Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Can Formula 1 drive to protect human rights? A case study of the Bahrain GP - By Pedro José Mercado Jaén

Editor's Note: Pedro is an intern at the Asser Institute and currently studying the Erasmus Mundus Master Degree in Sports Ethics and Integrity (KU Leuven et al.) He worked as a research fellow for the Centre for Sport and Human Rights, and his primary research interests lie in the fields of International Human Rights and sport. 


I.               Introduction

“I can’t do everything and I can’t do it alone. I need allies.” These are the words of the seven-time Formula 1 (F1) world champion, Lewis Hamilton. He was urging more support to advocate for the protection of human rights in the countries visited by Formula 1. During the last years, Hamilton together with Sebastian Vettel, have become the leaders of a movement demanding accountability and greater awareness of the impact of F1 on society.

The inclusion of the Bahrain GP on the F1 racing calendar for the first time in 2004 ignited concerns, which have grown with the inclusion of Abu Dhabi in 2007, Russia in 2014, Azerbaijan in 2017, and Saudi Arabia and Qatar in 2021. The inability and lack of commitment of state authorities to protect and respect human rights, the ineffectiveness of judicial procedures and the systematic repression of political opposition are some of the factors that make these countries prone to human rights violations. Academics and CSOs regularly argue that F1, by signing multi-million dollar contracts with these countries, is complicit in sportswashing. Those pulling the sport’s strings deny these accusations and claim that human rights are at the centre of their agenda when they visit these countries. They claim F1 can drive the improvement of human rights standards in a particular country. However, reality tells a different story. The Bahrain GP has been running for more than a decade and the situation in the country has only worsened, without any signs of F1 contributing to the improvement of the protection of human rights there.

This blog aims to provide an overview of the human rights challenges F1 is facing when hosting a Grand Prix. For this purpose, a case study of the Bahrain GP, one of the longest-running on the modern/current F1 calendar, will be carried out. This will allow us to examine in detail the historical evolution of the GP, the complaints from civil society organisations and the reaction of the Federation Internationale de l’Automobile (FIA) and other stakeholders to the ongoing allegations of human rights violations.

II.              The beginning of the story: 2011 Bahrain GP

The inclusion of the Bahrain GP on the Formula 1 calendar came years before the country ratified the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR) in 2006 and 2007 respectively. Already before this, several international organisations such as Amnesty International and Human Rights Watch (HRW) were documenting the systematic human rights violations in Bahrain, at least since the 1990s. However, the turning point in the country was the protests in 2011, inspired by the demonstrations in Tunisia and Egypt, in what is known as the “Arab Spring”. As the Report of the Bahrain Independent Commission of Inquiry highlighted, people mostly belonging to the Shia community were killed, tortured, unlawfully imprisoned or arrested during the armed repression of the protests.

In the same year, the protests directly impacted the organisation of the Bahrain GP. Initially, the race was postponed because it was to be held during the weekend when the first uprisings began. This measure was applauded by the teams, drivers and the authorities as the priority at the time for the Bahraini royal family was to heal divisions and overcome the tragedy. Nevertheless, three months later, FIA decided to approve the return of the Bahrain GP to the F1 calendar and host the race in December. The decision was taken on the basis of a report drafted by Carlos Gracia, FIA Commissioner, who in May of the same year went to Bahrain to analyse the situation and meet with different stakeholders. The report concluded that there was “NO indication of any problems or reasons why Bahrain’s F1 Grand Prix should not return to the 2021 Calendar”. This report contrasts starkly with the situation that civil society organisations were reporting at that time. Five days after Mr Gracia’s visit, a letter from HRW to Jean Todt, Chair of FIA, and Martin Whitmarsh, Chair of F1 Teams Association, expressed concern about the possible rescheduling of the Bahrain GP. The letter reiterated that the human rights situation in the country had “worsened considerably since the cancellation decision in February”. It explicitly indicated that arrests, tortures and restrictions on the work of CSOs and the media continued to be a daily occurrence in the country.

