Dear all,

Our Slovenian friends (and former colleague) Tine Misic and Blaž Bolcar are organising the second edition of the Sports Law Arbitration Moot (SLAM).

The best four teams of the SLAM competition will compete in the finals, which will be held in Ljubljana, Slovenia, on 30th and 31st March, 2021.

This is a great opportunity for students to familiarise themselves with the world of sports arbitration, to meet top lawyers and arbitrators in the field, and to visit beautiful Ljubljana.

Go for it!

You'll find more information and can register at https://sportlex.si/slam/en

On 1 April 2015, the new FIFA Regulations on Working with Intermediaries (hereinafter referred as the Regulations) came into force. These Regulations introduced a number of changes as regards the division of competences between FIFA and its members, the national associations. A particularly interesting issue from an EU competition law perspective is the amended Article 7 of the Regulations. Under paragraph 3, which regulates the rules on payments to intermediaries (also previously referred to as ‘agents’), it is recommended that the total amount of remuneration per transaction due to intermediaries either being engaged to act on a player’s or club’s behalf should not exceed 3% of the player’s basic gross income for the entire duration of the relevant employment contract. In the case of transactions due to intermediaries who have been engaged to act on a club’s behalf in order to conclude a transfer agreement, the total amount of remuneration is recommended to not exceed 3% of the eventual transfer fee paid in relation to the relevant transfer of the player.

In other words, the new Regulations recommend a benchmark cap on the percentage of remuneration that an intermediary engaged in negotiations with a view to concluding an employment contract or a transfer agreement can receive for his/her service. From the perspective of an antitrust lawyer such a provision immediately rings a bell of a potential distortion of competition. The Association of Football Agents (AFA), the representative body of 500 football agents in England, contends in a complaint to the European Commission that Article 7(3) of the Regulations distorts competition under EU law. In this regard, the present blog post will analyse whether Article 7(3) of the Regulations infringes Article 101 of the Treaty on the Functioning of the European Union (TFEU). If so, what would be the possible justifications and which are the requirements that must be fulfilled in the case at hand.

The general rule

To begin with, Article 101(1) of the TFEU stipulates that the following shall be prohibited: “all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of completion within the internal market”.[1] Thus, in order to find an infringement of Article 101(1), it must be established that 1) the FIFA Regulations constitute a decision by an association of undertakings; 2) that Article 7(3) of the Regulations may affect trade between EU Member States; and 3) that Article 7(3) of the Regulations has as its object or effect the prevention, restriction or distortion of competition within the internal market.

Decision by an association of undertakings

Even though, the concept of ‘decision by an association of undertakings’ is not defined in the founding treaties of the European Union, this notion has been interpreted broadly by the Court of Justice of the European Union (CJEU).[2] In order to determine whether the FIFA Regulations are to be regarded as a decision of an association of undertakings within the meaning of Article 101(1) TFEU it has to be established that the members of FIFA are undertakings for the purpose of EU competition law and that FIFA constitutes an association of undertakings. In Piau it was settled that “…it is common ground that FIFA’s members are national associations, which are groupings of football clubs for which the practice of football is an economic activity. These football clubs are therefore undertakings within the meaning of Article 81 EC and the national associations grouping them together are associations of undertakings… ”.[3] Therefore, from the judgement of the Court of First Instance (now the General Court) it is plain that FIFA constitutes an association of undertakings within the meaning of Article 101(1) TFEU. As regards the concept of ‘decision’, the General Court declared that since players’ agents receive a fee on a regular basis for the provision of their service, this constitutes an economic activity which does not fall within the scope of the specific nature of sport as defined by the previous CJEU’s case-law.[4] Moreover, the Regulations adopted by FIFA are binding  on national associations members of FIFA and on clubs, players and their agents and thus those regulations constitute a decision by an association of undertakings within the meaning of Article 101(1) TFEU.[5] In addition, in a recent case, the CJEU adjudged that even a price recommendation, regardless of its exact legal status, may be regarded as constituting such a decision.[6] Therefore, from the abovementioned it follows that based on the proximity of the legal issues discussed in Piau and the main research question at hand, it is likely that the new FIFA Regulations will be deemed a decision by an association of undertakings for the purpose of Article 101(1) TFEU.

Effect on trade between Member States

According to the Commission guidelines on the effect on trade, it is the agreement or decision that must be capable of affecting trade between Member States. It implies that there must be an impact on cross-border economic activity and that it must be possible to foresee with a sufficient degree of probability that the decision may have direct or indirect, actual or potential influence on trade between EU countries.[7] Since the Regulations at hand bind all members of FIFA, including all 28 EU Member States, and concern intermediaries operating in every EU country, there is undoubtedly a potential effect on trade between Member States. As a result of the provisions under Article 7(3) of the Regulations on Working with Intermediaries, every football player or club’s agent in the EU will be potentially restricted to receive a remuneration under the specified recommended price cap. Therefore, the second condition under Article 101(1) TFEU is also fulfilled.

Object or effect the prevention, restriction or distortion of competition

Article 101(1) (a) TFEU lists “…directly or indirectly fix purchase or selling prices…” as an object by an agreement that constitutes a restriction on competition.[8] Further, the Commission has continuously interpreted recommended pricing as falling under the category of price fixing in the sense of Article 101.[9] In this line of reasoning, the CJEU stated that in order to establish that a recommendation constitutes price-fixing, account must be taken of three factors: 1) the common interest between the members of the association, 2) the nature of the recommendation and 3) the statutes of the association.[10] The same test was later applied also by the Commission in its Fenex Decision.[11] Furthermore, in its Guidelines on the applicability of Article 101 to horizontal co-operation agreements, the Commission has acknowledged that any standard terms containing provisions which influence the prices charged to customers, including recommended prices, would constitute a restriction of competition by object. The General Court has also confirmed that recommended rates may constitute indirectly a pricing system binding its members.[12] Therefore, Article 101(1) (a) TFEU has been interpreted by the Commission and the CJEU as capable of encompassing “recommended prices” under the scope of “price-fixing”.

As regards the content of Article 7(3) of the Regulations, it clearly recommends a 3% benchmark cap on the remuneration an intermediary may claim as a result of his/her service. Firstly, even though the provision recommends the percentage cap, the national football associations are bound to implement the Regulations at the national level and the decision of whether to impose the remuneration cap is ultimately determined by the football clubs and the players.[13] By being able to limit the percentage of the commission that an intermediary can receive for a certain transaction, the relevant participating clubs and football players will have the common interest to secure a bigger ‘piece of the pie’ for themselves. Secondly, the nature of the recommended cap, even though non-binding, is detailed, clear and specific. It also appears in a binding legislative document, which national associations are required to fully implement. Nonetheless, even if they decide not to apply the recommended price cap, clubs and players will still be inevitably influenced by such a recommendation in their business activities.[14] Therefore, indirectly the nature of Article 7(3) encourages national associations to follow the recommended limit on agents’ remuneration. Lastly, the statutes of FIFA (Articles 2, 5, 10 and 13), give the Association the competence to draw up regulations and ensure their enforcement, regulate the transfer of players and oblige its members to fully comply with its regulations. As a consequence, even though the remuneration cap is a recommendation by FIFA it is highly likely that de facto this provision will lead to a coordinated behaviour among clubs and players as regards limiting the maximum payment that an intermediary can receive.

Typically, agents receive between 5-10% of their player’s gross income, so the limit of 3%, if enforced, would be a serious damaging shift for agents from a financial perspective as well.[15] Moreover, Article 7(3) of the Regulations constitutes a measure that could also be detrimental to the players and the quality of service that they receive. Due to the price cap, intermediaries will be discouraged to compete and improve. The goal of players’ having experienced and professional agents, who provide a high quality of services, is to assist and guide athletes in achieving the best possible deal in usually considered short careers.[16] As a result, the benchmark cap enshrined in Article 7(3) has the object of distorting competition on the market of football intermediaries’ services by both limiting the amount of remuneration and by indirectly decreasing the quality of the provided services.

At national level, not only the AFA in the UK has contested the Regulations, but also recently, after a complaint lodged by Rogon Sport Management, the German District Court (Landgericht Frankfurt/Main) suspended the implementation of the national regulation adopted by the German Football Association (DFB) transposing the FIFA’s Regulations. The District Court ruled that the limit on agents’ commissions in player transfers constitutes and unlawful restriction on the right to provide services even though DFB was following the recommendations stipulated by FIFA.

In the alternative, even if a restriction by object cannot be established, Article 7(3) still has the effect of distorting competition under Article 101(1). The criteria establishing whether a decision by an association is restrictive by its effect include defining the relevant market and assessing the possibility to access it, while taking into account existing and new competitors.[17] It must also be appraised whether the decision restricts actual or potential competition that would have existed in its absence.[18] Concerning the present discussion, Article 7(3) of the Regulations applies on the market of football intermediaries’ services in the EU. There will be undoubtedly an effect on the behaviour of existing intermediaries since normally their remuneration has been 5-10% and now it will be capped to 3%. This amendment could have the possible effect of lowering the level of competition on the market, decreasing the quality of the provided services and possibly driving some intermediaries out of business. In the absence of the decision at hand, these effect on competition would be significantly less likely to occur. As a consequence, the decision of FIFA to recommend a restriction on the remuneration of football intermediaries will have the effect of distorting competition.

Therefore, from the abovementioned analysis it follows that the recommended remuneration cap of 3% falls under the scope of Article 101(1) TFEU and constitute a decision by an association which has effect on trade between Member States and which restricts competition within the internal market.

Possible Justification

Although, a restriction within the meaning of Article 101 has been established, it remains to be analysed whether such a restriction may be justified. In Wouters, the CJEU held that not every decision of an association of undertakings which restricts the freedom of action of the parties necessarily falls within Article 101(1).[19] In order to apply this provision, account has to be taken of the overall context in which the decision was taken, its objectives. Subsequently, it has to be considered whether the consequential restrictive effects are inherent in the pursuit of those objectives.[20] In that context, it is important to verify whether the restrictions of competition are limited to what is necessary to ensure the implementation of legitimate objectives.[21] In other words, for a restriction to be justified, there must be a legitimate reason and the restrictive measure has to be necessary and proportionate for the achievement of the legitimate aim.

In Piau, the Regulation of Agents was justified as it aimed “to raise the professional and ethical standards for the occupation of players’ agent in order to protect players, who have a short career”.[22] In this case, the General Court ruled that the Commission did not err in its assessment by deciding that the licence system in place, which imposes qualitative rather than quantitative restrictions, seeks to protect players and clubs and takes into consideration the risks incurred by players in the event of poorly negotiated transfers.[23] Moreover, according to FIFA, the European Commission, EPFL and FIFPro, it is indisputable that the aim of the new Regulations is to enhance financial transparency related to players’ transfers and the protection of minor players. In this regard, even though the Commission or the CJEU has not yet decided upon the legitimacy of Article 7(3), it can be fairly assumed that the percentage cap, aiming to protect the exploitation of football players through enhanced financial transparency, can be considered as a legitimate aim.

Nevertheless, contrary to Piau, which concerned the licensing procedure of an agent, the present Article 7 stipulates a qualitative criterion rather a quantitative one. Furthermore, it is dubious whether such a recommended benchmark is suitable for achieving the legitimate aim of protecting football players. According to some commentators, it is foreseeable that the remuneration cap will lead to underhand, illegal payments so that intermediaries can maintain the level of compensation that they receive. As a result, intermediaries will further the very problem that FIFA intends to resolve by behaving in a manner that completely negates the primary purpose of the regulations. It can thus, lead to agents looking for new inventive ways to secure payment, for instance through higher percentage for work carried out in relation to the player’s commercial rights or signing longer representation contracts, which in turn  can also result in exploiting players. Some other negative effects may be the emergence of more persons involved in player transfers (lawyers, accountants or financial advisors), leading to less legal certainty and more disputes over the question who is liable for a certain transaction. Furthermore, a protection of minor players (Article 7) and ensuring financial transparency (Article 6) are already regulated in other provisions of the Regulations and thus a 3% cap seems to be redundant limitation towards the achievement of those goals.

Instead, other less restrictive possibilities for attaining the protection of football players are available. As proposed by AFA, a model of self-regulation and accreditation of intermediaries can be set up in co-operation with the national football associations.[24] By such a system, clubs and players could ensure themselves that an intermediary is of a particular standard, even though they would have the freedom to conclude a contract with those agents who do not fulfil a binding accreditation standard.[25] Such a system will not only be more preferred than the current FIFA’s Regulations but it will also be compatible with EU competition rules.[26] Other commentators consider that a more efficient option would be for FIFA not to cap agent fees but rather to strengthen existing ‘fit and proper’ enforcement measures to ensure global compliance with those standards. In this way, the fear expressed by FIFPro that “unnecessarily large amount of money disappears from professional football through agents” will be countered by stricter enforcement measures without restricting competition on the market. Another option for FIFA to avoid anti-competitive effects is for example, the publication of historical or survey-based price information by independent parties. Such regular publications might provide more trustworthy price guides reflecting the dynamics of the relevant market, enhance price transparency and at the same time avoid distortion of competition.

In any event, the measure in question appears to go beyond what is necessary. Typically agents receive between 5-10% of the player’s gross income and thus, a 3% recommended cap is seriously damaging the financial interests of intermediaries. Here, it ought to be mentioned that during the consultation process at FIFA’s Executive Committee, which led to the approval of the Regulations, all relevant stakeholders were present (member associations, clubs, FIFPro, professional football leagues, etc.) with the exception of any intermediaries’ representatives. Subsequently, the interests of agents were neglected during the discussion and the outcome was a stronger bargaining power granted to clubs and players in relation to transfers’ negotiations. This imbalance might lead to an asymmetry of information between agents and players and thus, to a distortion of the market. Further, not only is the content of Article 7(3) too strict but it is also too general and broad, encompassing all intermediaries and not foreseeing any exceptional circumstances. There is also no procedure in place, which allows agents to prove their qualifications and loyalty. As a result, even though an intermediary must have an impeccable reputation and is not allowed to charge minor football players, he/she is still presumed to be abusing his/hers powers and there is no mechanism allowing an intermediary to rebut this presumption.

Since, Article 7(3) of the Regulations does not satisfy the broad criteria for justification in Wouters and API, it is highly unlikely that it will pass through the narrow efficiencies test laid down in Article 101(3) TFEU. Hence, this assessment will not be analysed in this blog post.

Therefore, regardless of the fact that Article 7(3) of the Regulations serves a legitimate aim, it is dubious whether this particular measure is suitable for the achievement of the said goal and it is apparent that its restrictive effects go beyond what is necessary.

Conclusion

In this post, the potential negative effects of Article 7(3) of the FIFA Regulations on Working with Intermediaries on EU competition law were considered. It was concluded that pursuant to the Piau case and the Commission’s decisional practice, such a recommendation constitutes a decision of an association of undertakings which is capable of distorting competition within the meaning of Article 101(1). Next, it was analysed whether the legitimate reason of preventing the abusive practices of players’ exploitation can justify the restriction on competition. The author’s view is that a 3% cap on the commission granted to agents is not the most appropriate measure to do so and thus it constitutes a disproportionate restriction on EU competition rules.

[1] Consolidated version of the Treaty on the Functioning of the European Union (2012) OJ C326/01 art 101.

[2] Case C-309/99 Wouters and Others [2002] ECR I-1577 para 64; Case C-35/96 Commission v Italy [1998] ECR I-3851 para 60; A recommendation by an Association can also constitute a decision, see Case C 96-82 IAZ v Commission [1983] ECR 3369 paras 20-21.

[3] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 69.

[4] Ibid, para 73.

[5] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 75. See also Case C-45/85 Verband der Sachversicherer v Commission [1987] ECR 405 paras 29-32 and Case C-309/99 Wouters [2002] ECR I-1577 para 71.

[6] Case C-136/12 Consiglio nazionale dei geologi v Autorità garante della concorrenza e del mercato (ECJ 18 July 2013) para 46; See also Case C-45/85 Verband der Sachversicherer v Commission [1987] ECR 405 para 32.

[7] Ibid, paras 19-24.

[8] Consolidated version of the Treaty on the Functioning of the European Union (2012) OJ C326/01 art 101(1) (a).

[9] Belgian Architects’ Association [2005] OJ L4/10 paras 3 and 4; Case COMP/37.975 PO/Yamaha [2003] para 141; See also, a tariff recommendation issued by an Association of undertakings was considered to be anticompetitive in Fenex [1996] OJ L181/28 para 74.

[10] Case C-45/85 Verband der Sachversicherer v Commission [1987] ECR 405 paras 29-31.

[11] Fenex [1996] OJ L181/28 para 47.

[12] Joined Cases T-213/95 & T-18/96 Stichting Certificatie Kraanverhuurbedrijf (SCK) and Federatie van Nederlandse Kraanbedrijven (FNK) v Commission [1997] ECR II-1739 paras 159 and 161-164.

[13] See the text of Article 7 of the Regulations.

[14] See Fenex [1996] OJ L181/28 para 73.

