In review: sports governance and dispute resolution in Sweden
All questions
Organization of sports associations and sports governing bodies
in organizational form
Almost 3.5 million of Sweden’s 10 million inhabitants are members of a sports association (as competitors, managers, coaches, trainers, supporters, etc.). About 2.45 million of these compete regularly. For historical reasons, voluntary non-profit associations play a large role in Sweden. The right to participate in clubs and associations is guaranteed by the Swedish constitution. Sport in Sweden is historically organized as an independent voluntary movement (commonly known as the Scandinavian or Nordic model). Long experience of cooperation with the state and municipality has led to the sports movement being trusted to organize sports in Sweden with the help of financial support from the state and municipality.2
Local sports associations are the foundation of the sports movement in Sweden. There are more than 20,000 local sports associations in Sweden registered as non-profit associations with the aim of organizing sports activities, having elite sports and sports for all under the same umbrella. A non-profit association becomes a legal person from the moment it is formed. In order for a non-profit association to exist in the legal sense, it is required that a number of individuals have entered into an agreement to act jointly in organized form to fulfill a common, non-profit purpose (to organize sports activities). The agreement itself must be legalized in the form of law. A non-profit association can only engage in commercial activities in support of its non-commercial purpose, and not to enrich its members. Sports clubs are thus governed by their statutes, which require democratic forms such as annual meetings and executive committees. A sports association is ‘owned’ by its individual members, who at the sports association’s annual meeting decide which activities the club should carry out and how the club should distribute its financial resources, etc. The basic principle is that each member has one vote.
Sweden’s National Sports Confederation is an umbrella organization consisting of 72 committed sports confederations and 21 district sports confederations that organize more than 250 different sports and approximately 22,000 sports associations that are all members of the confederation. Membership is only available to non-profit associations. Legally speaking, the National Sports Confederation is itself a non-profit association governed by the statutes agreed upon by the members.3 The association’s task is to support its member associations and, in an official capacity, represent the entire Swedish sports movement in contacts with authorities, politicians, etc.
Sports associations hold participation licenses to participate and compete in sports activities organized by their respective sports federations. Clubs may, however, transfer these rights to a wholly or partially owned joint stock company under certain conditions; for example on the condition that the sports association holds the majority of votes at the joint stock company’s general meeting (the 51 percent rule) and that the joint stock company is prohibited from transferring the sports rights to third parties.4 Many sports clubs with professional elite sports activities, such as the top clubs in football and ice hockey, have taken advantage of this opportunity to have their elite teams in a separate legal entity, which can attract financial investors from private companies. So far, only one of these limited companies, AIK Fotboll, has listed its shares on the public market.
The highest authority in Swedish sport in all Olympic matters is the Swedish Olympic Committee (SOC). It consists of 41 national Olympic sports federations as well as 15 sports federations recognized by the International Olympic Committee. The main responsibility for developing individual sports rests with the appropriate dedicated sports federations, but the SOC aims to strengthen the work of these federations.
ii Corporate governance
Swedish law does not prescribe special corporate governance rules for sports clubs or sports governing bodies. Sport has historically received significant government support, but the governance of sport has been semi-autonomous in relation to the state and therefore self-regulation has been the norm rather than regulation by the state. But the governance of sport has been subject to professionalisation, commercialization and globalisation, as in the rest of the world. Therefore, sports governance in Sweden (including corporate governance) has undergone a period of transformation. If an organization is formed as a limited company, it will need to comply with the Companies Act (2005:551) (the Companies Act). Listed limited companies are also subject to special rules and recommendations on corporate governance, such as the Swedish Code of Corporate Governance.5 The code can be applied voluntarily by non-listed companies.
iii Corporate responsibility
Swedish law contains no special legal provisions for liability for managers and officials in sports clubs or sports governing bodies. Most sports organizations are structured as non-profit associations and in some cases as limited liability companies. The board is responsible for organization and management of the organization’s activities. The board must continuously assess the organization’s financial situation and ensure that the association’s or company’s organization is structured in such a way that the accounting, asset management and the financial situation in the organization in general are followed up in a safe manner. The board is also the organization’s official representative body and has the authority to sign on behalf of the organization.
