Sports & commercial arbitration: How both the ends meet


The worldwide practice of resorting to arbitration in terms of dealing with sports-related disputes did not really transpire instantaneously; It rather emanated from the general consensus among the sports sectors’ stakeholders who used to dwell upon the fact that arbitration was preferable over ordinary litigation before State courts. Given the context, sporting communities of recent times are also aligned with the same perception, that the sporting sector embodies several peculiarities that can be better understood by a specialized hearing body than by ordinary judges. Such preferential importance of sports arbitration forms its basis emphasizing the fact that sports sectors have always been favoring a “result-oriented” approach over a “truth-oriented” one as speed and finality are the two fundamental needs of organized sports competition and of related disputes. Within the said ambit, arbitration appears to be the only resolution mechanism that can provide both the sports competition as well as the disputes related to such competition with the proper resolution than that of ordinary litigation.

In order to exemplify the above-mentioned preference of result-oriented approach in sports competition and in disputes related to it, the Court of Arbitration for Sports (CAS) and its awards emphasizing the so-called “field of play” doctrine, stating that sports referees or judges can make their own decisions on the field and these decisions cannot be reviewed by CAS arbitrators unless these decisions are influenced by arbitrariness or bad faith – must be referred.

Judicial Dictums

1. In Mendy v. AIBA (CAS OG 96/06), a referee’s decision to disqualify a boxer for a low blow had been challenged, and the CAS ad-hoc Panel even after accepting the jurisdiction over a game rule, considered it inappropriate to exercise the same. Given the context, the ad hoc Panel was of the opinion that the referee’s decision, being purely technical and pertaining to the rules of the concerned federation, could not be reviewed regarding the application of these rules. The restraint was way more complicated because, from the perspective of the area where the action took place, the ad hoc Panel was not as suitably positioned as the referee in the ring or ring judges who decided the matter. The Panel, at the same time, also enunciated that such restraint must be limited to technical decisions or standards; it doesn’t apply when an official’s field of play decision seems to be tainted by fraud or arbitrariness or corruption.

2. In Segura v. IAAF (CAS OG 00/13), the CAS arbitrators had shown their incapability to review the decision taken on the playing field by judges, referees, umpires, or other officials if any, who are empowered with applying what is sometimes called “rules of the game” or “field of play” whereas the exception lies on the circumstances when such rules have been applied in bad faith, e.g. as a consequence of corruption. And since the aforementioned did happen at the relevant event, CAS arbitrators were mere spectators with no official role.

3. In addition, the award ordered in Swedish National Olympic Committee & Swedish Triathlon Federation v. International Triathlon Union (CAS OG 12/10) had been pursuant of the same line of CAS jurisprudence which delineated that, the CAS would only review a field of-play decision in case the circumstances related to that decision is taken arbitrarily or in bad faith.

Understanding the basis of field of-play principle within the CAS jurisprudence, the following opinion of the Hon. Michel Beloff QC in Yang Tae Young v. FIG (CAS 2004/A/704) seems to be of utmost importance.

“Finality is in this area allimportant: rough justice may be all that sport can tolerate”.

Arbitration & Sports: Where the connection lies

From the perspective of common socio-cultural background, the profound reasons existed in the said context are self-explanatory to the sports sector’s extensive resort to arbitration. Given the prospect, reference must be made in relation to the transition of how the following six features of both, commercial arbitration and modern competitive sports, within or without the Olympic movement were meant to meet and marry.

I. Tracing the Origin: Given the context, both modern commercial arbitration and modern organized sports trace their origins to the nineteenth century. It was the time when the Industrial Revolution sparked the development of economic liberty and caused an exponential growth of technology, manufacture, and commerce. This revolutionary era apart from the above developments and growth also brought into realization the following two prospects which, in recent times, were served as the stepping stones for both the commercial arbitration and organized sporting sectors.

 i. The merchants of that time felt the need for a quick and specialized response to disputes which was why the concept of arbitration could come to the surface.

ii.The need for increasing the leisure time allowing individuals of the rising middle class to engage in sports, either as performers or as spectators, was felt. As a result, the first sporting clubs and sports associations were established back then.

II. Contractual Autonomy & Associational Freedom: When it relates to international arbitration and organized sports, both of them share the expression of contractual autonomy and associational freedom. In order to make this terminology more explicit with the given subject matter, it is to be considered that the parties often agree to submit their disputes to arbitration while selecting a private mechanism for dispute resolution that tends to minimize the role of sovereign States. With proper observance, it seems to be no coincidence that arbitration traces many of its roots to the trade association, commercial guilds, and religious associations. Given each of these arrangements, the members of a community most often get into disputes with each other but their ways to resolve such disputes tend to revolve around a mechanism of their own choice and design. Parties given the context prefers such because they desire to minimize the effects of their disputes on their underlying and shared community. At its fundamental context, parties agree to arbitrate at times of disputes because it guarantees them maximum autonomy and control over the resolution of their disputes and at the same time the parties can be assured that the resolution of these disputes would not disrupt or damage their underlying relationship, out of which the disputes arose in the first place.

