Is FIFA’s forced arbitration clause invalid?

Posted in Football Dispute resolution, litigation and investigations

Authors: Josh Kay and Majdie Hajjar

In the case of RFC Seraing and Doyen Sports Company v FIFA and Others [2018] (RFC Seraing), the Belgian Court of Appeal handed down a ruling with potential far-reaching consequences on the validity of arbitration clauses in the context of sporting agreements. The Belgian court assumed jurisdiction over a dispute despite a clause in FIFA’s statutes providing for arbitration in the Court of Arbitration for Sport (CAS). The court acknowledged that there was little case law on the requirement of a ‘defined legal relationship’, but ruled that this did not prevent its application. A ‘defined legal relationship’ is required to define the scope of a potential dispute arising between the parties should they wish to submit their dispute to arbitration. Therefore, it ruled that the absence of a ‘defined legal relationship’ in FIFA’s arbitration clause meant it was invalid. Whilst it is unlikely that CAS arbitration has been shown the red card for future sports disputes, this case highlights the risks associated with widely drafted arbitration clauses.

Facts

The crux of this dispute relates to third parties purchasing ownership of a player’s economic rights (TPO), which FIFA and UEFA have banned under the FIFA Regulations on the Status and Transfer of Players (RSTP). In short, TPO means that the economic rights of a player are owned by the third party so in the event of a transfer, the third party receives all, or at least a proportion, of the transfer fee. RFC Seraing is a third division Belgian football club registered with the Royal Belgian Football Association (RBFA). Doyen Sports Investments Limited (Doyen Sports) is a Maltese company which provides funding for clubs to buy players.

This dispute arose in September 2015 when RFC Seraing and Doyen Sports contested the validity of sanctions imposed on them by FIFA and UEFA for breaching TPO rules. RFC Seraing was fined 150,000 CHF and handed a transfer ban spanning four transfer windows. This was upheld by CAS but the transfer ban was reduced to three windows.[1] RFC Seraing’s appeal to set aside the arbitral award before the Swiss Federal Court was also dismissed.[2]

RFC Seraing and Doyen Sports launched a parallel challenge in the Belgian state court challenging the validity of the arbitration clause in FIFA’s statutes. Belgian law, just like the UNCITRAL Model Law on International Commercial Arbitration and the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), requires any arbitration agreement to identify a ‘defined legal relationship’. Put simply, an arbitration clause must define the scope of a potential dispute arising between the parties. RFC Seraing and Doyen Sports argued that the scope of the arbitration clause in FIFA’s statutes was very wide and could apply to any dispute, regardless of the object of dispute.

Article 66(1) of FIFA’s 2015 statute[3] states that “FIFA recognises the independent CAS … to resolve disputes between FIFA, members, Confederations, Leagues, Clubs, Players, Official, intermediaries and licensed match agents.[4] As such, RFC Seraing and Doyen Sports argued that Articles 66-68 of FIFA’s 2015 statutes (Articles 57-59 of the corresponding 2019 statute)[5] were incompatible with Belgian law because they did not meet the ‘defined legal relationship’ requirement.

Decision

The Belgian Court of Appeal accepted RFC Seraing and Doyen Sports’ arguments. It held that the obligation on all football clubs to resolve all disputes exclusively by arbitration before CAS was invalid under Belgian law because there was no ‘defined legal relationship’. One of the main reasons the Belgian court stressed the importance of finding a ‘defined legal relationship’ was to prevent the parties from referring any and all disputes that may arise between them to arbitration. In coming to its decision, the court looked at three key factors:

  1. the fundamental right of access to justice[6];
  2. party autonomy (in that, if the parties don’t specifically agree to an arbitration clause, they shouldn’t go to arbitration), noting that the New York Convention emphasises the importance of the parties’ consent to arbitration clauses; and
  3. the concern of the party with the stronger bargaining position imposing their will (and thus choice of court) on the weaker party.

Interestingly, the court rejected FIFA and UEFA’s arguments that a limitation in the scope of the arbitration clause can be implied by reference to their statutes. It held that reference to statutes for the parties’ activities and corporate purpose is not a sufficient delimitation of a legal relationship. Further, restricting the jurisdiction of CAS to sport-related disputes only did not meet the requirement of the ‘defined legal relationship’ as FIFA would be free to amend its statutes at any time.

Comment

Arbitration clauses must relate to a ‘defined legal relationship’ to define the scope of a potential dispute arising between the parties or otherwise run the risk of being found to be invalid. FIFA’s arbitration clause, which submits anyone abiding by its laws to CAS arbitration, is very widely drafted. Given the court’s insistence on finding a ‘defined legal relationship’ is based on widely held principles of fairness and due process, it is likely that other jurisdictions may come to a similar conclusion to the one reached by the Belgian Court of Appeal and deem FIFA’s arbitration clause invalid.

As it stands, this decision undermines FIFA’s recognition of CAS as the final dispute resolution chamber. In response to the case, CAS released a statement arguing that the Court of Appeal’s decision should be interpreted narrowly[7] and that the problem with the arbitration clause lay ‘with the wording of the CAS clause in the FIFA Statutes.’ It also noted that the Court of Appeal did not express any objections or reservations towards sports arbitration as a dispute resolution mechanism. As such, the shortcomings highlighted by this case can be addressed through the appropriate drafting of arbitration clauses. Given that the Court of Appeal did not wish to depart from the German Federal Court of Justice’s[8] decision confirming the validity of ‘forced’ arbitration clauses, further confirmed by the European Court of Human Rights[9], there is no reason to suggest that the CAS will not continue to be used as the final arbiter in sports disputes.

 

 

 

[1] http://jurisprudence.tas-cas.org/Shared%20Documents/4490.pdf

[2]https://www.bger.ch/ext/eurospider/live/fr/php/aza/http/index.php?highlight_docid=aza%3A%2F%2F20-02-2018-4A_260-2017&lang=fr&type=show_document&zoom=YES&

[3] https://img.fifa.com/image/upload/qcpshqziazmnmikh6tk5.pdf

[4] https://img.fifa.com/image/upload/qcpshqziazmnmikh6tk5.pdf

[5]https://resources.fifa.com/image/upload/fifa-statutes-5-august-2019-en.pdf?cloudid=ggyamhxxv8jrdfbekrrm

[6] per Article 6 of the European Convention on Human Rights

[7] https://www.tas-cas.org/fileadmin/user_upload/ICAS_statement_11.09.18.pdf

[8] German Supreme Court, Decision of 7 June 2016, KZR 6/15

[9] Mutu and Pechstein v. Switzerland (nos. 40575/10 and 67474/10)

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