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The Essendon 34 – A new perspective

Allistar Twigg

15 Jan 2016

Topics

  • Sports Law
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Does the finding of guilt of the 34 Essendon players by the Court of Arbitration for Sport (CAS) mean that they are forever drug cheats?

The Essendon 34 were found guilty in the Court of Arbitration for Sport. Our Sports law specialist Allistar Twigg, discusses their legal rights of appeal.

The Roar published Allistar’s article ‘The Essendon 34: Can CAS’s decision be appealed?’ on 21 January 2016.

Commentators seem to see only two ways for the players to go from here: they can either appeal the CAS’s findings to the Swiss Federal Tribunal or sue the Essendon Football Club for breach of the club’s duty of care to them. The commentators seem pessimistic about the likely outcome of the first option and the second option is fraught with difficulties, not the least of which is: even if the players are successful in obtaining judgments for their loss of earnings, reputation, etc, will Essendon be able to survive the financial onslaught?

But there may be a third way: apply to an Australian court to set aside the CAS’s decision.

Under normal circumstances, the decision of an arbitrator is regarded as res judicata (essentially, finally decided) and further appeal is precluded. In the Essendon 34 case, the CAS process and decision are regarded as international arbitration and are subject to the International Arbitration Act 1974. Article 34 of Schedule 2 of this Act (Model Law on International Commercial Arbitration) allows an application to be made to set aside the CAS’s decision in only limited situations. The important ones for our purposes are:

  • Article 34 (2) (a) (i): a party furnishes proof that the arbitration agreement is not valid under the law of Australia; or
  • Article 34 (2) (b) (ii): a court finds that the award is in conflict with the public policy of Australia.

It is arguable that:

  • the AFL’s arbitration agreement is not valid under the law of Australia and/or
  • the CAS’s decision is in conflict with the public policy of Australia

because either or both constitute:

  • a misuse of market power under section 46 of the Competition and Consumer Act 2010 (Cth) by the AFL in relation to the players; or
  • an unlawful restraint of trade by the AFL in relation to the players.

This could give the players a right to commence legal action against the AFL (as the party compelled to implement the CAS decisions).

Is there a misuse of market power by the AFL in relation to the players?

Section 46 (1) (c) of the Competition and Consumer Act 2010 prohibits a corporation that has a substantial degree of power in a market from taking advantage of that power for the purpose of deterring or preventing a person from engaging in competitive conduct in that or any other market.

It can be argued that the AFL is in breach of this section because:

  • it has a substantial degree of power in the relevant market
  • it has used that power to compel the players to enter into highly restrictive arbitration agreements
  • those arbitration agreements and the attendant consequences prevent those players from engaging in competitive conduct in the relevant market.

Therefore, the arbitration agreement binding the players is arguably not valid under Australian law and could be set aside pursuant to Article 34 (2) (a) (i).

Further, it is arguable that the CAS’s decision is also against the public policy of Australia and could be set aside pursuant to Article 34 (2) (b) (ii).

Does the arbitration agreement or the decision of CAS constitute an unlawful restraint of trade?

A further and alternative basis for setting aside the CAS’s decision may be by making the argument that the AFL’s arbitration agreement constitutes an unlawful restraint of trade in relation to the players and is therefore not valid under the law of Australia and/or the CAS’s decision is in conflict with the public policy of Australia.

In Australia, prima facie, all restraints of trade are unlawful as contrary to public policy and therefore void. This general rule has exceptions. Restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. But in all cases, such restriction must be reasonable: that is, in reference both to the interests of the parties concerned and to the public interest. And the person seeking to rely upon the restraint must show that it is no more than reasonably necessary to protect its legitimate commercial interests.

It would seem that, in this case, the arbitration agreement amounts to a restraint of trade: it seeks to prevent AFL players from resolving their grievances through any channels other than the CAS which has, by its decision, stopped them from pursuing their livelihood. So then the question needs be asked: is it reasonable with respect to the interests of all the parties concerned and to the public interest?

