CAS to VAR review? CJEU Advocate General proposes court oversight of CAS awards

The Advocate General Ćapeta decided in an Opinion last week that awards by the Swiss Court of Arbitration for Sport (CAS) must be open to full review by national courts. Although this is not binding on the Court of Justice of the European Union (CJEU) (who are due to pass judgment on the case at a later date), the Opinion is in favour of ensuring that the Fédération Internationale de Football Association (FIFA) rules are compatible with European Union (EU) law and would offer EU sports actors an alternative legal avenue outside of FIFA's dispute settlement system.

Background

This case concerns a long running dispute between Royal Football Club Seraing (Seraing) in Belgium and FIFA. Seraing had entered into contracts with the Maltese company Doyen Sports in January and July 2015. Doyen Sports specialises in providing financing to football clubs in Europe. Pursuant to these agreements, Doyen financed players chosen by Seraing in return for ownership of a percentage of the economic rights of those players.

FIFA penalised Seraing, declaring that this arrangement was a violation of FIFA's rule on the prohibition of third-party ownership of players' economic rights (in force since 2015). Seraing was unsuccessful in challenging this sanction through the FIFA Appeal Committee, its appeal to the Court of Arbitration for Sport (CAS) and Switzerland's Federal Supreme Court. Doyen Sports challenged the award in the Belgian courts, arguing it was a breach of EU law, and contrary to i) the free movement of capital, ii) the right to the freedom to provide services, iii) the right to the free movement of workers, and iv) competition law.

Initially, the Belgian courts declined jurisdiction, considering CAS awards to be commercial arbitration awards which were final (res judicata) in light of the dismissal of challenge proceedings before the courts of the seat (in this case, Switzerland). Seraing appealed to the Cour de Cassation of Belgium, which made the reference to the CJEU to determine whether EU law precludes res judicata of arbitral awards in circumstances where the decision has been rendered by a court or tribunal that is not a Member State of the EU (Switzerland).

Opinion

The Advocate General indicated that CAS awards should be subject to full judicial review for compliance with all EU laws for the following reasons:

• Compliance with FIFA's sports arbitration clauses, and dispute procedure, are non-negotiable for players and clubs. This distinguishes FIFA arbitration clauses from general commercial disputes, and in turn affects the proper scope of judicial review by national courts of arbitral awards. The limited scope of judicial review for public policy control only is acceptable in commercial arbitration by virtue of the parties' voluntary agreement. In circumstances where arbitration is mandatory, however, limited judicial review is insufficient – "[a] national court must, therefore, be able to conduct the review of FIFA rules against any and all rules of EU law" (paragraph 114).
• The Advocate General also relied upon the self-enforcing nature of CAS awards in the FIFA system, as a result of which the possibility for national courts to become seized of a case concerning a CAS award is necessarily significantly reduced. As such, the principle of judicial protection of EU law requires a "direct judicial path to access and, if necessary, prevent the application of FIFA's rules that are contrary to EU law" (paragraph 105). 
• As to the New York Convention, this allows for the review of arbitration awards on the grounds of public policy considerations. The Advocate General questioned whether the Convention was applicable to mandatory arbitration (such as this instance, where the parties did not 'undertake' to submit to arbitration). She did not rule conclusively on whether this was inconsistent, but indicated that judicial review should be available regardless, suggesting that "[o]ne way of approaching the possible applicability of the New York Convention is thus to interpret as part of public policy, for the purposes of that convention, the EU principle of effective judicial protection, which, in cases of mandatory arbitration, requires full judicial review. That principle would therefore serve as a gateway to a full review of the arbitral award in respect of the applicable EU law" (paragraph 122).
  • It is noteworthy that this aspect of the Opinion collides noticeably with discussions had in the European Court of Human Rights (such as in Mutu and Pechstein v Switzerland) that declared while CAS' authority was based on private law, the possibility of appeal to the Swiss Federal Supreme Court meant that it had the "appearance of a tribunal established by law” (para 149).

Comments

If the Advocate General's opinion is adopted by the CJEU, this would represent a seismic change to the sports legal landscape with CAS awards being subject to review by both the CJEU and all national courts for compliance with any and all EU laws. This opinion marks the latest shift in the power dynamic between the sports industry and the EU.

This Opinion aligns with C-124/21 P, International Skating Union [(ISU)] v European Commission, in which the Court had determined that mandatory CAS arbitration with judicial review by a non-EU member state (Switzerland) further undermined EU competition law because "judicial review must, in any event, be able to cover the question whether those awards comply with the fundamental provisions that are a matter of EU public policy, which include Articles 101 and 102 TFEU" (paragraph 193). This AG Opinion therefore expands on the ECJ's 2023 decision by broadening the scope of the necessary judicial review to all Member State national courts on all matters of EU law (i.e., not just public policy competition law).

If this Opinion is followed by the CJEU, CAS verdicts will no longer reign supreme in sports arbitrations; their status as res judicata will be toppled. Instead, the CJEU and national courts might become the final arbiter of such disputes. This is likely to have a number of impacts on CAS and the industry, including:

• The length of disputes will grow with parties now seeking to extend proceedings beyond the Swiss courts to claims before the CJEU or Member States. As such, CAS disputes can be anticipated to become lengthier and more costly. This could favour parties with deeper pockets.
• The risk of loss of confidentiality is more significant – while certain CAS arbitrations are private, the public nature of judicial review might mean that sensitive information disclosed during the arbitration is then later exposed. This could also deter parties from choosing arbitration as their dispute resolution mechanism.
• The effect of this Opinion on CAS remains to be seen. The Opinion also joins a host of recent CJEU decisions disrupting established sporting hierarchy, including those affecting FIFA (see our article here), the International Skating Union (discussed above), amongst others. When released, the judgment of the CJEU could pose a threat to CAS's dominance. Football, and FIFA in particular, have historically been the court's greatest source of revenue and they may well seek to influence CAS to make amendments to seek to reassert the res judicata nature of CAS Awards – for instance, one potential change could be changing the Swiss seat to a Member State (which would be significant given Switzerland's historic status as home to the major footballing institutions.
• It will be interesting to see the CJEU's stance in relation to whether the New York Convention applies, and whether these awards are automatically enforceable under it. It would diminish the scope of the Convention if it was found to only apply to arbitration agreements where the parties have voluntarily agreed to arbitrate their disputes, and potentially lead to uncertainty in the enforcement of mandatory arbitration awards.

Sports actors and lawyers across the world await the hotly-anticipated CJEU judgment.

For more information, please contact a member of our sports practice – Neil Blake (Partner), Mike McClure KC (Partner), Jake Savile-Tucker (Senior Associate) or your usual HSF contact.

The authors would like to thank Maddy Van Every (Trainee Associate) for her assistance in preparing this piece.