Editor's Note: Dr. Despina Mavromati, LL.M., M.B.A., FCIArb is an Attorney-at-law specialized in international sports law and arbitration (SportLegis) and a Member of the UEFA Appeals Body. She teaches sports arbitration and sports contracts at the University of Lausanne (Switzerland) and is a former Managing Counsel at the Court of Arbitration for Sport.

This comprehensive book of more than 500 pages with contributions by 53 authors and edited by Nick De Marco QC “aims to embody the main legal principles and procedures that arise in football law”. It is comprised of 29 chapters and includes an index, a table of football regulations and a helpful table of cases including CAS awards, UEFA & FIFA Disciplinary Committee decisions and Football Association, Premier League and Football League decisions. 

The 29 chapters cover a wide range of regulatory and legal issues in football, predominantly from the angle of English law. This is logical since both the editor and the vast majority of contributing authors are practitioners from England.

Apart from being of evident use to anyone involved in English football, the book offers additional basic principles that are likely to be of use also to those involved in football worldwide, including several chapters entirely dedicated to the European and International regulatory framework on football: chapter 3 (on International Federations) gives an overview of the pyramidal structure of football internationally and delineates the scope of jurisdiction among FIFA and the confederations; chapter 4 explains European law and its application on football deals mostly with competition issues and the free movement of workers; and chapter 29 deals with international football-related disputes and the Court of Arbitration for Sport (CAS).

In addition to the chapters exclusively dealing with international football matters, international perspectives and the international regulatory landscape is systematically discussed – in more or less depth, as the need might be – in several other chapters of the book, including: chapter 2 on the “Institutions” (from governing bodies to stakeholders groups in football); chapter 6 on the FIFA Regulations on the Status and Transfer of Players (RSTP); chapter 8 dealing with (national and international) player transfers; chapter 11 (on Third Party Investment) and chapter 16 on Financial Fair Play (mostly discussing the UEFA FFP Regulations); chapter 23  on disciplinary matters (very briefly discussing the disciplinary procedures under FIFA and UEFA Disciplinary rules); chapter 24 on domestic and international doping-related cases in football, with an overview of the CAS jurisprudence in this respect; and finally chapter 23 on corruption and match-fixing (with a very short description of the FIFA and UEFA regulations).

Furthermore, the book offers extensive chapters in less discussed – yet of high importance – football topics, including: chapter 13 on image rights and key clauses in image rights agreements; chapter 14 on taxation (referring also to taxation issues in image rights and intermediary fees); chapter 15 on sponsoring and commercial rights, with a guide on the principal provisions in a football sponsoring contract and various types of disputes arising out of sponsorship rights; chapter 17 on personal injury, discussing the duty of care in football cases (from the U.K.); and chapter 18 on copyright law and broadcasting (with short references to the European law and the freedom to supply football broadcasting services).

Some chapters seem to have a more general approach to the subject matter at issue without necessarily focusing on football. These include chapters 27 (on mediation) and 22 (on privacy and defamation), and even though they were drafted by reputable experts in their fields, I would still like to see chapter 27 discuss in more detail the specific aspects, constraints and potential of mediation in football-related disputes as opposed to a general overview of mediation as a dispute-resolution mechanism. The same goes for chapter 22, but this could be explained by the fact that there are not necessarily numerous football-specific cases that are publicly available. 

As is internationally known, “football law” is male-dominated. This is also demonstrated in the fact that of the 53 contributing authors, all of them good colleagues and most of them renowned in their field, only eight are female (15%). Their opinions, however, are of great importance to the book due to the subject matter on which these women have contributed, such as player contracts (Jane Mulcahy QC), player transfers (Liz Coley), immigration issues in football (Emma Mason), broadcasting (Anita Davies) or disciplinary issues (Alice Bricogne).

The book is a success not only due to the great good work done by its editor, Nick De Marco QC but first and foremost due to its content, masterfully prepared by all 53 authors. On the one hand, the editor carefully delimited and structured the scope of each topic in a logical order and in order to avoid overlaps (a daunting task in case of edited volumes with numerous contributors like this one!), while on the other hand, all 53 authors followed a logical and consistent structure in their chapters and ensured an expert analysis that would have not been possible had this book been authored by one single person.  

Overall, I found this book to be a great initiative and a very useful and comprehensive guide written by some of the most reputable experts. The chapters are drafted in a clear and understandable way and the editor did a great job putting together some of the most relevant and topical legal and regulatory issues from the football field, thus filling a much-needed gap in the “football law” literature.

FIFA’s Third-Party Ownership (TPO) ban entered into force on the 1 May 2015[1]. Since then, an academic and practitioner’s debate is raging over its compatibility with EU law, and in particular the EU Free Movement rights and competition rules. 

The European Commission, national courts (and probably in the end the Court of Justice of the EU) and the Court of Arbitration for Sport (CAS) will soon have to propose their interpretations of the impact of EU law on FIFA’s TPO ban. Advised by the world-famous Bosman lawyer, Jean-Louis Dupont, Doyen has decided to wage through a proxy (the Belgian club FC Seraing) a legal war against the ban. The first skirmishes have already taken place in front of the Brussels Court of first instance, which denied in July Seraing’s request for provisional measures. For its part, FIFA has already sanctioned the club for closing a TPO deal with Doyen, thus opening the way to an ultimate appeal to the CAS. In parallel, the Spanish and Portuguese leagues have lodged a complaint with the European Commission arguing that the FIFA ban is contrary to EU competition law. One academic has already published an assessment of the compatibility of the ban with EU law, and many practitioners have offered their take (see here and here for example). It is undeniable that the FIFA ban is per se restrictive of the economic freedoms of investors and can easily be constructed as a restriction on free competition. Yet, the key and core question under an EU law analysis, is not whether the ban is restrictive (any regulation inherently is), but whether it is proportionate, in other words justified.

I will first present the key arguments of the opponents of the ban, before offering my own assessment. As the reader might know, I am no friends of FIFA and a staunch critic of its bad governance syndrome. Although I am convinced that FIFA’s governance deserves a ground-up rebuilt, I also believe that FIFA’s TPO ban is justified.

I.               Antithesis: FIFA’s TPO ban is contrary to EU law 

The legal waters are very much chartered insofar as the question of the application of EU law to FIFA’s TPO ban is concerned.[2] The key legacy of the CJEU’s jurisprudence on sport, starting with the Bosman ruling, is that FIFA’s regulations do not escape the reach of EU law and that they must be subjected to a proportionality control of the restrictions they impose on economic freedoms. The fundamental question with respect to the TPO ban is then whether it will be deemed justified and proportionate by the national courts, the CAS, the European Commission and ultimately the CJEU.

The opponents of the FIFA ban consider first and foremost that the practice of TPO (they usually prefer to refer to as Third-Party Investments or Third-Party Entitlements) is a legitimate financial investment practice, which is needed to sustain and raise the competitiveness of certain clubs. Basically if banks are reluctant to finance those clubs, then less risk-averse investors have to step in. Thus, they support investment in the training capacity of the clubs (especially in South America) and their capacity to take their chances in the most prestigious competitions (for example FC Porto or Atlético Madrid). Hence, TPO can be seen as a legitimate investment practice and its regulation left to the contractual freedom of the parties. Such a radical libertarian view is not often supported nowadays,[3] as the potential integrity risks of TPO are widely acknowledged.[4]

Instead, if the risks connected to TPO are to be tackled, it is argued that TPO should be properly regulated. In EU law jargon, this is labelled a less restrictive alternative.[5] The existence of a less restrictive alternative would point at the disproportionate nature of the FIFA ban. For example, a bundle of regulatory measures are suggested by the Spanish league (La Liga):

·      Prohibition of certain transactions based on the player's age;

·      Maximum percentage of participation in the "economic rights";

·      Quantitative limitations on the maximum number of players per club;

·      Maximum remuneration for the investor;

·      Prohibition of certain clauses that may limit the independence and autonomy of the clubs; and

·      Prohibition of transactions depending on the investor's particular status or business (or participation in the same) such as shareholders, directors and managers of the clubs.

The proposed regulatory changes would undeniably be an improvement with regard to the current situation. However, I do not believe they are sufficiently credible to undermine the legality of FIFA’s TPO ban.

II.             Thesis: FIFA’s TPO ban is compatible with EU law

A.    The necessity to tackle the integrity risks generated by TPO

First, we need to come back to the function and functioning of TPO deals. There is a reason why banks refuse to offer loans to certain clubs. They are often in difficult financial situations, their revenues do not add up with their expenses. Investment funds fill this gap, they replace banks in financially supporting these clubs. In return, they expect a modern version of the “pound of flesh”, a share of the transfer fee attached to a specific player. For a club, the TPO investments will only be fruitful while it is successful on the pitch and lucky in picking the players it recruits. It is a very risky bet on the future. In good times everybody wins, but in bad times the club is in deep trouble (see FC Twente’s fate). The TPO system works as a devil’s circle, the club is drawn into more and more TPO deals to stay financially viable.

