[Authors: Aakash Batra, Junior Associate at 14 Sports Law and Editor at SLRI; Aakash Thiagarajamurthy, Masters in International Sports Law LLM candidate at ISDE Law School (Madrid) & Legal Intern at 14 Sports Law]
Introduction:
On 21 December 2023, the Court of Justice of the European Union (‘CJEU/ECJ’) delivered a series of judgments concerning international sports law. Among these rulings, it grappled with the legality, within the framework of EU law, of regulations imposed by FIFA and UEFA pertaining to the proposed ‘Super League’ requiring prior approval and oversight (Case C-333/21), regulations established by UEFA and the Belgian football association concerning minimum quotas for ‘home-grown players’ (Case C-680/21), and finally – regulations set forth by the International Skating Union (‘ISU’) mandating prior authorization for skating competitions (Case C-124/21 P) (‘Judgment’/’ISU Judgment’). While the latter decision may have garnered comparatively less attention so far, it is indeed a landmark caselaw, considering that it essentially signals the potential emergence of further clashes between EU law and international arbitration. This is why it is of immense importance to discuss this ruling.
Background of the Appeal before the ECJ:
The case arose out of a complaint by two Dutch professional speed skaters and members of the ISU’s Dutch member association to the European Commission. They claimed that ISU’s rules on prior authorization for organizing international skating competitions and the (in)eligibility of athletes to participate in skating competitions, constitute restrictions on free competition under Articles 101 and 102 of the Treaty on the functioning of the European Union (‘TFEU’). The said ISU rules essentially prohibit the Athletes (covered under ISU) to take part in any competition that the ISU does not organize.
Preceding the present judgment by the CJEU, two pertinent rulings were issued and it is of the utmost importance to take note of the same. Initially, on the 8 December 2017, the European Commission (Case AT.40208) determined that the regulations set by the ISU represented a constraint on competition, contravening EU law, and that resorting to the CAS further entrenched and reinforced such constraints.
Subsequently, on 16 December 2020, the EU General Court (Case T-93/187) affirmed the restrictions on competition, but diverged from the Commission’s stance concerning CAS arbitration. Unlike the Commission, the General Court held that referring these disputes to CAS did not reinforce competition constraints, as it did not violate the right to a fair trial, was justified in pursuit of a legitimate interest inherent to the sport’s unique nature, and did not foreclose other legal avenues for the parties, such as seeking damages in national courts or lodging complaints with the Commission or national competition authorities. [Reference is drawn to paras 141-164 of Case T-93/187]
ISU appealed this General Court’s ruling. Furthermore, athletes and the European Elite Athletes Association filed a cross-appeal before the CJEU challenging the General Court’s finding that the CAS’ exclusive and compulsory jurisdiction did not reinforce the infringement of Article 101(1) TFEU, which forms the basis of the present case.
The Judgment in a Broader Context:
In its judgment, the ECJ firstly determined that the ISU regulations in question indeed restrict free and fair competition. Furthermore, it overturned the General Court’s ruling regarding CAS arbitration, asserting that within the specific context shaped by the ISU regulations, resorting exclusively to CAS for disputes regarding eligibility and pre-authorization exacerbated competition constraints. Accordingly, the ECJ rejected the ISU’s appeal and affirmed the Commission’s and General Court’s determination that the prior authorization and eligibility regulations represented an inherent restriction of competition that lacked justification. Per contra, it upheld the athletes’ cross-appeal against the General Court’s ruling that the exclusive and obligatory jurisdiction of the CAS did not exacerbate the violation of Article 101(1) TFEU. Consequently, the ECJ overturned the General Court’s verdict and dismissed the ISU’s action for annulment to the extent not previously dismissed by the General Court.
In what is a strong diversion from the aforementioned 2020 decision, the ECJ has particularly ruled that such “rules […] must be subject to effective judicial review”. This, according to the ECJ, especially means that the courts reviewing the relevant awards must be entitled to refer questions of EU law to the ECJ under Article 267 TFEU. [Reference is drawn to para 197 and 198 of Case C-124/21 P]
In other words, the ECJ categorically affirmed that the CAS is not a suitable venue to ensure an effective access to remedy for claimants in cases involving EU competition law. This was because the CAS is the lynchpin of the current structure of transnational sports law and the implications of this ruling could have impact beyond the context of the ISU. It was observed that the organization of sporting competitions is very clearly an economic activity, and this activity must be compliant with the competition rules even though sports have certain specific features (specificity of sport) like existence of associations with regulatory control and sanctioning powers.
