More to it than meets the eye: why arbitration isn’t always the best approach in the sports sector

In sport, it's not just the athletes who fight for victory – also beyond the sport-related contractual content, decisions made during contract negotiations can have a groundbreaking effect for the future. The interests of athletes, clubs, sponsors, media companies and other stakeholders are closely intertwined, which often leads to complex contractual agreements. This makes it all the more important to make provisions for possible legal disputes at the contract drafting stage and to determine where and, above all, before which court such disputes should be settled when the need arises. A question that soon arises in this case is: arbitration clause or jurisdiction agreement?

Jurisdiction agreements in the sports sector: their often underestimated importance

By agreeing on an arbitration clause, the contracting parties are stipulating that legal disputes are to be settled before an arbitration tribunal, whereas with a jurisdiction agreement, the parties are opting to have the legal dispute settled before the state courts. Within the framework of both clauses, the contracting parties also typically stipulate where the legal dispute is to be conducted.

Jurisdiction agreements have an unjustifiably outdated image. It is often argued that state court proceedings are unattractive due to their length, as it can take years for the court to reach a decision at first instance, depending on the scope and complexity of the matter. Arbitration proceedings, on the other hand, are often seen as a quick and flexible solution. However, the parties should not allow themselves to be prematurely blinded by the supposed advantages. When are jurisdiction clauses the better choice and why?

Outdated image dispelled: the advantages ofjurisdiction agreements

1. Costs: state courts as the more economical alternative

The question of costs is a key aspect when deciding between an arbitration clause and a jurisdiction agreement. While court costs in state courts are regulated by fixed fee scales (e.g. the German Court Costs Act [Gerichtskostengesetz, GKG]), the costs of arbitration proceedings can vary considerably:

• Additional fees: Arbitration proceedings require the payment of arbitrators, whose fees are often based on the amount in dispute and can quickly run into the thousands or even tens of thousands of euros. Added to this are the fees for the arbitration institution, which are also not insignificant.
• Cost-benefit ratio: Particularly in disputes with a low or medium claim value (e.g. in the five or six-figure range), the costs of arbitration proceedings are often disproportionate to the amount in dispute. State court proceedings are a more economical and predictable alternative here.

2. Control through appeal proceedings: more certainty through review

A major advantage of state court proceedings is the possibility of appeal proceedings. Unlike in arbitration proceedings, where the arbitrators' decision is usually final, in cases before the state courts the parties can appeal.

• Rectification of errors: The appeal procedure makes it possible for errors in the first-instance decision to be reviewed and corrected by a higher court. This provides the parties with additional certainty.
• Further development of the law: In certain cases, previously unresolved legal issues can be brought through the courts as far as the Federal Court of Justice. This not only contributes to the clarification of individual disputes, but also to the further development of the law and the creation of precedents.

3. Legal certainty and transparency: clear rules instead of uncertainty

State court proceedings offer a high degree of legal certainty and transparency as they are bound by clear legal requirements.

• Rules of procedure: The course of proceedings is precisely regulated by the German Code of Civil Procedure (Zivilprozessordnung, ZPO), which provides the parties and their legal representatives with clear guidance from the very outset.
• Predictability: By analysing previous judgements, which are usually publicly accessible, the parties can assess the possible outcome of the proceedings in advance. This transparency is lacking in arbitration proceedings, whose decisions often remain confidential.
• Confidence: Familiarity with the legal framework and the procedure before the state courts gives the parties confidence that their interests will be treated fairly and impartially.

4. Enforcement: efficiency in the enforcement of judgements

Another advantage of state court proceedings is the ease with which judgements can be enforced.

• Within the EU: Thanks to the Brussels Ia Regulation, decisions by German courts are enforceable within the EU without a separate recognition procedure. This saves time and costs.
• International: Even outside the EU, judgements by German courts are easier to enforce in many countries than arbitration awards, which must first be recognised in accordance with the New York Convention. This procedure can entail additional hurdles and delays.

5. Confidentiality: new possibilities through § 273a ZPO

Confidentiality is generally seen as an advantage of arbitration proceedings. However, with the introduction of Section 273a ZPO on 1 April 2025, the German legislator has created a regulation that also enables confidentiality in state court proceedings.

• Protection of trade secrets: At the request of a party, the court can classify certain information as confidential if it relates to trade secrets. This closes a previous loophole and also makes state court proceedings more attractive for companies wishing to protect sensitive information.

Conclusion: Jurisdiction clauses as a strategic tool in the sports sector

Arbitration proceedings are undoubtedly justified in the sports industry, especially in international or highly complex disputes. However, not every conflict in the sports sector requires complex and expensive arbitration proceedings. In particular in case of disputes without an international dimension or with a manageable claim value, court agreements offer an attractive alternative. For smaller players in the sports industry who do not have the financial resources for arbitration proceedings, state court proceedings are often the better choice. The possibility of appeal proceedings, the clear procedural rules and the simple enforceability of judgements make jurisdiction clauses an important part of the strategic contract design beyond the sport-related contractual content.

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