Could we see another competition law tackle by the Court of Justice of the EU on football governing bodies?

An opinion, examining the compatibility of the FIFA transfer rules with EU competition rules, freedom of movement of workers and the Charter of Fundamental Rights, was handed down by Advocate General (AG) Maciej Szpunar of the CJEU on 30 April 2024. Whilst this is only the AG’s opinion and not yet the decision of the EU Court of Justice (CJEU or the ‘Court’), we believe it is likely that the Court will follow the AG’s reasoning and conclusions.

The opinion determines that ‘there can be little doubt as to the restrictive nature of all the contested provisions’[1] of the FIFA rules on the transfer of players and that these rules should only be able to apply in very specific circumstances.

It suggests a continuation of the recent CJEU’s approach whereby a critical and relatively new ‘competition and anti-trust’ light is being shone on the sports sector’s regulations, including on football governance.

In the past, supra-national sports federations have been held out to be somewhat untouchable and beyond scrutiny. These non-elected bodies have rather surprisingly, up until now, benefitted from a certain level of leniency from the courts, including the CJEU.

However, the tide seems to be changing rapidly and a CJEU judgment adopting the AG’s opinion, would have implications for, not only, clubs, national and international football federations but also, more widely, sports federations throughout the world.

Background to the case

Football player, Lassana Diarra, brought a case before the Belgian courts against FIFA and the Royal Belgian Football Association (RBFA) for damages and loss of earnings of €6 million as a result of certain FIFA ‘Regulations on the Status and the Transfer of Players’ (RSTP) rules. Mr Diarra won his case which was then appealed before the Court of Appeal of Mons. The Court of Appeal proceeded to seek guidance from the CJEU on the application of EU competition law to the case.

Two of the RSTP rules are being scrutinised

Firstly, Article 17 and more specifically sections 17(1), 17(2) and 17(4) of the RSTP provide that where a football player terminates his/her contract with a club without just cause, the player and his/her new club shall be held jointly and severally liable for payment of compensation for this breach of contract (Rule 1). The club will also be banned from registering any new players both internationally and nationally. The rationale for this is that ‘any club signing a professional who has terminated his contract without just cause has induced that professional to commit a breach.’

Secondly, under Article 9(1) of the RSTP and Article 8.2(7) of Annexe 3 to the RSTP, a former club shall not deliver an International Transfer Certificate if a contractual dispute remains ongoing (Rule 2).

In 2014, Mr Diarra sought to leave the Russian football club Lokomotiv Moscow after salary cuts. The club responded by filing an action under the RSTP rules for termination without ‘just cause’.

Mr Diarra then struggled to find a new club which would take him on in light of the onerous repercussions of liability under Rule 1. The Belgian club Sporting Charleroi offered Mr Diarra a position subject to FIFA and the RBFA’s assurance that it would not be liable for the payments and that Mr Diarra would be able to be registered in official competitions – FIFA and the RBFA refused to give this assurance. As a result, Sporting Charleroi withdrew its offer and Mr Diarra ultimately ended up signing with Olympique de Marseille in July 2015.

Mr Diarra’s lawyers argued that the former suffered a loss as a result of FIFA’s and the RBFA’s refusal.

Commentary on the opinion

The AG’s examination of whether the rules should be seen as restriction of competition by object or by effect (article 101(1) TFEU) sides firmly with the former, explicitly writing: ‘I do not see how this cannot be equated with a restriction of competition by object [indeed] these elements are strong indications that there is a restriction of competition by object.’[2]

This is highly significant as, if a provision is deemed to be anti-competitive by object, it is considered by its very nature to be anti-competitive and, as a result, market effects do not need to be considered.

It is only where one of the exemptions under article 101(3) TFEU apply that the provision can be saved.

Nevertheless, in this opinion, the AG concludes decisively that the criteria for any exemptions under article 101(3) TFEU ‘are clearly not met’ here[3] – in other words, it is a direct red card!

Thus, should the CJEU follow the AG’s opinion that Rule 1 and/or Rule 2 are restrictions of competition by object, article 101(1) TFEU would entirely preclude their application.

The AG argues in his opinion that ‘the contested provisions [the RSTP] are designed in such a way as to have a deterrent effect and send a chill, down each player’s spine’[4] and therefore ‘by their very nature […] limit the possibility for players to switch clubs and, conversely, for (new) clubs to hire players.’

The AG explicitly accepts and follows the Royal Antwerp December 2023 decision of the CJEU Grand Chamber which recognised that the recruitment of talented players constitutes ‘one of the essential parameters of the competition in which football clubs may engage’[5] which makes ‘players the most important ‘factor of production’ for clubs’[6].

Further, considering the position in the event that the CJEU disagrees with him and considers that Rules 1 and/or 2 are restrictions by effect (rather than by object) the AG sets out the specific circumstances in which the restrictions under Rules 1 and/or 2 could be justified[7]:

• Article 101 TFEU (prohibition of anti-competitive behaviour) should be interpreted as precluding Rule 1 and Rule 2 if the implementation of those rules cumulatively (i) are liable to affect trade between Member States and (ii) restrict competition between professional football clubs. However, if the rules are considered to be restrictions by effect (and not by object), Rule 1 and Rule 2 may be justified where such restrictions are convincingly proven to be necessary for the pursuit of one or more objectives which are legitimate and strictly necessary to achieve these objectives.
• Article 45 TFEU (freedom of movement of workers within the Union) should be interpreted as precluding Rule 1, unless it can be proven that it is genuinely possible, within a reasonable time, not to apply this principle if it is established that the new club was not involved in the unjustified termination of the player’s contract; and
• Article 45 TFEU should be interpreted as precluding Rule 2, except where it can be proven that effective, genuine and expeditious provisional measures can be taken where there has been a mere allegation that a player has not complied with the terms of the contract.

There are still a number of practical clarifications needed with regards to these ‘specific circumstances’.

For example, we consider that, hypothetically, provisional measures for Rule 2 could take the form of a temporary certificate until a dispute is resolved. However, at this stage, it is unclear what would constitute ‘effective, genuine, and expeditious provisional measures’ in such circumstances.

Further, it appears that the burden of proof, for establishing the satisfaction of the above circumstances, would fall on the sport federation, in this case FIFA. The AG places the level of evidence required at a high standard: arguments must be ‘convincing’ and it must be proven that measures will have a ‘genuine’ effect. However, it is unclear from the opinion at what stage such evidence would have to be put forward.

Observations and implications

The implications of a win for Mr Diarra would be wide ranging. The AG states that his conclusions apply to rules ‘adopted by an association responsible for organising football competitions at world level and implemented by both that association and its member national football associations’[8]. Thus, any final judgment which takes a similar stance, will have implications for federations and clubs at world level and at a national level.

From a social standpoint, Mr Diarra’s lawyers, Jean-Louis Dupont and Martin Hissel commented in a joint statement that ‘this will put an end to the degrading practice of commoditising players’ [9] and that should a favourable judgement be given ‘this would finally enable the social partners, players’ unions and clubs’ unions, to regulate their labour/employment laws’[10].

Recent cases, and this new opinion, demonstrate at the very least that the field has been opened for litigants wishing to challenge the regulations of sports federations and that competition law may be an effective angle to use.