Editor’s note: Tomáš Grell comes from Slovakia and is currently an LL.M. student in Public International Law at Leiden University. He contributes also to the work of the ASSER International Sports Law Centre as a part-time intern.

This is a follow-up contribution to my previous blog on FIFA's responsibility for human rights abuses in Qatar published last week. Whereas the previous part has examined the lawsuit filed with the Commercial Court of the Canton of Zurich ('Court') jointly by the Dutch trade union FNV, the Bangladeshi Free Trade Union Congress, the Bangladesh Building and Wood Workers Federation and the Bangladeshi citizen Nadim Shariful Alam ('Plaintiffs') against FIFA, this second part will focus on the Court's ruling dated 3 January 2017 ('Ruling').[1] 

Before embarking on a substantive analysis of the Ruling, it is worth recalling the Plaintiffs' claims. First, the Plaintiffs requested the Court to order FIFA to redress the ongoing human rights violations by pressing the responsible Qatari authorities to abolish the controversial kafala system and ensure that human rights and fundamental freedoms of migrant workers are preserved ('Claim 1'). Alternatively, they asked the Court merely to declare the unlawfulness of those human rights violations ('Claim 2'). As regards the monetary compensation, the Bangladeshi worker Nadim Shariful Alam sought damages of USD 4,000 and a satisfaction amounting to CHF 30,000 ('Claim 3').[2] The present blog attempts to provide a clear overview of the basis on which the Court rejected the Plaintiffs' claims and to draw a few concluding remarks therefrom.

The Court's reasoning 

The Court considers at the outset of the Ruling that the case at hand immediately proves to be ripe for a decision.[3] Therefore, FIFA had not been invited by the Court to express its views before the Ruling was issued. Pursuant to the Swiss Code of Civil Procedure ('ZPO'), a court shall verify ex officio the fulfilment of the relevant procedural requirements[4], including but not limited to unambiguity of claims[5] and jurisdiction ratione materiae.[6] The following subsections of this blog will take a brief look at how the Court appraised these two procedural requirements.

Unambiguity of the Plaintiffs' claims 

Should a certain claim be considered unambiguous in line with Swiss rules on civil procedure, it needs to be enforceable[7] and sufficiently specified.[8] In respect of Claim 1 (i.e. to oblige FIFA to press the competent Qatari authorities), the Court states that such claim would not be enforceable, since ''anyone who merely exerts pressure on something does not redress any susceptible ills.''[9] The Court is firmly convinced that only the sovereign State of Qatar is empowered to bring about a direct change in the country's human rights situation. In addition, the Court finds Claim 1 to be vague, because it does not specify the Qatari authorities to which FIFA should turn in order to ameliorate the humanitarian conditions for World Cup-related migrant workers.[10]

In respect of Claim 2 (i.e. to declare the illegality of the respective human rights violations), the Court is of the opinion that it does not meet the requirement of being sufficiently specified either. In particular, the Court argues that the Plaintiffs did not precisely identify what part of FIFA's conduct should be declared unlawful. According to the Court's line of reasoning, if Claim 2 were to be admitted, this would essentially make it impossible for FIFA to defend itself.[11] 

Jurisdiction ratione materiae     

Based on the above, the Court considers Claims 1 and 2 inadmissible on account of their ambiguity and does not analyse whether it may exercise jurisdiction ratione materiae over these claims. Nevertheless, in obiter dicta comments, it indicates that Claim 1 is more likely to fall within the ambit of public law.[12] More importantly, the Court does not rule out that a decision requiring a private association (i.e. FIFA) to interfere in domestic affairs of a sovereign State (i.e. Qatar) could be potentially deemed unlawful[13], and that such a decision would consequently negate the Plaintiffs' legitimate interest.[14]

