The 40 recommendations of the Olympic Agenda 2020 are out! First thought: one should not underplay the 40 recommendations, they constitute (on paper at least) a potential leap forward for the IOC. The media will focus on the hot stuff: the Olympic channel, the pluri-localisation of the Games, or their dynamic format. More importantly, and to some extent surprisingly to us, however, the IOC has also fully embraced sustainability and good governance. Nonetheless, the long-term legacy of the Olympic Agenda 2020 will hinge on the IOC’s determination to be true to these fundamental commitments. Indeed, the devil is always in the implementation, and the laudable intents of some recommendations will depend on future political choices by Olympic bureaucrats. 

For those interested in human rights and democracy at (and around) the Olympics, two aspects are crucial: the IOC’s confession that the autonomy of sport is intimately linked to the quality of its governance standards and the central role the concept of sustainability is to play in the bidding process and the host city contract.  

Good Governance = Autonomy

“Good governance and autonomy are strongly linked; they are two sides of the same coin”

This statement is to be found in the only document that really matters to understand the depth of the reforms envisaged: The context and background report. It is a confession; there is no autonomy of sport, unless this autonomy is in the hands of irreproachable institutions. The IOC is prone to consider itself as abiding to such standard, but it is not for itself to judge. The global public will be the sole arbiter of this pledge to good governance, as the IOC recognises: “Autonomy has to be earned”. 

In this regard, the IOC’s Agenda 2020 proposes a certain number of institutional and “good governance” reforms:

Recommendation 27 Comply with basic principles of good governance

The Agenda 2020 foresees that “all organisations belonging to the Olympic Movement [are] to accept and comply with the Basic universal Principles of Good Governance of the Olympic and Sports movements”. To this end, the organisations will be monitored and mentored and self-evaluation tests (probably similar to WADA’s compliance test) will be introduced. Furthermore, the IOC will update the principles of good governance with the help of a working group composed of “experts”. Obviously, the impact of this recommendation depends very much on the stringency of the monitoring and of the nature of the good governance requirements imposed. 

Recommendation 29: Increase Transparency

The IOC vows to publish financial statements according to the International Financial Reporting Standards and to produce an annual activity and financial report, including the allowance policy for IOC members. This is an important step, since it enables external observers to better scrutinise the financial flows in the Olympic movement and to have a full picture of the allowances received by each individual member of the IOC. It will be easier to follow where the IOC’s money is going and it will make money laundering harder. However, external revenues received by IOC members will stay undeclared, leaving the door open for suspicions.  

Recommendation 30: Strengthen the IOC Ethics Commission independence

This recommendation aims at securing the IOC’s ethics commission independence by proposing to elect its chair and its members via a secret ballot of the Session (the IOC’s parliament, assembling all IOC members). This seems quite an obvious thing in a democratic society, but for an institution versed in nepotism, it is a big step. Once implemented, the nomination process of the members of the Commission will be more difficult to control, and, thus, reinforce the independence of the sole potential counter-power (to the executive board) inside the IOC’s institutional structure. Again, this is no cure-all, and the Ethics Commission has yet to prove itself as an effective control mechanism, but it is a first step towards a more balanced institutional game.

 
Recommendation 32: Strengthen ethics

Here it is suggested to revise the Code of ethics, so that it “be fully aligned with the Olympic Agenda 2020’s drive for more transparency, good governance and accountability”. This is a vague, but potentially important, commitment to rethink the IOC’s Code of Ethics. Only time will tell if this revision will lead to better and accountable governance. In any event, only heightened public scrutiny can force the IOC to adopt governance standard ensuring full transparency and accountability. 

Recommendation 37: Address IOC membership age limit

The IOC is recommending a complex system to allow members over 70 to go beyond the official age limit entrenched in Article 16 of the Olympic Charter. In practice, the Session will be able to vote on allowing each member the right to stay on for maximum four years more than the age limit. This is a (minimal) concession to the IOC members strongly opposed to the age limit.  

Recommendation 38: Implement a targeted recruitment process

Recommendation 38 concerns the selection process of new IOC members. The IOC is no democratic institution. The “citizens” of the Olympic family do not elect their representatives. In fact, the IOC members are not necessarily part of the “Olympic family”. Historically, its selection process has been marred by nepotism (e.g. the Samaranch dynasty) as it is based on co-optation. The Agenda 2020 does not do away with this fundamentally oligarchic procedure, but it is slightly correcting it by empowering (and constraining) the nominations Commission, which is in charge of proposing candidates. The choice of the Commission is to be constrained by specific selection criteria, the most prominent being: gender balance; geographical balance; and the existence of an athletes’ commission within the organisation for representatives of Ifs/NOCs. As from now on, the press and the public will be able to blame the IOC if it does not follow its self-imposed requirements (gender balance being the one to watch closely) in the future. 

Some changes are also on the books concerning the Scope and Composition of IOC Commissions (Recommendation 40). Unfortunately, they are of unclear nature and magnitude.

These institutional innovations, if implemented, are positive steps forward to constrain power inside the IOC and to open it to outside scrutiny. The most remarkable outcome of the Olympic Agenda 2020 remains the crystal clear acknowledgment by IOC that the autonomy of sport is necessarily tied to the quality of the governing processes in place. This essentially means that the Agenda 2020 can only be the beginning of a dynamic institutional reform process that must lead the IOC to be more inclusive of the many constituencies of the sporting world. This is not enough, however; the IOC must also be receptive to the needs of society as a whole.  

Sustainability and Human rights in the bidding process

The bidding process should be at the centre of all critical attention. It is clear that it is the bidding process that entrusts the IOC with real political leverage. At this point, it takes fundamental decisions that will impact the life of millions (if not billions) of citizens Therefore, the brunt of the substantial (in contrast with the institutional measures discussed above) reforms was expected to impact on the bidding procedure (see the joint paper by the Swiss, German, Austrian and Swedish NOCs). It is also on the bidding process that the IOC received the most contributions in the framework of the Agenda 2020 (more than 90). In this regard, Sochi was a wake-up call, due to the abuses recorded on the human rights and anti-discrimination front, and the environmental sustainability side. The IOC Agenda 2020 is not shy of tackling these issues and, with caveats discussed below, should be praised for doing so. First, and this is a fundamental point, the Host City Contract will from now on be made publicly available (for now we only have leaked draft documents as for the 2022 contract). This is a necessary move for an institution claiming to follow good governance principles. Indeed, it will ease the work of critics and commentators scrutinising the contract and the public as a whole will have access to the official document itself.  

Recommendation 1: Shape the bidding process as an invitation

This first recommendation contains a variety of proposals. The spirit of which is “to invite potential candidate cities to present an Olympic project that best matches their sports, economic, social and environmental long-term planning needs”. Thus, for “reasons of sustainability”, the IOC will tolerate that events do not take place in the Host-city but in another nearby city or country (modification of article 34 of the Olympic Charter). The Host City Contract will include a provision banning discriminations, as was previously announced and celebrated by Human Rights Watch. In addition to this, article 21 of the 2022 Host City Contract will impose sustainability requirements on the Host city. Yet, the transformative quality of these provisions is still to be demonstrated. The main point remains that new regulations for the bidding procedure will be drafted. These will be key to set in stone the sustainability and Human rights turn of the Olympic family and will be the place to look at in order to assess whether the IOC is really serious about the changes put forward in the Olympic Agenda 2020.

Recommendation 2: Evaluate bid cities by assessing key opportunities and risks

The evaluation of the bids is key to the IOC’s impact on sustainability or human rights aspects (and not only to ensure that its commercial interests are safeguarded). Hence, it is good news that the IOC is to consider as positive aspects of a bid: “the maximum use of existing facilities and the use of temporary and demountable venues where no long-term venue legacy need exists or can be justified”. Furthermore, the Evaluation Commission is “to benefit from third-party, independent advice in such areas as social, economic and political conditions, with a special focus on sustainability and legacy”. In fact, the final reports by the Evaluation Commission are to include “an assessment of the opportunities and risks of each candidature, as well as of sustainability and legacy” (modification of bye-law to rule 33) and third-party independent risk-assessments are to be conducted. This will be a powerful tool in the hands of NGOs to decisively influence the selection process by providing in depth (and public) assessments of the sustainability of the different bids. It will also, and perhaps mainly, offer critical ammunitions in case the IOC is inclined to disregard the sustainability assessment provided by the Evaluation Commission. There is no rock solid guarantee that the IOC will in the end take into account the sustainability of a bid to allocate the Games. Yet, a full-blown neglect of this assessment would give way to damaging public criticism.  

