Competition & Arbitration Blog

On 21 December 2023, the Court of Justice of the European Union (ECJ) ruled that the rules of the International Skating Union (ISU) governing the prior authorisation of international skating competitions and the conditions for athletes to participate in such competitions constitute an infringement of European Union (EU) competition law. The ECJ also ruled that the arbitration rules as adopted by the ISU reinforced this infringement by making judicial review more difficult in light of EU competition law. In doing so it fully followed the European Commission's (Commission) decision on the matter and set aside the judgment of the General Court of the European Union (EGC) on this point. 

The ISU judgment is important because (i) it clarifies the application of Article 101 of the Treaty on the Functioning of the European Union (TFEU) to conduct of dominant undertakings (and associations of undertakings) with special rights, and (ii) the ECJ finally sets the boundaries for arbitration rules adopted by undertakings from a competition law perspective, thereby clarifying the relationship between arbitration and the mandatory status of EU competition law.

Factual background

In 2014, Dutch speed skaters Mr Tuitert and Mr Kerstholt submitted a complaint to the Commission regarding the ISU rules on (i) the prior authorisation required to organise international skating competitions (Prior Authorisation Rules) and (ii) the conditions under which athletes may participate in such competitions (Eligibility Rules). More specifically, the speed skaters claimed that these rules infringed Article 101 (cartel prohibition) and 102 (abuse of dominance) of the TFEU. 

The reason for the complaint was that the rules made it virtually impossible for speed skaters to participate in international skating competitions that were not organised by either the ISU or the national skating associations that are ISU members. Participation in an unauthorised competition would lead to negative consequences, ranging from a warning to even a penalty: "loss of eligibility" (i.e. a ban from all competitions organised by the ISU for a certain period of time) or "ineligibility" (i.e. a lifetime ban from all competitions organised by the ISU). Furthermore, the Dutch speed skaters believed that the arbitration rules as adopted by the ISU merely reinforced the infringement of EU competition law.

Mr Tuitert and Mr Kerstholt stressed that the Prior Authorisation Rules and Eligibility Rules prevented them from participating in an international skating competition in Dubai. This competition would have offered athletes an opportunity to make a better living from their profession thanks to the significant prize money and other sources of revenue (e.g. sponsorship) available. As a result of the ISU's refusal to grant permission for the event in question, it had to be cancelled, as many professional skaters were effectively prevented from participating. 

Prior Authorisation and Eligibility rules from a competition law perspective

In its 2017 decision, the Commission found that both the ISU and its members are undertakings under EU competition law as far as commercial activities are concerned, such as activities related to the organisation and marketing of ice sports events. As the ISU members are undertakings, the Commission also found that the ISU constitutes an association of undertakings.

The Commission qualified the Prior Authorisation Rules and the Eligibility Rules as a decision of an association of undertakings which distorts competition between its members (who are all obliged to comply with the Prior Authorisation Rules and the Eligibility Rules). The Commission stated, in essence, that the Prior Authorisation Rules and the Eligibility Rules have as their object the restriction of competition on the relevant market within the meaning of Article 101(1) TFEU. It drew this conclusion because its investigation showed that the rules in question allowed the ISU to (i) prevent potential organisers of international skating competitions from entering the market; and (ii) deprive potential organisers of such competitions of the possibility to attract speed skaters whose participation is necessary for such events to be held. The Commission did not pursue the case under Article 102 TFEU and therefore found no infringement of Article 102 TFEU by the ISU.

Both the EGC, at first instance, and the ECJ, on appeal, upheld the Commission's reasoning in relation to the Prior Authorisation Rules and Eligibility Rules. In particular, the ECJ confirmed that the practice of sport is subject to EU competition law in so far as it constitutes an economic activity. It also stated that the specific characteristics of an economic sector may in principle be taken into account in the application of Article 101 TFEU, in particular when determining whether conduct has as its "object" or as its "effect" the restriction of EU competition law. Finally, the ECJ stated that Articles 101 and 102 TFEU may apply to the same conduct and held that the power of a dominant undertaking or association of undertakings which has obtained exclusive or special rights may be regarded as having as its object the prevention, restriction or distortion of competition within the meaning of Article 101(1) TFEU – unless this power is subject to restrictions, obligations and review to prevent abuse.

In its judgment, the ECJ did not say that the ISU should be banned from organising events or from requiring event organisations to seek prior authorisation. Nor did it say that the ISU should be banned from imposing penalties on speed skaters who do not comply with its rules. However, it held that substantive and procedural safeguards must be imposed on the ISU, meaning that the imposed rules are subject to suitable restrictions, obligations and review to prevent infringement of EU competition law.

Boundaries between EU competition law and sports arbitration

While the Commission, the EGC and the ECJ agreed on the competition law assessment of the Prior Authorisation Rules and Eligibility Rules, they disagreed on the competition law assessment of the arbitration rules as adopted by the ISU. In particular, they disagreed as to whether Article 25 of the ISU Statutes reinforces the infringement of EU competition law resulting from the Prior Authorisation Rules and Eligibility Rules. The article in question allows athletes to challenge a decision imposing a "loss of eligibility" or "ineligibility" sanction on them by lodging an appeal against that decision with the Court of Arbitration for Sport (CAS) in accordance with the "ISU Arbitration Rules". Such ISU Arbitration Rules also allow for appeals against CAS arbitral awards but exclusively before the Swiss Federal Supreme Court.

