By Édouard Bruc and Ben Williams[1]

Since its inception in 1983, the Court of Arbitration for Sport (CAS) has rapidly established itself as the world’s leading forum for sports disputes.  Yet – despite calling itself a “Court” – CAS is functionally an arbitral institution.  Based in Switzerland, CAS handles around a thousand proceedings a year, and its caseload encompasses a wide range of legal issues.  And much of CAS’ popularity is attributable to its use in high-profile, international sporting events.  For example, both the Olympic Charter and FIFA’s statutes require athletes to consent to CAS arbitration to compete.

All of this may be about to change.  In January, EU Advocate General (AG) Ćapeta authored a non-binding opinion (Opinion) in Case C-600/23, Royal Football Club Seraing v. FIFA et al. (Seraing), which considers whether and to what extent CAS arbitral awards should be subject to review by national courts in the EU.  AG Ćapeta has taken a bold stance, suggesting that CAS arbitration has particular features which not only distinguish it from commercial arbitration, but also require national courts to apply a stricter level of scrutiny in reviewing CAS awards.

More broadly, by declining to accord any weight to foreign courts’ judgments and by asserting the exclusive jurisdiction of EU-based courts, the Opinion could be seen as taking the Achmea judgment into new territory.  As with intra-EU investment arbitration not so long ago, the approach suggested in the Opinion could generate real uncertainty, for parties, practitioners and institutions alike.  What is more, despite some reassuring statements from the AG, the Opinion could have long-term implications for commercial arbitration, particularly in cases involving asymmetric bargaining power.

As this blogpost explains, the Opinion raises a number of potential issues.  Indeed, before a final decision is handed down by the ECJ, certain factual and legal elements of the Opinion may warrant further consideration.

AG Ćapeta’s Opinion

The matrix of facts underlying this case centres around a single dispute between a football club and FIFA.  However, it engages two sets of parallel proceedings: CAS arbitration in Switzerland and court litigation in Belgium.  By way of background:

• In 2015, a contractual dispute arose between a Belgian football club (Seraing) and FIFA regarding the assignment of the economic rights of some of the club’s players to a Maltese company. FIFA’s disciplinary committee found against Seraing, imposed a fine and a two-year ban on registering players.  Seraing referred FIFA’s decision to an arbitral tribunal under CAS, which found in favour of FIFA.  An application to annul the award was brought before the Swiss Federal Court but was ultimately unsuccessful.
• In parallel, the Maltese company brought proceedings before the Belgian national courts, seeking a declaration that FIFA’s rules breached the players’ economic rights under EU law. In 2019, the Court of Appeal declined jurisdiction on the basis that Belgian law applies the principle of res judicata to certain types of commercial arbitration awards, including CAS awards.  On further appeal, Belgium’s Court of Cassation decided to stay the proceedings and refer several preliminary questions to the ECJ.

Against this background, the referral to the ECJ was concerned primarily with the following, central question: is Belgium’s law on the recognition of CAS awards compatible with the EU’s fundamental right to an effective remedy?  And, in particular, is it permissible for Belgium’s law to recognise CAS awards, when the arbitral tribunal is seated in a jurisdiction which is unable to refer preliminary questions of EU law to the ECJ?

While a ruling from the ECJ is expected in the coming months, AG Ćapeta has issued an advisory, non-binding opinion intended to inform the Court’s deliberations.  To begin with, AG Ćapeta’s Opinion reiterates a now-settled principle that arbitral tribunals do not fall within the standard definition of a “court or tribunal” under EU law and cannot refer questions to the ECJ.  Intuitively, this would suggest that CAS tribunals should engage the framework for commercial arbitration set out in Nordsee and Eco Swiss.  In those cases, the ECJ recognised that the benefits of arbitration and the role of party consent in the arbitral process could justify less stringent requirements.  The ECJ accordingly held that it is sufficient for commercial arbitral awards to be subject to post hoc review by national courts as part of the enforcement process and a review that is limited to “matters of public policy.”

