Recognition and enforcement of CAS rulings as Swiss arbitral awards

Once a ruling of the CAS has been made (and left undisturbed under Swiss law) it is to be recognized and enforced by ordinary courts of law as a Swiss arbitral award. So the CAS ruling may be enforced in whichever jurisdiction or jurisdictions is most convenient or appropriate, which will typically be the place(s) where the losing party and/or its assets are located. This is not a sports-specific matter. It is the general assumption that underpins arbitration. It applies pursuant to the New York Convention, which governs the recognition and enforcement of arbitral awards in states which have ratified the Convention. This covers some 150 states, including the United States and all of the EU’s twenty-eight Member States. It is made specific by Article III: ‘Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles.’ An English judge, asked to interpret and apply the Convention as incorporated into English law by the Arbitration Act 1996, has helpfully captured the intent behind this system: ‘the purpose of the Convention is to ensure the effective and speedy enforcement of international arbitration awards’.[1] [2] Were national courts inclined to ready and regular interference with awards once made, then the very purpose of arbitration as a speedier, cheaper, and expertise-driven alternative to litigation would be thwarted. Accordingly the strong emphasis is on judicial enforcement of arbitration awards once made.38

Therefore the CAS’s awards, like arbitration awards generally, are final and binding on the parties, and they are enforceable internationally (as Swiss arbitral awards) by the parties by virtue of the New York Convention. So national courts outside Switzerland should and do enforce the CAS’s rulings as foreign arbitration awards. In practice this is rarely necessary. The CAS’s awards appear to command general respect and in any event some sports are capable of penalizing or threatening to penalize refusal to comply with an award of the CAS through ‘internal’ means without the need to seek the strong arm of the ordinary courts. FIFA’s Disciplinary Code, for example, provides that failure to comply with a CAS decision exposes the party refusing to a range of penalties, both financial and sporting, including points deduction, relegation and/or a transfer ban for clubs and a ban on any football- related activity for players.[3] This happened to Matuzalem, as explained earlier, and even though he was able to go to law in Switzerland to shake off the supplementary penalties imposed as a follow-up for failure to pay the initially stipulated sum of compensation, the lesson is that it takes not only exceptional circumstances but also courage, energy, and deep pockets to resist an award of the CAS. And Matuzalem, even if freed from the ban on playing football imposed by FIFA as a result of the intervention of the Swiss Federal Tribunal, still was not released from the compensation award initially made against him.

The principle, then, holds that the ordinary courts of states that are party to the New York Convention should treat awards of the CAS as binding (foreign, ie Swiss) arbitral awards, and they should, if called upon, enforce them without further inquiry. This allows not simply for respect for the lex sportiva as reflected in the CAS’s rulings, but in fact it serves as an active transnational promotion of that incrementally accumulated lex sportiva. Scope for national courts to intervene in or to decline to recognize awards made by the CAS and arbitral bodies generally is tightly limited by the Convention. But it is not wholly excluded.

Article V of the New York Convention seeks to codify the possibilities for intervention. These are exceptional. Article V(1) addresses detailed flaws in an arbitral ruling. So, for example, recognition and enforcement of the award may be refused on grounds of the incapacity of the parties, the absence of proper notice, or that the award goes beyond the term of the submission to arbitration. Article V(2) adds that recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that (a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country or (b) that the recognition or enforcement of the award would be contrary to the public policy of that country.

The principal concern animating these bases for refusal to enforce an arbitral award is not the merit of the legal or factual assessment visible on the face of the award but rather the (absence of) integrity of process.[4] However, the last item on this list, appeal to ‘public policy’ as envisaged by Article V(2), is potentially the window through which aggressive intervention by national courts might be driven to the prejudice of the autonomy of the process of arbitration. But this is not the practice.

