Constitutional complaint challenging admissibility of arbitration clause successful

Press Release No. 61/2022 of 12 July 2022

Order of 3 June 2022
1 BvR 2103/16

In an order published today, the Second Chamber of the First Senate of the Federal Constitutional Court granted the relief sought by a constitutional complaint asserting a violation of the right of access to justice.

In the initial proceedings before the German civil courts, the complainant, a professional athlete, asserted inter alia claims for damages and compensation for pain and suffering against two sports associations that had imposed and implemented a doping ban on the complainant. The Federal Court of Justice found the complaint inadmissible because the complainant had agreed to an arbitration clause mandating dispute resolution before the Court of Arbitration for Sport (CAS) located in Lausanne, Switzerland. The complainant challenged this decision in her constitutional complaint.

The challenged decision of the Federal Court of Justice violates the complainant’s right of access to justice under Art. 2(1) in conjunction with Art. 20(3) of the Basic Law (Grundgesetz – GG). The Federal Court of Justice failed to recognise the importance of the right to have the proceedings held in public. The weighing of the right of access to justice, on the one hand, and the freedom of contract and the autonomy of association, on the other hand, did not conform with constitutional requirements.

Facts of the case:

In February 2009, the complainant took part in the world championships in her sport. As part of the registration for the competition, she committed to complying with the anti-doping rules of the international sport federation that hosted the event and signed an arbitration agreement in favour of arbitration before the CAS.

Due to an elevated level of certain blood components in the samples taken from the complainant at the competition, the disciplinary commission of the international federation banned the complainant for two years for illegal blood doping. In a further action by the German sports association, the complainant was also excluded from organised training and from participating in the Winter Olympics in Vancouver, Canada in February 2010.

The complainant appealed the decision of the disciplinary commission to the CAS. Under the operative rules of arbitration, neither party had the right to have the proceedings held in public. The CAS did not grant the complainant’s request for a public hearing and did not conduct the proceedings in public. In an arbitration decision of 25 November 2009, the CAS dismissed the complainant’s appeal against the decision of the disciplinary commission. The complainant’s appeal of this verdict to the Swiss Federal Supreme Court was unsuccessful. In response to an individual application by the complainant against the decision of the Swiss Federal Supreme Court, the European Court of Human Rights (ECtHR) found in a judgment dated 2 October 2018 that the lack of a public hearing before the CAS violated Art. 6(1) of the European Convention on Human Rights (ECHR).

Prior to this ruling, the complainant had already brought an action before a German Regional Court against the German association and the international federation seeking a declaration that the doping ban was unlawful and claiming damages and compensation for pain and suffering. The Regional Court dismissed the claim, and this judgment is not a part of the present proceedings. The Higher Regional Court confirmed the decision of the Regional Court with regard to the complainant’s application for a declaratory judgment; its decision, partially interim and partially final, is also not challenged here. For the rest of the claim, the Higher Regional Court found the action to be admissible. It determined that the arbitration agreement reached between the parties did not preclude legal recourse to the ordinary courts. The arbitration agreement was declared void.

By judgment dated 7 June 2016 in response to an appeal by the international federation on points of law, the Federal Court of Justice reversed the interim judgment of the Higher Regional Court insofar as the latter had ruled to the detriment of the federation, and rejected the complainant’s appeal against the dismissal of her claim by the Regional Court in its entirety. This is the challenged judgment in these proceedings. The Federal Court of Justice held that the lawsuit was inadmissible because it was precluded by the arbitration agreement pursuant to §1032(1) in conjunction with § 1025(2) of the Code of Civil Procedure (Zivilprozessordnung – ZPO). The Federal Court of Justice found that the CAS was a “genuine” arbitral tribunal within the meaning of these provisions and that the arbitration agreement was effective. It further found that it did not constitute an abuse of market power for a sports federation to make an athlete’s participation in a competition contingent on the signing of an arbitration agreement that, under the anti-doping rules, provides for the CAS as the arbitral tribunal. It also found that the rules of procedure of the CAS contained sufficient guarantees to protect the rights of athletes. Under these circumstances, the Federal Court of Justice found that the arbitration agreement was not incompatible with the right of access to justice under Art. 2(1) GG, the fundamental right to occupational freedom under Art. 12(1) GG or the right to a fair trial according to Art. 6(1) ECHR.

In her constitutional complaint, the complainant asserts a violation of Art. 2(1) in conjunction with Art. 20(3), Art. 12(1), Art. 101(1) second sentence and Art. 103(1) GG. She also asserts a violation of her rights under Art. 6(1) ECHR.

Key considerations of the Chamber:

The constitutional complaint is admissible and well-founded. The contested judgment of the Federal Court of Justice violates the complainant’s right of access to justice guaranteed in Art. 2(1) in conjunction with Art. 20(3) GG, because it fails to recognise the importance of the right to have public proceedings. In the present case, the weighing of the right of access to justice, on the one hand, and the freedom of contract and the autonomy of association, on the other hand, did not conform with constitutional requirements.

