<h3>I. The Dispute</h3>
The dispute arises from a complaint filed by two athletes in 2014. The athletes complained about certain rules of the International Skating Union (ISU) providing for sanctions in case of participation in competitions other than those authorized by the ISU. After conducting a competition law investigation, in December 2017, the European Commission issued an infringement decision finding that the ISU eligibility rules restricted competition within the meaning of Article 101 TFEU. The European Commission also found that the rules providing that disputes with the ISU in relation thereto shall be solved through CAS arbitration aggravated such infringement because of the lack of proper review of EU competition law issues in CAS arbitration proceedings.
The General Court confirmed that the ISU eligibility rules constituted an infringement of EU competition law. However, it overturned the European Commission&#8217;s decision on the rules providing for CAS arbitration. Referring to ECHR case law (such as Mutu and Pechstein v. Switzerland), the General Court found that the ISU rules providing for the exclusive jurisdiction of the CAS were justified by legitimate interests relating to the specific nature of sports disputes, such as the use of a specialized tribunal capable of resolving disputes quickly and economically, and the need to ensure international uniformity.
While the ISU challenged the infringement finding, the decision of the General Court on the CAS arbitration rules was challenged by the two athletes and an athletes&#8217; association with the support of the European Commission.
<h3>II. The ECJ Decision</h3>
Ruling on the appeal of the athletes, the ECJ sided with the European Commission and overturned the General Court&#8217;s decision regarding the rules providing for CAS arbitration. The ECJ elaborated on what constitutes «effective judicial review» of EU competition law issues.
The ECJ recalled that sports associations have legal autonomy to adopt rules relating, inter alia, to the organization of competitions, their proper functioning and the participation of athletes in those competitions. However, sports associations cannot restrict the exercise of the rights and freedoms conferred on individuals by EU law. According to the case law of the ECJ, such individual rights and freedoms include the rights underlying Articles 101 and 102 TFEU. Hence, rules of sport associations concerning matters such as the prior authorization of sports events and eligibility rules must be subject to effective judicial review, especially where the arbitration mechanism «must be regarded as imposed» on the athletes.
The requirement of effective judicial review means that in the event that such rules contain provisions conferring mandatory and exclusive jurisdiction on an arbitration body, the court having jurisdiction to review the awards made by that body may confirm that those awards comply with Articles 101 and 102 TFEU. In addition, the requirement of judicial review entails that such courts satisfy all the requirements of Article 267 TFEU, so that they are entitled, or, as the case may be, required, to refer a question to the ECJ and obtain a preliminary ruling.
The ECJ found that since the rules at stake concern the organization and marketing of skating events as well as the participation of professional athletes in such events, any dispute relating thereto arises in the context of economic activities as opposed to merely the sport as such. Accordingly, any decisions enforceable within the territory of the EU must comply with EU competition law, irrespective of the place of establishment of the entities that adopted rules providing for arbitration as a dispute resolution mechanism.
Applying the above principles, the ECJ concluded that the rules at issue were not justified by legitimate interests relating to the specific nature of sports disputes and that they rather aggravate a potential infringement since they fail to ensure the required effective judicial review: CAS awards are reviewed only by the Swiss Federal Tribunal, i.e. a court of a third State that cannot obtain a preliminary ruling from the ECJ, and such review does not include compliance with EU competition law. On this basis, the ECJ held that «[i]n the absence of such judicial review, the use of an arbitration mechanism is such as to undermine the protection of rights that subjects of the law derive from the direct effect of EU law and the effective compliance with Articles 101 and 102 TFEU, which must be ensured – and would therefore be ensured in the absence of such a mechanism – by the national rules relating to remedies».
The ECJ noted that the possibility of claiming damages does not compensate for the lack of a remedy against the infringement as such. As to complaints lodged with the European Commission, the ECJ observed that complainants are not entitled to obtain a decision on the existence or non-existence of the alleged infringement.
<h3>III. Potential Implications of the ECJ Decision</h3>
There is no debate that disputes involving competition law issues, including those arising under EU law, are arbitrable under Swiss arbitration law. Moreover, under certain conditions set out in Article 19 of the Swiss Private International Law Act, it is possible for a court or an arbitral tribunal sitting in Switzerland to take into account EU competition law as a mandatory provision of EU law regardless of the law applicable to the merits of the case. Indeed, numerous CAS awards consider and apply EU competition law, either directly or on the basis of Article 19 of the Swiss Private International Law Act.
All this does not matter according to the ECJ. By finding that the required effective judicial review of EU competition law issues may only be ensured within the EU judicial system, the ECJ makes it practically impossible for the sport associations to ensure homogenous conditions for all athletes. It remains to be seen whether athletes will share the ECJ&#8217;s view that the courts of the EU Members States are better placed to hear their claims despite the lack of specialization, the duration of state court proceedings and the costs involved. Voluntary submission by the athletes to CAS arbitration is not impacted by the ECJ ruling which does not question the validity of the sport associations&#8217; offer to arbitrate. It is submitted that well-advised athletes may well continue to turn to CAS arbitration to enforce their rights, including those arising under EU competition law.
It is difficult to see how the current framework of CAS arbitration may be reconciled with the ruling of the ECJ, as such ruling requires that CAS awards involving the exercise of a sport as an economic activity in the EU be reviewed by the courts of a Member State. Absent the possibility of having such disputes heard by a CAS arbitral tribunal sitting in a Member State, rules included in the statutes or regulations of sport associations providing for CAS arbitration may not be enforceable in the EU countries in case of disputes with athletes involving EU competition law. The new ECJ ruling may effectively open up the possibility of submitting the «same» dispute to a myriad of different fora, which inevitably translates into greater legal uncertainty and a greater risk of contradictory and/or discriminatory rulings.

