Jurisdiction clause and arbitration clause contradicting each other must be interpreted according to the principle of reliance

Case information
January 17, 2013
4A_244/2012
Interest to foreign readers: 
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Very interesting
Topics: 
Jurisdiction of the Arbitral Tribunal
Arbitration clause
Violation of due process (right to be heard)
Deadline to file briefs to the Federal tribunal
Decisions of Lausanne Court of Arbitration for Sport
Original language: 
German
Chairman: 

Parties

Appellant: 
Respondent: 

Counsel

Appellant: 
Introductory note: 

The case involved a sport arbitration and three contracts with conflicting arbitration or jurisdiction clauses.

 

An Employment Agreement of June 2009 provided for the exclusive jurisdiction of the Court of Arbitration for Sport (“CAS”) in Lausanne and the contract was governed by Swiss law. Later, two of the parties entered into a “Second Agreement” which contained a dispute resolution clause in favor of “the appropriate bodies” of a professional football league. In May 2010 the parties to the Employment Agreement entered into a Settlement Agreement governed by Swiss law and containing a submission to “the non-exclusive jurisdiction of the Swiss Courts”.

 

A dispute arose and a CAS Panel was constituted, with Brigitte Stern, Efraim Barak and Lars Hilliger as chairman. One of the parties challenged the jurisdiction of the CAS but stopped participating in the proceedings before the hearing. On March 19, 2012, the CAS upheld part of the claim and ordered the football club involved to pay damages for breach of contract. The club appealed to the Federal Tribunal and the following are interesting in the opinion:

 

  1. The Court forcefully reiterated what it has said in many decisions, namely that a party that wishes to argue that the “right to be heard” (Swiss parlance for due process) was violated must do so in good faith. This means that the alleged deficiency must be raised in the arbitral proceedings. A party waiting for the outcome of the case to raise the argument forfeits the right to do so (see section 3 of the opinion in this respect).

 

  1. An arbitration agreement is to be interpreted like any other contract. If the factual findings do not justify a conclusion that the parties agreed and expressed the same mutual intention, the so called “principle of trust” (principle of reliance, Vetrauensprinzip, principe de la confiance) applies. According to this tool of interpretation, the arbitral tribunal must determine what each party could and should have understood in good faith from what the other was stating (see section 4 of the opinion in this respect, particularly section 4.2).

 

<>(iii)The existence of an agreement to arbitrate must not be accepted lightly, because it deprives the party submitting to arbitration from the generally available legal remedies. However, once the existence of an arbitration clause has been admitted, it must be interpreted liberally (see section 4 of the opinion in this respect).

Translation: 

 

4A_244/20121

 

Judgment of January 17, 2013

 

First Civil Law Court

 

Federal Judge Klett (Mrs.), Presiding

Federal Judge Corboz,

Federal Judge Kolly,

Federal Judge Kiss (Mrs.),

Federal Judge Niquille (Mrs.),

Clerk of the Court: Leemann.

 

FC X.________,

Represented by Mr. Thomas Sprecher,

Appellant,

 

v.

 

Y.________,

Represented by Mr. Michele Bernasconi and Mr. Philippe Fuchs,

Respondent,

 

 

Facts:

 

A.

A.a

Y.________ (the Claimant, the Respondent) is a professional football coach domiciled in A.________.

 

The FC X.________ (the Defendant, the Appellant) is a football club in B.________. It is a member of the national football federation of B.________ and of the professional football league of the country, both of which belong to the Asian Football Confederation (AFC). The national federation of B.________ is also a member of the Federation International de Football Association (FIFA).

 

A.b

On March 25, 2009, the parties and W.________ GmbH, Zug, signed a Memorandum of Understanding as to the main points of a future employment contract. On June 6, 2009, the parties and W.________ GmbH entered into an agreement entitled “Employment Agreement,” written in English and in Portuguese. According to this, FC X.________ undertook to hire Y.________ as coach for its first team for the period between July 1, 2009, and December 31, 2010, unless the Employment Agreement was extended or terminated in advance by a mutual agreement, according to the corresponding contractual provisions before December 31, 2011.