Given that Claim 3 (i.e. Mr. Alam's request for monetary compensation) is clearly unequivocal, the Court proceeds to determine whether it has subject-matter jurisdiction to entertain such claim. The Commercial Courts in Switzerland are endowed with jurisdiction ratione materiae, insofar as a commercial dispute within the meaning of Article 6 (2) ZPO is concerned. A dispute is classified as commercial in accordance with the said provision, if both parties are registered with the Swiss Commercial Registry or an equivalent foreign registry and at least one of them exercises a commercial activity. Article 6 (3) ZPO further clarifies that in a situation where only the defendant is registered with the Swiss Commercial Registry or an equivalent foreign registry, the claimant is free to choose between the Commercial Court and the ordinary court.

Applied to the case at hand, Mr. Alam relies on Article 6 (3) ZPO, since he does not raise Claim 3 as a tradesman registered either with the Swiss Commercial Registry or an equivalent foreign (Bangladeshi) registry.[15] In this regard, the Court also notes that Mr. Alam is not engaged in any kind of commercial activity.[16] Perhaps surprisingly, the question of whether FIFA exercises a commercial activity in terms of Article 6 (2) (a) ZPO turns out to be less straightforward. Although FIFA generally conducts significant commercial activities, the Court underlines that ''the exercising of an alleged power to influence the political system and legal order of a foreign State and/or the neglect of such influence cannot – even interpreting the term broadly – be regarded as a commercial activity.''[17] Consequently, the Court concludes that, in the absence of a commercial dispute between Mr. Alam and FIFA, it is precluded from adjudicating on Claim 3.[18]

It follows from the above that the Court draws a rigid demarcation line between what it considers as being FIFA's commercial activities and its policy influence vis-à-vis World Cup-hosts. However, in practice, a large share of FIFA's revenue comes from FIFA-organized football tournaments, the most prominent being by far the FIFA World Cup. FIFA's Financial and Governance Report 2015 indicated that, insofar as the financial year 2015 is concerned, event-related revenue amounted to 85 % of FIFA's aggregate revenue (USD 973 million out of USD 1,152 million).[19] Especially the sale of broadcasting rights for the FIFA World Cup constitutes an irreplaceable source of FIFA's funding. Moreover, the practice shows also that FIFA is used to compel World Cup-hosts to modify their domestic laws for the benefit of tournament's sponsors, a textbook example thereof being the well-known 'Budweiser Law' which has already been discussed in the first part of this blog. Hence, it seems that FIFA's commercial activities and its policy influence vis-à-vis World Cup-hosts are much more intertwined in reality than envisaged by the Court.   

A way forward

Based on the aforementioned reasons, the Court dismissed the Plaintiffs' lawsuit in its entirety. The Plaintiffs were entitled to challenge the Ruling before the Swiss Federal Court within 30 days of its delivery.[20] For the time being, it remains unclear to us whether the Plaintiffs availed themselves of the right to appeal the Ruling or not.

It should be emphasized that the Ruling in question does not imply that FIFA generally cannot be held accountable for human rights abuses linked to the World Cup in Qatar. The Court rejected the Plaintiffs' claims on grounds of inadmissibility and lack of jurisdiction, without pronouncing itself on the merits of the case. In particular, the Court points out that the Plaintiffs' claims, as they were formulated, would not be enforceable, because FIFA is allegedly not in a position to force Qatar to amend the widely criticised labour laws.[21] That being said, the Court arguably turns a blind eye to the ever-increasing power of non-State actors in contemporary international relations.

Following the Court's line of reasoning, the only feasible way for World Cup-related migrant workers (and trade unions acting on their behalf) to pursue effective legal redress in Switzerland is to claim damages based solely on the illegality of FIFA's decision to select Qatar as World Cup-host. An affirmative response given by the Court to such claim would undoubtedly encourage hundreds of other migrant workers currently residing in Qatar to follow the same path. Nonetheless, absent an explicit legal obligation on the part of FIFA to press the relevant Qatari authorities, it remains questionable how much impact such a decision would have on the overall human rights situation in Qatar and on those migrant workers coming to the Gulf country in the future.

