State of play: What does the Seraing judgment say about arbitration and EU Law?

In its recent ruling in Seraing (C-600/23) the CJEU returned to issues concerning the degree to which EU Member State courts must review arbitration awards for compliance with EU public policy. Although concerned with the very specific model of CAS arbitration imposed in the statutes of a sports association, there are some wider lessons and clarifications. We take a look.

Kick off: the background

RFC Seraing, a Belgian football club, had sanctions imposed on it by FIFA for allegedly breaching its rules prohibiting third party ownership of players’ economic rights. Seraing challenged that sanction in CAS arbitration (FIFA’s statutes require disputes between it and clubs to be so referred) alleging, amongst other things, that the sanctions infringed fundamental EU law; in particular three of the four freedoms of movement (people, services and capital), and EU competition law.

That was dismissed by CAS, and the Swiss Federal Supreme Court upheld the CAS decision (CAS being seated in Switzerland). Meanwhile, Seraing had also become involved in proceedings before the Belgian courts in which it also sought a ruling that the FIFA sanction was contrary to EU Law.

The Brussels Court of Appeal, however, dismissed this claim on the basis that, under Belgian national law, arbitral awards rendered abroad, such as the CAS award, have res judicata effect in Belgium without the need for prior leave for enforcement (exequatur) from the Belgian courts. Seraing appealed the case before the Belgian Supreme Court (Cour de cassation) which asked the CJEU whether the resulting impossibility of Seraing obtaining a review of the CAS award, by an EU Member State court, for its compatibility with EU law, was contrary to rights of effective judicial protection under EU law.

Blowing the whistle: the CJEU’s decision

Some general observations

In tackling the case, the CJEU first made a number of comments generally relevant to the relationship between arbitration and the requirements of effective judicial protection under EU law (stemming from the fact that arbitration tribunals cannot refer questions of EU law to the CJEU). Of particular note were its following observations:

• Its decisions in Achmea and PL Holdings are confined to their circumstances of intra-EU member state treaties, and ad hoc agreements replicating those arrangements, rather than representing any broader restriction on arbitration [79].
• Although, more generally, arbitration is in principle acceptable, a distinction is to be drawn between compulsory and voluntary arbitration [80] (with particular consequences for this case, more below).
• To ensure compatibility with the EU’s judicial architecture and EU public policy, it must remain possible for arbitration awards to be subjected to effective judicial review by Member State courts; albeit this review can justifiably be limited in nature to whether the award is consistent with EU public policy. This need not be a full rehearing, rather an assessment of the relevant principles/provisions and their consequences as against the facts established and assessed in the arbitration [82-86]. Also, there is no requirement for it to be “direct” by way of annulment, or appeal, proceedings (i.e. the possibility of arbitration seated outside the EU is admitted) [76, 100].
• The content of such public policy includes principles and provisions of EU law essential to the EU’s legal order or of fundamental importance to its tasks. These include Articles 101/102 TFEU and the three freedoms in issue in the case [87-89].

Mandatory CAS arbitration under scrutiny

The CJEU then considered what effective judicial review of EU public policy requires in the particular context of the sports arbitration mechanism before it. It noted that the use of arbitration by international associations such as FIFA, to settle disputes between themselves and participants in the sport they oversee, is characterised, due to their statutes and powers, by a number of specific factors making the possibility of such review particularly important. Given the position of an association such as FIFA the mechanism was to be regarded as unilaterally imposed; this being closely linked to the fact that it applies to disputes between an association with unique and extensive oversight powers and a general group of persons subjected to them in pursuing their professional activities [90-96].

In this context, effective judicial review of an award therefore required:

• The possibility of individuals concerned (either at their own request or a court’s own motion) to obtain an effective judicial review of consistency with EU public policy from a court of a Member State (either by way of being subject to a direct annulment measure or, more indirectly, when examined for some other reason e.g. recognition or enforcement) [99-100]
• A scope of review in line with that set out above at [86] as a matter of general application [101]
• The ability to go beyond ruling on the consistency of the award with EU public policy to address all “appropriate legal conclusions” from any finding of inconsistency – such as an order to bring the conduct amounting to an infringement to an end or award due compensation [103-104]; and
• The ability to obtain interim measures pending the determination of such a review [105-107].

As to the rule of finality/res judicata applied by the Belgian court to the CAS award in the case, that rule operated so as to prevent any possibility of obtaining such a review and, therefore, the Belgian court was bound to disapply it [110-111, 121]. Furthermore, the CJEU also expressed the view that any rule of finality/res judicata of national law was also not to be applied to such a CAS award unless it had first been subject to a review of compatibility with EU public policy by the courts of the relevant Member State. It reasoned that, in the present context, to otherwise confer such an award with such authority was itself inconsistent with the requirement of effective judicial protection [122-123]

Extra-time? What does this mean for arbitration, and the enforcement of awards, in the EU?

From a generalist position, the CJEU’s decision might be regarded as a score draw for arbitration. Some of the judgment valuably affirms orthodoxy; for example, confirmation that Achmea is to be kept to its boundaries. And, the indication that there is no per se issue with arbitration with a seat in a non-EU state is welcome (albeit the question whether, as in the earlier ISU case, such a choice might be regarded, in relevant circumstances, as aggravating an underlying breach of EU competition law, would seem to be a different point).

Furthermore, the CJEU’s general endorsement of the possibility of Member State court review of awards for compatibility with EU public policy is little surprise in the light of its earlier Eco-Swiss and Mostaza Claro rulings. But, the CJEU has also taken the opportunity to clarify that such a review doesn’t mean a full hearing, refused to expand it beyond rules of EU public policy, and read that concept relatively narrowly, albeit non-exhaustively. Conversely, pessimists may point to the potential for this to be defined on a case-by-case basis.

By contrast, the impact on the finality in the EU of CAS awards under imposed CAS sports arbitration may be significant; in particular the apparent requirement for effective public policy review before such an award can be regarded as final in a Member State. In that respect the material parts of the CJEU’s judgment refer only to such CAS awards and make specific reference to the particular characteristics, and context, of the form of arbitration in question. So, it would seem unwarranted to regard such a requirement as extending to the commercial context more generally (in which, in Eco Swiss, the CJEU has previously indicated that public policy review can be foreclosed by appropriate time bars). Again, however, pessimists may question where rooting distinctions in concepts such as “mandatory” arbitration may take the CJEU next.