 

§ 11 of the Employment Agreement, entitled “Compensation,” reads as follows (in the English text):

 

“In consideration of the services to be provided by the Employee, the W.________ will pay the Employee the amount of EUROS 7.500.000 (seven millions, five hundred thousand euros): in the following compensation:

a) Euros 2.500.000, Net of Tax in B.________, for the period from the 1 July 2009 to 30 December 2009

b) Euros 2.500.000, Net of Tax in B.________, for the period from the 1 January 2010 to 30 June 2010, and

c) Euros 2.500.000, Net of Tax in B.________, for the period from the 1 July 2010 to 30 December 2010…”

 

§ 16, entitled “The Guarantee,” reads as follows:

 

“The undersigned Guarantor, jointly and severally, hereby unconditionally guarantees to the Employee, and assigns that all the payments from the Club and all the financial obligations and consequences that should be originated from this agreement to the Club, will be punctually paid and performed. Hereby agrees to be personally bound by, and personally liable for the breach of, each and every provision of the Agreement (including any amendments or modifications of the Agreement).”

 

§ 19, entitled “Default Termination,” reads as follows:

 

“...

If the Employee does not receive the cleared funds from Payments within thirty (30) days of the payable schedule date, the Contract will be terminated without further notice. If the Contract is terminated due to the Club non-payment, then the Employee shall be entitled to receive from the W.________, within 5 days of such termination, a sum as proportional time worked.

The Employee reserves the right to exercise any remedies available to him under the terms of this Contract, including the commencement of legal proceedings against the Club and against the Company.

If the Contract is terminated due to the Club non-payment, then the Employee shall be entitled to receive from the W.________, within 5 days of such default termination, a sum as proportional time worked.

The W.________ will be responsible for the costs and expenses (including, but not limited to, attorney's fees, court costs, and fees and expenses) resulting from, consisting of, or arising out of or in connection with the failure by the Club to perform its obligations under the Agreement, or any amendments thereto.”

 

§ 7, entitled “Arbitration,” reads as follows:

 

“Any dispute arising from or related to the present contract will be submitted exclusively to the Court of Arbitration for Sport in Lausanne, Switzerland, and resolved definitely in accordance with the Code of sports-related arbitration. Notwithstanding the foregoing provisions of this clause 7 and without prejudice thereto, the parties shall use and until the conclusion of the arbitration shall continue to use their best endeavors to attempt to reach a settlement of their dispute by mediation.”

 

§ 25, entitled “Governing Law,” reads as follows:

 

“This agreement shall be governed by and construed in accordance with Swiss law and each of the parties hereto submits to the non-exclusive jurisdiction of the Swiss courts.”

 

A.c

On an unspecified date the Claimant and the Defendant entered into a Second Agreement written in Russian and English, which also concerned the Claimant’s employment as chief coach for the period between July 1, 2009, and December 31, 2010. § 7.1 of that agreement reads as follows:

 

“All disputes and disagreements which may arise during performance of obligations under the present contract, coordinate the parties by negotiations. The parties are obliged to abstain from the decision of disputes among themselves in courts of the general jurisdiction for this purpose it is necessary to use the appropriate bodies of Professional football league of B.________, Football Federation B.________, AFC and FIFA.”

 

A.d

On May 26, 2010, the parties and W.________ GmbH entered into a “Settlement Agreement.” This contains the following preamble:

 

“I. The Employee is employed by the Club by virtue of the ‘Employment Agreement’ signed on 6th June 2009.

II. ‘The Club’ is entering into this Agreement and is duly authorized to do so.

III. According to Article 20, paragraph (b) ‘Default Termination’ of the Employment Agreement, if the Employee does not receive the cleared funds from Payments within thirty (30) days of the payable schedule date, the Employment Agreement will be terminated without further notice.

IV. This article also states that if the Employment Agreement is terminated due to the Club’s non-payment, then the Employee shall be entitled to receive from the Club, within 5 days of such termination, a sum equal to the Total Compensation that the Employee would have been entitled to from the date of termination on 31 December 2010.

V. According to Art. 12 ‘Form of payment’ of the Employment Agreement, there is an installment of Euros 2.500.000 payable on 01 January 2010 by the Club to the Employee.

VI. At the present date, the previous amount has not been fully paid. The total outstanding amount is Euros 750.000 Net of Tax (‘Net of Tax’ as defined in clause 23(b) of the Employment Agreement).