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Does CAS Arbitration Clash with EU Competition Law?

On December 21, 2023, the European Court of Justice (ECJ) handed down two long-awaited landmark judgments that provide new clarity and guidance on the applicability of competition law to governing bodies in the field of sport. Both cases focus on whether sports governing bodies can make competitions subject to prior approval by the respective body and impose sanctions on athletes and clubs that participate in unauthorized competitions.
<h3>1. The Judgments: European Superleague and Ice Skating Union</h3>
<h4>1.1 Overview</h4>
The first case (C-333/21) concerns the project to create a European Superleague (ESL). In 2021, twelve clubs from England, Spain and Italy, which together formed the European Superleague Company (ESLC), announced their plans to create a new football competition at European level: the ESL. Football&#8217;s European governing bodies, namely UEFA (the Union of European Football Associations) and FIFA (Fédération Internationale de Football Association), refused to recognize the project and threatened to impose sanctions under their respective statutes on clubs and players who might decide to participate. The ESLC brought an action against FIFA and UEFA before the Commercial Court of Madrid, arguing that FIFA&#8217;s and UEFA&#8217;s rules on the approval of competitions and the exploitation of media rights infringe EU law. The Spanish court referred questions to the ECJ.
The second case (C-124/21 P) concerned an appeal by the International Skating Union (ISU) against a decision of the General Court (GC). The International Skating Union (ISU) is the only international sports federation recognized by the International Olympic Committee (IOC) in the field of figure skating and speed skating. Confirming an infringement decision of the European Commission, the GC found that ISU&#8217;s rules, which require its prior approval for the organization of international competitions and provide for severe penalties on athletes who participate in unauthorized competitions, constituted an infringement of competition law.
As the ISU appealed a decision of the GC, the ECJ&#8217;s decision on that case is final, while the ESL case was referred by the ECJ back to the commercial Court in Madrid, where it is expected that the reasoning of the ECJ will be applied and further specified.
The conclusions drawn by the ECJ in both cases apply generally to sports federations beyond these individual cases. The following sections will focus on briefly analyzing the reasoning of the ECJ in the ESL case.
<h4>1.2 Applicability of EU Competition Law to Sport</h4>
In its deliberations in the ESL case, the ECJ first examined the applicability of EU (competition) law to sport and the activities of sports federations, recalling that the practice of sport, insofar as it constitutes an economic activity, is subject to the provisions of EU law. It expressly stated that UEFA and FIFA are engaged in an economic activity consisting of the organization and marketing of international football competitions and the exploitation of the various rights associated with those competitions, which makes those activities subject to EU competition law. Against this background, the ECJ first clarified that UEFA and FIFA are to be categorized as ‘undertakings&#8217; and &#8216;associations of undertakings&#8217; within the meaning of EU competition law (Article 102 and 101 TFEU, respectively), to the extent that they engage in economic activities such as the organization of competitions and the exploitation of the rights related thereto. Second, the ECJ examined whether the adoption by UEFA and FIFA of rules on the prior approval of, and participation in, interclub football competitions under penalty of sanctions could be considered to amount to an abuse of a dominant position under Article 102 TFEU and/or to an anti-competitive agreement under Article 101 TFEU.
<h4>1.3 Analysis Under Article 102 TFEU</h4>
The ECJ examined whether the rules of the sports federations, which make competitions subject to prior approval and impose sanctions on athletes and clubs participating in unauthorized competitions, constitute an abuse of a dominant position under Article 102. In this context, it should be noted, that although the ECJ did not explicitly examine the question of whether UEFA or FIFA hold a dominant position, the ECJ assumed that this is the case, both factually and legally, since the referring commercial court of Madrid appears to have taken this position.
Next, the ECJ recognized that there are specific considerations which allow the conclusion to be drawn that it is legitimate to subject the organization and conduct of international professional football competitions to common rules when they are intended to ensure the homogeneity and coordination of such competitions and to promote the conduct of sporting competitions on the basis of equal opportunities and merit. The ECJ also recognized that it is legitimate to ensure compliance with such common rules by means of sanctions, such as those of the sports federations under scrutiny, which require the prior approval of such competitions and of the participation of clubs and players.
