The IOC has trumpeted it worldwide as a « historical milestone »: the United Nations has recognised the sacrosanct autonomy of sport. Indeed, the Resolution A/69/L.5 (see the final draft) adopted by the General Assembly on 31 October states that it  “supports the independence and autonomy of sport as well as the mission of the International Olympic Committee in leading the Olympic movement”. This is a logical conclusion to a year that has brought the two organisations closer than ever. In April, UN Secretary General Ban Ki-moon appointed former IOC President, Jacques Rogge, Special Envoy for Youth Refugees and Sport. At this occasion, the current IOC President, Thomas Bach, made an eloquent speech celebrating a “historic step forward to better accomplish our common mission for humanity” and a memorandum understanding was signed between the UN and the IOC. This is all sweet and well, but is there something new under the sun?

A beautiful friendship

As the IOC points out itself, it has always had a friendly institutional relationship with the UN. There is a good deal of solidarity of kin between the two transnational organisations. The UN has been keen on shoring up the Olympic truce. In fact, since 1993, it has adopted no less than 24 resolutions supporting sport (and the Olympic Games) as a means to promote education, health, development and peace. However, this year’s resolution goes beyond the previous resolutions. The text includes the usual references to the use of sport to foster peace and development, but it also celebrates in unequivocal terms the work and the autonomy of the Olympic movement. This is music to the IOC’s ears and resonates with its repeated calls on States to respect the autonomy of the “lex olympica”. The IOC has already stretched the interpretation of the resolution and claims “boycotts are incompatible with this UN request for respect of the values of sport”. Nevertheless, one must keep her feet on legal earth. This resolution by the General Assembly (GA) has no legally binding value on the UN Member States, it is merely encouraging them to act upon it. International legal scholars have endlessly debated the potential legal effects of UN resolutions, and they agree on one thing: Resolutions by the GA are not per se legally binding.[1] To be so, they must be capable of creating obligations on their addressees, or recognized as customary international law, both very unlikely in our case. Thus, this resolution should be interpreted as a declaration of friendship, which could have a practical impact (or not) on the work of national courts, depending on their willingness to acknowledge the UN resolution. In practice, it is just another sign (after the UEFA-EU arrangement) that international organisations tend to side politically (and usually uncritically) with the IOCs of this world.

A liaison dangereuse

Being good friends with the IOC guarantees good shots of the UN Secretary General holding the torch, but it might not be in the best interest of the UN, nor of the world’s citizens. The Olympic Games’ capacity to trigger an Olympic peace of some sort has been largely discredited by the invasion of Crimea and the proxy war fuelled by Russia in Ukraine, just days after the Winter Olympic Games in Sochi came to a close. The Secretary General of the UN himself stated in a recent (20 October 2014) report to the General Assembly that “[s]adly, there is no evidence of any initiative by warring parties either to unilaterally observe the Olympic Truce or to promote its mutual observation”. The Olympic truce myth has been a collective exercise of wishful prophesizing with no self-fulfilling effect in sight.

Furthermore, the UN General Assembly reaffirms “that any form of discrimination is incompatible with belonging to the Olympic movement”, but the latest Games in Sochi have also shown that the IOC is not sanguine, to say the least, in fighting discriminatory laws adopted by Olympic host countries. In fact, exactly on this matter, the IOC has announced already that it does not “have a mandate to impose measures on sovereign States outside its own fields”. This is surprising, as the IOC seems to consider it has a mandate to impose (via the host city contract) a string of measures on sovereign States covering core public policies (tax, infrastructure or intellectual property rights). Why does it not include the fight against all sorts of discrimination in the "fields" it deems its own? The latest draft of the Host city contract for the 2022 Winter Games comprises a reference to the “prohibition of any form of discrimination”, but it is still deprived of real legal teeth.

This relationship between the IOC and the UN is more of a liaisons dangereuse than a “beautiful friendship”. The UN should be weary to associate itself too closely with an institution characterised by a lack of transparency, internal democracy and accountability. Sure, one could hope that this friendship would lead the IOC to reform itself, but its readiness to do so is rather enhanced by public outrage and the threats of legal challenges than warm accolades. There is a regrettable paradox here: While the global citizenry is loudly contesting the IOC and FIFA, it is à la mode for international organisations to align themselves politically with them.

[1] On this question in general, see K. Hailbronner and E. Klein, Commentary of Article 10 of the UN Charter in B. Simma (ed.), The Charter of the United Nations : A Commentary, Oxford University Press, 2002, p.257-275

The summer saga surrounding Luis Suarez’s vampire instincts is long forgotten, even though it might still play a role in his surprisingly muted football debut in FC Barcelona’s magic triangle. However, the full text of the CAS award in the Suarez case has recently be made available on CAS’s website and we want to grasp this opportunity to offer a close reading of its holdings. In this regard, one has to keep in mind that “the object of the appeal is not to request the complete annulment of the sanction imposed on the Player” (par.33). Instead, Suarez and Barcelona were seeking to reduce the sanction imposed by FIFA. In their eyes, the four-month ban handed out by FIFA extending to all football-related activities and to the access to football stadiums was excessive and disproportionate. Accordingly, the case offered a great opportunity for CAS to discuss and analyse the proportionality of disciplinary sanctions based on the FIFA Disciplinary Code (FIFA DC). 