VII. As a consequence of the previous provisions and facts described, the employee is entitled to terminate the Employment Agreement and to receive the remaining amount of the Employment Agreement: Euros 3.250.000 Net of Tax. This is composed by Euros 750.000 outstanding from the partial payment of the second installment, and Euros 2.500.000 from the third installment.”

 

The contractual provisions read as follows:

 

“1. The Club agrees to pay and will pay the Employee the amount of Euros 1.000.000 Net of Tax, not later than the 30th June 2010.

2. Subject to the payment being duly received, the Employee will warrant that there will not be any further sums owed to him in concept of the compensation stated on Article 11 of the Employment Agreement.

3. In the case that the payment is not received until the agreed date, 30th June, the total amount to be paid by the Club will be the remaining payments of the Employment Agreement, this is Euros 3.250.000. The Employee shall be entitled to receive this amount from the Club, within 5 days after the Termination Date, as defined in point 5.

The Employee reserves the right to exercise any remedies available to him under the terms of this Agreement, including the commencement of legal proceedings against the Club and against the Guarantor.

...

5.1 The Employee’s employment with The Club will terminate on 26th May 2010 (‘the Termination Date’), and the employment Agreement dated 6th June 2009 will have no further effect thereafter save in respect of those clauses expressed to apply following the Termination Date. 

5.2 Following the Club's request, the Employee will perform diligently all his duties as a Manager and First Team Coach of the Club and exercise the powers as are consistent with his employment until 26th May 2010.

...

7. The Guarantee. The undersigned Guarantor, jointly and severally, hereby unconditionally guarantee to the Employee, and assigns that all the payments from the Club and all the financial obligations and consequences that should be originated from this agreement to the Club, will be punctually paid and performed. Hereby agrees to be personally bound by, and personally liable for the breach of the Agreement. It is the guarantor's obligation to satisfy the payment upon simple written request from the Employee.

...

8. Governing Law and Jurisdiction

This Agreement is to be construed in accordance with Swiss Law and each of the parties hereto submits to the non-exclusive jurisdiction of the Swiss Courts.

...”

 

It is undisputed that the payments to the Claimant agreed in the Settlement Agreement failed to materialize.

 

B.

B.a

On August 16, 2010, Y.________ filed an arbitral request with the Court of Arbitration for Sport (CAS) against FC X.________ and submitted that the latter should be ordered to pay EUR 750’000 with interest at 5% from January 1, 2010, and EUR 2.5 Mio with interest at 5% from May 26, 2010.

 

In a brief of October 25, 2010, the Defendant challenged the jurisdiction of the CAS; in the alternative, it argued that if the Arbitral Tribunal accepted jurisdiction, the claim should be rejected.

 

B.b

On March 30, 2011, the CAS gave the Claimant a time limit to file some strictly limited topical comments and a short and final statement as to the jurisdictional objection. The Claimant’s corresponding brief was filed on April 25, 2011.

 

On May 18, 2011, the Defendant submitted that several exhibits filed by the Claimant should be disallowed for breach of the March 30, 2011, instructions of the Arbitral Tribunal limiting the submissions; moreover the Defendant should be given an opportunity to file an additional brief.

 

In a decision of June 3, 2011, the Arbitral Tribunal rejected the Defendant’s submission as to the exhibits in dispute. However it gave the Defendant the opportunity to state its position as to the exhibits.

 

On June 15, 2011, the CAS set the main hearing for August 31, 2011, in agreement with the parties; both agreed to this date in writing.

 

On August 22 and 24, 2011, counsel for the Defendant asked that the hearing be canceled or in the alternative postponed; at the same time he advised the CAS that as of August 24, 2011, he would no longer represent the Defendant. The Claimant opposed a postponement and asked that the date of the hearing on August 31, 2011, be maintained.

 

On August 26, 2011, the CAS advised the parties that the hearing would take place on October 17, 2011, and requested them to confirm their participation and to communicate to the Arbitral Tribunal by September 16, 2011, the names of their counsel, translator, witnesses, and experts. This letter was sent to the parties by fax and DHL and it was received by the Defendant (i.e. there is a positive transmission report of August 26, 2011, and a confirmation by DHL as to the delivery on September 5, 2011).