Furthermore, TPO deals are not unlike the complex financial instruments that led to the terrible financial crisis of 2008. They give way to similar conflicts of interest. Where banks were selling derivatives based on subprime mortgages to their clients while betting against them at the same time, TPO funds might push their clients to recruit (thanks to loans they have generously provided for high interests) a mediocre player in which they already have a stake. Another option would be for a TPO fund, which is often (if not always) also acting as an agent, to force the departure of a player by triggering an offer which the club cannot refuse (or it would have to buy back the rights which is impossible due to its financial situation). The many hat(s) of TPO investment funds are extremely worrying in terms of conflicts of interest.[6] The most dangerous, though in my view less likely (but see the Tampere case), risk being that TPO investors would use their broad networks of influence to fix games. FIFA’s objective of curbing those risks is clearly a legitimate one.

The heart of the trade of TPO funds is to leverage the hubris of football clubs, to corner them into making a bad financial deal in return for a credible shot at winning a title. But once the high is over, the low starts and the awakening is rather uncomfortable. The high financial risks saddled to the club are sustainable only so long as it is a winner. As soon as its fate on the pitch turns, the bad news accumulates and not unlike a bank run the club crashes, while the investors have more often than not managed to escape before the fall. In short, unless you truly believe in the superpowers of the invisible hand of the market, this practice, as well as the financial practices that led to the financial crisis, deserves either a thorough regulation or an outright ban.

B.    Is there a realistic regulatory alternative to the ban?

The key question for the assessment of the TPO ban under EU law is whether the many negative externalities triggered by the use of TPO could be tackled by the way of a less restrictive encroachment on the economic freedoms of the investors/clubs than the FIFA ban. Critics of the ban have very much insisted on the existence of less restrictive regulatory alternatives and put forward some proposals. Yet, I am of the opinion that these alternatives are generally unworkable in the present context. The main reason being that FIFA is incapable to properly regulate and control the TPO investment market. This is due to the fact that FIFA does not dispose of the legal competence needed to force investment funds to disclose information. To do so, it must be empowered by governments to be able to cease the information wanted, which is unlikely. Some would object, that this could be done via the FIFA TMS system put in place to supervise international transfers. But it would be extremely difficult for FIFA to verify any complex set of contractual information entered into the TMS. The destiny of former article 18 bis of the FIFA Regulations on the Status and Transfers of Players (see the 2014 version here) is there to prove this point. Under article 4.2 of Annexe 3 of the FIFA RSTP 2014, Clubs were already supposed to provide a “Declaration on third-party payments and influence”. Nonetheless, in previous years, FIFA was unable to charge any club (except for Tampere in a match-fixing context and due to a local police investigation) on the ground that an investor was exercising undue influence, mainly because it lacked the knowledge needed to do so. This is exemplified in the case of the ERPA signed by Doyen and FC Twente, which was only partially disclosed to the Dutch Football Association.

If FIFA is powerless, how is it supposed to enforce the ban? Well here lies the crucial difference between a ban and complex regulation. A ban is simpler to enforce, as it is merely a black-or-white matter. FIFA will be able to rely on investigative journalists unearthing investment contracts linked to transfers. The mere existence of a TPO contract will lead to a dissuasive sanction, without the need to get into the nitty-gritty details of each case. It thus makes it easier for FIFA to control the use of TPO and to force investment funds to come out in the open and take charge of the management of a club if they wish to stay active on the transfer market. The higher probability of being caught linked to the use of TPO will most likely work as a strong deterrent for clubs to engage in such a financing practice. This is undeniably a blunt instrument, and in an ideal world a true regulation of the TPO market would be put in place and enforced, but this ideal world is not compatible with the pluralist and complex transnational legal setting in which the transfer system operates. The complex regulatory schemes proposed as substitute to the ban are very well intended, but they do not take into account the extreme difficulty (and costs) linked to their implementation. The fiasco of the old FIFA Players’ Agents Regulations illustrates the practical constraints that burden any regulation of the football transfer market.

C.    TPO is not compatible with the 2001 agreement between the European Commission and FIFA

There is a final argument in favour of the compatibility of the TPO ban with EU law, which is grounded in the 2001 agreement between FIFA, UEFA and the European Commission. As should be obvious by now, the existence of TPO is dependent on the existence of the FIFA transfer system. Such a transfer system is unknown in other industries (though one could very well imagine a transfer system for academics for example). In turn, the FIFA transfer system restricts the economic freedom of both clubs and players. The European Commission highlighted these restrictions during its investigation of the FIFA transfer system in the early 2000s. However, the Commission signed an agreement with FIFA and UEFA signalizing its support for a new (the current) FIFA transfer system in 2001 and put an end to its investigation. This support was conditioned on the idea that a form of transfer system was needed to maintain the contractual stability necessary to the existence of stable and successful teams.[7] This is the fundamental assumption that underlies the compatibility with EU law of the FIFA transfer system, and therefore the sheer existence of TPO. Yet, TPO as a practice is per se promoting contractual instability. Players have to change clubs for TPO investors to cash in on their investments. It is perfectly logical for TPO contracts to include various clauses strongly incentivizing clubs to sell their players. If not, they will have to bear the costs, for example, of paying a fee (usually the invested amount plus a healthy interest) in case the player leaves the club on a free transfer, or forcing the club to buy back at market rate the investors’ shares in the economic right of a player in case of an offer above a minimum price. For a cash-strapped club, e.g. a club that lost access to the banking system and has to turn to TPO investors, this is usually impossible and means that it will be forced to sell-on the player. In a way, TPO is a radical perversion of the deal stroke by FIFA/UEFA and the Commission. The transfer system was meant to ensure that contractual stability is secured in football, not to enhance contractual instability. This contradiction between TPO and the rationale conditioning the legality under EU law of the FIFA transfer system will necessarily bear on the EU Commission’s analysis of FIFA’s TPO ban.

Conclusion: TPO is a symptom, the transfer system is the problem

20 years of the Bosman case oblige, the case has been back in the news cycle this week (see here, here, and here). It is widely credited, or rather blamed, for having changed football for bad, turning it into some kind of commercial monster. I very much doubt this storytelling is right. It is based on a collective misreading of the case. Bosman took stock of a contemporary development in football at that time: the eagerness of the ���football family” to commercialize its activities by primarily selling TV rights in a monopoly position. What Bosman is about, then, it is the regulation of this economic activity. Central questions are: How should the proceeds be distributed and especially who should bear the costs of ensuring competitive balance amongst the teams? Until Bosman the players were the main losers, they could not move freely across Europe and in some countries they could not transfer for free even after the end of their contracts. This situation was deemed an unjustified restriction on the player’s freedom by the Court. Nevertheless, and this is widely forgotten, Bosman is not about dogmatically ensuring that economic freedoms and a deregulated market always prevail. In fact, Advocate General Lenz was advocating as an alternative to the transfer system that the economic revenues derived from TV rights be shared more equally to ensure competitive balance.[8] This is obviously an important restriction on the economic freedom of clubs and leagues, yet the Court endorsed it as viable alternative.[9] Since then, the Court has repeatedly approved various type of sporting regulations restricting the economic freedoms of athletes or clubs.[10] After Bosman, FIFA and UEFA (supported by many clubs) insisted on maintaining a transfer system instead of the alternative suggested by Lenz and the Court. Despite the Commission’s aforementioned challenge of the legality of the FIFA transfer system, FIFA and UEFA were able to marshal the political support of the most influential Member States (France, Germany and the UK) in their bid to save the transfer system.[11] This led to the 2001 agreement and to the survival of the transfer system in its current form.

It is certainly ironical that the transfer system is based on the same legal principles denounced by UEFA and FIFA officials when they talk of slavery regarding TPO. This hypocrisy, rightly pointed out by the critics of the ban,[12] does not entail that the TPO ban is contrary to EU law, as they in turn seem to assume. However, it does imply that TPO as a practice is just the tip of the iceberg. In fact, it is a symptom, as well as the murky world of agents, of a global transfer market gone rogue. This is due mainly to the insistence of FIFA in transforming players into moveable assets included on the balance sheets of clubs. The transfer system is certainly not about contractual stability or the financing of training facilities. Indeed, FIFA is trumpeting the growing number of transfers each year (see this year’s celebratory press release here) and is very much dragging its feet as far as enforcing training compensations and solidarity payments is concerned.[13] Undoubtedly, there is some doublespeak going on. If clubs are forced to turn to TPO investors it is mainly because FIFA and UEFA (and the big clubs) have refused to put in place the necessary redistributive mechanisms to ensure a minimum of competitive balance as was advocated by the CJEU in the Bosman ruling 20 years ago (and by the EU Commission recently). Instead, they have put their faith into a transfer system that is neither correcting competitive imbalances nor guaranteeing contractual stability (a view supported by Stefan Szymanski on behalf of FIFPro). FIFA has lost control over its Frankenstein-like transfer system and it is desperately trying to rein its negative externalities with regulatory patches (e.g. UEFA’s Financial Fair-play Rules or FIFA’s TPO ban). In this regard, the TPO ban is unlikely to contravene EU law, but it is also unlikely to be a solution to the many problems caused by FIFA and UEFA’s handling of the post-Bosman football era.

[1] See FIFA Circular no. 1464 announcing the ban.

[2] This is well done by Johan Lindholm in his article: Can I please have a slice of Ronaldo? The legality of FIFA’s ban on third-party ownership under European union law.

