Riot Games Introduces Arbitration Mechanism for EMEA Esports Disputes – What about Art. 101 and 102 TFEU?

Introduction

Riot Games has launched a new arbitration mechanism for resolving disputes within the competitive ecosystems of League of Legends and VALORANT in the EMEA region. The system, developed with Martens Rechtsanwälte, is intended to address financial and contractual conflicts among players, teams, and coaches, promising a cost-effective, streamlined approach. Notably, while the mechanism is voluntary, it uses a closed list of arbitrators, and details of its rules have not been published yet—Esports Legal News (ELN) plans to inquire further and publish a detailed analysis once they are available.

Starting today, players, coaches and teams in Tier 1 and 2 Valorant/League of Legends can access the Dispute Resolution for Riot Games’ Esports in EMEA for a variety of issues they are experiencing, including those related to unpaid salaries, bonuses, prize money and transfer disputes.

However, the mechanism’s introduction raises important questions concerning its compatibility with EU competition law, particularly Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Analyzing this mechanism under the Court of Justice of the European Union’s (CJEU) findings in the recent ISU (International Skating Union) case helps us examine if Riot’s approach might restrict competition or abuse a dominant market position.

The arbitration framework introduced by Riot includes distinctive features meant to streamline resolution while ensuring cost-accessibility for participants:

1. Closed Arbitrator Pool: Only 14 arbitrators, chosen for their expertise in sports law and arbitration, are eligible to preside over cases. Martens Rechtsanwälte will oversee the arbitration, with responsibility for selecting arbitrators and managing independence from Riot. As David Menz from Martens explained, “The arbitration body will be a completely separate body from Riot… [Martens will] handle both team vs. team disputes and team vs. player disputes.”
2. Cost Structure and Financial Aid: The system imposes a handling fee ranging from EUR 500 to EUR 4,000, depending on the dispute’s value, as well as an arbitrator’s fee between EUR 1,000 and EUR 5,000, split equally between claimant and respondent. Recognizing financial constraints that may impact Tier 2 participants, Riot has set up a Legal Aid Fund to cover costs for those unable to afford arbitration. However, the fund’s size and eligibility criteria remain unclear, and Esports News UK has sought clarification from Riot on these specifics.
3. Process and Equity-Based Decisions: The arbitration allows only one written submission per party, with no hearing, aiming to expedite proceedings. Decisions are rendered ex aequo et bono—“according to equity”—prioritizing fairness over strict legal interpretations. Menz highlighted this equity-based focus, explaining, “If the arbitrator finds that the strict enforcement of the contractual terms would lead to an unjust and unfair result, the arbitrator may apply general principles of equity and fairness to come to a better solution.”

Given these design choices, the arbitration mechanism presents several potential benefits but also opens the door to legal scrutiny, particularly with respect to EU competition laws governing market dominance and anti-competitive practices.

The ISU Case and Its Implications for Riot’s Arbitration System

The recent ISU v. Commission case (C-124/21 P), decidedby the CJEU, provides a crucial precedent for examining Riot’s arbitration approach. The ISU case involved the International Skating Union’s rules requiring prior authorization for non-ISU events and imposing eligibility restrictions on athletes who participated in unapproved competitions. The European Commission found ISU’s rules anti-competitive, concluding they effectively limited athletes’ choices and reinforced the ISU’s dominant position. The CJEU upheld this view, emphasizing that rules which restrict participation in alternative events could distort market competition under Article 101 TFEU.

Applying this precedent to Riot’s arbitration system, three key concerns arise:

1. Article 101 TFEU: Potential Anti-Competitive Agreements: The ISU case underscored the impact of restrictive rules that prevent athletes from freely choosing between competitions. Riot’s arbitration mechanism, while nominally voluntary, might exert indirect pressure on stakeholders to use this system. Guerrero noted that Riot intends to standardize arbitration across the ecosystem, with a goal of integrating arbitration clauses in over 80% of employment contracts within a few years. Although Riot’s mechanism does not explicitly restrict access to other forums, such a goal could limit alternatives, particularly given Riot’s market influence and provision of financial aid for arbitration. A closed arbitrator pool could further reinforce the perception that Riot’s system is the default or preferred forum for resolving disputes, subtly limiting the choice of alternative venues.If Riot’s arbitration mechanism were to become a de facto standard, it might risk contravening Article 101 by limiting competition between dispute resolution systems.
2. Article 102 TFEU: Dominance and Market Power: Article 102 TFEU prohibits the abuse of dominant positions. In the ISU case, the CJEU found that ISU’s eligibility restrictions hindered athletes’ freedom to compete, an abuse of ISU’s significant control over the skating market. Riot’s arbitration system could similarly raise concerns under Article 102, given Riot’s leading role in the esports market. The closed arbitrator pool, combined with financial incentives, might create a perception that Riot is using its influence to channel disputes through its preferred mechanism. While not a direct abuse, the limited choice in arbitrator selection may lead stakeholders to question the independence and fairness of outcomes. Thus, Riot’s control over both the arbitrator pool and the terms of financial support warrants scrutiny to ensure it does not disproportionately disadvantage those who prefer to use other arbitration or litigation avenues.
3. Transparency Concerns and the Lack of Published Rules: A lack of transparency can exacerbate concerns about competitive fairness. The rules governing Riot’s arbitration mechanism have not yet been published, making it difficult for stakeholders to assess the system’s procedural safeguards and potential biases. The closed list of arbitrators, combined with unpublished procedural details, could contribute to skepticism regarding the system’s impartiality and reliability. Given Riot’s influence, full transparency about how disputes are handled and how arbitrators are selected is essential to mitigate competitive concerns and ensure trust in the system.

