The world of professional cycling and doping have been closely intertwined for many years. Cycling’s International governing Body, Union Cycliste Internationale (UCI), is currently trying to clean up the image of the sport and strengthen its credibility. In order to achieve this goal, in January 2014 the UCI established the Cycling Independent Reform Commission (CIRC) “to conduct a wide ranging independent investigation into the causes of the pattern of doping that developed within cycling and allegations which implicate the UCI and other governing bodies and officials over ineffective investigation of such doping practices.”[1] The final report was submitted to the UCI President on 26 February 2015 and published on the UCI website on 9 March 2015. The report outlines the history of the relationship between cycling and doping throughout the years. Furthermore, it scrutinizes the role of the UCI during the years in which doping usage was at its maximum and addresses the allegations made against the UCI, including allegations of corruption, bad governance, as well as failure to apply or enforce its own anti-doping rules. Finally, the report turns to the state of doping in cycling today, before listing some of the key practical recommendations.[2]

Since the day of publication, articles and commentaries (here and here) on the report have been burgeoning and many of the stakeholders have expressed their views (here and here). However, given the fact that the report is over 200 pages long, commentators could only focus on a limited number of aspects of the report, or only take into account the position of a few stakeholders. In the following two blogs we will try to give a comprehensive overview of the report in a synthetic fashion.

This first blogpost will focus on the relevant findings and recommendations of the report. In continuation, a second blogpost will address the reforms engaged by the UCI and other long and short term consequences the report could have on professional cycling. Will the recommendations lead to a different governing structure within the UCI, or will the report fundamentally change the way the UCI and other sport governing bodies deal with the doping problem? 

Relevant findings

Different forms of doping have been around since the earliest days of cycling (1890’s), but it was the introduction of Erythropoietin, or EPO, in the professional peloton that brought the problem of doping to new levels. Taking it enabled an athlete to gain a significant competitive advantage that could range between 10 and 15%.By using EPO, a rider is able to increase the blood’s oxygen carrying capacity, to stimulate muscle growth and aid muscle recovery.[3] However, the use of EPO thickens the blood, and race dehydration concentrates the blood further, which can cause clotting, stroke or heart failure.[4] In fact, there is widespread suspicion that EPO caused the deaths of up to 20 cyclists between 1987 and 1990. Even though cyclists started using forms of EPO as far back as the 1980’s, it was not until 2001 that a reliable detection test for EPO was developed. This meant that professional cyclists were able to use EPO for over a decade with very little chance of getting caught. The exact percentage of professional cyclist using EPO remains unknown, but it is very likely that this figure was well above 50%. “Doping became the norm in the peloton, not only to increase performance but also just to keep up with the rest of the peloton”.[5]

One of the main findings of the report is the revelation that the UCI’s past policy regarding anti-doping was primarily aimed at protecting the health and safety of the riders and not trying to curtail the use of doping all together from (professional) cycling. This is especially evident from the way it chose to combat EPO. In 1997, UCI introduced the “No Start Rule”. Under the rule, the UCI carried out blood tests before and during competition and any rider with a haematocrit reading higher than 50% (when natural levels are normally between 40 and 45%) was deemed unfit for competition and prevented from competing for 15 days from the date of the test.[6] The UCI stated that the purpose of this rule was to protect riders’ health and safety and to prevent further deaths from EPO. It was not an anti-doping rule, but a health and safety measure. However, the problem with this measure is that it allowed the use of EPO, and therefore doping, to a certain extent. Furthermore, given that the advantage gained from EPO was so significant, the riders were in fact obliged to use EPO simply to keep up, let alone to win.