I.               Admissibility: Can FC Barcelona join the appeal?

As a preliminary matter, FIFA was contesting the right of FC Barcelona to take part in the appeal against the decision. The Panel judged that “in light of the specific circumstances of the case, taking into account the impact of the specific sanction imposed, the Panel finds that the Club is sufficiently affected by the Appealed Decision and that the Club has a tangible interest of financial and sporting nature at stake” (par. 47). In other words, “in a case where the FIFA authorities are issuing a sanction against a player and such sanction affects direct financial interests of a club, such club must have the possibility to appeal (within the applicable deadline) such decision in order to be able to protect its legal interests, even if this interests became actual after the challenged decision was issued” (par.48). In short, the right to appeal to CAS is extended to the club of the player, even when he is not party to the original proceedings.

II.             Merits: Is it the right sanction?

a.     The applicability of Art. 57 FIFA DC

The first problem raised was “whether the actions of the Player at the Match constitute […] an unsporting behaviour to be sanctioned […] under art. 57 FIFA DC” (par.69). The club and the player were invoking various well-known principles of criminal law (ne bis in idem and nulla poena sine lege certa) against it, but the arbitrators decided to reject these objections (par.70-74). Interestingly, the Panel held that “it is not necessary for the principles of predictability and legality to be respected that the football player should know, in advance of his infringement, the exact rule he may infringe, as well as the measure and kind of sanction he is liable to incur because of the infringement”. Furthermore, “[t]he fact that the competent body applying the FIFA DC has the discretion to adjust the sanction mentioned in the rules deemed applicable to the individual behaviour of a player breaching such rules is not inconsistent with those principles” (par.73). Yet, the Panel was also of the opinion that “the wording of art. 57 FIFA DC shows that this provision contains a mere general clause, trying to cover all possible conducts against fair play, which are not yet covered by other articles, or “consumed” by the application of any other provision, of the FIFA DC”. Hence, “to the extent the action of biting (in the circumstances in which it occurred at the Match) falls within the scope of art. 48 par. 1 lit. d) FIFA DC (as all the parties concede), since the kinds of “assaulting” therein described (“elbowing, punching, kicking”) are expressly not exhaustive (“... etc.”), the same action could not be comprised in the scope of art. 57 FIFA DC, even though the Player’s assaulting in the case at hand, being a misconduct, is also against fair play”. Thus, “the punishment of the Player is already and fully covered by the application of art. 48 par. 1 lit. d) FIFA DC – with no room left for art. 57 FIFA DC, wrongly applied by the FIFA disciplinary bodies” (par.77). In short, article 48 par. 1 lit. d) FIFA DC is deemed the lex specialis to art. 57 FIFA DC. Therefore, “any sanction going beyond those allowed by art. 48 par. 1 lit. d) FIFA DC would be inappropriate to the peculiarities of the case and would be disproportionate” (par.78).

b.     The existence of mitigating factors and aggravating circumstances

The claimants argued that the FIFA disciplinary bodies did not take in account the mitigating factors and wrongfully assumed aggravating circumstances. The Panel rebuts this line of thinking. Indeed, regarding “the question of the relevance to be given to the Player’s remorse as a mitigating factor, the Panel, looking at the non-contested facts and the Parties’ allegations, finds that the margin of discretion the FIFA Appeal Committee had to judge this case was not exceeded, and that it was correctly exercised” (par.81). The arbitrators find that “the remorse of an offender can hardly be given any weight when the same offender had in precedent occasions committed the same infringement and in those occasions had already expressed its remorse and pledged not to repeat that infringement” (par.83). Moreover, “the remorse and apologies shown by the Player after having already been sanctioned cannot have the same impact as a remorse expressed immediately after the event and before any disciplinary proceeding is started and/or sanction is imposed” (par.83). Additionally, “the disciplinary bodies could take into account the fact that the Player had already committed in two preceding occasions the very same infringement, and irrespective of the level (national) of the competition in which they had occurred” (par.87). Thus, the Panel is of the view that the discretion granted to the FIFA Appeal Committee by art.39 par. 4 FIFA DC in weighing the mitigating factors and aggravating circumstances was properly exercised (par.90). The sanction against Luis Suarez is not based on an erroneous analysis of the factual situation. Indeed, remorse can only come into play if immediately voiced, while the concept of recidivism should be interpreted widely as including a similar wrongdoing in the framework of any football competition. 

c.      The proportionality of the ban

The key argument raised by the appellants against the length (and nature) of the FIFA sanctions imposed on Luis Suarez concerned the proportionality of the sanctions (par.91-108). In that regard, FC Barcelona and Suarez argued that “the biting of the Player is not an act of extreme violence and that there was no damage or injury caused to the opposing player, as he was able to continue to play without medical assistance” (par.93), while FIFA dismissively stated that “CAS should not correct any of its decisions if it is not considered to be “evidently and grossly disproportionate to the offence”” (par.94). The Panel rejected both analyses. On the one hand, it held that “biting is absolutely foreign to football and therefore to be considered as a sort of aggravated assault” and “the fact that the opposing player was not injured could not be considered a mitigating factor in the case at hand “(par.95). However, on the other hand, it also held that “the Player is responsible (only) for the violation of art. 48 par. 1 lit. d) FIFA DC” (par.96). Therefore, “the four (4) month ban on taking part in any football-related activity and the prohibition of entering the confines of any stadiums, not allowed for a violation of art. 48 par. 1 lit. d) FIFA DC, could not be applied” (par.96). Nevertheless, due to its specific nature as an intentional assault, the biting “deserves a sanction well above the minimum level of a two match suspension and a fine indicated as such in art. 48 FIFA DC” (par.97).