The AFL, like the ISU (see below), has a degree of power as against the players and requiring them to submit to the WADA regime and the CAS without further recourse may well be an unlawful restraint of trade, being unreasonable in the circumstances. It is strongly arguable that, given the way the whole saga has played out, the finality of the CAS’s decision is neither in the players’ best interests nor in the public’s interest. It is arguable that the AFL and WADA might have difficulty in showing that the bans on the players are no more than is reasonably necessary to protect their legitimate commercial interests.

Overseas examples

For some time, a consensus of international sports law commentators has felt that there is a ‘structural imbalance’ in the CAS, in that the body administering it, the International Council of Arbitration for Sport (ICAS), is effectively controlled by, too closely aligned to and too heavily weighted in favour of sport’s governing bodies, leading to a tendency to unfairness to athletes by the CAS. Accordingly, these commentators have been calling for reforms to be made, particularly to the structure of the ICAS. And although some changes have been made, many commentators feel that these are not sufficient, and that the CAS is still biased against athletes.

There are two overseas examples supporting the suggestion that the recent decision by CAS might be appealed in an Australian court.

In 2009, Claudia Pechstein, a German police officer and speed skater, was found guilty of blood doping on the basis of changes in readings of samples taken over a period of time and noted in her Athlete Biological Passport; effectively, on circumstantial evidence (like the Essendon 34). The International Skating Union (ISU) banned her from all competitions for two years. She exhausted the appeals process at the CAS, who upheld the ban. She subsequently appealed this decision to the Swiss Federal Tribunal (on the basis that the CAS is a Swiss legal body) and was rejected twice. Her defence was that the abnormal blood values were caused by a disorder which she had inherited from her father, and she produced experts who testified to that effect.

For a number of reasons, including that her employment was put at risk by such findings, Pechstein sued the ISU in a German court, asking that the doping ban be overturned because of a breach of the applicable competition law and seeking compensation of €4.4 million in damages.

To the apparent dismay of the CAS, the Munich Higher Regional Court decided that her claim that her doping disqualification was unlawful could be tried within the German jurisdiction. It found that the ISU had a degree of market power, as against the athletes, and that requiring them to submit completely to the jurisdiction of the CAS without further recourse, whilst not necessarily coercion and therefore unenforceable per se, could amount to an abuse of that market power and be in breach of German competition law.

The court’s reasoning was that, notwithstanding changes in the 1990s whereby the administration of the CAS had become more independent of the IOC, it was not yet so independent that it was obvious that the structure of the CAS was not biased in favour of sport’s governing bodies and against athletes.

This decision appears to be fortified by an earlier decision of a German Court of Appeal (in SV Wilhelmshaven), where another CAS decision had been questioned for breaching relevant competition law and was not automatically thrown out by the German court. This was a case relating to an EU treaty regarding the free movement of workers within the European Union.

Interlocutory steps

The above course of action could also allow for an interlocutory injunction to be obtained by the players, to prevent implementation of the bans until final disposition of the action. They would need to show, amongst other things, that: (i) there is a serious question to be tried; (ii) damages alone are not a sufficient remedy; and (iii) the balance of convenience favours granting the injunction. Each of those things seems reasonably arguable. The first depends on the strength of the players’ case. The second is clear, given the immense financial and reputational damage each of the players and the game — and therefore the public — will suffer if the injunction is not granted. As to the balance of convenience, the cost and inconvenience of any interim injunction to the defendants (and it is not clear who they will be at this stage, but at least the AFL and possibly WADA, ASADA and possibly even the CAS) would appear as nothing compared with that of the players. The lower risk of injustice would clearly favour the players being granted an interim injunction.

There are real questions to be considered about the compatibility between the forced nature of the CAS arbitration on the one hand and the rights of the players to a fair decision on the other. Interested AFL players may wish to seek legal advice about exploring this proposed course of action.

If German courts are prepared to accord its athletes justice, why not Australian courts?

To discuss this with our team, please contact Allistar Twigg today.