Mandatory Sports Arbitration After the Pechstein Decision

An English translation of the judgment can be read here. The CAS can be relieved that it has not been criticised as inherently unfair; but could the German Court’s reasoning suggest other sports dispute resolution bodies are more vulnerable?

Ms Pechstein is a German speed skater who signed up to a mandatory arbitration agreement (providing for the determination of disputes by the CAS) with the ISU in order to participate in the World Championships in 2009. She was subsequently banned for a doping offence, and appealed the decision of an ISU disciplinary commission to the CAS. The CAS dismissed her appeals but – undeterred – Ms Pechstein, having first exhausted available actions in the Swiss courts to no avail, commenced proceedings in Germany, claiming the ban was unlawful and that she should be awarded damages.

The central issue in the case was whether the agreement to arbitrate disputes before the CAS was valid, and in particular, whether – contrary to antitrust law – it amounted to an abuse of the ISU’s dominant position in the relevant market for speed skating events. This issue turned on whether the CAS was a sufficiently independent and neutral tribunal for its imposition on athletes to be fair.  

Ms Pechstein argued that the manner in which arbitrators were selected for the CAS had the effect of stacking tribunals against athletes. In particular, she contended that the International Council of Arbitration for Sport (‘ICAS’), which was responsible for drawing up the list of possible CAS arbitrators, is itself imbalanced, as 60% of its members are chosen by sports federations, while only 20% supposedly represent the interests of athletes (the remaining 20% being apparently independent of both groups). The imbalance in the composition of ICAS was likely to be reflected in an imbalance in the list of possible arbitrators. This argument had succeeded in the lower court (Munich’s Oberlandesgericht).

The Bundesgerichtshof disagreed with both Ms Pechstein and the Oberlandesgericht. True, there was an apparent structural imbalance in the appointment of CAS arbitrators. But this would only matter if athletes and sports federations were to be regarded as occupying opposing “camps”, with consistently differing interests. At least as far as anti-doping was concerned, that was not the case: athletes and federations had a common interest in ensuring that anti-doping rules were consistently and rigorously applied. Moreover, there were safeguards insofar as arbitrators undertook to remain impartial, and there was a procedure for objecting to and removing arbitrators from a tribunal. Finally, each party in CAS was entitled to choose its arbitrator, albeit from a possibly imbalanced list.

More generally, the Bundesgerichthshof seemed to view the structural balance of the CAS as regrettable but inevitable, making the rather resigned comment that it was “in the nature of things” that sports bodies should have greater opportunities to appoint arbitrators (§38). In a similarly aporetic vein, the Court said (§50):

“No one has succeeded as yet in drawing up a system of rules capable of maintaining international sports arbitration, while, at the same time, completely avoiding the deficiencies in connection with the appointment of arbitrators and the proceedings in general that results from the significant influence exercised by the international sports federations and the Olympic Committees.”

The German Court therefore gives the CAS a “clean-ish” bill of health. The CAS is not perfect, but it is good enough for a mandatory agreement to arbitrate before it not to amount to an abuse. The question raised by the judgment is: can the same be said of other sports dispute resolution bodies?

According to the reasoning in Pechstein, a dispute resolution body whose decision-makers were exclusively appointed by a sports governing body might not be seen as sufficiently independent. There is a clear domestic example in FA disciplinary commissions (albeit that the FA expressly characterises these as non-arbitral). Members of these commissions are all appointed by the FA’s own various committees and members of first instance and appeal panels are drawn from the same limited pool, meaning that the same people frequently review one another’s decisions. This raises real concerns as to independence and neutrality, as Nick De Marco has highlighted.

Similarly, concerns as to independence may arise in a dispute where the interests of players and the sports governing body are diametrically opposed (as they were held not to be in the field of anti-doping in Pechstein). An example might be a dispute concerning national team player contracts, such as those that have historically plagued the West Indies test cricket team, and currently threaten Australia’s participation in the 2017-18 Ashes. In such a dispute, where a direct conflict between the interests of athletes and those of the governing body is more obvious, an imbalance in a list of arbitrators of the kind suffered by the CAS may be more of a threat to neutrality.

The issues are complicated, and there are powerful countervailing arguments in favour of a uniform system of sports dispute resolution, which helped carry the day in Pechstein. The German Court’s decision, however, may open the door to further creative challenges to mandatory dispute resolution agreements in the sporting world, whether based on antitrust law or otherwise.