Exclusion of jurisdiction of state courts must be crystal clear

Case information
January 22, 2018
4A_432/2017
Interest to foreign readers: 
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Required reading
Topics: 
Decisions of Lausanne Court of Arbitration for Sport
Jurisdiction of the Arbitral Tribunal
Arbitration clause
Original language: 
German

Parties

Appellant: 
Respondent: 

Counsel

Respondent: 
Introductory note: 

The dispute, a typical one in the field of professional football, arose from the conclusion of an exclusive agency agreement for the period of two years between Player A (the Appellant) and the former football Agent B (the Respondent), who was licensed by the Argentinean Football Association (AFA). The agency agreement provided for compensation of 10% of the Appellant’s earned income payable to the Respondent. It also included a dispute resolution clause that provided (translation from Spanish as found in the challenged CAS Award):

 

For processing and elucidation of any conflict …in connection with …the present contract and without prejudice that can occur before national and international bodies corresponding states …, based on the Constitutional guarantee of natural judge (Art. 18 N.C.) the parties submit to the jurisdiction of the courts in the Comercial de Capital Federal, Republica Argentina.

 

A dispute arose after the Appellant terminated his agency contract in December 2012 and one month later he signed a 4.5-year employment agreement with another club for a payment of approx. EUR 5.5 million. The Respondent (Agent) subsequently filed a claim with the FIFA Players’ Status Committee (PSC) requesting compensation due under the agency contract. The FIFA PSC did not entertain the claim and the Respondent appealed against the FIFA decision to the Court of Arbitration for Sport (CAS), which accepted jurisdiction, upheld the appeal and ordered the Appellant to pay the Agent his commission.

 

In the subsequent Civil law appeal to the Swiss Federal Tribunal, the Appellant requested the annulment of the CAS Award for lack of jurisdiction. The Federal Tribunal reiterated the general principles that apply to the existence and scope of arbitration agreements under Swiss law. In cases where the actual will of the parties cannot be found, the arbitration agreement is interpreted according to the principle of trust (also “principle of reliance” Vertauensprinzip, principe de la confiance), i.e. the presumed will of the parties as it could and should have been understood by them, in good faith, under the circumstances. The Court repeated its previous case law that the fact of the existence of an arbitration agreement depends on the strict condition that the parties intended to waive the jurisdiction of the state courts and submit their dispute to arbitration.

 

In the present case, the CAS Panel had accepted the jurisdiction of the previous instance – namely the FIFA Players’ Status Committee – and indirectly its own jurisdiction, based on the agency contract and due to the primacy of the jurisdiction of the organs of an association.

 

However, the Federal Tribunal found that the dispute resolution clause in the contract between the parties did not mention an “arbitral tribunal”: it held that the hearing bodies of the “AFA” and the “FIFA” mentioned in the clause are not real “arbitral tribunals” but rather only internal organs of the associations and the reference to state courts could not be understood as a substitute jurisdiction in case the association organs should declare themselves as incompetent: more specifically, the distinction in the FIFA Rules (between national and international disputes) is, in the Federal Tribunal’s view, only pertinent for the determination of the competent national (i.e. AFA) – or international (i.e. FIFA) tribunal, and leaves no room for the Argentinean state courts that were included in the dispute resolution clause of the contract. For this reason, the Federal Tribunal dismissed the interpretation according to the primacy of the jurisdiction of the association’s organs since this would not correspond to the presumed will of the parties, who included the jurisdiction of state courts. Furthermore, the explicit reference to “a right of a constitutional judge” would equally dismiss the argument that the parties had the right to choose between the judicial instances of the associations or the Argentinean state courts.

