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arbitration blog: Decisions of the Swiss Federal Court in international sports arbitration published in December 2023 and January 2024

Vedovatti Marco and Merkt Emile, in: bratschi arbitration blog, February 2024

In this new entry of bratschi's blog series on sports arbitration, Marco and Emile summarize and briefly comment on the decisions of the Swiss Federal Court (SFC) in sports arbitration published in December 2023 and January 2024. All of the decisions relate to awards of the Court of Arbitration for Sport (CAS): 

  1. Decision 4A_240/2023 23 November 2023: Lack of interest, substantive public policy, autonomy of associations, principle of legality under association law – OBJETLESS (GEGENSTANDLOS)

 

Facts: This decision relates to a dispute between a national Swimming Organisation of the State of U (Applicant) and World Aquatics (formerly FINA) (Defendant) regarding organisational deficiencies of the Applicant and FINA Bureau’s decision to appoint a stabilisation committee on the basis of the FINA Rules. The CAS dismissed the Applicant’s appeal against the FINA’s decision and the Applicant filed a set-aside application before the SFC pleading the violation of substantive public policy (Article 190(2)(e) of the Federal Act on Private International Law – PILA) in that the FINA’s decision allegedly breached the principle of legality under association law and the principle of autonomy of associations. A few weeks later, the Applicant lost its competence to regulate the professional sport of swimming in the State of U. The SFC declared the application objectless («gegenstandlos»).

 

Decision: The SFC ruled that the Applicant lacked any interest in having the FINA’s decision set aside since it lost its competence to regulate professional swimming in the State of U. Therefore, Applicant could no longer fulfil its statutory purpose and was nothing but an empty shell. In particular, the SFC pointed out that the Applicant failed to prove that the annulment of the FINA’s decision would have led to its re-inscription into the sports register of the state of U. The SFC then recalled that the principle of legality under association law and the principle of autonomy of associations do not belong to the concept of substantive public policy under Article 190(2)(e) PILA and conclude that, in any event, the application could hence not be upheld and had to be declared objectless («gegenstandlos»).

 

Commentary: This decision confirms previous case law of the SFC court and is a good reminder that the principle of autonomy of associations does not fall under the very narrow scope of substantive public policy of Article 190(2)(e) PILA. 

 

 

1. Decision 4A_494/2023 13 November 2023: infra petita, procedural and substantive public policy (principle of pacta sunt servanda) – DISMISSED 

 

Facts: A dispute arose between two football clubs regarding the transfer of a football player (Player) from FC A (Applicant) to FC B (Defendant). The Defendant filed a claim against the Applicant before the Commission of the C Football Association, who ordered the Applicant to pay the certain amount of money to the Defendant following the transfer of the Player to a third club (Subsequent Transfer Fee). The Appeals Committee of the C Football Association dismissed the Applicant’s appeal, and so did the CAS on appeal.  The Applicant filed a set-aside application before the SFC arguing (i) a violation of the prohibition to decide «infra petita» in that the Sole Arbitrator purportedly failed to establish the unlawfulness of the obligation to pay the Subsequent transfer Fee (Article 190(2)(c) PILA), and (ii) a breach of procedural and substantive public policy (Article 190(2)(e) PILA) because by incorrectly applying the federation’s internal rules of procedure and by violating the principle of sanctity of contracts («pacta sunt servanda») the Sole Arbitrator allegedly failed to apply a contractual clause despite the fact that it was binding on the Parties. The SFC dismissed the application.

 

Decision: First, regarding the argument of «infra petita», the SFC ruled that the Applicant was in fact pleading a violation of its right to be heard (Article 190(2)(d) PILA) but not a breach of the prohibition of deciding «infra petita» (Article 190(2)(c) PILA) and that the Applicant failed to show that it had requested the Sole Arbitrator to decide on the question of lawfulness of the obligation to pay the Subsequent Transfer Fee, which, in any event, the Sole Arbitrator in fact did.  Second, concerning the alleged violation of procedural public policy, the SFC considered that Applicant failed to concretely explain how the Sole Arbitrator breached generally recognised procedural principles. Third, regarding the purported violation of the principle of «pacta sunt servanda», the SFC found that the Applicant was in fact challenging the Sole Arbitrator’s application and interpretation of the applicable sports regulation, which is not an issue of «pacta sunt servanda».