In order to understand the UCI’s position in this matter, the report explains in full detail the facts that led up to this situation. In doing so, it also addressed the questions whether UCI officials directly contributed to the development of a culture of doping in cycling.[7] It has to be borne in mind that as an umbrella sporting organisation, the UCI was for many years an institution with a minimal structure and no real power. When Hein Verbruggen became president of the UCI in 1991, the UCI had less than 15 employees and very little revenue. The UCI itself does not organise the major cycling event such as the Tour de France. In fact, the organisation that organises the Tour (Amaury Sport Organization) enjoys a dominant position and is economically much more powerful than UCI.[8]

With the inclusion of professional cycling in the Olympic games of 1996, revenue redistributed by the IOC became substantial, while the proceeds derived from TV rights increased dramatically for the UCI. To further boost its revenues, the UCI needed a “big star” to attract broadcasters and sponsors.[9] Lance Armstrong, being outspoken, charismatic and, above all, a cancer survivor, was exactly the type of “big star” it was looking for. The timing of Armstrong’s comeback in professional cycling (1998/99) could not have been better, since the image of cycling and its main event, the Tour de France, were at an all-time low after the “Festina affair” of 1998.[10]

The report shows well the UCI’s conflict of interest during the Tour de France of 1999: On the one hand, it wanted to eliminate doping from the sport, especially after the “Festina affair” a year earlier; on the other hand, it wanted to make the sport more appealing to the public and for that it required the presence and victory of a hero: Lance Armstrong. The practical meaning of this conflict of interest became apparent during that same Tour. Armstrong was tested positive four times for corticosteroids that was forbidden under the UCI Anti-Doping Rules.[11] Armstrong justified the positive tests by submitting a medical certificate that was provided after the tests. According to the UCI’s own rules, the medical certificates should have been handed in prior to the tests. Had the UCI applied its rules, Armstrong would have received a sanction for violating anti-doping rules, which would have resulted in him not being allowed to win the Tour of 1999, the first of his seven Tour victories. [12]  

Apart from UCI decisions concerning Armstrong, it becomes evident from the report that the UCI took a number of controversial decisions regarding doping violations which, in hindsight, should have been dealt with differently. However, to answer the question why the UCI made these decisions, it is necessary to understand how the UCI made these decisions. As mentioned above, it is clear that the conflict of interest regarding the UCI’s objectives was a prime factor in the choices made. However, it was also the UCI’s governing structure that allowed for such decisions, especially the way the UCI dealt with its anti-doping policy.

In 1992, the UCI set up an Anti-Doping Commission (ADC). The ADC was headed originally by a lawyer, Werner Goehner. He was succeeded by the ADC’s first Vice-president, Lon Schattenberg, an occupational therapist, in 2003. It has been reported that Schattenberg de facto ran the ADC from the start. Furthermore, even though the ADC was composed of three members in total, it was Schattenberg who effectively ran the whole Commission. The conflict of interest is further substantiated in the report when it stresses that the focus of Schattenberg’s work was on health concerns rather than on disciplinary aspects of doping. His view was that trying to catch the doped cyclists amounted to a witch hunt.[13] In other words, between 1992 and 2006, most, if not all, of the Anti-Doping Commission’s decisions were taken by one man whose primary aim was to protect the riders’ health rather than catching and sanctioning the doped cyclists.

Similarly, the report emphasised the prime role of the UCI President Hein Verbruggen (1991-2005) as regards the UCI’s governance structure. Due to the passive nature of the large majority of the UCI’s governing bodies, the president had a wide range of executive powers. In the CIRC’s view this led to serious problems of governance and deficiencies in internal control processes. By way of example, Verbruggen, with the agreement of the majority of his colleagues on the Management Committee, chose his successor (Pat McQuaid) and managed to secure his election.[14] Moreover, even though Schattenberg’s ADC was formally considered independent, Hein Verbruggen was not only informed of all relevant anti-doping matters, he also interfered in the decision-making of the anti-doping Commission. As is stated in the KPMG report on UCI Governance and Independence Assessment (2013), “(t)he President has taken many decisions alone or based on external advice during critical times…Critically important matters…are taken solely by the President.”[15] 

