Sailing away from judicial interference: arbitrating the America's Cup.

• Author: Schultz, Thomas

The America's Cup is one of the most prestigious and oldest sports events in the world. The stakes involved are huge, be it only in financial terms. Moreover, it is organized in an almost entirely autonomous fashion, in the sense that the respective defender of the Cup (the sailing club that last won the Cup), along with its first challenger are almost completely free to organize the competition as they see fit, the only real constraint being a 150-years old two-pages document. The combination of this liberty and the stakes just mentioned lead, over the years, to a series of interesting adjustment as regards the way dispute arising in the context of the Cup are resolved. From long and bitter litigation in connection with Dennis Conner's famous catamaran, the sailing community has learned the importance of providing for extra-judicial methods and bodies. These methods and bodies have, over the last editions of the America's Cup, gradually evolved, thereby revealing likely strong points and pitfalls in the setting up of ad hoc dispute resolution.

This article first introduces the various documents and rules that govern the Cup. It then goes back over the court proceedings that sparked the intention to equip this sporting event with private dispute resolution mechanisms. Thereafter, it presents the three different dispute resolution bodies that accompanied the five last editions of the Cup. Finally, this article reviews the jurisprudence (13 arbitral awards so far) of the current edition of the Cup.

Introduction

The fact of calling to mind the America's Cup unavoidably conjures up scenes of awe-inspiring boats and regattas, images of a grandiose event and a noble sport, and the notion of a particularly high-stakes competition from which radiates an ideal of sportsmanship. But below these flamboyant aspects of the event, the Cup has a more shadowy history of disputes and dispute resolution. Dispute resolution, in reality, is entrenched in the very history of the America's Cup. The very race that led to the creation of this 154-years-old competition gave rise to a protest because a vague rule had been taken advantage of. (1) Since that time, the competition has been punctuated with protests, court actions and arbitral proceedings.

It is the effort to reconcile these two sides of the America's Cup that is interesting to the lawyer. It is interesting because the need emerged to provide the Cup with a dispute resolution process able to handle the inevitable disputes in an honorable fashion. A system was needed that prevents the competition from becoming a battle on the complex rules of sailing rather than a contest at sea, while ensuring that the inevitable disputes do not cripple the spirit of the race because of unsatisfactory resolutions. In this regard, the America's Cup shows an interesting history of experiments and gradual innovations and improvements, as a core feature of the Cup is that its respective organizers, which have a large liberty to do as they think fit, have in recent decades come to change at a frequency quite unlike other sports. These successive changes and the factors of these changes reveal many valuable insights into the field of dispute resolution in sports, but also into ad hoc dispute resolution mechanisms in general.

This article seeks to go back quickly over this evolution and to present in further detail its outcome so far: the America's Cup Jury, which has a broad and radically exclusive jurisdiction over the current 32nd edition of the Cup.

This article moves in three parts. Part I presents the history of the Cup that led to the constitution of specific dispute resolution bodies for this competition (I. Historical and legal background). Part II focuses on these dispute resolution bodies and provides an analysis of the global setup and procedures of the three different ad hoc bodies that the Cup has known in its history, with special emphasis on the current system, the America's Cup Jury (II. Dispute resolution bodies). Part III reviews the 13 decisions that the Jury has rendered so far (III. The Jury jurisprudence related to the 32nd America's Cup).

1. Historical and legal background

   Although the most famous heritage of the Great Exhibitions certainly is the Eiffel tower, the America's Cup may increasingly deserve a good second place. During the 1851 Exhibition, the schooner "America", built and owned by a syndicate of members of the New York Yacht Club (NYYC), entered a race around the Isle of Wight against 16 British yachts. On August 22nd, before the eyes of a disappointed British Queen at Cowes, (2) in England, the lone American vessel won the race hands down and earned a 100 [pounds sterling] ornate silver cup prize, sometimes called the "Auld Mug". The syndicate, back in New York, entrusted their yacht club with the trophy, which was to be "preserved as a perpetual Challenge Cup for friendly competition between foreign countries", becoming in turn the "property of the [winning] Club". The competition, not exactly "friendly" at all times, became rapidly known as the "America's Cup". (3)

   Thus was born a sporting event associated with many superlatives: many today consider it the third most important sporting event in the world (after the Olympic Games and the football world championships); (4) it is said to be the world's oldest sports trophy (it is even 45 years older than the modern Olympic Games); it is probably, with Formula One racing, the sports competition that requires the most significant financial investments (5) (which may exceed USD 100 million per team).