Financial and Procedural Concerns

The arbitration system’s variable cost structure is designed to make it accessible, especially to smaller teams or less financially resourced participants. However, reliance on Riot’s financial assistance could create an indirect economic pressure for stakeholders to use Riot’s system. While Riot’s financial aid may enhance accessibility, it could also lead participants to perceive this as a subtle form of encouragement, potentially reinforcing Riot’s influence in EMEA esports dispute resolution.

This indirect influence on stakeholders’ choices raises concerns that the system might subtly limit access to other dispute resolution venues. Moreover, the CJEU emphasized in ISU that any attempt to constrain freedom of choice or impose exclusivity indirectly could amount to a breach of Articles 101 and 102 TFEU. Riot’s arbitration mechanism, while not explicitly exclusive, could risk a similar interpretation if it is seen to influence participants toward its system rather than leaving them free to select from a competitive array of dispute resolution options.

Enforcement of Awards and the New York Convention

Enforcement of arbitration awards is a critical factor in any dispute resolution mechanism, particularly in international contexts. Riot’s arbitration awards could potentially be enforced under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Convention, to which most EMEA countries are signatories, allows for cross-border enforcement of arbitral awards, provided they meet certain criteria, such as being issued in a recognized seat of arbitration.

However, it remains unclear if Riot’s mechanism allows parties to choose the seat of arbitration, which could affect the applicability and ease of enforcement under the New York Convention. Without clarity on the seat of arbitration, stakeholders may face challenges in enforcing awards, particularly if the seat is defaulted to a jurisdiction with complex enforcement barriers.

Horyna addressed concerns over enforceability within Riot’s ecosystem, explaining, “If [a party] does not pay… [the winning party] has two options. They can either go to ordinary court… or [request Riot to enforce it]. We can then apply sporting and financial sanctions on the party, if that’s a player, coach, or team.” This internal enforcement mechanism could help ensure compliance but does not replace the need for enforceability under broader legal frameworks like the New York Convention, especially for awards that might involve stakeholders outside Riot’s ecosystem.

The Broader Impact on the Esports Industry

Riot’s arbitration initiative introduces a significant level of professionalization in EMEA esports, with potential to create contractual stability and more efficient dispute resolution. As Whalen Rozelle, Riot’s Chief Operating Officer for Esports, stated, “This initiative will better serve our players, coaches, and teams across EMEA, providing them access to legal support should they need it.” Riot’s emphasis on arbitration in player contracts also reflects a push for long-term stability, as noted by Audrey Cech, Riot’s Global Esports Rules & Compliance representative: “We want to incentivize that when someone is signing a new contract, there is this new arbitration clause… This arbitration clause is a massive advantage, in my opinion, it’s really beneficial to teams.”

Despite these positive intentions, the system’s closed arbitrator pool, lack of published rules, and ambiguity over the seat of arbitration raise potential competitive and procedural concerns. Drawing on the CJEU’s ISU precedent, Riot must ensure that its arbitration mechanism does not inadvertently restrict stakeholders’ freedom to pursue alternative dispute forums. Transparent rules, a diversified arbitrator pool, and flexibility in choosing the seat of arbitration could address these concerns and align the initiative more closely with EU competition principles.

Conclusion: Riot’s Arbitration System and EU Competition Law Compliance

Riot’s arbitration mechanism presents a promising development in esports governance but also poses several competition law considerations. Drawing on the CJEU’s findings in the ISU case, a voluntary arbitration mechanism with a closed arbitrator pool and financial incentives could indirectly limit competitive freedom, especially if it discourages stakeholders from pursuing alternatives. As long as Riot maintains the non-exclusive nature of its system and takes steps to increase transparency—particularly by publishing its rules and expanding the arbitrator pool—it may align more closely with Articles 101 and 102 TFEU.

Esports Legal News will continue to monitor developments regarding the rules governing Riot’s arbitration system and will publish a detailed analysis once these rules become available. Meanwhile, Riot’s future modifications and oversight mechanisms will play a critical role in ensuring the arbitration system serves as a fair, impartial, and competitive model for esports dispute resolution.

Source: Esports Insider