The International Olympic Committee (IOC), a legal entity having its seat in Switzerland, is the organiser of the prime sporting event in the world, ie the Summer Olympic Games that are going to be held in London 2012. At this event 12’000 athletes from around the world are going to participate. In order to be eligible, the athletes must fulfil certain sporting conditions and, in addition, enter into an “event participation ” (hereinafter referred to as EPC) with the IOC. According thereto all Athletes participating in the Olympic Games must – inter alia – comply with the rules and of the IOC, in particular with the Olympic (hereinafter referred to as the OC). No admittance to the games is granted to athletes who do not sign said contract. The IOC fears that disputes might arise in the context of the Olympic Games and, therefore, contacts its legal advisor to inquire whether an arbitration agreement should be included in the EPC.

(i) What would be the benefits and disadvantages of including an arbitration agreement in the present case?

The legal advisor of the IOC recommends providing the following clause in the (written) EPC:

“The contractual relationship between the Athlete and the IOC is submitted to the rules and of the IOC, in particular the OC”.

Further, the OC is amended and the following clause is inserted in the Olympic Charter:

“Art. 62 All disputes arising out of or in connection with the application of these rules or the Olympic Games are finally settled by an arbitral consisting of three arbitrators. The seat of the arbitration is in Lausanne, Switzerland.”

(ii) Discuss the validity of the arbitration agreement from a Swiss perspective.

(iii) Under what circumstances/ in what proceedings can an athlete seize an English (state) in order to have the validity of the arbitration agreement examined? What standards/rules would the court apply?

ad (i)

Advantages

- since both parties (in most cases) have their place of business/domicile in different countries concluding an arbitration agreement gives them the opportunity to choose a “neutral forum”; - parties may choose arbitrators who have expert knowledge in the respective filed and who are familiar with the particularities of these kind of . This is one of the substantial benefits of arbitration as a means of ; - confidentiality is often perceived as one of the major advantages of arbitration. Arbitration is a private process between the parties and, therefore, not public. This might be particularly interesting for disputes arising in connection with sporting events in order to prevent bad publicity that could be detriment to the marketing of the sporting event; - arbitration proceedings are not subject to a rigid set of procedural rules applicable in national court proceedings. By contrast, party autonomy and procedural flexibility are guiding principles of international arbitration. This might be important in the present case, since it might well be that the parties involved have different legal backgrounds. Party autonomy enables them to agree on a hybrid set of procedural rules that harmonize and approaches. Furthermore, the parties are free to agree on the language of the proceedings; - in case enforcement should be necessary, it is worth to mention that arbitral awards are – almost globally – enforceable under the New York Convention on Recognition and Enforcement of foreign Arbitral Awards. - arbitral awards are only subject to limited review which is not comparable to an appeal process applicable in state court proceedings. In many cases, therefore, arbitration will provide a faster dispute resolution than state court proceedings. However, this is not necessarily the case and varies from to jurisdiction; - arbitration enables the parties to enforce the principle of uniformity in sport, ie that all athletes are treated along the same material standards and, thus, a level playing field in sport is established.

Disadvantages

- the IOC should be aware of the risk that the costs of arbitral proceedings may and often are higher than those of state court litigation (depending on the arguments submitted, costs can also be listed under advantages) ; - since the very basis of an arbitral tribunal’s jurisdiction is a private agreement between the parties arbitral lack coercive power. In particular arbitral tribunals o lack the power to enforce interim measures or the arbitral award itself, o lack the power to require the attendance of witnesses under penalty o lack the power to sequestrate assets to secure the enforcement of the award; - no universal rule on the issue of res iudicata exists; - since the arbitrators are –to a certain extent – party-appointed, there may be issues of independence and impartiality; - the lack of is – commonly – not perceived as a disadvantage

ad (ii)

1. the applicable standard:

- Swiss law differentiates between 2 internal , ie the PILA and the CCP. Scope of application of the PILA is defined in Art. 176. According thereto o the seat of arbitration must be in Switzerland: The seat of the arbitral tribunal can be defined as the “juridical connection which binds the parties to the arbitration and the arbitrators, on the one hand, to a state court forum and a national arbitration law, on the other hand”. Designating the seat of arbitration is primarily a matter for the parties, see Art. 176 III PILA/Art. 355 CCP. o at least one of the parties at the time of the conclusion of the arbitration agreement was neither domiciled nor habitually resident in Switzerland. The problem in the case at hand is, that IOC has its seat in Switzerland. If an athlete that is domiciled in Switzerland “signs” the EPC, the PILA will not apply (but the CCP instead). So only for the great majority of the athletes (but not all of them) the PLA will be the standard against which the validity of the arbitration agreement will be measured. However, the IOC and the athletes residing/domiciled in Switzerland may agree to “opt in” for the PILA (Art. 353 III CCP).

2. substantive validity:

- is governed by Art. 178 II, III PILA. The arbitration agreement must alternatively – as to substance – comply with o the law chosen by the parties o the law governing the object of the dispute o the law applicable to the principal contract, or o Swiss law (+) - scope of Art. 178 II PILA (in particular: conclusion of the arbitration agreement, interpretation, rights and obligation connected with the arbitration agreement, termination). o mutual intent with regard to the essentialia negotii of an arbitration agreement, ie  submit dispute to arbitration  sufficiently specify the object of the dispute/legal relationship o is there a voluntary agreement in the case at hand? IOC has a monopoly position, athlete has no bargaining power. The question, therefore, arises, if there is sufficient consent in cases of “forced arbitration”. According to Swiss unequal bargaining power between parties as such does not render the arbitration agreement void/invalid.

3. objective arbitrability

- is governed by Art. 177 PILA. According thereto all pecuniary claims may be submitted to arbitration. The notion of pecuniary claims is to be understood in a broad sense. Disputes arising in connection with the Olympic Games are – in principle – pecuniary claims.

4. formal validity

- is governed by Art. 178 I PILA. o Formal validity is only required in respect of the essentialia negotii; o arbitration agreement must be evidenced by a text. No signature of the parties is required. No exchange of documents required. It is not required that the actual arbitration clause is inserted in the text agreed upon by the parties. It suffices if the agreement (evidenced by text) makes reference to an external document that contains the arbitration clause. No specific reference to the arbitration clause referred to is needed. ad (iii)

English may be seized to stipulate on the validity of the arbitration agreement in 2 situations, ie

- stage of recognition and enforcement of a foreign (here Swiss) arbitral award. The applicable standard would be – in the first instance – the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The scope of the latter is dealt with in Art. 1. According thereto the NYC is applicable to o foreign arbitral award: In order to determine the nationality of an award most country follow the territorial principle enshrined in the NYC (Art. 1 I 1: “made in the territory of a State other than the State where recognition and enforcement is sought”). An arbitral award is “made” not where the last act to issue the award has been accomplished, but at the seat of the arbitral tribunal. The latter is designated according to party autonomy. From an English perspective, hence, the award is Swiss. o Reciprocity reservation Art. 1 III, commercial reservation

the validity of the arbitral agreement will be looked at

o regarding the substantive validity, according to Art. 5 I lit. a NYC (law to which the party have subjected the arbitration agreement, or, failing any indication thereon, under the law of the country where the award was made); o the formal validity, according to Art. 5 I lit. a in connection with Art. 2 II NYC o essentialia negotii, Art. 2 I NYC o objective arbitrability, Art. 5 II lit. a NYC (under the law where recognition and enforcement of the award is sought); o subjective arbitrability, Art. 5 I lt. a NYC (law applicable to them)

According to Art. VII NYC the court may look at more favourable provisions in the national law (if any)

- stage of recognition of the arbitral agreement. This stage comes into effect if the English court is seized by a main action and the Respondent raises the arbitration exception. The English Court will then apply Art. 2 III NYC and refer the parties to arbitration unless the arbitration agreement is null and void, inoperative or incapable of being performed. o For the scope of application of this provision, see supra. o As for the individual aspects of the validity of the arbitration agreement, see – in principle – supra.