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| Feature | No.64 June 2013 |

The Role of Arbitration in Sport; the real Legacy of Lance Armstrong?

Mike Townley

The Role of Arbitration in Sport; the real Legacy of Lance Armstrong?

Few things rankle the professional sports administrator more than the notion of the ‘ordinary courts’ interfering with sport decisions. It’s a deep-seated and prevalent fear that is also held by most sports fans and journalists. The prevailing view is that ‘the law’ gets in the way of real sports issues, corrupting what would otherwise have been a sound and reasonable solution.

When it comes to football, justification for this position is readily found in ‘the Bosman Ruling’. As most people know, this was a 1995 decision of the European Court of Justice (ECJ) [Union Royale Belge des Societes de Football Association ASBL v. Jean-Marc Bosman]. The ECJ ruled that it was illegal for a football club to demand a transfer fee for a player at the end of his contract. The effect has been that top players, for whom a club had to pay a huge transfer fee, now hold their employing club under constant pressure to renegotiate their wages upwards during the term of their contract. It is a curious process that forces an employer to approach its employee mid way through his contract of service to ask ‘in return for a wage hike would you agree to extend your contract, please?’ Bosman has created an environment of contract uncertainty and wage inflation.

The solution to the perceived problem of ‘the law’ interfering with sport (as it has been generally characterised) has been to seek refuge in arbitration. The world of sport is now replete with arbitral bodies dedicated to solving sports disputes, and arbitration agreements of all types abound. Athletes, coaches, ‘athlete support personnel’, national and international federations and most of the other actors in the world of sport are party to one or more forms of arbitration agreement. If you try to submit a sport dispute to a court now, it is more than likely that the first response of the Defendant will be to apply for a stay of proceedings in favour of arbitration.

In the beginning

The trend towards arbitration started in the 1980s, but it only really took hold in the 1990s. The big-bang moment for sports arbitration happened on 30th June, 1984 with the formation of the independent Court of Arbitration for Sport (CAS), which opened its doors in Lausanne, Switzerland housed in a lovely villa on the shores of Lake Geneva right next door to the International Olympic Committee’s (IOC) Olympic Museum. Since then, many national sport specific arbitral bodes have sprung up.

The introduction to the CAS on its own web site summarises the rationale for its instigation in this way:

“At the beginning of the 1980s, the regular increase in the number of international sports-related disputes and the absence of any independent authority specialising in sports-related problems and authorised to pronounce binding decisions led the top sports organisations to reflect on the question of sports dispute resolution.”

The most obvious reason why arbitration gained favour was that Governing Bodies became fed up with losing court cases, the impact of which needs to be viewed in the context of what was happening to the development of sport at the time. The 80s and 90s were a period of tremendous consolidation of power in the hands of the major sport governing bodies. Many of them became rich for the first time as they learnt how to exploit their commercial rights, packaging them up and selling them to the highest bidder. With this newfound wealth came a desire to control their sport as they had not done before. Commercial partners expected that the party they were paying so much money to was in fact in charge of the show. How inconvenient then when athletes took their disputes to court and won!

Doping played a huge role in shaping the Olympic sports’ attitude towards the courts. Indeed doping cases formed the majority of arbitrations heard before the CAS in its early years. By the 1980s, a belief had developed that the Judges did not understand ‘the specificity of sport’, which is a phrase whose preponderance is alarmingly inverse to its elegance. Nothing exemplifies the increasing frustration of the major governing bodies with the court system better than a triumvirate of doping cases involving track athletes Sandra Gasser, Katrin Krabbe and Harry Reynolds. The then named International Amateur Athletics Federation (IAAF) was the Defendant in these cases and it seems inevitable that the hostility of this particularly powerful governing body towards the civil courts had a huge influence on how the sports arbitration system came to be developed.

The founding cases?

Sandra Gasser’s case [Gasser v. Stinson 1988, unreported High Court of England and Wales] is the least obviously dramatic of the three, but it hit at the heart of something particularly precious to the world of athletics at the time. The court dealt a fatal blow to the, by then, creaky notion of ‘amateur’ athletics. Gasser was a Swiss 800 meter runner who was banned for a fixed term of 2 years under the ‘strict liability’ anti-doping rules of the IAAF. Then, as now, an athlete was responsible for what was found in their body regardless of how it got there, including if there had been an entirely innocent ingestion of a very small amount of a prohibited substance, with absolutely no intention to gain an advantage and no advantage in fact gained. Gasser’s lawyers argued that the anti-doping rules were an unreasonable restraint of trade in that while a ban for cheating was understandable, there was no provision for any sort of mitigation for athletes who could show that they were innocent of any intention to dope. In this sense, the rules lacked proportionality. The response of the IAAF was to retort that as an ‘amateur’ athlete she had no trade to protect!