 

On September 20, 2011, the CAS advised the parties by fax that the Defendant had not yet submitted the list of the participants in the hearing of October 17, 2011, and requested it to do so by September 26, 2011. Although the fax was received by the Defendant there was no communication. The Order of Procedure also sent to it by fax on October 14, 2011, was not signed by the Defendant. The hearing took place in Lausanne on October 17, 2011, without the Defendant’s presence or that of counsel.

 

B.c

In an arbitral award of March 19, 2011, the CAS upheld the claim in part and ordered the Defendant to pay EUR 2.5 Mio with interest at 5% from June 1, 2010.

 

C.

In a civil law appeal, the Defendant submits that the Federal Tribunal should annul the award of March 19, 2012, and deny the jurisdiction of the CAS to adjudicate the dispute. In the alternative, it submits that the award under appeal should be annulled and the matter sent back to the Arbitral Tribunal for additional factual findings. Procedurally, the Appellant submits that a stay of enforcement should be granted, that the file of the Arbitral Tribunal should be requested, that it should be given access to the file, and a time limit set to supplement its appeal. In his answer of October 23, 2012, the Respondent submits that the appeal should be rejected to the extent that the matter is capable of appeal. The CAS submits in its brief that the appeal should be rejected.

 

The Appellant was advised by letter of the Presiding Judge of August 9, 2012, that it could file an addition to its appeal brief if it considered it appropriate but that its admissibility would be decided in the judgment only and therefore no time limit to supplement the appeal would be set. On August 17, 2012, the Appellant filed a supplement to the appeal with the Federal Tribunal.

 

The Appellant submitted a reply to the Federal Tribunal on November 12, 2012, and the Respondent a rejoinder on November 30, 2012.

 

In a decision of July 30, 2012, the Federal Tribunal granted a stay of enforcement and gave the Appellant access to the file of the CAS.

 

 

Reasons:

 

1.

According to Art. 54 (1) BGG,2 the judgment of the Federal Tribunal is issued in an official language,3 as a rule in the language of the decision under appeal. When the decision under appeal is in another language, the Federal Tribunal uses the official language chosen by the parties in the appeal. The decision under appeal is in English. As this is not an official language and the parties used German before the Federal Tribunal, the judgment of the Federal Tribunal shall be issued in German.

 

2.

In the field of international arbitration a civil law appeal is allowed pursuant to the requirements of Art. 190-192 PILA4 (SR 291) (Art. 77 (1) (a) BGG).

 

2.1

The seat of the Arbitral Tribunal is in Lausanne in this case. Both parties had their seat or their domicile outside Switzerland at the relevant point in time. As the parties did not exclude in writing the provisions of chapter 12 PILA they are applicable (Art. 176 (1) and (2) PILA).

 

2.2

A civil law appeal within the meaning of Art. 77 (1) BGG may in principle seek only 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 authorizes the Federal Tribunal to decide the matter itself). To the extent that the dispute involves the jurisdiction of the arbitral tribunal there is, however, an exception to the effect that the Federal Tribunal may decide itself the jurisdiction or lack of jurisdiction of the arbitral tribunal (BGE 136 III 605 at 3.3.4 p. 616 with references). The Appellant’s submission is admissible to that extent.

 

2.3

Only those grievances listed in Art. 190 (2) PILA are permitted (BGE 134 III 186 at 5 p. 187; 128 III 50 at 1a p. 53; 127 III 279 at 1a p. 282). According to Art. 77 (3) BGG the Federal Tribunal reviews only the grievances that are raised and reasoned in the appeal; this corresponds to the duty to submit reasons contained in Art. 106 (2) BGG on the violation of constitutional rights and of cantonal and intercantonal law (BGE 134 III 186 at 5 p. 187 with references). Criticism of an appellate nature is not permitted (BGE 134 III 565 at 3.1 p. 567; 119 II 380 at 3b p. 382).

