Football, pyrotechnics and arbitration: Higher Regional Court of Frankfurt a.M. rules on hot topics in arbitration

Higher Regional Court of Frankfurt am Main, Order of 23 June 2020 – 26 Sch 1/20

The Higher Regional Court of Frankfurt am Main (OLG Frankfurt a.M.) in its decision of 23 June 2020 dealt with the questions whether the Court of Arbitration for the 3rd German Football League (Ständige Schiedsgericht für die 3. Liga) is an arbitral tribunal within the meaning of §§°1025 et seq. of the German Civil Procedure Code (ZPO) and if an arbitral award based on the strict liability of soccer clubs for the unsportsmanlike conduct of their supporters will be set aside due to a violation of public policy (ordre public).

Facts of the case

At the beginning of 2018, the FC Carl Zeiss Jena football club, whose men’s team plays in the 3. Liga, and the German Football Association (DFB), which is the umbrella organisation of all football associations in Germany, entered into an “Arbitration Agreement”. It provided that all disputes on sanctions imposed on FC Carl Zeiss Jena by organs or representatives of the DFB will be decided by a three-member tribunal of the Permanent Court of Arbitration of the 3rd German Football League (Permanent Arbitration Court of 3. Liga).

In October 2018, the DFB Sports Court (DFB-Sportgericht), an organ of the DFB (but not an arbitral tribunal) that is competent for decisions on sanctions, imposed a fine on the FC Carl Zeiss Jena for the unsportsmanlike behaviour of its supporters. The reason was the illegal use of pyrotechnics (e.g. Bengal fireworks, smoke bombs) and the throwing of objects at the playing field by supporters of FC Carl Zeiss Jena during several football games in the summer of 2018. The fine was based on §°9a of the DFB Legal and Procedural Rules which provides for the strict liability of football clubs for the behaviour of their supporters, especially before, during and after a football game.

After an unsuccessful internal appeal before the appellate body of the DFB, the DFB Federal Court (DFB-Bundesgericht), like the DFB Sports Court an internal organ and not an arbitral tribunal, FC Carl Zeiss Jena took recourse to the Permanent Arbitration Court of 3. Liga.

FC Carl Zeiss Jena requested that the Arbitration Agreement concluded in 2018 be declared invalid or alternately that the fine imposed by the DFB Sports Court be annulled. In its decision of 25 November 2019, the Permanent Arbitration Court of 3. Liga dismissed the request and confirmed the fine imposed on the FC Carl Zeiss Jena (Award), arguing that the strict liability of football clubs for spectator riots was the only means to prevent violence and discrimination inside and outside football stadiums.

In January 2020, FC Carl Zeiss Jena applied for the setting aside of the Award under § 1059 ZPO, mainly based on three arguments:

• The “Arbitration Agreement” was invalid as it had not been concluded voluntarily, but solely due to the oppressive negotiating power of the DFB in the admission procedure for the right to play in the 3. Liga;
• the Permanent Arbitration Court of 3. Liga was an organ of the DFB staffed by DFB's officials and thus does not qualify as an arbitral tribunal in the sense of §§°1025 et seq. ZPO;
• the Award was contrary to ordre public as the application of §°9a of the DFB Legal and Procedural Rules violated, among others, the principle of nulla poena sine culpa (i.e. no punishment without fault).

Decision by the Higher Regional Court of Frankfurt am Main

On 23 June 2020, the OLG Frankfurt a.M. dismissed the application of FC Carl Zeiss Jena for setting aside the Award.

Permanent Arbitration Court of 3. Liga is a “genuine” arbitral tribunal

The OLG Frankfurt a.M. held that the "Arbitration Agreement" was valid and the Permanent Arbitration Court of 3. Liga qualified as an arbitral tribunal in the sense of §§°1025 et seq. ZPO.

Valid arbitration agreement

FC Carl Zeiss Jena took the position that the Arbitration Agreement was invalid because, due to the structural imbalance between FC Carl Zeiss Jena and the DFB, the agreement was not concluded on a voluntary basis. The OLG Frankfurt a.M. did not follow this argument and held that the Arbitration Agreement was not the result of the abuse of market dominance §°19 of the Act against Restraints of Competition (GWB). According to the Court, even if the DFB requested the conclusion of the Arbitration Agreement, such a request was due to legitimate interests and did not violate the fundamental legal values enshrined in the German constitution and the European Convention on Human Rights (ECHR).

The OLG Frankfurt a.M. reasoned that parties can validly waive their constitutionally guaranteed right of access to the state courts in favour of arbitration if their waiver is voluntary. The Court held that a waiver was involuntary if it is the result of the following:

• physical, psychological violence or deception;
• one of the parties was not aware of the scope and meaning of its declaration; or
• did not know that it is making a declaration of intent at all.

According to the OLG Frankfurt a.M., an arbitration agreement included in a contract was generally to be deemed voluntary and thus had to be respected by state courts.

The OLG Frankfurt a.M. held that the Arbitration Agreement was not mandatory for the admission to the 3. Liga, as alleged by FC Carl Zeiss Jena. According to the Court, the admission documents clearly distinguished between compulsory prerequisites (e.g. sports performance of the football club, timely application) and non-compulsory requirements, such as an agreement to arbitrate a conclusion that was merely "intended". Even if one were to assume that the DFB insisted on the Arbitration Agreement and had market dominance due to its monopoly in organising the professional football leagues in Germany, in the view of the OLG Frankfurt a.M. there was no indication that the DFB misused its market power in the sense of §°19 GWB when concluding the Arbitration Agreement.

