Self-regulation in Sport: Why arbitration is leading the field

22 May 2007

Sophie Lamb, Daniel Astaire

1. Introduction

The use of arbitration to resolve disputes arising out of sporting events and participation in regulated sporting activities is well established. The generic advantages of arbitration – privacy, flexibility of procedure, expertise of decision-makers, among many others – are of particular benefit and importance in sporting disputes, not least where reputations and results hang in the balance. What is often overlooked in any consideration of the use of arbitration in sport, however, is the level of commercial activity generated by the business of sport and the often novel and intricate legal issues arising in associated disputes. In this era of digital convergence, significant volumes of complex, high value, cross border M&A and other investment activity permeate sports and related media industries. Arbitration should commend itself as the dispute resolution methodology most appropriate for use in these transactions. Certainly the purpose of this short article is to highlight the significant amount of arbitration activity related to all aspects of sport and to emphasise the benefits of arbitration for resolving the disputes that arise in this sector.

2. Disputes arising out of sporting events and participation in regulated sporting activities

To date, much of the focus on arbitration in sport has been directed towards conduct-related disputes. Indeed the majority of cases commenced before the most recognised arbitral bodies concern disciplinary matters, alleged infringements of sporting regulations including anti-doping rules and access or entry to sporting competitions.

2.1 Arbitration at national level

At national level, and particularly in football[1], the dispute resolution methodology utilised to determine these issues is increasingly arbitration: disputes are often resolved by impartial, independent bodies who deliver reasoned, binding decisions. The agreed dispute mechanism may also provide for appeal to national arbitral bodies (for example, the Sports Dispute Resolution Panel (SDRP) in the UK) or indeed to the appellate division of the Court of Arbitration for Sport (CAS) in Lausanne, Switzerland.

Where the relevant dispute resolution mechanism is arbitration, this produces a number of consequences and benefits. In the UK, where the 1996 Arbitration Act will by consequence apply, these include the following: no recourse to ordinary courts for the resolution of disputes; a limited right to appeal; a binding award enforceable as if it were a judgment; and immunity from civil suit for the tribunal (and for witnesses at common law), the importance of which should not be underestimated given the impact of a flawed decision on the reputation of sportsmen and women.

2.2 The role of national courts

As sport turns increasingly to arbitration for the resolution of its disputes, so national courts will need to support this trend by enforcing commitments to arbitrate and limiting the scope for judicial intervention.

In the UK, the recent case of Stretford v. The Football Association [1996] EWHC 479 (Ch) clearly demonstrates the willingness of the English courts to enforce arbitration clauses appearing in the rules and regulations of sport. In Flaherty v. National Greyhound Racing Club Limited [2005] EWCA Civ 1117, the court explicitly recognised the benefits of arbitration in sport and that “it is not in the interest of sport” for judges to second guess the decisions of expert sporting bodies who “have unrivalled and practical knowledge of the particular sport that they are required to regulate”.

Judicial enforcement of arbitration agreements in sporting regulations is not always straightforward, however, as a recent decision of the Belgian courts demonstrates (SA Sporting du Pays de Charleroi, G-14 Groupment des clubs de football européens v Fédération internationale de football association (FIFA), Tribunal de Commerce de Charleroi, Chambre 1ère, 15 May 2006). The Charleroi dispute, which is supported by G14 (an organisation involving many of the most significant European football clubs), concerns the alleged incompatibility with EU law of certain FIFA regulations mandating the release of club players for international fixtures without entitlement to financial compensation. Disputing the jurisdiction of the Belgian courts, FIFA relied, among other things, upon the various references to arbitration and CAS in its own regulations. Two principal difficulties arose, however. Firstly, the language of the only FIFA regulation that expressly contemplated arbitration between FIFA and the clubs was not sufficiently prescriptive. (Article 59(1) of the FIFA regulations simply provides that “FIFA recognises the independent Court of Arbitration for Sport …to resolve disputes between FIFA, Members, Confederations, Leagues, clubs, Players, Officials and licensed match agents and players’ agents”.) Secondly, although mandatory language compelling arbitration before CAS appears elsewhere in FIFA regulations, the pyramid structure of the regulatory regime (from FIFA, down to UEFA, then to national football associations and finally to clubs and players) was assumed to negate any direct nexus (or intention that such nexus should exist) between FIFA and the clubs. Although national football associations are obliged, under FIFA regulation 61(3), to “insert a clause in their statutes stipulating that their clubs and members are prohibited from taking a dispute to ordinary courts of law”, nothing in the regulations expressly prohibits the clubs themselves from referring disputes with FIFA to national courts (although this was plainly the intention of the dispute resolution scheme contained in Articles 59-61 of the FIFA regulations). As a result, FIFA was unsuccessful in its jurisdictional challenge and the Belgian court has now referred certain issues to the ECJ (a process conservatively expected to take some 24 months).