Public policy is not defined in the Convention, but typically it is interpreted narrowly in the many jurisdictions in which the New York Convention is the governing text. Practice shows it is rare that it is allowed to intervene to withhold recognition and enforcement: the autonomy of arbitration awards is widely respected among the courts of the contracting states.[5] [6] [7] [8]

An exhaustive survey of global judicial enforcement practice is unfeasible. Let the United States serve as an illustration. If any state is likely to have incentives to sacrifice the advantages of reciprocal enforcement of arbitral awards guaranteed by the Convention in order to assert a unilateral interventionist jurisdiction then it is likely to be the most powerful state on the planet. But it is instructive that any such temptation is not visible. A typical example of the practice of judicial deference, rooted in anxiety to make the Convention system function effectively, is provided by the US Court of Appeals Second Circuit in its ruling in Parsons and Whittemore Overseas Co4 The ruling refers to ‘the general pro-enforcement bias informing the Convention’ and draws from this the logically consequent trend ‘toward a narrow reading of the public policy defense’. As the Court convincingly observes, ‘An expansive construction of this defense would vitiate the Convention’s basic effort to remove preexisting obstacles to enforcement’, which led it to state that refusal to enforce foreign arbitral awards should be denied for affront to public policy ‘only where enforcement would violate the forum state’s most basic notions of morality and justice’. And the judgment refers explicitly to ‘considerations of reciprocity’ which, it advised, ‘counsel courts to invoke the public policy defense with caution lest foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States’. The background to the dispute which had generated the arbitral award which the American Court was asked to enforce—and was willing to enforce—was distant from sport. It was mired in the 1967 conflict involving Israel and Egypt. But, as the Court put it, ‘To deny enforcement of this award largely because of the United States’ falling out with Egypt in recent years would mean converting a defense intended to be of narrow scope into a major loophole in the Convention’s mechanism for enforcement’. So an American court enforced a foreign arbitral award against an American corporation and in favour of an Egyptian firm. And, to underline that this attitude represents a shared understanding among judges about the virtues of the system, in 2014 the Privy Council of the United Kingdom, hearing an appeal from the Court of Appeal of the British Virgin Islands, relied explicitly on Parsons and Whittemore in asserting the general approach to enforcement of an award as ‘pro-enforcement’V

In similar vein the US Court of Appeals Fifth Circuit in Karaha Bodas declared: ‘Erroneous legal reasoning or misapplication of law is generally not a violation of public policy within the meaning of the New York Convention.^

This respect for the finality of the process of arbitration has been applied in the context of arbitration in sport too. Justin Gatlin was an American sprinter. He won the gold medal for the 100 metres dash at the 2004 Olympics and the 2005 World Championships. However, he was subsequently found guilty of taking prohibited performance-enhancing drugs—a doping offence. Sanctions were imposed preventing him from competing and, on appeal, they were upheld by the CAS. He brought an application before a court in the United States for an order requiring that he be treated as free to compete in the US athletics trials. He was granted a temporary injunction against the relevant agency, USADA, in June 2008, to lift his suspension by the US District Court, Northern District of Florida. The competent federal court set aside the injunction four days later because it ruled that it lacked jurisdiction to intervene in USADA’s process.^

The court explained:

Pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (‘New York Convention’), claims that have been properly submitted to arbitration and ruled upon by entities such as CAS are barred from relitigation in this forum ... the only conceivable exception is where enforcement of the award would be

contrary to public policy____This, however, is a very slender exception reserved for decisions

which violate the ‘most basic notions of morality and justice’ ...

The conditions of this ‘slender exception’ were not present in Gatlin’s case. The court was therefore willing to enforce the award against him. The vigour with which the court was prepared to apply the New York Convention in such a way as to disable its own review function and to protect the ruling of the CAS in the case is strongly emphasized by the observation in the court’s judgment that the actions of the authorities and of the CAS were, in its estimation, ‘arbitrary and capricious’. The court, examining the basis of the investigation, found it ‘troubling’ that Gatlin had in the circumstances been condemned for violation. However, it explicitly concluded that a decision which is arbitrary and capricious does not qualify for re-opening in the name of public policy. This meant that the New York Convention protected the CAS ruling, which was to be recognized and enforced by the American courts. The implication is that only recourse to the Swiss courts could help Gatlin—though, as explained previously, that was and is cold comfort, even in the light of the more recent Matuzalem decision of the Swiss Federal Supreme Court.[9] [10]