The response to the decision of the FIA to reschedule the Grand Prix was not unanimous, with some of the drivers expressing their disagreement. Red Bull F1 driver Mark Webber stated, “like it or not, F1 and sport in general isn’t above having a social responsibility and conscience. I hope F1 is able to return to Bahrain eventually but now isn’t the right time.” CSOs also started to advocate for the complete suspension of the race, collecting more than 300,000 signatures on a petition hosted by the organisation Avvaz. Ultimately, following a letter from The Formula One Teams Association (FOTA) to FIA expressing their objections, the event was suspended from the 2011 F1 calendar.

At the beginning of 2012, the situation was still tense, and the successful staging of the Bahrain GP for the new season was still in the air. Some CSOs were putting pressure on the teams to boycott the race while pointing out that the situation concerning human rights violations was similar to or worse than the previous year. In the end, with the support of many of the teams, FIA decided that the Bahrain GP would go ahead as planned.

Obviously, the protests in 2011 had a direct impact on the organisation of the Bahrain Grand Prix, to the extent that they led to its cancellation. This set the bar high for what needs to happen in terms of humanitarian reasons or human rights violations for the cancellation of an event. However, despite the deteriorating human rights situation in the country, the Bahraini authorities, F1 and FIA did not hesitate to reschedule the event from 2012 onwards. These decisions echoed beyond the world of sport and triggered reactions from civil society.

III.            The Bahrain GP and the growing human rights expectations of civil society vis a vis F1

The events of 2011 and 2012 were the perfect breeding ground for CSOs to exert pressure in the years to come. Different organisations since then have been demanding more significant consideration of human rights by F1 and other commercial stakeholders.

In 2013, four Bahraini NGOs stressed, in a letter to F1 race organisers, drivers, sponsors and broadcasters, that the situation in the country did not differ much from previous years. For these organisations, the intention of the government and organisers in hosting the Grand Prix was clear: “to broadcast a false picture of normality to the outside world”. The letter also prompted a political backlash from some British MPs who called for the Bahrain GP to be cancelled. But for the F1 chief executive at that time, Bernie Ecclestone, the allegations had nothing to do with the race. He expressed that “We [F1] don’t go anywhere to judge how a country is run. I keep asking people, ‘What human rights?’ – I don’t know what they are”. Thus, during 2013 and 2014, the race was run despite clear opposition from a number of CSOs.

Given the limited impact of the various reports and letters sent by CSOs to different stakeholders involved in the Bahrain GP, one of these organisations decided to explore a new approach. In 2014, Americans for Democracy & Human Rights in Bahrain (ADHRB) submitted a complaint to the United Kingdom National Contact Point for the OECD Guidelines for Multinational Enterprises. ADHRB alleged that “companies in the Formula One Group [a company registered in the UK] had failed to address human rights impacts associated with the Bahrain Grand Prix.” After a mediation procedure, ADHRB and F1 reached a common ground. F1 issued a statement including a commitment to respect internationally recognised human rights in all of its operations and to develop and implement a due diligence policy. The statement also states that “where domestic laws and regulations conflict with internationally recognised human rights, the Formula 1 companies will seek ways to honour them to the fullest extent which does not place them in violation of domestic law.” At first, this step was welcomed by the CSOs, but as time passed, it proved to be merely a mirage and not a substantial change in F1 practices.

The consistent violation of human rights in Bahrain continued in the years following the publication of the statement, especially through political repression and the use of violence against demonstrators, media and workers of human rights organisations, and so did the racing in Bahrain. During different demonstrations in 2016 and 2017 against the Bahrain GP, the police used excessive force, resulting in several arrests and even the death of one teenager. This revived the criticisms of the CSOs, who again demanded with more forcefulness and support for the respect of the commitments that F1 itself had published years ago. In a letter by different CSOs, it was highlighted that “failing to exercise due diligence and thus abide by your own Statement of Commitment to Respect for Human Rights risks greater complicity in human rights abuses in Bahrain and the tarnishing of your brand’s [F1] reputation.” In response to the letter, F1 stated that

“We believe that Formula 1’s presence in every country on its calendar is positive and a force for good. Sport engages people from all walks of life and plays an important role in uniting communities and encouraging tolerance and acceptance. We believe too that Formula 1’s global profile shines a light and brings transparency to the internal affairs of every country that we visit.”

