Introduction

The preceding articles delved into the right of access to justice, including the elements of a fair trial, and explored how legal disputes can be settled outside of trials at court, through alternative dispute resolution (ADR) methods, such as mediation or arbitration. The parties can decide themselves what route they choose, after considering the benefits and downsides of all the options: each legal dispute is unique, and tailoring the approach to its specific circumstances ensures a more effective resolution. It is therefore an understanding, that these concepts can coexist and can complement each other.[1]

However, the emergence of the Alternative Dispute Resolution (ADR) movement over the past decades has also played a role in distancing people from the courts.[2] But why is this the case and what effects does it have?

Throughout this article a case study will serve to illustrate the intricate connection between the right of access to justice and arbitration, highlighting their conflicting aspects and examining the influence one exerts upon the other.

The case

The selected case[3] addresses the need to find a delicate balance between ensuring the right to access justice and respecting the autonomy of private associations in the context of sports disputes. It encompasses various dimensions, many of which will be expounded upon subsequently. However, let us first provide a concise overview of the case:

The Federal Constitutional Court (Bundesverfassungsgericht, the supreme constitutional court for the Federal Republic of Germany) has overturned a judgment by the Federal Court of Justice (Bundesgerichtshof, the highest court of civil and criminal jurisdiction in Germany) in a case involving a German professional athlete’s challenge of a doping ban. The athlete had agreed to an arbitration clause mandating dispute resolution before the Court of Arbitration for Sport (CAS). The Federal Court of Justice deemed the arbitration agreement to be valid and dismissed the athlete’s appeal. However, the Federal Constitutional Court has now ruled that the athlete’s right of access to justice was violated because there was no provision for a public hearing in the arbitration process.

Power imbalance between the parties

As it was mentioned, the athlete had consented to an arbitration clause that compelled dispute resolution through the CAS. If it had been just that, nobody would have raised an eyebrow, as arbitration is a necessary means to ensure internationally uniform sports jurisdiction. To consent to this clause, she signed a standardized registration form for a global championship, which was hosted by the international federation for her sport. This international sports federation holds the exclusive authority to organize international competitions in these sports. Within the competition registration form, the complainant recognized the jurisdiction of the CAS, effectively precluding recourse to conventional courts.

Considering the exclusive authority of the sports federation, it became clear, that the complainant had no real choice but to sign the agreement if she wanted to compete professionally. Clearly, the choice of whether to agree to mandatory arbitration is not much of a choice in this case.

The fact that the complainant was effectively forced to sign the arbitration agreement in order to pursue her profession suggests that there may have been a power imbalance between the parties, but the Federal Court of Justice found that the arbitration agreement was not invalid due to coercion.

Nonetheless, if one of the two contracting parties possesses such substantial bargaining power that it can effectively impose contract terms unilaterally, the law should aim to safeguard against the complete deprivation of self-determination for one party to the contract.

Access to justice is a part of the rule of law and includes the right to a public hearing

The complainant challenged the fact that the CAS Statutes did not provide for a right to a public hearing and had already unsuccessfully requested a public hearing in the prior arbitration procedure. She later argued that the Federal Court of Justice’s decision violated her right of access to justice and the judgment failed to recognize the constitutional significance of the right to have proceedings held in public. The Federal Constitutional Court concurred.

The essence of this case revolves around the matter of a public hearing. To comprehend why it played a pivotal role in the favorable ruling for the complainant, it is essential to delve into the origins of this principle.

Public hearing is one of the special guarantees of the general right of access to justice and the guarantee of the right of access to justice is an integral part of the rule of law. The rule of law ensures that laws are enacted, enforced, and interpreted in a fair and consistent manner. So, when it comes to violating one’s right to a public hearing its importance goes far beyond individual procedural rules. The principle of public proceedings is an important aspect of the rule of law, which is a fundamental principle of any modern legal system.[4]

Arbitration versus access to courts

Despite the athlete’s arguments, the Federal Court of Justice found the arbitration agreement to be compatible with the right of access to justice. But the Federal Constitutional Court later found that the challenged judgment of the Federal Court of Justice violated the complainant’s right of access to justice. As mentioned above, their reasoning was mostly based on the lack of public hearing, but why does the requirement of public hearing compulsorily apply in arbitration? Does it not conflict with the principle of contractual freedom inherent in private arbitration?

