LitArb
Riot Games Introduces Arbitration Mechanism for EMEA Esports Disputes – What about Art. 101 and 102 TFEU?
Riot Games recently launched a new arbitration mechanism to address disputes within its EMEA esports ecosystem, including unpaid salaries, bonuses, prize money, and transfer disputes for League of Legends and VALORANT players and teams. The Dispute Resolution mechanism, created with Martens Rechtsanwälte, serves as an independent arbitration forum for financial and contractual issues, focusing on Tier 1 and Tier 2 teams in the EMEA region. According to Alberto Guerrero, Riot’s Head of Esports for EMEA, the initiative is intended to bring a “whole new level of professionalism, contractual stability, and integrity” to Riot’s esports ecosystem, aligning with structures seen in traditional sports organizations such as FIFA and FIBA.
Table of Contents
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:
- 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.”
- 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.
- 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:
- 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.
- 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.
- 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
Author
Labor&Immigration
Moist Esports’ Legal Battle with U.S. Immigration over B1-Visas
The esports industry has recently been thrust into a legal spotlight due to Moist Esports’ initiation of a lawsuit against the U.S. Department of Immigration. This action follows a series of visa denials for the Australian contingent of their Apex Legends team, a pivotal challenge given the team’s qualifications and the implications of their participation in critical esports tournaments. This article offers an in-depth analysis of the legal and procedural aspects of the case, referring to foundational visa policies as discussed in our previous coverage on esports and U.S. immigration law.
Table of Contents
Case Background
Charles ‘MoistCr1TiKaL’ White Jr., the founder of Moist Esports, has publicized the organization’s struggles with obtaining U.S. visas for its players. Despite qualifying for a major tournament in Los Angeles, the team faced repeated visa rejections. The U.S. immigration authorities challenged the veracity of the team’s professional status and ranking, leading to initial visa applications being denied. Subsequently, the players were compelled to abandon their team visas and individually apply for B-1 business visitor visas instead of P-1 or O-1 visas, which are typically issued for attending conferences or consulting with business associates. The last-minute approval of these visas allowed the players minimal preparation time for the tournament.
Legal Foundations of the Dispute
The lawsuit is built on allegations of procedural mishaps and the potential misinterpretation of eligibility criteria under U.S. immigration laws concerning professional esports players. As detailed in “An Overview of Esports and United States Immigration Law,” the specific visa requirements and criteria for esports athletes are intricate and often subject to the discretionary powers of immigration officials. The denial of P-1A visas, intended for internationally recognized athletes, to Moist Esports players suggests a significant disconnect between the recognition of esports in legal versus operational realms of immigration policy.
Challenges in Legal Proceedings
The case unfolds under the shadow of sovereign immunity, which may limit the scope of recoverable damages against a government agency, as hinted by MoistCr1TiKaL’s commentary on constitutional constraints. The discretionary nature of visa issuance, particularly under the P-1A category, often leaves substantial room for subjective decision-making by immigration officers. This aspect makes legal challenges arduous and sets a high bar for proving any claims of improper handling or bias in visa processing.
Economic Impact and Organizational Disruption
The visa denials and subsequent legal battles have wrought considerable financial strain on Moist Esports. The inability to compete under the organization’s banner not only resulted in direct financial losses but also diminished potential sponsorship and earnings from the tournament. These disruptions underline the significant stakes that immigration decisions hold over esports organizations, which operate in a rapidly globalizing competitive field.
Concluding Observations
This lawsuit may serve as a critical juncture for the recognition and handling of esports professionals within U.S. immigration frameworks. It challenges the consistency of the application of immigration laws to esports athletes, a relatively new area where traditional sports and modern digital competitions intersect. Whether or not Moist Esports succeeds in its legal claims, the outcome will likely influence future policy considerations and the operational practices of immigration authorities dealing with similar cases.
Image source: VisaService.de
Author
Labor&Immigration
Tribunal Judiciaire de Paris: Rethinking the Esports Employment Contract
The Paris Tribunal Judiciaire issued a landmark ruling on 27 March 2024, that has significant implications for the contractual relationships within esports. This decision, which reclassified an esports player’s service contract as an employment contract, marks a pivotal shift in how employment relationships are perceived and regulated in the rapidly growing esports sector. The ruling not only emphasizes the need for a clearer understanding of employment laws in new-age digital and entertainment industries but also potentially sets a precedent for future contractual disputes in esports across jurisdictions.
Table of Contents
Statement of Facts
The case, TJ Paris, ps ctx protection soc. 3, 27 mars 2024, n° 22/02668, involved an esports player who had entered into a contractual agreement with an American esports club to participate in Counter-Strike competitions from 2016 to 2017. The employment contract in question was titled a “self-employed worker contract,” under which the player was ostensibly hired as an independent contractor. This classification has significant legal and financial implications, primarily regarding tax and social security liabilities.
