I think we would all agree that the reputation of players’ agents, nowadays called intermediaries, has never been a good one for plenty of reasons. But the truth is their presence in the football industry is much needed and probably most of the transfers would never take place if these outcast members of the self-proclaimed football family were not there to ensure a fluid and smooth communication between all parties involved.

For us, sports lawyers, intermediaries are also important clients as they often need our advice to structure the deals in which they take part. One of the most recurrent situations faced by intermediaries and agents operating off-the-radar (i.e. not registered in any football association member of FIFA) is the risk of entering in a so-called multiparty or dual representation and the potential risks associated with such a situation.

The representation of the interests of multiple parties in football intermediation can take place for instance when the agent represents the selling club, the buying club and/or the player in the same transfer, or when the agent is remunerated by multiple parties, and in general when the agent incurs the risk of jeopardizing the trust deposited upon him/her by the principal. The situations are multiple and can manifest in different manners.

This article will briefly outline the regulatory framework regarding multiparty representation applicable to registered intermediaries. It will then focus on provisions of Swiss law and the identification of the limits of dual representation in the light of the CAS jurisprudence and some relevant decisions of the Swiss Federal Tribunal.

A)   Regulatory framework:

Those agents acting in the market as registered intermediaries will necessarily be subjected to the specific football regulations enacted by FIFA and the national associations in which they operate. The answer as to the possibility to represent more than one party to a deal will therefore, be necessarily found in internal rules of each association. 

As opposed to the obsolete FIFA Players’ Agent Regulations[1], the FIFA Regulations on Working with Intermediaries (RWWI) allow intermediaries to represent more than one party in a transaction. Pursuant to the definition of intermediary[2] in combination with Article 8 RWWI, the only substantive requirement to intermediaries willing to act for multiple parties is that they obtain prior written consent and confirmation in writing on which party (i.e. the player and/or the club) will remunerate the services of the intermediary. The regulations, therefore, prioritize transparency over the question of who pays for the services of the intermediary. Consequently, it is not forbidden for an intermediary to represent and be paid by multiple parties to a transaction, as long as they all know and agree to it in advance.  

At a national level, most FIFA member associations[3] have followed the solution adopted in the RWWI and have transposed ad literam the right of intermediaries to multiparty representation as long as the transparency and information requirements are met (i.e. any potential conflict of interest is disclosed to the parties in advance, and subject to the prior written consent of the parties to the transaction).

However, there are still many agents that prefer to operate off-the-radar of organized football and its regulations. For these ‘rogue’ agents, the scenario is different and the question of the legality of multiparty representation will ultimately depend on the applicable law chosen by the parties[4]. Based on my personal experience, off-the-radar agents often end up acting through very rudimentary authorizations subject to the ordinary jurisdiction of the CAS. For this reason, I chose to dissect in this paper the limits of multiparty representation according to Swiss law, for based on article XY of the CAS Code of Sports Arbitration it represents the applicable law to ordinary disputes before the CAS when parties fail to make a particular choice of law.

The provisions of the contract of brokerage (“contrat de courtage”) in Articles 412-418 of the Swiss Code of Obligations (CO) are of relevance in this regard. The cornerstone provision concerning conflict of interest is found in Article 415 CO[5] whose English translation reads as follows:

“Where the broker acts in the interests of a third party in breach of the contract or procures a promise of remuneration from such party in circumstances tantamount to bad faith, he forfeits his right to a fee and to any reimbursement of expenses”.

The article differentiates between two non-cumulative hypothetical situations where the broker (i.e. agent) may be in a position of conflict of interests.

• First: the broker “Acts in the interest of a third party in breach of the contract”.
• Second: the broker “Procures a promise of remuneration from such party in bad faith”.