[3] The Spanish Competition Authority comes close to such a view in its advisory opinion criticizing FIFA’s TPO ban. It states at page 6 (in Spanish): “Se ha de partir del hecho de que si el mercado ha facilitado la aparición de estas operaciones es porque una multitud de agentes (tanto clubs como jugadores), actuando de manera descentralizada, han considerado que es lo mejor para sus intereses. Por tanto, la prohibición del TPO resulta en una limitación de la capacidad de obrar y de la libertad de empresa, restringiendo el uso de una conducta que en principio es maximizadora de beneficios (o minimizadora de pérdidas).”

[4] Even though very reluctantly by the Spanish Competition Authority, see p.9-10.

[5] This is also the view of Johan Lindholm, he considers that “regulation is likely a legally more successful response to the perceived ills of TPO”.

[6] This is also true for other types of third party funding, for example in arbitration.

[7] This is in essence the meaning of paragraph 57 of the EU Commission’s rejection decision in the Affaire IV/36 583-SETCA-FGTB/FIFA. The paragraph states : « La protection des contrats pendant une période de durée limitée qui se traduit par des sanctions correspondant notamment à la suspension du joueur pendant une période de 4 mois à 6 mois (dans des cas de récidives) semble indispensable pour garantir la construction d’une équipe. Un club a besoin d’un temps minimum pour construire son équipe. Si un joueur pouvait rompre unilatéralement son contrat dès la première année et être transféré à la fin de la saison vers un autre club, sans aucune sanction autre que la compensation financière, son club d’origine n’aurait pas de possibilité de construire convenablement son équipe. Les sanctions visent donc à démotiver les joueurs de rompre unilatéralement leurs contrats pendant les deux premières années pour permettre l’existence d’équipes stables. En raison des spécificités du secteur en cause la durée de la période protégée et des sanctions semble être proportionnée aux objectifs légitimes quelles visent à atteindre. »

[8] See in particular paragraphs 218-234 of his Opinion.

[9] See para. 110 of the Bosman ruling.

[10] For example: Selection rules in Deliège; Transfer windows in Lehtonen; FIFA’s agent regulation in Piau; Doping sanctions in Meca-Medina; Training compensations in Bernard. The European Commission also recognised the legality of UEFA’s rule limiting the multiple ownership of clubs in ENIC.

[11] On this episode see Borja Garcia’s article, ‘The 2001 informal agreement on the international transfer system’.

[12] In his article Johan Lindholm criticizes this moral posture taken by FIFA and UEFA. He rightly points at its hypocrisy: “[…] a third party owning fifty percent of the economic rights to a player is the very height of moral corruption, but a club owning one hundred percent of the same right is not only perfectly acceptable but also applauded”.

[13] A recent study commissioned by the European Clubs Association (ECA) on the transfer market, shows (at page 88) that the solidarity payments are way below the 5% threshold imposed by the FIFA RSTP (reaching instead only 1,15% of the transfer fees).

The CAS denial of the urgent request for provisional measures filed by the Legia Warszawa SA in the course of its appeal against the UEFA Appeals Body Decision of 13 August 2014 put a premature end to Legia’s participation in the play-offs of the UEFA Champion’s League (CL) 2014/2015. Legia’s fans- and fans of Polish football - will now have to wait at least one more year to watch a Polish team playing in the CL group stage for the first time since 1996.

While the CAS proceedings for the appeal filed by Legia against UEFA and Celtic FC are pending and the grounds of dismissal by the CAS of the application for provisional measures have not been publicly known, the CAS is called to rule on the interpretation of the proportionality principle with regard to the application of the 3-0 defeat sanction against a club that fielded an ineligible player. The cornerstone question is whether the final award on the merits will be in line with UEFA and CAS jurisprudence suggesting a literal interpretation of Article 21.2 of the UEFA Disciplinary Regulations (UEFA DR) or whether the CAS will allow for a broader interpretation of the proportionality principle in case of mere technical administrative errors. 

Background and facts of the case

Legia’s adventures began when Legia’s player, Bartosz Bereszynski, was sent off in their final Europa League tie of last season against Apollon Limassol FC and was sanctioned by the UEFA Control and Disciplinary Body decision of 13 February 2014 with three-match suspension.  UEFA regulations are clear in that a ban applies to a player if he is listed in a club’s squad for matches. Bereszynski did not play in Legia’s games with St Patrick’s Athletics and in the first leg against Celtics FC. However, due to a technical error of Legia’s administrator, which was to prove fatal, the player was not registered in the squad list for the St Patrick’s tie and the first two games of his suspension were never properly recognized. As a result of the player’s failure to serve the suspension, Bereszynski’s participation in the second leg against Celtics FC as a 86^th minute substitute triggered the application of Article 18 of the Regulations of the UEFA Champions League 2012-2015 and Article 21.2 of the UEFA DR and Legia was to be sanctioned for fielding a suspended player. Therefore, the match was declared forfeited; for UEFA’s purposes, Legia lost the game 3-0 and the initial 6-1 aggregate defeat for Celtic was reversed to a 4-4 aggregate score, opening the door for Celtic to progress in UEFA CL play-offs on away goals.  

The Legia case in the light of UEFA jurisprudence

At a first glance, the case at issue seems to present several factual similarities with the Bowyer and Matoukou cases brought before UEFA’s Control and Disciplinary Body, which, however, have never been appealed before the CAS.

In the first case, similarly to the Legia case, due to an administrative error of Newcastle United FC, Bowyer had not been registered as ‘eligible to play’ in the six UEFA matches in 2004. As a result, UEFA’s Control and Disciplinary body, applying UEFA Regulations, decided that Bowyer had not served the suspension carried over from his days as a Leeds United player and was banned for the next six European matches. This decision was challenged by Newcastle and the English Football Association (FA) before the UEFA’s Appeal Body, which upheld the initial decision. It is remarkable that the FA supported Newcastle’s appeal, expressing its concerns with regard to the ambiguous language of the rules on players’ eligibility.

In the second case, Matoukou while playing for KRC Genk against FC Porto on 19 August 2010 in a UEFA Europa League qualifier, received a red card and as a consequence was sanctioned with a two-match suspension. Matoukou sat out the second leg of that tie and, after Genk’s elimination, played no further European games for Genk. On 2 August 2012, Matoukou, as a player of Arsenal Kiev FC, scored against ND Mura 05. However, Matoukou had not served the second part of his suspension before taking part to this game. As a result of his ineligibility, UEFA’s Control and Disciplinary Body declared the match forfeited. Although there is no doubt that the player did not serve the two-match suspension, this case illustrates the most recent example of the clear-cut application of Disciplinary Regulations by UEFA.

A similar example is the harsh sanction of 3-0 defeat applied against PAOK Saloniki in 2004 for fielding the suspended player, Laisis Louca, in the first leg of the CL third qualifying round against Maccabi Tel Aviv. NK Zepce was also punished with the same severity in 2005 for fielding a suspended player in the first half of their match against FK Baskimi. The inevitable conclusion of this brief overview of UEFA jurisprudence is that UEFA’s practice has been consistent; UEFA Regulations on players’ eligibility are sufficiently clear and they give no room for a different interpretation. However, it should be noted that the UEFA decisions can be appealed before the CAS. Therefore, the CAS jurisprudence needs to be examined in order to assess whether the CAS in interpreting UEFA Regulations has deviated from this rather simplistic clear-cut approach of UEFA.  

The Legia case in the light of CAS jurisprudence

The Sion[1] case has been the CAS landmark case with regard to the proportionality of the sanction of forfeiture for clubs fielding ineligible players. In this case, the CAS confirmed that FC Sion was banned from registering five new players in the summer transfer period of 2011/12 pursuant to the FIFA decision and was excluded from UEFA Europa League. Funnily enough, Celtic was also back then the lucky club, which enjoyed a ‘second bite of the cherry’. While this case presents only few factual similarities with the Legia case, its importance lies in that the CAS had to rule whether a club’s exclusion mandated by UEFA Regulations is in conformity with Swiss antitrust law and the proportionality principle.

The CAS confirmed that UEFA is an undertaking enjoying a dominant position on the market of international football competitions.[2] However, according to the CAS,  Article 18 of the UEFA Regulations authorizing UEFA to sanction clubs which field ineligible players does not constitute an abuse of its dominant position, but rather ‘guarantees the efficiency and equal treatment of the clubs’[3]. Relying on its mandate to establish uniform regulations applicable equally to all clubs and to guarantee legal certainty in sports competitions, the CAS found that the sanction of forfeiture for clubs fielding ineligible players is an appropriate, necessary and proportionate measure.[4] To reach this conclusion, the CAS applied a twofold test for the proportionality principle to be enforced: (1) the capacity of the sanction of forfeiture to achieve the aim it pursues, i.e. to ensure the equal treatment of the clubs; and (2) the necessity of the sanction, i.e. the absence of alternative measures, since during the qualification phase of the tournament other sanctions such as the deduction of points are not possible.

In this case, the CAS deviated from the strict literal interpretation of Article 21.2 of UEFA Disciplinary Regulations and elaborated an interpretation of the forfeiture sanction in the light of the proportionality principle, applying the twofold test. It is highly likely that the CAS in the Legia case will follow this interpretation, relying on the necessity of the sanction, i.e. because of the absence of alternative measures, and its mandate to protect the equal treatment of the clubs and will confirm, therefore, the conformity of the UEFA decision with Article 21.2. However, it is the suggestion of this case commentary that a different interpretation of Article 21.2 in the light of the proportionality principle could also be elaborated on.  