In the view of these writers, CAS may well have taken a different view to that of the Belgian court had it been ruling on its own jurisdiction[2]. What the Charleroi case does demonstrate is that although national courts must make every effort to support sport in its endeavour to regulate itself, sport must also be careful to ensure that its intentions in this regard are clearly reflected in any rules and regulations that contemplate arbitration.

2.3 The international dimension - the Court of Arbitration for Sport (CAS)

International arbitral institutions also determine disputes arising out of participation in and access to sporting events, either by way of original jurisdiction or as the result of an agreed appeals procedure.

The Court of Arbitration for Sport (CAS) was created in the 1980s and, twenty years on, it is now an independent and well established international sports tribunal enjoying the support of, among other things, the Olympic movement (an arbitration clause appears in the entry form for the Olympic games and in Rule 62 of the Olympic Charter).

CAS is comprised of an Ordinary Arbitration Division and the Appeals Arbitration Division. Jurisdiction arises out of an arbitration clause in a contract, submission agreement, entry form or applicable sporting regulations. Appeals to CAS can be made against a decision rendered by any federation, association or sports body whose rules or regulations expressly provide for such an appeal.

The Ordinary Arbitration Division of CAS deals with any sports related dispute. Such cases may involve matters of principle relating to sport, matters of pecuniary interest, or any other interests or activities related or connected to sport. Many provisions of the CAS Code should read familiarly to those well acquainted with the rules of the leading arbitration institutions. CAS arbitrations are confidential unless the parties agree otherwise: the rules provide for the exchange of one set of written submissions together with supporting evidence, followed by a hearing at which fact and expert witnesses can appear (subject to the sanctions of perjury); there is no automatic right to disclosure of documents before CAS, although the tribunal has the power to order the production of documents either following a request by a party or of its own volition; CAS awards are enforceable under the New York Convention.

CAS is also unique in many ways. It has an event-specific Ad Hoc Division which has operated at the 1996 Atlanta Summer Games, the 1998 Winter Games in Sydney, Salt Lake City, the Athens Olympics, various Commonwealth Games, the European Football Championships in 2000 and 2004, and, most recently, at the FIFA World Cup 2006. Pursuant to the ad hoc rules, tribunals can render a decision during the event concerned or refer the matter to regular CAS arbitration for determination at a later point. Speed is another principal feature of the ad hoc system. Applicable rules can provide for resolution of disputes within hours (the rules for the 2006 FIFA World Cup provided for the resolution of disputes within 48 hours).

CAS also performs a valuable advisory function, most recently as to the compatibility of FIFA regulations with the World Anti Doping Code[3].

The necessity for an autonomous international body such as CAS is evident from the volume of matters which come before it. Whilst only single figure requests for arbitration were filed in the 1980s, in 2004, over 270 requests for arbitration were received by CAS.

3. Commercial disputes

Arbitral tribunals have long recognised that sporting bodies are high-value sophisticated entities which engage in a variety of commercial activities: “There is no doubt that professional football clubs engage in economic activities and, consequently, are undertakings. In particular, they engage in economic activities such as the sale of entrance tickets for home matches, the sale of broadcasting rights, the exploitation of logos and the conclusion of sponsorship and advertising contracts.” (AEK and Slavia Prague v. UEFA, Award of 20 August 1999 in CAS 98/200, Yearbook Comm. Arb. Vol. XXV (2000), at p.402).

Sport is big business. Substantial amounts of revenue are generated every year by the global exploitation of broadcasting rights with digital convergence creating yet further value for rights holders. (The 2006 World Cup in Germany is on course for profits of €1.1 billion, with the estimated €1 billion cost of staging the event far outweighed by revenues from the sale of media rights, sponsorship, merchandise and tickets.) Businesses spend billions of euros each year sponsoring top athletes and their teams. Arbitration is very often the dispute methodology of choice for such arrangements, particularly where the parties are based in different jurisdictions or wish to preserve confidentiality in respect of sensitive financial or commercial arrangements.