To explore this issue further, we will now approach the case from a jurisdictional standpoint.

The arbitration procedure removes the matter from the jurisdiction of state courts. With that, mandatory arbitration limits the access to courts: clearly, these agreements stipulate that disputes must be resolved through arbitration procedures, thereby prohibiting access to the courts.[5] It may sound harsh at first, but some even think arbitration has the “capacity to reduce, if not altogether eliminate, access to the courts and to the law.”[6]

To make things even more serious, these arrangements are not always negotiated and are often not even noticed at the time of contracting, yet mandatory arbitration clauses are enforceable.

Moreover, arbitration is an informal process in which the rules of substantive and procedural law are not necessarily applied by arbitrators. The lack of established legal criteria can result in significant substantive and procedural injustices, especially in cases where there are serious power imbalances between the parties involved.[7] The current case acknowledges this concern and, in response, argues that “the arbitration procedure, which removes the matter from the jurisdiction of state courts, must comply with the guarantees of Art. 6 of the (European) Convention (on Human Rights).”[8] This article states that “in the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.”[9]

Therefore, the significance of the case in this context lies in its assertion that the arbitration procedure must guarantee effective legal protection and meet minimum standards of the rule of law. It might sound nice at first, but what about contractual freedom?

Conflicting fundamental principles

We can witness the inherent conflict between two frequently conflicting principles: freedom of contract and the rule of law, which are both fundamental ideas.

The principle of freedom of contract allows parties to negotiate and determine the terms and conditions of their agreements and private arbitration is anchored in the freedom of contract.

But this freedom does not stand alone in space but might clash with other rights. In this particular case, the freedom of contract and the autonomy of private association must be balanced against the right of access to justice and other fundamental rights in order to ensure that the contract is not unfairly one-sided and that both parties have equal protection under the law.

After careful consideration of the facts, the Federal Constitutional Court found that the previous court’s balancing of the freedom of contract and the autonomy of private association did not conform with constitutional requirements.

While it is still true that with arbitration states opened an alternative, non-state tribunal for binding dispute resolution for citizens seeking justice[10], its independence from state dispute settlement is not full. For the state to recognize arbitration decisions and enforce them in the exercise of its public authority, it must ensure that the arbitration procedure guarantees effective legal protection and meets the minimum standards of the rule of law.

Conclusion

This decision highlights the importance of ensuring effective legal protection and also emphasizes the minimum standards of the rule of law in arbitration procedures.  It was stated the specific guarantees of the right of access to justice should be considered when interpreting and applying the law to arbitration agreements.

The courts had to balance the right of access to justice, on the one hand, and the freedom of contract and the autonomy of private association on the other hand. They came to the conclusion that the arbitration procedure, which removes the matter from the jurisdiction of state courts, must comply with the guarantees of Art. 6 of the European Convention on Human Rights and to waive one’s access to state courts by means of an arbitration agreement is subject to some limitations.

The Federal Constitutional Court stated that public hearings are an essential part of the principle of the rule of law.

The court held that the CAS arbitration agreement was invalid because it did not provide for the right to a public hearing.

In conclusion, this decision serves as a compelling reminder of the delicate equilibrium that must be maintained between access to justice, contractual freedom, and the autonomy of private associations within the realm of arbitration. The ruling’s profound implications underscore the ongoing evolution of legal principles in an ever-changing landscape.