 

2.4

The Federal Tribunal bases its judgment on the factual findings of the arbitral tribunal (Art. 105 (1) BGG). It may not rectify or supplement the factual findings of the arbitral tribunal even when they are blatantly inaccurate or based on a violation of the law within the meaning of Art. 95 BGG (see Art. 77 (2) BGG ruling out the applicability of Art. 97 BGG and of Art. 105 (2) BGG). However the Federal Tribunal may review the factual findings of the award under appeal when some admissible grievances within the meaning of Art. 190 (2) PILA are raised against such factual findings or when new evidence is exceptionally taken into consideration (BGE 138 III 29 at 2.2.1 p. 34; 134 III 565 at 3.1 p. 567; 133 III 139 at 5 p. 141; with references). Whoever relies on an exception to the binding character of the factual findings of the arbitral tribunal upon the Federal Tribunal and wishes to rectify or supplement the facts on that basis must show, with reference to the record, that the corresponding factual allegations were raised in the arbitral proceedings in accordance with applicable procedural rules (see BGE 115 II 484 at 2a p. 486; 111 II 471 at 1c p. 473; with references).

 

2.5

As to the necessity of a brief to supplement the appeal it is argued in the appeal that “in the shortness of time” the Appellant was not  able to make available the documents relevant for the decision; also it did not have “adequate representation by counsel” in the arbitral proceedings. Therefore, it was not in possession of the file of the case. The Arbitral Tribunal did not make the file available to the Appellant despite a corresponding request. In its submission of August 6, 2012, the Appellant sweepingly submits that it was not given “the access to the file necessary to submit the reasons for its appeal to the Federal Tribunal” within the time limit to appeal. In its supplementary appeal of August 17, 2012, the Appellant again generally states that due to the heretofore lack of “access to the documents relevant for the decision” a supplement to the appeal would be necessary.

 

A time limit to supplement an insufficiently reasoned appeal is not included in Art. 42 (5) and (6) BGG (see BGE 134 II 244 at 2.4 p. 247). The reasons supporting the appeal must be contained in the brief submitted within the time limit of Art. 42 (2) BGG (see Art. 100 BGG). Supplementary appeal briefs are possible only under the restrictive conditions of Art. 43 BGG, which are not met in this case. The Appellant is unable to show in its explanations that the opportunity to supplement the appeal in the proceedings after the time to appeal has expired would be necessary to guarantee the right to be heard. The Appellant was undeniably represented by counsel in the proceedings in the CAS until August 24, 2011. The fact that from that point in time it renounced its participation in the proceedings, behaved passively until the decision was issued, and did not react to the procedural orders of the CAS cannot permit the disregard of a statutory and not extendable time limit to file and reason an appeal in civil matters. Its request for an opportunity to supplement its appeal brief after accessing to the entire arbitration file is not worthy of any legal protection.

 

According to the submission of the CAS of May 25, 2012, and the attached letters to the Appellant’s present counsel (enclosure 9), the file concerning the period after August 24, 2011, was made available to counsel by the Secretary General of the CAS on May 4, 2012 – therefore within the time limit to appeal the award notified by mail on April 25, 2012. The Appellant itself confirms in several submissions that the Secretary General of the CAS sent it several documents in copy on May 4, 2012. In its submission of July 10, 2012, it expressly renounces any remarks as to that letter and also does not show in its supplementary appeal of August 17, 2012, after access to the file was granted by the Federal Tribunal, which documents it become aware of only through that access to the file and to what extent that would require a supplementary appeal brief. Instead, in its supplementary brief the Appellant expresses its view as to the alleged lack of jurisdiction of the CAS with reference to the decision under appeal and to its own submission in the arbitral proceedings and argues an inaccurate interpretation of the contractual agreements described in the arbitral award as well as a violation of the right to be heard. Its explanations do not show in the least how it become able to do so only as a consequence of the access to the file given after the time limit to appeal. Its arguments as to jurisdiction in the supplementary brief of August 17, 2012, must therefore be disregarded. The same applies to the grievance raised in connection with its request of May 18, 2011, in the arbitral proceedings to be given an opportunity to comment the Respondent’s submission of April 25, 2011.

 

Whether or not the other arguments in the supplementary brief of August 17, 2012, may be taken into account, with which it argues unequal treatment of the parties and violation of the right to be heard, needs not be analyzed in depth: they would be untenable anyway, as will be seen hereunder, even if its arguments as to the proceedings after August 24, 2011, were not of an appellate nature, to the extent that it departs inadmissibly from the factual findings in the award under appeal.

 

3.

