Source: http://www.swissarbitrationdecisions.com/jurisdiction-arbitral-tribunal-decision-lausanne-court-arbitration-sport
Timestamp: 2019-07-23 01:00:01
Document Index: 455606138

Matched Legal Cases: ['Art. 19', 'Art. 19', 'Art. 19', 'Art. 19', 'Art. 177', 'Art. 54', 'Art. 190', 'Art. 77', 'Art. 176', 'Art. 77', 'Art. 77', 'Art. 107', 'Art. 190', 'Art. 190', 'Art. 190', 'Art. 190', 'Art. 177', 'Art. 177', 'Art. 19', 'Art. 190', 'Art. 19', 'Art.177', 'Art. 178', 'Art. 16', '§ 16', 'Art. 1', '§ 16', 'Art. 66', 'Art. 68']

Jurisdiction of the Arbitral tribunal decision on Lausanne Court of Arbitration for Sport | Swiss International Arbitration Decisions
Jurisdiction of the Arbitral tribunal decision on Lausanne Court of Arbitration for Sport
4A_388/2012
Bulgerian Football Union
Kumar Sugandha
The case involved the coach of the Bulgarian national football team and a contract governed by Bulgarian law. The contract also stated that disputes would be referred to “the competent court” and that the parties “recognized” the Court of Arbitration for Sport (CAS) in Lausanne.
Considering that he had been improperly terminated, the coach sued in Bulgaria. In Bulgarian law, employment disputes are not arbitrable. The Bulgarian court found that it had jurisdiction and denied the claim because contractual penalties are not allowed in Bulgarian law. The coach sued again in Bulgaria, for breach of contract this time and during the Bulgarian proceedings he initiated arbitration proceedings in the Court of Arbitration for Sport in Lausanne.
Petros Mavroidis was appointed as sole arbitrator and in an award of May 24, 2012, the CAS denied jurisdiction.
Mandatory rules of foreign law concerning the arbitrability of a dispute may be taken into account in an international arbitration conducted in Switzerland but the arbitral tribunal is not obliged to take them into account and the fact that the award may or may not be recognized in a foreign country is not a decisive factor (see section 3.3 of the opinion in this respect).
While an arbitration clause must be interpreted according to the principle of reliance (Vertrauensprinzip) when the concordant will of the parties cannot be established, a party may not invoke the principle of reliance when its own behavior demonstrates a different understanding of the contractual provision (see sections 3.4.2 and 3.4.3 of the opinion in this respect).
4A_388/20121
Judgment of March 18, 2013
Federal Judge Niquille (Mrs),
Bulgerian Football Union, represented by Dr Bernd Ehle and Mrs Sugandha Kumar,
A.______ (the Claimant, the Appellant) is a Bulgarian national living in Sofia. He was the chief coach of the Bulgarian national football team.
The Bulgarian Football Union (BFU), (Defendant, Respondent) is the national football federation of Bulgaria. It belongs to the Féderation Internationale de Football Association (FIFA).
On January 11, 2008, The Parties enter into an appointment contract by which the Claimant was retained as chief coach of the Bulgarian national team for a fixed period until December 31, 2009 with a monthly salary of € 11’000.-- and expenses as well as bonuses depending on the results.
Paragraph 16 of the employment contract reads as follows:
"The disputes concerning the interpretation of the meaning and the performance of the contract will be resolved amicably by agreement of the parties. In case an agreement is impossible to reach, the dispute shall be referred for resolving by the competent court. The parties to the contract recognize the Court of Arbitration for Sport (CAS) in Lausanne, Switzerland as in this case the Statute and the regulations of BFU and the provisions of Bulgarian legislation will apply."2
On January 13, 2009 the Defendant terminated the employment contract early and paid the salary for one month to the Claimant.
On January 19, 2009 the Claimant initiated civil proceedings in the regional Court of Sofia and submitted that the Defendant should be ordered to pay € 132’000.-- .The regional Court found that it had the jurisdiction as employment relationships are not arbitrable pursuant to Art. 19 (1) of the Bulgarian Court of Civil Procedure (bCCP) but must be decided by the state Court. However the Court rejected the claim because the contractual prevision rely the point by the Claimant, according to which a contractual penalty was due in case of unilateral termination contradicted Bulgarian employment law and was void.
