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The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Can (national or EU) public policy stop CAS awards? By Marco van der Harst (LL.M, PhD Candidate and researcher at the AISLC)

Introduction[1]

The Court of Arbitration for Sport (CAS) registers approximately 300 cases every year. Recently, the Swiss Federal Supreme Court – which is the sole judicial authority to review arbitral awards rendered in Switzerland – reminded in the Matuzalém Case (Case 4A_558/2011) that CAS awards may be enforced in other States that are parties to the New York Convention on the recognition and enforcement of foreign arbitral awards.

However, in that case, the Federal Court failed to recognize the main intent of FIFA, which is to avoid foreign State courts’ interference – even to the detriment of a plaintiff’s right of having the option to challenge a CAS award in a non-Swiss jurisdiction. Article 67(2-3) FIFA Statutes requires that provision shall be made to CAS arbitration and prohibits FIFA members to have recourse to courts of law unless provided for by FIFA regulations. Member associations must accordingly insert an arbitral agreement in their statutes on the recognition of CAS to resolve disputes under Article 10(4)(c) FIFA Statutes. Regarding labour-related disputes, Article 22 FIFA Regulations on the Status and Transfer of Players in conjunction with Article 5 FIFA Statutes 2003 has carved out an exception to the aforesaid FIFA ‘exclusion’ and ‘allows’ FIFA members to seek redress before civil courts. Nonetheless, FIFA could still use its disciplinary power to enforce decisions (e.g. CAS awards). In addition, Article 64(1) FIFA Disciplinary Code explicitly stipulates that ‘[a]nyone who fails to pay another person […] or FIFA … money…, even though instructed to do so by … a subsequent CAS appeal decision …, or anyone who fails to comply with another [CAS appeal] decision …, will be disciplinary sanctioned (e.g., fine, ban on any football-related activities, expulsion (member association), relegation (club) and transfer ban (club)). This is a typical case of so-called ‘arbitration with a reduced consensual character’ (Steingruber 2012), which is contrary to the consensual spirit that underlies private arbitration.

It should also be noted that in the Cañas case (Case 4P.172.2006, par. 4.3.2.2) the Swiss Federal Supreme Court recognized and tolerated the athlete’s reduced consent to arbitration (under Article 2 of the Player's Consent and Agreement to ATP Official Rulebook) in order to be able to practice tennis as a professional. It is moreover ‘based on the continuing possibility of an appeal acting as a counterbalance to the “benevolence” with which it is necessary to examine the consensual nature of recourse to arbitration where sporting matters are concerned’ (Case 4P.172.2006, para. 4.3.2.3). In other words, the application of ex post reviews of CAS awards by the Federal Court is a sine qua non to its acceptance of an athlete’s reduced consent to arbitration.

CAS awards could be challenged before courts, however, if they are incompatible with public policy (of Switzerland or EU Member States et cetera). 


CAS awards – Swiss notion of substantive public policy

As far as arbitration is concerned, national courts generally adopt a deferent attitude to arbitration, mainly reviewing the due process components and only entering substantial matters if they are incompatible with substantive public policy. Accordingly, the parties involved can only challenge arbitral awards on substantive grounds if they contravene the national notion of substantive public policy.

The Swiss Federal Supreme Court has only once annulled an international arbitral award rendered in Switzerland for being incompatible with substantive public policy. Interestingly, the case concerns a CAS (appeal) award.

In case an international arbitral award such as a CAS award is rendered in disregard of fundamental principles of substantive law, and consequently cannot be reconciled with the essential and widely recognized system of values that from a Swiss perspective should be part of any legal order, it violates the Swiss notion of substantive public policy. 

In the Matuzalém case (Case 4A_558/2011) of 2012, the Federal Court annulled a CAS award for being an excessive restriction of Matuzalém’s economic freedom and therefore contrary to the Swiss notion of substantive public policy. Moreover, the Federal Court found that:

-          The ban imposed for an unlimited period for being unwilling or being unable to pay the large amount of damages that was awarded in the first CAS award of 2011, is a self-constituted violation of public policy.

-          Matuzalém’s ban from all football-related activities is inappropriate because it would deprive him of the possibility to earn his working income as a professional footballer to fulfill his obligations, namely to pay the aforesaid debts.

-          The aforesaid ban on request of Shaktar Donetsk is unnecessary because the first CAS award may be enforced under the New York convention.

-          The abstract objective of enforcing compliance by Matuzalém was to be regarded as less important by CAS than his ban from all football-related activities. 