The first hypothesis establishes the prohibition of the broker to act in the interest of a third party if the obligations towards his client are breached. Accordingly, an agent representing a player is prevented from assisting the players’ contracting club to negotiate the terms of his employment contract, as he would be defending irreconcilable interests (i.e. the interest of the club to pay the lowest salary possible v/ the interest of the player to obtain the highest possible salary). Conversely, the same agent could be hired by the club in a different transaction without incurring a conflict of interest with the player. The condition triggering this first hypothesis will be thus, whether the agent acting for the third party is in breach of his contractual obligations.

It is important to note that the published English translation of the CO differs slightly from the original text of the code[6]. While the English translation refers to the breach of the “contract”, the original French version refers instead to a breach of the “obligations” which has obviously a broader scope, covering a wider range of situations than a contract might include.

This linguistic difference can be misleading as the obligations emanating from the CO may go beyond the obligations set forth in a simple authorization or a brokerage contract. By way of example, think of a very simple “Authorization” that does not explicitly prohibit the agent of the player to simultaneously act for the club. Sticking to literal text of the English translation, one could be tempted to believe that the agent was not acting in breach of the contract. However, the same situation seen under the lens of the legal obligations would imply that the agent could still be infringing the obligation of loyalty and trust stemming from the CO.

In view of the above, a correct evaluation of the first hypothesis will necessarily account for the legal obligations inherent to the brokerage contract, the scope of which might go beyond the obligations stipulated in the contract. Amongst these, the obligation of loyalty, the obligation to safeguard the interest of the client by not entering into conflictive situations, and the obligation of transparency and information.

The second hypothesis covers the prohibition in Swiss law of dual representation by procuring a promise of payment from third parties to the relationship broker/principal, if such a promise amounts to bad faith.

It needs to be underlined that this provision does not exclude dual payment, but subjects it to a certain limit, i.e. not incurring in bad faith. Delineating bad faith can turn out to be a difficult task as the concept itself has an inevitable component of subjectivity and, as opposed to good faith which is legally presumed (cf. Article 3 of the Swiss Civil Code), bad faith must always be proven by the party claiming it, who ultimately bears the burden of proof[7]. 

Applied to football agents, it can be safely assumed that an agent acting in good faith towards his client would necessarily act in a transparent way and inform his client that he is simultaneously acting for the other contracting party. Not disclosing such information in the context of negotiations can serve as indication of bad faith when combined with other elements. However, to prove the presence of bad faith will still require sufficient material evidence in order to discharge the burden of proof, since the simple negligence of the broker would not be sufficient to fall under the scope of the article.

The consequence for a broker (i.e. football agent) infringing the prohibition of dual representation in he hypotheses described in article 415 CO is the nullity of the contract and the forfeiture of the right to be remunerated, or the obligation to reimburse the amounts received if the infringement is ascertained after the realization of the contract and payment of the fee (“quod nullum est nullum producit effectum”).  

With the above premises in mind, a detailed look into the CAS and the Swiss Federal Tribunal jurisprudence regarding Article 415 CO will help identifying the scope of the legal obligations of a football agent towards his client (i.e. club and/or player), as well as the mechanisms used by the decision-making bodies to determine the existence of bad faith.

B)   Jurisprudence:

One of the very few CAS cases dealing with Article 415 CO in the context of football agents' relationships with clubs is the CAS award  2012/A/2988 PFC CSKA Sofia v. Loic Bensaid.

In short, the dispute opposed the flagship Bulgarian football club CSKA Sofia against a French football agent and revolved around the right of the latter to be remunerated by the club, considering he had acted simultaneously in representation of the player in the signature of the employment contract.

One of the many arguments used by the club in support of its alleged right not to pay the agent was based on Article 415 CO. The club asserted that the agent acted in violation of his obligations for having represented both parties. On the merits, the Sole Arbitrator concluded, nevertheless, that the agent had fulfilled the obligations of transparency and information as the Club was aware at all times that the agent also acted for the player and knew about the existence of the representation contract with the player[8]. The full knowledge and acceptance of the situation impeded the club to contend, at a later stage, the violation of the duty of loyalty and transparency.

