EU General Court delivers ruling on the application of EU competition law to sports authorization rules and upholds the role of the Court of Arbitration for Sport
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The General Court of the European Union (the "General Court") has confirmed this week that the eligibility rules of the International Skating Union ("ISU"), which penalized athletes participating in competitions not authorized by the ISU, infringe EU competition law.1 While the EU General Court considered it appropriate for sports governing bodies to seek to establish common standards for the organization of sporting events, such rules should not unduly deprive third-party organizers from market access, and must be fair and proportionate to the legitimate objectives pursued by these rules. In addition, the EU General Court upheld the role of the Court of Arbitration for Sport ("CAS") as the primary body for the adjudication of sports-related disputes.
Background
The ISU is the sole international sports federation recognized by the International Olympic Committee for the purpose of managing and administering figure and speed skating, and organizes all major international competitions in this area.
All speed and figure skaters affiliated with national federations that are members of the ISU are subject to the ISU's pre-authorization system, including so-called "eligibility rules". The ISU rules provided, among others, that a skater participating in an unauthorized event faces severe penalties of being suspended for several years (or even a lifetime ban) from any competition organized by the ISU.
Triggered by a complaint from two Dutch speed skaters, who had been prohibited by the ISU from participating in a competition in Abu Dhabi in a new format2 organized by a private Korean company, the European Commission (the "Commission") started investigating the case in 2014.
On 8 December 2017, the Commission decided that the ISU's eligibility rules violated Article 101 TFEU and ordered the ISU to change them, subject to a periodic penalty payment if it would not do so.3 The Commission found that the eligibility rules prevented competing organizers from setting up alternative sporting events and had the object of restricting professional speed skaters from freely participating in international third-party events. The rules thereby deprived those operators of the services of athletes necessary in order to host those competitions in the first place.
The Commission also took issue with the ISU's compulsory arbitration mechanism to challenge eligibility decisions. The Commission recognized that arbitration was a generally accepted method of resolving disputes and that agreeing to an arbitration clause as such did not constitute a restriction of competition. However, it considered that the arbitration rules reinforced the restrictions of competition caused by the eligibility rules by making it difficult to obtain effective judicial protection against any ineligibility decisions of the ISU that are contrary to Article 101 TFEU, and that athletes were required to accept the arbitration rules and the exclusive jurisdiction of the Court of Arbitration for Sport ("CAS"). The Commission noted that the Swiss Federal Tribunal has ruled that EU competition law does not pertain to international public policy in the sense of the Swiss legal order, and that the Swiss Federal Tribunal was therefore not likely to annul a CAS arbitral award that confirms an ineligibility decision taken in violation of Article 101 of the Treaty.4 In addition, the Commission pointed to the "lack of real consensus" on arbitration given the compulsory nature of the ISU rules.5 The Commission thus concluded that the Appeals Arbitration rules, while not constituting a breach of athletes' right to a fair hearing, did reinforce the restriction of the athletes' commercial freedom and the foreclosure of the ISU's potential competitors under the eligibility rules.6 The latter findings, which related to the compulsory jurisdiction of the CAS, including in cases involving EU competition law, were potentially very important for the future of the CAS.
The judgment
The ISU appealed the Commission's decision before the EU General Court. In its judgment of 16 December 2020, the General Court in essence upheld the Commission's decision. However, it differed in view with the Commission in respect of the role and relevance of the ISU rules on compulsory arbitration, referring potential plaintiffs exclusively to the CAS in Lausanne.
In respect of the main claim related to the ISU eligibility rules, the General Court ruled that the ISU, as a sports federation, is subject to the obligations under Article 101 TFEU and, thus, must not distort competition between different sporting events by restricting the athletes' access to such events. Furthermore, the General Court confirmed that the Commission was right to conclude that the eligibility rules had as their object the restriction of competition in the worldwide market for the organization and commercial exploitation of international speed skating events within the meaning of Article 101 TFEU.