This was a dangerous argument from the outset because by this time, the development of ‘shamateurism’ in athletics was a well recognized phenomenon.

The court had no difficulty in dismissing the amateurism argument, but it did uphold the rules on the ground that they were reasonable given the threat to the sport posed by doping and that in these circumstances a strict liability approach could be justified. Nevertheless, a civil court had pointed out that ‘amateurism’ was, by the late 1980s, an unsustainable sham (ie ‘shamateurism’).

The case of Harry ‘Butch’ Reynolds was altogether more colourful. What a great runner he was; Olympic Silver medalist and world record holder, and a great character. Butch was ‘box office’.1

The degree of outrage that spilled within the corridors of power at the
IAAF would be hard to exaggerate. What this case illustrates is that by the early 1990s, the IAAF had ceased to have any real regard for the civil courts (certainly in the field of doping), considering themselves and their rules to be superior to the law within the domain of track and field. The quote from the case that best sums up this attitude was provided by the senior IAAF anti-doping official at the time, Arne Ljundquist, who said that ‘..the Courts create a lot of problems for our anti-doping work, but we don’t care in the least what they say. We have our rules and they are supreme’.

In his excellent article (see footnote), and having surveyed the entire tortuous procedure, Mr McArdle sums up the impact of this case in the following way:

“the real interest of the Harry Reynolds saga, 20 years after the event, rests in what it reveals about governing bodies’ beliefs in the sanctity of their own decision-making processes and their powers to run their fiefdoms in whatever way they saw fit, regardless of the broader legal principles with which their activities appeared to be in conflict.”

Reynolds had failed a random drugs test at an athletics meeting held in Monte Carlo in 1990 and was initially suspended from all competition by the IAAF pending an internal disciplinary hearing to be conducted by his own national governing body, The Athletics Congress (TAC) (then named). Under the IAAF rules, Reynolds had the right to request a review of the findings even before the full disciplinary hearing had taken place and under these rules, his suspension should have been stayed pending the determination of the review. Reynolds duly requested a review and the IAAF duly ignored its obligation to stay the suspension. Reynolds brought proceedings in the Sothern District Court of Ohio in March, 1991 (Reynolds lived in Ohio).

Reynolds claimed in court that the tests had been negligently carried out and that the results were erroneous. He claimed that the IAAF had failed to disclose to him information that was vital to his defence and that the forthcoming TAC disciplinary hearing should be regarded as a sham with the outcome already decided. He also claimed that the IAAF had been wrong to suspend him pending the disciplinary hearing and in so doing they had unlawfully interfered with his contractual right to compete in athletics competition, and they had conspired with the IOC to commit the tort of interference with his legitimate business. In other words, he threw the book at the IAAF!

The IAAF filed a motion in court to have the action dismissed for lack of jurisdiction and they were successful on the ground that Reynolds had not exhausted all of his ‘internal remedies’ prior to commencing the civil litigation.

Reynolds was therefore obliged to participate in the TAC’s ‘internal disciplinary hearing’. This hearing was conducted as an arbitration under the auspices of the American Arbitration Association. The result of this binding arbitration procedure was that Reynolds was completely exonerated of any wrongdoing. The evidence showed that the A and B samples came from different people and neither sample was that of Reynolds’. The TAC accepted the arbitration award; the IAAF did not. There then followed a series of stand offs between the TAC who were prepared to allow Reynolds to resume his career and the IAAF who not only refused to recognise the arbitration award, they even threatened to discipline any athlete that competed against him (the so called ‘contamination’ rule). The IAAF also threatened to suspend the TAC from IAAF membership, thereby prohibiting all USA participation in international competition.

Reynolds returned to the Ohio District Court and obtained an injunction prohibiting the TAC and the IAAF from continuing any form of suspension; he was finally free to run. He competed in the US trials for the 1992 Barcelona Olympic Games. Unsurprisingly, given the inevitable distraction of the dispute, he performed poorly and failed to make the team. He retired from athletics having endured a torrid and premature end to what should have been a stellar career.

