Does CAS Arbitration Clash with EU Competition Law?


On December 21, 2023, the Court of Justice of the European Union (ECJ) not only delivered its judgment in relation to the European Football Superleague but also ruled on a matter involving the International Ice Skating Union (ISU) as well as professional skaters (C-124/21 P). The EU competition law aspects of the two ECJ rulings have been discussed in our recent Newsletter (accessible here). This Newsletter focuses on the considerations of the ECJ in the ISU ruling regarding the interplay between EU competition law and arbitration.

The ISU ruling is likely to have significant impact on the reach of arbitration rules included in the statutes or other regulations of sports federations providing for disputes with athletes to be resolved through arbitration outside the EU: According to the ECJ ruling, arbitration outside the EU fails to ensure an effective review of compliance with the EU competition rules, which is required as a matter of EU law in case of disputes concerning the exercise of a sport as an economic activity, in particular where the arbitration mechanism «must be regarded as imposed» on the athletes.

I. The Dispute

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’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’ association with the support of the European Commission.

II. The ECJ Decision

Ruling on the appeal of the athletes, the ECJ sided with the European Commission and overturned the General Court’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.

III. Potential Implications of the ECJ Decision

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’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’ 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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