Art. 19 (1) (bCCP) provides the following (in English translation):
"The parties to a property dispute may agree that it be settled by a court of arbitration, unless the dispute has as its subject property rights or possession of immoveable property, alimony or rights as per employment relationship."3
On October 13, 2011 the Claimant introduced another claim in the regional Court of Sofia and demanded compensation amounting to six month of salary for breach of contract. The regional Court again accepted the jurisdiction pursuant to Art. 19 (bCCP) because the matter was not arbitrable. The regional Court adjourned the proceeding and called the Parties to a hearing on May 8, 2012.
On November 8, 2011 the Claimant submitted a request for arbitration against the Respondent in the Court of Arbitration for Sport (CAS) and made the following submissions in the proceedings:
"a. Declare that the CAS has jurisdiction over the dispute and the Parties to this arbitration.
b. Declare that the Employment Contract dated 11 January 2008 entered into by and between the Bulgarian Football Union (the Respondent) and Mr. A.________ (the Claimant) was terminated without just cause;
c. Order BFU to pay to the Claimant as compensation for the termination of the Employment Contract 11 salaries in the amount of EUR 121,000 corresponding to the remaining value of the Employment Contract;
d. Order BFU to pay to the Claimant simple interest at 5 % per annum on the amount of EUR 121,000 from 15 January 2009 until full and final payment;
e. Order BFU to pay to the Claimant further allowances and payments listed in para. 20 of the RFA [Request for Arbitration] above the amount of which is to be further specified;
f. Order BFU to pay to the Claimant simple interest at 5 % per annum on the amounts related to further allowances and payments listed in para. 20 of the RFA from issuance of the award until full and final payment;
g. Order BFU to pay all the costs of the arbitration, including without limitation the fees and expenses of the Panel and the CAS;
h. Order BFU to pay to the Claimant its legal fees and expenses;
i. Award such other relief as the Panel deems appropriate."4
The Defendant objected to the jurisdiction: the dispute was not arbitrable and the state Court in Bulgaria had mandatory jurisdiction, the arbitration close was null and the Claimant had renounced reliance upon the arbitration close. Furthermore the arbitral claim was barred by the (res iudicata) effect of the Court decision already issued.
In an arbitral award of May 24, 2012 the CAS found that it did not have jurisdiction for lack of arbitrability. It held Art. 19 (1) (bCCP) applicable, which excludes employment disputes from adjudication by an arbitral tribunal. Art. 177 PILA5 was not an obstacle as PILA allows taking into consideration the mandatory provisions of a foreign law. Furthermore the CAS pointed to the real risk that a CAS arbitral award could not be enforced in Bulgaria.
In a Civil law appeal, the Appellant asks the Federal Tribunal to annul the arbitral award of May 24, 2012 and to declare that the CAS has jurisdiction.
The Respondents submit that the appeal should be rejected: the CAS did not submit a brief.
The Appellant submitted a reply to the Federal Tribunal on November 28, 2012, the Respondent a rejoinder on December 20, 2012.
According to Art. 54 (1) BGG6 the judgment of the Federal Tribunal is issued in an official language7, as a rule in the language of the decision under appeal. If the decision is in another language, the Federal Tribunal resorts to the official language chosen by the parties. The decision under appeal is in English. As this is not an official language and the Parties used German in the Federal Tribunal, the judgment of the Federal Tribunal will be issued in German.
In the field of international arbitration and Civil law appeal is allowed under the requirements of Art. 190 -192 PILA (SR 291) (Art. 77 (1) (a) BGG).
The seat of the arbitral tribunal is in Lausanne in this case. Both parties had their seat or their domicile outside Switzerland at the relevant point in time. As the parties did not opt out of the prevision of the 12 chapter of PILA in writing, they are applicable, (Art. 176 (1)and (2) PILA).