Recommendation 4: Include sustainability in all aspects of the Olympic Games

This recommendation is aimed at ensuring that sustainability “is included in all aspects of the planning and staging of the Olympic Games”. Sustainability is to be achieved via “a sustainability strategy to enable potential and actual Olympic Games organisers to integrate and implement sustainability measures”. The IOC wants to assist the Organising Committees “to establish the best possible governance for the integration of sustainability throughout the organisation”. To this end, the “[n]ext Host City Contract [is] to reflect, through a number of additional obligations” these policy goals. Moreover, the IOC considers signing a “MoU with the United Nations Environment Programme (UNEP) for possible independent assessment of OCOG sustainability performances”. Again, depending on the extent to which the Host City Contract will be modified, these changes are substantial. However, the UNEP might need concrete commitments to be convinced to deepen its existing collaboration with the IOC, especially after the disaster of the Sochi Games. The Host City Contract is certainly an important lever to impose obligations on the Host City, but to effectively do so it needs to be accompanied by clear and potent procedures ensuring its enforcement.  

Recommendation 5: Include sustainability within the Olympic Movement’s daily operations

The IOC’s administration in its day-to-day operations is to follow sustainability standards. Most notably, it aims to “introduce sustainable sourcing policies in tendering processes, sponsorship, licensing and supplier agreements for renewals or new contracts”. This is an instance of IOC greening its own administrative operations to improve its image. 

Recommendation 14: Strengthen the 6^th Fundamental Principle of Olympism

In a symbolic gesture, the 6^th fundamental principle of Olympism, which forbids all types of discrimination, is to be re-written into a hybrid text of Article 14 of the European Convention of Human Rights and Article 2 of the UN Universal Declaration of Human Rights.  This is a tricky move and guessing the way the new principle will be interpreted in the future is an impossible deed. On one side, it seems that the principle is now completely in line with anti-discrimination standards widely recognised under international law. On the other, one has the impression that the new wording narrows its scope of application. Indeed, discrimination is not “incompatible with belonging to the Olympic Movement” anymore, it is merely inadmissible when exercising the rights and freedom granted by the Olympic charter. In general, this is a symbolic provision, the wording of the Host City Contract or the bidding requirements have way more practical relevance, but this development is not necessarily a sign of a more stringent action from the part of the IOC against discriminations. 

Conclusion: The Devil is in the implementation/interpretation

This leads us to a final, and crucial, caveat. Law is very much about the interpretation of the meaning of words. In our case, the IOC will be the main responsible to give a practical meaning to the sweet words enshrined in the Agenda 2020’s recommendations. Starting with the IOC Session on the 8 and 9 December in Monaco, which will decide on the modifications to the Olympic Charter or its byelaws. The legal meaning of transnational concepts such as sustainability, good governance and discrimination is more or less shared around the globe. The IOC cannot afford to betray it; there is no space for the use of newspeak, or for any other word games leading to a practical disregard of the essential gist of those concepts. The IOC and its president have raised high expectations with this set of recommendations indicating a willingness to change from the side of the Olympic movement. Such expectations cannot be disappointed over and over again; it would certainly be suicidal for the Olympic movement to betray its grand promises. Now comes the time to deliver!

The last years has seen the European Commission being put under increasing pressure to enforce EU State aid law in sport. For example, numerous Parliamentary questions have been asked by Members of the European Parliament[1] regarding alleged State aid to sporting clubs.  In reply to this pressure, on 21 March 2012, the European Commission, together with UEFA, issued a statement. In this statement, the Commission held that the objectives of the UEFA’s Financial Fair Play (FFP) Regulations are consistent with the aims and objectives of European Union policy in the field of State aid. Moreover, the Commission highlighted that it is willing to cooperate with UEFA when enforcing the rules on EU State aid onto professional football. According to the Commission, when football clubs experience financial difficulties, there is a particular risk that public authorities may be tempted to grant State aid. Thus, enforcing EU rules on State aid will ensure prudent economic management by football clubs that will serve to protect both the interests of individual clubs and players as well as the football sector in Europe as a whole.

Now that UEFA is in the process of enforcing its FFP regulations on football clubs, the question remains whether the European Commission has kept its word about its part of “the deal”. In other words, is there a visible change regarding the enforcement of the EU State aid rules by the European Commission?

Article 107 of the treaty on the Functioning of the European Union (TFEU) foresees that a Member State may not aid or subsidize private parties in distortion of free competition. The State aid rules constitute one of the four policy areas forming EU competition law. The others being the rules on cartels, abuse of dominance and mergers. The European Court of Justice established long ago that EU competition Law was also applicable to sporting entities[2], but very little has ever been done or said about State aid in sport. In fact, one could easily get the impression that the Commission deliberately avoided to get its hands dirty with such problems. One famous example concerns a terrain qualification change in Madrid in the late 90’s that proved hugely advantageous for Spanish football club Real Madrid[3]. In this case, the Commission, even though agreeing that an advantage was conferred to the club, simply stated that the new qualification of the terrain in question does not appear to involve any transfer of resources by the State and could therefore not be regarded as State aid within the meaning of article 107 TFEU.

So has anything changed since then, or more specifically, since 21 March 2012? The Commission has never been famous for its celerity, meaning that it could take another few years before true change can be witnessed. The continuous delays in coming to decisions has also been one of the main points of criticism by the European Ombudsman on the way the Commission is dealing with State aid in sport. However, on a close look, one can distinguish the beginning of a shift towards active enforcement of EU State aid law in sports.

On the day of the joint statement, the Commission published a decision indicating that it would initiate a formal investigation into alleged State aid granted by Sweden for the construction of a sporting arena for ice hockey and other indoor sports in the town of Uppsala. The Swedish State notified the Commission that it had planned to grant EUR 16.5 million directly plus EUR 1.7 million for 25 years for the construction because the arena would fulfil an objective of common interest. Moreover, due to its multifunctional character, the arena would also be used for other sports and events, such as concerts. Nonetheless, the Commission had doubts as regards the necessity to use public funding for this projects and the reasons advanced by Sweden to justify the need of a completely new arena instead of renovating an old one.

The Commission’s scrutiny of State aid in the field of sport did not end there. Since March 2012 the Commission has dealt with 12 cases in which it had to decide whether to launch an official investigation or not. The cases included possible State aid to over 30 beneficiaries in six different Member States, the latest one published 9 April of this year (see table). The aid measures varied from grants for renovating old stadiums or constructing new ones, debt waivers and reduced tax-rates for certain clubs, to acquisition of a stadium by the municipality, guarantees on bank loans by the club and suspected advantageous property transfers between a club and the municipality. In five out of the 12 cases, the Commission has decided to launch an official investigation in accordance with article 108(2) TFEU.

TableStateAidInSport.pdf (95.1KB)

Launching an official investigation does not mean that the Member State in question will get sanctioned for granting unauthorized State aid. Article 108(2) TFEU allows the Member States and concerned parties, such as the beneficiaries, to submit comments and to respond to any doubts the Commission might have regarding the legality of the aid. Indeed, on 2 May 2013, in its final decision regarding the construction of a sporting arena in the town of Uppsala, the Commission concluded that the granted aid is compatible with the internal market in accordance with article 107(3)(c) TFEU[4] and is therefore authorized. Nonetheless, four cases, which will be analyzed in future blog posts, are still pending a final decision by the Commission. For now, it is fair to say that the Commission has shifted towards an active enforcement of EU State aid law in sports. However, whether the Commission is prepared to “show its teeth” and sanction the Member States who granted unlawful aid to sporting clubs remains unclear.

[1] See for example: E-005417/2011, E-004360/2011 and P-4699/09

[2] Case 36/74 Walrave and Koch, (1974)

[3] The qualification change allowed Real Madrid to sell its old training grounds. Though the exact price for the grounds remains unknown, Real Madrid was suddenly capable of buying players like Figo and Zidane for record fees.