 

Overall, even though there has previously been another CAS award in which the Federal Tribunal had reached a similar finding (i.e. the specific and clear exclusion of state courts’ jurisdiction as a condition to affirm the existence of an arbitration clause), this case was different in that it concerned an appeal against a FIFA PSC Decision, which is typically accompanied by a “legal remedy” clause that explicitly provides for the jurisdiction of CAS in case of appeal, in accordance with Art. 67.1 of the FIFA Statutes. In essence, the Federal Tribunal found that the rules of the association in question cannot be employed or found to have precedence over a clause that includes the jurisdiction of state courts. In other words, insofar as there is a dispute resolution clause mentioning the jurisdiction of “state courts”, it is extremely difficult – if not impossible – to establish, in accordance with the principle of trust, that the parties wanted to exclude their dispute from the state courts jurisdiction and submit themselves to the jurisdiction of an arbitral tribunal.

 

Despina Mavromati                                                  Charles Poncet

 

Translation: 

4A_432/20171

 

Judgment of January 22, 2018

 

First Civil Law Court

 

Federal Judge Kiss, Presiding

Federal Judge Klett,

Federal Judge Hohl,

Clerk of the Court: Leemann (Mr.)

 

A.________,

Represented by Messrs. Dr. Lucien W. Valloni and Mr. Davide Colacino,

Appellant,

 

v.

 

B.________,

Represented by Ms. Melanie Schärer,

Respondent.

 

 

Facts:

 

A.

A.a B.________, Claimant, here Respondent, is a former player’s agent who had been licensed as such by the Argentinean Football Association (AFA).

 

A.________, Respondent, here Appellant, is a professional footballer. From November 2015, he has played for the football club C.________, in U.________.

 

A.b On September 1, 2011, the parties signed an exclusive agency agreement for a period of two years until August 31, 2013. In the event of a successful mediation, the agreement provided for a 10% compensation of the Appellant’s earned income to go to the Respondent. In addition, the agreement contained the following dispute resolution clause in Number 6:

 

Para la tramitación y dilucidación de cualquier conflicto que pudiere suscitarse con motivo de la celebración, interpretación, ejecución y extinción de este contrato y sin perjudicio que podrán ocurrir por ante las instancias federativas nacionales e internaciones que correspondan (Órgano de Resolución de Litigos AFA y Comisión del Estatuto del Jugador FIFA en el orden international), con fundamento en la garantía constitucional del juez natural (art. 18 C.N. [Costitución Nacional]) las partes se someten al la jurisdicción y decisión del las tribunales ordinarios en lo Comercial de Capital Federal, República Argentina.2

 

The Respondent’s translation, reproduced here from the contested Award, reads as follows:

 

For processing and elucidation of any conflict that may arise in connection with the celebration [conclusion], interpretation, execution, and Extinction of the present contract and without prejudice that can occur before national and international bodies corresponding states [...], based on the Constitutional guarantee of natural judge (Art. 18 N.C.) the parties submit to the jurisdiction and decisions of the courts in the Comercial de Capital Federal, República Argentina.3

 

A.c On November 1, 2011, the Appellant signed a new employment contract with the Football Club D.________ until June 30, 2015, which replaced a previous contract with this football club.

 

On January 12, 2012, the Appellant signed a sponsorship agreement with E.________ S.r.l.. For the period of January 1 to July 31, 2012, he received EUR 12'500, and for the periods August 1, 2012, to July 31, 2013, and from August 1, 2013, to July 31, 2014, he received EUR 22'500 each time.

 

On January 31, 2012, D.________ rejected an offer made by the football club F.________ to acquire the Appellant.

 

In May 2012, the Appellant signed an agreement with G.________S.r.l., under which he transferred the right to his name and image to be used for a computer game for a compensation of EUR 9'000. By letter of December 3, 2012, the Appellant terminated the agency agreement of September 1, 2011. On January 30, 2013, the Appellant signed a 4.5-year employment agreement with F.________, on a salary totaling EUR 5'593'000.

 

By letter sent on May 20, 2013, to the AFA, the Respondent gave his agent license back to the Argentinean Football Association AFA with immediate effect. On May 21, 2013, he was appointed to the Board of the football club H.________ S.p.A.

 

B.

B.a On September 11, 2013, the Respondent filed a claim with the Players' Status Committee of the Fédération lnternationale de Football Associations (FIFA) requesting compensation from the Appellant based on the agency contract.