In what became a mere postscript (but offered so much more) Reynolds returned to Court in 1993, this time claiming damages for defamation, breach of contract and restraint of trade. He was granted pecuniary damages of $7 million and punitive damages of $20m against the IAAF. The Ohio Court citing the ‘ill will and spirit of revenge’ manifested in the conduct of the IAAF. The IAAF ignored these latest proceedings when they were issued and ignored the judgment when it was made. They sat bolt upright however once Reynolds had obtained his garnishee orders against the US based sponsors of the IAAF, including Coca Cola. They launched an appeal and the damages award was overturned on the basis of lack of jurisdiction.

The case of Katrin Krabbe should be made into a film, and might have been but for the confidentiality agreement she entered into when she finally settled all of her litigation against the IAAF in 2002. What a story; beautiful girl from East Germany emerges as the first truly global sports star of the newly united country. Germany had finally rid itself of the scar left over from the Second World War and Krabbe was there to make the nation whole again. It all ended in tears in 1992 when she tested positive for the banned substance ‘clenbuterol’. The German Federation ran into difficulties with their own rules and were unable to impose a doping ban and were instead forced to bring the lesser charge of ‘unsporting conduct’ which carried a ‘mere’ 1 year suspension. Concerned by the lack of a proper 2 year doping ban, the IAAF set to work. They conducted their own disciplinary hearing into the positive finding and they imposed an additional 2 year ban to run consecutively with the 1 year imposed by her national federation. Krabbe took the case to the German civil courts and won a ruling that a ban in excess of two years was unlawful under the rules of the IAAF.

Mimicking the Reynolds proceedings, Krabbe commenced a separate action for damages for loss of earnings against the IAAF. Those proceedings took a full 8 years to resolve. Finally, in April, 2002, the IAAF reached a confidential settlement with Krabbe. We can safely assume that no settlement would have been reached (or even contemplated) unless the IAAF had absolutely no other avenue to pursue.

Soca Warriors v. Trinidad and Tobago Football Federation (TTFF) – the life story of a sport arbitration case.

In October, 2006, two angry, confused and disappointed football players came to see me. The story they outlined over the course of the next 2 hours made me cross. How can you treat your national football team this way?! The Soca Warriors, as they had become known in their own country, had brought great credit to their small Island state of Trinidad and Tobago by managing to qualify as one of the best 32 nations in the world to participate in the World Cup finals to be held in Germany. Qualification was the start of 7 years of legal dispute and wrangling.

In January, 2006, the players had met their Federation in a London Hotel. At that meeting, Mr Jack Warner reached an agreement with the players that the Federation would share certain World Cup related revenues with them on a 70/30 split. Mr Warner adjusted this percentage during the competition itself so that the split of revenues was to be 50/50.

Jack Austin Warner was then one of the 24 members of Fédération Internationale de Football Association’s (FIFA) Executive Committee and therefore one of the most powerful characters in world football. He is of course a man intimately related to FIFA scandal and resigned all of his football positions in the wake of a bribery scandal (see CAS Arbitration 2011/A/2625 Mohamed Bin Hammam for more details).

In the run up to the World Cup, it was possible for the players to keep their own tally of the sort of money that was being made through sponsorships etc, and therefore estimate the amount of their share. It was running into a pretty hefty sum, certainly well over £100,000 per man.

It is easy to imagine their surprise, disappointment and anger therefore when they turned up to their meeting with Mr Warner in October following the tournament and were shown an entirely unintelligible accounting spreadsheet, and told that they were entitled to about €300 per man.

I wrote my initial letter to the TTFF on the 26th October, 2006 in which I set out the claim on the contract and importantly, directly raised the issue of dispute resolution forum in the following terms:

“To be clear, unless we can reach agreement on the points set out in this letter, the matter will have to be resolved either in the civil courts or through arbitration. Please provide us with a copy of the applicable statutes or governing regulations of the Federation, which provide for the dispute resolution process for such matters. Please also confirm how you propose this matter be dealt with in accordance within such framework.”

I was unable to identify an applicable arbitration agreement. Without an arbitration agreement, there was no possibility of submitting a dispute to arbitration. Therefore, in July, 2007, we commenced proceedings in the High Court in Port of Spain, Trinidad.

This was met with an immediate application by the TTFF for a stay of the High Court proceedings in favour of arbitration! We then concluded a written arbitration agreement whereby the parties agreed to submit the dispute to arbitration in London under the rules of the Sports Resolution Dispute Panel (now called Sport Resolutions UK).