[4] Article 107(3)(c) TFEU: “The following shall be compatible with the internal market: aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest”.

Since the landing on the sporting earth of the Übermensch, aka Usain Bolt, Jamaica has been at the centre of doping-related suspicions. Recently, it has been fueling those suspicions with its home-made scandal around the Jamaica Anti-Doping Commission (JADCO). The former executive of JADCO, Renee Anne Shirley, heavily criticized its functioning in August 2013, and Jamaica has been since then in the eye of the doping cyclone.

In light of the reluctance of Jamaica to remedy the failures of JADCO, the World Ani-Doping Agency (WADA) ordered a formal review of the anti-doping practices on the Island. In case of a negative report, WADA would have declared Jamaica non-compliant, this would in turn trigger sanctions by Sport Governing Bodies, in extreme cases even a full ban from major international events (Olympic Games or World Cups). In order to avoid such a dire fate the sporting Minister of Jamaica and the head of WADA met on November 2013 and a reform plan for the Jamaican anti-doping organisations was agreed. The minister accepted to undertake a legislative review of anti-doping law in Jamaica and to evaluate JADCO’s governance and management structure. Furthermore, the Jamaican government allocated new funds to the fight against doping. In short, JADCO is being restructured, this is very much a work in progress, but WADA is strongly backing the reforms so far.

Furthermore, in 2013, Jamaican track and field athletes have been hit by a strange string of positive doping cases: Asafa Powell, Sherone Simpson, Veronique Campbell-Brown, Allison Randall,  Damar Robinson, and (in 2012) Dominique Blake. All those cases lead to sporting bans of various lengths by Jamaica Athletics Administrative Association’s  (JAAA) Disciplinary Panel. However, even the Jamaican doping justice is scrambling, the probity of some judges have been doubted and calls to reverse the bans in the cases of Asafa Powell and Sherone Simpson have been heard. Anyhow, the cases will probably end up in front of CAS.

Before CAS, the weaknesses of the Jamaican anti-doping system became overt in the Campbell-Brown case. Indeed, in that case, the JADCO acknowledged that it had been, as a matter of policy choice, constantly ignoring the WADA International Standards for Testing. Thus, CAS was prompt to assert that “systematic and knowing failure, for which no reasonable explanation has been advanced, is deplorable and gives rise to the most serious concerns about the overall integrity of the JAAA’s anti-doping processes, as exemplified in this case by the flaws in JADCO’s sample collection and its documentation” (§182). Consequently, the ban on Veronique Campbell-Brown was lifted. Additionally, in a recent decision (2 May 2014) in the Dominique Blake case, CAS reduced the 6-year ban to 4,5 years because, among other reasons, “she was provided with barely any anti-doping education” and “she has only had one previous experience with doping control (when she was 19 years-old)”.

What kind of lessons does the fiasco of the anti-doping system in Jamaica holds for the whole World Anti-Doping edifice? Well, first, that the local level matters a lot. Indeed, if local authorities are inefficient and/or unwilling to address the various dimensions (education, compliance, enforcement) of the anti-doping fight, the WADA and its rules lose relevance. This might engender loopholes in the global anti-doping regime, thus creating discrepancies between athletes. Indeed, some might be very strictly monitored due to their residence being in a complying country, while others will systematically escape any control or punishment due to insufficient procedural standards. Hence, for the WADA Regime to be successful in reining in doping and ensuring a level playing field for athletes, WADA must urgently warrant that enforcement asymmetries are avoided.

 After Tuesday’s dismissal of Michael Garcia’s complaint against the now infamous Eckert statement synthetizing (misleadingly in his eyes) his Report on the bidding process for the World Cup 2018 and 2022, Garcia finally decided to resign from his position as FIFA Ethics Committee member. On his way out, he noted: “No independent governance committee, investigator, or arbitration panel can change the culture of an organization”. It took Garcia a while to understand this, although others faced similar disappointments before. One needs only to remember the forgotten reform proposals of the Independent Governance Committee led by Prof. Dr. Mark Pieth.

FIFA is the world’s government of football. It decides who should get to organize the World Cup every four years, but it also imposes the rules applying to international transfers of football players and redistributes a massive amount of money to the various layers of the football pyramid. Those are no mundane tasks. But, despite its relentless display of an entrenched culture of bad governance and corruption, the timidity of public authorities in confronting FIFA is striking. In fact, opacity and a dramatic lack of accountability characterize FIFA’s decision-making processes.

FIFA’s Opacity Culture

Transparency is one of the key requirements of “good governance”. Transparency implies that the public sphere can scrutinize the acts of government and criticize them in full knowledge of their contents. To the contrary, FIFA’s daily governmental work is marred in opacity. Disciplinary decisions, as the one handed out on Tuesday, are never released in full. Thus, it disables any critical checks on the way justice is rendered by FIFA’s disciplinary bodies. The two Garcia reports, the first on the ISL Corruption scandal and the second on the World Cup 2018 and 2022 bids were not publically released (Michael Garcia did not complain over the non-publication of his first report). In an ironical twist, FIFA regulations bar FIFA from releasing these reports supposed to restore credibility of FIFA in the eyes of the world. Hence, FIFA publically trumpets investigations into the most controversial and sensitive issues, while knowing that the findings will be buried forever. But beyond the Garcia reports, opacity is a pervasive feature of FIFA’s governance. For example, the two academic studies ordered by FIFA on the legality and desirability of third-party ownership were similarly kept in a drawer, despite the fact that they are to serve as a basis for upcoming legislation on the matter. In this way, FIFA is able to keep the public debate at bay. Maintaining the public uninformed on the substance of legislative or judicial decisions is the surest way to avoid any controversies and to distance the world government of football from its “citizens”. 

FIFA’s Accountability Deficit

Accountability is another keyword for anybody interested in Good Governance standards. In short, it implies that a decision-maker can be held responsible in front of a forum (legal or political) for the decisions she (or most likely he in the case of FIFA) is taking. FIFA has a huge accountability deficit for two reasons: internally no strong accountability mechanisms have been put in place; externally no societal accountability is imposed. Internally FIFA has been at pain to paint the emergence of its “independent” Ethics Committee as a revolution. However, the Garcia Report saga was prompt to display it as a farce. The Ethics Committee’s investigation as such seems to have been fundamentally flawed, suffice here to recall that the Russian Federation got away with a simple “computers destroyed”. If the Ethics Committee is incapable of inquiring seriously into those matters, it should simply be discarded as an instance of whitewashing. Moreover, despite Blatter being a finalist for this year’s edition of the world’s most hated human being, he will most likely be re-elected by FIFA’s member (the leaders of the national associations) at the upcoming congress in May 2015. Indeed, FIFA’s members are accountable to nobody as FIFA shields them from any national legal or political challenges on the pretext of protecting the autonomy of football.

As pointed out by Garcia, FIFA is incapable of reforming itself and until now it has been immune to the pressure of public outrage. All the expertise of the world would be incapable of changing this state of affairs, unless it is matched with hard legal constraints. This pressure has to come from the states, the first among those being the Swiss state. The Swiss public authorities have the duty to use all legal tools available (especially criminal law) to clean up this Swiss association seated in Zurich, they should collaborate with Europol, Interpol and the FBI in doing so (the new anti-corruption laws are a first step in that direction). In the end, the Swiss state is the sole capable of putting an end to FIFA’s corrupt politics. Would this be an inadmissible intrusion in the autonomy of sport? Even the IOC acknowledged, in the background paper to the Agenda 2020 recommendation, “autonomy has to be earned” and must be exercised “responsibly and in accordance with the basic standards of good governance”. There is no way FIFA can be seen as complying to any good governance standards. The time to clean-up FIFA has come.

Mohamed Dahmane is a professional football player of French-Algerian origin, who has played for a variety of European clubs, including French club US Mauberge, Belgian club RAEC Mons and Turkish club Bucaspor. However, he will mostly be remembered as the player whose legal dispute with his former club (Belgian club KRC Genk) revived the debate on football players’ labour rights.  

