Switzerland: An Arbitrator Can Act As Umpire Then As Party-Appointed Co-Arbitrator In Successive Arbitration Proceedings Concerning The Same Dispute Without "Prima Facie" Losing His Independence

Last Updated: 25 March 2011
Article by Frank Spoorenberg and Isabelle Fellrath

The closed-list based appointment procedure for arbitrators operating under the aegis of the Switzerland-seated Court of arbitration for sport has been under the close scrutiny of the Swiss Supreme Court in the last few years1. And the Swiss Supreme Court has made its point clear: independence and impartiality of arbitrators are paramount requirements of judicial and arbitral justice alike; there can be no fair adjudication without an independent and impartial adjudicating authority. Sport adjudication is no exception.

Facts

The Mutu v. Chelsea FC dispute will probably be best remembered for the astronomic compensation awarded to the Club as a result of the Romanian footballer's serious breach of his contractual duties and obligations to the Club – over Euro 17 million2 – than for the legal controversy surrounding arbitration tribunals having decided the various stages of the case. It is yet this second aspect that is of a particular interest to the arbitration community. In August 2003, Romanian striker Adrian Mutu was transferred on a five-year contract from Parma Football Club to Chelsea Football Club for a transfer fee of Euro 22.5 million plus various premium and commission fees. Weeks into his new contract, Mutu received a seven-month ban from all competition and a fine from the English Football Association on drug-related charges. Chelsea immediately rescinded Mutu's five-year employment contract for unilateral breach devoid of just cause / sporting just cause (FIFA Regulations for the Status and Transfer of Players version 2001 (RSTP 2001), Art. 21-23). Internal and arbitral proceedings ensued, to determine first the validity of the rescission of the contract, and then Chelsea's right to compensation. The first issue was consensually referred to the English Premier League Appeal Committee, and, on appeal, to the Court of Arbitration for Sport (CAS) before a panel presided by CAS Arbitrator Dr. Reiner Martens. The CAS panel confirmed the Appeal Committee's finding that (a) the notion of unilateral breach within the meaning of the RSTP 2001 was meant to apply to contractual infringements and not, as the player argued, to contract rescission, and (b) in the case at hand, the Club had validly rescinded the player's contract for unilateral breach. In a subsequent proceeding filed before FIFA's Dispute Resolution Chamber, the Club was awarded Euro 17 million in compensation for unilateral breach of the employment contract from the player. Mutu appealed the Chamber's decision before the CAS; a new panel was constituted and Chelsea designated Dr. Martens as co-arbitrator. Mutu's disqualification request for Dr. Martens was denied by the International Council of Arbitration for Sport (ICAS) ; such decision, being that of a private body, could not be challenged immediately before the Swiss Supreme Court.3 Consequently, Mutu could only raise the issue of Dr. Martens' alleged partiality before the Swiss Supreme Court in his challenge against the final CAS award that confirmed the Euro 17 million compensation. Mutu argued, inter alia, that Dr. Martens could not have remained independent and impartial in the compensation proceeding, after having chaired the arbitral panel that ruled overwhelmingly in the Club's favour in the first stage of the proceeding. The player relied, in particular, on the standards set under the IBA Guidelines on Conflict of Interests in International Arbitration 2004 concerning arbitrators' prior involvement in a same case4.

Decision

The Swiss judges, whilst acknowledging the useful guidance offered by the IBA Guidelines, stressed out that ultimately, "the circumstances of the case at hand, as well as the Swiss Supreme Court case-law on the matter, will always be decisive to determine the question of conflict of interests"5. Referring to its decisions on the independence and impartiality in the judiciary6, the Court acknowledged that the prior involvement of a judge in a case could cause legitimate suspicion of partiality. Such prior involvement would thus be tolerated from the perspective of due process only in so long as it may be reasonably and objectively considered that the judge has not acquired, in the first proceeding, a pre-formed opinion on the issues to be decided in the second proceeding to such an extent that the outcome of the second proceeding would have been pre-judged in the first proceeding.