In conclusion, “the Panel finds that the four (4) month ban of the Player on taking part in any football-related activity and the prohibition of entering the confines of any stadiums are not contemplated by art. 48 par. 1 lit. d) FIFA DC, and are also not appropriate to the infringement committed by the Player on the pitch” (par.104). Moreover, “the FIFA Disciplinary Committee and the FIFA Appeals Committee did not take into consideration that with the four (4) months ban of the Player on taking part in any football-related activity and from entering the confines of any stadiums, the Player actually was prohibited to train with a team and keep his fitness in order to be ready to start playing for the Club after and above this four (4) month ban” (par.105). Furthermore, “this prohibition appears to impact, without any legitimate justification in the case at hand, on the general possibility for the Player to derive profits from his image as football player – beyond the simple participation in football matches” (par.105). Besides, “no justification was offered in the Appealed Decision (beyond a generic reference to the gravity of his actions) in support of the specific sanction of the stadium ban– a measure usually imposed to hooligans, which in the case of the Player does not seem to pursue any legitimate purpose” (par.106). In light of all of this, the Panel decides “to replace the sanction of the prohibition on exercising any football-related activity for four (4) months with the sanction of a match ban (applicable to official matches played at any level) for the same period” (par.107). 

Conclusion

Luis Suarez is long back on the pitch and the practical relevance of this discussion is very limited for his future career. Yet, interesting insights can be derived from this award. Litigants in disciplinary cases involving FIFA will be interested to know that a Club, even if it is not directly part to a dispute in front of FIFA’s disciplinary bodies, might have a legitimate right to appeal a decision rendered against one of its players. More importantly, the systematic interaction between article 48 and 57 FIFA DC has been clarified. Article 48 FIFA DC constitutes a lex specialis to article 57 FIFA DC and, thus, both cannot be applied cumulatively to sanction a player more heavily. This is not to say that a very peculiar offense, like the one at hand, will not face a tough sanction. Nonetheless, a sanction imposing a drastic stadium or football-related activity ban, threatening the player’s ability to derive any revenues from his work, will be deemed disproportionate unless it is thoroughly justified. This is a clear warning not only to FIFA’s disciplinary bodies but also to any Sports Governing Body: the harsher you get, the stronger the supporting reasoning must be.

Editor's note: Ben Van Rompuy, Head of the ASSER International Sports Law Centre, was recently interviewed by LexisNexis UK for their in-house adviser service. With kind permission from LexisNexis we reproduce the interview on our blog in its entirety. 

How does competition law affect the sports sector?  

The application of EU competition law to the sports sector is a fairly recent and still unfolding development. It was only in the mid-1990s, due to the growing commercialization of professional sport, that there emerged a need to address competition issues in relation to, for instance, ticketing arrangements or the sale of media rights.  

Apart from the evident link between competition law and commercial activities related to sport, competition law also has a vital role to play in relation to the regulatory aspects of sport. Most markets for the organization of sports events are a textbook example of monopolistic markets. As a result, sports associations exercise pure monopsony power: athletes have no choice but to accept unilaterally imposed restrictions. Albeit limited to case-by-case inquiry, competition law is thus a meaningful instrument to curb the otherwise unfettered private regulatory power of sports associations. Unfortunately, it remains underutilized. Only a handful of international sports federations have truly experienced the “Bosman effect” and faced scrutiny of their regulatory activity under the EU antitrust rules.   

Have there been any important sports-related antitrust cases in recent years? 

Not at the EU level. Regarding commercial activities, the latest case dates from 2006, namely the Commission’s commitment decision on the joint selling of the Premier League media rights. And after some politically difficult uphill battles around the 2000s against FIFA and the International Automobile Federation the European Commission has been extremely reluctant to intervene in regulatory matters. Lasts year’s rejection of the complaint against UEFA’s Financial Fair Play Rules was the latest “achievement”. In the last few months, however, the Commission has received a number of new interesting complaints. 

Since the decentralization of EU antitrust enforcement in 2004, National Competition Authorities have addressed more than 40 decisions concerning the joint selling of sports media rights. For the most part, the remedy package designed by the Commission has been replicated, but there are some differences: the more widespread use of a “no single buyer” obligation and the acceptance of exclusive rights contracts exceeding three years. 

Regarding regulatory aspects, a string of recent national cases have challenged rules that disproportionally restrict athlete participation in events not organized and promoted by the official federation, notably in smaller sports such as motor sport, horseracing and bodybuilding (Ireland, Italy, Sweden). What characterizes these cases is that the remedial action was purely national in scope. In Germany, by contrast, two exploitative abuse cases are making their way up through the courts that have the potential of becoming important EU-wide precedents. Both are concerned with unfair trading conditions – a rarity these days: mandatory arbitration clauses (International Skating Union) and rules concerning the mandatory release of players to the national team without compensation (International Handball Federation).  