It was only at the end of 2018 that F1 publicly expressed its concerns about the human rights situation in Bahrain, more specifically about the imprisonment of the activist Najah Yusuf for protesting against the GP. The United Nations Working Group on Arbitrary Detention (WGAD) considered this detention arbitrary, unlawful, and in violation of her rights to free speech and to a fair trial. Nevertheless, F1 never took action in the investigation process or strongly condemned the imprisonment. This prompted a large number of CSOs, including HRW and Amnesty International, to call on F1 again in 2019 to cancel the Grand Prix in response to a lack of investigation into Yusuf’s claims and urged drivers to boycott the race.

The second turning point was the postponement of the Bahrain GP in March 2020 due to the Covid-19 pandemic. In November of the same year, seventeen CSOs, including World Players Association, HRW and Amnesty International, issued a statement on the worsening situation in the country and how the pandemic has increased the risk of human rights violations linked to F1. Moreover, the focus was no longer only on the violations directly linked to the GP, but also on the use of the sporting event to whitewash the image of the country, what has been called “sportswashing”. This latter line of argument was also followed by a letter delivered by thirty British MPs to F1 chief Chase Carey. It is at this point that CSOs begin to gain more support from public officials for their demands. For example, 90 parliamentarians from Britain, Spain, Ireland, France, Belgium, Italy and Germany sent a letter in 2022 to Mohammed ben Sulayem, president of FIA, accusing FIA and F1 of actively facilitating sportswashing in Gulf countries.

We have charted ten years of human rights advocacy and demands linked to the Bahrain Grand Prix and directed at the FIA. Initially, these human rights claims were related to the 2011 uprisings, when CSOs claimed that the Bahrain GP could not be held due to the fragile political situation in the country and the constant human rights violations linked to the protests. Subsequently, from 2014 onwards, the discourse focused mainly on the direct links of some human rights violations with the organisation of the GP, with CSOs reproaching F1 for not exercising due diligence and thus failing to comply with its own human rights commitments. The final phase, from 2020 onwards, is mainly characterised by the involvement of other actors, such as politicians and F1 drivers, who protested against the F1 being used as an instrument by authoritarian states to launder their reputations. What has been the impact of such public protests and mobilizations by CSOs and others? Have they triggered transformative changes in the way F1 tackles human rights risks linked to the Bharain GP?

IV.            What has F1 done to improve the human rights situation in Bahrain?

While the human rights expectations of civil society vis a vis F1 are clear and increasingly demanding, as exposed in the previous section, only a few of these expectations have had a practical impact to some degree. In order to analyse these actions, it is necessary first to identify the two organisations with the power to take appropriate measures. On the one hand, the Formula One Group (FOG) is composed of a diverse cluster of companies and, on the other hand, the actions taken by the governing body of F1, FIA.

The position of the FOG until 2015 was highly criticised by CSOs, as the previous section illustrates, not only because of its lack of action but also because of its official discourse, mainly led by Bernie Ecclestone, which belittled human rights. The exit of the British magnate from the FOG prompted a discursive change in the organisation, now recognising certain links between human rights violations and the organisation of the Bahrain GP. Nevertheless, the only real action taken was forced by the ADHRB when they submitted the complaint to the UK National Contact Point for the OECD Guidelines, resulting in the F1 Human Rights Commitment.

Now the FOG includes in its Code of Conduct (CoC) a section regarding human rights and modern slavery. Nevertheless, they only refer to what has already been stated in their Human Rights Commitment. In this CoC, they also add that if “you believe that an individual’s human rights may be adversely affected, you must report it to the Compliance Team as soon as possible”. This compliance team is led by two legal counsels, notably without experience in human rights topics that also deal with other areas such as compliance, brand protection, human resources and administration functions. In fact, Sacha Woodward, one of the members of the compliance team, when asked in 2019 about the impact of F1 on human rights, stated that “we [FOG] don’t see ourselves as a political organisation. We just want to bring a great entertainment spectacle to as big an audience as possible to as many countries as we can reach”. This comment clearly shows the priorities of the FOG, profit over human rights, and tries to reinforce the idea that F1 is a bubble free from human rights violations. A change in this dynamic seems unrealistic at this point since the FOG is a sport business entity that seeks primarily economic profit, which Bahrain brings to it in spades.

