In review: sports governance and dispute resolution in China

All questions

Organisation of sports clubs and sports governing bodies

i Organisational form

In China, sports governing bodies mainly include administrative bodies responsible for sports administration,2 sports administrative centres3 and sports-industry social organisations.4 Administrative bodies take the form of governmental legal persons,5 sports administrative centres take the form of public institution legal persons6 and sports-industry social organisations take the form of social organisation legal persons.7

Most professional sports clubs in China are registered as limited liability companies8 or joint-stock limited companies,9 while amateur sports clubs may choose to take the form of a limited liability company, joint-stock limited company, private non-enterprise entity10 or non-legal person organisation.11

ii Corporate governance

While there are no governance laws and regulations that apply exclusively to sports organisations in China, sports organisations are subject to relevant governance rules applicable for their respective organisational forms stipulated in relevant laws and regulations including but not limited to the Civil Code of the People’s Republic of China, the Interim Regulations on Registration of Public Institutions, the Regulations on Registration and Administration of Social Organisations, the Company Law of PRC, the Interim Regulations on Registration and Administration of Private Non-enterprise Entities, the Sports Law of PRC, the Anti-Doping Regulations, the Measures for Anti-Doping Administration and the Criminal Law of PRC.

The provisions regarding organisational structure, use of funds, financial management system, liabilities and responsibilities for different legal entities in China stipulated in the above-mentioned laws and regulations apply to sports organisations. In addition to the relevant laws and regulations, the rules regarding good governance of sports organisations are primarily provided in the constitutions, by-laws, disciplinary codes and other internal regulatory documents of sports organisations.

iii Corporate liability

As sports organisations in China are mainly organised in the form of legal-person entities such as companies, the general provisions regarding the liability of legal representatives, directors, supervisors and senior management officials stipulated in the Civil Code,12 the Company Law13 and other laws and regulations are equally applicable to sports organisations. For example, if the legal representative of a sports organisation causes damage to a third person in the performance of duties, the legal person organisation may, after assuming civil liability for such damage, claim reimbursement from the legal representative at fault.14 And the controlling shareholder, actual controller, directors, supervisors and senior management officials of a sports organisation formed as a company shall be liable for damages caused to the organisation through taking advantage of affiliations.15

The Sports Law also stipulates that if a sports organisation violates the provisions of this Law, the responsible leading personnel and directly liable personnel may be sanctioned accordingly,16 including a four-year or lifelong ban on sports administration and athlete-supporting work, removal from office, dismissal and other applicable sanctions.17

If the sports organisation as an organisational unit commits the crime of accepting bribes, offering or soliciting bribes then, in accordance with the relevant provisions of the Criminal Law, the directly responsible supervisor and other personnel who are directly held responsible for the crime will also be held criminally liable.18

If the manager or officer of a sports organisation is a civil servant or a leader of a wholly state-owned or state-controlled professional sports club, the provisions of the Civil Servants Law and the Regulations on the Integrity of Leading Personnel of State-owned Enterprises19 would also apply. The manager or officer of a sports organisation will be held criminally liable for any acts or omission constituting a crime under the Criminal Law, or otherwise be given a warning, a demotion or downgrade or be dismissed or removed from office for any misconduct that does not constitute a crime.20

The dispute resolution system

In China, decisions made by sports organisations, athlete management authorities, sports events organisers and sports administrative departments (sports administrative bodies) against athletes or clubs can be remedied through internal appeal procedures, sports arbitration, reconsideration application to the General Administration of Sport of China or administrative litigation.

i Access to courts

An athlete or a club may file for administrative litigation in the competent people’s court if they believe that an administrative penalty decision made by a sports administrative body infringes their lawful rights and interests.21 In addition, civil disputes such as contractual disputes (e.g., sponsorship contract disputes) and sports-related tort disputes between athletes, clubs and sports governing bodies can be brought before a civil court.

ii Sports arbitration

The China Commission of Arbitration for Sport (the Commission of Arbitration for Sport) is currently authorised to accept the following cases submitted according to arbitration agreements, constitutions of sports organisations and rules of sports events:

  1. disputes arising from objections against decisions made by sports organisations, athlete management authorities or sports events organisers regarding disqualification, cancellation of competition results, suspension, and other sanctions in accordance with anti-doping or other administrative regulations;
  2. disputes arising from athlete registration and exchange; and
  3. other disputes arising during competitive sports activities.22

However, arbitrable disputes under the Arbitration Law23 and labour disputes under the Labour Dispute Mediation and Arbitration Law24 are excluded from the scope of sports arbitration.