Secondly, adhering to the grounds of the supporting FIFA decision, the Sole Arbitrator also remarked that the mandate between the Agent and the player did not contain any obligation to remunerate the services of the agent. The prohibition of agents to be remunerated twice for their services has been traditionally a key element in previous FIFA decisions where dual representation was at the center of the dispute[9]. This fact possibly led the Sole Arbitrator to also highlight this circumstance when assessing the behavior of the agent. However, the Sole Arbitrator further stated that, even if the mandate would have provided for a remuneration in favor of the agent (quod non), Article 415 CO would still not have been violated as the club failed to discharge the burden of proof as to the existence of bad faith, reinforcing with it that dual representation is only forbidden to the extent the agent acts in bad faith[10].

This final remark of the Sole Arbitrator is crucial as it evidences, in my view, that whether the player and the agent agreed upon a remuneration, remains in the end irrelevant for the evaluation of a possible violation of Article 415 CO. Indeed, pursuant to the CAS arbitrator’s interpretation of the article, the agent can be remunerated twice, as it is the disregard of the obligations inherent to the contract and in particular for the second hypothesis acting in bad faith that determines compliance with Article 415 CO.

To better illustrate the irrelevance of the “double remuneration” discussion, think for a moment of a brokerage contract where there is no explicit reference to the remuneration. Does such a lacuna in the contract imply that the brokerage is necessarily, pro bono? The answer is no, for as a general rule, mandates given in the context of professional relationships are presumed to be lucrative (see Art. 394(3) CO). That is precisely the case of football agents when they contract with players or clubs. This circumstance renders the reference to a remuneration in the contract a secondary element, or at least not an essential one. The former FIFA PAR (Ed. 2008[11]) followed this ratio legis when explicitly providing for a default remuneration of 3% of the players’ basic income where the parties cannot agree on the remuneration.

Beyond the specific CAS awards, some decisions of the Swiss Tribunal Federal help getting the full perspective on dual representation in the context of disputes subject to Swiss law. Although these do not refer to football agents, the similarities that exist with real estate and/or corporate brokers allow to derive important conclusions that can be applied to football agents.

A first decision worth mentioning is no. 4A_214/2014 of 15 December 2014. The case concerned a classic real estate intermediation where the agent agreed a commission from both the seller and the buyer involved in the transaction. The agent also failed to inform the seller of the existence of a better buying offer from a third potential buyer. In this context, after concluding the deal, the buyer refused to pay the agent, invoking Article 415 CO.

This case is important because it reveals the existence of two types of brokerage contracts under Swiss law (i.e. “courtage de negotiation” and the “courtage d’indication”). Whereas in a brokerage of negotiation the broker is entrusted by his client to negotiate the conditions of the transaction, in a brokerage of indication, the broker is simply called to indicate the possibility to conclude a transaction, with no negotiation duties involved. Furthermore, according to the doctrine cited in the decision, both types of contract are treated differently under Article 415 CO.

In casu, the Federal Tribunal qualified the contracts signed by the agent with the buyer and the seller as “courtage de negotiation” as he was entrusted with conducting all aspects related to the transaction. The agent was required to obtain the best possible conditions for his clients (e.g. the best buying and selling price respectively) and this circumstance directly generated an irremediable conflict of interest (i.e. the negotiation was either benefitting the financial interests of seller or the buyer) infringing the obligation of loyalty inherent to the brokerage contracts with the parties.

All in all, the Federal Tribunal rejected the appeal submitted by the real estate agent and confirmed the nullity of both contracts for violating Article 415 CO. The Federal Tribunal followed a strict interpretation of Article 415 CO according to which “no one can serve two masters” and thus, dual representation would only be possible (if so) in simple intermediations where no negotiation from the broker is required[12], in other words in “courtage d’indication”. In addition, in this case the agent also acted in bad faith for failing to disclose the existence of a more favorable offer to the detriment of the seller.