The passivity of the FOG is not beyond reproach, but the position of the FIA is even more flagrantly disregarding human rights. Since 2011, the sport governing body has not taken any initiative or seriously addressed the human rights issues in Bahrain that CSOs have brought to its attention year after year. Although in recent years, some SGBs are adopting human rights policies (e.g., FIFA) or recognising the importance of their protection (e.g., IOC), the organisation that safeguards motorsports seems unwilling to take that road. This unwillingness was clearly shown by the new FIA president, who recently stressed that drivers should devote more time to driving and less to advocating for human rights problems. Nevertheless, we could be witnessing the end of this passivity, as some signs of change can be glimpsed recently. At the end of 2021, the World Council for Automobile Mobility and Tourism (WCAMT), the body responsible for all FIA issues affecting the automobile in society, hold their Annual General Assembly. In this meeting, Prince Zeid Ra’ad Al Hussein, former UN High Commissioner for Human Rights, and Rachel Davis, Vice President of the non-profit organisation Shift, presented a set of recommendations “to take the authoritative international framework – the United Nations Guiding Principles on Business and Human Rights – and apply it to the FIA’s reality”. These recommendations are the result of a process that FIA, in the context of its Diversity, Inclusion and Human Rights Strategic Framework, started to develop in 2020. The group of experts took a look at three spheres of FIA’s activity: FIA “as an employer and procurer of goods and services; as the regulator of world motorsport, and as a major player in mobility”. Unfortunately, both the Framework and the recommendations are not public, which underlines how FIA is still far from achieving the standards of transparency and integrity in governance that society has been demanding of SGBs.

The highlighted actions, or rather inactions, show a clear lack of will from both organisations over the last ten years. Small shoots seem to flourish recently, but it is still necessary for both organisations to commit more human and financial resources to address this problem and improve their governance standards.

V.              Conclusion. What needs to change in Formula 1?

The blog has illustrated how FIA and F1 have come under increasing public pressure from CSOs (and beyond) over the human rights impacts of the Bahrain Grand Prix. Civil society and drivers are increasingly demanding more profound changes in both organisations. Therefore, to conclude this piece, some basic recommendations to FIA and F1 are presented as a point to start with, all of them inspired by the report “For the game. For the world. FIFA and human rights” prepared by John Ruggie at the request of FIFA.

First of all, FIA, like FIFA, has to adopt a Human Rights policy. As of today, the FIA statutes only refer to human rights in article 1.2, which states that “the FIA shall promote the protection of human rights and human dignity […]”. A future human rights policy shall specify and expand on the implications of this commitment. It should not only address the internal organisation of FIA but also consider its business relationship with the FOG. In this context, the United Nations Guiding Principles on Business and Human Rights and OECD Due Diligence Guidance seem to be the most appropriate frameworks through which to articulate and implement the policy.

Secondly, as Ruggie mentions in the report, “even the best human rights policy is no more than words on paper without the necessary actions and incentives to make it part of everyday practice”. The Human Rights commitment adopted by the FOG in 2015 is a clear example of this discrepancy between words and deeds. Instead, both organisations should embed their human rights policies and commitments in their daily operations. Decision-making, especially those concerning the decision to host a Grand Prix in a particular country, should be subjected to detailed human rights impact assessments.

Lastly, once these actions have been adopted, it is necessary to adopt mechanisms to monitor their effects and effectiveness. Without it, the policies will not cover the new challenges and will not adapt to the changing circumstances of the countries hosting a Grand Prix.

For all of the above reasons, both FIA and the FOG must stop ignoring the CSOs working in Bahrain and the rest of the community demanding a change. All stakeholders must work for the common good: the protection of human rights.