1. In the context of examining whether the arbitration agreement is invalid pursuant to § 19 of the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB), the Federal Court of Justice fully considered the complainant’s right of access to justice guaranteed in Art. 2(1) in conjunction with Art. 20(3) GG. The Federal Court of Justice also appropriately found that the arbitration procedure, which removes the matter from the jurisdiction of the courts, must comply with the guarantees of Art. 6 ECHR. However, it did not take into account that the statutes of the CAS do not provide the right to a public hearing, for which the complainant had unsuccessfully applied.

2. When interpreting § 19 GWB in the version applicable to the present dispute, the specific guarantees of the general right of access to justice must be taken into account, according to which the arbitration procedure must guarantee effective legal protection and meet minimum standards of the rule of law.

Neither the general right of access to justice nor Art. 92 GG prohibit private arbitration. Private arbitration is anchored in the freedom of contract in accordance with Art. 2(1) GG and Art. 12(1) GG.

Nevertheless, the ability to waive one’s access to the courts by means of an arbitration agreement in the field of sport is subject to some limitations. Arbitration is necessary to ensure internationally uniform sports jurisdiction and to combat doping in international sports competitions; as such, it is not objectionable under constitutional law. However, both the general right of access to justice itself and the protection of private autonomy guaranteed by Art. 2(1) GG set limits as to what can be required by an arbitration agreement. With the legal recognition of private arbitration, the state opens up an alternative, non-state tribunal for binding dispute resolution for citizens seeking justice. In order for the state to recognise arbitration decisions and enforce them in the exercise of its sovereignty, it must ensure that the arbitration procedure guarantees effective legal protection and meets the minimum standards of the rule of law. When interpreting and applying the provisions on the recognition and enforcement of arbitration proceedings and the effectiveness of arbitration agreements, the specific guarantees of the general right of access to justice under Art. 2(1) in conjunction with Art. 20(3) GG must be taken into account.

Moreover, the minimum requirements that an arbitration procedure envisaged by a particular arbitration agreement must satisfy in accordance with these specific guarantees cannot be assessed without considering the actual freedom of choice of the party subject to the arbitration agreement. If one of the two contracting parties has so much bargaining power that it can in fact unilaterally dictate the terms of the contract, it is the task of the law to work towards safeguarding the fundamental rights positions of both contracting parties in order to prevent the effective elimination of self-determination for one party to the contract. Conflicting fundamental rights positions must be considered in terms of how they interact and must be balanced, in accordance with the principle of practical concordance, in such a way that the fundamental rights of all parties are given effect to the broadest possible extent.

3. As the Federal Court of Justice did not take into consideration that the statutes of the CAS do not provide for a right to a public hearing, which the complainant had already unsuccessfully requested in the prior arbitration proceedings, it failed to recognise the requirements of Art. 6(1) ECHR as further defined in the case-law of the ECtHR. It subsequently also failed to take into account the full extent of the complainant’s right of access to justice.

The public nature of oral argument is an essential part of the rule of law and its importance goes far beyond individual procedural regulations. It also corresponds to the general principle of the public nature of democracy. The procedural guarantee of public proceedings is intended to protect those involved in a trial against a secret judiciary that is not subject to public control. If the normative design of an arbitration procedure must ensure equally effective legal protection that corresponds to minimum standards of the rule of law, then it must also be recognised that the principle of the rule of law also includes the principle of public proceedings, which is standardised in Art. 6(1) ECHR. The rule of law component of public justice aims to ensure compliance with formal and substantive law. It is intended to contribute to ensuring procedural fairness in the sense of a procedural safeguard for the parties involved. The public can be partially or completely excluded from a proceeding for compelling reasons of the common good where it is fundamentally required by the Constitution. In particular, the principle of public proceedings says nothing about the modalities under which the public is permitted to have access.

This also corresponds to the guarantees under Art. 6(1) ECHR. In the German legal system, the European Convention on Human Rights has the status of a federal law. When invoking the ECHR as a guideline for interpretation, the Federal Constitutional Court takes into account decisions of the ECtHR. The case-law of the ECtHR recognises that Art. 6(1) ECHR does not require a public hearing in all cases and the public may be excluded from a trial under certain circumstances. Therefore, voluntary arbitration proceedings can in principle also provide for proceedings closed to the public. However, according to the judgment of the ECtHR, the conditions under which a public hearing can be dispensed with were not met in the present case.

The violation of the principle of public proceedings, which must be observed under the rule of law, is not a mere procedural violation. Therefore, it is irrelevant whether a public hearing is specifically required in the complainant’s proceedings or whether such a hearing could be dispensed with in accordance with the case-law of the ECtHR. The decisive factor is that the statutes of the CAS applicable by virtue of the arbitration agreement do not provide for a right to public proceedings, even in cases in which public access is mandatory in accordance with Art. 6(1) ECHR. The normative design of the arbitration proceedings, which is decisive for the effectiveness of the arbitration agreement at issue here, therefore does not satisfy either the guarantees of Art. 6(1) ECHR or the corresponding requirements of the right of access to justice. It is not necessary to decide whether the current modified rules of procedure guarantee this principle.