[15] UEFA ‘Club Licensing Benchmarking Report 2012’ < http://www.uefa.org/MultimediaFiles/Download/Tech/uefaorg/General/02/09/18/26/2091826_DOWNLOAD.pdf> page 54.

[16] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 102.

[17] Case C-234/89 Delimitis [1991] ECR I-0935 paras 14, 16 and 18.

[18] Ibid, para 19 and 21.

[19] Case C-309/99 Wouters and Others [2002] ECR I-1577 para 97.

[20] Ibid.

[21] Joined Cases C-184 to 187, 194, 195 & 208/13 API (CJEU 4 September 2014) para 48; Case C-519/04 P Meca-Medina [2006] ECR I-6991 para 47 and Case C-136/12 Consiglio nazionale dei geologi v Autorità garante della concorrenza e del mercato (ECJ 18 July 2013) para 54.

[22] Case T-193/02 Piau v Commission [2005] ECR II-0209 para 102.

[23] Ibid, para 100.

[24] Nick De Marco, ‘The New FA Football Intermediaries Regulations and the Disputes Likely to Arise’ (Blackstone Chambers, 27 April 2015) pages 13-14.

[25] Ibid.

[26] Ibid.

Editor’s note: Rhys Lenarduzzi is a final semester Bachelor of Law (LL.B) and Bachelor of Philosophy (B.Phil.) student, at the University of Notre Dame, Sydney, Australia. As a former professional athlete, then international sports agent and consultant, Rhys is interested in international sports law, policy and ethics. He is currently undertaking an internship at the T.M.C. Asser Institute with a focus on Transnational Sports Law.

In 2019, training compensation and solidarity contributions based on FIFA’s Regulations on the Status and Transfer of Players (RSTP) amounted to US$ 75,5 million. This transfer of wealth from the clubs in the core of the football hierarchy to the clubs where the professional players originated is a peculiar arrangement unknown in other global industries. Beyond briefly pointing out or reminding the reader of how these systems work and the history behind them, this blog series aims to revisit the justifications for FIFA-imposed training compensation and the solidarity mechanism, assess their efficacy and effects through a case study of their operation in the African context, and finally analyse the potential impact of upcoming reforms of the FIFA RSTP in this context.

First, it is important to go back to the roots of this, arguably, strange practice. The current transfer system and the legal mechanisms constituting it were largely the result of a complex negotiation between European football’s main stakeholders and the European Commission dating back to 2001. The conclusion of these negotiations led to a new regulatory system enshrined in Article 20 and Annex 4 of the RSTP in the case of training compensation, and at Article 21 and Annex 5 in the case of the solidarity mechanism. Before paying some attention to the historical influences and how we arrived at these changes, as well as the justifications from the relevant bodies for their existence, let us briefly recall what training compensation and the solidarity mechanisms actually are.

1.     FIFA’s training compensation and solidarity mechanism: A very short introduction

Training compensation is the obligation of an acquiring/buying/signing/new club to compensate the training clubs of a player. A training club is considered to be the clubs of the player between the ages of 12 and 21, though the obligation to compensate continues if either of the following two instances take place, up until the season of a player’s 23^rd birthday:  i) “[A] player is registered for the first time as a professional” or,  ii) “a professional is transferred between clubs of two different associations…”. The obligation does not arise if a former club terminates a player’s contract without just cause, when a professional reacquires amateur status in moving clubs, or when a player transfers to a category 4 club. Regarding the categories, this is important because the amounts owed to a training club hinge on where clubs fall within four categories (For more on the four categories see HERE).

There are some regulatory differences between the EU/EEA and the rest of the football world. A significant distinction is that without sufficient justification that it is worthy of compensation, a former club will not be owed by a “new club”[1] if they have not offered a contract of equivalent value to the player in question.[2]

The Solidarity mechanism provisions stipulate that when a player moves to a new club, mid contract, for a fee agreed between the new club and former club, then 5% of that fee is designated as a solidarity contribution, and each of the player’s training clubs will receive a portion. The apportionment varies depending on what age the player was registered with the training club (further information on apportionment can be found HERE). This obligation arises when a player is transferred definitively or on loan, between clubs from different associations, as well as when a transfer takes place within the same association, but a training club of the player is affiliated to another association.

For both training compensation and the solidarity mechanism, the regulations provide that the national association will instead receive the money when the club owed “has in the meantime ceased to participate in organised football and/ or no longer exists”.[3] In cases as such, the compensation is to be used for youth football development.

Disputes can arise when the new club does not pay on time or at all, or if there is a disagreement on the amount owed, as well as when a new club attempts to make the case that a player has already terminated his training period prior to age of 21. Given the above explanation of the systems is brief, further detail may be found within the relevant articles and annexes (see HERE for the full regulations).

2.     A brief history: From the ‘retain and transfer system’ to the FIFA RSTP 2001

Much of the current framework is the product of various events surrounding the birth of the regulations in 2001, though the ideas and concepts it captures go way back beyond this time. The English Football League’s registration system that would go on to be touted as the ‘retain and transfer system’ dates back to at least 1893.[4] Both this system and the American Baseball ‘reserve rule’ system are often mentioned in the same breath. As Sloane pointed out in 1969: “The justification for the reserve rule and the retain and transfer system lies in their alleged function in bringing about a more or less equal distribution of playing talent between clubs, whilst, their advocates argue, free competition would lead to a concentration of 'star' players into a few rich clubs.”[5]  Both systems were the target of an array of challenges over the years, though up until ‘free agency’[6] in the case of American Baseball (much earlier) and Bosman[7] in football, each system remained largely the same in existence and justification.[8] To further emphasise that the issues recognised, and in turn the ideas and justifications pertinent to the current system are hardly new, the Chester Report of 1969 on the situation regarding employment and transfers in football in England had striking similarities to much of what was raised within the European-level negotiations that lead to the changes in 2001.[9]

With the momentous Bosman case in 1995, the previously commonplace practice of an out of contract player being retained and unable to transfer (regardless of that player’s preferences) was found contrary to EU law. Importantly for the subject of this blog, the court also recognised that “encouraging the recruitment and training of young players must be accepted as legitimate”[10] aim, on the basis of which the free movement rights of players could in principle be restricted. Thus, leaving an opening for a regulatory system that would support the “recruitment and training of young players”[11] and restrict free movement in a proportionate way.

In 1998, the European Commission decided to open an investigation against FIFA based on competition law concerns linked to its then applicable RSTP.  This decision brought FIFA, UEFA and FIFPro to the European Commission’s negotiating table to hammer out a compromise that would satisfy their divergent interests and be compatible with the EU’s antitrust rules. The regulations as they now stand, aside from some minor amendments, reflect the outcome of those negotiations. The final press release of the European Commission concluded that FIFA’s new regulations would have to reflect a set of principles in order to be deemed compatible with EU competition law. In particular it accepted that:

• in the case of players aged under 23, a system of training compensation should be in place to encourage and reward the training effort of clubs, in particular small clubs;
• creation of solidarity mechanisms that would redistribute a significant proportion of income to clubs involved in the training and education of a player, including amateur clubs; 

These are in fact quite faithfully transposed in the FIFA RSTP provisions discussed above. Since then, the Bernard[12] ruling of the CJEU further clarified that the societal significance of sport, rendered the incentivisation of training legitimate. In its ruling, the court specified that in order to comply with EU law, a training compensation system ‘must be actually capable of attaining that objective and be proportionate to it, taking due account of the costs borne by the clubs in training both future professional players and those who will never play professionally’.^[13] This remains the main benchmark that any FIFA training compensation system must meet in order to comply with EU law.

As we have shown in this section, the shape of the current FIFA training compensation system and solidarity mechanism are very much a direct result of the EU’s interventionism in the regulation of football in the aftermath of the Bosman case. In doing so, the EU institutions also recognised that the idea of redistributing funds to compensate the costs incurred by the training club in instructing a player is a legitimate one.

3.     Justifying redistribution: Sharing the costs of training

Why do football institutions want this system in place and how was it justified? As was alluded to above, these ideas are not new ideas and are rooted in tradition.[14] Football and its intricacies have been deemed in need of protection for a long time, at least from within. More importantly for this blog, there is a desire for wealth to be redistributed in the form of compensation to the training clubs, to manufacture solidarity between the different levels of football and to incentivise goals such as training, education and development. This justification for FIFA’s redistributive systems is largely connected to the recognition that sport is important for the social fabric, and that incentivising development and training clubs goes beyond football and has societal benefits.

These objectives are reflected in the compromise agreed between FIFA and the EC in 2001. The latter’s press release emphasised that training compensation was “to encourage and reward the training effort of clubs, in particular small clubs“. Similarly, FIFA stated in Circular no. 769; “This system is designed to encourage more and better training of young football players, and to create solidarity among clubs, by awarding financial compensation to clubs which have invested in training young players.” Thus, it is clear that both the football authorities and the EU institutions recognise that the core aim of the FIFA’s training compensation and (though less obviously) its solidarity mechanism are to support the recruitment and training of young professional footballers. In fact, the CJEU’s advocate general in Bernard later recognised that training compensation rules “ensure that clubs are not discouraged from recruitment and training by the prospect of seeing their investment in training applied to the benefit of some other club, with no compensation for themselves”.[15] She went on to emphasise that “there is a broad public consensus that the training and recruitment of young players should be encouraged rather than discouraged”.[16]

At the heart of these rationalisations lies the core belief that failing to compensate the club that has helped a young player grow into a professional player is unfair and would discourage the club’s future effort to train players. Whether a training compensation system is necessary to attain such an objective is, however, far from evident. As was pointed out by advocate general Lenz in the Bosman case, such objectives could as well “be attained by a system of redistribution of a proportion of income, without the players' right to freedom of movement having to be restricted for that purpose“.[17] Nevertheless, the idea of redistribution between clubs remains the fundamental policy objective that underpins both FIFA’s training compensation system and solidarity mechanism.

Concluding remarks and subsequent blogs

This blog has highlighted that FIFA’s training compensation system and solidarity mechanism were introduced, after lengthy discussions with the European Commission and relevant stakeholders, in order to create a solidarity and redistributive relationship between the club where a player was trained and the club were a player pursues his professional career. The core justification behind them is that the training clubs provide an important educational service and that their work would be discouraged if they would not be enjoying some economic returns on their investment (in time and resources) to train players that go on to play professionally for a bigger/richer club.

While this objective is certainly respectable, there are, however, questions that remain regarding the adequacy and necessity of these systems to effectively redistribute funds between clubs. First, one should always keep in mind that training compensations are restricting the players’ freedom to move between clubs. Second, as we will see in the coming blog focusing on African players and clubs, it is questionable whether the current FIFA rules are in practice achieving their main redistributive function. Third, if these mechanisms are necessary to encourage training, it is as well remarkable that they are not also introduced in the context of women professional football, as will be discussed in our third blog. Finally, my last blog will assess how the coming changes to FIFA’s RSTP will affect the structure and operation of both the training compensation system and the solidarity mechanism.

[1] “New club” is the language used in the RSTP.

[2] “[I]n writing via registered post at least 60 days before the expiry of his current contract” per RSTP Annex 4 (6) ‘Special provisions for the EU/EEA’.

[3] RSTP - Annex 4 (3) 3; Annex 5 (2) 3.

[4] Sloane, P. J. (1969), The labour market in professional football, British Journal of Industrial Relations, 7, 181-199.

[5] Ibid.

[6] Established from the decision in Curt Flood v. Bowie Kuhn, et al. 407 U.S. 258.

[7] Case C-415/93 Union Royale Belge des Socie´te´s de Football Association and others v. Bosman and others, ECLI: EU: C:1995:463

[8] Gerrard, B. (2002), The Muscle drain, Coubertobin-Type Taxes and the International Transfer System in Association Football,  European Sport Management Quarterly at 50 – “High Court in England ruled in 1963 that the retain-and transfer system was a restraint of trade. This led to a progressive relaxation of the transfer system with players being given more freedom to move between teams at the end of their contracts while transfer fees remained payable”.

[9] Per Sloane (1969) – “Contracts should have a terminable date and be renewable only on the consent of both parties… The committee did, however, suggest that a special levy should be imposed by the Football League on transfer fees, in addition to the present arrangement and graded according to the size of fee at a progressive rate. This levy could be returned to clubs for the purpose of ground improvements and would thereby tend to offset the tax advantage which clubs derive by signing players, since such payments, unlike the cost of ground improvements, are tax allowable.

[10] Bosman, para 106.

[11] Ibid.

[12] Case C-325/08 Olympique Lyonnais SASP v Olivier Bernard and Newcastle UFC, ECLI: EU: C:2010:143

[13] Ibid para 45.

[14] Pearson, G. Sporting Justifications under EU Free Movement and Competition Law: The Case of the Football ‘Transfer System’, European Law Journal, Vol. 21, No. 2, (March 2015) pp. 222.

[15] Opinion of Advocate General Sharpston in CJEU case C-325/08 Olympique Lyonnais SASP v Olivier Bernard and Newcastle UFC, para 46.

[16] Ibid para 47.

[17] Opinion of Advocate General Lenz CJEU case C-415/93 Union Royale Belge des Socie´te´s de Football Association and others v. Bosman and others, para 239.

Editor’s note: Mario Vigna is a Senior Associate at Coccia De Angelis Vecchio & Associati in Rome, Italy. His main practice areas are sports law, commercial law, and IP law. He also has extensive experience in the Anti-doping field, serving as Deputy-Chief Prosecutor of the Italian NADO and as counsel in domestic and international sports proceedings. He is a frequent speaker at various conferences and workshops. He was not involved in either of the cases discussed below.

I.               Introduction 

Gambling in football is a popular and potentially lucrative activity. It also raises numerous issues. When faced with the issue of gambling, the European Court of Justice (now Court of Justice of the EU) determined that gambling was economic activity per se, notwithstanding gambling’s vulnerability to ethical issues, and thus could not be prohibited outright.[1] With the legality of gambling established, it was left to the proper legislative bodies (national legislatures, national and international federations, etc.) to regulate gambling in order to guard against fraud and corruption. Gambling was not going to disappear; the dangers inherent to gambling would require attention. 

Given the amounts of money sometimes at stake, it is unsurprising that fraud and corruption are constant threats in football gambling. Match-fixing, i.e. wherein participants in a match deliberately attempt to secure a specific result to allow certain gamblers to obtain favorable rewards, is one prominent form of such corrupt activity. FIFA and UEFA, as well as other relevant bodies, have attempted to regulate match-fixing to protect the integrity of football competitions. After all, illicit gambling not only enables unjust enrichment on behalf of the corrupt gamblers and their accomplices; illicit gambling undermines the trust that spectators have in an activity and can lead to a decline in interest as a result.

The Italian Football Federation (FIGC) has adopted a strict liability approach to deter and punish match-fixing. Under the operative rules, clubs and federations whose agents or members engage in match-fixing activity are liable for match-mixing regardless of whether the club or federation itself knew of or condoned the conduct. Unfortunately, two relatively recent appeal decisions—Novara and Pro Patria—have handicapped this strict liability regime by allowing clubs to escape or reduce their liability on account of dubious mitigating circumstances. These decisions have undermined the efficacy of strict liability as a doctrine, and consequently diminish the efforts against match-fixing.

This blog post argues first that strict liability is effective in deterring match-fixing activity so long as adjudicatory bodies enforce it with appropriate rigidity. In fact, the doctrine of strict liability is widespread, in sports law and other fields, precisely because it can be effective. Next, this post critiques the decisions in Novara and Pro Patria, contending that both decisions misapply the principle of proportionality and erroneously recognize certain circumstances to mitigate against liability. As a corrective to these two decisions, this post concludes by outlining an effective application of strict liability and highlighting important regulatory efforts that out to be adopted. And while the discussion herein focuses on Italian football, the ideas explained are widely applicable across all sports and throughout all levels of competition. 

II.             Italian Law, Rules, and Regulations Against Match-fixing in Football

On the eve of the 2006 World Cup, which Italy won, Italian investigators uncovered efforts involving several major football clubs aimed at rigging referee selection for matches. This scandal became known as Calciopoli and implicated clubs from both Serie A and Serie B (respectively the first and second divisions in Italian football). Subsequent investigations in 2011 and 2015 led to additional scandals concerning clubs competing in Serie B and Lega Pro (the third division of Italian football), among them Scommessopoli (Bet City), Last Bet, Dirty Soccer, and Treni del Gol. Match-fixing, it was revealed, was a real problem in Italian football.

The FIGC, as the national football federation, maintains regulatory and disciplinary authority over all Italian football competitions and activity. To address the problem of match-fixing, the FIGC employs a set of regulation that deems match-fixing activity improper and sanctionable under a strict liability principle. Article 4 of the FIGC Code of Sport Justice (CSJ) states:

2. Clubs are strictly liable for disciplinary purposes for the actions of their managers, members and the individuals set forth in art. 1, par. 5

[…]

5. Clubs are presumptively liable for the wrongdoing committed for their benefit by any person. Liability is excluded when it is clearly or reasonably doubtful that the club participated in the wrongdoing or ignored it. [2]

Thus, clubs are liable for match-fixing even if they are not intimately aware of or complicit in the match-fixing efforts that benefit the club; liability is found once someone associated with the club—a player, an agent, etc.—engages via their acts or omissions in match-fixing activity. Match-fixing is explicitly prohibited in Article 7 of the CSJ[3], which also provides that strict liability applies for match-fixing and is punishable subject to the degree of fault borne by the club.[4] Here, it is important to note that under Article 7 the adjudicating body has discretion to assess a club’s degree of fault and reduce accordingly the corresponding sanction(s). This discretion is important; it is, however, in making use of this discretion that the appeal bodies erred in Novara and Pro Patria.