A civil law appeal within the meaning of Art. 77 (1) BGG may in principle seek only the annulment of the decision under appeal (see Art. 77 (2) BGG) which rules out the applicability of Art. 107 (2) BGG, to the extent that the latter allows the Federal Tribunal to decide the matter itself). However there is an exception to the effect that when the dispute involves the jurisdiction of the arbitral tribunal, the Federal Tribunal may decide itself the jurisdiction or the lack of jurisdiction of the arbitral Tribunal (BGE 136 III 6058 at 3.3.4 p.616 with references). The Appellant’s submission is admissible to that extent.
The Appellant argues that the CAS was wrong to denied jurisdiction (Art. 190 (2) (b) PILA) as the dispute is arbitrable contrary to what was held in the award under appeal.
The pre requirement of arbitrability is to be reviewed in the framework of a jurisdictional appeal (Art. 190 (2) (b) PILA (BGG 133 III 139 at 5 p.141; 118 II 353 at 3a p 355). The Federal Tribunal reviews the jurisdictional issue according to Art. 190 (2) (b) PILA freely from a legal point of view, including the substantive preliminary issues from which the determination of jurisdiction depends. However, even in a jurisdictional appeal, the court reviews the factual findings of the arbitral award only when some admissible grievances without the meaning of Art. 190 (2) PILA are brought forward against such factual findings or exceptionally when new evidence is taken into consideration (BGE 138 III 299 at 2.2.1 p. 34; 134 III 565 10 at 3.1 p. 567; 133 III 139 at 5 p. 141).
If lack of jurisdiction is argued in the appeal and properly reasoned; the Federal Tribunal reviews all legal issues freely (iura novit curia), and the Court may be led, as the case may be, to reject the argument raised for reason other than those contained in the award under appeal (judgment 4A_392/2008 from December 22, 2008 at 3.2)11 .
Whether or not a dispute can be brought into an international arbitral tribunal seating in Switzerland before decision is assed – as the appellant rightly argues – according to Art. 177 (1) PILA. According to this any proprietary claim may be the object of arbitration. The provision contains no substantive rules of arbitrability as the legislator intentionally renounced the introduction of a rule of conflict in order to avoid the difficulties resulting from such a solution as to the determination of the law applicable (BGE 118 II 353 at . 3 (a) p. 355).
The monetary claim for breach of contract contained in the request for arbitration is a proprietary claim within the meaning of Art. 177 (1) PILA and the Respondent does not dispute this in the Federal Tribunal. However it argues that Art. 19 (1) bCCP must be taken into account in the case at hand as part of the bulgarian public policy forbidding recourse to an arbitral tribunal as employment disputes cannot be decided by arbitral tribunals.
In its case law the Federal Tribunal has taken into account the possibility that the arbitrability of the specific dispute may be denied by reference to legal provisions stating the mandatory jurisdiction of the state Courts and their consideration from the point of view of public policy (Art. 190 (2) (e)PILA) may be called for (BGE 118 II 353 at 3c p. 357; 4A_654/201112 of May 23 2012 at 3.4; 4A_370/200713 of February 21, 2008 at 5.2.2). Contrary to what is held in the award under appeal this cannot be understood as meaning that the provisions of a fine law which the dispute is connected should necessarily be taken into account when they may entail a more narrow concept of arbitrability (BGE 118 II 193 at 5 at p. 196). The CAS may not be followed to the extent that he denied the jurisdiction because the matter was not arbitrable. Moreover it wrongly took into account as to the jurisdictional issue that pursuant to Art. 19 (bCCP) and Art. V (2) (a) of the June 10, 1958 New-York Convention on the Recognition and Enforcement of Foreign Awards (SR 0.277.12), there was a risk that a CAS arbitral award may not be enforced in Bulgaria. It must be accepted that some awards of international arbitral tribunals sitting in Switzerland admitting the arbitrability of a dispute pursuant to Art.177 (1) PILA may not be enforced in some country as this is the intent of the legislator which intentionally chose substantive rules of arbitrability; it therefor behooves the parties to avoid such a risk (BGE 118 II 353 at 3c p. 357 and at 3d p. 358; 4A_654/201114 of May,23 2012 at 3.4; also see BGE 118 II 193 at 5 at p. 196; also see the message of November 10, 1982 submitting the private international law, BBL 1983 1 460). Without prejudice to the forgoing, the arbitral tribunal cannot anticipate with certainty in the main proceedings in which state a party may someday seek the enforcement of the arbitral award (see BERNHARD BERGER/FRANZ KELLERHALS, International and Domestic Arbitration in Switzerland, 2. ed. 2010, section. 179, 256; BBI 1983 I 460).