Mapping an alternative interpretation of Article 21.2 of UEFA Disciplinary Regulations

In this attempt to elaborate a different interpretation of Article 21.2 in the light of the proportionality principle, this article will use as a benchmark the CAS finding that ‘other elements such as the systematic context, the purpose and history of the rule may contribute to the correct understanding of the meaning of the rule’[5]. Although the wording of Article 21.2 is clear and seems to create a lex specialis rule with regard to the forfeiture sanction in case of a player’s ineligibility, it is suggested that a different interpretation of Article 21 can be envisaged if it is examined in conjunction with the General Principles laid down in Article 17.1 of the UEFA Disciplinary Regulation.

Specifically, Article 17.1 states that the disciplinary body determines the type and extent of the disciplinary measures to be imposed in accordance with the objective and subjective elements of the offence, taking account of both aggravating and mitigating circumstances.[6] This means that a sanction may be scaled down when proper consideration is given to the specific circumstances. This provision is in line with the well-established in Swiss law, EU law and CAS jurisprudence[7] proportionality principle, namely that in disciplinary matters a reasonable balance must be struck between the violation and the sanction.

Therefore, in the case at issue the question could be articulated as such: Could an interpretation of Article 21.2 in the context of Article17.1 and the proportionality principle result in a different sanction than forfeiture?

In the light of Article 17.1, an argument deriving from the specific ‘aggravating and mitigating’ circumstances of Article 17.1 could be that the ineligible player did actually abstain from three matches and it was due to a mere technical error that the player did not serve his suspension correctly. It could be suggested, therefore, that the forfeiture sanction is too harsh, since Legia acted in good faith and it was only because of this administrative error that the player was considered ineligible.

Furthermore, in the same spirit, Legia could claim that the sanction should be scaled down given that the player in question played for only four minutes as a substitute with the aggregate score of 6-1 in Legia’s favour. Considering that the ineligible player did not have any considerable impact on the tie[8], Legia could claim that the forfeiture sanction is too harsh as compared to the violation committed by the club. In a similar case, in 2010, UEFA fined Debrecen VSC for fielding in a good faith an ineligible player, instead of declaring the match forfeit: UEFA considered that Debrecen ‘had no interest in fielding this player for the three last minutes of additional time, when the score was so clearly in its favour’. It should be pointed out that in the Debrecen case the ineligible player was free to play if registered and, as a result, Article 21.3 applied. By contrast, in the Legia case the player was suspended and therefore excluded from the competition.

However, it could be argued that UEFA’s decision in the Debrecen case could serve as a guideline for a more flexible interpretation of Article 21.2. While the wording of Article 21.3 itself gives enough room for discretion to UEFA to declare a match forfeit (‘a match may be declared forfeit’), an interpretation of Article 21.2 in the light and purpose of Articles 17.1 and 21.3 could lead to a less draconian sanction, taking into consideration the specific circumstances of the case. Although the difference in the wording between Articles 21.2 (‘a match is declared’) and 21.3 draws a clear distinction between the consequences of fielding a suspended player and an ineligible player, it is the suggestion of this commentary that this distinction is at odds with the proportionality principle. Considering the proportionality’s principle status as a ‘general principle of law governing the imposition of sanctions of any disciplinary body’[9], it is surprising that Article 21.2 imposes the forfeiture sanction, without any reference to the proportionality of the sanction as compared to the violation committed. In this sense, the sanction of forfeiture leading to Legia’s exclusion from UEFA CL – and to the enormous economic loss for the club that this exclusion entails- seems disproportionate in the light of the specific circumstances of the case. In other words, a literal interpretation of Article 21.2, even in cases where the violation is the result of a mere technical error and the fact that the Club had no interest in fielding the suspended player, seems to overturn the reasonable balance between the violation and the sanction. 

Conclusive remarks

Until today, in the name of legal certainty, UEFA and the CAS have applied in a consistent way a literal interpretation of Article 21.2 of UEFA Disciplinary Regulations. While legal certainty is the ratio legis and justification of the sanctions imposed by UEFA[10], this commentary argued that the ‘without-exemption’ application of the forfeiture sanction can undermine the proportionality principle, which is also a fundamental principle recognized by the CAS jurisprudence. In this light, it has been demonstrated that a flexible interpretation of Article 21.2 in the context of the general provisions of Article 17.1, i.e. an interpretation which would render the act of fielding a suspended player subject to the full scale of disciplinary measures and would leave sufficient room for discretion to UEFA disciplinary body and to the CAS, would be in compliance with the proportionality principle. To this extent, construing a method for interpretation of Article 21.2 in conjunction with Articles17.1 and 21.3 is an important step to arrive at a better evaluation of the existing regime and to clarify the complex and still unsettled interplay between the intensity of the violation and the sanction.

Therefore, it remains to be seen whether the CAS will follow the path -strikingly consistent until now- of a literal interpretation of Article 21.2 or whether it will opt for a tailored sanction, which would be in compliance with the proportionality principle.

[1] CAS 2011/O/2574 UEFA v. Olympique des Alpes SA/FC Sion

[2] CAS 2011/O/2574 (n 5), para 115.

[3] Ibid, paras 124 & 130.

[4] Ibid, para 135.

[5] CAS 2007/A/1363 TTF Liebherr Ochsenhausen v/ETTU, award of 5 October 2007, para 12

[6] Article 17.1 (n 1).

[7] CAS 2001/A/330 R. v. Fédération Internationale des Sociétés d'Aviron (FISA), Award of 23 Nov 2001

[8] By contrast, see Sion case (n5) where Pascal Feindouno, one of Sion’s ineligible players, scored against Celtic.

[9] G. Kaufmann-Kohler and A. Rigozzi, ‘Legal Opinion on the Conformity of Article 10.6 of the 2007 Draft WADA Code with the Fundamental Rights of Athletes’, 42.

[10] CAS 2007/A/1278&1279,  para 131.

On Wednesday 26 May 2021 from 16.00-17.00 CET, the Asser International Sports Law Centre, in collaboration with Dr Marjolaine Viret (University of Lausanne), is organising its fifth Zoom In webinar on the Court of Arbitration for Sport (CAS) from the perspective of the European Court of Human Rights (ECtHR).

We have the pleasure to be joined by Prof. Helen Keller, former Judge at the ECtHR and a prominent dissenter to the majority’s ruling in the Mutu and Pechstein case.

The ECtHR decision in the Mutu and Pechstein case rendered on 2 October 2018 is widely seen as one of the most important European sports law rulings. It was also the first decision of the Strasbourg court dealing with a case in which the CAS had issued an award. The applicants, Adrian Mutu and Claudia Pechstein, were both challenging the compatibility of CAS proceedings with the procedural rights enshrined in Article 6(1) of the European Convention on Human Rights (ECHR). The court famously declined to conclude that the CAS lacked independence or impartiality, but did find that, insofar as Claudia Pechstein was concerned, she was forced to undergo CAS arbitration and, therefore, that CAS proceedings had to fully comply with the procedural rights guaranteed in the ECHR. In particular, the court held that the refusal by CAS to hold a public hearing, in spite of Claudia Pechstein’s express request, was contrary to Article 6(1) ECHR. Beyond this case, as highlighted by the recent decision of Caster Semenya to submit an application to the ECtHR, the decision opens the way for a more systematic intervention of the Strasbourg court in assessing the human rights compatibility of CAS awards and more broadly of the transnational sports regulations imposed by international sports governing bodies.

Prof. Helen Keller will discuss with us the implications of the ECtHR’s Mutu and Pechstein decision and the potential for future interventions by the court in the realm of the lex sportiva.

The webinar will take the form of an interview followed by a short Q&A open to the digital public. 

Please note the discussion will NOT be recorded and posted on our Youtube channel. 

Register HERE!

Editor's note: Rhys was an intern at the T.M.C. Asser Institute. He now advises on investments and Notre acquisitions in sport (mainly football) via Lovelle Street Advisory. Following a career as a professional athlete, Rhys has spent much of his professional life as an international sports agent, predominantly operating in football. Rhys has a Bachelor of Laws (LL.B) and a Bachelor of Philosophy (B.Phil.) from the University of Dame, Sydney, Australia. He is currently completing an LL.M at the University of Zurich in International Business Law / International Sports Law.

Having looked at the different types of investors in football in part one of this two-part blog series, “A non-exhaustive Typology”, it is fitting to now consider the regulations that apply to investors who seek to build a portfolio of football clubs.

One way to measure the momentum of a particular practice and how serious it ought to be taken, might be when that practice earns its own initialism. Multi-club ownership or MCO as it is increasingly known today, is the name given to those entities that have an ownership stake in multiple clubs. Within the little research and writing that has been undertaken on the topic, some authors submit that investors with minority stakes in multiple clubs ought not to be captured by the MCO definition.  This position appears problematic given some of the regulations draw the line at influence rather than stake.

There are now approximately 50 MCO’s across the football world that own approximately 150 clubs.^[1] Given the way MCO is trending, one might consider it important that the regulations keep up with the developing MCO practice, so as to ensure the integrity of football competitions, and to regulate any other potentially questionable benefit an MCO might derive that would be contrary to football’s best interests.