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Asser International Sports Law Blog | Call for papers: ISLJ Annual Conference on International Sports Law - 26-27 October 2017

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Call for papers: ISLJ Annual Conference on International Sports Law - 26-27 October 2017

The editorial board of the International Sports Law Journal (ISLJ) is very pleased to invite you to submit abstracts for its first Annual Conference on International Sports Law. The ISLJ, published by Springer in collaboration with ASSER Press, is the leading publication in the field of international sports law. Its readership includes both academics and many practitioners active in the field. On 26-27 October 2017, the International Sports Law Centre of the T.M.C. Asser Instituut and the editorial board of the International Sports Law Journal will host in The Hague the first ever ISLJ Annual Conference on International Sports Law. The conference will feature panels on the Court of Arbitration for Sport, the world anti-doping system, the global governance of sports, the FIFA transfer regulations, comparative sports law, and much more.


Abstracts could, for example, tackle questions linked to the following international sports law subjects:

  • The interaction between EU law and Sport 
  • International sports arbitration (CAS, BAT, etc.)
  • The functioning of the world anti-doping system (WADA, WADC, etc.)
  • The global governance of sport
  • The regulation of mega sporting events (Olympics, FIFA World Cup)
  • The international regulation of football (FIFA Regulations on the Status and Transfer of Players and UEFA Financial Fair play Regulations)
  • The global fight against corruption in sport
  • Comparative sports law

Your abstract (no more than 300 words) and your CV should be sent no later than 15 May 2017 to Antoine Duval. Selected speakers will be informed by 30 May.

The ASSER Institute will offer one night accommodation for the speakers and will provide a limited amount of travel grants. If you wish to be considered for a grant please provide an explanation in your submission.

ISLJ Awards: The three best papers of the conference will receive an ISLJ award and their authors will be given the opportunity to publish them in the ISLJ.


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Asser International Sports Law Blog | The 2006 World Cup Tax Evasion Affair in Germany: A short guide. By Gesa Kuebek

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

The 2006 World Cup Tax Evasion Affair in Germany: A short guide. By Gesa Kuebek

Editor's note:

Gesa Kuebek holds an LLM and graduated from the University of Bologna, Gent and Hamburg as part of the Erasmus Mundus Master Programme in Law and Economics and now work as an intern for the Asser Instituut.


On Monday, 9 November, the German Football Association (DFB) announced in a Press Release the resignation of its head, Wolfgang Niersbach, over the 2006 World Cup Affair. In his statement, Niersbach argued that he had “no knowledge whatsoever” about any “payments flows” and is now being confronted with proceedings in which he was “never involved”. However, he is now forced to draw the “political consequences” from the situation. His resignation occurred against the backdrop of last week’s raid of the DFB’s Frankfurt headquarters and the private homes Niersbach, his predecessor Theo Zwanziger and long-standing DFB general secretary Horst R. Schmidt. The public prosecutor’s office investigates a particularly severe act of tax evasion linked to awarding the 2006 World Cup. The 2006 German “summer fairy-tale” came under pressure in mid-October 2015, after the German magazine “Der Spiegel” shocked Fußballdeutschland by claiming that it had seen concrete evidence proving that a €6.7 million loan, designated by the FIFA for a “cultural programme”, ended up on the account of Adidas CEO Robert-Louis Dreyfuß. The magazine further argued that the money was in fact a secret loan that was paid back to Dreyfuß. Allegedly, the loan was kept off the books intentionally in order to be used as bribes to win the 2006 World Cup bid. The public prosecutor now suspects the DFB of failing to register the payment in tax returns. German FA officials admit that the DFB made a “mistake” but deny all allegations of vote buying. However, the current investigations show that the issues at stakes remain far from clear, leaving many questions regarding the awarding of the 2006 World Cup unanswered.

The present blog post aims to shed a light on the matter by synthetizing what we do know about the 2006 World Cup Affair and by highlighting the legal grounds on which the German authorities investigate the tax evasion.


What’s the 2006 World Cup Affair all about?