Sport also creates multiple commercial opportunities for other industries, including pay and print media, cable networks, food services, marketing, construction, and transportation among many others. International events such as the Olympic Games now involve unprecedented levels of commercial activity from services, to infrastructure, building of stadia, exploitation of rights, brands, logos, procurement and sponsorship, catering, security, hospitality, tourism, communications, IT and ecommerce. The heightened international profile of the host city can also results in an associated increase in international commercial investment following the games. Not only has Sydney received in the region of £400 million of extra investment post-Olympics, Australian contractors are said to have secured capital projects for the Beijing Olympics worth upwards of £10 billion. Again, for obvious reasons, arbitration commends itself as the most appropriate form of dispute resolution for complex, high value international projects of this nature.

The Court of Arbitration for Sport is not only concerned with disputes of a disciplinary nature. Its remit, established by section 27 of the CAS Code, is broadly drafted and extends to “matters of principle relating to sport or matters of pecuniary or other interests brought into play in the practice or the development of sport and, generally speaking, any other activity related or connected to sport”. Moreover, CAS arbitrators are not drawn exclusively from the world of sport. CAS membership is awarded on the basis of “recognised competence with regard to sports law and/or international arbitration” (S14 CAS Code 2004).

Cases which come before CAS can involve complex issues of competition law, contractual interpretation and conflicts of law. For example, in AEK Athensand SK Slavia Prague v UEFA[4], CAS was asked to rule on the compatibility of UEFA regulations prohibiting the common ownership of football clubs in UEFA club competitions with Swiss law, EU competition law and EU provisions on freedom of establishment and free movement of capital.

The AAA administers franchise, joint venture and partnership disputes in the sports sector. Commercial disputes arising in the sports industry – including investment, broadcasting, sponsorship and player transfer disputes - are also on the rise before other arbitral institutions such as the LCIA and the ICC, particularly those disputes arising at the intersection of sports, media, and broadcasting.

WIPO sees the majority of international domain name and branding disputes, of which many arise in this sector. SIAC in Singapore has determined a dispute concerning broadcasting rights for transmission of Sri Lankan National Cricket Team matches and the Swedish SCC has ruled on the Czech licensing of an American owned television channel.

In sum, given the level of commercial activity arising out of the business of sport, it is inevitable that this will be accompanied by an associated rise in the number of sports or media-related disputes seen by the major arbitration institutions. In addition, there is a growing trend on the part of sports governing bodies to preclude the involvement of national courts in any disputes arising in this sector. That being the case, it is important that applicable procedural rules keep pace with the range and complexity of the disputes now being arbitrated. In factually and/or legally complex matters, procedures, including those employed by the FIFA Disputes Resolution Chamber, which aim to resolve disputes largely on paper, or with limited opportunity to test evidence through the cross examination of witnesses, may need to be revisited.

3.1.1 Digital convergence – a new breed of commercial disputes

In this era of digital convergence, leagues, clubs, advertisers, broadcasters and the media will enjoy multiple new opportunities to generate revenue from interactive applications, with digital technologies offering new and high value revenue streams for sports broadcasters. A recent surge in European M&A activity in this sector has contributed to the erosion of the traditional distinction between communications and entertainment operators. The telephone can be accessed over the internet and premium sporting events can now be watched via mobile phone and the internet. This latter development has the potential to produce unhappy consequences for traditional Pay TV businesses who may have assumed that their exclusivity automatically extended to all forms of media. Such parties may well wish to enforce a renegotiation of their commercial arrangements if and insofar as the wider availability of rights diminishes the value of their own coverage.

Moreover, regulators, and particularly competition authorities, have taken a keen interest in new media technologies and any attempts to tie up the market for sports rights by bundling together broadcasting rights across multiple media. Launching its inquiry into commercial practices in this sector, the European Commission issued the following public comments: “Sports rights and notably football rights are power drivers for the sale of pay-TV subscriptions but also for the roll-out of new media markets, such as enhanced Internet and UMTS services. In the interest of entrepreneurship, consumer choice and innovation, the Commission wants to make sure that access to this key premium content is not unduly restricted … The Commission’s experience so far in this field has highlighted possible anti-competitive commercial arrangements and conduct across the whole industry. Such behaviour would briefly take the form of refusals to supply, the bundling of TV rights with new media/UMTS rights, the existence of embargoes favouring TV coverage over new types of coverage or the purchase of new media/UMTS rights on an exclusive basis … The aim of the Commission’s inquiry is to establish whether current commercial practices infringe the European competition rules, in particular the prohibition of restrictive practices and abuses of dominant position”[5].