It should be noted that the national notion of public policy may vary per jurisdiction. Accordingly, enforcing arbitral awards that have been annulled at the seat of arbitration – e.g. the Matuzalém case – could still be enforced in e.g. Austria, Croatia, Denmark, France[2], Ireland, Luxembourg, The Netherlands[3], Poland and Spain.[4] However, arbitral awards that have been set aside at the seat of arbitration are likely to be refused enforcement in e.g. Germany, Hungary, Italy and the United Kingdom.[5] 


CAS awards – EU notion of substantive public policy

From an EU law perspective, it must be taken into consideration that enforcing arbitral awards like, e.g., CAS awards by Member States’ courts may affect the internal market. The Court of Justice already dealt with this topic and introduced a broad notion of public policy in the Eco Swiss Case (Case C-126/97) by ruling that Article 101 TFEU may be regarded as a public policy matter in the sense of Article V(2)(b) of the New York convention. In the Manfredi Case (Joined cases C-295/04 to C-298/04), the Court further stated (para. 31): ’Articles … [101-102 TFEU] are a matter of public policy which must be automatically applied by national courts …’. In other words, national courts do have an ex officio duty to exercise control during inter alia enforcement proceedings of arbitral awards. In the Nordsee Case (C-102/81), the Court further stressed the importance of ex post reviews of arbitral awards by national courts.

The latter is especially relevant in reference to their obligation to ensure the uniform application of EU law. The Court stated (para 13) that private arbitral tribunals are not to be considered as ‘any court or tribunal’ under Article 267 TFEU and therefore are not allowed to directly submit an application for a preliminary ruling on EU law. However, in case an arbitral tribunal is, inter alia, established by law, permanent, independent, has a compulsory jurisdiction, its procedure is inter partes and it applies rules of law, the Court of Justice recently (Case C‑555/13) characterised it as ‘any court or tribunal’. Consequently, a mandatory arbitral tribunal established in a Member State may refer questions to the Court of Justice for a preliminary ruling.

As regards to doping-related disputes, the WADA Code is mandatory in substance and must be followed by signatories like, e.g., National Anti-Doping Organizations. Moreover, all Member States have designated a National Anti-Doping Organization (Appendix 1 WADA Code) as the primary authority to adopt and implement inter alia anti-doping measures at the national level. In addition, Article 23.2.2 in conjunction with Article 13.2.1 WADA Code refers inter alia to the exclusive jurisdiction of the CAS Appeal Arbitration, which means that CAS has been recognized by all Member States as a mandatory arbitral tribunal (established in Switzerland) with regard to doping-related disputes. However, as opposed to the regulations of sports governing bodies like FIFA, the WADA Code explicitly mentions the application of ex post reviews of CAS awards by national courts.                                                       

According to the Court, reviewing arbitral awards should be limited in scope and refusing to enforce foreign arbitral awards (i.e. CAS awards) by national courts should only be possible in exceptional circumstances, both in the interest of efficient arbitral proceedings. As previously mentioned, national courts are generally deferent towards arbitral awards. Moreover, they do not review the way the law is applied by the arbitrators. A national court’s review is confined to the nature and impact of the decision and its procedural aspects. Accordingly, the Court accepted the national courts’ limited scope of review in reference to the principle of procedural autonomy to implement and enforce national and EU law. Moreover, in the interest of good administration, fundamental principles of procedure recognized by all Member States must prevail. This procedural autonomy finds its limit in the need to warranty the effet utile of EU competition law as fully as other public policy matters (i.e. principle of equivalence). Moreover, according to the Court, EU competition law is a fundamental provision for the realisation of the internal market and must therefore be regarded as a public policy matter by national courts when enforcing arbitral awards. Thus, the Court ruled that a national court’s limited review of arbitral awards must extend to EU competition law, which should be integrated in the Member State’s national notion of public policy in order to ensure that EU law actually takes effect (principle of effectiveness).

The Court furthermore stated that reviewing an arbitral award for being incompatible with public policy should only occur under exceptional circumstances. Only if the effects of enforcing an arbitral award by a national court contravene the most fundamental principles of law in the respective jurisdiction, it may be denied recognition and enforcement for being incompatible with public policy. In order to qualify as such, a competition law violation must therefore be regarded as very serious, e.g. a complete disregard of an obvious and serious violation such as a cartel. In addition, the Court especially referred to the prohibition laid down in Article 101(1) TFEU, which is primarily a matter of substance. In reference to the national courts’ limited scope of review, one can therefore argue that infringements to EU competition law may be regarded as substantive public policy violations during inter alia enforcement proceedings of arbitral awards.