This is plainly important. The higher the threshold that must be crossed before a national court withholds recognition and enforcement from an award of the CAS, the sturdier the development of a genuine global lex sportiva which in effect ousts varying national laws that would otherwise have the potential to impose different standards of validity in different legal jurisdictions. This is immensely helpful to the aspiration of sports governing bodies to apply a consistent and even pattern of legal regulation across the world. The lex sportiva is their monopoly regulation, which they would wish to shelter from fragmentation consequent on the incursion of the ‘ordinary law’ of particular jurisdictions. The aggressive protection by national courts of rulings of the CAS as arbitral awards grants much of this wish for sporting autonomy.

It is, however, a protection which is only as valuable as national courts are prepared to make it. Any departure from this general, though not absolute, respect for the finality of decisions of the CAS would weaken the autonomy of the lex sportiva. Two recent cases before German courts highlight the delicacy of the relationship between the ordinary courts and the lex sportiva. The first was Wilhelmshaven SV. In December 2014 a regional court, the Oberlandesgericht of Bremen, refused to enforce a CAS ruling that imposed sanctions on the club for violation of the FIFA rules on the transfer of players, specifically those governing the payment of compensation to clubs that had committed resources to train young players. The court’s objection was that the possible relevance of EU free movement law as a restraint on the transfer system had been badly misunderstood by the CAS. The second case is Pechstein. It was decided in early 2015. This is even more serious: it does not object to a particular rogue decision, rather it represents an assault on the very foundations of the CAS as currently constituted. The Oberlandesgericht of Munich refused to respect a clause which obliged the athlete, a speed-skater found to have committed anti-doping violations whose two-year suspension from competition had been confirmed by the CAS,[11] [12] [13] to pursue arbitration in the event of a dispute. The basis for the decision was that the CAS lacked the independence required of an arbitrator because its composition led to a slant in favour of governing bodies. The German court accordingly treated the clause as anti-competitive and unenforceable.4®

Such scepticism about the virtues of the autonomy of the system of sporting arbitration would, if sustained by the German courts, be unlikely to be confined to Germany and would be capable of undermining the global integrity of the CAS- based system as a source of a uniformly applicable lex sportiva. But the decisions have not been sustained by the German courts: both bombs have been defused. In September 2016 the Bundesgerichtshof(BGH), the highest civil court in the German system, dealt with Wilhelmshaven SV by focusing only on the incompatibility with German law of the sanctions imposed.49 It treated neither the FIFA rules nor EU law as relevant to its decision. As for Pechstein, in June 2016 the Bundesgerichtshof concluded, in contrast to the lower court, that the CAS is structured in such a way as to guarantee due independence and that it is accordingly entitled to be treated as a genuine arbitration tribunal.50 The BGH also noted the advantages of speed and expertise granted by the system to both governing bodies and athletes. Calm and stability was therefore restored: the decision adopts the conventional judicial stance in favour of strong, though not absolute, protection of the finality of CAS rulings. Unsurprisingly the CAS itself welcomed the rulings confirmation of the validity of the arbitration clause and of its own status as a genuine arbitration tribunal.51