The scandal centres on the payment of €6.7 million, which was, according to Der Spiegel, secretly loaned to the DFB by the private investor Louis Dreyfuß, at the time CEO of Adidas, prior to the Word Cup decision on 6 July 2000. Accordingly, the money was never recorded in either the balance sheets of the Bid Committee or, later, in the balance sheets of the German Organisation Committee of the World Cup. Der Spiegel argued that the money was used to buy the four votes of the Asian representatives of the 24-membered FIFA Executive Committee. The four Asians voted together with the European representatives at the elections in July 2000 in favour of Germany becoming the host of the 2006 World Cup. Due to the fact the New Zealand’s representative Charles Dempsey surprisingly refrained from voting in the last ballot, Germany won with 12:11 votes in favour. In a later article, Der Spiegel stated that Zwanziger and Schmidt discussed in a recorded telephone conversation to whom the Dreyfuß millions were transferred and mentioned the name of Mohamed Bin Hammam in this context. It is worth remembering that the Qatari Bin Hammam, a former member of the FIFA Executive Committee from 1996 to 2011, was charged with offering bribes for votes and banned for life from all football activities by FIFA on two occasions in 2011 and 2012. The DFB, however, denies all allegations of vote-rigging.

The current investigations of the public prosecutor focus on the supposed repayment of the €6.7 million loan in April 2005. The Organisation Committee officially declared the money as the German contribution to a “cultural programme” during the 2006 World Cup. As such, the German money went to a FIFA account in Geneva, Switzerland. However, the FIFA cultural programme never happened. Instead, FIFA allegedly transferred the money immediately to an account of Louis Dreyfuß in Zurich. Up to now, there are neither bills nor a receipt of payments at FIFA for the ominous €6.7 million. Furthermore, it remains unclear through which channels the DFB’s money was transferred back to Louis Dreyfuß.


How does the DFB react?

Initially, the DFB acknowledged in a Press Release of 16 October that evidence came to light “that a payment of the Organisation Committee in April 2005 amounting to €6.7 million attributed to FIFA may not have been used according to the indicated purpose”. On that same day, Der Spiegel published its article. The DFB promptly reacted in another Press Release, denying the existence of slush funds. It refuted the allegations of Der Spiegel as “completely untenable” and denied any accusations of vote-rigging. Niersbach added that the DFB “will refute Der Spiegel’s claims and take legal action against them”. In a similar manner, German football legend Franz Beckenbauer, who acted as the head of the Head of the 2006 World Cup Organisation Committee, repudiated the article’s claims publicly.

By contrast, on 23 October, Zwanziger described Niersbach, his well-known enemy and successor as DFB president, as a liar in a Spiegel interview, acknowledging for the first time the existence of slush-funds “during the German World Cup application”. He argued that it is, “similarly clear that the current DFB president has not just been aware of the matter for a few weeks, as he states, but at least since 2005”.

Shortly thereafter, Franz Beckenbauer admitted for the first time that “mistakes” had been made, but still denied vote buying. According to the DFB, the €6.7 million were indeed disguised under the false pretences of the “cultural programme” and used to repay the loan to Louis Dreyfuß. However, the DFB claims that the original payment to the German Organisation Committee led by Franz Beckenbauer was made in 2002, thus after Germany had already won the 2006 World Cup bid. According to the DFB, the money was used to fulfil a particular demand of FIFA: FIFA president Blatter requested an advanced payment of €6.7 million to guarantee a €170 million loan.[1] Beckenbauer acknowledged that the Organisation Committee should not have agreed to the proposal of the FIFA Finance Committee. Blatter, however, denies this version.[2]

By this time, the DFB had contracted the law firm ‘Freshfields Bruckhaus Deringer’ to investigate the matter. On 27 October, the law firm stated that the proceedings will probably take a long time.


Why is the German public prosecutor’s office investigating tax evasion?

On 19 October, the German Prosecutor’s office stated that they were in the process of verifying an initial suspicion before launching a preliminary investigation. Possible criminal wrongdoings involved deception, fraud and corruption. However, in a later Press Release, the public prosecutor’s office in Frankfurt stated that there would be no further investigation into the alleged crimes due to the expiration of the limitation period of proceedings. Instead, a preliminary investigation involving a particularly severe case of tax fraud was initiated.