The French URSSAF Caisse Nationale, responsible for the collection of social security and family benefit contributions, challenged the contractual classification. URSSAF initiated a recovery action claiming that the income derived by the player under this contract should be subject to contributions as “non-commercial profits,” according to Article L131-6 of the French Social Security Act. The agency’s position was that the player’s engagement bore all the hallmarks of traditional employment rather than those of an independent contractor.
The player contested URSSAF’s assessment, arguing that despite the contractual designation as a self-employed worker, the actual terms and conditions of his engagement demonstrated a dependency and subordination typical of an employment relationship. This challenge led to judicial scrutiny of the nature of the contractual relationship between the player and the esports club.
Legal Framework and Tribunal’s Analysis of the Employment Contract
The tribunal’s analysis centered on distinguishing between self-employed status and employment based on the degree of subordination to the employer, as characterized by French labor law. Article L.8221-6-1 of the French Labour Code defines independent contractors as follows:
“is presumed to be an independent contractor, any individual whose working conditions are defined exclusively by himself or in a contract, in conjunction with his customer”.
The French Labour Code stipulates that individuals registered as self-employed service providers are generally assumed not to have an employment contract with their clients while carrying out their activities. Nevertheless, this assumption can be challenged. The same legal provision notes that an employment contract may still be recognized if the registered individual delivers services in circumstances that create a continuous subordinate relationship with the client.
The judges meticulously reviewed the contractual obligations and daily activities imposed by the esports club on the player, which included:
- Mandatory participation in specific competitions as directed by the club.
- A set schedule for training and streaming that the player was required to follow.
- Requirements to wear the club’s uniform during official events and partake in promotional activities.
These conditions, alongside regular monthly payments and the provision of accommodations and travel arrangements by the club, clearly illustrated an employer-employee relationship, as the club exerted substantial control over the player’s professional activities.
Analysis of the Tribunal’s Ruling
The judges’ assessment focused on various aspects of the player’s contract and daily work engagements that pointed toward an employment relationship. The following elements were particularly influential in the tribunal’s decision:
- Subordination and Control: The club required the player to participate in specific competitions, adhere to a strict training schedule of 15 hours per week, and engage in a minimum of 20 hours of streaming per month. Such requirements are indicative of an employer’s control over the employee’s work activities.
- Contractual Obligations: The contract stipulated that the player wear the team uniform during competitions and participate in marketing activities dictated by the club. These obligations demonstrate the club’s control over the player’s professional image and public engagements, further evidencing an employment relationship.
- Economic Dependency: The regular payment between EUR 4,000 and EUR 5,000, alongside provisions for accommodation and travel for competitions, indicated an economic dependency typical of an employment relationship rather than freelance or self-employed arrangements.
- Termination Conditions: The contract allowed the club to terminate the agreement if the player failed to meet the set obligations or was unable to provide services for at least 30 consecutive days. This level of control and the potential for penalization align with the characteristics of an employee-employer relationship.
Implications of the Ruling
For Esports Clubs: The reclassification of service contracts to employment contracts suggests that esports clubs need to meticulously review and possibly revise their contractual practices. Clubs may face increased financial liabilities due to obligations to pay social security contributions and potential penalties for previously undeclared work, as outlined in articles L8223-1 and L8211-1 of the French Labour Code. This ruling may compel clubs to establish clearer, more structured employment agreements, potentially increasing operational costs but providing more stability and clarity for both parties involved.
For Players: Esports players may find this ruling beneficial as it provides a clearer path to securing employment benefits, including social security, health insurance, and guaranteed wages. This could also empower players to challenge unfavorable contractual terms and seek reclassification as employees to gain the protections and benefits that employment status confers.
For the Esports Industry: The decision may prompt a broader reevaluation of how esports professionals are classified across the industry. It challenges the current contractual norms and may lead to more standardized employment practices. While this could increase costs for esports organizations, it also has the potential to professionalize the industry further, attracting more stable investments and improving the overall working conditions for players.
Conclusion
The Paris Tribunal Judiciaire’s decision of 27 March 2024 is a very important one for the esports industry. As the sector continues to grow and professionalize, the legal definitions and frameworks that govern these professional relationships will be crucial. Esports organizations and players must take these changes carefully into account, balancing competitive interests with legal compliance and fair labor practices.
Via: Victoire-Avocats
Author
Gambling
Alleged Video Games Addiction Leads to Lawsuit (Updated)
In a developing legal battle reminiscent of the Colvin et al v. Roblox Corporation et al case that challenged Roblox’s alleged facilitation of illegal gambling with minors, a new lawsuit has been filed in Missouri against major players in the video game industry alleging video games addiction.
Table of Contents
This lawsuit, just like Casey Dunn et al. v. Activision Blizzard et al., on which ELN reported before, accuses companies, including Epic Games, Mojang Studios, and Roblox, of designing games that create an excessive video games addiction in children, leading to serious detrimental effects on their physical, social, and mental health.
Context and Background of the Case
In a legal filing that marks a significant escalation in the scrutiny of video game companies’ practices, a lawsuit has been filed in the U.S. District Court for the Western District of Missouri, Central Division. The case, bearing the number 2:24-cv-4055, has been initiated by Carey Courtwright, representing her minor child K.C. This legal action addresses serious concerns about the design and operation of video games that allegedly lead to addiction among young players. K.C., who began engaging with video games at the tender age of six, is presented as a victim of these manipulative gaming practices.