Crucially, the ECJ held that «rules on prior approval and participation are thus legitimate in the specific context of professional football and the economic activities to which the practice of that sport gives rise, neither their adoption nor their implementation may be categorised, in terms of their principle or generally, as an ‘abuse of a dominant position&#8217;. The same holds true for sanctions introduced as an adjunct to those rules, since such sanctions are legitimate, in terms of their principle, as a means of guaranteeing the effectiveness of those rules» [N 145-146].
However, on the basis of the assumption of a dominant position, the ECJ essentially held that the relevant rules of sports federations on prior approval of and access to competitions would be abusive if there were no framework providing for substantive criteria and detailed procedural rules capable of ensuring that the rules on prior approval of competitions are transparent, objective, non-discriminatory and proportionate. The ECJ referred the case back to the commercial court in Madrid, holding that it will be for the referring court to categorize the rules at issue in the main proceedings in the light of Article 102 TFEU, after carrying out the additional verifications it may deem necessary.
The ECJ reached this conclusion on the basis that without such a framework, the current rules on prior approval of and access to competitions could create a conflict of interest. According to the ECJ&#8217;s analysis, equal opportunities for competitors must be maintained. In the ECJ&#8217;s view, the fact that an undertaking engaged in a particular economic activity (sc. Organizing competitions) has the power (de jure or de facto) both to decide which other undertakings may compete in that activity and to determine the conditions under which they may do so creates a conflict of interest which may harm competition. According to the ECJ, it is not per se unlawful to apply rules on access to competition, but it is required that the criteria are transparent, objective and non-discriminatory. The ECJ provides specific guidance on how these criteria should be assessed. First, they must be published in advance in an accessible form. Second, they must be non-discriminatory, and to that end, the rules must set comparable conditions for the sports federations that establish them as well as potential third-party competitors and must not make it impossible or excessively difficult for third-party competitors to comply with them. Finally, the sanctions introduced to enforce these rules must not be discretionary, i.e. they must be based on objective and non-discriminatory criteria and be subject to procedures that ensure that they are proportionate to the infringement in each individual case.
<h4>1.4 Analysis Under Article 101 TFEU</h4>
Next, the ECJ analyzed rules on prior approval of and access to competitions under article 101 TFEU. The ECJ held that, although the rules on the prior approval of and access to competitions may include the pursuit of legitimate objectives, such as e.g. ensuring compliance with the principles, values and rules of the game which underpin professional sport, these rules confer on the sports federations the power to authorize, control and determine the conditions of access to the relevant market for any potentially competing undertaking. They thus also confer on the sports federations the power to determine both the degree of competition which may exist on that market and the conditions under which that potential competition may be exercised.
According to the ECJ, as regards the adoption or implementation of rules for the prior approval of and access to competitions by associations which are responsible for football at world and European level and which at the same time carry out various economic activities related to the organization of competitions, the key question is whether there is a framework containing substantive criteria and detailed procedural rules capable of ensuring that they are transparent, objective, non-discriminatory and proportionate. In the absence of such a framework, the adoption and implementation of such rules by associations constituted a decision by an association of undertakings which has as its object the prevention of competition. Therefore, in the absence of such a framework, the prior approval rules would be within the scope of Article 101(1) TFEU, without it being necessary to examine the actual or potential effects of the rules.
This conclusion itself is not surprising, as the aim of these rules is obviously to prevent unauthorized competition. The key question, however, is whether the rules can be justified.
<h4>1.5 Potential Justification</h4>
The ECJ hence examined whether the rules on prior approval, participation and sanctions at issue may either benefit from an exemption or be considered justified.
With regard to Article 101 TFEU, the ECJ first examined whether the rules can be justified. The Court first addressed the scope of the so-called Wouters or Meca-Medina exemption. Certain specific types of conducts, such as ethical rules or principles adopted by an association, may fall outside the scope of the prohibition in Article 101(1) TFEU if they can be justified, even in cases when they have an inherent restrictive effect on competition. However, for this to be the case, they must be justified by the aim of pursuing legitimate objectives in the public interest, which may not per se be anti-competitive in nature, and the specific means used to pursue those objectives must be necessary and proportionate to that aim (cf. the ECJ&#8217;s prior case law in this regard, specifically Wouters and Others, C‑309/99 and Meca-Medina and Majcen v Commission, C‑519/04 P).