III.           Novara and Pro Patria: Setting the Wrong Precedent

The FIGC Code of Sport Justice applies strict liability to clubs for match-fixing but allows for consideration of mitigating circumstances to reduce the sanction(s) if appropriate. The problem is that currently there is no standard for what qualifies as appropriate mitigating circumstances. Novara and Pro Patria highlight this problem. In both cases, Italian football clubs—Novara Calcio and Aurora Pro Patria—were sanctioned for match-fixing, but later had those sanctions reduced on appeal on the basis of mitigating factors. This blog post contends that those reductions were ill-informed. If strict liability is to work as a deterrent and truly discourage match-fixing, acceptable mitigating factors against strict liability require greater scrutiny than provided in these two cases.

A.    Novara Calcio

An investigation by the Italian media, coined Scommessopoli, uncovered one of the largest match-fixing schemes in Italian footnall history. Scommessopoli was a wide-ranging, multi-dimensional enterprise; players were involved, as were Italian and foreign criminal groups—in total, the investigation alleged that at least twenty-two clubs and sixty-one people participated in match-fixing efforts. One of the individuals involved, Cristian Bertani, played for Novara Calcio, a club in the Italian Serie B. According to the findings of the National Disciplinary Commission, Bertani conspired with a foreign gambling group and a local criminal group to fix matches. Consequently, the National Disciplinary Commission sanctioned Bertani’s club Novara Calcio under the strict liability regime in effect. Novara Calcio was fined EUR 35,000 and received a four-point deduction from the league table.[5]

The club appealed the decision to the FIGC Court of Justice. On appeal, the court reduced the deduction to three points and eliminated the fine entirely:

“[The reduced sanction] leads to a more accurate assessment of the overall conduct of the Appellant of all the activity carried out by the club, whether in a preventative or subsequent manner, specifically aimed at fighting the phenomenon of illicit sports or eliminating the consequences… In this sense, recalling among others, the approval by Novara Calcio of the first organizational model of the legislative decree no. 231/2001 related to the Code of Ethics; earning the ISO 9001:2008 certification of quality, being the first football association to earn it; having contracted since February 2012 the professional services in order to study the betting quota over the matches played by the club, bringing a discipline scheme over those studies thanks to an Antifraud Code in April 2012 “[6]

In essence, the Court reduced the sanctions on account of the club’s implementation of self-protection tools in accordance with the organizational model set forth in the Legislative Decree no. 231/2001. The problem with this decision, however, is that the efforts in question were taken after the incident. The Court treated this post-incident measures as mitigating circumstances, even though these measures were not operative when Bertani attempted to fix matches.

Such allowance of post-incident mitigating factors is inappropriate and undercuts the effort to prevent match-fixing. Indeed, only the prior adoption of an adequate organizational model against match-fixing by a club should (potentially) mitigate against strict liability. Two requirements should be satisfied: (1) prior adoption, and (2) adequate measures. Legislative decree no. 231/2001 and Italian jurisprudence both distinguish between superficial adoption of an organizational model—which is insufficient by itself—and the adoption of an organizational model with demonstrated sufficient, concrete measures to prevent wrong-doing. Only the latter satisfactorily deters potential wrong-doing, and only the latter should (potentially) shield against strict liability so long as a club can prove its preventative efforts were adequately effected. With Novara Calcio, the problem was that the adoption of an organization model was merely superficial, in addition to being after-the-fact, and that the club did not have to prove that the adopted measures were or would be effective in combatting match-fixing.

B.    Aurora Pro Patria 

In 2015, the Catanzaro Police Department arrested more than forty individuals for alleged participation in match-fixing in matches of the Italian 4^th Division. Three arrestees were former members of the club Aurora Pro Patria—two players and one coach—accused of match-fixing activities while employed by Pro Patria. All three were found guilty in the ensuing proceedings. Thus, under the doctrine of strict liability, Pro Patria received a seven-point deduction as a sanction for the conduct of its employees.[7]

Pro Patria appealed the ruling and sanction. And like the Novara case, the sanction was reduced: 

Having found the defendant liable, it cannot but follow the confirmation of the strict liability held by the association (Club). As marked by the vast jurisprudence, indeed, the referred liability cannot be avoided but graduated in the presence of circumstances that would see to deserve special consideration.

… the thorough preventative activity put in action by Aurora Pro Patria, that even when they were not obliged to, they still adopted the model of conduct as set out in the rule Legislative Decree no. 231/2001, they imposed a Code of anti-fraud and have entered into a contract with Federbet [a monitoring company] by which said company will check the flux of the bets related to the activity of the club, we determine that, given the relevant circumstances, the sanction against the association (club) must be reduced…”[8]

The Court reduced the sanction to a three-point deduction. Although the appeal court affirmed strict liability, it undercut its potency by accepting as mitigating circumstances factors that were not in place when the unlawful conduct occurred. The appeal court was in some ways excusing a violation, at least partially, for efforts the responsible party undertook to not commit the same violation again in the future. The efforts had no impact on the violation that already took place.

C.    Problems Posed by the Novara and Pro Patria Rulings 

After being charged with match-fixing, both Novara and Pro Patria hired monitoring companies that supposedly help prevent, or at least detect, potential match-fixing activity. These post-facto efforts were deemed by ruling bodies compelling enough to reduce sanctions imposed for match-fixing. This precedent of reducing on account of mitigating circumstances occurring after the match-fixing activity occurred poses two issues.

First, the precedent undermines the strict liability regime by allowing the reduction of a club’s liability where it fixes the problem ex post facto, thereby providing clubs with a loophole to escape with minimal harm. Second, the precedent does not consider the actual efficacy of the hired monitoring companies or their methods. Without a regulatory framework and established standards for monitoring companies and certification of their services, i.e. no way of assessing whether the hired companies actually make any difference when it comes to the prevalence of match-fixing, nothing separates effective monitoring from the appearance or claim of monitoring.

IV.           A Better Way of Evaluating Mitigating Circumstances

An adjudicatory body rightfully must consider the particular context of each case. Accurate and fair decisions acknowledge that not all cases concerning similar issues deserve equal treatment. Mitigating circumstances are an important aspect of any fair legal system. With Novara and Pro Patria, however, the appeal bodies erred by giving weight to certain post-incident mitigating circumstances that had no bearing on the issue at hand. Further, allowing the hire of a monitoring company to mitigate a club’s liability introduces a separate issue, i.e. the efficacy of the monitoring company and its services. Both appeal decisions reduced the capacity of strict liability to deter match-fixing. If a strict liability regime is to be effective in combatting match-fixing, then clear standards for evaluating mitigating circumstances in cases like Novara and Pro Patria are necessary.

Before proposing a way forward, it is important to first try and understand why the appeal decisions reduced the sanctions in the cases at hand. Inherent to the appeals’ justification is the doctrine of proportionality, or the notion that any punishment must fit the crime and cannot be more extreme than is warranted. In Novara and Pro Patria, it seems that the appeal bodies thought that the clubs’ liability for the conduct of their employees should be limited. In other words, while the appeal bodies certainly assigned liability to the clubs, they were unwilling to allow that liability to support too onerous sanctions.

This, of course, misses the point of strict liability in the first place. Strict liability is used to assign liability notwithstanding immediate fault because the liable party is best positioned to absorb the liability and/or work to prevent the wrongful conduct. Punishments for strict liability in match-fixing, if reduced to minimal amounts, do little to nothing to promote clubs to actively prevent match-fixing. The Court of Arbitration for Sport (CAS) re-affirms this point:

With regard to the alleged disproportionality of the Decision, the Panel first of all wishes to stress that the fight against match-fixing is considered to be extremely important for the purpose of preserving confidence in and the integrity of sport.[9]

Part of the proportionality calculus must be the severity of the wrongdoing concerned. Match-fixing is, arguably, the greatest wrong in sports. Therefore, hefty punishments should not violate proportionality. 

The Novara and Pro Patria appeal decisions also over-value the post-incident preventative actions (which is an oxymoron!). The treatment of post-incident actions as mitigating circumstances suggests future offenders will be able to correct wrongful conduct after-the-fact simply by hiring a company that claims to monitor match-fixing activity. Even if a club were to hire a monitoring company prior to any wrongful conduct, the mere signing of a contract with a monitoring company is generally a questionable preventative measure. Clubs that employ monitoring companies and are then subsequently charged with liability for match-fixing should only have sanctions (and thus liability) reduced if they prove to the court that the monitoring company undertook actual and sufficient efforts to monitor and prevent match-fixing.

Merely employing a monitoring company without any regard for the efficacy of its services is an inadequate escape route from strict liability. After all, these companies are unregulated and unaccredited; there is no guarantee that the companies do any work, or that any work the company performs is effective. At a minimum, then, a club must demonstrate that in conjunction with a monitoring company it undertook significant and adequate measures to prevent match-fixing by its employees and agents.

A standard for monitoring companies is important in light of the Novara and Pro Patria rulings, which will support a booming (and unregulated) market for monitoring companies. Clubs may now look to symbolically contract with these companies to escape liability if/when they are accused of match-fixing. The football community should not allow such a deregulated and opaque market to emerge.

V.             Conclusion

Match-fixing poses one of the most elemental dangers to professional football—it damages the credibility of the sport and could potentially damage the market. The doctrine of strict liability discourages a club’s participation in match-fixing activities, and incentivizes clubs to put into place measures that ensure their employees abide by anti-match-fixing regulations. Judges and tribunals must not lose sight of the broader picture when determining sanctions in match-fixing cases. In light of the Novara and Pro Patria decisions, this blog post offers a way forward to maintain strict liability’s capacity to effectively combat match-fixing: (1) post-incident efforts should not be considered as mitigating circumstances, and (2) monitoring companies and their services must meet a certain standard if they are to absolve, partially or fully, a club from its liability.

Strict liability can be effective so long as courts and tribunals do not unduly handicap it. Match-fixing is still a prominent threat in football and in sports in general. Now is not the time to weaken the most effective tool (strict liability) available to combat match-fixing. While the preceding discussion focuses on Italian football, the lessons are universal for all sports, at all levels.

[1] Case Her Majesty's Customs and Excise v. Gerhart Schindler and Jôrg Schindler, C-275/92 Judgement of 24th March 1994 [1994] ECR 1-01039.

[2] Unofficial translation from Italian: “Responsabilità delle società 1 […]; 2. Le società rispondono oggettivamente, ai fini disciplinari, dell'operato dei dirigenti, dei tesserati e dei soggetti di cui all’art. 1 bis, comma 5; 3 […]; 4 […] 5. Le società sono presunte responsabili degli illeciti sportivi commessi a loro vantaggio da persone a esse estranee. La responsabilità è esclusa quando risulti o vi sia un ragionevole dubbio che la società non abbia partecipato all'illecito o lo abbia ignorato; 6 […].”

[3] “Committing, by any means, acts to alter the development or outcome of a match or competition or to assure any advantages in the ranking constitutes a sporting wrongdoing.” Unofficial translation from Italian: “1. Il compimento, con qualsiasi mezzo, di atti diretti ad alterare lo svolgimento o il risultato di una gara o di una competizione ovvero ad assicurare a chiunque un vantaggio in classifica costituisce illecito sportivo.”

[4] Art. 7, par. 4: It is considered the strict liability of a club in the sense of art. 4, par. 5 and the fact is punishable subject to the degree of fault, with the sanctions foreseen in art. 18, par. 1 sections (g), (h), (i), (l), and (m). Unofficial translation from Italian: “Se viene accertata la responsabilità oggettiva o presunta della società ai sensi dell'art. 4, comma 5, il fatto è punito, a seconda della sua gravità, con le sanzioni di cui alle lettere g), h), i), l), m) dell’art. 18, comma 1.” The sanctions consist, broadly speaking, in the deduction of points, to be sent to the bottom of the table, to be disqualified from the competition, to have a tittle taken away or the barred from participating in a specific competition.

[5] The sport prosecutor had sought a six-point deduction.

[6] Unofficial translation from Italian: “A ciò conduce una più attenta valutazione della complessiva condotta della reclamante, di tutta la attività da questa posta in essere, invero tanto in via preventiva che successiva ed espressamente finalizzata a combattere il fenomeno degli illeciti sportivi ovvero ad eliminarne le conseguenze… In questo ambito vanno riassuntivamente richiamati, tra gli altri interventi, l’approvazione da parte del Novara Calcio del primo modello organizzativo ex decreto legislativo n. 231/01 e relativo Codice etico; l’approvazione nel gennaio del 2012 di un nuovo modello organizzazione e di gestione; il conseguimento nel marzo ancora di quest’anno di certificazione di qualità ISO 9001:2008 come prima società calcistica in Italia; l’aver affidato nel febbraio 2012 a soggetto professionale lo studio dell’andamento delle quote di scommesse legate alle partite che avrebbe giocato il Novara da quel momento alla fine del campionato, successivamente deliberando di continuare l’opera di monitoraggio delle partite; disciplinando infine tale sistema con l’adozione di un Codice Antifrode.”

[7] The sport prosecutor sought a twenty-point reduction as an exemplary punishment and to increase its deterrent effect.

[8] Federazione Italiana Giouco Calcio; COMUNICATO UFFICIALE N. 48/TFN – Sezione Disciplinare (2015/2016), p. 81.

[9] CAS 2013/A/3297 Public Joint-Stock Company “Football Club Metalist” v. UEFA & PAOK FC, award of 29 November 2013. (Case about match-fixing and sanctions under UEFA rules.)

The Editors of the International Sports Law Journal (ISLJ) invite you to submit abstracts for the next edition of the ISLJ Conference on International Sports Law, which will take place on 24 and 25 October 2024 at the Asser Institute in The Hague. The ISLJ, published by Springer and TMC Asser Press, is the leading academic publication in the field of international sports law and the conference is a unique occasion to discuss the main legal issues affecting international sports and its governance with renowned academic experts.

We welcome abstracts from academics and practitioners on all issues related to international and transnational sports law and their impact on the governance of sport. We also welcome panel proposals (including a minimum of three presenters) on specific issues of interest to the Journal and its readers. For this year’s edition, we specifically invite submissions on the following themes and subthemes:

Reformism in transnational sports governance: Drivers and impacts

• Legal and social drivers of reforms in transnational sports governance   
• The role of strategic litigation (before the EU/ECtHR/National courts) as a driver of reform;
• The role of public/fan pressure groups on clubs, competition organisers and governments as a driver of change.
• The impact of internal reforms in transnational sports governance: Cosmetic or real change? (e.g. IOC Agenda 2020+5, FIFA governance reforms, CAS post-Pechstein changes, WADA sfter the Russian doping scandal)
• Emerging alternatives to private sports governance – the UK’s Independent Football Regulator.

The organization and regulation of mega sporting events: Current and future challenges 

• Mega-sporting events as legalized sites of digital surveillance 
• Greening mega-sporting events (e.g. carbon neutral pledges, environmental footprints of events, the impact of multiple hosting sites)
• Mega-sporting events and the protection of human rights and labour rights (e.g. Paris 2024 Social Charter, Euro 2024 human rights commitments)
• The Olympic Games and athletes’ economic rights (remuneration/advertisement)
• Reviews of the legal issues raised at Euro 2024 in Germany and the Paris 2024 Olympic Games
• Previews of the legal issues likely to have an impact on the FIFA 2026 World Cup and the Milano-Cortina 2026 Winter Olympic Games

Please send your abstract of 300 words and CV no later than 15 July 2024 to a.duval@asser.nl. Selected speakers will be informed by 30 July.

The selected participants will be expected to submit a draft of their paper by 1 October 2024. Papers accepted and presented at the conference are eligible for publication in a special issue of the ISLJ, subject to peer-review. 

The Asser Institute will provide a limited number of travel & accommodation grants (max. 300€). If you wish to be considered for a grant, please explain why in your submission.

The editor’s note:

Two weeks ago we received the unpublished CAS award rendered in the Eskişehirspor case and decided to comment on it. In this post Thalia Diathesopoulou (Intern at the ASSER International Sports Law Centre) analyses the legal steps followed and interpretations adopted by CAS panels in this case and in a series of other Turkish match-fixing cases. The first part of the post will deal with the question of the legal nature of the ineligibility decision opposed by UEFA to clubs involved in one way or another into match-fixing and with the personal and material scope of UEFA’s rule on which this ineligibility is based. The second part is dedicated to the procedural rules applied in match-fixing cases.