The matter came before Ian Mill, QC sitting as the sole arbitrator in April, 2008 for a 3-day hearing. Despite the case involving an alleged oral contract, the existence of which was being denied, three lawyers but no witnesses turned up for the TTFF. Mill was critical of this lack of evidence and in his written decision, had this to say:

“In the light of these matters I have no doubt that Mr. Warner, had he made himself available to be cross-examined, would have been subjected to some quite close questioning as to his motives on 12 June, 2006 . . . However Mr Warner did not make himself available for cross-examination and Mr McCormick (the Defendant's lead Counsel) expressly stated to me that he did not have an explanation for his non-attendance that the TTFA wished me to take into account . . .”

On 19th May, Mill’s award was circulated to the parties. The Award deals with the issue of liability and it leaves open the vexed question of quantum, with the arbitrator saying this, at paragraph 58 of the decision:

- ‘It appears to be the case that the TTFA has yet to provide an account to the Applicants which complies with its contractual obligations under the commercial revenues sharing agreement as I have found them to be. Obviously, I hope that the effect of this Decision will be that a proper account will be expeditiously rendered, together with the payments shown as due by that account and sufficient inspection of the TTFA’s records to enable the Applicants reasonably to be satisfied that they have received that to which they are entitled. In that context, I should observe that any agreement entered into prior to qualification for the World Cup finals but which resulted in revenues accruing to the TTFA in consequence of qualifying should be disclosed by the TTFA to the Applicants (even if the TTFA would wish to argue before me on another occasion that the agreement is not one in whose revenues the Applicants are entitled to share). Furthermore, in case there be any debate hereafter as to whether any revenues fall within the ambit of “commercial revenues”, I require the TTFA to disclose any agreement which might arguably provide for the payment of such revenues, even if the TTFA would wish to argue before me on another occasion that the revenues are not caught by the commercial revenues sharing agreement. As it seems to me currently on the evidence that I have read and heard, the parties intended a very broad range of revenues to be caught.”

I received the Award fairly late in the day just before I left the office. No one from the Claimants’ side had the award except for counsel and me; none of the players had it. The next morning I woke up to find numerous messages on my phone, all wanting to know about the front page article that had appeared in the Trinidad Guardian newspaper under the banner headline ‘Soca Warriors win big bucks’. Within the article, written by Francis Joseph, were passages lifted directly from the award and in essence the whole decision was set out. This was a total surprise to me.

A couple of days later came the letter from TTFF’s lawyers expressing their outrage at the leak of the award and stating that their client no longer considered itself bound by the arbitration process. An application was made by the TTFF to the High Court in Trinidad for a declaration that the Arbitration Agreement should be set aside as a consequence of the Claimants’ conduct in leaking the Decision, which they said (and say) was a serious breach of confidentiality and therefore the arbitration process.

The basic law of course is that, save for limited and well defined circumstances, an arbitration award is final and binding. This is set out in the international treaty governing arbitrations, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”), and in the United Kingdom Arbitration Act 1996, which governed the arbitration process in this case, and under the Trinidad and Tobago Arbitration Act 1950.

In reaching his decision, the judge relied to a large degree on clause 10 of the arbitration agreement that said:

“10. The Arbitration award shall be final and binding on the Parties and shall be registered as a Judgment of the High Court of Trinidad and Tobago in these proceedings and enforceable accordingly, provided however that either party shall have a right of appeal to the Court of Arbitration on Sport but only with the leave of the Arbitrator.”

To the judges mind, the fact that the award was going to become public upon registration with the Court rendered ‘otios’ the basic argument of the Defendants that the arbitration award was to remain confidential.

The matter is still before the Trinidad courts, no longer on the issue of the enforceability of the Award but on the still opaque subject of quantum.

Lance Armstrong’s attempts to avoid the consequences of Arbitration

More recently, and more famously, Lance Armstrong tried to play ‘fast and loose’ with the sport arbitration landscape and he also came up short. His lawyers were not able to halt the United States Anti-Doping Agency process or impugn the legally binding nature of its consequences.

It took just a matter of hours for the Judge to dismiss Armstrong’s application, saying:

“the Court concludes Armstrong agreed to arbitrate with USADA, and its arbitration rules are sufficient, if applied reasonably, to satisfy due process.”

Taken together, Messers Warner and Armstrong are, or were, two of the most powerfully savvy, determined, unprincipled and self interested operators in the world of sport. Both tried to exile truth by destroying sport arbitration as a binding and effective process; and both failed. We’ve come a long way in the journey to make arbitration the near universal sport dispute resolution method; and in some respects the journey feels complete.

Contact

Mr. Mike Townley
IPC Legal Counsel
Email: mike.townley@paralympic.org

http://www.icsspe.org/