 

By decision of June 30, 2015, the FIFA Players' Status Committee did not entertain the claim.

 

B.b The Respondent filed an appeal to the Court of Arbitration for Sport (CAS), which issued an arbitral Award on June 21, 2017, overturning the decision rendered by the FIFA Players' Status Committee on June 30, 2015, and ordering the Appellant to pay EUR 559'300, plus interest at 5%, from September 11, 2013.

 

C.

The Appellant lodged a civil law appeal to the Swiss Federal Tribunal requesting to set aside the CAS Award of June 21, 2017, and to declare that the CAS had no jurisdiction to hear the appeal of the Respondent. Subsidiarily, he requested the case be sent back to the Arbitral Tribunal for a new decision.

 

The Respondent requested the appeal be dismissed. The TAS waived its right to file an answer.

 

The Appellant filed a Reply to the Swiss Federal Tribunal.

 

D.

By a decision of September 28, 2017, a stay of enforcement was granted.

 

 

Reasons:

 

1.

According to Art. 54(1) BGG,4 the judgment of the Federal Tribunal is issued in an official language,5 as a rule, in the language of the decision under appeal. When the decision under appeal is in another language, the Federal Tribunal resorts to the official language chosen by the parties. The Award under appeal is in English. As this is not an official language and the parties have filed their submissions in German, the judgment of the Federal Tribunal shall be issued in German.

 

2.

In the field of international arbitration, a civil law appeal is admissible pursuant to the requirements of Art. 190-192 PILA (SR 291),6 (Art. 77(1)(a) BGG).

 

2.1 The seat of the Arbitral Tribunal is Lausanne. At the decisive time, in accordance with Art. 176(1) PILA, both parties were domiciled outside of Switzerland. As the parties have not expressly waived the applicability of Chapter 12 PILA, the provisions of that chapter are applicable (Article 176(2) PILA).

 

2.2 A civil law appeal within the meaning of Art. 77(1) BGG may in principle only seek the annulment of the award under appeal (see Art. 77(2) BGG, ruling out the applicability of Art. 107(2) BGG to the extent that this empowers the Federal Tribunal to decide the case itself). To the extent that the dispute concerns the jurisdiction or the composition of the arbitral tribunal, however, there is an exception and the Federal Tribunal may decide itself the jurisdiction or lack of jurisdiction of the arbitral tribunal or the challenge to an arbitrator (BGE 136 III 6057 at 3.3.4 p. 616, with references).

 

However, the Federal Tribunal may send the matter back to the arbitral tribunal if it upholds the appeal on the basis of the violation of the right to be heard, as Art. 77(2) BGG excludes the applicability of Art. 107(2) BGG only to the extent that it would empower the Federal Tribunal to decide the matter itself (Judgments 4A_430/2017 of November 30, 2017, at 1.2 ; 4A_633/20148 of May 29, 2015, at 2.3; 4A_460/20139 of February 4, 2014, at 2.3 with references). The Appellant’s submissions are therefore admissible.

 

2.3  Only the grievances listed in Art. 190(2) PILA are admissible (BGE 134 III 18610 at 5 p. 187; 128 III 50 at 1a p. 53; 127 III 27911 at 1a p. 282). According to Art. 77(3) BGG, the Federal Tribunal reviews only the grievances raised and reasoned in the appeal brief; this corresponds to the duty to provide reasons at Art. 106(2) BGG for the violation of constitutional rights and of cantonal and intercantonal law (BGE 134 III 186 at 5 p. 187 with references). Criticisms of appellate nature are inadmissible (BGE 134 III 56512 at 3.1 p. 567; 119 II 380 at 3b p. 382). 

 

3.

The Appellant alleges that the Arbitral Tribunal wrongly accepted jurisdiction, as there was no valid arbitration agreement between the parties (Article 190(2)(b) PILA).