AG Ćapeta, however, considers that Seraing should be distinguished from Nordsee and Eco Swiss on two distinct grounds:

• CAS arbitration under FIFA’s statutes does not arise from the free consent of the parties. Rather, the choice of CAS jurisdiction is imposed on participants in the league, and failure to agree would prevent players from playing and clubs from competing.  Drawing on ECHR jurisprudence, the AG explains that FIFA’s control over the league means that “CAS’ jurisdiction is mandatory and not chosen of [the parties’] own free will.”
• CAS awards do not fall to be enforced by national courts, but by FIFA itself. Normally, in commercial arbitration, referral to the ECJ is preserved, as there is a natural opportunity for review of awards at the enforcement stage (and issues of EU law can then be referred to the ECJ).  In the Seraing context, however, FIFA’s control of the league means that, in many cases, enforcement of the award (whether a fine or access to the league) will fall to FIFA itself, rather than the courts.

For the AG, “those differences demand a specific assessment in light of the principle of effective judicial protection, in relation to both the question of access to courts and the scope of judicial review.”  In support of this “specific approach”, she cites the ECJ’s ruling in ISU, which did not address the issue of national review, but where the Court held that the “mandatory and exclusive nature” of CAS arbitration raised specific competition law issues in that case.  To account for the “specific” demands of CAS arbitration, Member States should account for two issues in particular:

• National legislation should ensure an appropriate opportunity for review of CAS awards. Unlike commercial arbitration, it is not sufficient for review to be limited to post hoc enforcement of awards for damages, because many CAS cases are concerned with other kinds of relief and would, accordingly, be afforded no opportunity for review.  A provision like Belgium’s, which automatically confers the full force of res judicata to CAS awards, therefore fails to meet this requirement.
• Review of CAS awards should not be limited to matters of public policy. Rather, the AG argues that the lack of party consent in FIFA-mandated CAS arbitration requires greater intervention by EU courts and, to this end, national courts should “be able to conduct the review of FIFA rules against any and all rules of EU law, any CAS award notwithstanding.”

Seen together, the Opinion proposes a two-tier system for ensuring the compatibility of private arbitration with EU law: (a) voluntary commercial arbitration, subject to limited review by national courts and (b) mandatory sports arbitration, subject to full review.  On one level, the rationale for this distinction is concerned with issues of party consent and the role of privity of contract as a basis for arbitration.  The absence of free will justifies greater oversight by the EU courts.  On another level, however, the Opinion could also be seen as forming part of a series of cases, in which the ECJ has expressed real concern about the application of EU legal principles by foreign-seated arbitral tribunals.

Analysis

There is certainly some appeal in this categorical, two-tier system.  And yet, as discussed below, the result gives rise to several potentially significant problems.  Particularly, the Opinion overlooks certain elements of the factual record and, more critically, the need for case-by-case analyses of the factual assumptions it has made.  Further, some elements of analysis are difficult to reconcile with principles of international arbitration law and perhaps underestimate the advantages of sports arbitration. The following sections address two particularly significant issues: (i.) the AG’s framework for determining whether parties freely consented to the jurisdiction of a CAS tribunal; and (ii.) the recommendation that CAS arbitration be subjected to a higher standard of review.

1. Party Consent Under FIFA Statutes: Ćapeta’s Offside Rule?

A central premise of the AG’s analysis is that – for the parties in Seraing, and for all players and clubs operating under FIFA’s statutes – CAS jurisdiction lacks party consent.   However, several issues arise from this premise.

First, no direct explanation is given as to how this point has been determined.  Instead, the Opinion proceeds on the assumption that CAS jurisdiction lacks party consent, without considering the matter in detail.  There is an implicit suggestion that CAS arbitration, as currently practised, relies on some form of economic duress being imposed on the parties. But this supposition is not without its complexities.  As a matter of logic, it does not automatically follow that the inclusion of CAS arbitration in FIFA’s statutes amounts to a mandatory imposition of CAS jurisdiction on players and clubs.  It remains entirely possible that CAS arbitration would be both a requirement of FIFA’s statutes and the preferred choice of players and clubs for reasons of efficiency, expertise or neutrality.  Those options are not mutually exclusive.

Second, the question of party consent to an arbitration agreement is an issue of fact.  The competence of the ECJ as a court, meanwhile, is restricted to issues of law.  Typically, the ECJ would defer to the relevant lower court on factual matters that have been previously decided.  However, the AG’s assumption around party consent flatly contradicts the Belgian Court of Cassation’s findings, which are neither discussed nor challenged (see the Court’s request for a preliminary ruling, para. 83).  Instead, the Belgian Court found that CAS arbitration was not forced onto the club, as none of the parties had challenged the arbitration on such grounds, and had affirmed their consent to arbitration “by the signing of the Procedural Order.”  These findings are not considered in the Opinion, which instead establishes an irrefutable presumption about consent that applies regardless of each case’s factual matrix.