The main lesson that can be learnt from this decision is that Article 415 CO must be interpreted restrictively and that it has to be distinguished between those intermediation contracts that imply an active involvement of the agent (i.e. the agent is contractually required to negotiate the terms of a transaction for the player and/or the club) and those contracts of intermediation where the agent is called to simply indicate the possible opportunity for his client to conclude a deal with no other involvement in the transaction. In this last case, dual representation could be allowed for there would be no conflict of interests, and therefore, no infringement of the obligations under the brokerage contract. The specific contractual clauses are therefore crucial as they ultimately reveal the extent of the role assumed by the agent.

The second important decision by the SFT is more recent, no. 4A_529/2015 of 4 March 2016. The factual background of this dispute is extremely complex. In brief, the case revolved around the selling and buying of the shares of a company exploiting a luxurious Hotel located in Switzerland. The seller and the broker entered into a negotiation brokerage contract whereby the latter was entrusted to find a buyer of the company against the payment of remuneration. The principal had to agree with the final potential buyer. In the end, it was proved that the broker misled the principal about the true identity of the final buyer (to whom the principal expressly refused to sell), with whom the broker had also agreed remuneration. On the basis of these facts, the principal refused to pay the broker. 

The Federal Tribunal confirmed again that Article 415 CO is always interpreted strictly, and considered that by allowing the banned buyer to indirectly acquire the company, the broker acted in the interest of a third party against the obligation of loyalty. What is most significant about this decision is that the court delimitates very clearly the scope of the obligation of loyalty. It is described as a double-edged sword, implying on the one side: a positive obligation consisting of actively safeguarding and defending the interest of the principal; and on the other side: a negative obligation, consisting of abstaining from any conduct that could harm the interests of the client.  

In particular, the fact that the principal had not objected to a previous e-mail sent by the broker where he expressly indicated that the potential buyer was “C or any company indicated by it” was also irrelevant for the principal could not expect in ‘good faith’ that the buyer would make use of this substitution prerogative in favor of the real buyer. The arguments of the broker according to which it was not important for the principal to know who the buyer was and that he suffered no damage, were also dismissed.   

Finally, the argument of the broker according to which the remuneration to be received from the buyer was agreed after the transaction took place was also irrelevant in the eyes of the court.

With these cases in mind, when applying the holding of the SFT above to football agents' professional relationships, it follows that the scope of the obligation of loyalty will be significantly wider for football agents entrusted with negotiations than for agents simply tasked with identifying possible opportunities to close a deal.

Likewise, in order to determine the existence of a violation of the obligations assumed by the agent, it will not be enough to demonstrate that there has been no threat to the interests of the client or that the agent has not actively engaged in a conduct against those interests. Indeed, a simple passive conduct with the potential of jeopardizing the interests of the principal, such as failing to disclose relevant information, can be sufficient to violate the obligation of loyalty and deprive the agent from the right to be remunerated.

To this effect, the correct identification of the interest pursued by the client will ultimately determine the infringement by the agent of his obligations under the representation contract. In the end, the agent will only violate his obligation of loyalty as long as his behavior damages the interests of his client. These interests will vary depending on whether the principal is a football club or a player. If a club is trying to transfer or recruit a player, the interests will in most cases be of a financial nature. If instead, the principal is a football player terminating or signing a contract with a club, he might have non-economic interests (e.g. willing to play in a different championship, lack of integration of the family in the country etc.). Furthermore, the moment in which the remuneration is agreed is not relevant to establish the violation of the obligation of loyalty.

In conclusion, the contract of representation and its clauses in combination with the particular circumstances of each case will be fundamental to establish compliance with Article 415 CO when multiple representation takes place.   Football agents pretending to be remunerated by both contracting parties simultaneously without risking to violate their obligations must either enter into simple brokerage contracts with no negotiation attributions, or, when acting through a negotiation brokerage, always inform all parties in complete transparency. 

[1] See Article 19.8 FIFA PAR.