Extending this reasoning to the arbitral process, the Supreme Court considered that the prior involvement an arbitrator in related or successive proceedings was not, as such, sufficient to conclude unconditionally to his partiality. Rather, in the Court's view, the risk of prevention should be assessed based on the concrete and specific circumstances of the case, including the nature and scope of the prior involvement and/or decisions of the arbitrator.

In the case at hand, the Court considered that the first procedure between the parties was strictly confined to the determination of the player's unilateral breach. Such determination was no longer contested in the second procedure, which was itself limited to the principle and quantum of the Club's compensation. The Court found no indication, in the first award, of any prejudgment on the amount of the compensation awarded. The Court thus concluded that, "save to judge arbitrator Martens on his mere intent, it is not possible to acknowledge, objectively, that by deciding the two aforementioned issues [the notion of unilateral breach within the meaning of the RSTP 2001 and the Club's rescission of the player's contract for unilateral breach], which were mostly theoretical, the arbitrator behaved in such a way as to cause any doubts about his impartiality and to lend support to the view that he had already formed his opinion in favour of the defendant [the Club]"7. For the Swiss judges, the first phase of the proceeding constituted in fact a preliminary stage to the disputed award, and based on constant practice, "saved exceptional circumstances, it is in principle not admissible [for a party] to challenge a posteriori the regularity of the composition of the arbitral tribunal having issued its final award on the sole ground that its members had already decided on the same matter when taking part in the issuance of interim or partial awards. To allow it would be tantamount to signing the death warrant of such awards [...]"8.

Commentary

There is little to argue against the Court's reasoning that it is in principle admissible for an arbitrator to be involved in various stages of an arbitral process without this fact alone constituting sufficient ground to question that arbitrator's independence and impartiality. Likewise, one can but lend support to the Court's firm stance against a party's allegation, in its challenge of the final award, of partiality based on a tribunal's having issued interim or partial awards in the same dispute and/or proceeding. However, one could argue that a fair and balanced decision-making, which would be derived from the parties' fair and equal treatment and the integrity of the arbitral process, would require that all arbitrators be equally informed on a given case. This prerequisite of equal information among arbitrators would arguably require, subject to the specific circumstances of a case, a repetition of whole or part of the procedure in case of replacement of one or more arbitrator(s) in the course of the arbitral process. This equality would, still arguably, not have been respected, in the instant case, between Dr. Martens and the other two arbitrators involved in the second stage of the dispute only.

Swiss Supreme Court's decision 4A_458/2009 in the matter Adrian Mutu vs /Chelsea Football Club Limited. The full text of the decision, which will not be published in the official reports of the Swiss Supreme Court's decisions, is available in its original (French) language at
www.bger.ch/fr/index/juridiction/jurisdiction-inherit-template/jurisdiction- recht/jurisdiction-recht-urteile2000.htm

Footnotes

1 Swiss Supreme Court's decision 4A_234/2010, of October 29, 2010, commented by F. Spoorenberg and N. Bürgenmeyer, Party-appointed Arbitrators and Chairman Must Meet the Same Requirement of Independence and Impartiality, in Mondaq, February 5, 2011; see also 4A_210/2008, of October 29, 2008 ; 4A_528/2007, of April 4, 2008 ; 4A_506/2007, of March 20, 2008.

2 This remuneration was deemed not contrary to the international public order as recognized in Switzerland considering the considerable economic advantages benefited from the player as a result of his transfer to the English Club.

3 Swiss Supreme Court's decision 4A_644/2009, of April 13, 2010.

4 Sect. 2.1.2 (waivable red list) and 3.1.5 (orange list) ; URL: http://www.ibanet.org/LPD/Dispute_Resolution_Section/Arbitration/Default.aspx

5 Decision 4A_458/2009, ground 3.3.3.1, authors' translation.

6 E.g. ATF 126 I 168 ground 2 and references.

7 Decision 4A_458/2009, ground 3.3.3.2, authors' translation.

8 Loc.cit., our translation.

For further information on this topic please contact Frank Spoorenberg or Isabelle Fellrath at Tavernier Tschanz by telephone (+41 22 704 3700) or by fax (+41 22 704 3777) or by email (spoorenberg@taverniertschanz.com, fellrath@taverniertschanz.com).

www.taverniertschanz.com

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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