Third, in neglecting to articulate the basis for this finding, it is unclear which legal principles are being applied.  As noted above, the Belgian courts held that, as Seraing failed to object to the arbitration, it was considered to have consented.  This reflects a view that has been upheld in a variety of circumstances.  As one leading authority on arbitration observes, commencing or participating in arbitration proceedings without contesting their jurisdictional basis can serve as a valid form of consent.  Likewise, the ECtHR has held that a party may lose its right to raise a jurisdiction argument where it did not avail itself of the “ample opportunity” provided in the arbitral proceedings (see Suovaniemi and Mutu and Pechstein, para. 122).   In a different context, the ECJ has, too, noted that a consumer could lose its right to challenge an award (see Asturcom, para. 40).

Put another way, some authorities consider that a party’s conduct and statements can effectively estop it from relying upon an otherwise well-founded objection to the validity of an arbitration agreement (or, similarly, constitute a waiver or venire contra factum proprium).  As highlighted in Hulley Enterprises, for example, this kind of estoppel has particular force in circumstances where a court (Belgium) has to consider a final judgment arising from the seat of the arbitration (Switzerland), which found that  one the parties is estopped from challenging the validity of the arbitration agreement applied to this case.  Here, during the annulment proceedings, the Swiss Federal Tribunal confirmed the undisputed nature of CAS’s jurisdiction (see here, p. 4).  The Opinion does not engage with these important issues.

Instead, the Opinion merely cites several cases from the ECtHR (including Mutu and Pechstein), which have distinguished – in quite abstract terms – between mandatory and voluntary arbitration.  But no explanation is provided about the precise legal test that is being applied.   Part of the problem here is that the ECtHR’s jurisprudence does not articulate a specific legal test for distinguishing between mandatory and voluntary arbitration.  More significantly, the absence of any discussion about the test to be applied ignores the detailed national-level contractual rules that govern this issue.  In essence, recycling such an ECHR standard leads to improperly superseding more detailed national rules, especially since EU directives or regulations do not regulate this, and confuses two different levels: the contractual principles governing arbitration agreements and the ECHR governing States.

Fourth, an alternative – and perhaps more suitable – legal standard for determining issues of party consent would be that derived from principles of contract law as applied under a large number of national arbitration rules and precedents.  The New York Convention, most notably, refers to contract law principles.  While the Opinion does not state this directly, some form of contractual test – whether economic duress, coercion, or similar – seems implicit in its references to FIFA’s economic position and to Mutu and Pechstein (see paras 104, 113, 155).

Yet this approach would present its own challenges.  For one, the tests for economic duress vary substantially between jurisdictions; there is no universally accepted test for invalidating an arbitration agreement based on economic duress.  Even in jurisdictions where this is an option, it is broadly accepted that duress should relate specifically to the arbitration agreement.  As Born explains, the general approach tends to recognise that “economic duress” may apply to the underlying contract, “but not to the separable arbitration agreement.”  This is particularly so, says Born, where the arbitration clause in question is one that is “frequently used by parties in the industry.”

Further, legal tests for economic duress usually turn on the imposition by one party of an unfavourable term on another.  This seems to require, as a minimum, a case-specific assessment of the terms and their favourability.  Again, the Opinion does not address this point, and simply contends that any FIFA-based CAS arbitration would be mandatory, and thus always unfavourable and invalid.

Additionally, a number of authorities suggest that sports arbitration – and the use of CAS in particular – enjoys an overwhelmingly positive status in the industry.  As Rigozzi explains, sports arbitration fosters international consensus in sporting decisions, provides necessary expertise and ensures that matters are determined with speed and sensitivity.  Similarly, the European Parliament issued a resolution in 2012 where it recognised “the legitimacy of sports courts for resolving disputes in sport, as long as they respect people’s fundamental rights to a fair trial.”  The Bundesverfassungsgericht in Pechstein opined that CAS “arbitration is a necessary means to ensure internationally uniform sports jurisdiction and to combat doping in international sports competitions; as such, it is not objectionable under constitutional law.”  Likewise, the Swiss Federal Tribunal has reasoned that CAS arbitrations are “branchentypisch” and that “there is virtually no elite sport without consent to arbitration in sport.”  For instance, it prevents judicial chauvinism in a context where sports can easily ignite national passions and false narratives.

