1. Facts and Sports Rules under referral.
The ECJ ruling was issued following a preliminary reference from the Court of Appeal of Mons, Belgium. It concerns the compatibility of certain specific provisions of the “FIFA Regulations on the Status and Transfer of Players” (RSTP) with the provisions of the TFEU on competition and free movement of workers across the internal market. Article 267TFUE on preliminary rulings is an instrument of cooperation between the EU Court and national judges. It is aimed at providing the national judges with the interpretative criteria of the TFEU rules which are necessary for the resolution of disputes that depend in whole or in part on the application of European law.
The ruling originates from a dispute between FIFA and a French footballer. It concerns the alleged restrictive nature of the Article 17 and other provisions of the RSTP, regulating the consequences of a dispute between a club and a football player in the event of unilateral contractual termination by one party, before the normal expiry of the contract. The rules allegedly provided for a set of direct and indirect sanctions, to the detriment of the football player.
Firstly, if the club held the player liable for having unilaterally terminated the contract without just cause, the latter would have had to pay a compensation for breach. Such compensation would be calculated on the basis of financial criteria including the remaining amortization of his contract accounted for by the club. Secondly, the club that subsequently hired the player would have been jointly liable for the payment of such compensation, as well as – in certain cases – subjected to sporting sanctions (i.e. a ban on hiring new players for the two subsequent transfer market sessions).
Finally, for the whole duration of the pending dispute, the Football Federation of the club of origin would not issue the necessary mandatory international transfer certificate (CIT). This would effectively prevent the player from moving to a club belonging to another national Federation, thus blocking his transfer. A prohibition from granting the CIT was foreseen on the sole basis of a finding of a pending dispute between the club and the player regarding the termination of the contract.
After having terminated his contract with Lokomotiv Moscow, the French player Diarra had searched a new club interested in registering him, but this search had encountered difficulties due to the risk of application of the above FIFA rules and, in particular, the risk, for the new club, of being condemned jointly and severally to pay the compensation. In fact, despite having received an employment offer from the Belgian club Sporting Charleroi, the player had to renounce, lacking the conditions for the release of the CIT, as the dispute was still ongoing before the competent FIFA bodies. Finally, in 2015, the FIFA Dispute Resolution Chamber condemned the player to pay to Lokomotiv Moskow a compensation for breach of €10.5 million. The decision was upheld on appeal by the CAS.
Following these events, the player brought an action against FIFA and the National Federation before a Belgian civil court, in order to obtain compensation for the damage he claimed to have suffered due to the application of the FIFA provisions. He argued that (i) the application of such rules had infringed the right of free movement within the EU, granted to him by the Treaty, by preventing him from seeking new employment and from exercising his profession in a Member State other than his home state (ii) the provisions constituted an agreement restricting competition within the EU. Following FIFA’s defeat in the first instance, the dispute was referred to the Court of Appeal of Mons, Belgium. In 2022, the Belgian judges referred two separate questions to the Court of Justice for a preliminary ruling, relating to the compatibility of the FIFA rules in question, respectively with Articles 45 TFEU and 101 TFEU.
2. Compatibility assessment by ECJ.
In answering the questions, the ECJ expressly clarified the need to proceed with a separate assessment on the basis of each of Articles 101 and 45 TFEU. The Court justified this requirement by explaining that each of Articles 45 and 101 TFEU pursues its own objective and establishes its own conditions of application. T
Therefore their infringement, if established, does not entail the same consequences. These Treaty provisions can therefore apply simultaneously, giving rise to different outcomes, for example compatibility under Article 45 TFEU and incompatibility under Article 101 TFEU. In so doing, the Court contradicted, in part, the Opinion of Advocate General Macej Spunjar The Advocate General had noted that both provisions of the Treaty, although addressed to different actors, have as their objective the functioning of the internal market, and had warned of the risks to legal certainty of a dual application of the two rules in the same case.
The Court also held that both from an internal market and a competition standpoint, the appraisal of the sports rules had to be conducted taking into account the “undeniable specificity of the sporting activity”.