By indicating the €6.7 million transfer as a contribution to the “FIFA cultural programme” on the DFB’s tax return, the transaction was classified as an “operating expense” under German tax law and was as such tax deductible. The public prosecutor’s office, however, thinks that the payment had in fact a different purpose. As a result of this requalification, the payment cannot be declared as a deducible operating expense anymore. Therefore, the suspects are accused of declaring wrongful tax returns within the limit of their prior responsibilities in the Organisations Committee, thereby evading corporate and commercial taxes as well as solidarity surcharges[3] for the year 2006 to a substantially high extent.

According to an article of the “Süddeutsche Zeitung”, the falsified tax return were signed by Niersbach himself. Niersbach denies “any involvement whatsoever” in the affair.


What are the legal grounds under German Law?

The legal basis for prosecution of tax evasion is the eighth chapter (§§ 369-412) of the Abgabenordnung (Fiscal Code; abbr. AO). Here, tax offences are distinguished into tax crimes (Steuerstraftaten) and misdemeanours (Steuerordnungswidrigkeiten). Whilst the former is characterised as a deliberate act, the latter offence is triggered in case of gross negligence. Only tax crimes are punishable by penalties and imprisonment.[4] The core offence within the category of tax crimes is tax evasion (Steuerhinterziehung) which is regulated under § 370 AO. A natural or legal person commits tax evasion by (i) misrepresenting or concealing relevant information regarding taxation to tax authorities; (ii) neglecting tax disclosure duties; or (iii) refraining from the compulsory use of tax stamps (§ 370 AO Abs. 1). As stated above, the act of tax evasion must be committed deliberately. In accordance with § 78 Strafgesetzbuch (Criminal Law Code; abbr. StGB), the statutory limitation period for prosecution of tax crimes is five years. However, the limitation period for tax repayment duties amounts to ten years; moreover, for tax repayment duties 6% interest per year is added. The potential sentence for tax evasion under German Law ranges from a financial penalty to a prison sentence of up to five years. In particularly serious cases of tax evasion in conjunction with abuse of an evader’s official authority or with fraudulent counterfeit the possible sentence ranges from minimally six month to maximally ten years of imprisonment (§ 370 AO Abs. 3 S. 1-5). If tax evasion is committed on a professional basis or as part of an organized crime (Gewerbs-/ Bandenmaessige Steuerhinterziehung) as stipulated in § 370a AO, the possible sentence ranges from one up to ten years of imprisonment.[5]

The search (Durchsuchungen) of private homes and business premises are primarily regulated in §§ 102 ff. Strafprozessordnung (Code of Criminal Procedure; abbr. StPO). Confiscation, or Beschlagnahmung, is regulated in §§ 98 ff. StPO. A search is conducted during preliminary investigations, and has to be based on “sufficient factual implications” (§ 152 Abs. 2 StPO). The preliminary investigation procedure can have three possible outcomes: First, one can decide to close the proceedings (§§386, 389 AO); second one can indorse a penalty order (Strafbefehl §§400; 407 StPO); and third, if enough evidence has been collected, the prosecutor can go to court and charge the defendant for tax evasion (§170 StPO).[6]


Against whom does the German prosecutor investigates?

The prosecutor’s investigation does not target the DFB as such. As stated in the introduction, suspects are the recently resigned DFB president Wolfgang Niersbach, who was the vice-president of the German Organisation Committee of the 2006 World Cup, his predecessor Theo Zwanziger, who acted as the treasurer of the Organisations Committee and Horst R. Schmidt, who was the managing Vice-President of the Organisations Committee and until 2007 General Secretary of the DFB. If Niersbach actually signed the falsified tax return papers, his role in the affair will most likely be difficult to deny.

The exact role of the other two officials in the putative tax evasion scheme remains unclear. Especially the role of Zwanziger raises questions. Not only did he publicly reveal Niersbach’s knowledge of the affair, he also gave evidence in front of ‘Freshfields Bruckhaus Deringer’ on 28 October. Although contracted by the DFB, the members of the law firm are supposed to act as external investigators. Zwanziger stated that he had “submitted all his documents [and] presented his annotations and assessments”. Six days later, the public prosecutor’s office initiated the preliminary investigation on tax evasion and searched the aforementioned premises. At this point in time, a linkage between Zwanziger’s testimony and the start of the preliminary investigations remains purely speculative.