The requirements for a valid arbitration agreement include:

  1. an arbitration clause is specified in a contract or an agreement with the intention to arbitrate reached before or after a dispute arises; and
  2. the arbitration agreement must be concluded in writing.25

In sports arbitration, parties may apply for interim measures in accordance with the specific procedures established by the Commission of Arbitration for Sport.26

iii Enforceability

Decisions issued by internal bodies of national sports associations such as the arbitration committees or dispute resolution committees may be enforced through the provisions of disciplinary code of such associations.

Where a party refuses to comply with the effective award or ruling of the Commission of Arbitration for Sport or the people’s court, the other party may apply to the people’s court with jurisdiction for enforcement.27

If there is a genuine error in the application of laws or regulations, or if the matter adjudicated does not fall within the scope of jurisdiction of sports arbitration, the parties may apply to the intermediate people’s court where the Commission of Arbitration for Sport is located to revoke the arbitral award.28 For a court ruling that has taken effect, if a party believes that there is circumstance that qualifies for a retrial such as an error in the application of law, it may apply to the people’s court at the next higher level for a retrial.29

In the enforcement process by the court, according to the relevant provisions of the Civil Procedure Law, parties and interested parties who believe that the act of enforcement to be in violation of laws may submit written objections to the people’s court responsible for enforcement,30 and a third person who is not a party to the case may also submit written objections to the subject matter of the enforcement.31

Dispute resolution system

Organisation of sports events

i Relationship between organiser and spectator

While there is usually no formal written contract between the event organiser and the spectator, a contractual relationship is formed through the sale and purchase of tickets. However, as consumers of sports event-related services, the fundamental rights of spectators are protected by various laws including the Civil Code (Article 1198 on the event organiser’s obligation to ensure safety), the Consumer Rights Protection Law32 and the Personal Information Protection Law (which imposes obligations on the event organisers regarding the reasonable collection and use of personal information of ticket-purchasing spectators).33

On the other hand, the event organisers may impose restrictions on ticket resale, access to venue, use of the facilities, personal belongings, photography, filming and live-streaming of the event through the publication of notices of ticket purchase and spectator guidelines during sales of tickets.

ii Relationship between organiser and athletes or clubs

The relationship between the event organiser and the athlete or club can be established by the signing of agreement. If the athlete or club is a member of the event organiser, their relationship may be governed by the organiser’s constitution.

If there is no signed agreement between the event organiser and the athlete or club, and the athlete or club is not a member of the event organiser, the relationship between the organiser and the athlete or club will be subject to the relevant provisions of the Civil Code, the Sports Law and the Regulations on the Administration of Sports Event Activities.

iii Liability of the organiser

As a contractual relationship exists between the event organiser and the spectators, if the event organiser fails to fulfil its contractual obligations such as provision of spectator services, the event organiser shall be liable for breach of contract and must adopt remedial measures or compensate for damages according to the Civil Code34 and the Consumer Rights Protection Law.35 If, during the course of the event, the event organiser fails to fulfil its safety obligations, resulting in personal injury to spectators,36 or if the event organiser violates the provisions of the Personal Information Protection Law, it shall assume tort liability.37

If the conduct of the organiser involves aggravating circumstances or causes serious consequences (e.g., violation of safety regulations resulting in mass casualty or other serious consequences) meeting the constituent elements of an offence under the Criminal Law, the organiser might be held criminally liable in accordance with the Criminal Law.38 The investigation of criminal liability is generally conducted by the public security authorities and the case will be prosecuted by public procurators. If the case involves dereliction of duty39 by an employee of a state organ, it can also be investigated by the Supervisory Committee or directly by the procuratorial authorities.

iv Liability of the athletes

Athletes may be held civilly or criminally liable for causing personal or property damage to other athletes or spectators. However, considering the unique nature of sports, and based on the principle of assumption of risk stipulated in Article 1176 of the Civil Code, athletes are only held civilly liable for personal or property damage caused to other athletes when they intentionally commit an act of infringement or cause harm through gross negligence. If an athlete, intentionally or with gross negligence, causes serious consequences meeting the criteria for conviction for intentional injury, intentional homicide, negligent infliction of serious injury or wrongful death due to negligence as stipulated in the Criminal Law, they may be held criminally liable.40

With regard to personal injury or property loss suffered by spectators due to athletes’ actions, in accordance with Article 1198 of the Civil Code, athletes shall assume tort liability, while the operators and managers of the sports venue together with the sports event organisers bear supplementary liability.