 

Commentary: This decision is a good reminder that alleged violations of a federation’s internal procedural rules must be clearly substantiated before the SFC when pleading the violation of procedural public policy (Article 19(2)(e) PILA). It is also a good reminder that the interpretation of process of contractual provisions (including sports regulations) according to the case law of the SFC cannot be challenged by pleading the violation of the principle of «pacta sunt servanda». 

 

 

2. Decision 4A 456/2023 dated 11 December 2023: Right to be heard – DISMISSED  

 

Facts: A dispute arose between the Football Club A (Applicant) and a professional football player (Defendant) and Football Club C – to which the Defendant had been lent. The FIFA Dispute Resolution Chamber of FIFA (FIFA DRC) ordered the Applicant to pay the Defendant a penalty in the amount USD 2,000.000.00. The CAS partially upheld the Defendant’s appeal and reduced that amount to USD 500,000.00. The Applicant challenged the DRC’s decision before the SFC arguing the violation of his right to be heard (Article 190(2)(d) PILA) because the CAS allegedly did not address its arguments regarding the assessment of the penalty, nor did it explain in a comprehensible manner how the amount of USD 500,000.00 was calculated. The SFC dismissed the application.

 

Decision: The SFC ruled that the Applicant’s argument was groundless as it was clear from the CAS’ award that the Panel did consider the Applicant’s arguments, regarding in particular the conclusion of the contract, its termination, and its terms. In line with its case law, the SFC pointed out that the fact that the CAS Panel did not expressly deal with each of the Applicant's individual arguments does not constitute a violation of its right to be heard and found that the CAS Panel gave sufficient reasons for its decision in the ward. The SFC then explained that by complaining that the CAS Panel should have reduced the contractual penalty to six months' wages (i.e. USD 24’000) in application of the relevant FIFA rules, the Applicant was in fact criticising the CAS’ application of those regulations, which is unacceptable under the plea of the violation of the right to be heard (Article 190(2)(d) PILA). In this sense, the SFC recalled that according to established case law, the right to be heard pursuant Article 190(2)(d) PILA does not include the right to a substantively correct decision, but merely ensures the right of the Parties to participate in the decision-making process. 

 

Commentary: In this decision, the SFC confirms its jurisprudence that under the plea of the breach of the right to be heard (Article 190(2)(d) PILA), the SFC is not entitled to examine whether an arbitral tribunal correctly applied the law. The SFC’s power of review is limited as to whether the CAS Panel breached a party’s right to be heard, which is not the case when the CAS Panel implicitly dismissed arguments that it considers irrelevant or unfounded.

 

 

3. Decision 4A_216/2023 dated 13 November 2023 – Right to be heard – DISMISSED 

 

Facts: A dispute arose between a Kazak football club (Applicant) and a Russian football player (Defendant) regarding the latter’s termination of the employment contract – governed by Kazak law - after the Applicant reduced his salary as a consequence of the Covid pandemic. The FIFA DRC ordered the Applicant to pay KZT 15,956,143.00, plus interest. The CAS Sole Arbitrator dismissed the Applicant’s appeal, who then filed a set-aside application before the SFC pleading the violation of its right to be heard (Article 190(2)(d) PILA) arguing that the CAS Sole Arbitrator incorrectly FIFA regulations and Swiss law. According to the Applicant, the CAS Sole Arbitrator should have applied the mandatory provision of FIFA regulations and Kazak law. The SFC dismissed the application

 

Decision: The SFC dismissed rather swiftly the Applicant’s argument, which the SFC considered to be manifestly appellatory in that the Applicant was in fact challenging the Sole Arbitrator’s application of the law. The SFC then ruled that in any event the CAS Sole Arbitrator did address the issue of the applicable law. Whether the solution reached was correct is irrelevant from the point of the view of the right to be heard (Article 190(2) PILA). Further, the SFC pointed out that the Applicant failed to explain how the purported violation of its right to be heard influenced the outcome of the dispute and that it cannot expect to obtained detailed explanations on every aspect of the reasoning of the Sole Arbitrator. 