The ECJ’s decision shares notable similarities with its 2018 ruling in the Achmea case, wherein the Court determined that intra-EU investment arbitration, based on bilateral investment treaties between EU member states, conflicted with EU law. Much like in Achmea, the ISU judgment seems largely driven by the ECJ’s aim to safeguard the autonomy of EU law and its exclusive jurisdiction over interpreting EU law. According to the rationale of the judgment, EU courts must possess ultimate authority in matters concerning EU competition law.
The Judgment in a Particular Context:
The judgment provides a very lucid restatement of the precedent on Article 101(1) TFEU, regarding in particular the definition and proof of restrictions by object and the possibility of considering that certain specific conduct, that is justified by the pursuit of legitimate objectives in the public interest, does not come within the scope of the prohibition laid down in Article 101(1) TFEU. Moreover, when analyzing Article 102 of the TFEU, the ECJ held that associations like the ISU can adopt and ensure compliance with by means of sanctions, rules relating to the organization and holding of competitions; however, these rules need to be subject to a certain framework to ensure that they are transparent, objective, non-discriminatory and proportionate.
The judgment is notable for equating entities such as the ISU with undertakings possessing authority akin to that delineated in Article 106 TFEU. Such organizations face a conundrum, as they function both as economic entities and regulators, wielding the ability to either impede competitors’ access to the market or favor their own activities. Consequently, the ISU was deemed subject to stringent obligations, including adherence to the principle of equal opportunity and the formulation of transparent, objective, non-discriminatory rules subject to judicial review.
By synthesising Articles 101, 102, and 106 TFEU, the Court concluded that unchecked authority, failing to meet these rigorous obligations, constitutes an abuse of dominance, potentially tantamount to a restriction either by object or effect.
Now, turning the attention towards the determinations concerning CAS arbitration, which is essentially what is an updated position of law contradicting the above cited General Court’s judgment of 2020 – one must begin the analysis by taking note of the preliminary observations of the ECJ in this regard. As an initial step, the ECJ precisely defined the parameters of its conclusions concerning the CAS’s exclusive and obligatory jurisdiction over challenges to ISU decisions. It confined its determinations to ISU decisions related to skating as a commercial pursuit, thus capable of impacting competition. Specifically, the Court restricted its findings to the referral of two specific types of disputes to CAS arbitration: disputes concerning (i) the organization and commercialisation of international speed skating competitions and (ii) the entitlement to participate in such competitions as a professional athlete. Consequently, it can be inferred that the mandatory submission of all other forms of disputes to CAS jurisdiction does not reinforce the ISU’s violation of Article 101(1) TFEU.
Analysis of Departure Points and Observations on CAS Arbitration:
There is no doubt that the judgment does not universally condemn CAS arbitration. Rather, the ECJ clarified that the reinforcement of the breach of EU competition law does not arise from the referral of the disputed matters to CAS arbitration, but rather from the fact that, due to CAS’s location in Switzerland, its rulings are effectively subject solely to judicial oversight by the Swiss Federal Tribunal. Consequently, issues pertaining to EU public policy, such as EU competition law, evade scrutiny by Member States’ courts and, ultimately, the jurisdiction of the ECJ. This is despite the necessity for such oversight to ensure individuals’ effective legal protection, particularly in scenarios where arbitration is not voluntarily chosen by the parties but rather imposed by the international sports body.
On this basis, it has been explicitly determined in the judgment that:
“[i]n the absence of such judicial review, the use of an arbitration mechanism is such as to undermine the protection of rights that subjects of the law derive from the direct effect of EU law and the effective compliance with Articles 101 and 102 TFEU, which must be ensured – and would therefore be ensured in the absence of such a mechanism – by the national rules relating to remedies” [Para 194]
Given the ISU’s authoritative position akin to entities referenced in Article 106 TFEU, its regulations on prior authorization and eligibility must undergo effective scrutiny by the courts of Member States. These courts have the authority to validate CAS awards or refer preliminary questions to the ECJ in accordance with Article 267 TFEU. However, review by the Swiss Federal Tribunal fails to meet this requirement, particularly given its jurisprudence that EU competition law does not constitute Swiss public policy. In light of these considerations, the ECJ concluded that the General Court erred in justifying recourse to CAS arbitration based on legitimate interests associated with the specific nature of the sport.