[2] “Definition of an intermediary

A natural or legal person who, for a fee or free of charge, represents players and/or clubs in negotiations with a view to concluding an employment contract or represents clubs in negotiations with a view to concluding a transfer agreement.” [Emphasis added]

[3] Only the FFF (France), the RFU (RUSSIA), the BFU (Bulgaria) the JFA (Japan) have explicitly adopted stricter rules prohibiting any conflict of interest. See Comparative Table of “The FIFA Regulations on Working with Intermediaries Implementation at a national level” (Ed. Michele Colucci).

[4] E.g. Arbitrage TAS 2007/O/1310 Bruno Heiderscheid c. Franck Ribéry.

[5] See article R45 of the CAS Code (ed. 2017).

[6] Art. 415. III. Déchéance:

“Le courtier perd son droit au salaire et au remboursement de ses dépenses, s'il agit dans l'intérêt du tiers contractant au mépris de ses obligations, ou s'il se fait promettre par lui une rémunération dans des circonstances où les règles de la bonne foi s'y opposaient.”

https://www.admin.ch/opc/fr/classified-compilation/19110009/index.html

[7] See. Decision of the SFT 131 III 511 para. 3.2.2 of  http://relevancy.bger.ch/php/clir/http/index.php?highlight_docid=atf%3A%2F%2F131-III-511%3Ade&lang=de&type=show_document

[8] See para. 118.

[9] E.g. Decision of the Single Judge of the PSC of 12 January 2012: “12. In view of the above, the Single Judge formed the view that, although the Claimant appears to have represented the Respondent and the player in the same transaction, the documentary evidence contained in the file clearly demonstrates that the Claimant could not have possibly been remunerated twice for his services. Consequently, and in accordance with the general principles of bona fide and pacta sunt servanda the Single Judge decided that the Respondent must fulfill the obligation it voluntarily entered into with the Claimant by means of the representation agreement concluded between the parties, and therefore, the Respondent must pay the Claimant for the services he rendered in connection with the transfer of the player to the Respondent.”

[10] See also para. 118.

[11] See i.c. article 20 para. 4 FIFA PAR (ed. 2008).

[12] See para. 1.1.3 of the SFT decision. An example of a courtage d’indication would be the brokerage of insurances, where the broker, acting for the policy-holder, is paid instead, by the insurance company.

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

The surge of e-sports has stimulated a lively discussion on the essential characteristics of sport and whether e-sports, in general, can be considered a sport. However, one should not overlook the fact that e-sports encompass a broad range of video games that fundamentally differ from one another. Thus, as one commentator recently underlined, “the position of video games and the e-sport competitions based on them should be analysed on a case-by-case basis.”[1] In this spirit, this blog aims to provide a concise analysis of one of these e-sports, League of Legends (LoL), and one of its main competitions, the League of Legends European Championship (LEC), to assess whether it could be considered a sport in the sense of EU law. The LEC offers a fascinating opportunity to examine this issue especially since the previous European League of Legends Championship Series (EU LCS) was rebranded and restructured this year into the LEC.

2.     What is League of Legends and the LEC?

At the time of writing, LoL released nearly a decade ago by Riot Games (a game developer based in the USA) and rapidly became one of the most played video games in the world due in part to its free to play business model. This means that anyone can download and play LoL on their computer without ever having to pay anything. In-game microtransactions exist but do not provide any competitive advantage. The game itself involves two teams of five players who each control a ‘champion’, which are characters in the game that each possess unique abilities. A team only wins when it has destroyed the enemy base (‘nexus’). The game is not only a popular video game, but it is a popular e-sport. The most recent world championships finals attracted 99.6 million unique viewers. While these numbers are greatly due to its popularity in China and South Korea, there is also a sizeable European viewership of LoL. For example, the LEC regular season matches have reached a record-breaking 355,000 concurrent viewers in its 2019 spring competition.

