The Supreme People’s Court’s Guiding Case No. 201 is a significant precedent in the intersection of international sports law and domestic judicial proceedings in China. It revolves around a contractual labor dispute between a Serbian football coach and a Shanghai football club, which later transformed into a catering business. This case provides valuable insights into how Chinese courts perceive the legal status of rulings made by sports organizations. However, its interpretation of the arbitral clause at issue arguably fails to reflect the parties' intentions to resolve disputes through arbitration, and may allow parties to circumvent arbitration by exploiting jurisdictional advantages in domestic courts.
Case Background
Following a six-month coaching tenure, a Serbian football coach (the “Coach”) and the Shanghai Ju Sports Football Club (the “Ju Club”) entered into a termination agreement, under which the Ju Club was obliged to pay the Coach a lump sum as compensation. When the Ju Club failed to fulfill its obligation, the Coach escalated the matter to the FIFA Players' Status Committee (the “FIFA Committee”) in accordance with Article 5.1 of the termination agreement, which provides that “any dispute related to this termination agreement or arising from it shall be subject to the jurisdiction of the FIFA Players' Status Committee or any other authorized FIFA body.”
The FIFA Committee ruled in favor of the Coach, mandating the Ju Club to make the payment within 30 days. The decision also informed both parties of their right to appeal to the Court of Arbitration for Sport (the “CAS”) and indicated that the decision would become final and binding if no appeal was filed. Neither party appealed, but the Ju Club did not comply with the decision. Instead, the Ju Club exited the football industry, deregistered from the Chinese Football Association, and rebranded itself as Shanghai Enwo Catering (the “Enwo Catering”), shifting its business to catering.
The Coach did not pursue recognition or enforcement of the FIFA Committee’s decision. Instead, he filed a labor contract lawsuit before a domestic court in Shanghai, seeking to hold Enwo Catering and its sole shareholder jointly liable for the payment. The Enwo Catering challenged the court's jurisdiction, arguing that the dispute should be submitted to CAS according to Article 5.2 of the termination agreement, which provides that “[i]f FIFA does not have jurisdiction over a dispute, the parties shall submit it to the Court of Arbitration for Sport in accordance with the Arbitration Rules for Sports.”
Key Points of the Judgement
The trial court dismissed the Coach’s case, citing Article 5.2 of the termination agreement, which directed disputes to CAS. On appeal, the Shanghai No.1 Intermediate People's Court (the “Appellate Court”) overturned the trial court’s decision, holding that despite the validity of Article 5.2, domestic courts had jurisdiction over the dispute at issue.
The Appellate Court emphasized two critical points:
1. The Appellate Court determined that the dispute resolution mechanism under Article 5.1 did not constitute arbitration, and that the FIFA Committee's decision did not qualify as an enforceable arbitral award under the New York Convention. The FIFA Committee was characterized as an internal dispute resolution body, not an independent arbitration institution. Its jurisdiction was non-exclusive, and its decisions were neither final nor binding. In this regard, the Appellate Court took notice of Article 22 and Paragraph 4 of Article 23 of FIFA's "Regulations on the Status and Transfer of Players" (the “FIFA Regulations”), which state that the committee’s competence in hearing cases is “[w]ithout prejudice to the right of any player or club to seek redress before a civil court for employment-related disputes” and that decisions made by the committee “may be appealed before the Court of Arbitration for Sport (CAS),” respectively.
2. The Appellate Court ruled that Article 5.2, while valid, was inapplicable because the dispute at issue was beyond Article 5.2’s scope. The Appellate Court held, consistent with the plain wording of Article 5.2, that it was only when "FIFA does not have jurisdiction" that disputes could be submitted to the CAS. In this case, the FIFA Committee had already exercised its jurisdiction and issued a decision. As a result, the dispute at issue was not a dispute over which “FIFA does not have jurisdiction.” Therefore, Article 5.2 could not exclude the jurisdiction of the trial court, as the defendant’s domicile was within the court’s jurisdiction.
Comments
This case is the first in mainland China to determine the legal nature of a decision made by internal dispute resolution bodies of international sports organizations. As one of the Guiding Cases (which are judicial precedents selected and published by the Supreme People's Court to ensure consistency in judicial decision-making), it establishes a precedent that the internal dispute resolution bodies of international sports organizations are not ipso facto arbitration institutions under the New York Convention, and that their decisions do not qualify as foreign arbitral awards under the said Convention.
However, the Appellate Court’s interpretation in this case with respect to the scope of the arbitral clause (i.e. Article 5.2) seems mechanical and problematic. By limiting the scope of Article 5.2 to disputes outside FIFA’s jurisdiction, the court effectively renders Article 5.2 meaningless. Given that under Article 5.1 FIFA’s authority covers “any dispute related to this termination agreement or arising from it,” the application of Article 5.1 is so broad that the ambit of disputes to which Article 5.2 would apply would be significantly diminished.
Further, the Appellate Court’s interpretation could also create a loophole for a party in similar circumstances to exploit a forum advantage. In the scenario where a party receives an unfavorable decision by the FIFA Committee, the party can either appeal to the CAS (and this right to appeal is provided for under the FIFA Regulations), or commence litigation before the Chinese domestic courts (according to the Appellate Court’s interpretation).
A better view is that, taking Articles 5.1 and 5.2 and the FIFA Regulations together, the parties intended to submit their disputes to CAS for arbitration, with the pre-arbitration requirement of submitting their disputes to an authorized internal body of FIFA if the internal body can properly exercise jurisdiction. Under this view, Article 5.1 serves as the pre-arbitration dispute resolution mechanism, with the implication that CAS has jurisdiction over those disputes, while Article 5.2 should be seen as a catch-all / sweeping-up clause, granting CAS authority over disputes not addressed by FIFA's internal bodies. This holistic view would better reflect the parties’ intent.