It is further unclear why the investigators refrain from targeting Franz Beckenbauer, who acted as the president of the Organisations Committee. The prosecutor argued that Beckenbauer had “nothing to do” with the tax evasion. By contrast, the German journal “Handelsblatt” suggested that “the most likely explanation” is that Beckenbauer lives in Austria and is thus outside the jurisdictional reach of the investigators.


What potential charges are the accused facing?

As the topic of the missing €6.7 million arose prior to any of the statements of the FIFA officials and – as to my knowledge - no retroactive payments have been made, the accused will not be exempted from charges under § 371 AO. If enough evidence can be found and if the accused are proven guilty in front of a Court, the accused six months to ten years imprisonment in case of a severe tax evasion scheme (§ 370 AO Abs. 3).


Why does the combination of “tax evasion” “Germany” and “Louis Dreyfuß” rings a bell?

It is not the first time that Louis Dreyfuß has been involved in a “German football scandal”. In 2000, Dreyfuß provided a loan to Bayern Munich’s Uli Hoeneß of 5 million Deutschmark (around €2.56 million) as “play money” to speculate primarily on shares and current exchange rates, which was deposited in a Zurich financial institution. Subsequently, the bank reportedly granted Hoeneß a loan amounting to 15 million marks, for which Louis Dreyfus also acted as guarantor. Hoeneß refrained from declaring the proceeds of his gambling to the tax authorities. For this and other tax evasion offences, Hoeneß was sentenced to a total of three years and six month of imprisonment in 2014.


What’s next in the investigation on the 2006 World Cup Affair?

With regard to the tax evasion charges, it is likely that the case will either be closed (§§ 386, 389 AO) or – if enough evidence is collected against one or all three of the officials – the offenders will be charged for tax evasion in front of a court (§170 StPO). The outcome will depend on the evidence that comes to light during the preliminary investigation. As the FIFA “cultural programme” never took place, it is very obvious that the money was indeed used for a different purpose than indicated on the tax return and as such, the transaction should not have been deducible as an operating expense. Hence, proving tax evasion will most likely not be the public prosecutor’s office primary problem. Instead, the investigators have to find evidence tying Niersbach, Zwanziger and/or Schmidt to the crime. If the Sueddeutsche Zeitung is correct in stating that Niersbach signed the illegal tax return, it will be difficult for him to avoid prosecution.

In any case, it is to be expected that the 2006 World Cup Affair will occupy Fußballdeutschland for a while. The results of the investigation which the DFB confided to the law firm ‘Freshfields Bruckhaus Deringer are not expected tomorrow. Moreover, the independence of the investigation is questioned after a personal connection between a Niersbach employee and a lawyer from the aforementioned firm became public. FIFA, too, has several external lawyers investigating the claims. In addition, the Sportausschuss (sport committee) of the German Bundestag started to look into the matter. However, the impartiality of the sport committee may also be questioned as one of the Bundestag’s members also acts as the treasurer of the DFB and is tipped to become the successor of Niersbach. As a result, the final word regarding the use, whereabouts and purpose of the €6.7 million is not to be expected soon.


[1] Frankfurter Allgemeine Zeitung:” Das Schweigen des Wolfgang Niersbach“, 04.11.2015, http://www.faz.net/aktuell/sport/fussball/dfb-praesident-wolfgang-niersbach-schweigt-nach-dfb-razzia-13893806.html

[2] Idem 1

[3] To finance the reunification of Germany a surcharge is levied from all taxpayers on their PAYE, income, withholding and corporation tax. The solidarity surcharge is currently 5.5 % of the relevant assessment basis.

[4] However, misdemeanours can be fined with up to €50 000

[5] See also L.P. Feld, A.J.Schmidt & F, Schneider: “Tax Evasion, Black Activities and Deterrence in Germany: An Institutional and Empirical Perspective”, Annual Congress of the International Institute of Public Finance, Warwick, 2007.

[6] See also Christoph Bräuning: „Durchsuchung und Beschlagnahme durch die Steuerfahndung“, ROSE & PARTNER LLP, 2012, http://www.rosepartner.de/fileadmin/redaktion/Durchsuchung_Steuerfahndung__Christoph_Braeunig_01.pdf

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