The report further notes that Mr. Verbruggen was constantly in conflict with WADA and its leadership. The importance of these conflicts when answering the question how the UCI made its decisions should not be underestimated. The first WADA Code, implemented in 2004, included the standard sanction of two years of ineligibility in case of a first Anti-Doping violation. Nonetheless, the UCI (read: Verbruggen) opposed the standard sanction and lobbied for much lower sanctions. It should be noted that, as the “new kid on the block”, the role and power of WADA in relation to sports federations in general and the UCI in particular was unclear. According to the UCI, WADA’s function was to assist sports federations, but not to interfere with internal matters or criticise their governance or anti-doping policy. Any interference or criticism by WADA in relation to UCI’s anti-doping policy was perceived by the UCI leadership as completely unacceptable and seemed to have been interpreted as a personal attack.[16]  

Conclusion

The goal of this report was to investigate the causes of the pattern of doping that developed within professional cycling over the last decades, especially taking into account the role of the UCI, and to recommend better ways of tackling doping problems in the future.

According to the report, the UCI’s role in the widespread use of doping in cycling was fundamental in several ways. Firstly, during the heydays of EPO the UCI was primarily focused on protecting the health and safety of the riders, rather than trying to eliminate the use EPO in the peloton. Secondly, the UCI’s objective of forming professional cycling into a global money-making sport had an impact on enforcing anti-doping rules. This became especially evident after Lance Armstrong’s comeback. Even though Armstrong took forbidden substances during the Tour de France of 1999, the UCI decided not to sanction him. Armstrong was the “big star” the UCI needed to further increase revenues, and a sanction would have been counterproductive in this regard. A third major element that allowed for doping to flourish was the UCI’s governing structure. The executive dominance of the UCI President Hein Verbruggen caused great deficiencies in the UCI’s internal control process. Moreover, the lack of collaboration with WADA was instrumental in delaying the full implementation of the WADA Code. 

The Report is in interesting plunge in the world of cycling at the turn of the century. It highlights the systematic failure of sports organisation to truly engage in the fight against doping. Indeed, both the fundamental objectives and the basic governance structure of the UCI seem to have run counter any attempt to deal efficiently with the recourse to doping of the cycling stars. This is a potent lesson, for doping seems to be as much a product of the institutional and economical system in place in a particular sport as of the malign intentions of the athletes. 

Having deciphered the main reasons that caused the pattern of doping, the report consequently outlined a set of recommendations. An analysis of these recommendation as well as the reforms the UCI has already undertaken shall be discussed in a second blog.

[1] CIRC Report to the President of the UCI, page 6

[2] Ibid

[3] CIRC Report to the President of the UCI, page 57

[4] Ibid, page 33

[5] Ibid, page 41

[6] Ibid, page 35-36, a haematocrit reading measures the percentage of red blood cells in blood. As EPO stimulates the production of red blood cells, an elevated haematocrit reading above 50% is “a strong indication of EPO use”.

[7] Ibid, page 90

[8] Ibid, page 91

[9] Ibid, page 91-92

[10] The affair concerned a large haul of doping products found in a car of the Festina cycling team just before the start of the Tour de France of 1998. The investigation revealed systematic doping, and suspicion was raised that there may have been a widespread network of doping involving many teams of the Tour de France.

[11] These rules state that “the use of corticosteroids is prohibited, except when used for topical application (auricular, opthmalogical or dermatological) inhalations (asthma and allergic rhinitis) and local or intra-articular injections. Such forms of utilisations can be proved with a medical prescription”.

[12] CIRC Report to the President of the UCI, page 171-173

[13] Ibid, pages 98-100

[14] Ibid, page 97

[15] Ibid, pages 104-105

[16] Ibid, page 108

It’s been a long wait, but they’re finally here! On Monday, the European Commission released its decisions regarding State aid to seven Spanish professional football clubs (Real Madrid on two occasions) and five Dutch professional football clubs. The decisions mark the end of the formal investigations, which were opened in 2013. The Commission decided as follows: no State aid to PSV Eindhoven (1); compatible aid to the Dutch clubs FC Den Bosch, MVV Maastricht, NEC Nijmegen and Willem II (2); and incompatible aid granted to the Spanish football clubs Real Madrid, FC Barcelona, Valencia CF, Athletic Bilbao, Atlético Osasuna, Elche and Hércules (3). 