Introduction

The unpredictability of the outcome is a sine qua non feature of sports. It is this inherent uncertainty that draws the line between sports and entertainment and triggers the interest of spectators, broadcasters and sponsors. Thus, match-fixing by jeopardising the integrity and unpredictability of sporting outcomes has been described, along with doping, as one of the major threats to modern sport.[1] 

It does not come as a surprise, therefore, that the fight against match-fixing has been elevated over the past years to a general interest issue, being also included in European Commission’s Agenda on sports as a priority. The urge to protect the integrity of sport, has stimulated the adoption by sports-governing bodies, and especially UEFA and FIFA, of regulations specifically intended to combat match-fixing. The evolution of UEFA Disciplinary Regulations (UEFA DR) in the last 10 years has been remarkable: it follows a path from a broad capture of match-fixing conduct by reference to the general values of loyalty, integrity and sportsmanship[2] in the 2004 version, to the explicit - first ever- reference to the offence of match-fixing in the revised 2013 edition.[3]

In this context, the CAS has been called to implement these rules in a series of match-fixing cases. Especially Turkey’s unprecedented match-fixing scandal in 2011 led to a series of important CAS awards tackling match-fixing. The latest episode of this Turkish series was written on 2 September 2014: following Fenerbahçe and Besiktas, it was Eskişehirspor’s turn to face a CAS ruling on a match-fixing related case.

CAS jurisprudence on match-fixing being in its infancy, the approach of the CAS panels towards procedural, evidentiary and matters of substance in match-fixing disputes is still uncertain. Considering the magnitude of the match-fixing threat and the CAS role as a ‘cartographer’ of the so called lex sportiva, it is worthwhile to monitor the emerging trends of CAS on these integrity-related issues. This blog series will, therefore, use the Turkish cases as a vehicle in order to build a legal roadmap in match-fixing cases and shed light on four issues that have been extensively addressed in recent CAS jurisprudence: the qualification of the legal nature of the measure of ineligibility as a result of a Club’s involvement in match-fixing, the scope of application of this measure, the standard of proof to be applied and, finally, the admissibility of evidence in match-fixing cases

Particularly, two substantial problems that emerged in match-fixing disputes, i.e. the legal qualification of the match-fixing related measure of ineligibility under Article 2.08 of the UEL Regulations as administrative or disciplinary measure (1) and the scope of application of Article 2.08 (2), will constitute the axes of this first blog series. 

The 2011 Turkish match-fixing series in brief

In the summer of 2011, following Turkish’s police investigation into 19 football matches suspected of being fixed, 61 individuals were arrested, including club managers and Turkish national players. Fenerbahçe, Besiktas and Eskişehirspor were connected with match-fixing allegations in domestic tournaments in 2011.

Istanbul giant Fenerbahçe was at the epicentre of this match-fixing scandal, with its Chairman, Aziz Yildirim, being convicted by Istanbul’s 16^th High Criminal Court of establishing and leading a criminal organisation, which rigged four games and offered payments to players or rival clubs to fix three others. Particularly, among other matches, it was found that under the leadership of the then President of Fenerbahçe, match-fixing agreements were made for the matches of Eskişehirspor against Fenerbahçe and Eskişehirspor against Trabzonspor dating from 9 April 2011 and 22 April 2011 respectively. The Eskişehirspor head coach and the player were found guilty for match-fixing in the match with Trabzonspor and were sentenced to imprisonment. Furthermore, the High Criminal Court convicted Besiktas’ Officials of match-fixing activities with regard to the Final Cup played between Besiktas and Istanbul BB on 11 May 2011.

As a result of this alleged match-fixing involvement Fenerbahçe was banned by the Turkish Football Federation (TFF) from participating in the 2011-2012 CL. Later on, the 25 July 2013, Fenerbahçe was found ineligible by the UEFA Appeals Body (UAB) to participate in the next two UEFA club competitions including the 2013/14 UEFA CL, since it could not comply with the UEFA Champions League (UEL) admission requirements. Similarly, Besiktas and Eskişehirspor, in 2013 and 2014 respectively, were considered by the UAB ineligible to participate in the next UEL season, on the grounds of a breach of the UEL admission criteria and particularly of Article 2.08.

A next round of proceedings was brought before the CAS. On 28 and 30 August 2013, the CAS rejected Fenerbahçe’s and Besictas’ appeals.[4] One year later, on 2 September 2014, Eskişehirspor faced the same fate. Interestingly enough, the Eskişehirspor panel was the first CAS panel to deal with the sanction of a club victim of a match-fixing arrangement.

The outcome of the Turkish cases is not necessarily surprising. The CAS practice has been consistently embracing the UEFA zero tolerance policy against match-fixing. However, the legal reasoning followed by CAS to reach a similar outcome differs significantly fostering legal uncertainty in the match-fixing context. At this point, therefore, this blog post will attempt to map the reasoning of the CAS over the following thorny issues which were particularly raised in the Turkish cases: the legal nature of the measure of ineligibility under Article 2.08 of the UEL Regulations (1) and the scope of application of Article 2.08 (2).   

Qualifying Article 2.08 UEL Regulations: administrative measure or disciplinary sanction?

At a first glance, the question of the legal nature of the ineligibility measure of Article 2.08 is rather theoretical, but it also bears important practical implications. The identification of the legal nature of Article 2.08 as administrative or disciplinary determines ‘how this measure shall be applied and under which legal principles’.[5] In other words, the characterization of the measure of Article 2.08 as a disciplinary one may trigger the application of UEFA Disciplinary regulations, including the strict liability principle and the possibility of issuance of a probationary period. Before proceeding with our analysis, it should be pointed out that the Fenerbahçe case, deals with the legal nature of Article 2.05 UEFA Champions League Regulations (UCLR). However, since the wording of Article 2.05 UCLR and Article 2.08 UELR is exactly the same, the panel’s findings are transposable.

When qualifying the legal nature of the ineligibility measure in match-fixing disputes, the Fenerbahçe,Besiktas and Eskişehirspor panels used as a landmark the well-established distinction between administrative acts and disciplinary measures.[6] This is the common point of reference for the three cases, which thereafter differentiates in the interpretation of the ineligibility measure.

In the first case, the Fenerbahçe panel introduced the idea of a ‘two stage process’ in match-fixing disputes: the first stage encompasses an administrative measure, akin to a preliminary minimum sanction, while the second stage is a disciplinary measure, imposing an additional sanction. Thereafter, in a surprising twist the CAS declared the inherent disciplinary nature of the administrative measure of ineligibility, since the subject matter of Article 2.08 is ‘the imposition of a sanction’. According to this panel, the minimum sanction serves the legitimate interest of UEFA to exclude a club from European competitions with immediate effect, while additional sanctions can be imposed if the circumstances so justify. However, this interpretation creates a paradox in that it blurs the lines between acts of administrative and disciplinary nature, a distinction well entrenched in CAS case law.

The Besiktas case adds to the legal uncertainty with regard to the legal nature of the ineligibility measure. According to this panel and contrary to the assessment in the Fenerbahçe case, Article 2.08 UELR does not have a sanctioning character, even if it excludes a club from UEFA competition. This argument is based on the wording of Article 50 (3) UEFA Statutes which, by referring to the ineligibility measure as a measure imposed ‘without prejudice to any possible disciplinary measures’, implicitly excludes its sanctioning nature.

This contradictory interpretation of the ineligibility measure by the previous panels triggered the concerns of the Eskişehirspor panel, which aimed to put an end to the legal uncertainty surrounding the definition of the legal nature of Article 2.08. Therefore, the CAS proceeded for the first time with an extensive analysis of the legal nature of Article 2.08. First of all, the CAS recognized the existence of a double regulatory regime in match-fixing cases: an administrative measure aiming at preventing match-fixing, laid down in Articles 2.05 UCL or 2.07, 2.08 of UEL Regulations and Article 50.3 of the UEFA Statutes 2008, and a disciplinary measure enshrined in the Disciplinary Regulations, specifically at Art 5.2j of the UEFA Disciplinary Regulations (DR) 2008. While this distinction seems to be inspired by the ‘two stage process’ elaborated in the Fenerbahçe case, this panel went a step further by drawing a clear line between measures of administrative and disciplinary character. After having clarified this distinction between measures of different legal nature and effect, the panel concluded that the measure of ineligibility of Article 2.08 is of a purely administrative nature. This assessment is based on an interpretation of Articles 2.09 UEL Regulations and Article 50.3 of the UEFA Statutes 2008 similar to the one adopted in the Besiktas case: both provisions refer to the automatic administrative application of the measure of ineligibility, leaving the door open for potential additional disciplinary measures ‘if the circumstances so justify’. Furthermore, the CAS noted that the administrative measure of Article 2.08 has a broad scope of application encompassing ‘any activity aimed at arranging or influencing the outcome of the match’, as compared to the disciplinary offence which in line with its sanctioning character is more restrictive.

Thereafter, the panel highlighted the consequences to be drawn from this qualification. As a result of the pure administrative nature of Article 2.08, the legal principles usually applicable to disciplinary measures are considered irrelevant. In practice, this means that the CAS excludes the application of: a) Articles 5.2 .j. and 17.1 of UEFA DR about the evaluation of mitigating circumstances when disciplinary measures are imposed; b) Article 6 of UEFA DR imposing a strict liability system; c) Article 11 of UEFA DR about the elimination of the ineligibility measure or the issuance of a probationary period; and finally, d) the ‘nulla poena sine culpa’ principle recognized in criminal law.

This straightforward position of the CAS in the Eskişehirspor case reflects its intention to put a provisory end to the legal uncertainty with regard to the legal nature of Article 2.08 and the legal consequences it entails. Borrowing elements from the previous Turkish cases, the CAS came up with a more sophisticated and coherent interpretation of the legal nature of the ineligibility measure, an interpretation that may serve as a reliable guideline for subsequent arbitral panels dealing with match-fixing. 

The scope of application of Article 2.08 UEL Regulations

Article 2.08 UEL Regulations does not define precisely the activities of a club that is directly or indirectly involvement in match-fixing. In match-fixing disputes, therefore, the CAS has a decisive role in clarifying the scope of application of the ineligibility measure.

As far as the scope ratione materiae is concerned, the Fenerbahçe and Besiktas panels converged in a broad understanding of the scope of Article 2.08. Indeed, based on the ordinary meaning of Article 2.08 which encompasses ‘any activity aimed at arranging or influencing the outcome of a match at a national or international level’ in conjunction with the ratio legis of this provision, which reflects the zero tolerance policy of UEFA against match-fixing, the CAS considered that Article 2.08 targets not only activities directly intending to fix the outcome of a game, but also activities that may have an unlawful influence on it. In this sense, for instance, the fact that Eskişehirspor accepted a bonus from a third party, i.e. Fenerbahçe, for winning, even though it cannot be qualified as match-fixing, is influencing the outcome of the match and, therefore, falls within the scope of Article 2.08. Furthermore, the Besiktas panel offered a broad interpretation of the wording ‘aimed at’ suggesting that not only the act of match-fixing, but also an attempt falls within the broad scope of Article 2.08. Hence, the Turkish cases establish an important finding with regard to the scope of application of the ineligibility measure in match-fixing disputes: a broad interpretation of Article 2.08 is in line with UEFA’s statutory objectives and, therefore, has to be adopted.

On the other hand, with regard to the scope ratione personae of Article 2.08, the CAS panels have been inconsistent. In order to identify whose actions are attributable to the club, the Besiktas panel applied the strict liability principle enshrined in Article 6 of the 2008 UEFA Disciplinary Regulations (DR). Here, the application of UEFA DR seems to be at odds with the previous characterization of Article 2.08 as an administrative measure. By contrast, in the Eskişehirspor case, where the issue whether the actions of a coach, who is a mere employee, can be attributed to the club is raised. In that case, the panel relying on the pure administrative character of Article 2.08, rejected the application of the strict liability principle. The Eskişehirspor panel, insisting on the qualification of the measure of ineligibility as an administrative measure, suggested an entirely different, but equally broad, interpretation of the ratione personae scope of article 2.08. Indeed, it suggests a broad interpretation of the term ‘official’, an interpretation that would capture ‘every board member ….coach, trainer and any other person responsible for technical, (…) as well as other persons obliged to comply with the UEFA Statutes’. In other words, the coach has to be considered as an official in the sense of Article 2.08 and his actions were, thus, attributable to the club.

To conclude, it seems that whatever the interpretative road chosen, the scope of application rationae personae and materiae of article 2.08 will be understood broadly. Nevertheless, it would be more coherent to have such a broad interpretation rely on a stabilized legal practice and the Eskişehirspor award provides an interesting first step in this direction.

The series of Turkish cases has provided the CAS with the opportunity to frame a consistent approach in substantive matters linked to match-fixing cases. In the Eskişehirspor case, the CAS attempts to clarify its approach to match-fixing in football. Two important conclusions can be drawn: the ineligibility measure imposed by Article 2.08 UELR has a broad scope of application and, secondly, it should be qualified as having an administrative nature. As a result, disciplinary rules do not apply to match-fixing disputes involving the eligibility of a club to European competitions. Regarding certain procedural matters, however, disciplinary standards and rules do apply. This is the real Achilles’ heel of the CAS approach in match-fixing cases: how can the application of rules of different nature to substantial and procedural matters in an identical match-fixing dispute be explained? 

(To be continued)

[1] Match-fixing in sport-A mapping of criminal law provisions in EU 27,  (http://ec.europa.eu/sport/library/studies/study-sports-fraud-final-version_en.pdf), 14.

[2] CAS 2009/A/1920 FK Pobeda, Aleksandar Zabrcanec, Nikolce Zdraveski v/ UEFA, para 78.

[3] UEFA Disciplinary Regulations 2013, Article 12 ‘Integrity of matches and competitions and match-fixing’ (http://www.ecaeurope.com/Legal/UEFA%20Documents/2013_0241_Disciplinary%20Regulations%202013.pdf)

[4] CAS 2013/A/3256 Fenerbahçe Spor Kubülü v UEFA & CAS 2013/A/3258 Besiktas Jimnastik Kulübü v. UEFA

[5] CAS 2014/A/3628 Eskişehirspor Kulübü v UEFA, para 98.

[6] CAS 2007/A/1381 & CAS 2008/A/1583

After a decade of financial misery, it appears that Valencia CF’s problems are finally over. The foreign takeover by Singaporean billionaire Peter Lim will be concluded in the upcoming weeks, and the construction on the new stadium will resume after five years on hold due to a lack of money. On 3 June Bankia, the Spanish bank that “saved” Valencia CF in 2009 by providing a loan of €81 million, gave the green light for the takeover. However, appearances can be deceiving. Indeed, Valencia CF has been the subject of numerous Spanish Court decisions since March 2013, the latest dating from 22 May 2014. The cases concern a guarantee given by the local authorities and whether this guarantee should be relied upon since Valencia CF is incapable of repaying its debt. Meanwhile, the European Commission announced that it will soon reach a final decision regarding the formal investigations into alleged State aid measures granted to the club. Strangely enough, the Spanish Courts are showing little interest in the pending Commission Decision and Mr Lim seems to be ignoring it as well. True, EU institutions have so far never sanctioned public authorities of Member States for granting aid to football clubs, but the evidence in this case is so damning that it will be difficult to overlook. Our aim in this blog-post is to disentangle the legal complexity of a case fought both at the national and the European level.  

Saving Valencia CF with public money

The aid measure has its origins in 2009, when Valencia CF, aiming to reduce the clubs total debt of €596 million and continue the construction works on a new stadium, decided to sell new shares for a total capital injection of €92 million. Unfortunately, club members only subscribed €18 million in shares. The majority of the shares were acquired by La Fundación del Valencia Club de F��tbol, (a foundation especially created by the club for this purpose) becoming majority shareholder of the club (70%) for the sum of €75 million. The money was loaned by BANCAJA, the largest financial institution of the autonomous region of Valencia. The loan was later increased to €81 million in November 2010. The Fundación and BANCAJA also agreed that the revenues for the old “Mestalla” stadium, which was for sale, would go to the bank. Furthermore, on 26 August 2009, the Instituto Valenciano de Finanzas (hereafter: IVF[1]) had issued a guarantee on the controversial loan.[2] In case of a default by the Fundación, the IVF was to pay back to the bank the outstanding amount. In return, the IVF would receive an annual premium of 0.5% and the Fundación is prevented to selling shares without the previous consent by the IVF.[3]

In September 2012, Bankia (the new name of the bank following a merger in 2010) was forced to restructure the deal it had with the Fundación. Bankia was suffering heavily from the financial crisis and, after being rescued by the Spanish Government, was forced to decrease its financial debt by increasing its liquidity and reducing its real estate portfolio. Thus, Valencia CF was to negotiate the refinancing of its debt, given that the Fundación was unable to repay the loan to Bankia.