Journalists wasted no time in comparing it to the Bosman case.[1] Fair enough, Dahmane and Bosman do show some striking similarities: the two cases concerned players employed by mediocre Belgian football clubs claiming their right to be treated as normal workers. Furthermore, in both cases the respective Courts met (to a large extend) the players’ demands. The Bosman case not only changed labour conditions for all footballers, it shook the whole transfer system. In Dahmane, the case is essentially about whether it is justifiable to have a special law that obliges professional football players who unilaterally break their players’ contract to compensate their club for up to 36 months of salary. After all, “normal” workers are only obliged to pay a 12 months of salary compensation in an identical situation. Whether the Dahmane case will have the same weight as Bosman depends on the effects of the judgment on footballers in Belgium, but also on the European football sector in general. Therefore, a close look at the ruling is needed to understand its potential consequences.

Dahmane signed a four-year contract with KRC Genk on 1 July 2007, he then unilaterally terminated the contract in January 2008 following a row with his coach. Due to the contract termination, KRC Genk demanded a compensation amounting to EUR 878.888,88. The demand was based on Articles 4 § 4 and 5 § 2 of the Law for Professional Athletes and the Royal Decree of 13 July 2004. Indeed, according to the Royal Decree, the compensation had to be equal to 36 months of salary. Dahmane disagreed with KRC Genk’s demands and argued that the compensation should be calculated in accordance with Article 40 § 1 of the general Labour Agreements Law. Pursuant to this Article the severance pay can only amount to a maximum of 12 months of salary.

In a judgment of 25 May 2009, the Labour Court (Court of first instance) concurred with the demands of KRC Genk and ordered Dahmane to compensate KRC Genk for EUR 878.888,88.

Dahmane placed an appeal with The Court of Labour arguing that Article 4 § 4 of the Law for Professional Athletes and the Royal Decree breached Articles 10 and 11 of the Belgian Constitution on equal treatment and non-discrimination.[2] KRC Genk, for its part, argued that the difference between labour agreements of professional footballers on the one hand and “normal” labour agreements on the other is based on the ‘specific character of labour agreements of professional footballers and the specific character of sport in general’. Thus, the ‘specificity of sport’ would imply a special status for sport, whereby ‘normal’ law (i.e. the general Labour Agreements Law) cannot be applied unabridged. KRC Genk highlighted that to achieve the objectives inherent to football, which include avoiding competition distortions and the preservation of the stability of participating sport clubs, certain specific measures, such as the Royal Decree of 2004, can be taken in order to safeguard the legal certainty of labour relationships in the sport sector.[3]

The Court of Labour dismissed the arguments raised by KRC Genk, and held that the Royal Decree applies to all professional sports, not only to football, thereby denying validity to RKC Genk’s claims on the specificity of football.[4]

The Court agreed with KRC Genk that sport exhibits certain characteristics that can deviate from other labour relationships between employer and employee. However, the Royal Decree in question did not mention the specificity of sport in its text, nor does it provide any objective justifications as to why separate rules regarding compensation after a unilateral termination of a labour contract is necessary for the sport sector. Furthermore, the pursuit of financial profits, and the importance of preserving a fair competition have to be taken into account. Those economic objectives are not specific to the sport sector. Therefore, the Court saw no valid reason justifying a separate Royal Decree, when sport’s economic dimension can be equally covered by existing legislation. In other words, the same laws should be used to achieve the same objectives.[5]

As regards KRC Genk’s view that some rules preventing richer clubs from buying all the good players from smaller clubs, thereby distorting competition, are justifiable, the Court found that to be incorrect. Even though it is true that football’s transfer system is different from “normal” movement of workers, a distinction needs to be made between buying and selling of players on the one hand, and the unilateral termination of a player’s contract on the other hand. Here again the Court found the breach of the Constitutional Articles on equal treatment and non-discrimination based on the specificity of the football transfer system was not objectively justified in the Royal Decree.

The Court reminded the parties that the transfer system, which only allows two periods a year for clubs to buy and sell players, would limit the possibility for professional footballers to change clubs. Moreover, it highlighted that compensation equal to 12 months of salary comprises two transfer periods, and should therefore not be seen as unreasonable. Lastly, the Court took into account that the average career of a professional sportsman is relatively short (12 years according to KRC Genk and six to eight years according to Dahmane). A compensation amounting to 36 months of salary would, for many professional players, amount to 1/3 of the player’s revenue during his career and should therefore be deemed unjustifiable.[6]

Hence, the Court considered that a Royal Decree imposing a compensation of 36 months of salary on a player breaching his contract is disproportionate. Furthermore, the Court found the Royal Decree unjustifiable under the Constitutional principle of equal treatment and non-discrimination.

Dahmane revives a debate that has occupied academics in the fields of sports law, labour law and other fields of law for many decades. Is sport special and do its specificities oblige the European and national legislators to make laws that answer the specificities of sport? Should professional athletes be treated different from normal workers because sport is “special”? After Bosman, no transfer fees needed to be paid for players whose contract had ended and no limitations on the number of EU nationals were allowed to be imposed by the football clubs. In other words, the European Court of Justice (ECJ) found professional footballers to be very much like normal workers. Similarly, the Dahmane case lead the Belgian Court of Labour to deny any difference between professional athletes and normal workers regarding compensation after a unilateral termination of the labour contract. Even though Dahmane, as appellant, had asked the Court to raise a preliminary question to the ECJ on the compatibility of the law with the free movement of workers[7], the Court decided the case under Belgian law only.[8] It is therefore highly unlikely that Dahmane will have the same transnational effect as Bosman and mass unilateral contract terminations by professional athletes across the EU are not to be expected. 

Dahmane could set a precedent and encourage professional players in Belgium to simply break their contract, move to another club and pay compensation equal to 12 months of salary. This would be the worst-case scenario for Belgian clubs, since a compensation equal to 12 months of salary will nearly always be inferior to a transfer fee. On the other hand, mass unilateral contract terminations by footballers in Belgium would vindicate the need for specific regulation for football clubs.

In many ways the Belgian Court of Labour has “passed the ball” back to the Belgian legislator. Should the Belgian legislator feel that professional athletes, or footballers for that matter, have to be treated differently compared to normal workers then it could always decide to adopt specific laws or Royal Decrees for professional athletes. However, Dahmane will serve as a warning that these separate laws or Royal Decrees will need proper objective justifications as to why professional athletes are to be treated differently.

[1] See for example: Zaak-Dahmane krijgt allure van zaak-Bosman

[2] Arrest A.R. 2009/AH/199 (6 may 2014) Sub II, §1

[3] Ibid, Sub III §6

[4] Ibid, §7

[5] Ibid, §6

[6] Ibid, §7

[7] Ibid, Sub II, §1

[8] Ibid, Sub III §12

Introduction

The year 2015 promises to be crucial, and possibly revolutionary, for State aid in football. The European Commission is taking its time in concluding its formal investigations into alleged State aid granted to five Dutch clubs and several Spanish clubs, including Valencia CF and Real Madrid, but the final decisions are due for 2015.

A few months ago, the Commission also received a set of fresh State aid complaints originating from the EU’s newest Member State Croatia. The complaints were launched by a group of minority shareholders of the Croatian football club Hajduk Split, who call themselves Naš Hajduk. According to Naš Hajduk, Hajduk Split’s eternal rival, GNK Dinamo Zagreb, has received more than 30 million Euros in unlawful aid by the city of Zagreb since 2006.

Investigations into potential aid granted to Dinamo are not something new. Croatia’s most successful club was already under scrutiny by the Croatian Competition Agency (CCA) prior to the country joining the EU on 1 July 2013. In a highly controversial decision dated from 13 June 2013, the CCA decided to terminate the proceedings. With Croatia joining the EU, the CCA ceased to have the legal competence to carry out State aid investigations. Instead, the European Commission has the exclusive competence to deal with the Dinamo Zagreb case.

It is no secret that football and politics, including direct State intervention, go hand-in-hand in many EU Member States. Remarks made by Spanish Government officials after news broke out that the Commission commenced formal investigations relating to Spanish clubs illustrate this point, thereby making it more sensitive for the Commission to decide these cases.

