was made in an appeal brought by German speed skater Claudia Pechstein (“Ms Pechstein”). The CAS had upheld a two-year ban for blood doping in 2009. Ms Pechstein challenged this ban, first in the Swiss Federal Tribunal and then through the German courts, on the basis that the results were due to an illness rather than her taking illicit drugs.

The OLG made two key findings:

First, it decided that no valid arbitration agreement had been concluded between Ms Pechstein and the International Skating Union (“ISU”) because, in reality, Mr Pechstein had no choice but to enter into the agreement if she wanted to take part in the ISU’s World Speed Skating Championship. The ISU was in a dominant position in the sport and had abused this position by imposing the clause. If this argument was to have general application, one could see it having the potential to undermine arbitration clauses in many other sports’ regulators’ rules.

Secondly, the CAS process was unfair. Parties were not treated equally because of the way in which the CAS’ panels were chosen. The secretariat which oversees the arbitration process is controlled, according to the OLG, by a majority of individuals nominated by the International Olympic Committee, the national Olympic committees and the international sports federations. That skewing towards sports’ governing bodies undermined both the closed list of arbitrators from which parties are required to nominate and the appointment of the president of any panel, who is chosen by the CAS.

As a result the OLG determined that the CAS award in the Pechstein case would not be recognised as it undermined German public policy.

However, the story is yet to conclude. The case is to go on appeal to the German Federal Supreme Civil Court. Further, the European Court of Human Rights is yet to decide a complaint brought by Ms Pechstein about the alleged failure of the Swiss Federal Tribunal to sufficiently review the CAS.

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