According to the Court, the Arbitration Agreement also complied with the right to a fair trial before state courts in Article 6 (1) ECHR. The OLG Frankfurt a.M. clarified that the jurisdiction of the state courts can be validly waived by way of an arbitration agreement if this agreement is voluntary, legally admissible and unambiguous, the arbitration proceedings comply with the principles guaranteed by Article 6 ECHR and the state courts are entitled to set aside an arbitral award. The Court considered all these prerequisites fulfilled with regard to the Arbitration Agreement.

Arbitral tribunal

The OLG Frankfurt a.M. held that the Permanent Arbitration Court of 3. Liga was an arbitral tribunal in the sense of §§ 1025 et seq. ZPO. The Court clarified that, as per its nature, a “genuine” arbitral tribunal requires an independent and neutral body. Independence is lacking if one party solely or predominantly appoints the members of the panel or the parties to the dispute do not have equal influence on the composition of the panel.

According to the OLG Frankfurt a.M., there were no grounds to doubt the independence of the Permanent Arbitration Court of 3. Liga as FC Carl Zeiss Jena and the DFB had equal influence on the constitution of the arbitral tribunal. The Arbitration Agreement provided for the jurisdiction of an arbitral tribunal of the 3rd League Arbitration Court consisting of one chairman and two co-arbitrators. According to the Arbitration Agreement, the chairman is designated by mutual consent of the 3. Liga football clubs and the DFB. Furthermore, the 3. Liga football clubs and the DFB nominate two co-arbitrators each. In case of a dispute, both the DFB and the affected 3. Liga football club (i.e. FC Carl Zeiss Jena) designates one of the available co-arbitrators. In light of these rules on the constitution of the arbitral tribunal, the OLG Frankfurt a.M. dismissed the allegation of the FC Carl Zeiss Jena that the Permanent Arbitration Court of 3. Liga was a mere organ of the DFB. The Court further clarified that, as follows from § 1034 (2) ZPO, providing for a timely limited legal remedy, and not the invalidity of the arbitration agreement, in case of a structural predominance of one party in the composition of the arbitral tribunal, not any impairment of the independence and neutrality of the arbitral body automatically results in an invalidation of the arbitration agreement in its entirety.

No violation of public policy in the sense of §°1059°(2) no. 2 lit. b ZPO

The OLG Frankfurt a.M. held that the enforcement of the Award would not lead to a result contrary to public policy (ordre public) as it would neither violate the constitutionally anchored principle that there is no punishment without fault (nulla poena sine culpa), nor the right to a fair trial under Art.°103 (1) of the German Constitution (GG) and the prohibition of arbitrary decisions in Art. 3 (1) GG.

Principle of nulla poena sine culpa

The OLG Frankfurt a.M. held that the strict liability of football clubs for a misbehavior of their supporters according to §°9a of the DFB Legal and Procedural Rules did not violate the principle of no punishment without fault (nulla poena sine culpa) as this rule applies only to criminal law sanctions. The purpose of the strict liability, however, was not to punish the football clubs as such, which may not have done anything wrong, but to ensure that they assume responsibility for the misconduct of their supporters and use all means at their disposal to prevent spectator riots and the like.

The OLG Frankfurt a.M. stated that the approach of strict liability is not unfamiliar to German law and referred to the strict liability of persons who operate a source of danger for any risk associated with the source, regardless of who is involved in the realisation of the risk. The Court held that as football clubs benefit financially from football games, it is legitimate to burden them with the financial risk associated with the misconduct of their supporters in the course of such games.

Right to a fair trial

In respect to the right to a fair trial, the OLG Frankfurt a.M. stated that arbitral tribunals had to view it in the same extent as state courts and were thus obliged to take note of and consider the statements of the parties. The failure to address substantial facts introduced by a party in the arbitral award indicates a violation of the right to a fair trial if in the view of the arbitral tribunal the facts were not insignificant or obviously unsubstantiated.

At the same time, the OLG Frankfurt a.M. stressed that the right to a fair trial does not imply a duty of the arbitral tribunal to follow the legal opinion expressed by a party or to evaluate the facts in a manner desired by the party. Against this background, the Court held that Permanent Arbitration Court of 3. Liga had sufficiently considered the arguments put forward by the FC Carl Zeiss Jena and thus denied a violation of the right to a fair trial.

Prohibition of arbitrary decisions

The OLG Frankfurt a.M. stated that the prohibition of arbitrary decisions derived from the principle of equality in Art.°3 (1) GG sets an essential standard for state courts and arbitral tribunals. A judgement is arbitrary if it is not justifiable under any conceivable aspect, such as because it ignores a relevant legal provision or is based on a blatant misinterpretation of a such a provision.

The OLG Frankfurt a.M. clarified, however, that due to the prohibition of révision au fond, the prohibition of arbitrary decisions could not lead to a full review of the application of law by the arbitral tribunal and justify the setting aside due to any inaccuracy in the arbitral award. Rather, its application would be limited to cases where there is a concern that the arbitral tribunal was guided in its decision by irrelevant considerations and thus obviously abused its jurisdictional power. Based on these principles, the Court held that the interpretation of the term "supporter" by the Permanent Arbitration Court of 3. Liga to include persons located in the fan sector of the FC Carl Zeiss Jena was not arbitrary.

Conclusion

The decision of the OLG Frankfurt a.M. has ramifications beyond sports arbitration. It provides an overview of the fundamental characteristics of an arbitral tribunal and an arbitration agreement. Also, in view of structural imbalance in question, the ruling contains guidelines for the interpretation and application of ordre public exception under German arbitration law.

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