In that sense, the Dinamo Zagreb case could prove a real snake pit, since State funding of professional sports undertakings is authorised by a national law known as the “Sports Act”. In Naš Hajduk’s eyes, joining the EU has not changed existing practices since Dinamo is still receiving unlawful State aid. In fact, they believe that the main reason for the City of Zagreb’s public funding is to preserve the dominant position of Dinamo Zagreb in Croatian football. Furthermore, according to the complainant, the CCA’s decision to declare the aid compatible with Croatian national law was unjustifiable because the CCA did not correctly interpret the relevant provisions stipulated in the Stabilisation and Association Agreement between the European Communities and its Member States and the Republic of Croatia and the Treaty concerning the accession to the EU of the Republic of Croatia. 

This blog post will briefly discuss the measures imposed by the relevant Croatian authorities regarding public funding to Croatian sporting entities in general and Dinamo Zagreb in particular in light of the decision of the CCA. Furthermore, now that a complaint has been lodged with the Commission, I will analyse the key legal issues raised by the case.  

Background

Since Croatia gained its independence from Yugoslavia in 1991, GNK Dinamo Zagreb has been the country’s most successful football club by a distance. It has won 16 national championships in total, and is currently well on its way to win its 10^th consecutive title. Notwithstanding all the sporting success, it has suffered great financial difficulties in this period of time, which climaxed in a Croatian Court declaring the football club bankrupt in 2002. However, after restructuring the club, Dinamo was allowed to remain active in the highest professional football league of Croatia.[1]

Since the introduction of the latest version of the Sports Act in 2006, Dinamo has been consistently included in the public financing programs adopted on the basis of Articles 74-76 (Sport Financing) of this Act. Article 75 allows public funding in sport on State level, whereas Article 76 allows for public funding in sport on regional and local level. Article 76 (1) lists the types of programs that are suitable for public finding. The list includes: implementing sporting activities of children, youth and students; sports preparations, Croatian and international competitions, as well as the general and special health protection of athletes; hiring persons to do professional work in sports and; planning, construction, maintenance and use of sports facilities important to the public authorities.[2]

In Zagreb, for example, the system of public funding works as follows: The Zagreb Sports Association (SSGZ), a public institution or “sports community” created by the City of Zagreb, submits a proposal to the city regarding the public needs for sport within the city.[3] The final decision on this proposal and the annual budget for the public needs for sporting entities within the city lies with the governing body of the City of Zagreb in accordance with Article 74 (2) and 76 (4).

In general terms, the program on public funding in sport of the SSGZ includes:

• Investing in the development of young athletes;

• Encouraging participation in sport for larger number of citizens, especially children and youth.

However, the program also includes:

• Improving the quality of elite professional sport that encourages the development of sport and contributes to the reputation of the City of Zagreb

• Planning, construction, maintenance and use of sports facilities important to the City of Zagreb.

The criteria of what can be considered “elite professional sport” are found in the Conclusion on the allocation criteria for the promotion of professional sport.[4] Funding for elite professional sport could be awarded to all sporting entities who have won a European title, who have gained the right to participate in European competitions, or that are successful in domestic and/or European professional competitions. Based on these criteria, special agreements were signed between the City of Zagreb and elite professional sport entities such as basketball club KK Cibona, waterpolo club HAVK Mladost, handball club RK Lokomotiva Zagreb and football club GNK Dinamo Zagreb.[5]

The City of Zagreb argued that public funding to these elite sport clubs was needed because the private market did not provide sufficient sponsor money in order for these clubs to compete at an adequate competitive level. Nonetheless, the complaints were launched by people who believe that the part of the program that allows specific funding for elite professional sport creates a financial advantage for a selective groups of professional sport clubs, which in turn can lead to unlawful State aid under EU law or under article 70 (1) (iii) of the Stabilisation and Association Agreement.[6] It was therefore no great surprise that the Croatian Competition Agency was urged to decide whether the public funding to one of the recipients, Dinamo Zagreb, amounted to a breach of the EU State aid rules. 

The CCA’s decision

The CCA considered the measures not to constitute unlawful State aid under the Stabilisation and Association Agreement.[7] More specifically, the CCA argued that until Croatia joined the EU on 1 July 2013, the City of Zagreb complied with all the requisites of the Program of public needs in sport and with Article 76 of the Sports Act. Given that “the Sports Act, which is in force and applicable in the Republic of Croatia (…), enables the financing of professional sports by local and regional governments, including the City of Zagreb, the (CCA) has found that there are no legal requirements for assessing whether the resources assigned to Dinamo Zagreb (should be) considered illegal state aid.”[8]

However, the CCA underlined that from the date of accession onwards EU Law will be applicable to Croatia and recognised that the Sport Act could contradict the EU State aid rules.[9]  Consequently, the CCA recommended the Croatian legislator to reformulate the relevant provisions in the Sports Act.[10] Therefore, since joining the EU the Sports Act contains a new paragraph which reads as follows: In accordance with the provisions of (the Sports Act), the financing of professional sports by the national, regional and local governments of Croatia and the city of Zagreb that effects trade between the Croatian State and other EU Member States is only possible if (the financing) is in line with the rules regarding State aid.[11] However, according to the CCA, with Croatia joining the EU, the CCA seized to have the competence for carrying out further State aid investigations for the measures granted to Dinamo Zagreb from both before as after the date of accession.[12]

The question whether aid granted to Dinamo Zagreb specifically due to a lack of sponsor money constituted unlawful State aid was also discussed by the CCA in its decision. In the end, the CCA held that it was “unable to determine whether the sponsoring contracts signed between publicly owned legal persons and (Dinamo Zagreb) contained State aid due to the following: from 2010 to 2012 (Dinamo Zagreb) did not receive financing from sponsoring contracts concluded with (public entity) Zagrebacki Holding, whereas at the moment of signing of the concerned contracts (public entity) Croatia Osiguranje acted as a market economy investor while the City of Zagreb Tourist Board and (public entity) Hrvatska Elektroprivreda signed sponsoring contracts not only with (Dinamo Zagreb) but also with other professional sport clubs.”[13]

The CCA’s decision to consider the public funding in line with the Sports Act and the Program of public needs in sport was heavily criticised, especially by Naš Hajduk. In their view, the CCA erred in their decision to justify the aid granted to Dinamo Zagreb. Their second concern involves the funding programs themselves, which are still in place after Croatia’s accession to the EU. Since 2006, Dinamo has received up to 244 million Kuna (31.7 million Euro) by the City of Zagreb for a variety of services, and there is no indication that the City of Zagreb is planning to seize the funding any time soon.  

The complainants’ arguments

Firstly, the complaint stipulates that Dinamo Zagreb is receiving unlawful State aid because it is allowed to use the Maksimir Stadium and several training grounds free of charge. This “free of charge lease agreement” has been anchored in several agreements signed between the City of Zagreb and Dinamo Zagreb, the latest of which being signed on 13 October 2011 for a period of five years with the possibility of extending that lease. Using the football stadium and the training grounds for free constitutes a selective advantage, they argue, because no private operator would consider leasing out real estate free of charge.

Secondly, Naš Hajduk argues that the maintenance costs of the stadium are not being paid by Dinamo Zagreb, but by the City of Zagreb. In fact, the maintenance costs for the period 2010 – 2014 amounted to 4.8 million Euro. This amount can be considered as an unlawful aid granted to Dinamo Zagreb.

Thirdly, the City of Zagreb has funded (and still does) the operating costs of “sport clubs of a particular importance for the city”. Operating costs include: Youth development and expenses made by Dinamo Zagreb’s youth categories; travel and accommodation costs for matches played in European competitions, international friendlies and training programs; the organisation of home games in European competitions; and “other development programs”.

Fourthly, Naš Hajduk regards the fact that the City of Zagreb has (partially) paid the salaries of the football trainers working for Dinamo for the last three years as further evidence of unlawful State aid. As a rough average, the city pays the club 100.000 Kuna (13.000 Euro) a year per trainer. According to the complainant, 30 trainers received this amount in 2012, 23 in 2013 and 22 in 2014. In fact, the operating costs and the payment of trainer salaries combined would amount to nearly 4.9 million Euros.