The Court established first of all that the provisions of the RSTP taken into consideration were incompatible with Article 45 TFEU as they constituted a clear obstacle to the free movement of footballers within the EU market. The enforcement of such rules would prevent a footballer from moving to a new club on the simple basis of the existence of a dispute between player and club. The financial, disciplinary and sporting risks that the rules created for the player himself and for the club of destination were in fact insurmountable for the purposes of the transfer. The Court however recognized that such sporting rules could be justified by the sporting objective of ensuring the stability of contracts between players and clubs and, consequently, of the “squads” that constituted the pool for the teams that clubs fielded in football competitions. Such objectives were indirectly aimed at pursuing the sporting objective of general interest of ensuring the regularity of professional football competitions based on merit. On the other hand, the sanctioning provisions of the rules appeared manifestly disproportionate to that objective also by virtue of their imbalance in favor of the interests of football clubs.
Secondly, from the point of view of the assessment of the FIFA provisions under competition law, the Court concluded that they constituted a decision of an association of undertakings which infringed “by object” Article 101 TFEU. Agreeing with the conclusions of Advocate General Macej Spunjar, it held that the rules brought about a serious restriction of competition between professional football clubs for the recruitment of talented players, i.e. an activity which constitutes one of the most relevant competitive parameters on the markets for professional football. From a pure competition standpoint, they had the objective of making it extremely difficult to recruit footballers who were no longer under contract with a competing club, but whose contract had allegedly been terminated without just cause by the player himself: they thus blocked competition between professional clubs in the acquisition of players.
Having regard to the assessment of the legal and factual economic context of the agreement, the Court analyzed the possible justification of the regulatory provisions in light of the specificity of the “product” that sports competitions between professional clubs constitute (as already stated in the judgments of December 2023)[1]. A FIFA regulation on the conditions under which professional football clubs can compose the teams participating in the competitions may be considered as legitimate, ensuring to a certain extent, the stability of the composition of the squads. This was the case of the prohibition of unilateral termination of employment contracts during the season, provided for by Article 16 RSTP. Conversely, the specificity of football did not justify “a general, drastic or permanent prohibition of any freedom to unilaterally recruit players already engaged by another club established in another Member State, or players whose employment contract has allegedly been terminated without just cause”. According to the Court, the rules in question, issued under the pretext of preventing aggressive practices of “poaching” of football players by the richest clubs, represent non-solicitation agreements. They bring about an artificial market partitioning both at national and local level, “to the advantage of all football clubs”.
The Court put forward that the classic mechanisms of contractual law, which provide for the club’s right to receive compensation in the event of a player’s non-performance (if necessary, also on the initiative of another football club) must be considered sufficient to guarantee the long-term presence of that player in the club, in accordance with the agreements made. They also guarantee “the functioning of the rules of the market between football clubs, which allow the clubs to proceed with the signing of the player at the end of the normal duration of the contract or before, in the event of the conclusion of an economic agreement between the transferor and transferee clubs”.
It is important to note that, pursuant to Article 101 TFEU, since the rules constituted a serious infringement of competition “by object”, the Court did not proceed to analyze their effects. Therefore, it was not possible to appraise the effects produced by the rules pursuant to the more favorable criteria provided for by Wouters and Meca Medina doctrines. Such an examination, in fact, could have been carried out in the light of the sporting objectives pursued by the RSTP rules, as well as of the proportionate nature of such rules.
3. Comment.
It is appropriate, first of all, to ask whether the Diarra judgment calls into question the compatibility of the whole transfer system itself, provided by the RSTP Regulation or whether it limits itself to establish the prohibition of the specific provisions which were the object of the referral by the national judges to the ECJ. Such rules, as examined, provided for particularly punitive consequences for the player in the event of termination of the contract without just cause.
It is possible to answer with a certain degree of certainty that the judgment, although particularly severe vis-à- vis the disputed provisions, in particular Article 17 FFTR, does not conclude that entire transfer system is incompatible with the EU provisions. Firstly, it does not challenge the general principle – on which the FFTR is based – that contracts between clubs and players shall be entered into for a fixed period of time and may not be unilaterally terminated by one of the parties in the absence of just cause. Indeed, point 145 of the Judgment, cited above, seems to confirm this principle. Furthermore, the Court reiterates that the specificity of sport and the economic context of professional football can justify transfer rules aimed at providing contractual stability and, consequently, the regularity of competitions. However, the rules must be consistent balanced and proportionate in order to pursue such objectives.
Finally, a general assessment of incompatibility of the transfer system would need to be grounded in detail, as it would raise the issue of a conflict with the previous case law of the Court established in the Barnard judgment. That judgment had considered that the transfer system providing a compensation in favor of the clubs that had borne the costs of training the player is lawful. Such compensation had to be provided by allocating a share of the transfer price, calculated according to objective and verifiable criteria (see Article 20 of the RSTP).