By February 2013 the total of Valencia’s debts reached €387 million owed to different creditors, including the €81 million it owed to Bankia. In light of the guarantee issued, the Consell de la Generalitat de la Comunidad Autónoma de Valencia (the local government of the autonomous region of Valencia, also known as the Generalitat) was asked to transfer €4.8 million to Bankia to cover interest payments. Even worse, the Generalitat might have to bear the full debt of €81 million the Fundación owed to Bankia. As a result, the Generalitat would hold 70% of the shares in Valencia CF, thereby making the football club state-owned.[4]

Claiming that the guarantee breached both Spanish and EU law and should therefore be declared void, two club shareholders lodged a complaint against the local government of Valencia.[5] In its judgment, dating from 8 March 2013, the Administrative Court of Valencia annulled the guarantee, arguing inter alia that the operation would not generate benefits for the IVF and that the restrictions placed by the public authorities on the selling of shares by Valencia CF will distort competition.^[6] Finally, the duty to evaluate whether the operation was subject to EU State aid rules had not been complied with.^[7]

This last argument by the Administrative Court is no surprise, in light of the blatant State aid. Indeed, both the press and Members of the European Parliament quickly jumped onto the allegations that State aid in the form of loan guarantees was granted by Spanish public authorities. The European Commission forced by this judgment, press reports and a flood of information sent by Spanish citizens officially asked Spain to comment on these reports on 8 April 2013.[8] After analysing all the information the Commission decided to initiate the procedure laid down in Article 108(2) TFEU on alleged illegal State aid on 18 December 2013. Now that the Commission has announced in its Management Plan 2014 that the final decision will be published in 2014, one can reasonably expect the case to draw to its close.

The strategy of the Spanish Courts: Let’s ignore State aid rules and the Commission

The judgment by the Administrative Court of Valencia was only the first in a whole string of judgments by the Spanish Courts. The most important ones date from 15 November 2013, 19 December 2013, and 22 May 2014. 

Bankia appealed the judgment of 8 March 2013, claiming it should have been invited as a party at the trial. At first, the Administrative Court of Valencia upheld the previous decision annulling the guarantee, but Bankia’s second appeal, this time in front of the Tribunal Superior de Justicia de la Comunidad Valenciana, sala de lo Contencioso (the High Administrative Court of the autonomous region of Valencia) was successful. On 15 November 2013, the High Court, found the judgments by the Administrative Court to be void due to a procedural deficiency. Indeed, as Bankia was not provided the opportunity to present its views at the first trial, the tribunal violated Bankia’s right to be heard. More precisely the High Court considered that the IVF had not informed Bankia adequately when, as a public authority, it had the obligation to do so; Bankia’s own financial troubles and instability were too important for it to be left out of the procedure; and the fate of the football club would be at stake if the guarantee is revoked.[9] Hence, the guarantee provided by the local authorities on the loan was considered legally valid and Valencia CF’s bankruptcy risk dismissed. That the guarantee probably is in breach of EU State aid rules was irrelevant to the High Court.

In response to this latest judgment the same shareholders demanded an injunction that consisted in suspending the execution of the guarantee since it could constitute illegal State aid. Once again the demanding parties won the day and the execution of the guarantee was suspended in a decision dating from 19 December 2013. The timing by the Administrative Court to suspend the execution could not have been better. Indeed, the decision occurred only 24 hours after the Commission announced a formal investigation into the Valencia F.C case, thus, the alleged state aid could have been used as a fitting legal justification to suspend the guarantee. However, strangely enough, the Administrative Court did not refer to the State aid constellation. In the fourth paragraph of its judgment, the Court did recognize that procedural rules were breached including the European procedural rules on State aid[10], but the reasoning used to freeze the guarantee was based on national law. 

Peter Lim appears on stage: the end of all the trouble?

By January of this year, the IVF received a formal offer from Mr Lim to invest €210 million in the club. Mr Lim would, thus, take over IVF’s debt with Bankia. The Valencian government must have hoped for the end of their troubles. Indeed, it appeared that it was only the Commission decision it had to worry about.

But, Bankia, on the other hand, still believed it had a right to compensation by the Valencian government for refusing to execute the guarantee and launched a new civil procedure. In a ruling dating from 22 May 2014, the high Civil Court in Valencia sided with the bank and upheld the validity of the guarantee (yet again). Furthermore, the judge ordered the local government to pay €4.2 million as a compensation for loss of opportunities.[11] To make the legal uncertainty certain, the Valencian government quickly reaffirmed its refusal to pay any compensation to Bankia since it considered the execution of the guarantee as suspended by the Administrative Court.[12]

The ball in the Commission’s Court

From a substantive perspective, the Valencia State aid case seems quite straightforward. Valencia CF is a professional football club engaged in economic activities and should therefore be considered an undertaking under EU State aid rules. The guarantee provided by the local government constitutes an economic advantage for the football club over its competitors, as it is technically shield from the possibility of going bankrupt. The measure is selective, distorts competition towards clubs not enjoying a similar guarantee and is funded by State (more precisely the regional governments) resources. In other words, the criteria of article 107(1) TFEU can be considered as fulfilled. Finally, the measure does not appear to fall under any of the exemptions of articles 107(2) and 107(3) nor under any provisions of the General Block Exemption Regulation. 

It remains to be seen, however, whether the Commission will take an unprecedented action and sanction the local authorities of a Member State for supporting financially a professional football club. The Valencia case certainly provides an outstanding opportunity to do so. First of all, the facts of the case cast little doubt as to whether or not the measure breached EU State aid law. Second, even though the Commission cannot decide the matter in place of the Spanish Courts, any decision will create a guiding precedent hopefully putting a final point to the prevailing legal uncertainty of a long-lasting and protracted legal saga.

[1] The IVF is the Public Entity that  performs the public credit policy of the government of the autonomous region of Valencia

[2] Memoria de Actividades: Institut Valencià de Finances, Informe Anual 2009, page 48

[3] Sentencia N° 103/2013, N° de Recurso 239/2010, 8 March 2013, §5

[4] Ibid

[5] J. M. Bortvalencia, “Creo que Bankia no puede recurrir esta sentencia”, Levante – EMV, 21 March 2013

[6] Supra Nº3, §7

[7] Ibid

[8] Commission Decision State aid SA.36387 – Spain: Alleged aid in favour of three Valencia football clubs

[9] Las Provincias, El Valencia gana tranquilidad al decretar el TSJ que la Generalitat vuelve a ser avalista, 16 November 213

[10] Auto N° 239/2010,  19 December 2013, §4

[11] Iusport, Bankia levanta el hacha de guerra y ejecuta parte del aval del Valencia, 27 May 2014

[12] Las Provincias, La Generalitat «no se plantea pagar nada» por el aval a la Fundación del Valencia CF, 27 May 2014

On 28 September 2016, the Commission published the non-confidential version of its negative Decision and recovery order regarding the preferential corporate tax treatment of Real Madrid, Athletic Bilbao, Osasuna and FC Barcelona. It is the second-to-last publication of the Commission’s Decisions concerning State aid granted to professional football clubs, all announced on 4 July of this year.[1] Contrary to the other “State aid in football” cases, this Decision concerns State aid and taxation, a very hot topic in today’s State aid landscape. Obviously, this Decision will not have the same impact as other prominent tax decisions, such as the ones concerning Starbucks and Apple. 

Background

This case dates back to November 2009, when a representative of a number of investors specialised in the purchase of publicly listed shares, and shareholders of a number of European football clubs drew the attention of the Commission to a possible preferential corporate tax treatment of the four mentioned Spanish clubs.[2] The preferential tax treatment derived directly from a Spanish sports law of 1990, which obliged all Spanish professional sport clubs to convert into sport limited companies. The justification for the measure was that many clubs had been managed badly because neither their members nor their administrators bore any financial liability for economic losses. This law exempted from this duty to convert those football clubs which had a positive balance in the preceding 4-5 years. The only clubs who at that moment fulfilled these conditions were Real Madrid, Athletic Bilbao, Osasuna and FC Barcelona, and were consequently permitted to remain associations. Sports associations are non-profit entities and, as such, qualified for a partial corporate tax exemption under the Spanish Corporate tax Law. Instead of paying tax for their commercial income at the general rate of 30%, sport clubs were only required to pay tax at a rate of 25%. Moreover, Spain did not include a time period for a possible re-assessment of the financial position of the sport limited companies. Thus, no professional sporting entity has had its legal qualification modified since the original assessment of 1990, irrespective of how the financial health of the entity evolved.[3]

Intervention by the European Ombudsman

The complaint was given a “high priority status” by the European Commission[4] and the allegations of an unfair Spanish tax system were widely covered in the press (see for example here and here). Nevertheless, it took the Commission more than four years to launch a formal investigation and nearly seven to reach a final decision. In fact, there are reasons to believe that the Commission’s delay in investigating the matter was only halted after an intervention by the European Ombudsman. As stated above, the complaint was submitted in November 2011. More than 25 months later, and not having been informed about the progress of the case, the complainant turned to the Ombudsman. According to the complainant, the Commission had failed to decide, in a timely way, whether or not to open the formal investigation procedure. The Ombudsman agreed with the complainant and found that the Commission had not justified its failure to decide on the matter. Furthermore, the public suspicion that the Commission’s inaction might be linked to the fact that the then Commissioner for Competition, Joaquín Almunia, was a socio (member) of one of the football clubs (Athletic Club Bilbao) involved, were highlighted by the Ombudsman in its Recommendation.[5] Even though the Commission has denied that the delay in launching the formal investigation was linked to Almunia’s personal footballing preferences, on 18 December 2013 (a mere two days after receiving the Ombudsman’s recommendation) the Commission decided to open an in-depth investigation into the tax privileges granted to the four Spanish football clubs.[6] 

The Decision

As is the case with most, if not all, State aid and tax cases, the key question is whether the tax measure (or treatment in this case) leads to a selective economic advantage for one or more undertakings, in this case the four professional football clubs.[7] In order to uncover a selective advantage in the form of tax income, the case-law subscribes that one begins by identifying and examining the common regime/system applicable in the Member State concerned. Secondly, an assessment is made of whether the treatment derogates from that common system. This assessment includes deciphering the objective assigned to the tax system, as well as determining whether the economic operators in question (i.e. the four football clubs) are in a comparable factual and legal situation to the other economic operators falling under the common system.[8] If the four clubs are in a comparable factual and legal situation, but their tax treatment derogates from the common system, this treatment will be considered selectively advantageous. Third and lastly, it is necessary to appraise whether the tax treatment is justified by the logic and nature of the tax system.[9] As regards this justification appraisal, there are two important aspects to note: First of all, there is a shift in the burden of proof, since it is for the Member State which has introduced such a differentiation in charges in favour of certain undertakings active in professional football to show that it is actually justified by the nature and general scheme of the system in question.[10] Secondly, this justification appraisal has to be separated from the general justification appraisal of Article 107(3), the latter of which will only take place after State aid in the sense of Article 107(1) is fully established.

The common system applicable and the objective assigned to the system

In both the Decision to open a formal investigation and the final Decision, the Commission considered that the common system applicable is that of the corporate tax law. This has been the common system since the professional sporting entities had to convert to limited companies in 1990. The Commission also held that the objective assigned to the system is generating State revenues on the basis of company profits.[11]

Are the four clubs in a comparable factual and legal situation?

The Commission believes that Real Madrid, Athletic Club Bilbao, Osasuna and FC Barcelona are in a comparable factual and legal situation as other professional sport companies in light of the abovementioned objective of the tax system, and cannot see how they should be treated differently. Nonetheless, Spain and the clubs argued that the clubs were not in the same factual and legal situation, because the clubs’ aim was not to make profits. Instead, all profits made have to be reinvested in the club itself. They also claimed that the CJEU’s case law allows for exceptions “in light of the peculiarities of cooperative societies which have to conform to particular operating principles”. Indeed, “those undertakings cannot be regarded as being in a comparable factual and legal situation to that of commercial companies, provided that they act in the economic interest of their members, the members being actively involved in the running of the business and entitled to equitable distribution of the results of economic performance”.[12] The fact that clubs cannot distribute profits to shareholders is a relevant peculiarity in the eyes of Spain.

The Commission rebutted Spain’s claim that sport associations and sport limited companies are not in the same factual and legal situation.   It firstly criticised Spain’s obligatory conversion of all-but-four sport associations into sport limited companies in 1990 by highlighting that “differences in the economic performance cannot justify different treatment as regards the obligatory form of organisation or the lack of choice in that respect. Losses are not intrinsic to a certain form of organisation. The business performance is therefore not an objective criterion justifying different taxation bases or imposing certain forms of incorporation for an indefinite period”.[13] Moreover, not being able to distribute profits to shareholders “cannot support a lower taxation of certain football clubs when compared to other professional sporting entities. (…) Those four clubs, although they are non-profit entities, actively seek to make profit themselves”, in a comparable way to other professional sporting entities.[14] Indeed, “the fact that clubs are obliged to reinvest the income they realise (…) does not weaken their competitive position, nor justifies a different, more favourable, tax treatment with respect to other entities active in professional sport. It rather drives them to improve their facilities”.[15]

Justification by the nature and logic of the tax system

As stated above, it is up to the Member State concerned to argue why the different tax treatment is justified under the general tax system. The Decision shows that Spain, the four clubs and La Liga (who was given interested party status by the Commission) presented a variety of arguments that in their eyes justified the different treatment. Three of these arguments were the followings:

1. Associations have stricter internal control mechanisms than sporting limited companies;

2. Associations have fewer possibilities of access to the capital market than sporting limited companies;

3. Associations are placed at a disadvantageous position under UEFA’s Financial Fair Play rules compared to sporting limited companies.

As regards the first justification brought forward, it underlines the liability regime imposed on the management body of a sport association. For example, a club’s management board “must provide a bank guarantee covering 15% of the club’s budgeted spending in order to guarantee any losses generated during its term. In addition, management board members will be strictly liable, in an unlimited manner, with their present and future personal assets, for any losses generated that exceed this guaranteed amount.”[16] Nonetheless, the Commission held that this justification is at odds with the rationale for the conversion of the other sport clubs to sport limited companies in 1990, which was the fact that many clubs had been managed badly. “If there was a need for certain clubs to be subject to stricter controls, the obligatory transformation into a limited company would not be necessary to pursue the purpose of that law.[17]

Further, Spain’s claim that clubs have fewer possibilities of access to the capital market cannot be seen as a justification for deviating from the common tax system. Simply put, “if the disadvantages of the clubs in this respect are as manifest as [Spain and the clubs] assert, they always have the possibility to change their corporate form”.[18]

Last, the Commission considers the Financial Fair Play rules of the UEFA to be “internal rules set by a football organisation which aim to ensure a reasonable financial management of sport entities and to avoid continuous loss making. They cannot justify a different taxation of profits by the State”.[19] With this last consideration, the Commission displays a rather benevolent attitude towards UEFA’s Financial Fair Play Rules. Indeed, refusing to attack these rules in any way is very much in line with its previous public statements on FFP, such as the Commission’s and UEFA’s Joint Statement on FFP of March 2012 and the Cooperation Agreement between the Commission and UEFA of October 2014.

Compatibility assessment under Article 107(3)

As can be read from paragraph 85 of the Decision, neither Spain nor the beneficiaries have claimed that any of the exceptions provided for in Article 107(2) and 107(3) TFEU apply in the present case. Generally speaking, successful justifications under Articles 107(2) and (3) are uncommon in State aid and taxation cases. Two possible reasons for this can be deciphered: On the one hand, Member State and interested parties seek justifications by the nature and logic of the tax system, i.e. they argue that the justification rules out a selective advantage for one more undertakings, thereby ruling out State aid under Article 107(1). On the other hand, State aid through tax advantages are in most cases considered as operating aid. Operating aid can normally not be considered compatible with the internal market under Article 107(3) TFEU in that it does not facilitate the development of certain activities or of certain economic areas, nor are the tax incentives in question limited in time, digressive or proportionate to what is necessary to remedy to a specific economic handicap of the areas concerned.[20] In the preferential corporate tax treatment of four Spanish football clubs case, the Commission noted that a lower tax burden than one that should normally be borne by the clubs in the course of their business operations, should be considered as operating aid.[21] Hence, this type of aid cannot be considered compatible aid under any of the exceptions of Article 107(3).

Yet, the tax benefit scheme in the Hungarian sport sector decision of 2011 provides an example of a tax benefit scheme for the sport sector that is declared compatible State aid under Article 107(3)c) TFEU. In this case, the Commission held that the scheme was introduced in a sufficiently transparent and proportionate manner, i.e. that the measure was well-designed to fulfil the objective of developing the country’s sport sector.[22] Moreover, the Commission acknowledged the special characteristics of sport and held that the objective of the scheme is in line with the overall objectives of sport as stipulated in Article 165 TFEU, namely that the EU “shall contribute to the promotion of European sporting issues”, because the sport sector “has enormous potential for bringing the citizens of Europe together, reaching out to all, regardless of age or social origin”.[23]

As regards the preferential corporate tax treatment of four Spanish football clubs case, no reference was made by Spain or the interested parties to Article 165, or how the preferential tax treatment could contribute to the promotion of sporting issues or values. Perhaps Spain and the four clubs were aware that such a justification would not fly, since the preferential tax treatment is only beneficial to four football clubs and not to the sports sector in general.