In this blog, I focus on the variety of ways (and levels at which) this practice is being regulated.  I will move through the football pyramid from member associations (MA’s) to FIFA, laying the foundations to support a proposition that FIFA and only FIFA is positioned to regulate MCO.

i)               The Cases that Shaped the MCO Regulatory Landscape

The ENIC and Red Bull cases essentially shaped MCO regulations, at least for UEFA.  For a comprehensive analysis of the cases, I would encourage one look at both “Multi-Club Ownership in European Football – Part I: General Introduction and the ENIC Saga” and “Multi-Club Ownership in European Football – Part II: The Concept of Decisive Influence in the Red Bull Case” by Tomáš Grell.

ENIC CASE[2]

The ENIC case featuring proceedings before the Court of Arbitration for Sport and before the European Commission, made its way to such bodies because London Stock Exchange listed entity, ENIC (English National Investment Company), owned stakes in both AEK Athens and SK Slavia Prague, that were set to play in the same UEFA club competition. At that point in time, UEFA had adopted regulations that made entry to UEFA club competitions conditional upon a club having not (i) held or been dealing in the securities or shares; and refrained from (ii) being a member; (iii) being involved in any capacity whatsoever in the management, administration, and/or sporting performance; and (iv) having any power whatsoever in the management, administration and/or sporting performance - of any other club participating in the same UEFA club competition. Furthermore, an individual or entity was prohibited from exercising control over more than one club participating in the same UEFA club competition.

The Committee for the UEFA Club Competitions had initially ruled that only SK Slavia would take part in the 1998/99 UEFA Cup. Not satisfied with that ruling, on 15 June 1998, AEK Athens and SK Slavia Prague filed a request for arbitration with CAS and simultaneously sought interim relief which was given, allowing both clubs to compete in the 1998/99 UEFA Cup. On 20 August 1999 however, the CAS held that the Original Rule was valid and that UEFA could apply the rule moving forward. Given the blow this dealt to ENIC’s football business strategies, on 18 February 2000, ENIC lodged a complaint with the European Commission and argued anew that the UEFA rules were contrary to EU competition law. The Commission was satisfied that the Original Rule was valid in that it sought to protect the integrity of UEFA competitions, rather than to restrict competition, hence seeing no violation of the relevant EU competition laws.

RED BULL CASE[3]

The current rules encapsulated in Article 5 of the UCL Regulations are distinct from the Original Rule in that one of the standards that would render a club unable to participate in a UEFA competition is if an individual or entity is able to exercise by any means a “decisive influence” in the decision-making of more than one club in that competition.

In 2017, RB Salzburg and RB Leipzig had both secured places in the 2017/18 UCL. Not long after, the UEFA General Secretary expressed concern with the Club Financial Control Body (CFCB), and the Adjudicatory Chamber of that body agreed that the clubs had failed to satisfy the criteria set out in the rules. The substantial levels of sponsorship received by Red Bull and certain individuals linked to the decision making of both clubs inter alia, were flagged as reasons for breaching the threshold.

However, and following some quite deliberate and specific changes, the CFCB Adjudicatory Chamber accepted compliance reports that RB Salzburg had cut ties with certain individuals, reduced the amount of sponsorship money paid by Red Bull and were satisfied that a cooperation agreement between the two clubs had been terminated.  The CFCB Chief withdrew his objection and RB Salzburg and RB Leipzig were admitted to the 2017/18 UCL.

ii)              Member Associations and Motives

Whilst one could simply list the national association’s MCO regulations, the reality is that for the MA’s that have express regulations, they are largely of a similar flavour to that of their Confederation. One might find the varying motivations of MA’s in enacting MCO regulations of more interest. One key feature is that some of the MA’s regulate based on MCO within their own nations, and some concern themselves with MCO even outside of the nation in which the MA governs football. This is where an MA’s motivations are evident.

Scotland

Scotland for instance, regulates MCO via Article 13 of the Articles of Association of the Scottish Football Association and refers to the section as “Dual Interests in Clubs”.[4]  It is understood that Scotland have a high standard when it comes to MCO, so as to ensure that its competition does not become the reserve competition to the English Premier League or another larger league.  With that in mind, one can then understand why Mike Ashley’s attempt to increase an already 8.92% to 29.9% shareholding of Rangers FC was rejected. The Newcastle United owner was not given written permission as is required per Article 13, as he had signed an agreement that he would not own more than 10% of the club and would not exercise influence on the board.

"The Board, under Article 13 of the Scottish FA Articles of Association, is required to have due regard to the need to promote and safeguard the interests and public profile of association football, its players, spectators and others involved with the game. This test is set out in full in Article 13.6."

Italy

Not too long ago, one was free to own more than one club in Italy (i.e. Aurelio De Laurentiis’ ownership of S.S.C. Napoli and S.S.C. Bari), but in recent months MCO in the Italian context has been headline material, with U.S. Salernitana 1919 promoting to the Serie A, a club owned by Claudio Lotito who also owns S.S. Lazio. The newly enacted Article 16 bis of the NOIF FIGC provides that an individual or entity cannot own two or more clubs in Italy, in the same competition.  On Thursday 30 September 2021, the FIGC announced that ownership of more than one professional club would be prohibited, “for those companies that should rise to Lega Pro from the Serie D” (translated), and multi-club owners would need to sell their (other) clubs “by the beginning of the 2024/2025 season”.

The result of this is retroactive in effect and one can reasonably suspect that the legal teams for these wealthy multi-club owners will be instructed to explore all options for a favourable outcome in courtrooms and other relevant decision-making bodies. One can simultaneously hold a view that MCO ought to be regulated, and concede that, when these owners bought these clubs, they did so on the representation that it was legal and they were free to do so. A forced sale as opposed to a willing sale distorts the market and what a willing buyer and willing seller would have otherwise settled on for a purchase price.  Flowing from the above, club owners can expect well below market rate offers, as has been the case reportedly with Salernitana, given they must sell. 

iii)             The Confederations

Most of the MCO regulations of Confederations refer to the concern of jeopardisation of the integrity of a match or competition. The regulations largely capture the substance of Article 20(2) of the FIFA Statutes which will be expanded upon below. For instance, the OFC regulation found at Article 15 (3) of the OFC Statutes, states that  ‘Member Associations shall ensure that no natural or legal person (including holding companies and subsidiaries) exercise third-party control in any manner whatsoever (in particular through a majority shareholding, a majority of voting rights, a majority of seats on the board of directors or any other form of economic dependence or control etc.) over more than one club or group whenever the integrity of any match or competition could be jeopardised.’  One will find almost verbatim, the same provision at Article 12(3) of the CAF Statutes and at Article 17(3) of the CONCACAF Statutes.

There is a distinction to be made however at confederation level, between MCO regulations applying specifically to the MA’s that fall under the Confederations, or to competitions hosted by the Confederation. Given the noise both the ENIC and Red Bull cases made, the most renown MCO regulations are those that apply to UEFA competitions, but consider also how CONMEBOL prohibits multi-club ownership in its competitions. Article 7(f) of the CONMEBOL Statutes provides that natural or legal persons cannot control more than one club. Perhaps an extension, “CONMEBOL’s Club Licensing Regulations establish as a requirement that, to participate in CONMEBOL Libertadores and CONMEBOL Sudamericana tournaments, license applicant clubs must submit a legally valid declaration if one: Owns or trades titles or securities of any other club participating in the same competition; or, b) Owns the majority of the shareholder voting rights of any other club participating in the same competition; or, c) Has the right to appoint or dismiss most of board or management or department members of another participating club in the same competition; or, d) Is a shareholder and controls most of the shareholder voting rights of shareholders in any other club participating in the same competition in accordance with an agreement signed with other shareholders of the relevant club; or, e) Belongs to the leadership structure of any other club participating in the same competition; or, f) Is involved in any quality in the management, administration and/or sporting performance of any other club participating in its competition; or, g) Has any power in the management, administration and/or sporting performance of any other club participating in the same competition.” 

The AFC regulates at both confederation club competition level, and via its club licensing regulations. The Entry Manual of the AFC Club Competitions provides as a condition of entry, at section 9.12: To ensure the integrity of an AFC Club Competition: no participating club may, either directly or indirectly, hold or deal in the securities or shares of any other participating club; be a member of any other participating club; be involved in any capacity whatsoever in the management, administration and/or sporting performance.

Article 19 of the AFC’s Club Licensing Regulations provides that a Licence Applicant must submit a legally valid declaration outlining the ownership structure and control mechanism of the club. These regulations prohibit a natural or legal person involved in the management, administration and/or sporting performance of the club, either directly or indirectly: a) holds or deals in the securities or shares that allows such person to exercise Significant Influence in the activities of any other club participating in the same competition; b) holds a majority of the shareholders’ voting rights of any other club participating in the same competition; c) has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of any other club participating in the same competition; d) is a shareholder and alone Controls a majority of the shareholders’ voting rights of any other club participating in the same competition pursuant to an agreement entered into with other shareholders of the club in question; e) is a member of any other club participating in the same competition; f) is involved in any capacity whatsoever in the management, administration and/or sporting performance of any other club participating in the same competition; and g) has any power whatsoever over the management, administration and/or sporting performance of any other club participating in the same club competition.