 

Commentary: This decision confirms settled case law of the SFC. It is a reminded that parties cannot rely on the ground of the right to be heard (Article 190(2)(d) PILA) to challenge the arbitral tribunal’s application of the law that they consider incorrect. 

 

 

4. Decision 4A_ 338/2023 dated 21 December 2023: excessive formalism and public policy – DISMISSED 

 

Facts: A dispute arose between a Spanish football club (Applicant) and FIFA regarding the matches calendar of the FIFA Club World Cup. The Applicant filed a request for arbitration with the CAS. The Applicant having refused to pay the totality of the advance on costs after FIFA’s refusal to pay its part, the President of the Appeals Arbitration Division issued a Termination Order and declared the Applicant’s appeal withdrawn as per Article 64.2(2) of the CAS Code. The Applicant challenged the Termination Order before the SFC pleading the breach of public policy (Article 190(2)(e) PILA), also relying on Article 6(1) of the European Convention on Human Rights (ECHR) and Article 30 of the Swiss Constitution (Cst.). The Applicant pleaded that FIFA’s refusal to pay its parts of the advance on costs is contrary to the principle of good faith it that it hampers the appealing party’s right to effective remedy. The Applicant also argued that by issuing the Termination Order the President of the Appeals Arbitration Division breached the prohibition of excessive formalism. The SFC dismissed the application

 

Decision: The SFC first confirmed that a CAS Termination Order qualifies as a final award under Swiss law in that it puts an end to the procedure before the CAS and can, hence, be challenged before the SFC. The SFC then recalled its case law according to which violations of the ECHR and of the Swiss Constitution are not among the grounds exhaustively listed in Article 190(2)(e) PILA and that, therefore, they cannot be invoked as such in a set-aside application before the SFC. The SFC moved on by ruling that the Applicant was in fact challenging the application of a provision of the CAS Code which, even if incorrect or arbitrary, does not fall under the narrow concept of public policy in Article 190(2)(e) PILA. The SFC further considered that the outcome would have been the same in court litigation before Swiss courts. Finally, the SFC left – again (see decision of the SFC 4A_436/2022 of 15 December 2022) – the question open as to whether the breach of the prohibition of excessive formalism forms part of public policy in Article 190(2)(e) PILA as it considered that the Termination Order in any event did not infringe on that principle.  

 

Commentary: This decision is a confirmation of previous case law of the SFC, both regarding the possibility to challenge a CAS Termination Order and the argument of the excessive formalism. A more interesting aspect of this decision is that the SFC has confirmed once more that violations of the ECHR cannot be raised as grounds to challenge an international award rendered in Switzerland. In this respect, one may have expected a change in the SFC’s approach after the case «Semenya v. Switzerland» (application 10934/21, judgment of 11 July 2023), in which the European Court of Human Rights condemned Switzerland for having failed to assess the compatibility of a CAS award with the ECHR. The Semenya case is however still pending before the Grand Chamber. Depending on its outcome, it remains to be seen whether the SFC will change its approach. 

 

 

5. Decision 4A_442/2023 dated 11 January 2024: principle of celerity and procedural public policy – DISMISSED 

 

Facts: A dispute arose between a Russian wrestler (Applicant), the World Anti-Doping Agency (WADA) and the Russian Anti-Doping Agency (RUSADA) regarding the re-testing of the Applicant’s sample. After RUSADA’s Disciplinary Commission cleared the Applicant, WADA and RUSADA filed an appeal with the CAS. The CAS Sole Arbitrator upheld the appeal and sanctioned the Application with a four-year suspension, plus the disqualification of his sporting results. The Applicant filed a set-aside application with the SFC arguing a violation of procedural public policy (Article 190(2)(e) PILA) in that the Sole Arbitrator purportedly breached the principle of celerity, i.e. to treat the case with adequate speed. The SFC dismissed the application.  