The award under appeal, in which the Arbitral tribunal found that it did not have jurisdiction is nevertheless not objectionable as to its result. The Respondent disputed the existence of an arbitration agreement in the arbitral proceedings and rightly relies upon the invalidity of the arbitration clause in the proceedings in the Federal Tribunal.
According to Art. 178 (2) PILA the material validity of an arbitration clause is determined according to the law chosen by the parties to govern the dispute, in particular the law applicable to the main contract or according to Swiss law. To the extent that the reference to the prevision of Bulgarian law at Art. 16 of the employment contract is understood as a choice of law as to the validity of the arbitration close and Bulgarian law applies to the employment contract, as is argued in the answer to the appeal, it must be concluded with the Respondent that the arbitration clause is invalid pursuant to the mandatory provisions as to the conclusion of arbitration agreements. The Appellant rightly does not argue that Bulgarian law would be more advantageous as to the substantive validity of the arbitration clause but merely relies on its validity according to Swiss law.
An arbitration clause is an agreement by which two determined or determinable parties agree to submit one or several existing or future disputes to the bidding jurisdiction of an arbitral tribunal to the exclusion of the original state jurisdiction, on the bases of a legal order determined directly or indirectly (BGE 130 III 66 at 3.1 p. 70). It is decisive that the intention of the parties should be expressed to have an arbitral tribunal, i.e. not a state Court, decide certain disputes (BGE 138 III 2915 at 2.2.3 p. 35; 129 III 675 at 2.3 p. 679 ff).
Schould – as is the case here – no concordant will of the parties be factually certain as to the arbitration clause, it must be interpreted according to the principal of reliance, i.e. the presumptive will is to be ascertained as it could and should have been understood by the respective recipient according to the rules of good faith (BGE 138 III 2916 at 2.3.1 p. 36 ff.; 129 III 675 at 2.3 p. 680 ff.; 128 III 50 p. 58 at. 2c/aa). The legal nature of an agreement to arbitrate must be taken into account in its interpretation; in particular it must be taken into account that renouncing recourse to the state Courts severely limits the legal recourses available. Such an intent to renounce cannot be accepted likely according to the case law of the Federal Tribunal, and restrictive interpretation is required in case of doubt (BGE 138 III 29 at 2.3.1 p. 36 ff.; 129 III 675 at 2.3 p. 680 ff.; 128 III 50 S. 58 at 2c/aa). However when the interpretation shows that the parties wanted to remove the dispute from the state Courts and submit it to the decision of an arbitral tribunal but that there are some differences as to the implementation of the arbitral proceedings, the principal of effectiveness applies fundamentally; according to this an understanding of the contract must be sort which will let the arbitration clause stand (BGE 138 III 29 at 2.2.3 p. 36; 130 III 66 at 3.2 p. 71 ff; 129 III 675 at 2.3 p. 681)
Paragraph 16 of the employment contract states that “the dispute shall be referred for resolving by the competent court"17 if some possible disputes cannot be settled amicably. An exclusion of the jurisdiction of the state Courts cannot be seen there; to the contrary; the general wording speaks in favor of maintaining the jurisdiction of the state Courts. While the parties recognize in the same contractual clause the jurisdiction of the CAS ("The parties to the contract recognize the Court of Arbitration for Sport ..."18), they also refer to the previsions of Bulgarian law at the same time ("... as in this case ... the provisions of Bulgarian legislation will apply"19), which does not allow arbitral proceedings but provides for the mandatory jurisdiction of the state Courts. It appears there for questionable to the very least whether the contractual understanding contained a sufficiently clear intention according to the principal of reliance, to remove any disputes resulting from the contract from the state Courts and submit them to the decision of an arbitral tribunal also see (judgment 4A_244/201220 of January 17, 2013 at 4.4). The Appellant rightly does not claim that the contractual close at § 16 would lead to the conclusion in good faith of a presumptive intent of the parties to give the claimant the choice between recourse to the CAS or to the state Courts in Bulgaria. The principal of effectiveness, according to which an understanding of the contract should be sort to the extent possible, which will uphold the arbitration clause, applies moreover only when the result of the interpretation shows that the parties wanted to remove the dispute from the jurisdiction of the state Courts (BGE 138 III 29 at 2.2.3 p. 36; 130 III 66 at 3.2 p. 71 ff; both with references).