The second part of the reasoning, concerning the compatibility of said FIFA rules with the competition provisions, however, appears more critical vis-à-vis the transfer system. The judgement highlights several times that the FIFA rules bring about a foreclosure of competition because they prevent, or make more it more difficult, for a club, to acquire the services of players who are already under contract with another club. According to the Court, in the absence of such rules, there could be greater competition in the recruitment of players who are already signed by their respective clubs. The statement according to which footballers already signed in would constitute the “majority of the resources available to the clubs, compared to the total number of players” seems particularly controversial.
One may not infer from the above that competition between clubs in the procurement of footballers could take place legitimately in violation of the rules currently in force within FIFA, or that the judgement authorizes football players to terminate the contractual unilaterally and without cause before its expiry.
In fact, it could be objected that, at present, competition between clubs in the acquisition of talented players already takes place, though in compliance with the current FIFA rules, namely (1) through consensual transfers negotiated between clubs, as regards players under contract or (2) by direct hirings of players at the end of their contract. On another stance, the judgment does not clearly explain to what extent competition between clubs is distorted, given that the FFTR rules apply in an identical and uniform manner to all professional clubs. Such rules, uniformly applied, aim to maintain a certain sporting balance within football competitions, in accordance with the European sporting model, which was repeatedly recognized and supported by the EU institutions.
Such appears to be the position of the European Commission who had alleged in the proceedings that the restriction of competition should be understood as “by effect” and not “by object”. The Commission had in fact argued that the controversial rules were enforced only in the specific case of termination of the contract without just cause and “therefore have no impact on the possibility for clubs to compete freely by engaging players both upon the expiry of the contract binding them to their previous club and during the validity of that contract, provided that such an engagement is agreed upon by all interested parties and complies with the various temporal and substantive rules that govern the registration of players[2]“.
Other statements of the ECJ ruling seem to recognize the lawfulness of the current contractual system. Point 145 in particular sets out that the classic contractual regulations are sufficient to guarantee “the normal functioning of the rules of the market between clubs, which allow the latter, at the end of the normal duration of the contract, or before, in the event of the conclusion of a financial agreement between clubs, to proceed with the engagement of that player“.
4. Conclusions.
From a full reading of the judgment it can be concluded with reasonable certainty that the assessment of incompatibility concerns only the specific provisions that are set out in the request for a preliminary reference. On the other hand, the general principles of the FFTR Regulation do not constitute, in themselves, an infringement of the rules on competition or on the free movement of workers. However, the judgment leaves some margins of uncertainty for the judge of the referral, as the appraisals under respectively, Articles 45 and 101 TFUE does not seem to entirely coincide.
On the other hand, the Court, once again, clarifies that the rules governing the relationships between sports organizations and their affiliates must be transparent and, in all their aspects, predetermined, in order to be enforced on a case-by-case basis according to objective and uniform criteria. In this respect, it is foreseeable that the international football Organization shall revise the current rules by regulating in more detail Article 17 of the FFTR, in cooperation with the representatives of the parties involved.[3]
Finally, an assessment of the competitive restrictions in terms of the effects produced (as opposed to an infringement “by object”) would have made it possible to carry out a homogeneous analysis of the RSTP provisions based on the legitimacy of the sports objectives pursued and the proportionality of the measures adopted. It is submitted that such approach would have shed more clarity for the benefit of all industry actors.
[1] Referring to the case-law recently produced by the Grand Chamber in Superleague and FC Antwerp the Judgment recalls that federations in charge of a sporting discipline are entitled to adopt rules relating to the organisation of competitions, their proper conduct and the participation of sportsmen and women in such competitions. It is therefore legitimate for FIFA to adopt common rules to ensure the homogeneity and coordination of international competitions within an annual or seasonal calendar, in order to promote the holding of sporting, competitions based on equal opportunities and merit.
[2] Reference is made in particular to paragraph 50 of the Advocate General’s Opinion, which summarizes the Commission’s position.
[3] In this direction appears to head the FIFA press release available on the website of the organization https://inside.fifa.com/legal/football-regulatory/news/fifa-to-open-global-dialogue-on-article-17-of-the-regulations-on-the-status-and-transfer-of-players