The LEC is LoL’s highest level of European competition and is owned and organised by Riot Games who establishes and enforces the rules which apply to the teams participating in the LEC. Consequently, Riot Games is truly at the apex of professional LoL in Europe by setting both the in-game parameters (the rules of the game) and the regulations that govern its competitive play. As explained earlier, Riot Games restructured and rebranded its previous European competition, EU LCS, into the LEC. While previously the EU LCS was characterised by a pyramid structure with a promotion and relegation system familiar to the European sports world, the LEC introduced a franchise model to follow its sibling competition in North America, the League Championship Series (LCS). The LEC itself is a limited liability company registered in the Republic of Ireland as League of Legends European Championship Limited.[2] The LEC buy-in fee for teams already in the EU LCS was reportedly set at 8 million euros and 10.5 million euros for those outside the EU LCS. Additionally, big brands such as KIA, Shell, Foot Locker and Red Bull sponsor the LEC and are featured during the broadcast. Besides being produced and diffused weekly by the official Riot Games English broadcast team in a professional studio in Berlin on Twitch (an online video game livestreaming service) and YouTube, the LEC partners with other official broadcasters who provide coverage of the matches in other languages (French, Spanish, Polish, German, Italian). Nevertheless, before examining the LEC’s position under EU law, a review of the broader arguments on the fundamental traits of sport will contextualise the Court of Justice of the European Union’s (CJEU) interpretation of the concept of sport.

3.     Is LoL played in the LEC a sport competition?

The academic discourse on the definition of sport has provided a plethora of elements and conditions for an aspiring sport to meet in order to be considered a ‘real’ sport. Needless to say, this blog will not be able to address all of them. However, the characteristics identified by Suits and elaborated by Jenny et al. and Abanazir are a good starting point for this brief review.[3] Suits explains that sports are in essence games that require skill, where the skill requires physicality, that the game have a wide following, and that this following have a certain level of stability. Abanazir delved into the concept of stability in the e-sports context by explaining institutionalisation’s central role in achieving permanence.

On the first requirement, there is very little room to argue that professional LoL does not require a great amount of skill. Suits explains that games of skill provide ‘unnecessary obstacles’ (in relation to daily life) “to realize capacities not otherwise realizable” that do not rely on pure chance.[4] Playing LoL is not in any way a necessary part of human life, yet many players practicing LoL play to refine and improve their mechanical skill (the physical element of the game, e.g. muscle memory and reflexes). Chance sometimes plays a role in LoL, but it is rarely a decisive factor in determining the outcome of a competitive match. Generally, Riot Games has taken steps over the years to limit the elements of pure luck in its game.

The role of physical motor skills in e-sports has been explained in detail by van Hilvoorde and Pot, and this blog will not dive into the arguments on whether actions taken in a video game can be considered taking place in the ‘real’ world.[5] Assuming that it does, the skill required in LoL is intrinsically connected to its physicality. LoL is played on a computer with a mouse and a keyboard. High level play requires precise movement of the arm, wrist and/or hand to most effectively control one’s character with the mouse. Additionally, the clicks and inputs registered by one’s fingers on the mouse and keyboard must be timed precisely and with enough practice these movements become muscle memory. The classic example of a game that does not require this sort of physicality is chess because the manner in which one moves a chess piece from a to b does not affect the result of the game. On the other hand, LoL demands precise and timed movements of the player’s arms, wrists, and/or fingers to be played optimally. One can be a LoL strategic genius but without a sufficient level of mechanical skill, it is impossible to become a professional LoL player.

Next, a large following is probably the easiest criteria for LoL and the LEC to fulfil. Between the large viewership that watch the LoL events online and the thousands of spectators that come to watch the championships live, there is very little doubt that LoL and the LEC have a wide following at the moment. However, this point leads into the next element which arguably may be the hardest criteria for it to satisfy in the long term: stability.