The Appellant filed two claims against the Respondent in the state Courts of Bulgaria, in which he presented the claims based on the employment contract of January 11, 2008; his course of action showed that he himself considered that the state jurisdiction should be maintain: yet a party may claim that its contractual partner should have understood an agreement in a certain manner according to the rules of good faith only if it has understood the provision in the same way itself (BGE 105 II 16 at 3a p. 19; 4A_538/2011 of March 9, 2012 at 2.2; 4A_219/2010 of September 28, 2010 at 1, not publ. in: BGE 136 III 528; KRAMER, in: Berner Kommentar, 1986, Nr. 122 ff. and Nr. 146 ad Art. 1 of the Swiss Code of Obligation). The Appellant cannot rely in good faith upon an interpretation that does not correspond at all to his understanding of the contract at the time. Interpreting § 16 of the employment contract according to the principal of reliance can therefore not lead to the exclusion of the state jurisdiction in favor of an arbitral tribunal and consequently to the validity of the arbitration clause. Therefore the CAS reached the right result by denying jurisdiction.
The appeal must be rejected to the extent that the matter is capable of appeal. In such an outcome of the proceedings the Appellant must pay the costs and compensate the other party for the federal proceedings (Art. 66 (1) and Art. 68 (2) BGG).
The appeal is rejected to the extent that the matter is capable of appeal
The judicial costs, set at CHF 4’000, shall be borne by the Appellant.
The Appellant shall pay to the Respondent an amount of CHF 5’000 for the federal judicial proceedings.
This judgment shall be notified in writing to the Parties and to the Court of Arbitration for the Sport (CAS)
Lausanne March 18, 2013
The Presiding Judge:The Clerk:
1. Translator’s note: Quote as A._____ v. Bulgarian Football Union._____, 4A_388/2012. The original of the decision is in German. The text is available on the website of the Federal Tribunal www.bger.ch
2. Translator’s note In English in the original text
4. Translator’s note: In English in the original text
5. Translator’s note: PILA is the most commonly used English abbreviation for the Federal Statute on International Private Law of December 18, 1987, RS 291
6. Translator’s note: BGG is the German abbreviation for the Federal Statute of June 17, 2005 organizing the Federal Tribunal, RS 173 110
7. Translator’s note : The official languages of Switzerland are German, French and Italian
8. Translator’s note Full English translation at: http://www.swissarbitrationdecisions.com/independence-and-impartiality-o...
9. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/jurisdiction-of-the-cas-upheld-...
10. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/extension-of-arbitration-clause...
11. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/review-by-the-federal-tribunal-...
12. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/motion-to-set-aside-a-tas-award...
13. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/appeal-against-interlocutory-an...
14. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/motion-to-set-aside-a-tas-award...
15. Translator’s note : Full English version at http://www.swissarbitrationdecisions.com/jurisdiction-of-the-cas-upheld-...
16. Translator’s note: Full English translation at: http://www.swissarbitrationdecisions.com/jurisdiction-of-the-cas-upheld-...
17. Translator’s note: In English in the original text
18. Translator’s note: In English in the original text
20. Translator’s note: Full English translation at: http://www.swissarbitrationdecisions.com/jurisdiction-clause-and-arbitra...