   From 1851 to the 1960's, the Cup was in essence a series of desperate attempts of the British to recover the Cup. Sir Thomas Lipton, for instance, challenged the NYYC five times in 31 years with his yachts Shamrock I - Shamrock V, but never returned home a winner. (His persistence in the face of failure made him being referred to as "the best of all losers", but it also made his tea brand famous throughout the world.) The Australians then joined in and, in 1970, the concept of multiple challengers was introduced. A decade later, in 1983, the Royal Perth Yacht Club, with their famous winged keel yacht, wrested the Cup from the NYYC, where it had stayed for 132 years, in an event watched by 500 million TV viewers. The Cup went back to the US in 1987 (San Diego Yacht Club), where it was successfully defended in 1988 and 1992. It was lost in 1995 to the Royal New Zealand Yacht Squadron, and it was successfully defended down-under once, in 2000. In 2003, it was then lost to the Societe Nautique de Geneve and Alinghi, the team from the only country ever to participate in the Cup with no access to the sea (but which had employed Russel Coutts, the illustrious New Zealand helmsman who had led his country to victory in the previous editions). Even this victory was marked by the intervention of a dispute resolution body, as Alinghi, because of Switzerland's absence of access to the sea, had to obtain a decision from the Arbitration Panel for the America's Cup, 31st edition, to be allowed to participate. (6) Alinghi's victory brought the Cup back to Europe for the first time since its creation.

   All the Yacht Clubs that have held the Cup, as we will see, have contributed to the progressive amendment of the documents and rules that govern the Cup and the setup of the dispute resolution bodies for the event.

   1. The Deed of Gift and its sources of interpretation

      When the America syndicate entrusted the NYYC with the silver Cup, it did so under the terms of a trust deed called the "Deed of Gift", (7) which established the fundamental rules of the America's Cup. As it gave rise to a series of interpretation disputes in the years following its first draft in 1857, it was amended several times until 24 October 1887, at which time the last surviving member of the America syndicate-wishing to leave a mark on the grand competition he had contributed to found-put pen to paper and bequeathed its final version to the sailing community. (8) A document of only two pages, it still governs the basic characteristics of the Cup today.

      The spirit of the fundamental rules laid out in 1887 is basically twofold. First, the challengers of the Cup are to be slightly disadvantaged-this led to rules providing for instance that the defender of the Cup chooses the place of the competition and that all vessels must be built in their home country and be sailed "on their own bottom" from their place of origin to the race venue. Second, additional rules setting out the details of how the race is organized-in recent times they came to be called the Protocol-are to be drafted for each Cup challenge by mutual consent between the holder of the Cup and the first challenging syndicate, called the Challenger of Record.

      Some important amendments and interpretations to the Deed have been made judicially-by the Supreme Court of New York-since the middle of the past century. (9)

      Significant amendments are for instance that, in 1956, the NYYC obtained an order from the Supreme Court of New York that reduced the minimum load water-line length set out in the Deed of Gift to its present 44 feet (thus opening the race to the at the time internationally prevailing 12-meter class) and to eliminate the requirement to sail the vessels to the race venue on "their own bottom". This amendment revived interest in the race to the point that elimination series (the "Challenger Selection Series") had to be introduced, the winner of the series being entitled to sail a match against the holder and defender of the Cup.

      In 1985, the Royal Perth Yacht Club of Western Australia, who had won the Cup in 1983, obtained an order from the same New York court that amended the Deed of Gift so as to allow the competition to take place in the southern hemisphere.

      The most important interpretation of the Deed by the New York Supreme Court was to declare, in the 1989 case known as Mercury...