What other aspects of competition law are important in the sporting context? 

The State aid rules are the last unexplored frontier. For decades, national and regional public authorities have directly or indirectly financed sports organisations, sports infrastructure or individual clubs, but these measures have blissfully remained under the radar of EU State aid control. Yet in the last four years, the number of complaints against alleged unlawful State aid to professional sport, mostly football clubs, has been rising. Interestingly, citizens filed most of these complaints. 

With the enactment of the new Block Exemption Regulation and several formal decisions on for instance Belgian, French, German, and Swedish State aid for the construction and renovation of stadiums, the Commission has developed a coherent set of principles for infrastructure funding. The most complex cases are still pending. They concern land swaps/sale of State property (Spain, the Netherlands), tax advantages (Spain), and bank loans, guarantees or debt waivers (Spain, the Netherlands). The beneficiaries include top clubs like Real Madrid and Barcelona so the decisions are bound to attract huge media interest. 

Are there likely to be any developments in the future? 

Competition problems related to the sale of sports media rights will continue to arise at the national level. Public authorities will inevitably face stricter State aid control when supporting professional sports. State aid control could also be an effective instrument to put an end to the practice that selective tax exemptions for UEFA, FIFA, the IOC, etc. are a condition for applications to host international sporting events. 

The European Commission is currently examining a new complaint against FIFA’s ban on third-party ownership of players’ economic rights (TPO) in football and one concerning FIFA’s new regulations for player’s agents. These could result in high-profile cases. 

I do hope that the Commission will reclaim its responsibility for ensuring that rules and practices of international sports associations comply with EU competition law, particularly when athletes lodge complaints. National competition authorities lack the political power to confront international federations. And for most athletes, the possibility of private enforcement is not a real alternative given clauses barring access to national courts, the costs and the length of proceedings. For example, I am currently advising two Dutch Olympic speed skaters whose faith lies entirely in the hands of the Commission. They filed a complaint against the International Skating Union, who threatens them with a lifelong ban if they would participate in lucrative events outside the official calendar. The European Parliament has urged the Commission to open a formal investigation so we are optimistic that the Commission will take its responsibility and handle this case.  

What should lawyers in this field advise their clients? 

It is all about justifications. What you often see is that, in an attempt to shield certain practices from competition law scrutiny, much effort is put into arguments that, for example, sports associations or clubs are not “undertakings”. And only when these fail, recourse is made to underdeveloped arguments about the specificity of sport. Yet the true test lies here: are the restrictive effects reasonably necessary for the organization and proper conduct of sport? This obviously necessitates a good understanding of the sports sector and its internal dynamics. Even more so because competition authorities and courts typically give considerable deference to the legitimate role and expertise of sports associations in regulating their competitions.  

Given that most sports-related antitrust cases are now being addressed at the national level, there is a strong need to learn and draw from this decisional practice and case law. I am currently developing a database that reports and comments on all these cases, which should be a useful resource for those advising clients in the sports world.

Yesterday, the press revealed that the European Commission decided to reject the complaint filed by Jean-Louis Dupont, the former lawyer of Bosman, on behalf of a player agent Striani, against the UEFA Financial Fair Play (FFP) Regulations. The rejection as such is not a surprise. The Commission had repeatedly expressed support of the principles underlying the UEFA FFP. While these statements were drafted vaguely and with enough heavy caveats to protect the Commission from prejudicing a proper legal assessment, the withdrawal of its support would have been politically embarrassing.

Contrary to what is now widely assumed, this decision does not entail that UEFA FFP regulations are compatible with EU Competition Law. UEFA is clearly the big victor, but the legal reality is more complicated as it looks.

UEFA’s Austerlitz

UEFA, which most probably leaked the decision to the press, must have been enchanted by it. At a time when Europe is buzzing with rumours on the potential illegality of the UEFA FFP Regulations, it is fully vindicated by this decision. Indeed, at least in the short run, the UEFA FFP regulations will not be legally threatened anymore. Basically, for the time being, FFP is here to stay.

The European Commission’s Death Sentence to the Striani complaint

The Commission’s decision to reject the complaint is less far-reaching than one would think. The decision does not enter into the substance of the compatibility of the UEFA FFP regulations with EU Competition law. Rather, the EC has chosen the easy way out of what it must have perceived as a toxic case, with much political capital to lose for a single player agent. The elegant way out of a potential mess was to consider Striani not directly affected by the UEFA FFP Regulations. We can gather from the press reports that the Commission argued that Striani as a Player Agent was not an addressee of the FFP rules and was not substantially affected by them (as he was claiming only a symbolic euro of damages in front of the Belgian Courts), thus leaving him with no legitimate interest. Moreover, the fact that the UEFA FFP Regulations were welcomed by diverse groups of stakeholders (ECA, FIFPro) corroborates in the eyes of the Commission that there is no interest for it to act ex officio in light of such a consensus. This decision can now be contested in front of the EU General Court. However, the European Commission enjoys, in light of its very limited resources, a wide discretion in deciding which cases deserve to be investigated. Hence, it is very unlikely that the Court would annul this decision. But is it the end of the legal war?