 On a similar token, modern organized sports also trace its roots to sporting clubs and associations which believed in setting out their own private rules in order to minimize the role of the State. Not very coincidentally, the entire sports system also dwells upon the same quote – contractual autonomy and associational freedom – as the participation of athletes and teams in the competition are subjected to their own consent for registering themselves with sports associations and entering the competitions. In the said context, athletes and teams fall under the contractual obligations to comply with the rules of the game and to abide by all decisions imposed on behalf of the sport’s governing bodies, such as those issued by referees on the field or by disciplinary judges off the field. Considering the recent practice of the widespread acceptance by people within the sporting community of rules and decisions issued by such private authorities – it is now well evident that such sports authorities in relation to their legislative and judicial mechanism dwell strongly upon their own choice and design.

 III. Resentments towards Intervention of State Judges: In line with the above-discussed point, both the commercial arbitration community, as well as the sports community, oppose the intervention of State judges into their own disputed matters. Given the context, such resentments towards the intervention of State judges have its relevance in the light of maintaining privacy, expertise, and finality in their dispute settlement process. Further, the State judges are not very enthusiastic about such a dispute resolution mechanism which is why these judges have often been hostile towards the private process of settling disputes within both, the commercial and sports domains.

IV. Transnational System of Justice: Arbitration and Sports have respectively developed set of rules that, while interacting in many respects with States’ legal system, tend to form complex private law system within the ambit of its own transnational levels. Having said that, international arbitration doesn’t only belong to a transnational system of justice but has also been characterized as expressing a transnational autonomous legal system that is often known as “Ordre Juridique Arbitral” or “Arbitral Legal Order”. On the other, organized sports have also been famous for its peculiar transnational branch of law as sports law, which has developed “under its own impetus, without any legislative underpinning to speak of” and is “inherently international in character”. Sports law, given its coherent transnational system of law, has also been characterized as “Ordre Juridique Sportif” or “Sports Legal Order” by State courts, legislators, and many scholars who with the help of some Italian jurists applied the notion of ‘legal pluralism’ to sports many decades ago.

V. Lex Mercatoria & Lex Sportiva: In relation to the above-discussed point, international arbitration and organized sports have both yielded the application of substantive transnational principles, standards, and rules which are respectively known as “Lex Mercatoria” and “Lex Sportiva”. As per Oxford Public International Law, the term “lex mercatoria” or law merchant is used to designate the concept of a national body of legal rules and principles, which are developed primarily by the international business community itself on the basis of their custom, industry practice, and general principles of law that are applied in commercial arbitrations as well as international in order to govern transactions between private parties and States, in transborder trade, commerce, and finance. Given the context, if there is no express choice of law in the arbitration agreement allowing the parties to act as amiable compositors, arbitrators may apply the source of “lex mercatoria.” In Sapphire International Petroleum Ltd. v. National Iranian Oil Company, the tribunal while considering the conflict of law rules, concluded that Iranian law should be followed to solve the dispute. Nevertheless, the parties’ intention and the fact that the contract had no governing law helped the tribunal reconsider that the use of Iranian law was not contemplated by the parties. As a result, the arbitrators determined those general principles of law accepted by civilized nations which are also known as the principle of “lex marcatoria” should be employed to decide the dispute.

On the other, the term “lex sportiva” has been defined to be constituted by a set of unwritten legal principles of sports law, having been derived from the interaction between the sports rules and general principles of law, developed and consolidated along the years through the arbitral settlement of sports disputes, both at the CAS and the at other dispute settlement institutions specialized in sports. In consideration of the above prospect, the existence and nature of such sets of rules despite being hotly debated, and often doubted, by scholars and practitioners, forms the entire basis through which disputes are regularly adjudicated both in commerce and sports. Having said that, adjudication of this kind doesn’t only depend on State laws but also on the basis of principles, standards, and rules derived from usages, practice, and the never-ending spirit of trade and competition. Apart from that, the idea of fairness given the context must be an essential asset as it doesn’t refer to the sports competition, rather it refers to the commercial status of sports entity. In Club Rangers de Talca v. Fédération Internationale de Football Association (FIFA), the dispute comprised of payment to a football player while the Chilean football club, Club Ranger was going through insolvency procedures. Once the club had been declared bankrupt in 2009, FIFA Dispute Resolution Chamber ordered Rangers de Talca to pay the amount of USD 21,000 to one of its former football players. Since the payment wasn’t made, the Player initiated disciplinary proceedings against the Rangers in FIFA. Consequently, assets of the Rangers were acquired by Piduco S.A.D.P. Knowing about the debt owed by Rangers, Piduco informed FIFA that it had no liability towards the prior debt corresponding to the Club. FIFA pondering upon the fact considered Chilean Insolvency Law on the basis of which employees have a privileged credit and they get paid first. The court, therefore, opined that the player failed to join the creditor’s list of the bankrupt club while he was well aware of such procedure. The court, considering the said aspect, concluded that the player was responsible for the sanction imposed by FIFA DRC in 2009. While analyzing the cases of bankruptcy, the FIFA DRC Panel was of the opinion that the declaration bankruptcy of different legal system disables the bankrupt entity to make further payments until there is a decision of insolvency proceedings. This gave birth to inequities as all clubs play at the same competition but the clubs in bankruptcy stay under the protection of bankruptcy laws, whereas the other clubs must make their payments when they are due. In the opinion of CAS ‘such inequity of treatment and opportunities is contradictory towards the essence of the so-called principles of “lex sportiva”’.