The recovery decisions in particular are truly historic. The rules on State aid have existed since the foundation of the European Economic Community in 1958, but it is the very first time that professional football clubs have been ordered to repay aid received from (local) public authorities.[1] In a way, these decisions complete a development set in motion with the Walrave and Koch ruling of 1974, where the CJEU held that professional sporting activity, and therefore also football, is subject to EU law. The landmark Bosman case of 1995 proved to be of great significance as regards free movement of (professional) athletes and the Meca-Medina case of 2006 settled that EU competition rules were equally applicable to the regulatory activity of sport. The fact that the first ever State aid recovery decision concerns major clubs like Real Madrid, FC Barcelona and Valencia, give the decisions extra bite. Therefore, this blog post will focus primarily on the negative/recovery decisions[2], their consequences and the legal remedies available to the parties involved.[3]

The launch of the formal investigations

The three Commission decisions to launch formal State aid investigations into alleged aid granted to Spanish professional football clubs were all made public on 18 December 2013. The first investigation concerned “possible privileges regarding corporate taxation of Real Madrid, FC Barcelona, Athletic Bilbao, and Atlético Osasuna. These four clubs are exempted from the general obligation for professional football clubs to convert into sport limited companies. The effect of this exemption is that these clubs enjoy a preferential corporate tax rate of 25% instead of 30% applicable to sport limited companies.” The second investigation involved Real Madrid specifically, and was opened after the Commission expressed its doubts over “a very advantageous real property swap with the City of Madrid. This swap was based on a re-evaluation of a plot of land at a value of €22.7 million, instead of its earlier supposed value in 1998 of €595 thousand”. The third investigation dealt with three clubs from the autonomous region of Valencia: Valencia CF, Elche FC and Hércules CF. In this case, the Commission decided to investigate State guarantees by the Valencia Institute of Finance for a bank loans of (1) €75 million to Valencia CF; (2) €14 million to Elche CF; and (3) €18 million to Hércules CF. The Real Madrid real property swap case and the Valencia CF case have previously been analyzed on this blog (here, here and here).[4]

Purely based on the decisions to open formal investigations, there was little doubt as to whether the criteria of Article 107(1) were fulfilled[5]: The football clubs in question received a selective economic advantage deriving from a measure taken by public authorities and which involved a transfer of State resources. This advantage has affected trade and threatens to distort the internal market. What remained unclear was whether the Member States could convince the Commission to declare the State aid compatible under Article 107(3)c) TFEU,[6] and, if not, how high the recovery would be. The complexity of the Real Madrid case in particular led to uncertainty as to whether a possible recovery decision would merely imply Real Madrid having to pay a lump sum to the city of Madrid, or whether one or more land transactions would have to be undone.[7]

Last but not least, it should be kept in mind that ordering recovery of State aid is a politically sensitive decision. Given that State aid investigations are always directed at the Member State (with limited room for interested party intervention, including the beneficiary), such proceedings are inherently political. Furthermore, from analyzing Commission speeches and policy documents, such as the recently published Report on Competition Policy 2015, one will reach the conclusion that actively enforcing EU competition law, including State aid law, in sport, is not a Commission priority. Any recovery decision in the professional sport sector, therefore, would need to serve as a blueprint for future cases: it should prevent other public authorities to grant State aid to professional sport clubs in contravention of State aid rules. 

The Commission’s press release ordering the State aid recovery

Though the press release does not provide all the facts, it includes many interesting elements. First of all, the privileges regarding corporate taxation of Real Madrid, FC Barcelona, Athletic Bilbao, and Atlético Osasuna were found to be incompatible State aid, and each club has to repay between €0 and €5 million depending on what the Spanish authorities determine in the recovery process. The press release further states that Spain adjusted its legislation on corporate taxation to end this discriminatory treatment. This last point is especially important, because it demonstrates that the “bite” of State aid could exceed a mere recovery order. Simply opening a formal investigation into this issue has made the Spanish authorities reconsider its corporate taxation and adjust it accordingly to prevent future State aid being granted. Moreover, tackling unfair corporate tax advantages has been a priority for the Commission for the last few years.[8]