Finally, competition law is not the internal market’s only fundamental provision. It could be extrapolated that the Court relied on a wide notion of public policy in Eco Swiss. For instance, the fundamental provisions of free movement may be applicable in a CAS award’s enforcement proceedings and could, in principle, qualify as public policy matters in exceptional circumstances. If, e.g., enforcement proceedings of the Matuzalém CAS award were sought before Member States’ courts, a violation of the freedom of workers (he played for Lazio Roma between 2008 and 2013) or service providers (e.g., personal sponsorship or endorsement deals) could be invoked to bar the recognition and enforcement of the award.


Conclusion

CAS awards are potentially fragile at the enforcement stage as they may contradict national States’ understanding of the public policy exception. This is even more so if one characterises EU competition law and EU free movement rights as public policy concerns. However, in practice the enforcement of CAS awards is very rarely used[6]. Sport governing bodies can rely on their contractual disciplinary power to ban athletes from the competition they organize and thus do not rely on national courts to enforce CAS awards. Nevertheless, banned athletes could initiate action for damages against sports governing bodies and force them to ask for the recognition and enforcement of the award in their defence plea. Thus, there is a very indirect (and protracted) way to challenge CAS award on the basis of EU public policy, but it is a windy and rocky legal path.


Epilogue

A personal message to Claudia Pechstein - German Speedskater and Olympic Champion (five gold, two silver and two bronze): Pursuant to Article 25(6) of the ISU Constitution, the ISU is also complicit and the respective CAS awards could accordingly be challenged for being incompatible with substantive public policy if they were to be enforced in a Member State …


[1] Notes are mostly ommitted. A comprehensive article will be published in 2014.

[2] E.g., Cour de cassation, 23 March 1994, Yearbook Commercial Arbitration, Vol XX (1995), p. 663.

[3] E.g., Amsterdam Court of Appeal, Case No. 200.005.269/01, April 28, 2009; Amsterdam Court of Appeal, Case No. 200.100.508/01, September 18, 2012.

[4] ICC Guide to national procedures for the recognition and enforcement of awards under the New York convention, ICC Court of Arbitration Bulletin (Vol 23, Special Supplement) 2012, p. 20.

[5] Ibid.

[6] It should be noted that, as far as we know, only one CAS ordinary award has actually been enforced in a Member State: IMFC Licensing B.V. v. R.C.D. Espanyol de Barcelona, Tribunal Superior de Justicia de Catalunya, 30 May 2012 (IMFC Licensing, B.V. v. R.C.D. Espanyol de Barcelona, S.A.D.) Yearbook XXXVIII (2013) pp. 462-464.

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Asser International Sports Law Blog | In Egypt, Broadcasting Football is a Question of Sovereignty … for Now! By Tarek Badawy, Inji Fathalla, and Nadim Magdy

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

In Egypt, Broadcasting Football is a Question of Sovereignty … for Now! By Tarek Badawy, Inji Fathalla, and Nadim Magdy

On 15 April 2014, the Cairo Economic Court (the “Court") issued a seminal judgment declaring the broadcasting of a football match a sovereign act of State.[1]


Background

In Al-Jazeera v. the Minister of Culture, Minister of Information, and the Chairman of the Board of Directors of the Radio and Television Union, a case registered under 819/5JY, the Al-Jazeera TV Network (the “Plaintiff” or “Al-Jazeera”) sued the Egyptian Radio and Television Union (“ERTU” or the “Union”) et al. (collectively, the “Respondents”) seeking compensation for material and moral damages amounting to three (3) million USD, in addition to interest, for their alleged breach of the Plaintiff’s exclusive right to broadcast a World Cup-qualification match in Egypt.  Al-Jazeera obtained such exclusive right through an agreement it signed with Sportfive, a sports marketing company that had acquired the right to broadcast Confederation of African Football (“CAF”) World Cup-qualification matches.

ERTU reportedly broadcasted the much-anticipated match between Egypt and Ghana live on 15 October 2013 without obtaining Al-Jazeera’s written approval, in violation of the Plaintiff’s intellectual property rights.


Arguments of the Parties

Plaintiff’s Position

The Plaintiff explained that its right was protected by various provisions of Law No. 82/2002 on the Protection of Intellectual Property Rights (the “IP Law”). Most notably, the Plaintiff referred to Article 139, which provides for copyright protection for both Egyptians and citizens of World Trade Organization member States, and Article 149, which grants copyright owners the right to transfer, in writing, all or some of their rights in the copyrighted content to third parties.

In addition, the Plaintiff stated that Articles 157, 158 and 159 of the IP Law gave it exclusive economic rights in the content it owned or acquired, which precludes the exploitation of broadcasting the match in any manner (including its reproduction and communication to the public) by a third party without its prior written authorization.