Understood in terms of current practice, therefore, it is difficult to square the generally positive reputation of sports arbitration and its widespread use with the requirement of unfavorability that is typically characteristic of economic duress.

2. Scope of Review: National Courts as Referees Not Linesmen?

The second premise of AG Ćapeta’s analysis is that for FIFA the CAS arbitration mechanism is “self-sufficient” and undermines the “effective judicial protection” that should be guaranteed for all EU rights.  In considering how to ensure that EU rights are effectively safeguarded, she suggests that the application of EU legal principles by CAS tribunals should be subject to a more stringent standard of review than applies to general commercial arbitral tribunals.  AG Ćapeta recommends an unfettered, comprehensive review standard, rather than one limited to public policy factors.

However, it is difficult to reconcile this position with the ECJ’s jurisprudence.  For example, part of the ratio decidendi for the more restricted, public policy review of commercial awards is grounded in a recognition of the particular benefits of commercial arbitration that would otherwise be unavailable to parties.  Many of these benefits – efficiency, confidentiality, speciality, finality, neutrality, and so on – are even more fundamental for sports arbitration than for commercial arbitration.  In proposing a full-scale review of CAS awards, the Opinion not only appears to look past these factors but to negate them entirely.

The position is also at odds with well-settled notions of international comity and finality of the award.  Article V(2)(b) of the New York Convention limits substantive review of arbitral awards to issues that are “contrary to the public policy” of the enforcing country.  AG Ćapeta suggests that a full review of CAS awards may nevertheless be consistent with this standard.  She posits that “effective judicial protection” can be considered a matter of EU public policy, and that this public policy ground justifies review of any applicable EU rights.  However, this interpretation is so broad that it cannot be reconciled with the meaning and strict scope of the “public policy” standard under Article V(2)(b) of the New York Convention.  If comprehensive review becomes a public policy concern of its own, the concept has little function.

Besides, in cases where arbitration was demonstrably non-consensual and was duly challenged, the issue is not about the scope of review of the entire award, but instead its jurisdictional legitimacy and the arbitral tribunal’s analysis of that legitimacy.  Those are two distinguishable issues.  As AG Ćapeta noted, nothing justifies applying an Achmea-like jurisdictional bar, as this is not a bilateral arbitration agreement between Member States.  And unlike national arbitration laws, EU law is clearly not equipped to answer such a jurisdictional issue concerning consent from an arbitration perspective (e.g. importance of the seat, conflict of laws, substantive contractual test, etc.), in contrast to EU competition law or the four freedoms.  For this reason, an EU public policy filter is much more appropriate under EU law.  And to answer the Belgian Court’s question, national courts remain free to do so under Eco Swiss, regardless of res judicata (see here, p. 4).

Finally, the Opinion’s recommended approach seems likely to have a chilling effect on CAS arbitration.  Any incentive to have disputes heard by a specialist body would be greatly diminished if – as would be the case here – any connection to the EU permitted a rehearing of all applicable EU law after the proceedings had concluded.  Accordingly, the dispute resolution process for sports disputes would become longer, more costly, and more unpredictable.  More generally, the absence of detailed consideration of international arbitration law would undoubtedly fuel concerns among arbitration practitioners about the future of commercial and investment arbitration.  Without clearly articulated tests to determine party consent and standards of review, those operating across commercial and investment arbitration – parties, tribunals, counsel and national courts – may find themselves with more questions than answers.

**

[1] Édouard Bruc is a Senior Associate at WilmerHale, where his practice focuses on litigation, notably in antitrust law, as well as other contractual and regulatory disputes.  He is qualified as a Solicitor in England and Wales and a Paris Bar Avocat à la Cour.
Ben Williams is an Associate at WilmerHale, and practices in both international arbitration and commercial litigation.  He is a qualified Solicitor in England and Wales, and has worked at law firms in the UK, US and Germany.

*** The opinions expressed in this article are the authors’ own, and do not represent the views of Wilmer Cutler Pickering Hale and Dorr LLP or its clients. ***