The ECJ effectively halted the state of impunity regarding EU competition law that the ISU had established for itself. This was achieved by putting an end to the ISU’s practice of consistently directing athletes to pursue their EU law-derived rights before unsuitable forums, namely the CAS and Swiss courts, without exception. In this regard, the judgment represents a commendable step forward.
From a doctrinal point of view, the ECJ expanded upon its established case law, as exemplified by the 1999 Eco Swiss ruling. In that precedent, the Court determined that member state courts must nullify arbitral awards if they ascertain “that the award in question is in fact contrary to Article 81 EC (ex Article 85) [now Article 101 TFEU], where its domestic rules of procedure require it to grant an application for annulment founded on failure to observe national rules of public policy”. In this regard, the ISU judgment further emphasizes that arbitral proceedings involving matters of EU competition law can only adhere to EU law comprehensively if they are situated within a member state.
Furthermore, referring back to the above-cited landmark case of Achmea case, it is clear (considering that no such reference has been made explicitly) that the ECJ did not consider CAS arbitration to fall within the commercial arbitration exception recognized by Achmea, despite the fact that both the ISU and the athletes are private parties. However, it is also clear that the spirit of Achmea’s ruling is somewhat imbibed herein. Thus, one can only conclude that this judgment further strengthens the existing jurisprudence under Achmea. The ECJ has not universally prohibited intra-EU CAS arbitration. However, the judgment contributes to an expanding body of rulings—most notably including the 2023 Semenya judgment of the ECtHR, the 2022 Pechstein judgment of the German Constitutional Court, and the judgment in Pechstein and Mutu by the ECtHR—that exert pressure on the CAS to reassess its methodologies. This includes opening themselves up to heightened public scrutiny or, as seen in the case of the ISU, to scrutiny by domestic courts other than the Swiss Federal Tribunal.
Debate Regarding the Future of Sports Arbitration vis-à-vis the ISU Judgment:
As soon as the judgment was pronounced, debates sparked across the sports law community, discussing the far-reaching implications of this judgment, to the extent of experts in sports law proposing that CAS could be forced to relocate within the EU.
While at the same time, such a proposal has been deemed to be ‘exaggerated’ by others involved in the ongoing debate. Indeed, an apparent solution could entail the CAS amending its regulations to permit CAS arbitrations to be seated outside Switzerland. However, we would like to underscore that the judgment does not mandate any corrective measures for the CAS. It does not specifically address the CAS and its practices, nor does it question the principle of resorting to the CAS for dispute resolution. Instead, the focus remains on the manner in which the ISU has structured the review of its decisions. Consequently, the likelihood of the CAS relocating appears slim.
Had recourse to CAS arbitration been voluntary, the outcome of the case on this matter might have diverged. As suggested by the ECJ, the ISU could have retained systematic and obligatory submission to CAS arbitration for all disputes concerning skating purely as a sport, not as an economic endeavour. Conversely, for disputes pertaining to the administration and promotion of skating competitions and eligibility for participation as a professional athlete, the ISU could have provided competitors and athletes with the option to elect between CAS arbitration in Switzerland or another form of institutional arbitration situated in an arbitration-friendly EU jurisdiction.
Both sports federations and athletes are thus advised to thoroughly reassess their contractual agreements in light of these developments.
[For feedback, query, or discussion, feel free to reach out to the Authors at ab@14sportslaw.com & aakash.tmurthy@gmail.com]
*NOTE- The opinions and views expressed in this article are that of the Author(s) and not of SLRI- the expressed opinions do not, in any way whatsoever, reflect the views of any third party, including any institution/organisation that the Author(s) is/are currently associated to or was/were associated to in the past. Furthermore, the expressions are solely for informational and educational purposes, and must not be deemed to constitute any kind of advice. The hyperlinks in this blog might take you to webpages operated by third parties- SLRI does not guarantee or endorse the accuracy or reliability of any information, data, opinions, advice, statements, etc. on these webpages.
PREFERRED CITATION: Aakash Batra & Aakash Thiagarajamurthy, “ISU v. Commission – Decoding the Implications on Sports Arbitration & EU Competition Law” SLRI, available at: https://sportslawreviewindia.blog/?p=4404(opens in a new tab) 18 March 2024.
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