When it comes to UEFA, MCO regulation is found throughout the so-called “UEFA Regulatory Framework”.  This includes the UEFA Statutes (Edition 2020), the UEFA competitions regulations, in particular the Regulations of the UEFA Champions League 2018-21 Cycle (2020/21 season) and the Regulations of the UEFA Europa League 2018-21 Cycle (2020/21 season), and the UEFA Club Licensing and Financial Fair play Regulations (Edition 2018).

The UEFA Statutes capture both the objectives of UEFA and the obligations of its MA’s, with a strong emphasis on the frequently referred to concern with MCO - issues of integrity. Then, within The Regulations of the UEFA Champions League, sits at Article 5 - Integrity of the competition / multi-club ownership.  This covers integrity of competition again and sets a criterion in order for a team to be eligible for UEFA competition, much the same flavour of regulation seen throughout the rest of the Confederations regarding ownership and control, but with the all-important test at Art.5 – 5.01(c) (iv)  No individual or legal entity may have control or influence over more than one club participating in a UEFA club competition, such control or influence being defined in this context as: being able to exercise by any means a decisive influence in the decision-making of the club.. 

FIFA reported that as of 2018, just 33 % of MA’s had regulatory provisions for MCO’s. The percentage of MA’s within the Confederations that regulate MCO is as follows:

• Confederation of North, Central America and Caribbean Association Football (CONCACAF) – 19%
• Oceania Football Confederation (OFC) – 22%
  
• Confederation of African Football (CAF) – 22%
• Asian Football Confederation (AFC) – 33%
• South American Football Confederation (CONMEBOL) – 50%
• Union of European Football Associations (UEFA) – 50%

What these figures might uncover is a gap in how serious MCO ought to be taken, between the Confederations and the MA’s, and that the perceived threat MCO posed to the integrity of competitions at the time these MA regulations were enacted was minor. Confederations might want to take a firmer proactive rather than reactive approach with MA’s, given the speed at which the MCO phenomenon has gained momentum. That is if one concludes that MCO regulation ought to lie with the Confederations.

Whilst MCO might not give rise to an issue for many nations (yet), the MCO environment of countries like Mexico, (1/3 of the clubs in the Liga MX are part of a domestic MCO arrangement, to say nothing of those same owners stake and influence in Mexican media and broadcast) where there are regulations in place at both MA and Confederation level, flies in the face of both the Mexican FEMEXFUT regulations and CONCACAF regulations. Might this highlight that FIFA and only FIFA can regulate this practice?

iv)             FIFA & MCO Regulation

FIFA does not expressly regulate MCO, assumingly as clubs are not its direct remit. Though through some interpretative effort, FIFA imposes an obligation on its MA’s to regulate MCO. In the FIFA Statutes at Article 20 (2), “Status of clubs, leagues and other groups of clubs”, it reads:

Every member association shall ensure that its affiliated clubs can take all decisions on any matters regarding membership independently of any external body. This obligation applies regardless of an affiliated club’s corporate structure. In any case, the member association shall ensure that neither a natural nor a legal person (including holding companies and subsidiaries) exercises control in any manner whatsoever (in particular through a majority shareholding, a majority of voting rights, a majority of seats on the board of directors or any other form of economic dependence or control, etc.) over more than one club whenever the integrity of any match or competition could be jeopardised.

Another way of looking at how FIFA may regulate MCO, is an obligation it places on the confederations at Article 23 (g), “Confederations’ Statutes”, it reads: 

The confederations’ statutes must comply with the principles of good governance, and shall in particular contain, at a minimum, provisions relating to the following matters:

(g) regulation of matters relating to refereeing, the fight against doping, club licensing, the imposition of disciplinary measures, including for ethical misconduct, and measures required to protect the integrity of competitions.

As one will notice, the protection of the integrity of competitions does not quite warrant its own sub-section of Article 23, and instead is heaped in with matters such as refereeing and doping. Article 20 might have more clout, but given the influx of MCO and investment in football in modernity, one can reasonably wonder if the regulations suffice.  

Article 20(2) of the FIFA Statutes (formerly Article 18(2)) has been considered to a degree at the Court of Arbitration for Sport. Though where it has, for instance in CAS 2014/A/3523 Club de Fútbol Atlante S.A. de C.V. v. Federación Mexicana de Fútbol (FMF) & Club Atlas F.C., the findings uncover that Article 20(2) cannot be relied upon for clarity, in terms of the jeopardisation MCO poses to the integrity of football matches or competitions.

“The FIFA rule on multiple ownership is not absolute but is based on a case-by-case assessment of the jeopardy caused to the integrity of football matches or competitions. Whether or not the integrity of a match or competition is jeopardised is a very intricate assessment which necessarily must be based on profound knowledge of the match or competition in question.”[5]

Whilst the case is not exclusively about the relevant integrity of competitions article within the FIFA Statutes, the appellant was unable to successfully argue the point that two clubs in the same league belonging to the same owner poses a serious threat to the competition (via the then Article 18(2) of the FIFA Statutes and the identical Article 7(m) of the CONCACAF Statutes) as it was unable to convince the Panel that the integrity of the Liga MX was indeed actually jeopardised.

The CAS in this instance was merely making a decision per its reach, but one struggles to imagine that any football governing body would want to take the position and to regulate so as to suggest that MCO within competitions does not “necessarily” raise integrity issues. Perhaps an extreme analogy, but that would be like concluding that doping is not “necessarily” performance enhancing and a case-by-case intricate assessment is needed to determine whether an advantage was actually attained.  Some threats to integrity require the preventative approach be captured in the regulations and the above case highlights that the articles regarding MCO found in the FIFA Statutes are insufficient and have probably not kept pace with the MCO phenomenon. A further reasonable question one might ponder, is what the reaction to the above case might have been if the clubs were UEFA based?

v)               Concluding remarks and why FIFA must assume MCO Regulations

MCO is a transnational phenomenon with no clear integrated or uniform regulatory framework and rather, a fragmented landscape, as one might reasonably expect when MCO regulation is left to the many Confederations and MA’s.  MCO regulations as they stand may have sufficed in yesteryear when football was not the target of such investment for direct financial return, branding in the case of company investment, or the branding and soft power strategies of nations – evidently the prime motivations for establishing an MCO. 

FIFA regularly offsets the negative news stories it attracts, with reference to growing the game globally. If FIFA is to cash in on the growing the game globally narrative, it surely has an obligation to regulate when that global growth produces integrity issues to football, as is the case with MCO. If one accepts that MCO is a transnational phenomenon and in turn a global issue, and that it does raise concerns in regard to the integrity of football inter alia, then it is difficult to see what body other than FIFA is best positioned to deal with the MCO phenomenon.

There are other reasons of significance as to why this should lie with FIFA as well. For instance, the MCO phenomenon also affects FIFA’s training rewards systems that it has gone to considerable lengths to attempt to fine tune (i.e. the establishment of the Clearing House). With players moving between clubs within the same MCO for free, many transfers will not trigger the trickledown effect they may have otherwise had players transferred for market rates. Another concern for FIFA might be player trading within an MCO being used as accounting tactics to avoid triggering Financial Fair Play issues, rather than a transfer representing the market value of the player.

Player welfare issues also arise, as do employment law questions.  It is already the case that there are clauses in player contracts where a player cannot refuse to be transferred to another club within an MCO if so requested (or demanded), which is in effect an MCO contract, rather than a club contract. Even when clauses of this nature are not inserted within an MCO club player’s contract, there are concerns when players are groomed within an MCO ,given the clubs have considerable time with players and a unique dynamic exists within MCO given common ownership, where a club is incentivised to persuade the player to remain within the group, when the best move, career, financial or otherwise, may be elsewhere. This is an entirely different dynamic to a player weighing up his or her transfer options and seeking professional advice from an agent and/or lawyer.  There are also instances where an MCO has only allowed a move internally and refused a transfer to another club and potentially better option for the player, raising  the ever-recurring freedom of movement questions. These instances are of course rare (for now), but real implications that need attention from football’s global governing body.

The increased globalisation of the game through creations like the UEFA Conference League and FIFA also expanding the Club World Cup, significantly broadens the number of clubs that may face each other, which increasing the risks that MCO presents. The obligations FIFA imposes on its MA’s and Confederations are not observed across the board, and are consequently not sufficient to keep pace with the burgeoning MCO phenomenon. FIFA can no longer simultaneously celebrate the globalisation of football, and defer on definition and regulation downwards in the football pyramid, when it comes to a product of that globalisation; Multi Club Ownership.

[1] I have added to the approximate figure mentioned in the hyperlinked article, to account for some recent acquisitions.

[2] CAS 98/200 AEK Athens and SK Slavia Prague / UEFA & Case COMP/37 806: ENIC / UEFA [2002] Commission

[3] CFCB Adjudicatory Chamber AC-01/2017 RasenBallsport Leipzig GmbH and FC Red Bull Salzburg GmbH

[4] DUAL INTERESTS IN CLUBS 13.1 Except with the prior written consent of the Board:- (a) no club or nominee of a club; and (b) no person, whether absolutely or as a trustee, either alone or in conjunction with one or more associates or solely through an associate or associates (even where such person has no formal interest), who:- (i) is a member of a club; or (ii) is involved in any capacity whatsoever in the management or administration of a club; or (iii) has any power whatsoever to influence the management or administration of a club, may at the same time either directly or indirectly:- (a) be a member of another club; or (b) be involved in any capacity whatsoever in the management or administration of another club; or ARTICLES OF ASSOCIATION 69 (c) have any power whatsoever to influence the management or administration of another club

[5] CAS 2014/A/3523 Club de Fútbol Atlante S.A. de C.V. v. Federación Mexicana de Fútbol (FMF) & Club Atlas F.C., at 88

The first part of our “Unpacking Doyen’s TPO deals” blog series concerns the agreements signed between Doyen Sports and the Dutch football club FC Twente. In particular we focus on the so-called Economic Rights Participation Agreement (ERPA) of 25 February 2014. Based on the ERPA we will be able to better assess how TPO works in practice. To do so, however, it is necessary to explore FC Twente’s rationale behind recourse to third-party funding. Thus, we will first provide a short introduction to the recent history of the club and its precarious financial situation. 