As regards Real Madrid’s advantageous real property swap with the City of Madrid, the Commission concluded that the football club was only entitled to a compensation of €4.3 million, so that Real Madrid obtained an advantage of €18.4 million. In other words, the city of Madrid needs to recover €18.4 million from Real Madrid. Although this calculation seems rather straightforward, it should be noted that the press release only refers to the re-valuation of one of the lands transferred. This means that only one land transaction was found to be incompatible with EU State aid rules, while all the land transactions remain valid.

In the third and final decision the Commission determined that Valencia, Hércules and Elche will need to repay €20.4 million, €6.1 million and €3.7 million respectively. The Commission acknowledged that the three clubs were in financial difficulties when the public institution Valencia Institute of Finance, placed a public guarantee on bank loans provided to the football clubs, but did not find this difficulties sufficiently severe to declare the aid compatible with the internal market.[9] The fact that the clubs paid no adequate remuneration for the guarantees, and that the State financing was not linked to any restructuring plan, made the Commission decide to order the recovery of that aid. The arguments brought forward by the Spanish authorities defending the State aid measure will not be known until the non-confidential version of the decision is published in a few months. What we do know is that at the time the formal investigation was launched in December 2013, the Spanish authorities had not communicated any restructuring or liquidation plan to the Commission, nor were any of the conditions met for authorizing restructuring aid under the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, even though the three clubs were in severe financial difficulties.[10]  

The consequences of the negative and recovery decisions

It is important to make a distinction between negative decisions and recovery decisions.[11] They are, in fact, two separate decisions. As can be read in Articles 9(5) and 16(1) of the State Aid Procedural Regulations 2015/1589, the negative decision precedes the recovery decision. Under a negative decision, the Commission decides that the aid shall not be put into effect for not being compatible with the internal market. Any plans to grant future State aid under that measure will automatically be halted. The recovery decision can only be granted if the aid, or part of the aid, has been granted in the past, such as in the cases at hand.[12] The decision orders the Member State concerned to take all necessary measures to recover the aid from the beneficiary.[13] As can be read in the Commission’s Recovery Notice, the main objective of the recovery order is to re-establish the situation existing before the aid was unlawfully granted.[14] The recovery, which is subject to a limitation period of 10 years[15], “shall be effected without delay and in accordance with the procedures under the national law of the Member State concerned”.[16]  This means that it is up to Spain to decide on the procedure of how and when it recovers the aid, in accordance with its own national law.

Since the negative and recovery decisions are addressed to Spain, it may institute proceedings against the negative decision and/or the recovery decision, pursuant to Article 263 TFEU. The Spanish central government has not yet announced its position regarding the decisions or whether it plans to launch an appeal. The city of Madrid and the autonomous region of Valencia on the other hand, have both declared that they wish to recuperate the State aid granted to the respective football clubs.[17] Article 263 TFEU also allows any natural or legal person to challenge a Commission decision that is of direct and individual concern to them. In other words, now that for example Real Madrid is ordered to repay €18.4 million to Spain, it is directly affected by the recovery decision and has already publicly stated that it will initiate proceedings against the Commission.

The General Court shall have jurisdiction to hear and determine at first instance actions referred to in Article 263 TFEU. A decision by the General Court may be subject to a right of appeal to the Court of Justice.[18] Contrary to the General Court, the Court of Justice could decide, under Article 278 TFEU, that the recovery order should be suspended.   

Conclusion

The negative and recovery decisions could have consequences for the relationship between the Spanish State (particularly local governments) and professional football. The practices now condemned by the European Commission are known to have been taking place for decades. A recently published report by Transparency International, for example, discusses how Spanish football clubs, in collaboration with the local governments, would turn to urban speculation with the objective of making easy money. The report used an agreement between the city of Murcia and its local football club Real Murcia as an example. The Real Madrid case, which is also about urban speculation, is another example of this standardized practice in Spain. The fact that the Commission orders recovery of aid from the richest and most successful club in Spain, should send a message to the smaller clubs and cities that urban/ land agreements between clubs and public authorities are not unconditionally accepted.