The arguments in the supplementary brief of August 17, 2012, that the parties were treated unequally and the right to be heard was breached are not persuasive.

 

The party that considers it has been disadvantaged by a denial of the right to be heard or another procedural deficiency according to Art. 190 (2) PILA forfeits that argument when it does not raise it in a timely manner in the arbitration proceedings and does not take all reasonable steps to correct the deficiency. It is contrary to good faith to raise a procedural deficiency only in the framework of an appeal when there was an opportunity during the arbitration proceedings to give the arbitral tribunal the chance to rectify the alleged deficiency (BGE 119 II 386 at 1a p. 388; judgment 4A_16/20125 of May 2, 2012, at 3.3; 4A_617/20106 of June 14, 2011, at 3.1; 4P.72/2001 of September 10, 2001, at 4c). A party acts contrary to good faith and abuses its rights in particular when it keeps the ground for appeal in reserve, only to raise it in the case of an unfavorable outcome of the proceedings and should the case be lost (see BGE 136 III 605 at 3.2.2 609; 129 III 445 at 3.1 p. 449; 126 III 249 at 3c p. 254).

 

The Appellant was unquestionably represented by counsel in the CAS proceedings until August 24, 2011. From that point in time it chose not to participate in the proceedings, did not react to the procedural orders of the Arbitral Tribunal anymore, and let itself be heard only after the award of March 19, 2012, was issued. Irrespective of the fact that in the arguments in the supplementary brief the Appellant departs in an inacceptable manner from the factual finding – which is binding upon the Federal Tribunal (Art. 105 (1) BGG) – that the procedural order of August 26, 2011, concerning the scheduling of the hearing on October 17, 2011, was sent by fax and by DHL courier, the argument submitted to the Federal Tribunal with reference to Art. 190 (2) (d) PILA that it was not involved in the arbitral proceedings as from August 24, 2011, and could therefore not participate in the hearing, is contrary to good faith. The Appellant – then still represented by counsel – agreed in its letters of June 10 or 24, 2011, to schedule the hearing on August 21, 2011, and in its submissions of August 22 and 24, 2011, still asked the Arbitral Tribunal to cancel or postpone the hearing. It must therefore have been aware that there was a hearing ahead and that the procedure would run its course. Even if its argument was accurate that the subsequent procedural orders of the Arbitral Tribunal did not reach it – a conclusion which cannot be drawn from the factual findings in the award under appeal – the Appellant could not have remained inactive and waited for half a year. To the extent that it discontinued any further participation in the proceedings and waited to see if the decision would be in its favor, it forfeited the right to avail itself of the alleged procedural violations in the federal appeal proceedings.

 

This does not apply to the argument that the CAS did not have jurisdiction (see Art. 186 (2) PILA) which the Appellant raised in a timely manner in the arbitral proceedings.

 

4.

The Appellant argues that the CAS was wrong to accept jurisdiction because there is no valid arbitration clause (Art. 190 (2) (b) PILA).

 

4.1

The Federal Tribunal reviews the jurisdictional issue according to Art. 190 (2) (b) PILA freely from a legal point of view, including the material preliminary issues from which the determination of jurisdiction depends. However, even in the framework of a jurisdictional appeal, the Court reviews the factual findings of the award under appeal only when some admissible grievances within the meaning of Art. 190 (2) PILA are brought against such factual findings or exceptionally when new evidence is taken into consideration (BGE 138 III 29 at 2.2.1 p. 34; 134 III 565 at 3.1 p. 567; 133 III 139 at 5 p. 141).

 

4.2

According to Art. 178 (2) PILA the validity of the contents of an arbitration clause is assessed according to the law chosen by the parties and applicable to the dispute, in particular to the main contract, or according to Swiss law. The CAS rightly assessed the validity of the arbitration clause according to Swiss law. The Respondent rightly does not rely on the provisions of a foreign legal order that would be applicable to the case and more advantageous than Swiss law as to the substantive validity of the arbitration clause.

 

An arbitration clause must be understood as an agreement by which two or more determined or determinable parties agree to be bound to submit some existing or future disputes to an arbitral tribunal to the exclusion of the original jurisdiction of the state courts, according to a determined or undetermined legal order (BGE 130 III 66 at 3.1 p. 70). It is essential that the parties should express the intention to let an arbitral tribunal, i.e. not a state court, decide certain disputes (BGE 138 III 29 at 2.2.3 p. 35; 129 III 675 at 2.3 p. 679 ff).