VI. Institutional Framework: Keeping in mind the discussed situation, both arbitration and organized sports have now given rise to important and influential non-governmental organizations which further led to the establishment of an institutional framework within their respective domains. On the one hand, disputes related to commercial contracts are nowadays commonly arbitrated under the administration of several private arbitration institutions such as the International Chambers of Commerce (ICC), The London Court of International Arbitration (LCIA), American Arbitration Association (AAA), etc; On the other hand, international sports institutions likewise International Olympic Committee (IOC), Fédération Internationale de Football Association (FIFA), The Union of European Football Associations (UEFA), etc. over the years have also emerged as a prominent aspect in the context of international relations. Also, in the eyes of the public opinion, it has gained emergence with respect to the fact that they often deal on equal footing with sovereign States in relation to the bids for organizing the major sports events.

Conclusive Analysis

Given the premise of such interweaving relationship mentioned above between arbitration and modernized sports sectors, a specialized or to some extent simplified model of arbitration known as Sports Arbitration with peculiar features of its own, got introduced in the sports fraternity in order to amicably resolve the dispute arises in the field of sports. Talking about disputes in conformity with the above principle of contractual party autonomy in both commercial arbitration and modern sports, it seems indispensable to construe whether “lex sportiva” being the transnational source of sports law, can become the governing law to sports’ contracts in the same manner that today, “lex mercatoria” being the transnational source of arbitration has become the preferred choice of law in a contract for the parties in disputes.

Lex Sportiva: A governing law for Sports’ Contracts Given the terminology of “lex sportiva”, it usually speaks of two of its major viewpoints that really define its true perspectives in the world of sports. The first perspective having been emanated from a narrow viewpoint, emphasizes the concept of “lex sportiva” to be made of reiterated decisions in awards issued by CAS, and the second one, based on a broader viewpoint, entitles that the said concept doesn’t only depend on to the CAS decision but also belongs to Sports Governing Body (SGB) regulation. In consideration with the broader perspective mentioned above, “lex sportiva” being the SGB regulation higher the possibilities to become the governing law for sports contracts. The only clarification needed in this regard to make the viewpoint prevalent in the world of sports is to ensure that the contractual party rather than having a clause in the contract expressly stating that “lex sportiva” is the governing law and a specific set of SGB regulations is the contractual choice of law, must, on the other, imply “lex sportiva” as their governing law. Having said that, the aforementioned concept of “lex sportiva” under the realm of its narrow viewpoint seems to be emanated from the CAS decisions that eventually enforce the SGB regulations. The scrutiny in this regard appears to be a bit challenging as “lex sportiva” doesn’t only belong to SGB regulation but also refers to CAS decisions on how to interpret such regulations. However, the SGB regulations being not so self-sufficient in the given aspects, the principle of “lex sportiva” usually complements such regulation with respect to the feasible grey areas in the law.

However, the principle of party autonomy, to a larger extent, favors the party itself in empowering them to select their preferred law whose nature-given certain situations, may not always have to be the domestic law, in order to rule their agreement. Having said that, parties while drafting their arbitration clause selecting CAS as the institution to host their upcoming arbitral disputes arising out of contract, must keep in mind that CAS already has its own models of standard clauses for facilitating the said procedure. According to such clause, it only specifies that disputes will be ‘resolved definitively in accordance with the Code of sportsrelated arbitration’. The said Code, unlike other model clauses available in other arbitral institutions, comprises the CAS rules as well as the regulations of the federation, association, or sports-related body in order to ensure resolution according to the clause of such Code. Therefore, parties referring to their applicable laws would not be considered enough for CAS to offer them such a possibility in return. Considering all if parties still willing to have “lex sportiva” as their rules of law, should perhaps draft an arbitration clause based on the standard provided by CAS with an inclusion of a text stating that the governing law of the contract will be “lex sportiva”.