Sources

Ben-Shahar, O. (2013). The Paradox of Access Justice, And Its Application to Mandatory Arbitration. University of Chicago Law Review, 83, 1755. https://doi.org/10.2139/SSRN.2197013. 15 September 2023

Bundestag document Bundestagsdrucksache – BTDrucks 13/5274, p. 34

Charkoudian, L., Eisenberg, D., & Walter, J. (2017). What Difference Does ADR Make? Comparison of ADR and Trial Outcomes in Small Claims Court. Conflict Resolution Quarterly, 35, 7-45. https://doi.org/10.1002/CRQ.21197.  19 September 2023

European Convention on Human Rights, Article 6 (1), European Convention on Human Rights (coe.int) 15 September 2023

FEDERAL CONSTITUTIONAL COURT – 1 BvR 2103/16 – p. 84, 35

FEDERAL CONSTITUTIONAL COURT – 1 BvR 2103/16 –https://www.bundesverfassungsgericht.de/SharedDocs/Downloads/EN/2022/06/rk20220603_1bvr210316en.pdf?__blob=publicationFile&v=2 12 September 2023

Pech, L. The Rule of Law as a Well-Established and Well-Defined Principle of EU Law. Hague J Rule Law 14, 107–138 (2022). https://doi.org/10.1007/s40803-022-00176-8 19 September 2023

Reuben, R. C. (1994). The Dark Side of ADR. California Lawyer, 14, 53.

Richard C. Reuben, First Options, Consent to Arbitration, and the Demise of Separability: Restoring Access to Justice for Contracts with Arbitration Provisions, 56 SMU L Rev 819, 822 (2003) (hereinafter Reuben, 56 SMU L Rev at 822 (2003)) https://scholar.smu.edu/cgi/viewcontent.cgi?article=2018&context=smulr 09 September 2023

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[1] Charkoudian, L., Eisenberg, D., & Walter, J. (2017). What Difference Does ADR Make? Comparison of ADR and Trial Outcomes in Small Claims Court. Conflict Resolution Quarterly, 35, 7-45. https://doi.org/10.1002/CRQ.21197.

[2] Richard C. Reuben, First Options, Consent to Arbitration, and the Demise of Separability: Restoring Access to Justice for Contracts with Arbitration Provisions, 56 SMU L Rev 819, 822 (2003) (hereinafter Reuben, 56 SMU L Rev at 822 (2003)) https://scholar.smu.edu/cgi/viewcontent.cgi?article=2018&context=smulr

[3] FEDERAL CONSTITUTIONAL COURT – 1 BvR 2103/16 –https://www.bundesverfassungsgericht.de/SharedDocs/Downloads/EN/2022/06/rk20220603_1bvr210316en.pdf?__blob=publicationFile&v=2

[4] Pech, L. The Rule of Law as a Well-Established and Well-Defined Principle of EU Law. Hague J Rule Law 14, 107–138 (2022). https://doi.org/10.1007/s40803-022-00176-8

[5] Ben-Shahar, O. (2013). The Paradox of Access Justice, And Its Application to Mandatory Arbitration. University of Chicago Law Review, 83, 1755. https://doi.org/10.2139/SSRN.2197013.

[6] Reuben, 56 SMU L Rev at 822 (2003)

[7] Reuben, R. C. (1994). The Dark Side of ADR. California Lawyer, 14, 53.

[8]  FEDERAL CONSTITUTIONAL COURT – 1 BvR 2103/16 – p. 84, 35

[9] European Convention on Human Rights, Article 6 (1), European Convention on Human Rights (coe.int)

[10] Bundestag document Bundestagsdrucksache – BTDrucks 13/5274, p. 34

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Anna NÉMETH – She is currently pursuing her master’s degree in law at Eötvös Loránd University, completing her courses with excellent marks. In addition, she is studying international public management BA at the University of Public Service. During her university years she won the New National Excellence Programme in 2020. She worked as an intern for KPMG Legal Tóásó Law Firm and for the Oppenheim Law Firm in Budapest. In her previous research, she has focused on the constitutional status of art and artistic freedom. Through another project she has explored the consumer protection and competition law aspects of the Digital Markets Act. In her ongoing research, she delves into the topic of mediation.