 

Decision: The SFC first recalled that in previous cases it had been called to decide upon whether the breach of the principle of celerity may amount to a violation of procedural public policy as per Article 190(2)(e) PILA but that it never answered this question as in those cases the principle of celerity had not been breached. The SFC then explained that it must be assessed on a case by case basis whether the principle of celerity is breached, taking into consideration the scope and complexity of the dispute, both from a factual and legal point of view, the type of procedure and the party’s interests at stake, and the parties’ and tribunal’s behavior during the procedure. The SFC eventually concluded that in the case at hand – considering the undisputed complexity of the dispute - the Sole Arbitrator did not breach the principle of celerity. The SFC also pointed out that the Applicant never really complained about the slowness of the procedure during the arbitration. 

 

Commentary: In this decision the SFC seems to consider that a violation of the principle of celerity may amount to a breach of procedural public policy under Article 190(2)(e) PILA. Be that as it may, this decision is a good reminder that if a party considers its rights of due process as being breached in an arbitration, it must raise an objection immediately, and not wait until the award is rendered. With the new revision of the PILA in 2021, Article 182(4) PILA explicitly refers to the principle of procedural good faith and provides that its violation may entail forfeiture of rights. 

 

 

6. Decision 4A_256/2023 dated 6 November 2023: res iudicata and procedural public policy – DISMISSED

 

Facts: This dispute relates to the case of the football player Byron Castillo (Player), who played for the Ecuadorian Football Federation (EFF or Applicant) during the qualification phase of the FIFA 2022 World Cup. A dispute had arisen regarding whether the Player had the Ecuadorian or Colombian nationality and whether the Ecuadorian football club correctly qualified to the final phase. In May 2022, the Peruvian Football Federation (PFF) and the Chilean Football Federation (CFF) requested FIFA to open disciplinary proceedings against the Player and the EFF, following the disclosure in a UK newspaper of a recording in which the Player apparently acknowledged that he was born in Colombia. The FIFA Disciplinary Committee and the FIFA Appeal Committee dismissed the claim, following which the PFF and the CFF filed an appeal with the CAS. After consolidating the procedures, a CAS panel partially upheld the appeal, ruling that the Player lacked standing to be sued and that the EFF had breached Article 21 of the FIFA Disciplinary Code (FIFA DC) for using a document containing false information regarding the Player’s nationality. The CAS panel also ordered a deduction of three points for the next FIFA World Cup and a fine of CHF 100,000.  The Player and the EFF filed a set-aside application with the SFC. The SFC declared the Player’s application inadmissible in its decision 4A_258/2023 of 19 June 2023. The SFC dismissed the EFF’s application.  

 

Decision: As a first ground the EFF argued that by imposing a sanction concerning the next edition of the FIFA World Cup – which the PFF and the CFF did not request – the CAS panel allegedly breached the prohibition of deciding «ultra petita» (Article 190(2)(c) PILA). The SFC dismissed this argument pointing out that the opposing parties requested the exclusion of the EFF from the 2026 FIFA World Cup and that by imposing a less sever sanction (i.e., deduction of three points) the CAS Panel did not infringe on the prohibition to decide «ultra petita». As a second ground, the Applicant pleaded the violation of procedural public policy (Article 190(2)(e) PILA) in that by not considering judicial decisions rendered by Ecuadorian courts confirming the authenticity of the Player’s information in the Ecuadorian Civil Register, the award purportedly breached the principle of res «iudicata». The SFC dismissed this argument. The SFC considered that the subject-matter of the procedures before the Ecuadorian authorities (i.e., authenticity of the information in the Ecuadorian Register) and the one before the CAS (i.e., disciplinary proceedings) was different, in addition of involving different parties (the Player in the Ecuadorian procedures and the Applicant in the CAS arbitration). Consequently, the SFC concluded that the CAS award did not breach the principle of res «iudicata» and was hence not contrary to procedural public policy (Article 190(2)(e) PILA).

 

Commentary: This decision reminds us of the pitfalls when pleading the principle of «res iudicata» before the SFC and that a very diligent analysis is needed when challenging an award to the SFC thereunder. 

Autoren

Merkt Emile
Emile Merkt
Rechtsanwalt
Zürich
Zum Profil
Vedovatti Marco
Marco Vedovatti
Rechtsanwalt, Partner
Zürich, Genf
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