The Court of Appeal in Brussels has recently handed down an important ruling on the validity of arbitration clauses. Under Belgian law, any dispute relating to a ‘defined legal relationship’ can be submitted to arbitration. As such, an arbitration clause must define the scope of any potential dispute arising between the parties. By a judgement of 4 September 2018, the Brussels Court of Appeal essentially held that the absence of such delimitation will cause the arbitration clause to be inapplicable.
The facts of the case can be summarized as follows. Belgian football club Seraing (“RFC Seraing“) and investment fund Doyen Sports (“Doyen Sports“) both had an agreement with the International Football Association (“FIFA“) and the European Football Association (“UEFA“). The dispute arose when RFC Seraing and Doyen Sports contested the validity of sanctions imposed on them by FIFA and UEFA for violating the rules prohibiting Third-Party Ownership (“TPO“). TPO is a practice whereby a third party invests in the economic rights of a player so that the third party, rather than a football club, benefits from transfer fees every time the player is sold.
The agreements contained an arbitration clause that referred all disputes between the parties to the Court of Arbitration for Sports (“CAS”). RFC Seraing and Doyen Sports instead brought proceedings before the Belgian state court, and challenged the validity of the arbitration clause. They argued that since the arbitration clause would apply to any kind of dispute, irrespective of the object, the clause did not comply with Belgian law because it did not meet the requirement of relating to a ‘defined legal relationship’. FIFA and UEFA defended themselves by arguing that their statutes delimitated the arbitration clause’s scope of application by defining their activities and corporate purposes, which would effectively mean that only disputes relating to those activities would be subject to the clause.
The Court of Appeal sided with RFC Seraing and Doyen Sports and refused to refer the case to arbitration. It acknowledged that the requirement of a ‘defined legal relationship’ had rarely been the subject of discussion, but confirmed that this does not preclude its application. The Court noted that the requirement of a ‘defined legal relationship’ is based on (i) the fundamental right of access to justice, (ii) respect for the agreement parties of the parties, in that they are not obliged to arbitrate disputes they did not agree on and (iii) avoiding that parties with strong bargaining power impose their will on weaker parties.
The arguments of FIFA and UEFA were rejected. The Court ruled that the parties’ activities and corporate purpose did not ensure a sufficient delimitation of the legal relationship. Accepting this argument would imply an exemption from the legal relationship requirement for companies, since it would suffice to refer to their corporate purposes instead. The restriction of the jurisdiction of the CAS to sport-related disputes in the parties’ statutes did not meet this requirement either, since FIFA and UEFA have the ability to amend their statutes at any time.
Lastly, the Court confirmed its jurisdiction by reference to the Convention on Jurisdiction and the Recognition and Enforcements of Judgements in Civil and Commercial Matters (“Lugano Convention“). Since it found the arbitration clause to be invalid, the jurisdiction of the national court needed to be determined by this Convention, because both FIFA and UEFA are domiciled in Switzerland. In analogy with the Brussels I Regulation Recast, article 6.1 of the Lugano Convention provides that, when the case involves multiple defending parties, all defendants can be sued in the courts of the state where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments.
The Court found that both RFC Seraing and the Belgian Football Association (“BFA“) are domiciled in Belgium. BFA is the governing body for football in Belgium and shares regulatory and disciplinary powers with FIFA. BFA’s position as a defendant in the case at hand was confirmed, since it was in the same legal situation as FIFA and UEFA. Its position as a national football authority created a sufficient degree of connection with the claims against FIFA and UEFA, which justified the application of art. 6.1 of the Lugano Convention. The Court thus declared itself with jurisdiction to handle the case. Its jurisdiction was, however, limited to the Belgian territory. It held that deciding otherwise would imply that parties are always able to bring disputes with FIFA or UEFA before a national court of choice based on the Lugano Convention, which breaches UEFA’s and FIFA’s legitimate expectation.
In conclusion, the Court decided that:
- Arbitration clauses must relate to a ‘defined legal relationship’, on pain of non-applicability of the clause;
- The delimitation of a company’s activities and corporate purpose in its statutes does not sufficiently define such legal relationship;
- If all conditions of article 6.1 of the Lugano Convention are met, the jurisdiction of a national court may be based on the corresponding national authority of an international (football) organisation, but will be limited to the consequences in the territory of that country.