v Liability of the spectators

If a spectator fails to comply with the regulations in relation to the management of the event set by the event organisers or sports venue managers resulting in personal or property damage to athletes, event staff or other spectators, they shall assume tort liability.41 If the circumstances are severe or lead to serious consequences, they may also be held criminally liable. In particular, according to the Sports Law, the collection or dissemination of images, audios or videos of sports events for profit without the permission of the relevant rights holders such as the event organisers constitutes a tort,42 and in the event that large amounts of profit are obtained through their infringement or there exists other aggravating circumstances, it may constitute the crime of copyright infringement under the Criminal Law.43

vi Riot prevention

Several laws and regulations such as the Measures for the Administration of Sports Events and Regulations for the Safe Management of Large-scale Mass Events contain provisions aimed at the prevention of riots from the perspective of sports event approval and event management.44 For example, for large sports events with expected participation of more than 1,000 people or held across different provinces, it is necessary to apply to the public security authorities for a safety permit according to the Regulations for the Safe Management of Large-scale Mass Events.45 The Measures for the Administration of Sports Events also provide that the event hosts and organisers are obligated to strengthen the management of the viewing environment, to maintain order on the field and to prevent incidents such as fights, crowding and trampling.46

Commercialisation of sports events

i Types of and ownership in rights

In China, the sports-related rights available for commercial exploitation primarily include title sponsorship of the event, use of the event name and logo, broadcasting rights of the event, venue rights (e.g., advertisement displayed on LED or A-boards, banners, etc., around the venue), media rights (e.g., advertising rights on tickets, programmes, promotional materials, publications and online platforms), hospitality rights (e.g., VIP seats, sponsor credentials, complimentary tickets and hospitality), as well as the development and sale of event derivatives. Typically, these commercial rights are held by the event organisers, who may authorise the event operators or third parties to develop these commercial rights.

ii Rights protection

On the one hand, protection of sports-related commercial rights can be achieved through contractual agreements. If there is a breach of the contractual terms in the process of commercial exploitation of events, the non-breaching party has rights to require the breaching party to assume default liability. On the other hand, the protection of commercial exploitation rights is also governed by a series of laws and regulations, such as the Civil Code, the Sports Law, the Copyright Law, the Trademark Law, the Anti-Unfair Competition Law, the Advertising Law, Regulations on the Administration of Special Signs and Regulations on the Protection of Olympic Symbols. If there is infringement of copyright and trademark rights, the injured party can request the infringing party to bear liability for the infringement in accordance with the provisions of the Civil Code, the Copyright Law and the Trademark Law.47 The injured party may also apply to the people’s court for a pre-litigation interim injunction to prevent irreparable damage to their legitimate rights and interests. If the infringement constitutes unfair competition, the relevant party can be held liable in accordance with the Anti-Unfair Competition Law and other applicable regulations.48,49

iii Contractual provisions for exploitation of rights

When drafting terms for the licensing of commercial rights of sports events, it is important to clarify the scope, geographical coverage, duration of such licence and whether or not the licence will be exclusive. The parties shall lay out specific terms on rights and obligations, revenue distribution, intellectual property rights, default liability and dispute resolution mechanisms. Furthermore, the addition of terms that explicitly prohibit ambush marketing50 should be considered if there is a requirement to do so.51,52

Professional sports and labour law

i Mandatory provisions

The Sports Law, the Labour Law and the Labour Contract Law do not contain any relevant provisions on labour contracts for professional athletes. There remains controversy in judicial practice over whether the employment contract between a professional athlete and a club can be categorised as labour contract. Some mandatory provisions on employment contracts of professional athletes are scattered in the internal regulations of and model employment contracts adopted by sports associations. For example, the Chinese Basketball Association (CBA) currently utilises six types of Employment Contract for Domestic Players, divided into five categories,53 the starting date for signing each type of contract is specified differently. Articles 43–47 of the Regulations on Selection, Salary Cap, Employment and Transfer Management of CBA League Players for the 2022–2023 Season contain mandatory provisions on the types of players to whom the five categories of contracts apply, the contracting period, the minimum basic salary standard and the conditions for termination of contracts, respectively. In football, the Chinese Football Association set out limits on players’ average salaries and bonuses and the penalties for exceeding the limits in documents such as the Notice on the Issuance of Financial Engagement Indicators for Division II League Clubs for the 2021–2023 Season, while Chapter VIII of the Regulations on the Status and Transfer of Players of the Chinese Football Association specifies that in order to maintain the stability of work contracts, the minimum duration of the work contract is one year and the maximum is five years.

ii Free movement of athletes

On 1 August 2022, the CBA issued the CBA Company’s Announcement on Information Related to the 2022–2023 CBA League Season, which stipulates that each team may register a maximum of four foreign players in the new season and may include a maximum of four foreign players on the roster per game. The Announcement imposed detailed restrictions on the number of foreign players allowed per session during the regular season and playoffs.