Recovery of the aid

Given that the Commission considered the preferential tax treatment to be unjustifiable State aid, a recovery decision was adopted. According to the Commission, the amount of the aid to be recovered from the four football clubs consists of the difference between the amount of corporate tax which the clubs actually paid and the amount of corporate tax which would have been due under the general corporate regime starting from the year 2000.[24] The Commission further recalls that the exact amount of the aid to be recovered will be assessed on a case by case basis during the recovery proceeding which will be carried out by the Spanish authorities in close cooperation with the Commission.[25]

In this regard, it is important to mention that Spain amended the corporate tax rules in November 2014 and new rules entered into force on 1 January 2015.[26] Under the amended law, the corporate income tax rate of 30% for all limited companies will be reduced to 28% for 2015 and to 25% from 2016 onwards. This includes limited sport companies as well, which will, from 2016, be submitted to that 25% corporate tax rate.[27] In other words, since there is no longer a different tax treatment for associations compared to sport limited companies as of 2016, Spain has seized to grant (unlawful) State aid to the four professional football clubs. The recovery will thus only involve the advantages obtained until the end of 2015. 

Conclusion

Few will disagree with the Commission in that the Spanish corporate tax system allowed for an economic selective advantage to be granted to Real Madrid, Athletic Club Bilbao, Osasuna and FC Barcelona over more than 25 years, and without the presence of an acceptable justification for such a favourable treatment. Having said this, this particular “saga” has not quite ended after it became clear that Athletic Club de Bilbao (at least) appealed the Commission’s Decision in front of the General Court of the EU.

Notwithstanding the upcoming Court case, the practical impact of this Decision will probably be very limited. Firstly, the actual aid that needs to be recovered by Spain will be relatively low in financial terms. As can be read in the Commission’s press release of 4 July 2016, it is estimated that the amounts that need to be recovered are around €0-5 million per club.[28] The Spanish government is yet to announce how much it will recover, but Real Madrid and FC Barcelona in particular will have no difficulties returning the aid, irrespective of what the amount exactly is. Secondly, by lowering the corporate tax rate for all limited companies in 2015 and 2016, Spain cannot be considered anymore as granting State aid to its professional football associations based on the corporate tax system. This also means that there is no more reason to believe that the European Commission could “force” the four clubs to change their legal status from club to sport limited company through the enforcement of EU State aid rules, as some have insinuated. The fans of these clubs were dreading this outcome because becoming a sport limited company would open the doors to external investors, who would not necessarily in their eyes have the best interest of the clubs in mind.

[1] The Commission has previously published: Commission Decision of 4 July 2016, SA.41613 on the measure implemented by the Netherlands with regard to the professional football club PSV in Eindhoven; Commission Decision of 4 July 2016, SA.40168 on the State aid implemented by the Netherlands

in favour of the professional football club Willem II in Tilburg; Commission Decision of 4 July 2016, SA.41612 on the State aid implemented by the Netherlands in favour of the professional football club MVV in Maastricht; Commission Decision of 4 July 2016, SA.41614 on the measures implemented by the Netherlands in favour of the professional football club FC Den Bosch in 's-Hertogenbosch; Commission Decision of 4 July 2016, SA.41617 on the State aid implemented by the Netherlands in favour of the professional football club NEC in Nijmegen; and Commission Decision of 4 July 2016, SA.33754 on the State aid implemented by Spain for Real Madrid CF. The last remaining decision to be published is Commission Decision of 4 July 2016, SA.36387 Aid to Valencia football clubs.

[2] Draft recommendation of 16 December 2013 of the European Ombudsman in the inquiry into complaint 2521/2011/JF against the European Commission, points 1-3.

[3] Commission Decision of 4 July 2016, SA.29769 on the State Aid implemented by Spain for certain football clubs, paras. 5-9.

[4] Draft recommendation of the European Ombudsman in the inquiry into complaint 2521/2011/JF against the European Commission, point 13.

[5] “Rather than allaying suspicions regarding a conflict of interests, and regarding inappropriate influences on the decision making process, the Commission's failures here have actually added to those suspicions”.

[6] Interestingly enough, on that same day, the Commission decided to open an in-depth investigation into State guarantees in favour of three Spanish football clubs in Valencia and land transfers by the Council of Madrid to Real Madrid: Commission decision of 18 December 2013, SA.36387, Spain—Alleged aid in favour of three Valencia football clubs; Commission decision of 18 December 2013, SA.33754, Spain—Real Madrid CF.

[7] C Quigley, “European State Aid Law and Policy”, Hart Publishing (2015), pages 109-127.

[8] See for example Joined Cases C-78/08 to C-80/08 Paint Graphos and others ECLI:EU:C:2011:550, para. 49.

[9] Commission Decision of 4 July 2016, SA.29769, para. 51.

[10] Commission Decision of 4 July 2016, SA.29769, para. 59. See also Case T-211/05 Italian Republic v Commission ECLI:EU:T:2009:304, para. 125.

[11] Commission decision of 18 December 2013, SA.29769, Spain—State aid to certain Spanish professional football clubs, para. 16; and Commission Decision of 4 July 2016, SA.29769, para. 53.

[12] Commission Decision of 4 July 2016, SA.29769, para. 62; and joined Cases C-78/08 to C-80/08 Paint Graphos and others ECLI:EU:C:2011:550, para. 61.

[13] Commission Decision of 4 July 2016, SA.29769, para. 56.

[14] Ibid, para. 65

[15] Ibid, para. 67.

[16] Ibid, para. 24.

[17] Ibid, para. 61.

[18] Ibid, para. 68.

[19] Ibid, para. 71.

[20] See for example Commission Decision of 10 October 2015, SA.38374 on State aid implemented by the Netherlands to Starbucks, para. 433.

[21] Commission Decision of 4 July 2016, SA.29769, para. 86.

[22] Commission Decision of 9 November 2011, SA.31722 – Hungary - Supporting the Hungarian sport sector via tax benefit scheme., paras 95-98.

[23] Ibid, paras 86-87. For more information on the tax benefit scheme in the Hungarian sport sector decision, see O. van Maren, “The EU State aid and Sport Saga: Hungary’s tax benefit scheme revisited? (Part 1)”, Asser International Sports Law Blog, 18 May 2016.

[24] According to Article 17(1) of the State Aid Procedural Regulation 2015/1589, the powers of the Commission to recover aid are subject to a limitation period of ten years. Since the Commission asked Spain for information for the first time in 2010, the recovery of the tax difference starts with the taxation year 2000.

[25] Commission Decision of 4 July 2016, SA.29769, paras. 93-97.

[26] Ley 27/2014 de 27 noviembre 2014, del Impuesto sobre Sociedades, BOE of 28 November 2014. Article 29(1) stipulates that “El tipo general de gravamen para los contribuyentes de este Impuesto será el 25 por ciento”.

[27] Commission Decision of 4 July 2016, SA.29769, para. 34.

[28] European Commission - Press release IP/16/2401 of 4 July 2016, State aid: Commission decides Spanish professional football clubs have to pay back incompatible aid.

Editor’s Note: Saverio Spera is an Italian lawyer and LL.M. graduate in International Business Law at King’s College London. He is currently an intern at the ASSER International Sports Law Centre.

In the football world the use of unilateral extension options (hereafter UEOs) in favour of the clubs is common practice. Clubs in Europe and, especially, South America make extensive use of this type of contractual clauses, since it gives them the exclusive possibility to prolong the employment relationship with players whose contracts are about to come to an end. This option gives to a club the right to extend the duration of a player’s contract for a certain agreed period after its initial expiry, provided that some previously negotiated conditions are met. In particular, these clauses allow clubs to sign young promising players for short-term contracts, in order to ascertain their potential, and then extend the length of their contracts.^[1] Here lies the great value of UEOs for clubs: they can let the player go if he is not performing as expected, or unilaterally retain him if he is deemed valuable. Although an indisputably beneficial contractual tool for any football club, these clauses are especially useful to clubs specialized in the development of young players.^[2] After the Bosman case, clubs have increasingly used these clauses in order to prevent players from leaving their clubs for free at the end of their contracts.^[3] The FIFA Regulations do not contain any provisions regulating this practice, consequently the duty of clarifying the scope and validity of the options lied with the national courts, the FIFA Dispute Resolution Chamber (DRC) and the CAS. This two-part blog will attempt to provide the first general overview on the issue.^[4] My first blog will be dedicated to the validity of UEOs clauses in light of national laws and of the jurisprudence of numerous European jurisdictions. In a second blog, I will review the jurisprudence of the DRC and the CAS on this matter.

Even though the DRC’s and the CAS’s view on UEOs matter most prominently in daily practice, it is impossible to entirely ignore the positioning of national laws and EU law vis-à-vis the legality of UEOs. In fact, as we will see later, arguments derived from national law also play a fundamental role in the assessment of the UEOs by the CAS. A comparative analysis of the UEOs validity under national laws is extremely difficult to conduct, as these clauses are relatively rare outside of football and the few rulings of lower level national courts are difficult to access. In an ordinary employment contract, deprived of the specificities of the sporting context, it is hard to fathom the utility for the employer to have the power to extend the contract unilaterally at his or her will. Due to the operation of the transfer market, football players are in a peculiar employment condition, hardly comparable to that of any other employee. The investments clubs make on training footballers and their transfer value contribute to this unique employment relationship to the extent that footballers are considered intangible assets for the clubs.^[5] Given the difficulty of comparing hardly comparable situations, the only way to proceed to a comparative overview is to attempt to produce comparative snapshots, which, due to the limited amount of space, are necessarily incomplete.

In Switzerland: It’s unenforceable

It is ironical that in a liberal country like Switzerland, where contractual freedom is interpreted widely, the validity of UEOs under national law is doubtful. Although there are no provisions concerning UEOs in Swiss labour law, we can conclude that under Swiss law these clauses are most likely unenforceable.^[6] In Switzerland such an option would be deemed to infringe employment law and thus considered invalid when incorporated in employment contracts. According to Art. 335a para. 1 of the Swiss code of Obligations^[7] there must be formal parity between employer and employee concerning terminations of contracts. UEOs clauses would circumvent this provision by creating disparity between the parties, as they confer to one party the unilateral possibility to prolong the contract. The Swiss Civil Court, although in disputes arising outside the realm of football, has in the past denounced the circumvention of the provisions. It imposed the equality of treatment between employer and employee concerning the conditions of termination of an employment contract. In one case regarding a two year contract for services abroad, which included the possibility of tacit renewal and the right for the company to recall the employee in Switzerland, the Court stated that the right to recall the employee granted unilaterally to the employer gave him a more favourable position than the employee with regard to the termination of the fixed-term contract. This situation, stressed the Court, is contrary to the purpose of then Art. 336 para. 2 CO, which aims to grant equivalent protection to the parties.^[8] A next case involved a trilateral service contract between an employee, an employer (Meco Mechanical Corporation) and a beneficiary (the government of the then United Arab Republic, a short-lived political union between Egypt and Syria). The contract included a right to early termination granted to the beneficiary. The Court, nonetheless, stated that this right is contrary to “Article 347 (3) of the Swiss Code of Obligations, which prohibits the agreement between different periods of notice for the employer and the service provider. This prohibition cannot be circumvented by making the right of termination or the automatic termination of the employment relationship conditional upon a condition which is unilaterally dependent on the will of the employer. Such a condition would allow the employer to terminate the contract at a point in time at which the service provider could not.”^[9]

It should be noted that the principle of parity between the parties is not considered part of the Swiss ordre public. Consequently, if a case has to be decided on Swiss territory according to a foreign law that allows for the use of unilateral extension options, Swiss law cannot prevent the application of such clauses. However, if the clause leads to over extensive commitment on the side of the employee, it might be considered an infringement of the ordre public and, thus, be deemed null and void. 

In Germany: It’s complicated

According to a first ruling of the Labour Court of Ulm, some UEOs are considered null and void. It concerned a one-year agreement (valid from 1 January 2007 to the end of season 2007/2008) between the club and the player, which contained an UEO giving the club the right to extend the contract for one more year. ^[10] The Court held the option invalid. More precisely, the Court considered the unilateral option ineffective. Based on Art. 307 para. 1 BGB, provisions in general terms and conditions should be considered invalid if they unduly penalize the contractual partner and are not accompanied with appropriate compensatory measures. In the present case, the Court found that the unilateral option clause served only the purpose of providing the employer with an additional income in the form of a transfer indemnity. In these conditions, the UEO amounts to a disproportionate restriction of the freedom to work enshrined in Art. 12 of the Grundgesetz (German constitution).^[11]

Nonetheless, a few years after the decision of the Labour Court of Ulm, the German Federal Labour Court held (implicitly) another UEO clause for valid.^[12] The Court dealt with the option only incidentally, as the case mainly revolved around the validity of the resolution agreement signed by the parties. The player, 15 years old at the time, and the club had originally concluded a contract for a period of four years (from 1 July 2006 to 30 June 2010) with the option granted to the club to unilaterally extend the relationship for another year (until 30 June 2011). Sometime after having joined the club, the player started suffering psychological pressure due to a series of personal circumstances and expressed the desire to terminate the contract prior to its natural expiry. The parties then signed a resolution agreement, pursuant to which the club agreed to a resolution in return of a payment of € 40,000. The decision was focused on the validity of that agreement, it only briefly scrutinised the extension option and considered it compatible with the framework of § 15 Abs. 4 TzBfG (or of § 624 BGB for free employment), due to the fact that the length of the contract respected the maximum binding time of five years.^[13] The Court emphasised, in fact, that this is the threshold a fixed-term employment contract has to observe in order to avoid curtailing excessively the employee’s personal freedom and added that the standard is consistent with the principle of freedom of work and of choice of work enshrined in Art. 12(1) of the Basic Law.^[14]

In the Netherlands: It’s probably ok

It takes a bit of legal extrapolation to conclude that any jurisdiction plainly authorizes UEOs, given that none of those examined for the purpose of this blog has a labour legislation in place which expressly supports the validity of UEOs. However, in the Netherlands, where the national labour legislation does not contain any provisions on UEOs, the only known (private) decision to date recognized the validity of such clauses under Dutch law. In the dispute between the Tunisian football player Hatem Trabelsi and his club Ajax Amsterdam the unilateral option included in the contract was deemed to be valid and binding.^[15] The ruling found the option compatible with the dismissal system provided by labour law in combination with contract law.^[16]

In Belgium, Spain, Austria and Italy: It depends on the collective bargaining agreement

A very common framework among jurisdictions seems to reflect the specificity of sport in that it makes footballers’ employment contracts sort of double-layered agreements regulated by employment legislation on the one side and by Collective Bargaining Agreements (CBAs) on the other. In this context, the various legislations delegate to CBAs the duty to outline the details of footballers’ employment conditions, among which one often finds the requirements for UEOs to be validly included therein.

In Belgium, player contracts are mainly regulated by provisions of employment law, in particular by the Act of 3 July 1978 on employment contracts (the Employment Contracts Act).^[17] Yet, with regard to option clauses, the Football Collective Agreement of 15 February 2016 states that, although in general these options are not valid, they are not considered to be unilateral under certain conditions. According to Art. 15 of said agreement, if the clause (i) is agreed upon in writing at the outset, (ii) provides a total duration, extension included, of the relationship of maximum 5 years, and 3 years for under 18 players and (iii) provides for a certain increase in salary (at least 15% of the fixed remuneration and 5% of the match- or selection premium, or 20% of the fixed remuneration, whereby the increase does not need to exceed the amount of 20.000 Euro), it might be considered valid and binding as not unilateral.

In Italy, the employment aspects of sports are regulated by the Law 91/1981. This special legislation, according to which some of the dispositions applicable to subordinate employment do not apply in the sporting context,^[18] was enacted to reflect the peculiarities of the employment relationship in sport.^[19] This legislation does not include any express provision covering UEOs, but – while generally stating at art. 5 that the duration of the fixed-term contract cannot exceed five years - it relies on the CBA for specific contractual requirements. Art. 2 para. 2 of the CBA states that “option agreements are permitted both in favour of the Club and the Player, on the dual condition that a specific consideration is provided in favour of the party who grants the option and that the limit of the overall duration of the Contract, such overall duration consisting of the sum of the duration provided plus any extension represented by the option […], does not exceed the maximum duration provided by law”. The “specific consideration” of the English version is translated from “corrispettivo specifico” which means that, aside from the five-year ceiling, the condition for the UEO to be valid is an increase in the salary of the player.

In Austria these clauses are not invalid as such, but they have to meet the requirements laid down in Section 6(4) of the Collective Agreement for football players of the Austrian Football League (KV-ӦFB), as amended on 1 July 2014. It reads as follows: “The granting of an option to be exercised by a unilateral declaration is only permissible if each party of the contract is granted equal rights and the exercise of the option is linked to equivalent conditions for both parties […]. The date of conclusion of the contract shall be decisive for the assessment of equivalence”.^[20] The Austrian Supreme Court recently upheld the decision of the lower courts in a dispute regarding the validity of an extension option contained in a football player’s contract.^[21] The one-year agreement, valid from 1 July 2014 to 30 June 2015, contained an option that granted the club the possibility to extend the contractual relationship for two more years, until June 2017, as long as the club exercised it by 31 May 2015.  On October 2015 the player remitted his salary payments to the club and referred the case to the Tribunal to question the validity of the option. Both the Court of first instance and the Court of Appeals considered the agreement ineffective as the clause did not meet the requirements of Section 6 (4) KV-ӦFB. The ground on which the two courts reached this conclusion was the lack of equivalency of rights under the agreement, as (i) the increase in salary (of 15%) was not proportionate to the length of the extension; (ii) at the time of signing the contract, the contractual conditions for an extension were not defined.[22] The Supreme Court held that the assessment of the lower courts could not be disputed and reiterated that Section 6 (4) KV-ӦFB is unequivocally clear in requiring the granting of equivalent rights to both parties of the contract for an UEO to be acceptable. Equivalence, the Court continued, that has to be assessed at the date of conclusion of the contract.