I. FC Twente 2004-2015

When local millionaire Joop Munsterman took over FC Twente in December 2003, the club was on the verge of bankruptcy. Munsterman certainly did not lack ambition and wanted to turn FC Twente into the best club of the Netherlands. With help of external investors, he quickly managed to reinforce the team with quality players such as the Swiss international Blaise N’kufo, the man who would later become FC Twente’s all-time top scorer. A few years later, in 2010, FC Twente won the Dutch League (Eredivisie), thereby defying the decade long dominance of Ajax, PSV and Feyenoord. By now the club was considered an example for a modern, innovative and successful football governance, and an inspiration for other smaller clubs. Through “excellent scouting” it managed to attract players from all over the world capable of winning the league and securing a spot in Europe’s most important and lucrative club competition, the UEFA Champions League. Moreover, Twente’s success on the field also led to financial success off the field. For example, Costa Rican international Bryan Ruiz was signed from KAA Gent in 2009 for €5 million and sold to Fulham in 2011 for €12.5 million, which makes for a healthy profit of €7.5 million.

The taste of the 2010 success and the additional earnings for participating in the Champions League created hunger for more. The club started spending large amounts of money on the transfer market, including the signings of Leroy Fer in 2011 for €5.5 million and Dusan Tadic in 2012 for €7.7 million. Furthermore, with the ambition of playing the Champions League consistently, the club decided to renovate and expand its stadium. Although FC Twente is the owner of the stadium, it did not have the means to finance the renovation. Therefore, it had recourse to external investors, including the municipality of Enschede, who provided a loan of €20 million.

Fast-forwarding to 2015, little is left of that over-ambitious FC Twente. The club currently finds itself in the lower ranks of the league table and is fearing relegation to the second league. Much-needed revenue from Champions League participation did not materialize since the club was not able to qualify after 2011 and many of the recent signings did not lead to transfer profits. In May 2014 the Dutch FA, KNVB, placed FC Twente into the so-called “Category 1”, a category dedicated to clubs in financial difficulties, which could face disciplinary sanctions if the financial situation is not improved swiftly.[1] In early 2014, FC Twente had probably taken on way too much financial risk and was in dire need of fresh money. In this context, the ERPA with Doyen was dearly needed to repay outstanding short-term debts. 

 Timeline.jpg (64KB)

II. The ERPA dissected

The ERPA between FC Twente and Doyen Sports is dated from 25 February 2014. The ERPA consists of two separate agreements: a first general agreement signed on 27 December 2013; and a second agreement added on 25 February 2014. By means of the ERPA, Doyen purchased part of the economic rights of seven players who at the time were all registered and playing for FC Twente, namely Castaignos, Promes, Ould Chikh, Mokhtar, Eghan, Ebecilio and Tadic. In return, Doyen provided FC Twente a fee for each of the players for a total amount of €5 million.

As stated, Doyen did not obtain all of the economic rights of the players, but only a share. The share acquired by Doyen varied from player to player and fluctuated between 10% (for Tadic) and 50% (for Castaignos). At first glance, the mechanism seems relatively straightforward: once a player is sold to another football club Doyen receives an amount equal to its share of the economic rights attached to the player. However, the story is a bit more complex. The ERPA provides for a minimum fee per player that is superior to the amount Doyen invested in that player. In other words, regardless of the transfer fee paid, Doyen will always make a profit. The bank always wins! Doyen’s minimum fee for each player has been set at a basic amount equivalent to the fee granted to FC Twente plus a fixed 10% to be increased at an annual rate of 10% elapsed as from 15 November 2013.  

The ERPA further sets out different scenarios which are described below.

A. Scenario 1&2: The Transfer offer

The first eventuality, and most likely the mutually desired one, is the transfer of the player. Under the first agreement (this part was central to its amendment), in case of a transfer offer for one of the players concerned by the agreement, FC Twente could choose to accept or reject the offer. If it accepted the offer, Doyen was entitled to the agreed share of the proceeds of the transfer. If this amount was inferior to Doyen’s minimum fee, then Twente had to pay the fee. In case Twente would refuse the offer, no further contractual consequences were foreseen. (Scenario 1). It appears from the latest release of footballleaks (available here) that the first agreement actually entailed a different scenario, which was later deleted from the ERPA and inserted in an additional agreement. This second agreement, added later to the ERPA and not communicated to the KNVB, radically changed the transfer scenario (Scenario 2). 

Under the second agreement, in case of a transfer offer equal or superior to the minimum market value of the player is received and rejected by the club, FC Twente is obliged to compensate Doyen by an amount equivalent to Doyen’s share of the proposed transfer fee. By way of illustration, say a given football club offers FC Twente €10 million for Castaignos, while his minimum market value is €8 million (see table 1). Should FC Twente reject this transfer offer it will be obliged to compensate Doyen for an amount of €5 million (50% of the proposed transfer fee of €10 million). Similarly, if the proposed transfer fee is equal or above 50% of the minimum market value and FC Twente rejects it, it could also be obliged to compensate Doyen. Using Castaignos again as an example, say the proposed transfer fee was not €10 million but €4 million. This amount is exactly 50% of Castaignos’ minimum market value. Should FC Twente decide to reject this offer and Doyen decides to make a written request to be compensated, Doyen could claim €2 million from FC Twente. 

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B. Scenario 3: Exchange of players

If Twente decides to exchange a player covered by the ERPA against another player, to which an additional fee might be added, the agreement foresees that Doyen will have three different options. First, Doyen can, in case of a partial exchange involving a complementary fee, decide to keep the same share of the economic rights attached to the new player and get the agreed share of the fee received by the club. If a one-to-one exchange takes place, Doyen can only keep the same share of the economic rights attached to the new player. Finally, in both types of exchanges, Doyen has the option to demand that FC Twente pays the minimum fee for the player.

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C. Scenario 4: A loan

In the third scenario, the player is loaned out to another club. If the loan fee received is higher than the wage bill of the player at FC Twente, the club makes a profit on the loan. Consequently, Doyen is entitled to receive a percentage of the loan fee. Doyen’s share of the loan fee is calculated on the basis of its share in the economic rights of the player concerned. If Castaignos were to be loaned out to another club and FC Twente receives a loan fee higher than its salary, Doyen would receive 50% of the profit on the loan fee.

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D. Scenario 5: Renewal of the player contract by Twente

The fourth scenario is also modified by the additional agreement signed on 25 February 2014. Under the original agreement, if the player renews his contract with FC Twente, Doyen simply keeps the same share of the economic rights for the total length of the new contract. However, Doyen does have the right to choose a new put option date or, importantly, simply stick to the old put option date (on the put option date see below scenario 6). Under the additional agreement, Doyen also has the possibility to request that the minimum fee be paid by FC Twente. 

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E. Scenario 6: The Put Option

In the ERPA, Doyen and FC Twente have agreed a put option, this alternative is covered in Scenario 5. A put option is a right given to Doyen to sell back its share of the economic rights linked to a player at FC Twente, at a given date and for a given price. The put option date was set at 31 August 2015 for all seven players of Twente(see table 1). To use a concrete example, Ebecilio was not sold before 31 August 2015. In fact, he currently still plays for FC Twente. In accordance with the particular conditions of the ERPA, Doyen had the right to sell to FC Twente its share of the economic rights of Ebecilio, and FC Twente would have the obligation to buy back those rights, for a fixed put option fee. According to Table 1, the put option fee for Ebecilio is €780.000. Whether Doyen actually exercised this option in the Ebecilio case is not clear, but it would have guaranteed the investment company a profit of €180.000. 

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F. Scenario 7: The player is unable to remain a professional football player

Point 8 of the ERPA foresees that FC Twente shall enter into a policy with an insurance company insuring the risk of the player’s death and the risk of the player suffering an incapacitating injury or any injury which may patently reduce the player’s ability as a professional football player. In the case of such events, Doyen will receive an amount equal to the put option fee, irrespective of whether the insurance policy claims are lower or higher than the put option fee.

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G. Scenario 8: The player becomes a free agent

Point 9.1 of the ERPA stipulates that FC Twente “shall use its best endeavors to prevent the Player from becoming a free agent and acknowledges that such endeavors are considered normal and ordinary business practice for professional football clubs”. The notion of “best endeavors” remains undefined and mysterious. Nonetheless, in the case a player’s contract expires and he becomes a free agent, FC Twente will be obliged to pay Doyen the minimum fee agreed in the particular conditions (see table 1). 