Further implications for transnational corporations

From a broader perspective, this case represents an example of a transnational private actor (i.e. FIFA) being sued in a State of its domicile (i.e. Switzerland) for damages resulting from human rights abuses which occurred in another country (i.e. Qatar). Taking into account FIFA's global operation and large-scale commercial activities, an analogy between FIFA and transnational corporations can be reasonably drawn.

The underlying purpose of suing a transnational entity in a State of its domicile is to evade judicial proceedings in developing countries which might prove to be largely inefficient.[22] In the United Kingdom, a group of Nigerian plaintiffs has recently sued Royal Dutch Shell plc ('RDS'), an Anglo-Dutch multinational oil company, and its Nigerian operating subsidiary Shell Petroleum Development Company of Nigeria Ltd ('SPDC'), for damages resulting from a severe pollution allegedly caused by the SPDC (and to a certain extent also the RDS) on Nigerian soil. On 26 January 2017, Mr. Justice Fraser, sitting as a Judge in the London High Court, dismissed the lawsuit in question on jurisdictional grounds.[23] Amnesty International has subsequently denounced the judgment by stating that it ''gives green light for corporations to profit from abuses overseas.'' However, less than a year ago, Mr. Justice Coulson, sitting as a Judge in the same court, decided to grant a forum for claims brought by Zambian citizens in relation to a massive water contamination in Zambia arising out of activities performed by Vedanta Resources plc ('Vedanta'), a global mining company with its headquarters in London, and its Zambian operating subsidiary Konkola Copper Mines plc.[24] Mr. Justice Coulson concluded that ''the claimants would almost certainly not get access to justice if these claims were pursued in Zambia.''[25] It has been suggested that Mr. Justice Coulson allowed the case to proceed in British courts particularly due to a substantial involvement of the parent company Vedanta with its Zambian subsidiary, as opposed to more independent regime established between the RDS and its Nigerian subsidiary SPDC. A decision on the merits is still pending.

The two cases referred to above demonstrate that extra-territorial human rights violations are usually triggered by a direct action of a foreign-incorporated subsidiary. Yet, FIFA's case differs in that the respective human rights violations emanate rather from a direct (in)action of a sovereign State - Qatar's unwillingness or inability to set aside its controversial labour laws. Alternatively, it could be argued that, by reason of its decision to award the World Cup to the Gulf country, FIFA is complicit in human rights violations triggered by Qatar's (in)action. That being said, is the difference between FIFA's case and the two cases mentioned above really substantial? In practice, is not the relationship between FIFA and Qatar akin to that of Vedanta and its Zambian subsidiary, with a high degree of direct involvement by FIFA? Be that as it may, the importance of the Ruling with respect to transnational corporations registered both in and outside Switzerland cannot be underestimated.

[1]      Ruling of the Commercial Court of the Canton of Zurich, HG160261-O, 3 January 2017. Parts of the Ruling which are quoted in this blog were translated from German by Prof. Liesbeth Zegveld (her team), who provided us with the English version of the Ruling.

[2]      Ibid., p. 2-3

[3]      Ibid., p. 4

[4]      See Art. 60 ZPO

[5]      Ruling of the Swiss Federal Supreme Court, BGE 137 III 617 E. 4.3

[6]      See Art. 59 (2) (b) ZPO

[7]      Ruling of the Swiss Federal Supreme Court, BGE 97 II 92

[8]      Supra note 6

[9]      Supra note 2, p. 6

[10]    Ibid., p. 7

[11]    Ibid., p. 8

[12]    Ibid., p. 9

[13]    Ibid.

[14]    According to Art. 59 (2) (a) ZPO, one of the preconditions for considering a civil lawsuit is the existence of plaintiff's legitimate interest

[15]    Supra note 2, p. 10

[16]    Ibid., p. 11

[17]    Ibid., p. 15

[18]    Ibid.