Wilhelmshaven SV and Pechstein serve as a reminder that the contractual route to preserving sporting autonomy from the application of ‘ordinary’ state law is not rooted in a seamlessly integrated legal order based on clear hierarchies. It is instead a system involving connections between the lex sportiva as a system of arbitration and national law which is mediated by the commitments made through the New York Convention. A national court that refuses to accept the finality of arbitration threatens the stability of the system, but its intransigence cannot simply be set aside, except by a higher national court. It is worth noting that one beneficial side-effect of these rough-edged arrangements is that this induces the CAS to take seriously its procedural probity: respect for the finality of its rulings is conditional on such scrupulousness. There is in fact an appealing analogy to be drawn between the conditional respect which the CAS earns from national courts and that which the Court of Justice of the EU enjoys in instructing that EU law shall be treated as supreme. In both cases national legal orders are receptive to pronouncements ‘from outside’ not because of any directly enforceable claim to authority made by those bodies, and still less because of any means of coercion, but rather because national law provides a basis for acceptance of those sources. National law is the door through which decisions of the CAS and the Court of Justice enter national legal practice, so national law may close that door, and it will do unless the practice of the CAS and the Court of Justice meets its standards. For the CAS this means in particular the need to attend to due standards of legal precision and procedural fairness, for the Court of Justice it has long meant in particular the need to supplement claims to the primacy of its legal order with respect for fundamental rights within it.52 This is to point to a certain fragility in the system, but it is a creative tension. [14] [15] [16]

For the CAS, the lesson of Wilhelmshaven SVshould be to take proper and careful account of relevant provisions of EU law, while the lesson to draw from Pechstein should be to keep checking the independence of its members and its processes from the governing bodies that make such frequent use of its offices.53 In fact the CAS welcome for the BGH’s ruling in Pechstein includes commitment to pursue ‘best practices in international arbitration law’.54 This needs to be made real.

  • [1] IPCO Ltd v Nigerian National Petroleum Corporation [2008] EWCA Civ 1157 (Court of Appeal,judgment, para 14 per Tuckey LJ).
  • [2] See Born (n 6) ch 26.03; Moses (n 6) ch 10; Blackaby, Partasides, Redfern, and Hunter(n 6) ch 11.
  • [3] Art 64 of the 2011 version accessed 29 November2016. See U Haas, ‘The Enforcement of Football-related Arbitral Awards by the Court of Arbitration forSport (CAS)’ [2014] Intl Sports L Rev 12.
  • [4] Moses (n 6) 217.
  • [5] See Born (n 6) ch 26.05[C][9]; Blackaby, Partasides, Redfern, and Hunter (n 6) chs 10.81—87,11.105-22.
  • [6] 42 508 F 2d 969 (1974).
  • [7] Cukurova Holding AS v Sonera Holding BV [2014] UKPC 15, [2015] 2 All ER 1061 (LordClarke).
  • [8] Co 364 F 3d 274 (2004).
  • [9] Gatlin v US Anti-Doping Agency 2008 WL 2567657 (ND Fla 2008—24 June 2008); accessed 29 November 2016.
  • [10] 46 The story of litigation pursued before courts in the US without success by an equally famouscheat, Lance Armstrong, is told by D McArdle, Dispute Resolution in Sport (Routledge 2015) 50—53.
  • [11] CAS 2009/A/1912-1913 Pechstein v International Skating Union, on which see D McArdle,‘Pechstein v International Skating Union’ in J Anderson (ed), Leading Cases in Sports Law (TMC Asser 2013) ch 13.
  • [12] 48 OLG Munchen, Urteil von 15.01.2015, U 1110/14 Kart.
  • [13] II ZR 25/15 accessed 29 November 2016.
  • [14] KZR 6/15 accessed 29 November 2016. For criticism written before the BGH’s reversal of the OLGdecision, see U Haas, ‘The Court of Arbitration for Sport in the Case Law of the German Courts’[2015] Intl Sports L Rev 71; after the fact, A Duval, ‘The BGH’s Pechstein Decision: A SurrealistRuling?’, Asser International Sports Law Blog, 8 June 2016 accessed 29 November 2016.
  • [15] Media Release, 7 June 2016 accessed 29 November 2016. CAS proudly provides an English-language translation of the BGH ruling on its website accessed 29 November 2016. See also D Mavromati (Head of research and mediation at the CAS), ‘The Legality of the Arbitration Agreement in favour ofCAS under German Civil and Competition Law’, available at SSRN accessed 29 November 2016.
  • [16] 52 S Weatherill, Law and Values in the European Union (OUP 2016) ch 4.3.
 
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