Fifthly, in addition to describing which measures should be deemed as unlawful State aid, Naš Hajduk argued in the complaint that regardless of whether the measures are considered illegal State aid or not, the Croatian authorities failed to meet their notification obligation as stipulated in Article 108 (3) TFEU and Article 2 of the Procedural Regulations 659/1999. A notification by the Croatian authorities, they argue, is not just a procedural obligation for Member States, but it would also lead to greater transparency on public funding and would take away any doubts disagreeing citizens, such as themselves, might have about how the State spends public money.

Lastly, the complainant pointed out to the Commission that the CCA erred in its decision to justify the public funding under the national Sports Act. The principle of supremacy of EU law is also applicable as regards accession treaties such as the Stabilisation and Association Agreement between the European Communities and its Member States and the Republic of Croatia and the Treaty concerning the accession to the EU of the Republic of Croatia.  

Is Dinamo Zagreb receiving (unlawful) State aid?

Naš Hajduk believes, and perhaps rightly so, that the advantages gained by the free of charge lease contract, the maintenance costs of the stadium, the operating costs reimbursements and the trainer salaries cannot be justified because of “lack of sponsorship from the private sector”. Moreover, as regards the lease and maintenance agreements between the club and the city, there is a realistic possibility that the City of Zagreb did not behave in accordance with the Market Economy Investor Principle[14] and that Dinamo gained a financial advantage from these deals. It would not be the first time that the Commission would find such agreements contrary to Article 107 (1) TFEU. For example, in its decision regarding alleged municipal aid to several professional Dutch football clubs, the Commission found that the payment agreement between the municipality of Tilburg and the football club Willem II for the stadium provided a selective advantage to Willem II with the use of public resources. In essence, the Commission accepted the possibility that stadiums belonging to municipalities that are not rented out at market conditions to professional football clubs could entail State aid.[15]

Similarly, it cannot be denied that an undertaking would gain a financial advantage if the public authorities were to fund a large part of its operational costs, such as travel expenses, accommodation costs and (youth) trainings. The question remains however, whether the payment by the City of Zagreb of the operational costs endured by Dinamo Zagreb are selective. It is important to note the legal basis for the measures are found in the Sports Act, which is applicable in the entire Republic of Croatia. Even though it is not clear whether the public funding granted to other sport clubs in Zagreb differed from the public funding granted to the football club Dinamo, the measures do appear to be selective. Firstly, the criteria for public funding set by the SSGZ distinguish between professional sport that can be considered elite and (professional) sport not considered elite. Because Dinamo is considered an “elite professional sports clubs”, it is entitled to receive public funding. However, other professional sporting entities that are not considered “elite professional sports clubs” do not receive this public funding. Therefore, if the contested measures by the City of Zagreb are solely granted to Dinamo Zagreb for being an “elite sporting entity”, the measures could be considered selective in the light of Article 107 (1) TFEU. Secondly, the selectivity criterion should also be assessed by comparing how different regional and local governments fund their respective “elite sporting entities”. Once a discrepancy is found from one region to another regarding the amount of money granted to sports (i.e. because some local governments simply have more money to spend), the measure could be deemed selective.

Apart from determining whether the public funding of Dinamo could entail State aid, as is the case with all State aid cases, one has to look at possible arguments that could justify the measures. Keeping in mind recent State aid decisions, it becomes clear that measures that support sport’s educational, public health, social and recreational functions will be declared compatible with EU law.[16] It is therefore worth remembering that Article 76 (1) of the Croatian Sports Act, also includes the possibility of public funding with the aim of implementing sporting activities of children, youths and students, protecting the health of athletes and hiring persons to do professional work in sports. Furthermore, on numerous occasions in the last few years, the European Commission has declared State aid provided for sports infrastructure compatible, with EU law.[17]

The facts of the Dinamo Zagreb case show that at least part of the aid measures are aimed at supporting the educational functions of sport, i.e. covering expenses of Dinamo’s youth teams. Moreover, the City of Zagreb’s decision to aid Dinamo paying for the maintenance costs of the stadium and training grounds could show similarities with Commission decisions where such aid was declared justified. These measures may, in principle, be compatible with EU law, where there is a clear common objective. However, the positive effects on the common objective must outweigh the negative effects on competition and trade in order for these measures to be compatible with EU law. Therefore, in the Dinamo Zagreb case, this balancing test has to determine whether the objectives of the measures (i.e. improving the quality of elite professional sport that contributes to the reputation of the City of Zagreb and the planning, construction, maintenance and use of sports facilities important to the City of Zagreb) outweigh the negative effects this could have on other entities in general, and football clubs in particular.

In addition, it should not be forgotten that Croatia joined the EU on 1 July 2013. This means that Dinamo Zagreb received the contested aid before and after the date of accession. Therefore, another key question is to what extent the Commission can sanction Croatia for aid measures implemented before the accession date. It follows from settled EU case law that Articles 107 – 109 TFEU and the Procedural Regulations 659/1999 are applicable on to a Member State only as from its accession to the European Union.[18] Moreover, it follows inter alia from EU case law[19], and Article 19 of the Procedural Regulations that existing aid can be found to be incompatible with prospective effect only. With regard to the Dinamo Zagreb case, this effectively means that the Commission can only order a recovery of the aid granted to the football club after the date of accession. Therefore, should the Commission, for example, decide that the stadium lease agreement (signed in 2011) constitutes unlawful State aid, it can only order the recovery of the advantage gained through this agreement as of 1 July 2013.

The last point that Naš Hajduk addressed in their complaint to the Commission that the CCA incorrectly allowed the aid to be granted to Dinamo because it was compatible with Croatian national law. Irrespective of whether the CCA interpreted the Accession Treaties correctly or incorrectly, it is my understanding that EU law does not allow the Commission the power to overrule the CCA’s decision. As has been stated above, since the Commission can only order the recovery of the aid granted after the date of accession, it has no competence to decisions made regarding State aid before the date of accession. In other words, any options Naš Hajduk could have in challenging the CCA’s decision have to be found in national appeal procedures.

The Dinamo Zagreb State aid case currently finds itself in a preliminary investigatory phase. Given the Commission’s inconsistency regarding the time frames to decide whether to commence formal investigations or not, it is impossible to say if we can expect news from Brussels any time soon. Nonetheless, this case will certainly drive forward the discussion in the quickly expanding field of State aid and sport.

[1] Vanja Smokvina, “Case Law of the Croatian Supreme Court in the Fields of Sports Law – Emphasis on Labour Relations”, International Sports Law Journal, 2012/1-2, pages 106 - 108

[2] Article 76 (1) points 2, 4, 5 and 8 of the Sports Act

[3] Article 76 (2) of the Sports Act

[4] A Croatian version of the Program is available on: http://www.zagreb.hr/default.aspx?id=60227.

^[5] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, pages 7 – 10 (Croatian version).

[6] Article 70 (1) (iii): “The following are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the Community and Croatia: any State aid which distorts or threatens to distort competition by favouring certain undertakings or certain products.”

[7] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, (English version), page 1

[8] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, pages 19

[9] Ibid, page 18

[10] Tatjana Jakovljević, “Public Support for Sports: The Name of the Game – Football!”, EStAL, 3/2013, page 445

[11] Article 74 (3) of the Sports Act

[12] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, (English version), page 1

[13] Ibid

[14] The essence of the MEIP is that when a public authority invests in an enterprise on terms and in conditions which would be acceptable to a private investor operating under normal market economy conditions, the investment is not a State aid.

[15] SA.33584 – Alleged municipal aid to professional Dutch football clubs Vitesse, NEC, Willem II, MVV, PSV and FC Den Bosch in 2008-2011, paras. 51-52

[16] See for example: SA.31722 - Supporting the Hungarian sport sector via tax benefit scheme

[17] See for example: SA.37109 – Football Stadiums in Flanders; SA.35440 - Multifunktionsarena der Stadt Jena and; SA.37342 - Regional Stadia Development in Northern Ireland

[18] Case C-262/11 Kremikovtzi AD, paragraph 50

[19] Ibid, paragraph 54

The Pechstein decision of the Oberlandesgericht of Munich is “ground-breaking”, “earth-shaking”, “revolutionary”, name it. It was the outmost duty of a “German-reading” sports lawyer to translate it as fast as possible in order to make it available for the sports law community at large (Disclaimer: This is not an official translation and I am no certified legal translator). Below you will find the rough translation of the ruling (the full German text is available here), it is omitting solely the parts, which are of no direct interest to international sports law.

