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Digg I. Introduction
International arbitration tribunals seated in Switzerland enjoy a considerable leeway when conducting arbitration proceedings. Only under restrictive grounds would the Swiss Supreme Court interfere ex post facto. The Supreme Court would intervene in particular in case of disregard of the most fundamental, generally recognised mandatory procedural principles (so-called procedural public policy, PILA Art. 190 par. 1 lit. d) which contravenes the sense of justice in an intolerable way, so that the award appears absolutely incompatible with the values and principles underlying the Rule of Law.1
Pursuant to the Court restrictive practice, only "the infringement of a rule essential to guarantee the loyalty of proceedings" could justify the annulment of an arbitral award on such grounds regardless of the chances of success of the case,2 excluding any other, even arbitrary, procedural infringements.3 Such fundamental, mandatory procedural principles typically include the parties' right to be heard in adversarial proceedings, the secrecy of the Tribunal's deliberations,4 and the res judicata principle.5 Commonly invoked in challenge proceedings, the procedural public policy ground had, until recently, never lead to any annulment of international arbitration awards. More often than not, the challenge fails on good faith consideration and estoppel (failure to immediately raise the procedural objection).6
II. Facts
The underlying dispute arose between a Portuguese (Sport Lisboa E Benfica) and a Spanish (Atlético de Madrid SAD) football clubs over the requested payment of a training compensation fee following the transfer of a player based on the Regulations on the Status and Transfer of Players as of 1997 (RSTP 1997). The matter was eventually referred to FIFA internal dispute mechanism, which, at the time, did not include any independent judicial review of FIFA's decisions on training compensation requests.7 FIFA Special Committee upheld the Portuguese club's request and ordered the Spanish club to pay EUR 2.5 mio. For want of any other independent judicial review of this decision in the RSTP 1997, the Spanish club successfully challenged FIFA's decision before the Commercial Court of the Canton of Zurich, relying on the general Swiss law provision allowing any member of a Swiss association to challenge any decision thereof taken without its assent.8 The judicial proceeding involved FIFA and the Spanish club, but not, individually taken, the Portuguese club. The cantonal court held that the RSTP 1997 infringed European and Swiss competition laws, and that the decision was therefore null and void. The cantonal judgement was not appealed and entered into force 30 days upon its notification to the parties.9 Complying with the terms of the judgement, FIFA Special Committee turned down the Portuguese club's new request filed a couple of months after the notification of the cantonal judgement, for the same training compensation fee for the same player. FIFA's decision was referred this time to the CAS, which had been by then designated as the appellate institution for FIFA Special Committee's decisions on training compensation fee.10 CAS upheld the appeal in part and ordered the Spanish club to pay EUR 0.4 mio, based on the RSTP 1997. It is this award that has been successfully challenged before the Swiss Supreme Court on procedural public policy ground.
III. Decision
The Swiss Supreme Court held in the nutshell that (a) the judgment of Commercial Court of the Canton of Zurich had disposed of the dispute pertaining to the payment of a training compensation fee to the Portuguese club in way that was final and binding; (b) the binding effect of the cantonal judgment was not limited to the parties involved in the proceeding but was erga omnes because the judgment upheld the challenge of a decision of an association; and (c) the CAS award disregarded "the material legal effect of the judgment of the Zurich Commercial Court of June 21, 2004 and therefore violates procedural public policy".
IV. Commentary
The significance of the reported case lies (exclusively) in the fact that, for the first time ever, the Court applied well-accepted principles and annulled an international arbitration award on procedural public policy grounds. The importance of this case, however, should not be overstated, since it relates to a particularity of FIFA's dispute resolution mechanism taken in its changing context. It was indeed as a direct result of the changes in FIFA's dispute resolution mechanism with respect training compensation fee that the same dispute regarding the same compensation for the same training fee for the same player between the same two football clubs could be brought before two distinct independent and impartial adjudicating authorities over a relatively short period of time (Zurich Commercial Court and CAS). Because of the different nature of the adjudication processes involved (referral of a Swiss association (FIFA)'s decision before the Zurich Commercial Court as a result of the lack of any specific dispute resolution method in RSTP 1997; referral of FIFA's decision to CAS arbitration), and the related differences in the actors involved in the adjudication processes, the triple identity characteristic of the res judicata (identity of parties, cause of action and dispute) might not have been as straightforward as in any standard commercial law case.
Beyond the particularities of the case, taking into consideration other recent and less recent cases, there is no sign that the Swiss Supreme Court is anywhere near to becoming more intrusive into the way international arbitration proceedings (including CAS proceedings) are conducted in Switzerland.
Swiss Supreme Court's decision 4A_490/2009, of April 13, 2010, in the matter Club Atlético de Madrid SAD v. Sport Lisboa E Benfica - Futebol SAD and Fédération Internationale de Football Association (FIFA), to be published in the Digest of the Swiss Supreme Court's decisions (ATF). The full text of the decision is available in its original (German) language at www.bger.ch/fr/index/juridiction/jurisdiction-inherit-template/jurisdiction- recht/jurisdiction-recht-urteile2000.htm
Footnotes
1. ATF 126 III 249, ground 3b.
2. E.g. unpublished decision in the matter 4P.26/2005, of Mars 23, 2005, grounds 3.1 and 3.3.
3. E.g. unpublished decision in the matter 4P.154/2005, of November 10, 2005, ground 6.1 and references.
4. ATF 129 III 727, ground 3.2.
5. ATF 128 III 191, ground 4a, on which see for instance CORBOZ, Le recours au Tribunal fédéral en matière d'arbitrage international, in SJ 2002 II p. 1 et seq., 19 and 29; TSCHANZ/VULLIEMIN, in Revue de l'arbitrage 2001 p. 885 et seq., 891.
6. E.g. unpublished decision in the matter 4P.146/2005, of October 10, 2005, ground 5.2.1 and references.
7. The review mechanism under the RSTP 1997 was one of the main points of contention between the European Commission and FIFA, with the initial sets of rules excluding any challenge of FIFA's decision on training and transfer fee before an independent adjudicating authority. Under the current RSTP, such disputes are first referred to the Dispute Resolution Chamber (Art. 22 let. d and Art. 24 par. 1), which decision is subject to appeal before the CAS (Art. 24 par. 2, second par. and CAS Code, Art. R47).
8. Under the Swiss Civil Code, Art. 75, "Every member of an [Swiss] association is entitled by law to challenge before the courts any decisions passed without its assent and which are contrary to law or the constitution of the society, within one month from the day on which its became cognizant thereof."
9. To put the case back in context, it should be noted that the European Commission had, at the time, objected to the RSTP 1997, revising the RSTP 1994 in the aftermath of the Bosman ECJ ruling (Union Royale Belge des Sociétés de Football Association ASBL & others v. Jean-Marc Bosman; Case C-415/93, ECR I-4921) as inconsistent with European competition law and RSTP 1997 were eventually substituted for the RSTP 2001 (so-called Monti rules), revised and simplified in 2005.
10. RSTP, Art. 22 and 24, and CAS Code, Art. R47.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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