Is a Waterloo still possible for UEFA?

After Austerlitz, came the Berezina and finally Waterloo: the war over the UEFA FFP regulations is far from done. The European Commission has not pronounced itself on the substantial merit of the claim and Dupont has still a case ongoing in front of the Belgium Courts. If it goes all the way up the legal ladder, it will most probably be referred, via the preliminary reference procedure, to the EU Court of Justice, giving it the opportunity to address the merits of the case. However, it is obvious that Player agents are perceived as the dark sheep of the football family. This is not a Bosman-like situation with a player barred from exercising his job because of a European-wide boycott and rules discriminating expressly on the ground of nationality. Therefore, we doubt that Striani will be more successful in front of the Courts. Nevertheless, if the players, for example via FIFPro, or the clubs decided to go after the UEFA FFP regulations (for now FIFPro and ECA are officially supporting FFP) it would be a completely different story. Such a complaint would be difficult to disregard by the Commission.

The Commission is certainly the guardian of Treaty, but not its interpreter. One would be ill-advised to throw caution to the wind and assume that the UEFA FFP regulations are definitely compatible with EU law. The European Commission conveniently avoided deciding on this matter. But, as Bosman reminded us, the Commission can also err in its evaluation of EU law’s bite and nothing precludes the Judges in Luxembourg from assessing the compatibility with EU law in a different way.

UEFA may have won a crucial battle, but there is still a legal war to fight.

Football-wise, 2014 will not only be remembered for the World Cup in Brazil. This year will also determine the credibility of UEFA’s highly controversial Financial Fair Play (FFP) Regulations. The FFP debate will soon be reaching a climax, since up to 76 European football clubs are facing sanctions by the UEFA Club Financial Control Body (CFCB). This large number of clubs includes two heavyweights: Manchester City and Paris Saint-Germain. On paper they face a potential disqualification from one or more editions of the UEFA Champions League. This would most certainly jeopardize the great ambition their billionaires-owners have for them and would vindicate FFP as a powerful mechanism capable of reigning in even the world’s richest football clubs. Whether this will indeed occur shall remain uncertain until the beginning of May, when UEFA is expected to announce the details of the (potential) disciplinary sanctions. However, in order to grasp the likely consequences of a sanction we offer you the definitive short introduction to FFP.

It is in the view of curtailing the, sometimes dramatic, losses made by an increasing number of football clubs, that UEFA’s Executive Committee decided to introduce the FFP Regulations in May 2010. The stated aims of FFP, stipulated in Article 2 of the Regulation include, inter alia, improving the economic and financial capability of the clubs; increasing their transparency and credibility; introducing more discipline and rationality in club football finances; encouraging clubs to operate on the basis of their own revenues; and protecting the long-term viability and sustainability of European club football. On UEFA’s own website a further aim was mentioned, namely to decrease pressure on salaries and transfer fees.

To achieve these aims, UEFA has introduced the break-even requirement[1]. By this requirement, clubs must demonstrate that their revenue exceeds or equals expenditure. The club’s spending on transfers and employee benefits (including wages) will be counted as expenditure, whereas income from gate receipts, TV revenue, advertising, merchandising, sales of players, and prize money is regarded as revenue. Any money spent on infrastructure, training facilities or youth development will not be included in the assessment.

In accordance with article 68 of FFP Regulations and article 3 of the Procedural rules governing the UEFA Club Financial Control Body, the CFCB is competent to inter alia determine whether clubs fulfil the break-even requirement and impose disciplinary measures in the event of non-fulfilment of the requirement. A first assessment is undertaken by the investigatory chamber, which leads the monitoring process, the investigation proceedings, and collects evidence. At the end of the investigation, the CFCB chief investigator, Jean-Luc Dehaene, after having consulted with the other members of the investigatory chamber, may decide to: (a) Dismiss the case; (b) Conclude, with the consent of the club in question, a settlement agreement; (c) Apply, with the consent of the club in question, a disciplinary measure limited to a warning, a reprimand or a fine up to a maximum amount of EUR 100,000; or (d) Refer the case to the adjudicatory chamber.[2] It should be noted that this is the phase the 76 clubs find themselves in right now.

Should the investigatory chamber decide to refer the case to the adjudicatory chamber, then the adjudicatory chamber can decide to: (a) Dismiss the case; (b) Accept or reject the club’s admission to the UEFA club competition in question; (c) Impose disciplinary measures; or (d) Uphold, reject, or modify a decision of the CFCB chief investigator[3]. A final decision by the adjudicatory chamber will be made before the end of the current season at the latest.

Concerning more specifically the disciplinary measures, Article 29 of the Procedural rules provides a long list of potential measures including fines, deduction of points, withdrawal of a title or award and disqualification from competitions in progress and/or exclusion from future competitions. Undoubtedly, for teams like Manchester City and Paris Saint-Germain whose greatest ambition is to be successful in Europe’s most prestigious tournaments, a disqualification from European competitions would be the most severe disciplinary sanction possible.

Furthermore, the Procedural rules governing the UEFA Club Financial Control Body give the sanctioned party the possibility to appeal against the decision. The appeal should be launched in accordance with article 34 of the Procedural rules, which states that final decisions of the CFCB may only be appealed before the Court of Arbitration for Sport (CAS) in accordance with the relevant provisions of the UEFA Statutes.