In Spain the main source of law regarding the employment relationships of professional athletes is the Royal Decree 1006/1985. Regarding the duration of the contract, art. 6 of RD 1006/85 provides that (i) sportsmen contracts are always fixed-term contracts, (ii) the extensions of these contracts, which shall always be definite as well, can be achieved through subsequent agreements between the parties when the contract is about to expire. Paragraph 3 of this provision admits different possibilities of extension in so far as the Collective Bargaining Agreement provides so.^[23]  On the matter, the current Collective Bargaining Agreement defer in turn to the RD 1006/85, as Art. 14 provides that “by mutual agreement between the Club and the Footballer, the contract may be extended, in the terms established in the second paragraph of article 6 of Royal Decree 1006/1985, of June 26”. At the moment, therefore, it seems that extension options in Spain need to be agreed with the player.

In the UK: Likely not

Sometimes circumstances other than the CBA can play a role. The United Kingdom and the Premier League, for instance, represent a unicuum in the panorama of the jurisdictions under scrutiny in the sense that, although here – as in other countries – the employment relationship is governed by national law, collective agreements and the rules of the Football Association (FA),^[24] two specificities place this system in a peculiar position. First of all, in the United Kingdom collective agreements are not legally enforceable. It is true that the terms of a collective agreement may be binding and enforceable between the parties of an employment relationship if these have been incorporated into the individual contract.^[25] However, a court may nonetheless conclude that the term is not enforceable. Secondly, no single overarching collective agreement encompasses the employment relationship between clubs and players in the Premier League. There are, instead, a series of collectively negotiated agreements, such as the Standard Players’ Contract.^[26] In an early decision that challenged the English ‘Retain and Transfer System’ as an unlawful restraint of trade, the High Court placed emphasis on the inequality of bargaining power in a professional football player’s relationship with a club, stating that “in the football industry players commonly enter into their first contract either while they are under 21 or shortly afterwards, and that wherever they may subsequently go, within the Football League, there is only one form of contract they can sign. The Court must be careful to see that contracts made in these circumstances are justifiable in the interests of both parties”.^[27]

That said, although there is no CBA in place that can enlighten us about the validity of UEOs, a satisfying answer could nonetheless be found in the Courts’ rulings concerning contracts in the (to some extent) comparable context of the music industry. The profession of the musician resembles in various aspects that of the football player. As for footballers, musicians’ contracts are linked to their performance, in terms of copies of albums sold, concert tickets sold, royalties from the ads etc. The more a musician is perceived to be promising, the more lucrative the contract he can get from the record company will be. Just as sports professionals, musicians often begin their career in their prime age. In order to get a foot in their respective highly rewarding industries, sportsmen and musicians might agree to contractual clauses without fully understanding the consequences or, more likely, even if they do fully understand the implications of such contracts they may feel they have no option but to sign them if they want their career to start or progress.^[28] This similarity allows us to draw some useful comparisons from the case law of UK courts regarding musicians.

For instance the House of Lords declared void an agreement between a young and unknown musician by the name of Tony Macaulay and the publishing company Schroeder Music Publishing Co Ltd, which contained a clause extending to 10 years the original five-year undertaking of the company.^[29] When he signed the contract, the musician was aged 21. The agreement provided that the duration of five years would have been extended to 10 in case the royalties for the first five years exceeded £ 5,000. In the words of Lord Reid “if the respondent’s work became well known and popular he would be tied by the agreement for ten years”.^[30] In consideration of the duration of the contract and the fact that the payment received by the author was minimal unless his work was released, which was not an obligation for Schroeder Music according to the contract, Lord Reid was of the opinion that the publishers’ appeal had to be dismissed. His reasoning was grounded on the consideration that “if contractual relations appear to be unnecessary or to be reasonably capable of enforcement in an oppressive manner, then they must be justified before they can be enforced”.^[31] Lord Diplock deemed the contract unenforceable due to its substantial unfairness and emphasised the need to accord protection to “those whose bargaining power is weak against being forced by those whose bargaining power is stronger to enter into bargains that are unconscionable”.^[32] For the same reason, the English Court of Appeal struck down as void a publishing agreement between the already established band Fleetwood Mac and the publisher which tied the band to the company for a five year period plus the possibility to extend the relationship for another five years.^[33] The court held that the publishing agreement gave the company “a stranglehold over each of the composers”^[34] and found the contract fundamentally unfair to the group.

These two decisions give us an insight on how under English law, where – it is important to bear in mind – as a general rule the letter of the contract prevails, clauses of these kind tying professional musicians have been considered null and void because of the disproportionate contractual power between the parties. A conclusion that was confirmed even when the band concerned was not unknown. It is easy to see how such reasoning could be applied to UEOs in professional football.

Under EU law: It should be fine

The last unknown is the position of EU law with regard to UEOs. In many ways, UEOs are contractual mechanisms used to attenuate the consequences of the Bosman ruling.  Indeed, they give the club the opportunity to prolong an employment contract without the consent of a player, and therefore to obtain compensation in case the player wishes to move to another club. However, the striking difference with a Bosman situation is that this contractual set-up is not mandated by the private regulations of the football federations or leagues. Instead, it is negotiated ab initio between the contractual parties, and hardly ever imposed by a collective agreement. Thus, as long as the original free will of the player is not constrained by private rules, which in fact might be the case in a closed labour market where the clubs can act as an oligopoly and (implicitly) coordinate their behaviour, one could argue that the free movement of a player is restricted only by his or her own free will.  In its more recent Bernard ruling, the CJEU came close to dealing with an UEO, but here again the forced prolongation of the contract was imposed by the French collective bargaining agreement in force at the time of the dispute and not negotiated on an individual basis between the parties. Therefore, it is relatively unlikely that EU law could be successfully invoked to challenge the validity of UEOs, unless those are at least identified as a collective practice or informal rule applied by clubs against the will of players.

Conclusion: A European legal mess

Notwithstanding the hardly avoidable incompleteness of the above comparative sketch, a short conclusion on the validity of UEOs in light of national and European law is in order. First of all, it is clear that no single answer prevails Europe-wide. The brief analysis carried out shows that each of the jurisdictions scrutinised approaches the topic differently. The only uniformly shared regulatory trait is that national legislators have not regulated the matter. Instead, we had to look for potential answers in the jurisprudence of local courts, more often than not extrapolating from cases outside of the realm of football. Furthermore, legislators commonly delegate to CBAs the duty to define the employment conditions of professional football players. In short, the legality of UEOs is usually dependent on the interpretations of local courts or the decisions of local social partners. However, where UEOs are deemed valid, it is always under stringent conditions such as a strict limit to the overall duration of the extended contract and the provision of a substantial increase in salary. Hence, the validity of UEOs hinges on the rather subjective evaluation of the overall fairness of a specific UEO in the context of a specific contract. Whether this is also true of the jurisprudence of the DRC and the CAS when confronted to UEOs will be the subject of our next blog.

[1] The reference is obviously to young players older than 18, as in respect of contracts of minors art. 18 FIFA RSTP is crystal clear in prohibiting the signing of contracts longer than three years.

[2] D. F.R. Comparie, G. Planás R.A. and S-E. Wildermann, Contractual Stability in Professional Football: Recommendations for Clubs in a Context of International Mobility, 2009, p.27. The authors point out that, although transfer fees constitute an important part of every clubs’ financial income, some clubs, particularly those with smaller broadcasting revenues, rely on them to a great extent. Usually, clubs which cover their costs mainly through transfer fees tend to build a good youth development, because being able to sell the players when they are valued the most is financially crucial for them.

[3] F. de Weger, The Jurisprudence of the FIFA Dispute Resolution Chamber, Asser Press, 2016, p. 164.

[4] The few existing contributions on this question are F. De Weger, The Jurisprudence of the FIFA Dispute Resolution Chamber, Asser Press, 2016, pp 163- 191 and W. Portmann, Unilateral option clauses in footballers’ contracts of employment: an assessment from the perspective of international sports arbitration,Sweet Maxwell Int Sports Law Rev, 2007,  7(1):6-16.

[5] See UEFA Club Licensing and Financial Fair Play Regulations (2015 Edition), which, at ANNEX VI (B)(ix), includes players as intangible assets among the assets that need to be disclosed for balance sheet requirements and, at ANNEX VII (C)(1), sets out the minimum accounting requirement “for player registrations carried out as intangible fixed assets as set out in Articles 47, 48 and 52”.

[6] For a similar view, see Jan Kleiner, Der Spielervertrag im Berufsfussball, Schulthess, 2013, at pp. 891-900.

[7] Art. 335a para 1 Swiss Code of Obligations reads as follows: “Notice periods must be the same for both parties; where an agreement provides for different notice periods, the longer period is applicable to both parties”.

[8] BGE 108 II 115.

[9] BGE 96 II 52. The original German version reads as follows: “Eine solche Schranke bildet insbesondere Art. 347 Abs. 3 OR, der die Vereinbarung verschiedener Kündigungsfristen für den Dienstherrn und den Dienstpflichtigen verbietet. Dieses Verbot kann nicht dadurch umgangen werden, dass das Kündigungsrecht oder die automatische Beendigung des Dienstverhältnisses von einer Bedingung abhängig gemacht wird, deren Eintritt einseitig vom Willen des Dienstherrn abhinge. Eine solche Bedingung würde es dem Dienstherrn erlauben, den Vertrag schon auf einen Zeitpunkt zu beenden, auf den der Dienstpflichtige das nicht tun könnte. Ein bedingtes Kündigungsrecht und eine bedingte automatische Beendigung des Dienstverhältnisses dürfen nur vereinbart werden, wenn und soweit der Eintritt der Bedingung vom Willen der Parteien nicht abhängt oder beide Parteien ihn in gleicher Weise herbeiführen können“.

[10] ArbG Ulm, judgment of 14 November 2008 – 3 Ca 244/08.

[11] Ibid., para. 37. The original German version reads as follows: “Nach § 307 Abs. 1 Satz 1 BGB ist eine formularmäßige Vertragsbestimmung unangemessen, wenn der Verwender durch einseitige Vertragsgestaltung missbräuchlich eigene Interessen auf Kosten seines Vertragspartners durchzusetzen versucht, ohne von vornherein auch dessen Belange hinreichend zu berücksichtigen und ihm einen angemessenen Ausgleich zu gewähren. Die Feststellung einer unangemessenen Benachteiligung setzt eine wechselseitige Berücksichtigung und Bewertung rechtlich anzuerkennender Interessen der Vertragspartner voraus. Bei diesem Vorgang sind auch grundrechtlich gestützte Rechtspositionen zu beachten. Zur Beurteilung der Unangemessenheit ist ein genereller, typisierender, vom Einzelfall losgelöster Maßstab anzulegen. Im Rahmen der Inhaltskontrolle sind dabei Art und Gegenstand, Zweck und besondere Eigenarten des jeweiligen Geschäfts zu berücksichtigen. Zu prüfen ist, ob der Klauselinhalt bei den typischen Interessen der beteiligten Verkehrskreise eine unangemessene Benachteiligung des Vertragspartners ergibt (vgl. BAG Urteil vom 18.03.2008 9 AZR 186/07 Rn. 19, NZA 2008, 1004 ff.). § 6 a Spielervertrag gibt nur dem Arbeitgeber das Recht, den Vertrag um ein Jahr zu verlängern. Will der Spieler den Arbeitgeber nach Ablauf der Laufzeit des Vertrages wechseln und übt der Arbeitgeber sein einseitiges Optionsrecht für die Vertragsverlängerung rechtzeitig aus, führt das dazu, dass ein aufnahmebereiter Arbeitgeber eine Freigabe des Spielers durch den bisherigen Arbeitgeber nur gegen Zahlung einer Transferentschädigung erhalten wird. Durch die Transferentschädigung reduziert sich die Aufnahmebereitschaft von neuen Arbeitgebern und die Verdienstmöglichkeit des Arbeitnehmers bei neuen Arbeitgebern. Der Kläger verursacht dem neuen Arbeitgeber bei einem ablösefreien Wechsel weniger Kosten. Der budgetierte neue Arbeitgeber kann dem Kläger in diesem Fall eine höhere Vergütung zahlen. Die einseitige Optionsklausel dient nur dazu, dem abgebenden Arbeitgeber eine zusätzliche Einnahme in Form einer Transferentschädigung zu verschaffen. Sie behindert damit erkennbar die Berufsfreiheit des Arbeitnehmers nach Artikel 12 Abs. 1 Satz 1 Grundgesetz, wonach alle Deutschen u. a. das Recht haben, die Arbeitsstätte frei zu wählen. Das Interesse des Beklagten an einer Einnahmequelle aus einem Spielertransfer hat hinter dem grundgesetzlich geschützten Interesse des Klägers an der Berufsfreiheit zurückzutreten”.

[12] BAG, judgment of 25 April 2013, 8 AZR 453/12.

[13] Ibid., para 32.

[14] Ibid.

[15] Dutch KNVB Arbitration Tribunal, 4 June 2004 n. 1022.

[16] M. Colucci and F. Hendricks, Regulating Employment Relationships in Professional Football. A Comparative Analysis, European Sports Law and Policy Bulletin 1/2014, p. 254.

[17] Ibid., 39.

[18] To sports contracts do not apply Art. 4, 5, 13, 18, 33, 34 L. 300/1970, regulating, among others, medical assessments and dismissals and Art. 1, 2, 3, 5, 6, 7, 8 L. 604/1966. To fixed term contracts, the provisions of L. 230/1962 do not apply.

[19] Colucci, Hendricks, Regulating Employment Relationships in Professional Football. A Comparative Analysis, European Sports Law and Policy Bulletin 1/2014, 201 – 202.

[20] The original German version reads as follows: “Die Einräumung von durch einseitige Erklärung auszuübenden Gestaltungsrechten (Optionsrechten) ist nur zulässig, wenn sie jedem Vertragsteil gleichwertige Ansprüche einräumt und auch die Art der Ausübung des Optionsrechtes für beide Teile an gleichwertige Bedingungen geknüpft ist (z.B. einseitige Vertragsverlängerungsmöglichkeit durch den Klub bei bereits vorab festgesetzter Gehaltserhöhung für den Spieler oder sonstiger gleichwertiger Verbesserungen für den Spieler, wobei stets die besonderen Umstände des Einzelfalles [Alter des Spielers, Dauer der Vertragsverlängerung] zu berücksichtigen sind). Für die Bewertung der Gleichwertigkeit ist der Zeitpunkt des Vertragsabschlusses maßgeblich”.

[21] OGH 28.10.2016, 9 ObA 88/16f

[22] Ibid., The original German reads as follows: “Das Erstgericht gab dem Klagebegehren statt. Es kam zu dem Ergebnis, dass die Optionsvereinbarung unwirksam sei, weil sie nicht den Voraussetzungen des § 6 KV-ÖFB entspreche. Den Vertragsteilen würden durch diese Vereinbarung keine gleichwertigen Ansprüche eingeräumt. Der „Sideletter“ zum Spielervertrag, der ein höheres Gehalt für die Verlängerungszeit regelte, sei nicht statutengemäß unterfertigt worden und daher nicht wirksam geworden; darüber hinaus sei diese Gehaltserhöhung im Verhältnis zur Dauer der Verlängerung auch nicht angemessen. Das Berufungsgericht gab der Berufung des Beklagten dagegen keine Folge. Auf die Frage des rechtswirksamen Zustandekommens der im „Sideletter“ vorgesehenen Vereinbarung komme es hier nicht an, weil § 6 Abs 4 des KV-ÖFB die Gleichwertigkeit der Ansprüche beider Vertragsteile bereits zum Zeitpunkt des Vertragsabschlusses fordere und die dem Beklagten im Spielervertrag eingeräumte Option daher dem Kollektivvertrag widerspreche. Bei Abschluss des Vertrags sei nicht festgesetzt worden, mit welchen Verbesserungen der Kläger im Fall der Verlängerung rechnen könne; eine Lösungsbefugnis des Klägers sei auch nicht vorgesehen. Außerdem sei die Option wegen ihrer Dauer (Verlängerung doppelt so lang wie das befristete, eigentliche Vertragsverhältnis) nicht als gleichwertig anzusehen. Wenngleich das Interesse eines Fußballvereins an einer einseitigen Verlängerungsmöglichkeit insbesondere im Nachwuchsbereich plausibel sei, dürfe sich der Verein nicht vom Risiko der sportlichen Entwicklung des Spielers zu dessen Lasten (weitgehend) befreien. Hier sei die Option wegen der doppelten Länge der ursprünglichen Vertragsdauer schließlich auch im Fall einer Erhöhung des Entgelts um nur 15 % (wie im „Sideletter“ vorgesehen) nicht als ausreichend gleichwertig anzusehen“.