In addition, the decisions will especially be tough for Valencia, Hércules and Elche, three clubs known to be in financial difficulties already. Valencia has already announced that it “reserves the right to appeal to the European Court of Justice”, but one wonders whether it is worth the risk, considering the legal fees attached to such an appeal. On the other hand, the public authorities will realize that granting State aid to professional football clubs can bounce back hard, if it is not granted pursuant an objective of general interest and in a transparent manner. Furthermore, rescue aid, such as in Valencia, cannot be granted without implementing a restructuring plan at the same time. A proper restructuring plan will help limit the possibility of the club returning to financial difficulties in the future. Finally, clubs too must be aware that they must live “within their own means” and that they cannot always depend on local public institutions to bail them out of there financial troubles.   

[1] For the discussion on why there was (and still is) so little State aid enforcement in the professional sport/football sector, see Ben Van Rompuy and Oskar van Maren, “EU Control of State Aid to Professional Sport: Why Now?” In: “The Legacy of Bosman. Revisiting the relationship between EU law and sport”, T.M.C. Asser Press, 2016.

[2] The distinction between a negative decision and a recovery decision will be explained further below.

[3] A specific blog post on the State aid decision concerning the Dutch football clubs will be made shortly.

[4] For an even more detailed (factual) analysis of the Real Madrid case, see: Oskar van Maren, “The Real Madrid case: A State aid case (un)like any other?” 11 Competition Law Review 1:83-108.

[5] Even though Real Madrid has always insisted the real property swap was not economically advantageous, since the value of the real property was calculated in accordance with market conditions. Supra note 4.

[6] Under this provision, State aid that facilitates the development of certain activities or of certain economic areas, where such aid does not adversely affects trading conditions to an extent contrary to the common interest, may be considered compatible with the internal market.

[7] It is a matter of discussion whether the Real Madrid case concerns only the land transaction of July 2011, or whether a second land transaction of November 2011 should be included in the same investigation. Supra, note 4.

[8] Report from the Commission COM(2016) 313 of 15 June 2016 to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions – Report on Competition Policy 2015, pages 12-13.

[9] Contrary to the State aid granted to FC Den Bosch, MVV, Willem II and NEC, where the Commission determined that the aid was granted in line with the 2004 Guidelines on State aid for rescuing and restructuring firms in difficulty.

[10] Commission decision of 18 December 2013 SA.36387 – Alleged aid in favour of three Valencia football clubs, para.44.

[11] A third option, as stipulated in Article 9(3) of the State aid Procedural Regulation, is the positive decision. This is a decision where the Commission decides that the aid is compatible with the internal market. The decision allowing the aid to the Dutch clubs is an example of a positive decision. Challenging a positive decision under Article 263 TFEU is also possible for the Member State concerned, should it wish to do so.

[12] The aid is, for example, not granted yet when the Member State simply notifies the Commission of its plan grant State aid. Should the Commission declare the plan to grant State aid incompatible with the internal market, then there will be no need to order recovery as well.

[13] The Commission, however, can decide against a recovery order if it believes that such a recovery would be contrary to a principle of Union law. This gives the Commission the possibility to declare a State aid measure incompatible with EU law on the one hand, but not order recovery of that aid on the other.

[14] Notice from the Commission (2007/C 272/05) of 15 November 2007 Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid, point 2.2.

[15] Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules fort the application of Article 108 of the Treaty on the Functioning of the European Union, Article 17(1).

[16] Ibid., Article 16(3).

[17] It is worth mentioning that at the time the State aid was granted, the Spanish Conservative Party, PP, was in power in Madrid as well as in the autonomous region of Valencia. These two local governments are nowadays formed by opposition parties. On the other hand, the PP is still the biggest political party at national level.

[18] Consolidated version of the Treaty on the Functioning of the European Union C 326/47 of 26 October 2010, Article 256(1).