Video games and consequently, e-sports, generally reach a point where they have achieved their max popularity and eventually begin to lose players and viewers. Often times, this is the result of newly released video games pushing older and ‘outdated’ games out of the spotlight. LoL has remained at the forefront of e-sports for nearly a decade and there is little suggestion that this will change in the near future. Part of this is Riot Games’ continued support of LoL by regularly updating the game. Updates are released nearly every other week and can range from graphical improvements, balancing the game to ensure the viability of new strategies, the introduction of new champions (currently 143 champions) and tweaks that improve the way the game runs on the computer. Abanazir describes that changes such as these “present a double-edged sword” because while they keep the game fresh for players, they can result in drastic changes to the best strategies (meta) to win the game.[6] Thus, professional teams and players must continually adapt their play to conform to the meta. Nevertheless, updates have never fundamentally changed the goal and overall ‘rules’ of the game. Professional LoL is always two teams of five players, each controlling one champion, aiming to destroy the enemy nexus.

From an outsider’s point of view, it may seem that the constant flux of the meta would truly damage any of LoL’s claim to stability. However, in this context, it is imperative to highlight the institutionalisation of the LEC. Institutionalisation describes the appearance of “standardisation of rules, the formalisation of learning of the games, the development of expertise and finally the emergence of coaches, trainers, officials and governing bodies.”[7] The very fact that the meta often changes have pushed professional teams to hire analysts that review the team’s play and are constantly searching for new and creative ways to play LoL. Additionally, all professional teams have at least one coach who not only define the team’s strategy before each game, but also ensure that players observe strict practice schedules. During LEC matches, referees (Riot Games employees) are always present in order to ensure that the LEC rules are observed, which greatly lends to the idea of a ‘standardisation’ of the rules.[8] In fact, Riot Games directly state that the creation of the LEC Rulebook is to help “unify and standardize the rules used in competitive play.”[9] From this outline, there are many indications that the LEC and LoL have many of the characteristics of a sport and currently have achieved a certain amount of stability and institutionalisation. The true test will be whether these structures continue to last as they have been developed and implemented over the past eight years.

4.     A Sport under EU Law?

Recently, the Court of Justice of the European Union (CJEU) ruled on whether the English Bridge Union could benefit from a sports exemption under the VAT Directive and in doing so examined the concept of sport under that Directive.[10] Furthermore, in this case, Advocate General (AG) Szpunar provided an enlightening opinion to the Court examining the concept of sport in the context of the VAT exemption.[11] Both provide a good opportunity to infer how the Court would perhaps go about determining whether the LEC is a sport competition under EU law. This being said, the sport exception in the current VAT Directive would not apply to the LEC since Article 132 (1) (m) applies only to services provided by non-profit organisations. Nonetheless, should League of Legends European Championship Limited eventually restructure into a non-profit, it would not be far-fetched to imagine a situation in which it would seek to have VAT reimbursed from authorities under a sports exception in the future. After all, Riot Games has repeatedly stated that it does not make a profit on its e-sport activities.[12]

The AG’s opinion began by explaining that the concept of sport in the exemption should be “interpreted in a narrow manner, while bearing in mind the purpose and objective of the exemption.”[13] From this it is clear that the analysis of the concept of sport differs depending on the applicable provision, which could mean that the LEC could be considered a sport competition under one provision and a purely economic activity in another context. The AG goes on to identifying elements which preclude an activity from being considered a sport and states that “where a physical element is not necessary, sport is defined by competition and the fact that equipment is provided by not just one supplier -  which excludes activities without a broad basis in civil society, such as commercial products in the market place, designed by firms for pure consumption (for instance video games).”[14] If this interpretation of the concept of sport had been endorsed by the CJEU, it would have constituted a tremendous obstacle for the LEC. Indeed, if the ‘equipment’ also encompasses the game itself, it is impossible to argue that Riot Games does not hold a monopoly over the supply of LoL. Moreover, Riot Games has made and continues to support LoL in order to make money. In analysing this opinion, Abanazir explains the core issue well: “e-sport competitions based on video games created for purely consumption purposes and organised by persons aimed to profit from these activities may find themselves out of the scope as they are perceived to be devoid of social function.”[15] Indeed, it can seem difficult for the LEC and LoL to argue that it has a deeper ‘social function’ but perhaps this requirement might not be completely insurmountable. An argument could be made that the e-sports aspect of LoL is not only a commercial product made for pure consumption especially because LoL is a free to play game, and Riot Games does not seem to be making any profit in its e-sport related activities. Riot Games and the LEC have also taken steps to enhance the social function of LoL by investing in regional leagues to develop local talent.