[23] Art. 6 RD 1006/1985 reads as follows: “La relación laboral especial de los deportistas profesionales será siempre de duración determinada, […].Podrán producirse prórrogas del contrato, igualmente para una duración determinada, mediante sucesivos acuerdos al vencimiento del término originalmente pactado. Solamente si un convenio colectivo así lo estableciere podrá acordarse en los contratos individuales un sistema de prórrogas diferente del anterior, que en todo caso se ajustará a las condiciones establecidas en el convenio”.

[24] L. O’Leary, Employment and Labour Relations Law in the Premier League, NBA and International Rugby Union, T.MC. Asser Press, 2017, p.204.

[25] Ibid., p.99.

[26] ibid., p.208.

[27] Eastham v Newcastle United Football Club [1964] Ch 413, p. 428, cited in in Leanne O’Leary, Employment and Labour Relations Law in the Premier League, NBA and International Rugby Union (2017), 5.

[28] S Gardiner, M James, J O’Leary and R Welch with I Blackshaw, S Boyes and A Caiger, Sports Law – Third Edition (2006), 494.

[29] [1974] 3 All ER 616

[30] Ibid.

[31] Ibid.

[32] Ibid.

[33] [1975] 1 All ER 237.

[34] Ibid., 238.

Editor’s note: Thomas Terraz is a third year LL.B. candidate at the International and European Law programme at The Hague University of Applied Sciences with a specialisation in European Law. Currently he is pursuing an internship at the T.M.C. Asser Institute with a focus on International and European Sports Law.

1.     Introduction

To many it may seem obvious that athletes in a national championship should only be able to participate if they have the nationality of the relevant state. The Dutch Road Cycling National Championships should have Dutch cyclists, and the German Athletics Championships should have German athletes and so forth. However, in reality, foreign competitors are allowed to participate in many national championships in the EU, and there is a wide discrepancy between the rules of national sport governing bodies on this issue. There is no unified practice when investigating this point by country or by sport, and rules on participation range from a complete ban on foreign competitors to absolutely no mention of foreign athletes.[1] Thus, the question arises: should foreign athletes be able to participate in national sport championships?

The Court of Justice of the European Union (CJEU) will soon be required to provide an, at least partial, answer to this dilemma as a result of an application for a preliminary ruling.  A German Court has referred three questions to the CJEU on the case TopFit e.V. Daniele Biffi v Deutscher Leichtathletikverband e.V. (DLV) which in essence ask whether EU citizenship rights and in particular, the requirement of non-discrimination on the basis of nationality, should be applied to non-nationals wishing to participate in an athletics national championship in Germany. In the meantime, the Advocate General (AG), who provides a non-binding opinion to the Court before a decision is delivered, Evgeni Tanchev has delivered an interesting opinion on the case. It addresses the claims from the applicants based on EU citizenship rights and urges the CJEU to instead review the case on the basis of the freedom of establishment.

This blog will dissect the AG’s opinion to assess the main arguments put forward in relation to freedom of establishment and EU citizenship. Furthermore, it will weigh the ramifications this case may have on the boundaries of EU law in relation to sport. To fully appreciate the AG’s opinion, it is necessary to first discuss the intriguing factual and legal background colouring this case. After all, this will not be the first time the CJEU faces thorny issues concerning discrimination on the basis of nationality and sport.

2.     Factual Background of TopFit e.V. Daniele Biffi v Deutscher Leichtathletikverband e.V. (DLV)

The second applicant in this case, Mr. Biffi, is an Italian resident in Germany since 2003. He works professionally as a personal trainer and coach and has a website which advertises his services. He has been a member of the Berlin-based athletics club TopFit (the first applicant) and has competed in athletics competitions including German national championships within the senior category of athletes above the age of 35. In these national competitions, he had his placings recorded and published his results on his website. In 2016, the DLV changed its rules on non-nationals participating in national championships across all age categories without notice or transitional period. The rules were changed to only allow German nationals to compete for the national title while non-nationals could only participate outside classification with the permission of the organisers. As a result, Mr. Biffi was even denied the ability to participate in one of the championships in which he previously participated without raising a brow. The applicants challenged the DLV rule on the basis that it is in contravention to the prohibition of discrimination on the basis of nationality under EU citizenship. 

3.     European Sports Law and Nationality Based Discrimination

Generally, sport governing bodies aim to have the maximum autonomy possible to formulate and apply their rules. In the EU, they have attempted and ultimately failed at securing an absolute autonomy.[2] The current relationship between the sport governing bodies and the EU has been described as a ‘conditional autonomy’ where sport governing bodies may exercise their discretion in formulating and applying their rules so long as they do not conflict with EU law.[3] It should be noted that the CJEU has mainly scrutinized rules from sport governing bodies which affect economic interests of the parties in the context of free movement and competition law. Evidently, this relationship has resulted in a struggle between sport governing bodies and the EU over a number of topics including non-discrimination on the basis of nationality.

Traditionally, the CJEU has addressed issues of non-discrimination on the basis of nationality in sports cases from a free movement perspective in ensuring that sport rules do not disrupt the EU’s internal market. For example, when a rule from the Union Cycliste Internationale (UCI) required that a pacemaker be the same nationality as the cyclist in the UCI Motor-paced World Championships, the CJEU rendered its ruling on the basis of the provisions establishing the free movement of workers and service providers. Moreover, the Union of European Football Associations’ (UEFA) 3 plus 2 rule which allowed football clubs to limit the number of foreign players who could play in a match to three players plus two more players who had been ‘assimilated’ by having played a certain amount of years in the concerned national football association were found in the famous Bosman case to be in contravention of the free movement of workers provisions.

In the present case, the parties have argued the case on the basis of the prohibition on the discrimination of nationality flowing from EU citizenship rights. Based on Article 9 of the Treaty on European Union, all nationals of an EU member state automatically have EU citizenship. However, these rights are only triggered when other more specific rights, such as free movement rights, are not activated first. Put differently, if the facts of a case fall within a free movement right, then the case can only be inspected in light of the relevant free movement provision; hence, EU citizenship rights may only be invoked where free movement rights are not applicable.

Interestingly enough, as the AG points out in his opinion, the facts of this case could also be framed as a restriction to freedom of establishment. In any event, the CJEU has yet to address sport rules which concern non-discrimination on the basis of freedom of establishment or EU citizenship.

So how should the CJEU address this issue? Freedom of establishment or EU citizenship rights?

4.     Analysing AG Tanchev’s Opinion: Freedom of Establishment or EU Citizenship Rights?

4.1.Scope of the Freedom of Establishment

Very early on in the opinion, AG Tanchev unambiguously expresses his preference for analysing the present case through a free movement lens.[4] He explains that Mr. Biffi is self-employed as a personal trainer and coach on a continuous and stable manner in Germany which amounts to an economic activity connected to his sporting pursuits.[5] Therefore, AG Tanchev believes the analysis should be pursued under the freedom of establishment provisions. For this view to be endorsed, it is essential that Mr. Biffi’s economic activity is sufficiently connected to his sporting endeavours.

In this context, AG Tanchev recalls the Deliège case which concerned a Judoka, who argued that a national sport governing body’s refusal to select her for an international competition was a violation of her freedom to provide services. The Court in that case had to determine whether she was engaged in an economic activity in order for the fundamental freedom to apply. In doing so, the Court unequivocally states that simply because a sport governing body labels its athlete an amateur, it does not mean that they are automatically disengaged from economic activity, and economic activities in the context of free movement of services should not be interpreted restrictively.[6] Therefore, the Court in the Deliège case focused on the judoka’s sponsorships deals and grants to conclude that she was engaged in economic activities.[7] AG Tanchev, in examining the Deliège case’s relevance, explains that this demonstrates EU law’s flexibility in finding a link between sporting and economic activities, and that even if the DLV’s rules only have an ‘indirect impact’ on Mr. Biffi’s economic activities, it should fall within the scope of the freedom of establishment.[8]

4.2.Restriction on the Freedom of Establishment and Justifications

The opinion then goes on to find that there has been a restriction of Mr. Biffi’s freedom of establishment because the DLV rule puts Mr. Biffi ‘at a disadvantage when compared with German nationals engaged in the provision of athletic training services’ because he is unable ‘to make reference to his achievements in national sporting championships in order to attract business.’ Furthermore, he states that consumers are ‘more likely to be drawn to an athletics coach advertising on-going excellence … in the national athletics championships.’[9] Given that the DLV rule is directly discriminatory, EU law only allows justification under the express derogations enshrined in the Treaty on the Functioning of the European Union (TFEU). The DLV would have had a larger window to defend their rules if they were indirectly discriminatory since the CJEU accepts both express derogations and justifications which have been developed by its own case law.

AG Tanchev readily finds that the DLV’s rules fall under the public policy derogation by aiming to ensure that the winner of the national title has a ‘sufficiently strong link’ with the country organising the championship and to ensure that the national selection of athletes for international competitions is not disrupted. It could be argued that these aims have been too easily advanced as public policy objectives. The CJEU has never accepted the former as a derogation or a justification, and concerning the latter, the CJEU has accepted objectives which ensure national representation in international competitions only as justifications. Since justifications developed by the CJEU generally are not applicable to cases of direct discrimination, such as the present case, it can be said that the opinion perhaps too quickly embraces these pursued aims as public policy objectives. This being said, sport already enjoyed a special treatment in the past as the CJEU has been open to consider justifications for directly discriminatory measures in the Bosman case.

4.3.Is the DLV’s measure proportionate?

Assuming that these aims are accepted as express derogations, the DLV measures must then pass proportionality requirements which in EU law require a measure to be suitable for the pursued aim and necessary to achieve those aims. In the sporting context, the CJEU has explained that in order for a sporting rule to be proportionate it must be limited to its proper objective and it must be inherent to the organization of the sport event.[10] AG Tanchev affirms that the measure is disproportionate because the rule disallows Mr. Biffi from competing for the national title and precludes classification in such a competition when for many years he had been allowed to compete and be classified as any other German athlete.[11] Furthermore, given he had this pre-existing right, the DLV’s failure to take any transitional measures or give sufficient notice of this change violates the legitimate expectations of Mr. Biffi who exercised his free movement in reliance of this established regime and infringes the general principle of acquired rights.[12] Thus, it can be inferred that in AG Tanchev’s view, the measure could have been proportionate had there been sufficient transitional measures in place. Such a broad interpretation of proportionality by including the non-national's right to compete for the national title, would greatly restrict the options of a sport governing body wanting to change a rule that could negatively affect the participation of non-nationals in their national competitions.

If this broad approach is not accepted, AG Tanchev contends the measure is still disproportionate since the DLV’s rules potentially exclude non-national participants from competing at all in the national championships. Such a measure could only be legitimate in ‘unusual circumstances.’ In this vein, the opinion suggests less restrictive rules which instead limit the number of non-classified athletes.[13]

Other alternative models have been suggested which are much more likely to pass the proportionality test. One commentator has suggested that non-nationals should be allowed to compete in national championships while perhaps only restricting their ability to actually win the title.[14] If applied to this case, this model would allow Mr. Biffi to participate with classification in the national championships, but if he (or other non-national) were to take the first place, the national title would be given to the highest classified German athlete in the competition. Another model put forward in a recent study suggests that a non-national can only compete in the national championship after having been resident or being member of a local club for a certain period of time. All of these suggestions show that there are a multitude of less restrictive ways to protect the organisation of national championships and the selection process of national athletes for international competitions. An outright ban on participation or only allowing participation outside of classification is remarkably restrictive and has very little chance of passing the necessity requirements under proportionality.

Overall, the argument that this case should be analysed from the freedom of establishment perspective is rather convincing because the economic dimension is clearly present. However, there is still a possibility that the CJEU will follow the line of arguments brought by the applicants based on EU citizenship rights addressed at the end of AG Tanchev’s opinion.

4.4.EU Citizenship Rights

AG Tanchev begins by explaining that even if non-discrimination on the basis of nationality deriving from EU citizenship are applied, the result of the case should be the same because the stated aims of the DLV simply do not meet the proportionality requirements.[15]  However, the opinion goes on to firmly oppose the application of EU citizenship rights in this context.

In its submissions, the Commission had strongly endorsed a view that access to leisure activities should always fall within the scope of EU citizenship rights. AG Tanchev disagrees with such a wide-ranging interpretation because it would be a huge ‘constitutional step’ to give Article 21 TFEU horizontal direct effect, meaning a private party could invoke this provision in a national court against another private party. He maintains that this provision is meant to only have vertical direct effect, where a private party may invoke this provision in a national court against the state. He explains that extending horizontal direct effect to this rather open-ended provision would have a capricious effect that would damage legal certainty because Article 21 TFEU ‘comes into play in the broad and unpredictable range of circumstances’ where applicants are ‘unable to show a link between what is in issue and economic activities’ or ‘fall outside of EU legislation concerning freedom of movement.’[16] On the other hand, one could argue the very purpose of this Article is to provide EU citizens with other means to dispute measures which harm their free movement, and such a restricted interpretation would damage l’effet utile of this provision.   

While it is probably the case that Mr. Biffi’s circumstances fall within the scope of his free movement rights, imagine if he did not have any economic interest, and instead of a coach and personal trainer, he was an accountant or car mechanic. If AG Tanchev’s approach were to be taken in such a case, Mr. Biffi would have absolutely no recourse under EU law to challenge such a discriminatory rule. If Article 18 and 21 TFEU were to be interpreted so restrictively, private monopolistic actors who exercise powers that resemble those of a state (such as many sport governing bodies) could make the exercise of the European citizenship less attractive by limiting the participation of non-nationals in certain leisure activities. The Commission is right in taking a broad approach on this issue, although in the end it found the DLV’s rule to be proportionate, especially since Article 18 and 21 TFEU makes no express reservations against the applicability of these provisions on private parties.[17] A wide interpretation would completely fit the ‘conditional autonomy’ model in which sport rules fall within the scope of EU law, and it is for the sport governing bodies to explain how and why the rule is necessary or ‘inherent’ to the conduct of sports.

5.     Conclusion

If the CJEU finds this case to fall under the scope of the freedom of establishment, it is likely the DLV’s rules will fail to be justified or crumble under the proportionality requirements. Likewise, the outcome is likely to be the same in the improbable case that EU citizenship rights are applied. However, it truly would be a ‘constitutional step’, as AG Tanchev asserted, by greatly widening the possibility of using EU citizenship rights to challenge nationality discrimination in even amateur and leisure sport. Moreover, solidifying horizontal direct effect of the EU citizenship rights would have an impact way beyond sport related cases.

Regardless, even if Mr. Biffi’s case is examined from the freedom of establishment, it will be a momentous occasion for the CJEU to further elucidate the boundaries of the application of EU law to sport. In this respect, AG Tanchev’s opinion provides an excellent analysis of the legal issues arising from the free movement perspective and picks up on the most evident detail that all the parties in the case seemed to have glanced over: Mr. Biffi has an economic interest which is tied to his sporting activities. In the long run, the application of EU citizenship rights to sports seems inevitable, but TopFit e.V. Daniele Biffi most likely does not provide the CJEU with a golden opportunity to express itself on this matter.

[1] T.M.C. Asser Institute Report, ‘Study on the Equal Treatment of Non-Nationals in Individual Sports Competitions’ (2010).

[2] Case 36-74 B.N.O. Walrave and L.J.N. Koch v Association Union cycliste internationale, Koninklijke Nederlandsche Wielren Unie and Federación Española Ciclismo [1974] ECR 1974 –01405; Case C-415/93 Union royale belge des sociétés de football association ASBL v Jean-Marc Bosman, Royal club liégeois SA v Jean-Marc Bosman and others and Union des associations européennes de football (UEFA) v Jean-Marc Bosman [1995] ECR I-04921.

[3] Stephen Weatherill, Principles and Practice in EU Sports Law (1^st edn, Oxford University Press 2017) 71.

[4] Case C-22/18 TopFit e.V. Daniele Biffi v Deutscher Leichtathletikverband e.V. [2019] ECLI:EU:C:2019:181, Opinion of AG Tanchev, para 48.

[5] ibid para 55.

[6] Joined Cases C-51/96 and C-191/97 Christelle Deliège v Ligue francophone de judo et disciplines associées ASBL, Ligue belge de judo ASBL, Union européenne de judo [2000] ECR I-02549 para 46.

[7] ibid paras 51-53.

[8] TopFit, Opinion of AG Tanchev (n 4) para 62.

[9] ibid para 70.

[10] Walrave (n 2) para 9; Deliège (n 6) para 64.

[11] TopFit, Opinion of AG Tanchev (n 4) paras 80, 88.

[12] ibid para 83.

[13] ibid paras 92-93.

[14] Weatherill (n 3) 203.

[15] TopFit, Opinion of AG Tanchev (n 4) para 97.

[16] ibid para 103.

[17] ibid paras 37-40.