A board member or officer of a non-profit association may be held liable for damage he or she causes the organization (or its members or shareholders) intentionally or negligently in the performance of his or her duties. The general rules of the Limited Liability Companies Act apply to sports associations that are organized as limited liability companies. According to the Companies Act,6 a company member, a board member or a managing director may be liable for damage that he or she causes the company (or a shareholder) intentionally or negligently in the performance of his or her duties. Board members are primarily responsible for the actions and omissions that fall within the scope of the board’s responsibility. Board members can be held liable for acts performed by an officer of the organization in the day-to-day management if they have neglected their duty of care. The level of care expected of board members depends on various factors, such as the type of business, the division of labor between the board members and the relevant board member’s qualifications and experience. Board members are generally obliged to stay informed about the association’s financial situation and make decisions based on sufficient information. They must also respond to warning signals, such as liquidity problems. Directors are often entitled to rely on information gathered by officers and others, provided they have no reason to suspect that the information is incorrect.
A board member and an official in an organization are similarly liable for damage to third parties that he or she intentionally or negligently causes by violating the association’s statutes or the provisions of the Companies Act. A board member may also be subject to a wide range of additional provisions in specific legislation, for example related to accounting, annual accounts, tax payments or environmental issues. Directors and officers of an organization may also incur criminal liability under certain provisions of the Companies Act and for a number of offenses under the Penal Code, such as credit fraud, embezzlement, breach of trust and bribery.
Insurance against liability exposure for directors and officers can be obtained and is quite common. The coverage, limit and premium of the policies may differ between different insurers and most policies are usually ‘claims made’ policies.
The dispute resolution system
in Access to Courts
There are no established principles in Sweden for when the general courts can try and decide on lawsuits in connection with decisions by the governing bodies of sports; for example decisions on disciplinary sanctions. In general, public courts are restrictive in challenging decisions of the sport’s governing body related to the sport’s specific rules and there are very few court cases on this issue.7 However, a general court can overturn a decision by a sports governing body if the decision entails at least some financial consequences for the athlete or if the decision is based on manifestly unreasonable circumstances, such as discrimination based on race or religion. In the absence of an agreement to arbitrate, public courts have jurisdiction over all disputes outside the specific rules of the sport, such as labor disputes or disputes related to commercial agreements, such as sponsorship, venue or trade agreements.
Arbitration outside the public court system is the preferred method for dispute resolution within the Swedish sports sector. A general court may not, over a party’s objection, decide a question which, according to an arbitration agreement, must be decided by arbitrators. A party must invoke an arbitration agreement at the first opportunity as a party to its substantive action in court. In this case, the court will dismiss the legal proceedings, unless the arbitration agreement is invalid.8
ii Sports Arbitration
Disputes concerning matters over which the parties have unrestricted disposal rights may by agreement be referred to arbitration. The arbitration agreement may refer to future disputes relating to a legal relationship specified in the agreement. The dispute may also concern the existence of a certain fact.9 As mentioned, the general court may not, over the objection of a party, decide a question which, according to the arbitration agreement, must be decided by arbitrators.10
The use of arbitration is very common in the Swedish sports sector. In accordance with the Swedish Sports Confederation’s statutes, sports federations, clubs and athletes are obliged to settle their disputes through arbitration and disputes may not be taken to public court. Each dedicated sports association has its own arbitration board, with the Supreme Sports Court as the final instance.11 The Supreme Sports Committee processes appeals from sports-related decisions and disciplinary sanctions announced by the sports federations. The Supreme Sports Tribunal also serves as the second instance for appeals against decisions made by the Anti-Doping Panel based on the Anti-Doping Regulations.
During or prior to the pendency of a dispute before arbitrators, and regardless of the arbitration agreement, a state court may issue orders regarding security measures within its jurisdiction.12
An arbitration award can only be declared invalid or set aside in whole or in part by a general court under certain special conditions.13
iii Enforceability
A Swedish arbitration award is enforceable as a court judgment following a decision by the Crown Bailiff.14 Swedish arbitration awards can only be challenged on certain formal grounds (e.g. if it involves the determination of an issue which according to Swedish law may not be decided by arbitrators, or if the arbitration award is clearly incompatible with the basic principles of the Swedish arbitration legal system).15
In accordance with the 1958 New York Convention, to which Sweden is a party, arbitration awards are recognized and enforceable in most countries. Foreign arbitration awards may be enforced in Sweden upon application to the Svea Court of Appeal. Enforcement may only be refused on certain formal grounds. If the Court of Appeal approves the application, the judgment is enforced as a final judgment.16