It is therefore clear that aggressive and protectionist measures taken by conventional TV operators will be closely scrutinised by competition authorities. Particular interest will arise where there is a concentration of broadcasting rights in the hands of a single operator unaccompanied by any meaningful effort to develop or use new technologies, alternatively to licence out such opportunities to interested third parties. In the circumstances, it is not unlikely that disputes arising from this episode in the digital convergence era will increasingly involve difficult or novel issues of competition law. Given that arbitral tribunals are not permitted to refer issues to the ECJ[6], appropriate expertise on arbitral tribunals is essential to ensure that arbitration remains an appropriate forum for the resolution of such disputes.

4. Conclusions: Arbitration commends itself as the most appropriate method for resolving disputes arising in the sports industry

The principal benefits and attractions of arbitration are particularly acute in sporting disputes. The flexibility, neutrality and privacy of the arbitral process have ensured its continued and innovative use in sport. In recent times this has been accompanied by a trend, particularly on the part of sports governing bodies, to expand the use of arbitration across all disputes arising in their sectors.

The innovative use of event-specific ad hoc arbitration is perhaps the clearest example of sports arbitration at its very best: expert, neutral, flexible, expeditious and discreet. The appellate function of CAS has also helped to ensure a uniform and rigorous application of important international standards particularly in the area of anti-doping.

For commercial disputes, arbitration continues to commend itself to those high value transactions and capital projects involving international parties, foreign investment and/or sensitive financial or commercial arrangements.

Sophie Lamb is a partner in the International Arbitration & Dispute Resolution practice at Bird & Bird. A former barrister, now solicitor-advocate, she has particular expertise, including as advocate, in complex cross-border disputes including in the sports and media sectors. She is recommended for international arbitration in a recent World Legal Forum poll which described her as “a rising star” and “one to watch”.

Sophie is currently lead counsel for the European Pay TV subsidiary of a multinational media company in an LCIA arbitration involving exclusive broadcasting rights (football). Her experience extends to broadcasting agreements, sponsorship arrangements, international investments, share valuations and high value construction projects for clients in the sport and media sectors.

Sophie has also represented a variety of US and European companies in high-value joint venture, M&A, investment banking, telecommunications and energy disputes before the leading arbitral institutions. In 2005 she was nominated by the ICC UK to join the Task Force on Guidelines for ICC Expertise Proceedings. She is a member of the New York Bar, ICC UK, IBA, LCIA, ASA, Chartered Institute of Arbitrators and British Association for Sport and Law.

Daniel Astaire is a senior associate in the International Arbitration and Disputes Resolution Team at Bird & Bird. Daniel was called to the English Bar in 1999 and spent time in Chancery and Intellectual Property Chambers before joining the London Litigation department of a US Law Firm, joining Bird & Bird in August 2006. Daniel has a broad international dispute practice in line with Bird & Bird’s sector focus.

In the sports and media sector, he has advised on numerous matters relating to image rights and trademarks as well as player representation agreements and the interpretation of artist recording agreements. Daniel has experience in defamation and privacy matters and has advised a number of well known personalities in this regard. Daniel has also advised television operators on their rights under Pay TV distribution agreements, particularly in European jurisdictions.

Daniel has also advised on trade specific arbitrations particularly under LMAA and GAFTA rules and has represented clients in ad hoc and LCIA arbitrations.

This article was published in The European Arbitration Review 2007







[1] The rules of the English and Swedish Football Associations in particular expressly provide for arbitration of disputes. Moreover, pursuant to the regulations of FIFA, national football associations are required to insert appropriate dispute resolution provisions in their own rules to ensure that disputes arising in connection with football are not referred to national courts.
[2] Swiss rules of civil procedure have been construed so as to require arbitration between parties where a model agreement incorporated sporting regulations by reference but did not expressly refer to the arbitration provisions in such rules (N v.Federation Equestre International, Swiss Federal Tribunal, 1st Civil Division, 31 October 1996 published in Recueil des sentences du TAS 1986-1998 (1998) p 585-592).
[3] See CAS 2005/C/976 & 986, FIFA & WADA.
[4] CAS 98/200
[5] European Commission Press Release IP/04/134, 30/01/2004.
[6] See Nordsee Duetsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co KG, C-102/81 [1982] ECR 1095).