The future of CAS is in the balance and this ruling should trigger some serious rethinking of the institutional set-up that underpins it. As you will see, the ruling is not destructive, the Court is rather favourable to the function of CAS in the sporting context, but it requires a fundamental institutional reshuffling. It also offers a fruitful legal strategy to challenge CAS awards that could be used in front of any national court of the EU as it is based on reasoning analogically applicable to article 102 TFEU (on abuse of a dominant position), which is valid across the EU’s territory.

Enjoy the read! 

Antoine

PS: The translation can also be downloaded at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2561297

OLG München · 15 January 2015 · Az. U 1110/14 Kart

Part 1. The facts (omitted)

Part 2. Holdings of the Court

A. The claim is partially receivable

I. The international competence of the German courts (omitted)

67 - II. The arbitration clause signed on the 2 January 2009 by the appellant (Pechstein) and the respondent nr 2 (ISU) does not preclude access to the ordinary courts

68 - To this end the question whether the CAS, designated by the arbitration clause, can be considered a real arbitration tribunal, despite the fact the parties have no equal influence on its composition, can stay open. The arbitration clause would also be null in that case.

1. […]

2. […]

71 - 3. The arbitration clause is in the present case inapplicable because it goes against antitrust law

a) […]

aa) […]

bb) […]

75 - b) The arbitration clause signed on the 2 January 2009 between Pechstein and ISU is invalid based on Art. 34 EGBGB, §134 BGB, §19 Abs. 1, Abs.  4 Nr. 2 GWB.

76 - aa) The ISU is a monopolist on the market for the access to Speed-Skating World Championships and therefore in a dominant position in the sense of §19 Abs.1, Abs 4 Nr. 2 GWB.

77 - An economic activity, in the sense of the German Act against restraints of Competition (GWB), is any activity consisting of offering goods or services on a market. If this condition is fulfilled, the fact that an activity is linked to sport cannot preclude the application of the Competition rules (C-49/07 MOTOE v. Greece). Sports associations offering their services on the market of sports competitions are to be considered undertakings.

78 - In the present case, the market for the organisation of the World Championships in speed skating is the relevant market. Contrary to the view of ISU, the participation to the event cannot be supplanted by the participation in national competitions, due to the worldwide interest it triggers and the connected side revenues that successful athletes can hope for.

79 – […]Moreover, it is not convincing to argue that international events as the Open Belrus Cup, the Cup of Kazakhstan, the Dutch Classics or the International Race-Seniors could trigger the same interest and be substitutable to the World Championships.

80 - ISU is thus, because of the “One-place-principle”[1], the only provider on the market for the organisation of World Championships in Speed-Skating and therefore, due to the absence of competition, a monopolist in a dominant position in the sense of § 19 Abs. 2 Nr. 1 GWB.

81 - bb) An undertaking in a dominant position is prohibited under § 19 Abs. 1, Abs. 4 Nr. 2 GWB from demanding payment or other business terms which differ from those which would very likely arise if effective competition existed.

82 - Hence, the ISU could not require Pechstein to agree to the arbitration clause signed on 2 January 2009.

83 - (1) The notion of terms of trade is be understood broadly. It comprises everything that can be agreed on contractually, including an agreement to arbitrate disputes excluding the recourse to national courts.

84 - aaa) Contrary to the opinion of ISU, the applicability of § 19 Abs. 1, Abs. 4 Nr. 2 GWB is not precluded because the signing of the arbitration clause was mandated to ISU by the International Convention Against Doping in Sport from the 19^th October 2005 ratified by Switzerland.

85 - The Convention does not include a rule imposing a duty to conclude an arbitration clause in favour of CAS. Rather, it refers in Art. 4 §1 to the principles of the World Anti-Doping Code, which in turn in Article 13.2.1 provides that in cases involving international competitions or international athletes, appeals against anti-doping decisions can only be submitted to CAS. It cannot be assumed, despite the compliance mandate that the Code imposes to its signatories in Article 23.2.2, that the Convention includes this provision in the fundamental principles to which the State parties have to abide following Art.4 §1. Moreover, the obligations stemming from Art. 4 par.1 require transposition by the national states as foreseen by Art.5 1) of the Convention. It is not clear from the submissions of ISU that Switzerland has introduced any law that would impose to ISU the duty to sign arbitration clauses in favour of CAS.

86 - The fact that the ISU may have felt that it had to sign arbitration clauses in favour of CAS due to other non-legal reasons, as for example to preserve its recognition by the IOC, is irrelevant in the context of this competition law analysis. 

87 – bbb) Omitted

88 - (2) The imposition of an arbitration clause by the organizer of International sporting competitions is not per se an abuse of a dominant position.

89 - aaa) In fact, sound and weighty arguments speak in favour of avoiding to leave to the many potentially competent national courts the duty to deal with disputes arising between athletes and International federations in the framework of international competitions, and instead to refer them to a single sports tribunal. In particular, a uniform competence and procedure can preclude that similar cases be decided differently, and therefore safeguard the equal opportunities of athletes during the competitions.

90 - bbb) Contrary to the view of the first instance court, arbitration agreements between a dominant organizer of international sports competitions and the athlete taking part in these competitions are not per se invalid due to the lack of free will of the athlete.

91 - Omitted

92 - Art 6 par. 1 ECHR is opposed to the validity of an arbitration agreement to which one of the parties has not acquiesced. But, if consent is present, the sole fact that this consent was necessary economically to be able to exercise one’s profession is not sufficient to constitute a violation of the rights warranted by Art.6 par.1 ECHR. 

93 - (3) Nevertheless, the fact that ISU required from Pechstein to sign an arbitration agreement in favour of CAS is an abuse of dominant position.

94 - It can be assumed that, due to the above-mentioned advantages, athletes would agree to the competence of a neutral arbitral tribunal if free competition would prevail on the market for the organisation of international competitions. However, an arbitration clause in favour of CAS would not be agreed under normal circumstances, as the one-sided designation of the potential arbitrators favours the associations (the International federations – such as the ISU – the national Olympic Committees and the International Olympic Committee) involved in disputes with athletes as regard the composition of the arbitral panel. Athletes accept this arrangement only because they have to in order to participate in international sporting competitions. 

95 - aaa) The aforementioned sports associations have a decisive influence on the selection of the persons acting as CAS arbitrators

96 – a-1) Pursuant to the CAS procedural rules of 2004, in place at the moment of the signing of the arbitral convention, the parties have to select an arbitrator amongst the list of CAS arbitrators compiled by ICAS [R33 par.2 of the procedural rules and S6. Nr.3 of the Statutes].

97-103 […]The Court goes on to describe the composition of the ICAS as provided for in article S4 and the mode of selection of the arbitrators included on the CAS list as provided for in article S14 of the statutes. 

104 - These provisions regulating the selection of the potential CAS arbitrators favour the sports associations in disputes against athletes, thus embedding a structural imbalance that is threatening the neutrality of CAS.

105 - Sports association hold, with 12 members directly designated by them, the majority in ICAS. Already through this situation they enjoy, due to the majority rule applying in ICAS’ decision-making procedure, a favourable position that enables them to have a decisive influence on the composition of the list of CAS arbitrators. Furthermore, due to the fact that the 12 members previously designated by the sporting associations nominate them, the independence of the 8 other members of ICAS is also not preserved. Even the CAS statutes themselves do not assume the independence of the ICAS members and of the CAS arbitrators, as they require that the last 4 ICAS members and the last fifth of CAS arbitrators be independent from the organisations which were responsible for the nomination of all the other previous members of both ICAS and the CAS arbitrators list.

106 - This disproportionate influence creates the risk that the persons included on the CAS arbitrators list predominantly or even entirely favour the side of the sporting associations over the athletes. This is also true concerning the arbitrators that are not suggested by the sporting association, but are selected in view to protect the interest of athletes or on the basis of their independence, as they are designated by ICAS members chosen by the sporting associations. A balanced influence of the parties on the composition of the arbitral tribunal that would be needed to safeguard its independence is thus not provided. Such a structural deficiency threatens the neutrality of the arbitral tribunal; this is independent of the fact whether the persons included on the CAS list of arbitrators are in any way linked to the sports associations, as this would actually open the possibility to challenge their nomination. Even when the personal integrity of the persons included on the CAS list is not affected, there is a potential risk that arbitrators share the worldview of the sports associations rather than the one of the athletes.