Article 53 of the Regulations on the Status of Players and Transfers of the Chinese Football Association stipulates that Super League and Division I League clubs may register a maximum of four foreign players in each season (and incoming transfer of foreign goalkeepers has been prohibited since 30 October 2000), that the clubs are only allowed to field three foreign players at the same time in a match and that each club may replace a maximum of one foreign player in a season.

iii Application of employment rules of sports governing bodies

The incorporation of employment-related provisions from the regulations of sports-governing bodies into employment contracts with athletes is allowed, provided that such provisions do not violate Chinese laws and administrative regulations.

Sports and antitrust law

According to the provisions of the Anti-Monopoly Law54 and anti-monopoly cases in the Chinese sports sector,55 whether or not a dominant market position has been abused to exclude or restrict competition is the key element in determining whether or not the Anti-Monopoly Law has been violated. Sports associations and other undertakings with a dominant market position in the sports industry in China (including natural persons, legal persons and non-legal person organisations engaged in the production or operation of goods or the provision of services) should comply with the relevant provisions of the Anti-Monopoly Law and should not abuse their dominant market position to exclude or restrict competition (for example, by restricting the counterparty to a transaction from transaction with others or by restricting such counterparty so that they may only deal with its designated undertakings without justifiable reasons, or applying differential treatment to trading counterparties on the same conditions in terms of transaction prices and other transaction conditions without justifiable reason).

Sports and taxation

According to the provisions of the Individual Income Tax Law, both Chinese and foreign athletes are required to pay individual income tax on salaries and remuneration for labour services obtained within China for participating in events (including international events) or engaging in other activities.56 However, prizes awarded from the Provincial People’s Government, a ministry of the State Council or a unit of the Chinese People’s Liberation Army at or above corps level, or from a foreign organisation or international organisations, and subsidies or allowances granted in accordance with state regulations are exempt from personal income tax.57

According to the Enterprise Income Tax Law, a club, whether Chinese or foreign, can be subject to enterprise income tax in China.58 The taxable amount of income will be the balance after deducting non-taxable income, tax-exempt income, various deductions and permitted remedies for losses of the previous year from the total amount of income (including but not limited to income from the sale of goods, income from the provision of labour services, rental income, income from royalties and income from donations) derived by the club through participating in events (including international events) or engaging in other activities within China. Furthermore, according to the Provisional Regulations on Value Added Tax (VAT), both Chinese and foreign clubs are subject to VAT for sale of services or intangible assets within China.59

For foreign athletes or clubs working or operating in China, if they are also residents of a country or region that has entered into a double tax treaty with China, they may enjoy exemption from double taxation in accordance with the provisions of the treaty.60

Specific sports issues

i Doping

China has established an anti-doping legal system based on the Sports Law, supported by a series of administrative regulations and departmental rules such as the Anti-Doping Regulations issued by the State Council, the Anti-Doping Rules and the Measures for Anti-Doping Administration issued by the General Administration of Sport of China. The promulgation of Amendment (XI) to the Criminal Law created a new offence of obstructing doping administration, further increasing the intensity of the fight against doping.

The Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in Criminal Cases of Smuggling, Illegal Operation and Illegal Use of Doping Agents, which came into effect on 1 January 2020, offered explanations on which specific crimes can be applied to offences involving doping, and promoted the use of criminal justice to combat doping-related offences. According to the Judicial Interpretation, athletes, athlete support personnel or other persons who commit doping-related offences may be convicted and punished for the crime of smuggling, illegal operation, abuse, organising examination cheating, food safety violation and dereliction of duty if the required criteria for such crimes are met.

Amendment (XI) to the Criminal Law, which came into effect on 1 March 2021, provides, by adding the crime of obstructing doping administration,61 that anyone who induces, instigates or deceives an athlete to use performance-enhancing drugs to participate in a major domestic or international sports competition, or who provides performance-enhancing drugs to an athlete knowing that the athlete is participating in such a competition, under serious circumstances, shall be sentenced to fixed-term imprisonment of not more than three years or detention, and shall be fined. For anyone organising or forcing athletes to use performance-enhancing drugs to participate in a major national or international sports competition, a harsher penalty (within the spectrum stipulated in the preceding paragraph) will apply.

ii Betting

Sports betting is prohibited in China by the Sports Law.62 Although neither the Public Security Administration Punishment Law nor the Criminal Law sets out special provisions for sports betting activities, sports betting falls under the umbrella of gambling activities that are all administered and sanctioned by the relevant public security authorities and the judicial authorities.