In its ruling on the Bridge case, the CJEU sidelined the AG’s approach and decided to focus on a physicality requirement. The Court, in examining the specific VAT provision, found that sport must be “characterised by a not negligible physical element,” and the fact that an activity has elements of competition, professionality and organisation were not deemed sufficient to argue that the activity is a sport for the VAT exemption.[16] Physicality was the central criteria in the CJEU’s interpretation of the concept of sport, but in doing so, it did not give any further clarity as to the threshold of physicality required for an activity to benefit from the VAT sport exemption. It has already been contended above that LoL does have a clear physical element which is intrinsically connected to the game’s skill, yet the question remains whether the physicality would be considered more than negligible by the CJEU.

In summary, if LoL and the LEC were to be examined under the VAT Directive sport exemption, it would be confronted with several challenges. The approach endorsed in the AG’s opinion would have been the most problematic since LoL is mainly a commercial product designed to attract consumers and ultimately profit a private company. However, the CJEU chose to focus its interpretation of the concept of sport on a physicality criterion. This decision may give the LEC a wide enough window to argue that the fine motor skills involved in LoL are enough to fulfil this condition.

5.     Conclusion

In its current form, the LEC would not be able to benefit from the sport exemption in the VAT Directive, but this is just one provision of EU law, and there could be other opportunities where it could attempt to claim to be a sport. In the meantime, this gives an opportunity to Riot Games to continue to develop and emphasise the social function of its e-sports competitions, which might entail building a not-for-profit entity to run the competition and to strengthen the redistribution of economic gains to the grassroots. In any case, LoL and the LEC share many characteristics with established sports, but it remains to be seen if this will be enough to boost its recognition as a ‘real’ sport in law and society.

[1] Cem Abanazir, ‘E-sport and the EU: the view from the English Bridge Union’ (2019) International Sports Law Journal 102.

[2] ‘LEC Rules’ (LoLEsports).

[3] William Morgan, Ethics in Sport (3rd edn, Human Kinetics 2018) ch 1: Elements of Sport by Bernard Suits; Seth Jenny et al., ‘Virtual(ly) Athletes: Where eSports fit within the definition of “Sport”’(2016) Quest 1; Cem Abanazir, ‘Institutionalisation in E-Sports’ (2019) Sport, Ethics and Philosophy 117.

[4] Morgan (n 3) ch 1.

[5] Ivo van Hilvoorde and Niek Pot, ‘Embodiment and fundamental motor skills in eSports’ (2016) Sports, Ethics and Philosophy 14.

[6] Abanazir (n 3).

[7] Jenny et al. (n 3); Abanazir (n 3).

[8] See LEC Rulebook Art. 8.15.

[9] LEC Rules (n 2).

[10] Case C-90/16 The English Bridge Union Limited v Commissioners for Her Majesty’s Revenue & Customs ECLI:EU:C:2017:814.

[11] Case C-90/16 The English Bridge Union Limited v Commissioners for Her Majesty’s Revenue & Customs ECLI:EU:C:2017:814, Opinion of AG Szpunar.

[12] Steven Asarch, ‘“League of Legends” cuts esports budget, can Riot Games bounce back?’ (Newsweek, 28 August 2018); Derrick Asiedu head of Global Events at Riot Games confirmed this in a Reddit post: “We’re a long way from breaking even (revenue minus cost equalling 0)”.

[13] English Bridge Union Opinion (n 11) para 21.

[14] English Bridge Union Opinion (n 11) para 38.

[15] Abanazir (n 1).

[16] English Bridge Union (n 10) para 19, 25.