 

When there is no factual concurring intention as to the arbitration clause, it must be interpreted according to the principle of reliance, i.e. the presumptive intention of the parties must be ascertained according to what the party receiving the statement could and should understand in good faith (BGE 138 III 29 at 2.2.3 p. 35 ff; 130 III 66 at 3.2 p. 71; 129 III 675 at 2.3 p. 680). To interpret an arbitration agreement, its legal nature must be taken into account; in particular it must be taken into account that renouncing access to the state court drastically limits legal recourses. According to the case law of the Federal Tribunal, such an intent to renounce cannot be accepted easily, therefore restrictive interpretation is required in case of doubt (see BGE 138 III 297 at 2.3.1 p. 36 ff; 129 III 675 at 2.3 p. 680 ff; 128 III 50 p. 58 at 2c/aa). However, when the result of the interpretation establishes that the parties wanted to depart from the state jurisdiction and to submit to a decision by an arbitral tribunal but differences remain as to the conduct of the arbitral proceedings, the rule that a clause must be rendered as effective as possible is applicable in principle. According to that, an understanding of the contract must be sought which preserves the validity of the arbitration agreement to the extent possible (BGE 138 III 298 at 2.2.3 p. 36; 130 III 66 at 3.2 p. 71 ff; 129 III 675 at 2.3 p. 681).

 

4.3

Contrary to what the Respondent appears to assume, the CAS did not find concurrence of intention of the parties to submit certain disputes only to an arbitral tribunal to the exclusion of the original state jurisdiction; no factual findings of an actual agreement of the parties as to the resolution of disputes can be derived from the award under appeal; the Arbitral Tribunal thus rightly based its interpretation of the agreement in dispute on objective considerations. While the Employment Agreement and the arbitration agreement contain a CAS arbitration clause and a jurisdiction clause, the Settlement Agreement contains merely a jurisdiction clause. The Second Agreement concluded after the Employment Agreement contains rules as to the disposition of disputes; according to the accurate assessment of the CAS however, it contains no arbitration clause on which its jurisdiction could have been based in the case at hand. The Respondent rightly does not argue that the jurisdiction of the CAS would be based on the Second Agreement in the case at hand but considers in agreement with the award under appeal that it is not decisive.

 

 

4.4

As to the Employment Agreement the Arbitral Tribunal held that besides the arbitration clause in § 7 it also contains an arbitration clause (§ 25) in favor of the (not exclusive) jurisdiction of the Swiss courts. However it found the arbitration clause valid without examining the relationship between the two clauses at all. Since the award under appeal found no factual agreement of the parties to remove the dispute from the state courts and submit it to the decision of an arbitral tribunal, the agreement must be interpreted according to the principle of reliance.

 

Each of the two provisions provides for a different way to resolve disputes: while the arbitration clause in § 7 states the exclusive jurisdiction of the CAS, the parties submit to the non-exclusive jurisdiction of the Swiss courts according to the jurisdiction clause in § 25. Neither the wording of the Employment Agreement nor any other circumstances at the conclusion of the contract provide any specific inferences as to the relationship between the two contradictory contract provisions. The contractual agreement therefore lacks decisiveness as to the disposition of disputes by an arbitral tribunal; the principle of reliance shows no concurrence of intention to remove disputes from the jurisdiction of the state courts and to submit them to an arbitral tribunal. In particular, the fact that § 25 provides for the non-exclusive jurisdiction of the Swiss courts cannot in good faith lead to the conclusion that there was a presumptive intention of the parties to give the Claimant the choice between seizing the CAS or the state courts. Irrespective of the fact that § 7 provides for exclusive jurisdiction of the CAS (“will be submitted exclusively to the Court of Arbitration for Sport”) and therefore contradicts such a right to choose, the choice of an non-exclusive forum (“submits to the non-exclusive jurisdiction”) must be construed, in principle, as permitting the seizing of other state courts as well as the tribunal given jurisdiction in the contract. § 25 thus merely provides for jurisdiction of the Swiss courts without ruling out a trial in another competent foreign court. The Respondent rightly does not claim a corresponding right to choose and the issue as to the requirements to allow such a right may remain open (see in this respect BERNHARD BERGER/FRANZ KELLERHALS, International and Domestic Arbitration in Switzerland, 2nd § 2010, Rz. 460; JEAN-FRANÇOIS POUDRET/SÉBASTIEN BESSON, Comparative law of international arbitration, 2nd § 2007, Rz. 159; also see JENS-PETER LACHMANN, Handbuch für die Schiedsgerichtspraxis, 3rd §, Köln 2008, Rz. 407). Contrary to the view adopted in the answer to the appeal, there is no indication that the jurisdictional clause must understood as pure substitute jurisdiction in a case where the arbitration clause would have no effect; furthermore, the interpretation of the Employment Agreement according to the principle of reliance does not show a clear hierarchy between the two clauses. In view of the contradictory provisions in the Employment Agreement therefore, the principle of reliance shows no clear intent of the parties to remove certain disputes from the jurisdiction of the state courts and to submit them to an arbitral tribunal. Contrary to the Respondent’s view, this leaves no place for the rule that a clause must be rendered as effective as possible, which would maintain the validity of the arbitration clause (BGE 138 III 299 at 2.2.3 p. 36; 130 III 66 at 3.2 p. 71 ff; with references).