 

3.1. Seized of a jurisdictional defense in accordance with Art. 190(2) PILA, the Federal Tribunal freely reviews the legal issues, including the preliminary material questions that are linked to the question of jurisdiction (BGE 142 III 23913 at 3.1; 134 III 565 at 3.1; 133 III 139 at 5 p. 141). However, it only examines the factual findings of the award at issue within the framework of the jurisdictional defense when certain admissible pleas within the meaning of Art. 190(2) PILA are raised or new arguments are exceptionally taken into consideration (Art. 99 BGG) (BGE 142 III 220 at 3.1, 239 at 3.1; 140 III 47714 at 3.1 p. 477; 138 III 29 at 2.2.1; with references).

 

3.2 The material validity or – as in this case – the very existence of an arbitration agreement is assessed under Art. 178(2) PILA, according to the law chosen by the parties and applicable to the dispute, in particular, according to the law applicable to the main contract or according to Swiss law. The Arbitral Tribunal found that the parties had not chosen a particular law in the agency contract and the dispute was governed by the relevant law of the Association as well as Swiss Law. The Respondent did not rely on legal provisions of a foreign jurisdiction that could apply in the present case for the material validity of the arbitration clause and could be more favorable than Swiss law.

 

An arbitration clause must be understood as an agreement in which two or more determined or determinable parties agree and bind themselves to submit one or several existing or future disputes to an arbitral tribunal to the exclusion of the original jurisdiction of the state pursuant to a directly or indirectly determined legal order (BGE 140 III 13415 at 3.1 p. 138 ; 130 III 66 at 3.1, p. 70). It is decisive that the will of the parties should be expressed to leave the decision of some specific disputes to an arbitral tribunal and not to a state court (BGE 142 III 23916 at 3.3.1 p. 247; 140 III 134 at 3.1 P. 138; 138 III 2917 at 2.2.3 p. 35; 129 III 675 at 2.3 p. 679 f.).

 

The interpretation of an arbitration agreement follows the generally applicable principles of interpretation of private declarations of will. It is therefore decisive to find the respective actual will of the parties (BGE 142 III 239 at 5.2.1; 140 III 134 at 3.2 p. 138; 130 III 66 at 3.2 p. 71, with references). Such subjective interpretation is based upon the appreciation of evidence that is – in principle – excluded from the review by the Federal Tribunal (BGE 142 III 239 at 5.2.1 with references).

 

If the actual will of the parties cannot be ascertained, the arbitration clause is to be interpreted according to the principle of trust, i.e. the presumed will of the parties is to be determined as that which could and should have been understood by the respective declarants in good faith under the circumstances (BGE 142 III 239 at 5.2.1; 140 III 134 at 3.2; 138 III 29 at 2.2.3). In interpreting the arbitration clause, the Court must take into account its legal nature; in particular, it should be noted that a waiver of a state court would severely restrict the legal remedies of the parties. Such a waiver cannot be accepted lightly, according to the jurisprudence of the Federal Tribunal, which is why, in case of doubt, the Court must favor a restrictive interpretation (see BGE 140 III 134,at 3.2 p. 139; 138 III 29 at 2.3.1; 129 III 675 at 2.3 p. 680 f.). In contrast, if the interpretation establishes the wish of the parties to exclude the jurisdiction of state courts and to opt for the jurisdiction of an arbitral tribunal, but there is still dispute regarding the handling of the arbitration procedure, the Court applies the principle of utility, according to which it will seek an interpretation of the contract that favors of the arbitration agreement (BGE 140 III 134 at 3.2, p. 139 ; 138 III 29 at 2.2.3 p. 36 ; 130 III 66 at 3.2).  

 

3.3 The Arbitral Tribunal affirmed the jurisdiction of the FIFA Players’ Status Committee – and indirectly, its own jurisdiction – based on No.6 of the agency contract of September 1, 2011. However, from the contested Award there seems to be no agreement of the parties regarding dispute resolution. Therefore, No.6 of the agency contract of September 1, 2011, must be interpreted according to the principle of trust.