Whether the CAS will have to pronounce itself on a specific case regarding FFP in the upcoming months will largely depend on the scope of the decisions adopted by the investigatory chamber later this week and then by the adjudicatory chamber in the upcoming month. The effectiveness, credibility and, more broadly, the future of the FFP Regulations are at stake. This is either the beginning of the end for FFP or the end of the beginning. 

A story to be continued…

[1] UEFA Club Licensing and Financial Fair Play Regulations. Edition 2012, Articles 58-63

[2] UEFA Procedural rules governing the UEFA Club Financial Control Body. Edition 2014, Articles 12-14

[3] Ibid, Article 27

The first part of this series looked at the legal framework in which FFP sits, concluding that FFP occupied a ‘marginal’ legal position – perhaps legal, perhaps not. Given the significant financial interests in European football – UEFA’s figures suggest aggregate revenue of nearly €17 billion as at clubs’ 2015 accounts – and the close correlation between clubs’ spending on wages and their success on the field,^[1] a legal challenge to the legality of FFP’s ‘break even’ requirement (the Break Even Requirement), which restricts a particular means of spending, was perhaps inevitable.

And so it followed.

Challenges to the legality of the Break Even Requirement have been brought by football agent Daniel Striani, through various organs of justice of the European Union and through the Belgian courts; and by Galatasaray in the Court of Arbitration for Sport. As an interesting footnote, both Striani and Galatasaray were advised by “avocat superstar” Jean-Louis Dupont, the lawyer who acted in several of sports law’s most famous cases, including the seminal Bosman case. Dupont has been a vocal critic of FFP’s legality since its inception.

Mr Striani’s Complaints

Initially, Mr Striani made a complaint to the European Commission to the effect that the Break Even Requirement breached European competition law, and that it restricts several fundamental freedoms of the European Union guaranteed by the Treaty of the Functioning of the European Union (TFEU); namely, the right to free movement of people (Article 45 TFEU), the right to free movement of capital (Article 56 TFEU), and the right to free movement of services (Article 63 TFEU).

In his complaint to the Commission, Mr Striani identified five anti-competitive effects of the Break Even Requirement:

1. It restricts external investment into football;
2. It will have the effect of calcifying the hierarchy of the game, preventing ‘small’ clubs from competing at higher levels;
3.  It will depress the transfer market;
4.  It will depress players’ wages; and
5. It will therefore adversely affect players’ agents’ revenue.

Superficially at least, each point above has merit and internal logic. Equally, there are coherent rebuttals. For balance, some (of the various) potential counter arguments are listed below:

1. From the outset, FFP has not altogether restricted exogenous investment into football and loss making (regardless of quantum) has been permissible for certain expenditure. Rather than restricting investment, FFP funnels loss-making investment in certain directions such as stadium and infrastructure spending.
2. There is little movement in football’s sporting hierarchy under any model. The evidence suggests that those clubs who spend the most on wages tend to experience the most success on the pitch;^[2] however, it is questionable whether there is inherent merit in supplanting the clubs that are best able to maximise revenue generation with those that have the owners most willing to fund losses. Under either model, those with the most money to expend on players’ wages will usually win.^[3]
3. It is reductive to equate a healthy, functioning transfer market with clubs’ rights to make losses; nor is it of intrinsic value to the sport for transfers to be significant in magnitude, whether in cost or volume.
4. Owners’ equity inputs are far from the only source of salary growth. In any event, further consideration should be given as to whether, if a deflationary effect can be established, this is a function of the top end of the salary scale being depressed reducing mean salary, or whether the impact is felt by in modal or median salary. Ultimately, FFP could depress wages on an aggregate basis but still benefit most players should median or modal wages improve in a more financially stable environment.
5. Players’ intermediaries may not have a sufficiently proximate interest in the financial regulatory aspects of clubs’ spending. UEFA’s rule-making power is given effect and legitimacy by way of complex contractual relationship between players, clubs and the sport’s governing bodies and intermediaries do not have privity of contract with UEFA insofar as FFP is concerned.

Mr Striani also brought a claim, on similar legal basis, in the Belgian national courts (Mr Striani being based in Belgium). In part because of these collateral proceedings, the Commission rejected Mr Striani’s complaint. In a press release, Mr Dupont confirmed that the Commission had given its view to the effect that Mr Striani, being an agent and therefore not directly subject to FFP, lacked a legitimate interest in the rules, and that the Belgian national courts, already having been seized of the case, were a suitable forum for a hearing of the merits.

Mr Striani was joined by various other parties in his claim in the Belgian courts. However, Mr Striani (along with his co-complainants) was again frustrated on technical grounds outwith the substantive issues of his dispute.  The Belgian court found that it did not have jurisdiction to hear the dispute, because, to put it simply, under the relevant jurisdictional rules (the Lugano Convention), UEFA was entitled to be sued in the courts of its place of domicile, i.e Switzerland. Ben van Rompuy goes into more detail on the jurisdictional nuances here.

Somewhat oddly, given its self-proclaimed jurisdictional incompetence, the Belgian Courts did make an order referring the case to the Court of Justice of the European Union (CJEU).