By broadcasting the match live on Egyptian channels without obtaining the Al-Jazeera’s prior written authorization, ERTU - the Plaintiff argued - breached the Plaintiff’s intellectual property rights that are protected under Egyptian and international law.  

Respondents’ Position

The Respondents emphasized the political nature of the decision to broadcast the match. They argued that Egypt’s executive branch of government was entitled to take decisions respecting the broadcasting of the match in the interest of Egypt, and its peace and security, without incurring any penalty or enduring judicial scrutiny.  The Respondents added that broadcasting the match was an activity that took place entirely within Egypt pursuant to an executive decision and, as such, was an act of State that was immune to judicial scrutiny. Accordingly, broadcasting the match did not violate any laws or agreements. 


Judgment on Jurisdiction

The Court began its assessment of the case by examining its jurisdiction in accordance with Article 109 of the Code of Civil and Commercial Procedures, which grants courts the power to rule on their own jurisdiction in any case before them.  Then, it consulted Law No. 13 /1979 relating to the Egyptian Radio and Television Union, as amended (the “ERTU Law”), which provided for the establishment of a national authority under the name of “Egyptian Radio and Television Union”.  Among other things, the ERTU Law states that the Union is (i) deemed a national authority that assumes all the functions and duties associated with audio-visual media and broadcasting services in Egypt; (ii) shall have a separate juridical personality; and (iii) shall be subordinated to the Minister of Information.

The Court established that the decision to broadcast this match was issued by ERTU, a national authority entitled to broadcast audio-visual media in Egypt for the purpose of achieving national interests and services, and ensuring collective interest in all aspects including sports.

Against this background, the Court concluded that the Union’s decision to broadcast the match fell within the Union’s mandate, which was to be exercised on Egyptian territory and without interfering with the sovereignty or law of another state.  Therefore, the decision to broadcast the game was, in the opinion of the Court, an act of sovereignty that may not be the subject of litigation; and the executive authority was permitted to take all necessary measures in Egypt’s interests, while enjoying immunity against court supervision.  

Finding that it lacked jurisdiction, the Court did not address the Plaintiff’s claims relating to its intellectual property rights.


Lessons Learned and Next Steps

The judgment raises several questions regarding the scope of sovereign powers that can be exercised by a State.  Most importantly, it provides a novel interpretation of what constitutes an act of State. Furthermore, the decision will likely push companies entering into broadcasting agreements with the Union to take various precautions, such as  subjecting potential disputes to international arbitration, as opposed to the supervision of local courts. 

The judgment comes as another blow to Al-Jazeera in Egypt, which saw three of its journalists sentenced by an Egyptian court to prison terms ranging from seven (7) to ten (10) years for charges that included spreading false news. One of the journalists, Peter Greste, has already been deported to his native Australia pursuant to a decree law that allows the deportation of foreigners to their home countries to stand trial or serve the remainder of their sentence.  The other journalists have been released on bail and are currently awaiting their retrial after the Court of Cassation, Egypt’s highest court, quashed their sentence.

On 11 June 2014, Al-Jazeera appealed the Court’s decision to the Court of Cassation, explaining that a sovereign act of State can be easily distinguished from regular administrative activities such as the ones typically performed by the Union.  According to Al-Jazeera, an act of State covers high political considerations, such as the protection of national interests, upholding the terms and principles of the Constitution, and overseeing Egypt’s relations with other States to ensure domestic and international peace and security. A football match does not meet any of these criteria.

It is likely that the Court of Cassation will overturn the Court’s judgment in light of Egypt’s IP Law and the fact that broadcasting and licensing agreements are a regular business activity.  It is also important to observe how the Court of Cassation will address the lower Court’s novel interpretation of the act of State doctrine. While soccer is the most popular sport in Egypt, it is unclear how broadcasting a match can be linked to a State’s higher political interests.

Equally unclear is how Al-Jazeera will react should the Court of Cassation uphold the judgment, and whether it will consider resorting to international arbitration given that Egypt and Qatar signed a bilateral investment treaty in 1999 that protects investors’ intellectual property rights, among other things.



[1] Tarek Badawy (tarek.badawy@shahidlaw.com), Inji Fathalla (inji.fathalla@shahidlaw.com), and Nadim Magdy (nadim.magdy@shahidlaw.com) are Attorneys-at-Law at Sarwat A. Shahid Law Firm (“Shahid Law”) in Cairo, Egypt.  The views expressed in this articles are those of the authors and do not constitute legal advice. 

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