107 - The imbalance in favour of the sports associations is not offset by the fact that the CAS arbitrators’ list comprises a minimum of 150 persons, as the risk of a potential capture by the sports associations extends to each one of them.

108 - a-2) Moreover, an imbalance in favour of the sports associations is also grounded in the fact that in the appeal procedure before CAS, when the parties have not managed to agree on a name (see R 50 par.1 procedural rules 2004), the president of the panel is designated by the president of the appeal division of CAS, while the president of the appeal division is himself nominated by ICAS, which is structurally dependent on the sporting associations, through a simple majority decision. In this way, the sports associations can also exercise an indirect influence on the third member of the arbitral panel competent to deal with a specific dispute. The trust of the parties in the independence and impartiality of an arbitral tribunal is eroded when there are reasons to fear that the judge facing them has been designated specifically in regard of the specific case at hand. Thus, it is necessary to take measures to combat the sheer possibility and suspicion of a manipulation of the designation of the judge.

109 - bbb) There is no rational justification for such an imbalance in favour of the sports associations 

110 - Contrary to the arguments of the ISU, a shared interest of the sports associations and the athletes cannot justify such an imbalance, as especially in disputes between athletes and sports associations no shared interest can be identified, to the contrary opposing interests are facing each other. In this regard, the fact that sports functionaries were often athletes in the past is also not a sufficient guarantee to ensure that the interests of the athletes are adequately protected.

111 - The circumstance that in a dispute between an international sports association and an athlete, the national sports association decides to support the athlete – as it was the case here in front of CAS - is not sufficient to challenge the fundamental homogeneity of the interests of the sports association. Surely, the national sports association concerned might have a specific interest that their own successful athlete be cleared, but other national sports associations do not share this interest so much that from a general point of view one can assume a homogeneity of the interests.[…]

112 - Finally, the argument of the ISU regarding the lack of organisation of the athletes that would hinder their participation in the drafting of the CAS arbitrators list must be rejected. If it would be impossible to involve athletes in the drafting of the list then athletes should be freed from their duty to nominate an arbitrator from the list, and be authorized to pick the arbitrator they wish – possibly under the condition of abstract qualification requirements.

113 - ccc) The reason why athletes accept to subject their disputes with sports associations to an arbitration tribunal, the composition of which is mainly determined by sports associations, is solely linked to the monopoly position of the sports associations. If the athlete could participate to the World Championship while agreeing to the competence of a neutral arbitration tribunal, we can safely assume that only this arbitration clause would be agreed upon to the detriment of the arbitral tribunal structurally favourable to the sports associations.

114 – Omitted

115 - ddd) The departure from arbitration agreements that would have been signed under normal conditions of competition strips Pechstein from her fundamental right of constitutional rank, flowing from the rule of law principles, to access to national courts and to a legally mandated judge (Art. 101 Abs. 1 Satz 2 GG). Hence, the arbitration agreement goes beyond the intensity threshold required for the recognition of an abuse of dominant position. 

116 - eee)[…] German law specific considerations to the notion of abuse of dominance not directly linked to the sporting context.

117 - (4) No need to discuss the other arguments raised by Pechstein against the CAS. […]

118 - cc) The arbitral convention is contrary to the ban on abuses of dominant position ((§ 19 Abs. 1, Abs. 4 Nr. 2 GWB) and therefore null and void on the basis of § 134 BGB. [...]

119 - c) The contradictory behaviour of Pechstein cannot justify refusing to grant her access to the ordinary courts.

120 - Based on its wording the arbitration clause covers a wide scope of potential disputes. The fact that Pechstein claims damages in front of the ordinary courts does not stand in contradiction with the fact that she challenged the doping sanction in front of CAS.  Even if the appeal to CAS would constitute a, legally doubtful, recognition of its competence to deal with the doping sanction, it would not entail that this recognition extends to every potential other dispute between the parties.

121 - Moreover, it has not been demonstrated by the ISU, nor is it clearly understandable, why, based on good faith, it could legitimately rely on the expectation that Pechstein would refer other disputes to CAS. Indeed, the fact that the arbitral convention underlying CAS competence is the result of an abuse of a dominant position by the ISU speaks out against any such legitimate expectations.

122 - 4. The fact that Pechstein signed, in the framework of the arbitral procedure involving her doping sanction, the Order of Procedure from the 29 September 2009, does not constitute an arbitration clause barring access to the ordinary courts, as it was in any case only referring to the specific dispute before CAS. Thus, it cannot constitute a valid arbitration agreement covering other disputes.

123 - III. Pechstein’s complaint is partially admissible. […]

124 – 128 Omitted

129 - B. As far as the complaint is admissible it is not yet ready for decision. Contrary to the view of the first instance court, the complaint cannot be discarded on the basis of the res judicata effect of the CAS award.

130 - I. It is true that the procedural relevance of a foreign arbitral awards, in particular its res judicata effect, does not necessitate a particular recognition process; but, this implies that the fundamental conditions for the recognition be fulfilled, which is not the case in the present instance.

131 - II. The recognition of the CAS award – which would anyway only be possible if CAS would constitute a proper arbitral tribunal – would go contrary to the public order. Consequently, the CAS award cannot be recognized due to § 1061 Abs. 1 Satz 1 ZPO in relation with Art. V par. 2. b) of the New York Convention on the recognition and enforcement of foreign arbitral awards from the 10^th June 1958.

132 - 1. An arbitral award violates the ordre public, and is thus not recognizable, when it leads to an outcome that is obviously incompatible with the fundamental principles of German law, and therefore breaches the prime foundations of the German legal order. However, not any decision potentially contrary to German mandatory laws constitutes a violation of the ordre public. 

133 - Fundamental provisions of competition law are part of the ordre public exception to the recognition of arbitral awards in the sense of Art. 5 par.2 b) New York Convention (CJEU, 4 June 2009, C-8/08 - T-Mobile Netherlands BV u.a./Raad van hestuur van de Nederlandse Mededingingsautoriteit; CJEU, 13. July 2006 - C-295-298/04 - Vincenzo Manfredi/Lloyd Adriatico Assicurazioni SpA;  CJEU 1. June 1999 - C-126/97 - Eco Swiss China Time Ltd/Benetton International; [...])

134 - 2. Thus the CAS award cannot be recognized

135 - a) In the present case the ISU was barred by § 19 Abs. 1, Abs. 4 Nr. 2 GWB from imposing the arbitration agreement onto Pechstein. The recognition of an award based on an agreement contrary to competition law would perpetuate the abusive conduct of the ISU, which would be contrary to the objective underlying the ban on abusive practices imposed by the competition rules. This is further confirmed by the fact that Pechstein disposes, on the basis of § 33 Abs. 1 Satz 1 GWB, of a right to require the ISU to remedy the consequences of the forced arbitration clause. This includes the fact that the ISU cannot rely on the CAS award issues on the basis of this arbitration agreement.

136 - Omitted

137 - b) The question whether with Pechstein’s appeal to CAS or her signing of the Order of Procedure a new arbitration agreement was concluded can stay unanswered.  Indeed, this would also constitute a perpetuation of the abuse of a dominant position by the ISU. Pechstein had no other credible option available to obtain the right to participate to the Winter Olympics taking place between the 12 and 28 February 2010 in Vancouver, but to appeal to CAS on the basis of the arbitral agreement of the 2 January 2009.  A recourse to the Swiss courts was in light of their jurisprudence, as confirmed later by the ruling of the Swiss Federal tribunal on the CAS award, not particularly promising. Similarly, a request for an order to be authorised to participate to the Olympics in front of the German courts can hardly be deemed a reliable alternative mean due to the uncertainties related to the assessment of their international competence in that matter.

138 - III. Due to the impossibility to recognize the CAS award, German Courts are not bound by its findings in their evaluation of the legality of the doping sanction in order to assess the legitimacy of Pechstein’s damage claims. 

[1] The concept of « Ein-Platz-Prinzip » is specific to German law and qualifies the fact that sports associations are monopolists by nature.