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H. Scenario 9: The economic rights are assigned to a third-party

After the signature of the ERPA, it is still possible to trade the economic rights attached to the same players with third parties. However, if Doyen wishes to sell the economic rights of one of the seven players, it would firstly have to offer those rights back to FC Twente on the same conditions as those that would be offered to third parties. Moreover, Doyen may not assign any share of the players’ economic rights to any Dutch club or to any other third party which is not suitable to hold them. In turn, should FC Twente wish to sell (part of) the remaining economic rights of a player, it would firstly have to offer these rights to Doyen before offering them to another assignee. 

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I. Scenario 10: Termination of the contract by the player without just cause

Final scenario, if the player terminates his contract without just cause (see Article 17 FIFA RSTP), the ERPA foresees that FC Twente shall pursue a claim for unlawful termination of the employment contract against the player before any competent judicial institution.^[2] If the relevant judicial body grants compensation to FC Twente, Doyen will get a share of the compensation equivalent to its share of the economic rights of the player. In the event the share of the compensation awarded to Doyen is less than the minimum fee, FC Twente will have to match the minimum fee. 

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III. The aftermath of the ERPA

On 26 November 2015, FC Twente told the Dutch press that it had bought off the TPO contract with Doyen. On that same day, footballleaks published a Settlement Agreement between Doyen and FC Twente. According to this settlement, the parties agreed to terminate the ERPA on the condition that Twente would pay to Doyen a compensation of €3.344.519. Whether the settlement agreement was signed by the two parties remains unknown since it does not include a date nor any signatures.

What is known is what happened to the seven players whose economic rights were partly sold to Doyen. Based on the information provided by the German website http://www.transfermarkt.de/, we made the following table summarizing the situation:

Since the signing of the ERPA (27 December 2013), five players have been transferred to other football clubs and two (Eghan and Ebecilio) are still under contract at FC Twente. Two players, Tadic and Promes, were sold for a relatively high fee (€13 million and €11.4 million respectively). For Tadic’s transfer, it is known that Doyen received a 10% of the transfer, since the fee was higher than the minimum fee. In fact, footballleaks provides a document called “Liquidation of Economic Rights Participation - Tadic”, holding that Doyen received €1.091.250 from Tadic’s €13 million transfer to English side Southampton. Doyen’s interest in Tadic was 10%. In principle this would mean that Doyen would receive 10% of €13 million, i.e. €1.3 million. However, based on article 7.2. of the ERPA, agent fees, solidarity contributions and the claim of another club (Groningen) were deducted to arrive at the final figure. The same process will have applied to the transfer of Promes.

Castaignos, Chikh and Mokhtar were sold for relatively low transfer fees (€2.5 million, €1.5 million and €1 million respectively). It is now possible to predict what truly happened to Doyen’s share of Castaignos’ economic rights. As Doyen’s share of the economic rights attached to Castaignos was 50% (see table 1), it should get €1.25 million (50% of €2.5 million). However, the particular conditions also stipulate that in such a case Doyen would be awarded the minimum fee, on 1 July 2015 it amounted to €1.8 million. Because Doyen’s share of Castaignos’ transfer fee (€1.25 million) is lower than the minimum fee (€1.8 million), it probably received the latter.

As to Ebecilio and Eghan, both remained at FC Twente after the put option date passed (31 August 2015), whether Doyen exercised its put option or not remains unknown. If Doyen has exercised this option, it would have received €780.000 for Ebecilio and €650.000 for Eghan.

Typically, these fees are not paid immediately at the date of the transfer. Instead the payment is divided in separate instalments. It is possible (even likely in light of its price tag), but we lack definite information on this point, that the settlement agreement between Doyen and FC Twente covers all outstanding instalments regarding previous transfers.  

IV. Is the ERPA in breach of KNVB and FIFA Regulations?

The Dutch media is full of rumours about the terrible things that are about to happen to FC Twente. Is the club going to go bankrupt? Or, will it be “only” losing more points in an already difficult battle to save its place in the Eredivisie? Until now, with few exceptions, very little substantial legal analysis has been provided. The KNVB and FIFA are the two main private regulators susceptible of going after FC Twente, though UEFA has also been mentioned in the press, but we are unable to identify under which legal basis it could get involved in the matter. One thing is certain, entering an ERPA with Doyen is a losing bet for a club. It takes huge financial risks and is the only actor facing disciplinary sanctions as Doyen escapes the jurisdiction of the football associations.

A. Has FC Twente breached the rules of the KNVB?

Pursuant to Article 57(1) of the KNVB Regulations, it is prohibited for clubs to reach any agreement that allows a third party to influence the club’s independence regarding the transfers of players. This provision is a mandatory transposition by the Dutch FA, as provided by article 1.3 of the FIFA Regulations on the Status and Transfer of Players (RSTP), of article 18bis RSTP (See below). The KNVB has stated that it was aware of the existence of the ERPA between FC Twente and Doyen and that it even intervened to prevent unauthorized influence by Doyen. However, the Dutch FA was apparently not informed of the existence of the additional agreement signed between Doyen and FC Twente and a KNVB insider was quoted saying that those provisions “appear to show that Doyen does exert influence on FC Twente”. Yet, at the time of writing, it remains unclear whether FC Twente is subjected to a formal investigation by the KNVB.

In fact, the difference between the original agreement and the additional agreement is flagrant and crucial. In the former case FC Twente was entirely free to refuse a transfer offer whatever its amount, while, in the latter, if an offer reached a minimum amount, the club was forced to sell the player or to pay out Doyen’s share on the offer. At this point in time, all parties must have been perfectly conscious that FC Twente was unable to disburse any cent to buy back the economic rights owned by Doyen. Hence, its transfer policy was entirely at the goodwill of the investment fund and the potential buyers. The fact that FC Twente did not disclose the additional agreement to the KNVB obviously vindicates this assessment. Moreover, the latest release by footballleaks shows that the original ERPA signed in December 2013 included some of the most controversial provisions regarding transfers. These were later redacted out of the agreement and inserted in the additional agreement, probably to circumvent the control of the KNVB. It will be extremely difficult for the KNVB to deny that Doyen exercised a substantial influence on FC Twente’s transfer decisions regarding the players subjected to the ERPA. The potential sanctions are listed in Article 11 of the License Regulations (page 78-90 of the KNVB Regulations) and include a fine, a points deduction or withdrawal of the license. Having in mind the severe financial situation FC Twente finds itself in, this could lead to the full-blown bankruptcy of the club. 

B. Has FC Twente breached the FIFA Regulations?

FC Twente might be facing a FIFA sanction as well. As everybody knows by now, the FIFA ban on TPO entered into force on 1 May 2015.[3] However, the ERPA between FC Twente and Doyen is not falling under the ban, as it is not applicable retroactively. Hence, its conformity to FIFA regulations can only be assessed in relation to the FIFA Regulations on the Status and Transfer of Players (RSTP) in force at the signature of the ERPA. Back then article 18bis of the RSTP on third-party influence on clubs provided that: 

1.      No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.

2.     The FIFA Disciplinary Committee may impose disciplinary measures on clubs that do not observe the obligations set out in this article.

The whole legal debate will hinge, as for KNVB proceedings, on whether Doyen had the ability to influence the policy of FC Twente in employment and transfer-related matters. As we have argued above, the agreement points a loaded financial gun at FC Twente’s head each time a transfer offer of a certain amount is made, or when the club wishes to renew the contract of a player subjected to the ERPA. There is very little doubt that the transfer policy of a club in financial difficulties will be directly influenced by an investor, which can financially pull the plug on the club at virtually any time if it refuses to sell a player for a certain fee. The problem now for FIFA (and KNVB) will be to find an appropriate sanction for the club. It is the only party facing disciplinary proceedings (Doyen is out of FIFA or KNVB’s disciplinary reach). In the end, the supporters and players are the victims of a gross mismanagement of the club’s affairs due to the hubris of an irresponsible president. FIFA will also have to decide whether the many other ERPAs signed by Doyen (you can find a probably incomplete list of Doyen’s investment in players here), which include similar provisions (see Doyen’s model ERPA here) are also in breach of article 18bis. If yes, and we think there is no reason to decide otherwise, then a number of clubs (think Atletico, Sporting or Porto) might face  FIFA (or national FA) sanctions in the near future. This case is not ending with FC Twente, it is about all the clubs that have signed an ERPA with Doyen Sport in the past.

Additionally, it is also possible that FC Twente be found in breach of Annexe 3 of the FIFA RSTP, which regulates the use of the FIFA ‘Transfer Matching System’ (TMS) in the case of a transfer. The TMS is an online system that intends to make international transfers of players between clubs quicker, smoother and more transparent. Under article 4.4 of Annexe 3, in case FC Twente transfers a player (five of the players concerned by the ERPA have been transferred), it must introduce in the FIFA TMS a ‘Declaration on third-party payments and influence’. It is thinkable that FC Twente did not include the full ERPA in the TMS system and might also, therefore, face the FIFA sanctions provided in article 9.4 of the Annexe.

In a nutshell, FC Twente is now in deep(er) trouble because it decided to play Maltese roulette with a ruthless investor.

[1] In fact, the KNVB has already deducted six points from FC Twente in the 2014/15 season for financial mismanagement.

[2] Point 9.4 of the ERPA.

[3] More information on the TPO ban can be found in our previous Bogs, such as “Blog Symposium: FIFA’s TPO ban and its compatibility with EU competition law – Introduction”.