[19]    FIFA's Financial and Governance Report 2015, p. 17

[20]    Supra note 2, p. 18

[21]    Ibid., p. 6

[22]    E. Brabandere, 'Human Rights and Transnational Corporations: The Limits of Direct Corporate Responsibility', (2010) 4 (1) Human Rights and International Legal Discourse 66, at 76

[23]    Judgment rendered by Mr. Justice Fraser in the High Court of Justice, Queen's Bench Division, Technology and Construction Court, 2017 EWHC 89 (TCC), 26 January 2017

[24]    Judgment rendered by Mr. Justice Coulson in the High Court of Justice, Queen's Bench Division, Technology and Construction Court, 2016 EWHC 975 (TCC), 27 May 2016

[25]    Ibid., para. 198

Day 1: FIFA must regulate TPO, not ban it.
Day 2: Third-party entitlement to shares of transfer fees: problems and solutions
Day 3: The Impact of the TPO Ban on South American Football.
Day 4: Third Party Investment from a UK Perspective.
Day 5: Why FIFA's TPO ban is justified.

On 22 December 2014, FIFA officially introduced an amendment to its Regulations on the Status and Transfers of Players banning third-party ownership of players’ economic rights (TPO) in football. This decision to put a definitive end to the use of TPO in football is controversial, especially in countries where TPO is a mainstream financing mechanism for clubs, and has led the Portuguese and Spanish football leagues to launch a complaint in front of the European Commission, asking it to find the FIFA ban contrary to EU competition law.

Next week, we will feature a Blog Symposium discussing the FIFA TPO ban and its compatibility with EU competition law. We are proud and honoured to welcome contributions from both the complainant (the Spanish football league, La Liga) and the defendant (FIFA) and three renowned experts on TPO matters: Daniel Geey ( Competition lawyer at Fieldfisher, aka @FootballLaw), Ariel Reck (lawyer at Reck Sports law in Argentina, aka @arielreck) and Raffaele Poli (Social scientist and head of the CIES Football Observatory). The contributions will focus on different aspects of the functioning of TPO and on the impact and consequences of the ban.

Before the five blogs (starting with the complainant, La Liga, on Tuesday) will be published next week on a daily basis, we have the pleasure to kick off today with a light introduction to TPO. At the end of next week we will synthesise the debate and provide our preliminary take on the ban’s compatibility with EU law.

With this exciting Blog Symposium on one of the hottest sports law topics, we celebrate the first anniversary of the ASSER International Sports Law Blog (last year’s opening blog is here). We hope you will enjoy the read and feel free to comment! 

What is TPO? 

The use of the notion of TPO is often criticized because it misrepresents the situation it purposes to qualify. Indeed, no third-party owns a player, but only a share of the “economic right” linked to the transfer of the player’s “federative right”[1]. This is why, as you will see later next week, some of our authors refuse to use the term and have opted for alternative concepts, such as TPE (third-party entitlements) or TPI (third-party investment). Due to our legal obsession with the written word, we will personally hold onto TPO as it is the notion enshrined in FIFA’s regulations.

Beyond this semantic debate, a plurality of contractual constellations is captured under the umbrella term TPO. What is common to all cases is that a company or an individual provides a football club or a player with money in return for being entitled to a share of a player’s future transfer value. Thus, TPO is enshrined in a separate private law contract between a third-party and a club or a player. The plurality of TPO situations derives from this contractual basis. The parties are free under national private law to creatively draft those contracts as they see fit, each one of them being a specific type of TPO in itself. 

The main aim of the practice is to finance clubs. Often TPO is used to externalise the costs of recruiting a player, sometimes it is used to finance the general functioning of a club. However, the use of TPO is always intimately connected to the drive of professional clubs to diversify their funding sources in order to leverage their competitiveness in national and international competitions. Nowadays, a club like Atletico Madrid would probably not have been able to reach the final of the Champions League or win La Liga without having widespread recourse to it.