 

4.5

A general assessment of the Employment Agreement of June 6, 2009, and of the Settlement Agreement of May 26, 2010, which are directly connected, leads to the same result, as the latter purports to amicably terminate the employment relationship based on the Employment Agreement. The Settlement Agreement merely contains a (non-exclusive) jurisdiction clause (§ 8); there is no arbitration clause there. Contrary to the view of the CAS, no arbitration clause by reference to § 7 of the Employment Agreement can be seen in § 5.1 of the Settlement Agreement. Irrespective of the fact that the arbitration clause contained in the Employment Agreement proves to be ineffective, the award under appeal overlooks the fact that, according to the case law of the Federal Tribunal, a jurisdiction clause contained in an out of court settlement agreement between contractual parties substitutes the arbitration clause contained in the contract previously concluded and renders it ineffective unless the parties express a different intention in their settlement (BGE 121 III 495 at 5 p. 496 ff). Even if it were accurate that, based on Art. 5.1 of the Settlement Agreement, certain clauses of the Employment Agreement remained valid, there is no good faith declaration of intention of the parties in § 5.1 to submit the dispute to an arbitral tribunal. To the contrary, § 8 of the Settlement Agreement clearly leads to the conclusion that it was intended to retain the jurisdiction of the state courts. Whether the agreement as to the (non-exclusive) jurisdiction of the Swiss courts is valid or ineffective for lack of precision as the Respondent argues, considering it objectively can only lead to the conclusion that there was a presumptive intention of the parties to maintain the ordinary jurisdiction of the state courts.

 

4.6

According to the principle of reliance therefore, there is no clear expression of the intention of the parties in the Employment Agreement or in the Settlement Agreement to remove the dispute from the State Courts and submit it to an arbitral tribunal. Instead it must be assumed that the parties did not renounce the jurisdiction of the state courts but rather wanted to leave the ordinary legal recourse open. Contrary to the award under appeal, there is no valid arbitration clause and the CAS, called upon by the Respondent to decide the dispute, was wrong to accept jurisdiction.

 

 

 

 

5.

The award under appeal must be annulled and it must be found, as requested, that the CAS did not have jurisdiction in the dispute. In such an outcome the Respondent must pay the costs and compensate the other Party (Art. 66 (1) BGG and Art. 68 (2) BGG).

 

Therefore the Federal Tribunal pronounces:

 

  1. The appeal is admitted and the arbitral award of the Court of Arbitration for Sport of March 19, 2012, is annulled.

 

  1. It is held that the Court of Arbitration for Sport has no jurisdiction in the dispute.

 

  1. The Respondent shall pay the judicial costs set at CHF 20’000.

 

  1. The Respondent shall pay an amount of CHF 22’000 to the Appellant for the federal judicial proceedings.

 

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

 

 

Lausanne January 17, 2013.

 

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

 

The Presiding Judge:                                       The Clerk:

 

Klett (Mrs.)                                                     Leemann