Perhaps unsurprisingly, the CJEU rejected the referral on the basis that it was “manifestly inadmissible,” and also “observing that the national court had failed to provide any of the necessary information to enable the European Court to address European competition law issues.”^[4]

This puts Mr Striani’s complaint into no man’s land. Rejected by the Commission; rejected by the Belgian national courts; and rejected by the CJEU; all without any substantive adjudicative decision as to the legality of the Break Even Requirement. Irrespective of one’s views on FFP, it is a source of frustration that five years on from FFP’s introduction, its legality remains an unresolved question despite vigorous and not frivolous challenge. Mr Striani’s challenges have, to date, proven impotent in settling the (increasingly academic) debate.

Evidently frustrated at the Commission’s refusal to formally review the legality of FFP, Mr Striani went on to make a complaint to the EU Ombudsman alleging maladministration by Vice President of the Commission at the material time, Joaquín Almunia. The complaint centred on Mr Almunia’s association with Athletic Bilbao and his prior statements perceived as endorsing FFP. However, the Ombudsman found no maladministration to have occurred. 

Galatasaray’s CAS Appeal

There is, however, a forum in which a decision has been made as to the legality of the Break Even Requirement; namely the Court of Arbitration for Sport (CAS) in Galatasary v UEFA (CAS 2016/A/4492). Galatasaray, like Mr Striani, were represented by Mr Dupont; and, like Mr Striani, the basis of Galatasaray’s case was that the Break Even Requirement breached EU competition law and illegally trammelled EU fundamental freedoms as to workers, services and capital.

The context of the dispute was as follows: Galatasaray was investigated by the UEFA Club Financial Control Body (CFCB), which, as mentioned in Part One, oversees and enforces adherence to FFP, in respect of a potential breach of FFP, and in particular the Break Even Requirement. The procedural rules governing the CFCB allow clubs to enter into a ‘settlement agreement’ at the discretion and direction of the CFCB Chief Investigator.

The CFCB Chief Investigator determined that Galatasaray had breached the Break Even Requirement and a settlement agreement was reached that provided, inter alia, that the Turkish club must “be break even compliant…at the latest in the monitoring period 2015/16,” and that the club must not increase its aggregate wage bill, which stood at €90m.

Galatasaray hopelessly failed to meet either stipulation, increasing their wage bill by €5.5m and exceeding the acceptable deviation figure in Break Even Requirement by €134.2m. These figures were audited and verified by independent consultants.

In view of this egregious breach of the settlement agreement, the Investigatory Chamber referred Galatasaray to the Adjudicatory Chamber, who, on 2 March 2016, issued a decision ordering, inter alia, that Galatasaray reduce their wage bill to a maximum of €65m over the next two FFP reporting periods, and banning the club from any European competitions for which they otherwise qualified on sporting merit for the next two seasons.

Galatasaray appealed this decision to the CAS, arguing that the sanctions levied by UEFA were illegal because the rules on which they were based, i.e. the FFP rules, were illegal.

If the basis of Galatasaray’s appeal (breach of competition law, breach of fundamental freedoms) is familiar to those with a knowledge of the legal issues FFP presents, so too will be UEFA’s defence of the Break Even Requirement. UEFA argued that the Break Even Requirement constitutes rules that “are prudential rules necessary for the proper functioning of football clubs,” and “Any restriction they may cause pursues legitimate governance objectives and is proportionate to their achievement.”^[5] (Emphasis added.) 

UEFA’s view is clearly intended to align FFP with the legal tests identified in Part One of this series; namely that FFP must be:

1. Necessary (for the proper conduct of the sport);
2.  Suitable (as a means to pursue that necessary objective); and
3. Proportionate (to the aims pursued).

Applicability of EU Law

The non-application of EU law by the CAS has previously been called ‘an absurdity’ by this blog “in light of the Bosman (and prior Walrave) case law of the CJEU, which made clear that EU law is applicable to the regulations of Sports Governing Bodies”.

In this case, UEFA postulated that EU law was “irrelevant” to the dispute – the parties both being from Turkey and Switzerland respectively, i.e. nations outside of the EU – but “did not argue” that FFP is “not subject to the invoked provisions of EU law or can be applicable even if contrary to these provisions.”^[6] Galatasaray argued that EU law applied as FFP constitutes mandatory rules in EU territory. The parties agreed that Swiss law applied.

The CAS panel of arbitrators (the Panel) found that EU law, being a foreign mandatory rule, applied pursuant to Article 19 of the Swiss Federal Act on Private International Law, under which arbitral tribunals must consider foreign mandatory rules where:

i.       such rules belong to a special category of norms which need to be applied irrespective of the law applicable to the merits of the case;

ii.      there is a close connection between the subject matter of the dispute and the territory where the mandatory rules are in force; and

iii.    in view of Swiss legal theory and practice, the mandatory rules must aim to protect legitimate interest and crucial values and their application must lead to a decision which is appropriate.

The Panel found that this test had been met on the facts in this instance. As an interesting side note, the CAS also followed this line of reasoning in the subsequent Third Party Ownership case discussed by Antoine Duval here.