 

While the clause at issue does not mention an arbitral tribunal – let alone the CAS – the parties submit themselves expressly to the jurisdiction of the commercial courts of the capital of Argentina (“las partes se someten al la jurisdicción y decisión del las tribunales ordinarios en lo Comercial de Capital Federal, República Argentina”), this with reference to the constitutional right to a Judge (“con fundamento en la garantía constitucional del juez natural [art. 18 C.N.]”). The exact meaning of the reference to the two associations (“sin perjudicio que podrán ocurrir por ante las instancias federativas nacionales e internaciones que correspondan [Örgano de Resoluciön de Litigos AFA y Comisión del Estatuto del Jugador FIFA en el order international]”) is not clear from the wording or the circumstances surrounding the conclusion of the contract. While the challenged Award finds a primacy of the associations in question as soon as the dispute falls within their jurisdiction, the Respondent wrote of an alternative jurisdiction of the associations’ organs.

 

However, the mere reference to the two AFA and FIFA bodies does not indicate a clear intention of the parties to submit disputes arising from the agency contract of September 1, 2011 to an arbitral tribunal, to the exclusion of the state jurisdiction.

 

Apart from the fact that the two aforementioned bodies are not arbitral tribunals but rather internal organs of the associations, there is no indication that the forum clause is to be understood as an alternative jurisdiction only in the event where the internal hearing bodies of the associations would, say, declare themselves as incompetent to hear the dispute (see Judgment 4A_244/201218 of January 17, 2013, at 4.4). In a legal dispute between players and agents, the rules of the federation mentioned in the Award distinguish merely between national and international disputes, which fall either within the jurisdiction of the national association or the jurisdiction of the FIFA Players’ Status Committee; in fact, there seem to be no particular limitations on jurisdiction. Following the arbitral opinion regarding the primacy of the jurisdiction of the organs of an association would therefore leave no room for the agreed competence of the state courts of Buenos Aires. Such an interpretation takes no account of the actual wording of the clause, which in principle provides for recourse to the state courts, and thus cannot be considered as corresponding to the presumed will of the parties. Also, the explicit reference of the parties to the right to a constitutional judge also militates against the interpretation of the Respondent that the parties had the right to choose between the adjudicative bodies of the associations provided in the contract (and eventually the Arbitral Tribunal) or the state courts of Buenos Aires.

 

Even apart from the fact that the jurisdiction of an arbitral tribunal is not mentioned in the clause, further, pursuant to the principle of trust and on its face, there is no clear ranking between, on the one hand, the competence of the organs of the associations and the jurisdiction of the state commercial courts on the other. The contractual provision thus lacks certainty with regard to dispute resolution by an arbitral tribunal; an interpretation in accordance with principle of trust and in good faith cannot show a meeting of the minds that corresponds to a declaration of mutual intent to exclude disputes arising from the agency contract from the jurisdiction of the state courts. The Arbitral Tribunal seized by the Respondent was therefore wrong to accept jurisdiction to decide the dispute.

 

4.

The appeal is hereby upheld, the Award under appeal is annulled, and the Court finds that the CAS did not have jurisdiction to hear the dispute. In such an outcome, the Respondent must pay the costs and compensate the other Party (Art. 66(1) and Art. 68(2) BGG).

 

 

Therefore, the Federal Tribunal pronounces:

 

1.

The appeal is upheld, the Award of June 21, 2017, is hereby set aside, and it is found that the Court of Arbitration for Sport had no jurisdiction to hear the case.

 

2.

The judicial costs of CHF 9'000 shall be borne by the Respondent.

 

3.

The Respondent shall pay the Appellant CHF 10'000 for costs incurred in relation to the proceedings before the Federal Tribunal.

 

4.

This Judgment shall be notified in writing to the parties and the Court of Arbitration for Sport (CAS).

 

 

Lausanne, January 22, 2018.

 

 

In the name of the First Civil Law Court of the Swiss Federal Tribunal

 

 

Presiding Judge:                                              The Clerk of the Court:

Kiss                                                                Leemann