Article 70 of the Public Security Administration Punishment Law provides that anyone who provides conditions for gambling for profit or participates in gambling with a large amount of money shall be punished with detention for not more than five days or a fine of not more than 500 yuan; if the circumstances are serious,63 the punishment shall be detention for 10–15 days and a fine of 500–3,000 yuan. Article 303 of the Criminal Law sets out three gambling-related offences, namely the crime of gambling, the crime of opening a casino and the crime of organising and participating in gambling abroad. These offences carry a range of sentences from probation to imprisonment for a term of not less than five years but not more than 10 years depending on the severity of the offence, and a fine must be imposed at the same time.

In response to the phenomenon of cross-border betting, the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security formulated the Opinions on Certain Issues in Handling Cases of Cross-border Gambling Crimes in 2020, which clarified issues such as the classification and jurisdiction of cross-border gambling crimes, in order to further strengthen the effectiveness of the crackdown on cross-border gambling and especially cross-border online gambling offences. In addition, the Ministry of Public Security has also established a comprehensive reporting platform for combating cross-border gambling to facilitate the reporting and gathering of intelligence.64

Although sports gambling is explicitly prohibited by law, one legal channel remains for sports betting through the purchase of sports lottery tickets from state-licensed lottery sales agencies.65 The Sports Lottery Administration Centre of the General Administration of Sport of China, as the sports lottery issuing agency established by the General Administration of Sport of China, is responsible for issuing and organising the sale of sports lottery tickets nationwide.66

iii Manipulation

Match-fixing is primarily regulated within the sports industry and sanctioned by different competent authorities depending on the status of the person committing the offence. The Sports Law explicitly prohibits organisers of sports events, athletes, coaches and referees from committing fraud or deception, and specifies the type and extent of punishment applicable for state organs and their working staff, athletes, coaches, referees and organisers of sports events.67

Match-fixing itself is not regulated by the criminal law system in China; however, if match-fixing is motivated by financial gain, the actions of the perpetrators in the process of match-fixing may constitute crimes such as gambling, bribery and corruption under the Criminal Law.

iv Grey market sales

Article 52 of the Public Security Administration Punishment Law provides that anyone who forges, falsifies or engages in the scalping of bus tickets, ferry tickets, airline tickets, tickets for cultural performances, sports tickets or other tickets or vouchers of value shall be punished with detention for 10–15 days, and may be fined not more than 1,000 yuan. If the circumstances are less serious, the punishment shall be detention for not less than five days and not more than ten days, and a fine of not more than 500 yuan if applicable. Therefore, under Chinese law, the selling of tickets to sports events in the ‘grey market’ is considered to be an act of obstruction of social administration and is sanctioned by the public security authorities.

The year in review

In June 2022, the revised Sports Law was adopted, marking the continuous improvement of the rule of law for China’s sports sector. The newly revised Sports Law provides a sports arbitration system, and in December 2022, the General Administration of Sport of China promulgated the Rules for the Organization of the China Commission of Arbitration for Sport and the Rules for Sports Arbitration, signifying the establishment of a sports arbitration system in China, which will facilitate the expeditious, convenient and economical resolution of sports disputes.

At the end of 2022, the Supreme Court issued Guiding Case No. 201, Dragan Kokotovic v. Shanghai Envoy Catering Management Co, Ltd and Lu En (labour service contract dispute). According to the ruling of the case, the dispute resolution decision made by the internal dispute resolution body of an international sports organisation is not considered as a foreign arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and even if the parties agree to submit the dispute to the Court of Arbitration for Sport for resolution, if the conditions for initiating arbitration agreed by the parties are not met, the people’s court shall have jurisdiction over the dispute in accordance with the law. This is an important guideline for the People’s Court in adjudicating sports-related disputes with an international aspect.

Outlook and conclusions

The establishment of China’s sports arbitration system and the internal dispute resolution mechanism of national sports associations is crucial for the timely, fair, economical and efficient resolution of sports disputes and the protection of the legitimate rights and interests of the parties, providing parties to sports dispute cases with an important means of resolving sports disputes within China and helping to increase the number of sports dispute cases resolved within China. The establishment of internal dispute resolution mechanisms is of great significance in promoting the resolution of sports disputes within the industry. However, as the Chinese sports arbitration system has just been created, the system is not yet perfect and there are many issues that need to be further studied and refined, such as the scope of jurisdiction of sports arbitration.

With the covid-19 pandemic coming to an end, the Chinese sports industry is beginning to regain its vitality, which will have a positive effect on the development of rule of law in sports. We hope and believe that the rule of law in sports in China will be further improved to protect the healthy and sustainable development of the sports industry in China.

Outlook

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