Article 101 TFEU

The first hurdle for Galatasaray in establishing the illegality of the Break Even Requirement is to show that it fits within the boundaries of the prohibition laid down in Article 101 TFEU, i.e. that it has as its object or effect the prevention, restriction or distortion of competition within the European internal market.

The Panel found that FFP did not have anti-competitive intent as its object. On its face, this seems a reasonable conclusion; after all, FFP is not intended to stymie inter-club competition. However, it should not be treated as axiomatic. As Weatherill has highlighted, “UEFA’s own website (though not the FFP Regulations themselves) identify as one of the principal objectives to decrease pressure on salaries and transfer fees and limit inflationary effect”. Whether such effect was an independent goal of UEFA in instituting FFP rather than mere political bluster is open to question, but the objectives of UEFA should be subject to further interrogation.

In this instance, the Panel found that Galatasaray “failed to demonstrate that the object of [FFP] would not be stated in its Article 2 [dealing with FFP objects]”. Having considered the question, the Panel “did not find convincing evidence that the object of [FFP] would be to distort competition, i.e. to favour of disfavour certain clubs rather than to prevent clubs from trading at levels above their resources”.

Thus in order to be caught within the prohibition under Article 101 TFEU, Galatasaray would need to show that FFP had an anti-competitive effect. As FFP did not fall within the examples given in the Commission’s guidance on anti-competitive agreements (horizontal/vertical), the burden of proof fell on Galatasaray to demonstrate FFP’s anti-competitive effects.

They did not do so. However – and frustratingly for those with an interest in the topic – Galatasaray did not actually adduce any detailed empirical analysis as to the effects of FFP on competition (para. 74).

Irrespective of the lack of empirical evidence put forward, the Panel expressed a view that “competition is not distorted by ‘overspending’” (para. 76); nor does FFP ossify the structure of the market as “dominant clubs have always existed and will continue to exist”. The latter point is superficially correct; however, it fails to address the fact that the Break Even Requirement may have prevented clubs from entry to the ‘dominant club’ position of superiority. 

The Panel went on to cite with approval the applicability of the carve-out for regulatory rules developed in Wouters, as discussed in more detail in Part One of this series.

Article 102 TFEU

Galatasaray produced evidence that UEFA was a dominant undertaking (which, given UEFA is a governing body with total authority over the rules of elite European football, is a case easily made), but it did not show how it was abusing its position in the case of FFP. Thus the Panel found that Galatasaray did not demonstrate an abuse of dominance by UEFA.

Fundamental Freedoms

Galatasaray argued that the Break Even Requirement violated fundamental freedoms of the EU as to the free movement of workers, the free movement of capital, and the free movement of services. However, it submitted “very little argumentation” in support of these claims (para. 85).

The Panel highlighted the fact that FFP does not discriminate based on nationality, as the rules apply equally to all clubs participating in UEFA competitions; that the rules apply equally to “domestic operations” (para. 86); and “do not restrict fundamental freedoms: players can be transferred (or offer services cross-border without limitations; capitals can move from a EU country to another without any limit.”

Ergo, the Panel found Galatasaray had not shown any breach of a fundamental freedom of the EU.

Swiss Law

Galatasaray did not invoke the relevant provisions of Swiss competition law in detail; however, the Panel noted that the substantive nature of Swiss competition law was analogous to EU competition law, diverging only in respect of reference to the domestic market. Accordingly, the Panel’s reasoning “would be the same” (para. 89). 

The CAS’s Finding

Galatasaray did not establish its case and as such its appeal was not upheld by the CAS and the CFCB’s decision was confirmed. UEFA successfully defended the first hearing on the substantive legal issues of the Break Even Requirement. 

An Illusory Victory for UEFA?

UEFA may have successfully fended off a binding determination of the legal issues at play in challenges brought in domestic and European courts, albeit on procedural grounds; and it may have won the first serious challenge to the substantive legal issues at play in the CAS, albeit aided by a lack of proper particularisation of some of the issues by Galatasaray; but it is debatable whether it was able to altogether insulate FFP from the effect of these challenges. In the years since its inception, the nature and content of the rules has gradually shifted towards a more liberal approach to external investment, and in all probability this was influenced by the vehemence of the legal challenges to the rules.

At the outset of Mr Striani’s challenge to FFP, his lawyer, Mr Dupont, said "What my client hopes is that Uefa will be forced to review this rule and go for more proportionate alternatives”.  He may not have achieved this through a favourable determination of the courts; however, as will be examined in greater detail in Part Three of this series, he may have ultimately been successful in his objectives to some extent.

^[1] See, for example, Kuper, S and Szymanski, S 2012 Soccernomics 2nd ed. London: HarperSport at p14

^[2] See Kuper, S and Szymanski, S 2012 Soccernomics 2nd ed. London: HarperSport

^[3] It should be noted, however, that Mr Dupont has argued that a flat salary cap – in many ways more restrictive than the Break Even Requirement – would be preferable, see Stefano Bastianon, 'The Striani Challenge to UEFA Financial Fair-Play A New Era after Bosman or Just a Washout?' [2015] 11(1) The Competition Law Review 7-39 at p18

^[4] Daniel Geey, LawInSport and BASL Sport Law Year Book 2015 - 2016 (Sean Cottrell ed, LawInSport 2016) at p108

^[5] Para 50

^[6] Para 39