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Monday, September 18, 2006
New Developments in Russia's Battle with the NHL

A month ago, I posted a story on Russian hockey phenom Evgeni Malkin, who bolted from his Russian professional hockey league team, the Metallurg Magnitogorsk. At that time, it was widely-believed that Malkin, who was already under contract for this season with the Metallurg, would quickly sign a multi-million dollar contract with the Pittsburgh Penguins, who drafted Malkin with the No. 2 overall pick in the 2004 draft. Well, since my post last month, Malkin signed a contract with the Penguins worth up to $3.8 million. And last Saturday, Jason Cato and Karen Price of the Pittsburgh Tribune-Review reported that a Russian arbitration tribunal issued a court order on Friday prohibiting Malkin "from performing for any other hockey club in the Russian Federation or in any other country." ("Arbitration committee rules against Malkin")

Malkin's agent, J.P. Barry of CAA Sports, says he's not surprised by the decision and that they will review the tribunal's ruling with their lawyers before making a decision about whether to appeal:

"It's a tribunal of the Russian Hockey Federation. Obviously, there's still no transfer agreement (between the NHL and Russia), and they're not going to agree with what's taken place to date. ... We'll have to see what their approach will be on this side of the ocean."
I don't think it's any secret what Russia's "approach will be on this side of the ocean." Mettalurg will first probably try to enforce the tribunal's order here in the United States pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In January, the Moscow Dynamo tried to enforce a Russian arbitration award against Alexander Ovechkin of the Washington Nationals. The United States District Court for the District of Columbia held in favor of Ovechkin because the Russian team was trying to enforce an agreement to arbitrate based upon merely an "exchange of letters" that transpired subsequent to the expiration of Ovechkin's player contract with the Dynamo. Dynamo v. Ovechkin, 412 F.Supp.2d 24. That precedent will not help Malkin because Mettalurg has a signed player contract with Malkin.

According to Cato and Price, the NHL has told its clubs that they are permitted to sign Russian players who give at least two weeks' notice to their Russian teams, relying upon general Russian labor laws. But Alexander Berkovich, a U.S. lawyer retained by Mettalurg, says that contracts of professional athletes in Russia are governed by Russian Federal Sports Law No. 80-FZ, specifically Section 26, which states that athletes may only transfer to another team, either in Russia or abroad, "after the expiration of the term of the Sports Activities Contract and fulfillment of all obligations stipulated in such contract." This would seem like the right result, because as I noted in my post last month, if the law were otherwise, it would make all multi-year terms in Russian professional sports contracts superfluous.

The fact that there is no transfer agreement in place probably hurts Malkin's and the Penguins' position more than it helps them because it essentially means that the Russian Hockey Federation has not consented to the NHL signing its players who are under existing contract with Russian teams. If an NHL team signs a player to a contract with a term that overlaps with the term of a Russian contract, there is plenty of precedent that such conduct constitutes tortious interference with contractual relations, for example when the WFL was competing for players with the NFL and the ABA was competing for players with the NBA within the United States in the late 60's and early 70's. Should the NHL be treated differently under the law because the other league is located in another country?

Mettalurg is probably not the only Russian team willing to fight this one out. The Russian tribunal ruled on Sept. 9 that Andrei Taratukhin, a Calgary prospect, and Alexei Mikhonov, an Edmonton prospect, violated their contracts with the Lokomotiv Yaroslavl as well when they gave notice and left the team following Malkin's departure from Mettalurg. I predict settlement and the entering of a transfer agreement in the very near future.


Ovechkin plays for the Washington Capitals, not the Washington Nationals

Anonymous Anonymous -- 9/18/2006 8:59 PM  

I hope they won`t make the same mistake again.
Suing Malkovich is absolutely useless.
The New York Convention applies to decisions of arbitrations courts (so called treteiskie sudi in Russia) only.
The arbitration committe is not not a court of arbitration (it was constituted as a private arbitration panel) and it can not issue a court order.
I have heard the lawyer for NHL had argued the legitimacy of the given committee.
If it is true, I have to admit he is more in Russian laws than Berkovich.

Anonymous daria -- 9/19/2006 3:56 AM  


I'm not an international law expert, but the federal district court in the Dynamo case I mentioned in the post applied the Convention I mentioned in assessing the case, which involved the same arbitration committee.

But regardless, none of that has any bearing on the Russian team's claim against the Penguins for tortious interference (it only goes to the Russian team's ability to get an injunction against Malkin for breach of contract to prevent him from playing for any other team).

Blogger Rick Karcher -- 9/19/2006 12:02 PM  


Thanks for catching that. I'm a baseball guy, what do you expect?

Blogger Rick Karcher -- 9/19/2006 12:19 PM  

An agreement would be nice, but I do not see it beeing a friendly meeting of terms. From the comments coming from Russian officials, coaches, and management, they don't seem to like the fact that their players are coming to "democratic America" to play hockey.

I just don't see them aligning with the IIHF's $200,000 agreement. I think they will want more money, and more regulation (whatever that entails).

Blogger WMUpsci_student -- 9/19/2006 4:06 PM  

The New York Convention applies to decisions of any court of arbitration.

Anonymous Anonymous -- 9/28/2006 11:52 PM  

And once again: The arbitration committe is not a court of arbitration within the meaning of the Convention. It has not been constituted in a due course, in accordance with Russian legislation. Hence its decisions are not enforceable in Russia. Moreover, in Russia labour disputes are of an exclusive state courts jurisdiction.
Or American courts may enforce decisions which do not have legal effect in a state of issuance?

Anonymous Daria -- 10/02/2006 3:37 AM  

Daria, why do you think the New York Convention has a particularly narrow interpretation of what constitutes an "arbitration"? I don't recall any award being refused enforcement because it did not meet the requirement of the decision-makers being an arbitration. If this is just a question of Russian domestic law--that the panel was not duly constituted--does this have any effect for an American court? If so, under what basis?

Anonymous Anonymous -- 10/03/2006 10:25 AM  

If you have a decision by a tretskii sud in Russia, it is not enforceable in Russia under the New York convention because it is a domestic award. This is true.

However, the mere decision to now try to enforce that award in another country (such as the US) provides the arbitral decision with an international quality such that it now qualifies for enforcement under the New York convention.

Anonymous Anonymous -- 10/03/2006 1:30 PM  

Under this basis:
Article V 17

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.
As I have said in Russia labour disputes are of an exclusive state courts jurisdiction.

Next:(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

The Regulations on The Arbitration Committee state that its decisions are subject to appeal to the Court Arbitration for Sport in Russia.

Anonymous Daria -- 10/04/2006 3:27 AM  


what is your argument-

that employment disputes are per se inarbitrable under Russian law

or that because it is subject to "natural" appeal--unlike most arbitrations, the Russian Hockey arbitration is not actually an "arbitration" within the meaning of the New York Convention?

Anonymous Anonymous -- 10/18/2006 9:41 AM  

1. Employment disputes are per se inarbitrable under Russian law.
2. The Russian Hockey arbitration panel is not actually an "arbitration" within the meaning of the russian law, hence its awards are not binding.

Anonymous daria -- 10/24/2006 3:38 AM  

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