In its assessment, the General Court recognized that the ISU was prone to a "conflict of interests" given that the ISU is not only the governing sports federation regulating the sport and authorizing events, but it also organizes skating events itself. Importantly, the Court then found that it is, as such, legitimate for sporting bodies to ensure common standards for sporting events by means of a pre-authorization system. It considered it legitimate for the ISU to protect the integrity of sport from the risk of betting manipulation, for example.
That said, when deciding about authorizations, it is key not to unduly deprive third-party organizers from market access. Further, the pre-authorization systems need to have fair and proportionate rules. In the case at hand, while the eligibility rules pursued legitimate purposes, such as protection against betting manipulation and ensuring that sporting competitions meet common standards, they went beyond what was necessary to achieve these objectives and, thus, were not proportionate. A key factor contributing to this conclusion was the severity of the potential penalties.
In contrast, the EU General Court found that the Commission was wrong to consider that the rules on compulsory arbitration, which refer potential plaintiffs to the CAS in Lausanne, Switzerland, constituted an "aggravating" circumstance to the infringement as they "re-enforced the restrictions created by [the] eligibility rules" by preventing athletes to enforce their competition law rights before an EU court.7
The General Court made it clear that the current arbitration system as adopted by the ISU and many other sports governing bodies, that essentially grants the CAS exclusive jurisdiction over sports-related disputes, does not violate EU law. In particular, the General Court found that the CAS's unique status may be justified by legitimate interests linked to the specific nature of the sport. It referred to the decision of the European Court of Human Rights in the Mutu and Pechstein case, which considered that a "single, specialized international arbitral tribunal" would bring about procedural uniformity and strengthen legal certainty.8 The General Court also noted that, while it is true that the arbitration rules do not permit skaters to bring an action before a national court for annulment of an ineligibility decision which infringes Article 101(1) TFEU, the fact remains that skaters may bring, if they so wish, an action for damages before a national court. In such cases, according to the General Court, the national courts are not bound by the CAS assessment, including in particular on matters of EU law.9 Such claims in turn may end up before the European Court of Justice itself. And athletes and third-party organizers of events could also bring the matter before the national competition authorities. In sum, according to the General Court, "contrary to what is argued by the Commission, use of the CAS arbitration system is not such as to compromise the full effectiveness of EU competition law."10
The General Court's ruling can still be appealed to the European Court of Justice.
Concluding remarks
The judgment provides clarity on two points with practical relevance not only for the sport of skating, but essentially for all sporting bodies and their athlete members across the world.
First, the General Court makes clear that sporting bodies can (continue to) implement pre-authorization systems for competing events, but these rules must be fair and proportionate and not unduly impede competing events. EU competition law applies to the actions of sports governing bodies, which often have a dual role as regulator and active organizer of events.
Second, the General Court gave its blessing to the compulsory arbitration rules as found in the rules of many sports governing bodies that automatically bring sports-related disputes to the CAS in Lausanne. The General Court referred with approval to the approach of the European Court of Human Rights in Mutu and Pechstein, which upheld the independence and impartiality of the CAS. It also considered that there are still sufficient ways in which athletes and organizers can invoke EU law, including EU competition law, before national authorities and national courts, such that the effectiveness of EU competition law is not undermined by the compulsory arbitration rules. This judgment will be seen as further confirmation of the legitimate role of the CAS as the body for sports adjudications.
1 Judgment of the General Court, 16 December 2020, Case T 93/18, International Skating Union vs Commission (the "Judgment of the General Court").
2 Initially, the organizers wanted to allow betting on the races, to use a different sized track from the ISU-approved one and to feature unorthodox races where long-track and short-track skaters compete in mass starts.
3 Commission Decision C (2017) 8230 final, adopted on 8 December 2017, relating to proceedings under Article 101 TFEU and Article 53 of the Agreement on the European Economic Area (Case AT/40208 — International Skating Union's eligibility rules) (the "Commission Decision").
4 Commission Decision, para. 271.
5 Commission Decision, para. 276.
6 Commission Decision, para. 286.
7 The concept of "aggravating circumstances" stems from the EC's Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (OJ 2006 C 210, p. 2), which the EC relied on despite not setting a fine.
8 Judgment of the General Court, para. 156.
9 Judgment of the General Court, para. 160.
10 Judgment of the General Court, para. 161.
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