Defendants in the Lawsuit
The defendants listed in this lawsuit are some of the most prominent names in the gaming industry:
- Epic Games, known for Fortnite
- Mojang Studios, the creators of Minecraft
- Meta Platforms, the conglomerate formerly known as Facebook
- Roblox Corporation
These companies are accused of creating and maintaining gaming environments that exploit psychological vulnerabilities in children.
Detailed Allegations of Video Games Addiction Triggers
The lawsuit articulates specific tactics employed by the defendants which are purportedly designed to foster addiction:
- Reward Systems and Feedback Loops: Games are structured to release dopamine in response to achievements within the game, perpetuating a cycle of engagement that can lead to excessive and unhealthy gaming habits.
- Limited Transparency and Predatory Monetization: The true costs of in-game transactions are often concealed or minimized, exploiting cognitive biases and leading players, particularly young ones, to spend money without a full appreciation of the cumulative costs.
- Fear of Missing Out (FOMO): By introducing time-limited events and exclusive in-game items, the games tap into a player’s fear of missing out, which can compel continuous or increased expenditure to remain competitive or included in gaming communities.
- Targeting of ‘Whales’: These companies strategically identify and exploit major spenders within their games — often referred to as “whales” — by encouraging them to spend large amounts of money through tailored incentives.
- Lack of Parental Controls: The complaint criticizes the insufficient mechanisms provided to parents to monitor and control their children’s gaming activity effectively, which exacerbates the problem of unregulated access and expenditure.
Human Costs and Plaintiff’s Burden
The complaint vividly describes the adverse effects on K.C.’s life due to the alleged gaming addiction. These include a noticeable decline in academic performance, social withdrawal from peers and activities, and the development of physical symptoms such as pain in the hands, eyes, and back, as well as disrupted eating patterns. Moreover, K.C. has reportedly suffered from mental health issues, including depression and anxiety, which were intensified by the inability to disengage from gaming. The plaintiff, Carey Courtwright, shares the emotional and financial burden inflicted by this ordeal, emphasizing the considerable expenses accrued through medical treatments and in-game spending by K.C.
Legal and Industry Implications
This lawsuit is part of an emerging trend where legal actions are increasingly highlighting the potential negative impacts of video games on minors. Similar to the issues raised in Colvin et al v. Roblox Corporation et al, this case underscores the urgent need for the industry to adopt more ethical practices in game design and marketing. The outcome of such lawsuits could potentially lead to stricter regulations and standards governing game development and marketing, particularly regarding the mechanisms that promote prolonged engagement and spending in games.
Entertainment Software Association’s Statement (Update)
Having read our article, the Entertainment Software Association (ESA) has provided a statement that offers a broader industry perspective. The ESA, a trade association that represents the U.S. video game industry and includes several of the defendants in the lawsuit as its members, has articulated its stance on the issues central to the lawsuit.
The ESA emphasized its commitment to player safety and digital wellness, stating:
“Video games are among the most dynamic, widely enjoyed forms of entertainment in the world. We prioritize creating positive experiences for the entire player community and provide easy-to-use tools for players, parents, and caregivers to manage numerous aspects of gameplay.”
Moreover, the ESA addressed the claims made in the lawsuit directly, noting:
“Claims that say otherwise are not rooted in fact and ignore the reality that billions of people globally, of all ages and backgrounds, play video games in a healthy, balanced way.”
This statement underscores the ESA’s viewpoint that while the lawsuit raises important concerns about player safety and addiction, the claims do not necessarily reflect the broader reality of gaming as an activity enjoyed healthily by a vast global audience.
Conclusion
This lawsuit could set important precedents regarding the accountability of video game developers and platforms in safeguarding the well-being of their youngest and most vulnerable users. The broader implications for the industry could include a reevaluation of game design ethics, the introduction of more stringent parental controls, and a more transparent communication regarding the costs associated with in-game content. The video game industry may need to balance commercial interests with a heightened responsibility towards its user base, especially children, in light of growing legal scrutiny.
Image source: DallE3
Carey Courtwright, individually and on behalf of K.C., a Minor v. Epic Games et al
Court: United States District Court for the Western District of Missouri, Central Division
Case No.: 2:24-cv-4055
Defendants
- Epic Games
- Counsel not listed
- Mojang Studios
- Counsel not listed
- Meta Platforms
- Counsel not listed
- Roblox Corporation
- Counsel not listed
Plaintiff
- Carey Courtwright (Individually and on behalf of her minor child, K.C.)
- Counsel to Carey Courtwright:
- Tyler W. Hudson, Eric D. Barton, and Melody R. Dickson of Wagstaff & Cartmell LLP
- Breean “BW” Walas, Tina Bullock, and Danielle Ward Mason of Bullock Ward Mason LLC
- Charles M. Stam of Thompson Stam PLLC
- Counsel to Carey Courtwright:
Author
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