The ECJ concluded that its previous case-law on justification, and specifically the justifications set forth in the Wouters / Meca-Medina decisions, cannot be applied in situations involving conduct that by its nature infringes Article 102 TFEU, as well as in situations in which such conduct reveals a sufficient degree of harm to justify a finding that has as its ‘object’ the prevention, restriction or distortion of competition within the meaning of Article 101 TFEU.
The ECJ then examined whether an exemption could apply. According to Article 101(3) TFEU, ain a given case is subject to four cumulative conditions: i) it must be demonstrated with a sufficient degree of probability that the agreement allows efficiency gains, ii) it must be demonstrated, with the same degree of probability, that a fair share of the profit resulting from these efficiency gains is reserved for the users; iii) the agreement in question must not impose on the participating undertakings restrictions which are not indispensable to the attainment of such efficiency gains; and iv) the agreement must not give the participating undertakings the opportunity to eliminate effective competition for a substantial part of the products or services concerned.
In the ESL case, the ECJ referred the case back to the commercial court in Madrid to make these determinations on the basis of evidence to be submitted by the parties. However, the ECJ did provide some guidance. According to the ECJ, as regards the fourth condition of an exemption (maintenance of sufficient competition), the commercial court in Madrid must take into account whether the sports federations current rules on prior authorization, participation and sanctions are embedded into a framework of substantive criteria as well as detailed procedural rules capable of ensuring that the rules and sanctions are transparent, objective, precise and non-discriminatory.
With regard to a potential justification under Article 102 TFEU, the ECJ recalled that justification is possible if the undertaking concerned demonstrates either that its conduct was objectively justified by circumstances external to the undertaking and proportionate to that justification, or that its conduct is counterbalanced or outweighed by efficiency gains which must also benefit consumers.
Regarding those rules of UEFA and FIFA which aim to reserve the organization of any competitions to themselves, the ECJ itself found no objective justification and instructed the commercial court in Madrid to examine a possible justification on the grounds of efficiency.
<h3>2. Implications</h3>
While at first glance it may seem that the ESLC has scored a decisive goal, the ECJ&#8217;s judgment may in fact be of limited use to the ESLC. However, both judgements regarding ESCL and ISU may have wide implications for sports and their governing bodies more generally, and not just in the arenas of football and ice skating. It remains to be seen how the ECJ&#8217;s decisions will affect the European Super League project, given that most clubs no longer support the project and the fact that the Madrid court will now have to rule on the project itself. The ECJ emphasized that it did not rule on the compatibility of the European Super League project with the TFEU, and referred this question back to the commercial court in Madrid.
Both the ESL and the ISU decisions clarify that sports governing bodies must establish transparent, objective, non-discriminatory rules when they require prior approval of and access to competitions and ensure proportionality in case of sanctions. Moreover, the ECJ provided clarity on the applicability of European competition law to sport: it does apply and must be respected. In this regard, the ECJ sets some guardrails and found that certain current rules of sports governing bodies may potentially fail to comply with EU competition law, although this analysis may change if the Madrid court finds that the disputed rules are justified. The ECJ also provided important guidance that may help sports governing bodies to assess how to adapt their rules to ensure continued compliance with EU competition law in the future.

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Landmark ECJ Judgments Regarding Competition Law in Sports

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Investment Control Act: Swiss Government Proposes Minimal Solution

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Homburger advised Lotus Bakeries on its strategic partnership with Mondelēz International to expand and grow the Lotus Biscoff® cookie brand

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Does CAS Arbitration Clash with EU Competition Law?

Landmark ECJ Judgments Regarding Competition Law in Sports

Investment Control Act: Swiss Government Proposes Minimal Solution

Homburger advised KPMG Switzerland on its merger with KPMG UK

Two new counsel for Homburger

Homburger advised Lotus Bakeries on its strategic partnership with Mondelēz International to expand and grow the Lotus Biscoff® cookie brand

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