Judicial oversight of sports associations in the Czech Republic – does the new Civil Code strike the right balance between autonomy and intervention?

Published 30 April 2019 By: Jirí Janák

Czech Republic law

In the Czech Republic (as in many other countries), sports normally govern their activities via a legally formed association. The right of association embodies certain principles, chief among which is “autonomy” - a characteristic that manifests itself principally in the separation of the association from the state. Yet while sports associations are essentially private, the exercise of their power is not completely outside of the supervisory jurisdiction of the courts. The extent to which courts can intervene in the decisions of a sports association is an interesting question, and one that has been discussed in previous LawInSport articles in relation to the UK (here1) and South Africa (here2).

This article examines the current position in the Czech Republic, the author’s home jurisdiction. It is a pertinent topic here, as the Government has recently introduced a new statutory regime that seems, on the evidence to date, to facilitate a greater degree of judicial intervention than was previously the case.

The Czech Republic’s new Civil Code

Article 20 of the Czech Charter of Fundamental Rights and Basic Freedoms enshrines the freedom of the right of association. This means that associations can be freely formed and have autonomy from the state in, for example, their internal governance and decision-making processes,3 and that people are free to choose whether or not to participate in the association. Pursuant to this overarching freedom, it is the right of a sports association to govern its functioning by internal rules and processes that it deems appropriate and effective (subject to respecting laws and principles) and state/court interventions are limited to a small number of cases concerning the appropriate exercise of power and fundamental fairness.

In 2014, the Czech laws regulating the rights of association underwent significant reform. The existing framework (set out under the Act of Association4) was revoked and replaced by a far more detailed set of provisions by Act No. 89/2012 Coll. (Civil Code). One notable change related principle of autonomy: while Section 2 (3) of the Act of Association expressly stated that state authorities may only intervene in the activities of associations within the limits of the law, the Civil Code does not include such a provision.5

The new statutory conditions for judicial intervention

Pursuant to an action filed under Section 258 of the Civil Code, a court can assess whether a particular decision of an association is in compliance with the law and its articles of association (and other regulations). If it is found not to be, the court may deem the decision in invalid and replace it with an order that it deems appropriate.

A legal action pursuant to this provision may be filed by:

  1. any member of the association; or

  2. anyone having an interest worthy of legal protection.

The conditions that must be met before filing are:

  1. all possible internal remedies have been exhausted; and

  2. the filing must occur no later than 3 months from the date on which the member of the association learned of the decision; and in any event, no later than within 1 year from the adoption of the decision.

Section 260 of the Civil Code6 states that a court cannot rule a decision invalid if:

  1. the breach has not had serious legal consequences; or

  2. it is in the interest of the association not to rule on the validity of a decision; or

  3. the rights of a third party acquired in good faith would be significantly jeopardized.

The common law limits on judicial intervention

Section 258 has given rise to legitimate concerns over excessive judicial intervention into the autonomy of associations as it does not express any specific conditions for its application. In theory, it seems that any decision is prima facie open to review.

In practice, however, it is within the discretion of the courts to decide which decisions should be subject to review. The Supreme Court, under the old regime (the Act of Association) developed a number of principles and criteria for intervention that should still be looked to for guidance.

The overarching principle, confirmed in numerous cases, is that while the courts generally have jurisdiction to review decisions, the relevant law has to be interpreted restrictively; that is, within the purview of the broader principle of autonomy. In practice, this means that the court has jurisdiction to hear challenges to fundamental decisions, provided the following restrictive criteria are met:

  • the actions are allegedly illegal – the actions/decision either conflicts with domestic laws or the internal rules/standards of the association. The majority of cases concern a conflict with the articles of association, although conflicts with other internal regulations (e.g. a disciplinary code) do also occur;

  • it is in the interest of society at large to hear the matter;

  • all internal remedies have been exhausted; and

  • significant harm has been suffered (material or personality related) by the claimant potentially.7

The criteria operate cumulatively (i.e. they must all be satisfied); and they are always individually assessed on the particular merits of the case. The Supreme Court has stated that the reason for defining the above criteria is:

to the broadest extent possible, to maintain the autonomy of associations guaranteed in Article 20 of the Charter of Fundamental Rights and Basic Freedoms without the imbalance of the engagement of state power.8.

What this meant in practice is that courts were, up until the introduction of the new Civil Code, relatively uninclined to intervene in the decisions of associations in all but the most serious of circumstances.

Are courts becoming more interventionalist under the Civil Code? A recent example

 

In the author’s view, the precedent established above is not sufficiently reflected in the new Civil Code, and courts are becoming increasingly prepared to review the decisions of sports associations.

In one recent case (in which the author acted for a national sports association), the courts (of first and second instance) reviewed a decision of the association relating to the value of a transfer fee, which was calculated by the association to be 400 EUR. The calculation was confirmed by two separate bodies within the association (including the Legislative Committee of the Association), and all due processes were respected.

The courts, however, still decided to review the decision, and ruled that the calculation of the fee was in fact incorrect and made a separate ruling on what the fee should be. The case is still pending as the association have lodged an appeal at the Supreme Court of the Czech Republic.

While a certain degree of judicial oversight should be welcomed, in author’s view it is concerning that the courts were prepared to overreach the association´s longstanding expertise in transfer matters and replace an internally approved decision on quantum with their own. It seems questionable that the judiciary have the requisite level of familiarity and experience in such matters (as compared to the internal bodies of the association), especially in relation to complex issues like transfers. It is equally concerning that the courts held that the sum of EUR 400 was sufficient to “significantly harm” the club; a point made no doubt to satisfy the requisite criteria identified above.

Comment

There are of course two principal view points on judicial oversight. On the one hand, sports organisations (generally) wish to retain the highest level of autonomy, and limit review to only the most serious of cases. On the other hand, members and third parties want to ensure power is kept under check, and that they have the widest possible range of options to challenge the activities and decisions of the association in case of harm. These interests need to be brought into balance. A high level of autonomy should be ensured to allow the association to efficiently fulfil its purpose; yet judicial intervention should be justified in cases when fundamental and significant intrusions into the rights of members or third parties occurs.

In the author’s view, the Civil Code’s new regulations, together with the evidence of recent case law, point towards an increasing likelihood that any decision of a sports association can be subjected to judicial review, and that the court will focus on assessing the level of harm caused to the complainant. We should still look to case law under the old regime (Act of Association) for guiding principles of when and how the power of review is exercised; however, the development of case law relating specifically to the interpretation of Section 260 will be interesting to follow.

The author would however like to end by stressing that, in his view, a situation in which the courts are in principle able to review any and all final decisions of associations (effectively acting as another “appellate” body) is wholly undesirable. Courts should be very careful to protect the underlying principle of autonomy, and to avoid consistently weighing the interests of an association and its members. To the extent that the Civil Code opens the door for greater intervention it is, in the author’s view, not desirable. To that extent, we will have to wait to see what the decision-making practices of the Czech Supreme Court will be.

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Author

Jiří Janák

Jirí Janák

Jiri Janak is an attorney-at-law specialising in the fields of sports law, civil and procedure law, and business law. He practices in Prague, Czech Republic for KSD Legal, the award winning sports law firm.

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