What are the problems with TPO?

We do not want to spoil too much of next week’s discussion, but we need to at least mention the possible problems that have been linked with the use of TPO and that might serve as a potential justification for banning it. TPO is first and foremost seen as an intrusion of a third-party in the life of a football club and a player with the potential for an illegitimate influence on the management of the team and the player’s career. The many conflicts of interest that might arise in the shadow of multiple, sometimes contradictory, investments are particularly feared. TPO is also seen as a dubious financing technique used to circumvent the new UEFA Financial Fair Play regulations and to prop up clubs that are chronically in financial troubles. Finally, there is a moral dimension. For example, UEFA president Michel Platini likened TPO to a type of modern “slavery”. In short, should it be acceptable for someone to own a share of an economic right personally attached to a player? Can a player be forced-sold on the basis of a TPO agreement? All these issues will be discussed extensively next week; they are central to the evaluation of the ban’s compatibility with EU competition law. 

Regulating TPO or banning it? That is the question!

TPO has been banned for some time in England, France and Poland, while it was authorized in the rest of the World. The English FA, profoundly traumatized by the Carlos Tévez case, decided to ban the practice as early as 2008. In other countries, particularly Spain, Portugal and South America, TPO has been, and still is, part of the “football culture”. For example, it is estimated that in Brazil’s top division 90% of the players are subjected to a TPO agreement. In these countries TPO is seen as a necessity for national football clubs - not only to compete with clubs in richer countries, but also for professional football to be financially viable. It was no surprise that the leagues and clubs of the abovementioned countries were against a blanket ban of TPO and would rather see it being regulated. They consistently expressed this opposition during the FIFA Congress in June 2014 and the working groups created by FIFA in September 2014 with the aim of tackling the issue. Nonetheless, on 26 September the FIFA executive committee took the decision to ban third-party ownership of players’ economic rights (TPO) with a short transitional period. Following this announcement, the FIFA circular fleshing out the legal details of the ban was published on 22 December. Article 18bis of the Regulations on the Status and Transfers of Players was amended and the Regulations now include a new Article 18ter.[2] These new articles came into force on 1 January 2015 and, after a transition period, TPO will officially be banned as of 1 May 2015.

This total ban raises many practical and legal questions. What is to become of the already signed TPO agreements? Will the ban be fully enforced? Or, will creative schemes arise to circumvent it? Was there a less restricting alternative to attain its objective? And…is it compatible with EU competition law? 

The debate is open!

[1] The legal construction underlying TPO is clearly explained (unfortunately only in Italian) by Leandro Cantamessa in his article, ‘Un Tema Semi-Nuovo di Diritto Sportivo Internazionale: la Third Party Ownership (TPO)’, in L’Europa e lo sport (a cura di) S. Bastianon, G. Giappichelli Editore, 2014, pp.123-134.

[2] Article 18bis(1) will now read : “No club shall enter into a contract which enables the counter club/counter clubs, and vice versa, or any third party to acquire the ability to influence in employment and transfer-related matter its independence, its policies or the performance of its teams.”

Article 18ter:

1.      No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation.

2.      The interdiction as per paragraph 1 comes into force on 1 May 2015.

3.      Agreements covered by paragraph 1 which predate 1 May 2015 may continue to be in place until their contractual expiration. However, their duration may not be extended.

4.      The validity of any agreement covered by paragraph 1 signed between 1 January 2015 and 30 April 2015 may not have a contractual duration of more than 1 year beyond the effective date.

5.      By the end of April 2015, all existing agreements covered by paragraph 1 need to be recorded within the Transfer Matching System (TMS). All clubs that have signed such agreements are required to upload them in their entirety, including possible annexes or amendments, in TMS, specifying the details of the third party concerned, the full name of the player as well as the duration of the agreement.

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