The Commission's view on CAS arbitration and exclusive appeal in Switzerland

The Commission recognised that arbitration is a generally accepted method of dispute resolution and that acceptance of the ISU Arbitration Rules does not restrict competition or violate athletes' right to a fair hearing. However, it noted that the judicial review of CAS arbitral awards was entrusted to a court located in a third country – outside the EU and its legal order – and that such awards could not be reviewed in the light of EU competition law. The Commission considered, in essence, that although the ISU Arbitration Rules do not constitute a restriction of competition, these rules should be regarded as reinforcing the restriction of competition resulting from the Prior Authorisation Rules and Eligibility Rules. Ultimately, the Commission did not challenge the existence, organisation or functioning of the CAS as an arbitral tribunal, but rather the legal immunity of the ISU in the exercise of its discretionary decision-making and sanctioning powers in the light of EU competition law.

The EGC's view on CAS arbitration and exclusive appeal in Switzerland

The EGC found that the ISU Arbitration Rules could be justified by legitimate interests relating to the specific nature of the sport, since disputes could be submitted to a specialised court capable of adjudicating them quickly and economically. 

The ECJ's view on CAS arbitration and exclusive appeal in Switzerland

The ECJ considered the ISU Arbitration Rules to be at issue in this case only in so far as they concerned the review of CAS arbitral awards. By opting for CAS arbitration in Switzerland, the review of CAS arbitral awards was exclusively assigned to the Swiss Federal Supreme Court – a court of a third country whose marginal judicial review does not take into account EU competition law – which made effective judicial review in the light of EU competition law more difficult. 

The ECJ held that the EGC had erred in law in holding that the mechanism established by the ISU Arbitration Rules “may be justified by legitimate interests linked to the specific nature of the sport". The EGC's view failed to acknowledge that an arbitration mechanism such as the one in question must be capable of being regarded as “allowing effective compliance with the public policy provisions that EU law contains to be ensured” and as “being compatible with the principles underlying the judicial architecture of the European Union”.

The ECJ confirmed that judicial review must, in any event, be able to cover the question whether CAS arbitral awards “comply with the fundamental provisions that are a matter of EU public policy, which include Articles 101 and 102 TFEU”. According to the ECJ, this is particularly necessary when such an arbitration mechanism must be regarded as being, in practice, imposed by an entity governed by private law, such as an international sports association, on another, such as an athlete.

The ECJ recognised that sports associations have legal autonomy which entitles them to adopt rules concerning, for example, the organisation of competitions, their proper functioning and the participation of athletes in those competitions. However, it held that sports associations cannot, in doing so, limit the exercise of rights and freedoms conferred on individuals by EU law, including the rights under Articles 101 and 102 TFEU.

The ECJ ruling confirmed that the ISU Arbitration Rules reinforced the infringement of EU law "by making judicial review, in the light of EU competition law, of CAS arbitral awards (…) more difficult".

Implications of these cases

From a competition law perspective, an interesting interplay between the cartel prohibition and the abuse of dominance prohibition can be observed when a dominant undertaking enjoys exclusive or special rights. In this case, the rules of such an undertaking may, by their very existence, infringe Article 101(1) TFEU in the absence of sufficient safeguards. The extent to which dominant undertakings, like certain Big Tech players or associations of undertakings, may be considered to effectively have exclusive or special rights, is thus open to question. To avoid problems under EU competition law, such dominant undertakings must ensure that their rules are subject to clear restrictions, obligations and review.

Furthermore, the ECJ judgment sets boundaries between arbitration and the mandatory status of EU competition law. While the EGC found that the ISU Arbitration Rules can be justified by legitimate interests relating to the specific nature of sports, the Commission and the ECJ found that undertakings' arbitration rules may reinforce an infringement of EU competition law. Both the Commission and the ECJ emphasised the de facto legal immunity that a dominant undertaking with exclusive or special rights would have when acting in breach with EU competition law if its arbitration rules do not allow for timely judicial public policy review by EU courts. Accordingly, undertakings, such as certain Big Tech players, would be well advised to carefully assess whether any alternative dispute mechanisms they have in place allow for the judicial review described.

From an arbitration perspective, reactions to the ECJ ruling have been mixed, with some observers questioning whether the EU remains a pro-arbitration jurisdiction. The implications of the ECJ ruling for the CAS arbitration mechanism, which is provided for in the rules of a great many other international sports associations, are not yet clear. Additionally, the impact of the ECJ ruling on domestic EU courts is uncertain. However, it is not unreasonable to expect that domestic EU courts may now be less reluctant to intervene in disputes governed by arbitration clauses requiring arbitration before the CAS when matters of EU competition law are at stake.