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The FIFA Business – Part 2 - Where is the money going? By Antoine Duval and Giandonato Marino

Our first report on the FIFA business dealt with FIFA’s revenues and highlighted their impressive rise and progressive diversification. In parallel to this growth of FIFA’s income, it is quite natural that its expenses have been following a similar path (see Graph 1). However, as we will see FIFA makes it sometimes very difficult to identify precisely where the money is going. Nonetheless, this is precisely what we wish to tackle in this post, and to do so we will rely on the FIFA Financial reports over the last 10 years.


 

Graph 1: FIFA Expenses in USD million (adjusted for inflation), 2003-2013.


The question of the final destination of FIFA’s money is a contentious one. Many allege that FIFA executives may be profiting directly or indirectly from the revenues amassed. In order to better understand to what end FIFA’s money is disbursed, we have gathered the data contained in FIFA’s Financial Reports over a 10 year time frame and we have adjusted the numbers for inflation, thus easing any comparison. This data is synthetized in Graphs 2 and 3.

Graph 2 provides a comparative overview of the evolution of the expenses of FIFA in absolute numbers. This shows that event-related and personnel expenses (to a lesser extent also other operating costs) have been rising, while FIFA’s expenses on development and committees and congresses have remained more or less stable. Graph 3 confirms that the evolution of FIFA’s expenses is not linear, but general lessons can be drawn. The event-related expenses have been representing more than 50% of FIFA’s expenses for 4 years out of the last 5 (2010 stands out as an outlier). The trend towards the reduction of the share of FIFA’s development expenses is clearly observable (from 25% of total expenses in 2003 to 15% in 2013). This trend was only reversed in the particular context of the South-Africa World-Cup in 2010. Besides that, the share of expenses linked to wages and personnel has remained fairly stable (from 7% in 2003 to 8% in 2013). Finally, the share of the other operating costs is difficult to compare across the years, as FIFA has changed its accountancy system. Nonetheless, one can assume that from 2007 onwards, other operating expenses and Football governance (Legal costs and Committees and Congress expenses) expenses should be read together to match the previous understanding of the notion of operating expenses. Thus, read together, operating expenses would have risen from a 16% share in 2003 to a 20% one in 2013. 

 

Graph 2: FIFA Expenses (per stream) in USD million (adjusted for inflation) 2003-2013


Graph 3: Share FIFA expenses over 2003-20013

FIFA’s expenses are concentrated on the organization of its events (see Graph 4). In 2013, 58% of the expenses incurred by FIFA were event related (Graph 3). Indeed, since 2003 FIFA’s expenses on its events have increased from USD 286 million in 2003 to USD 728 million in 2013. However, it is very difficult to extract from the reports provided by FIFA the precise objects of these expenses. It should be noted that the organizing country is tasked with the financing of the main infrastructural investments (stadium, transportation etc…), leaving little infrastructural costs bearing on FIFA. The event-related expenses can be traced back to the financing of the local FIFA World Cup Organizing Committee (the Brazilian committee received up to USD 221.6 million), prize money, travel and accommodation costs of the FIFA officials and the participating teams and other expenses. Furthermore, they also include the FIFA Club Protection programme that compensates clubs in case of injuries suffered by players while on duty with their national teams.

 

Graph 4: FIFA Event-related Expenses in USD million (adjusted for inflation), 2003-2013

 

FIFA is often keen on trumpeting its development-related investments. It is even a key argument to justify its public utility: FIFA is to favour the development of football worldwide. This myth falls partially apart when one looks at the numbers and at their recent trajectory. Indeed, as shown in Graph 5, since 2003 (omitting the exceptional South-African peak of 2010) the Development-related expenses of FIFA have remained fairly stable (139 USD million in 2003, 185 USD million in 2013), in spite of the tremendous growth of both its overall revenues and expenses. Thus highlighting that FIFA has not been very keen on developing redistribution streams in favour of its members, the players or the supporters. Furthermore, the development schemes of FIFA are notoriously lacking transparency and their ability to achieve any real trickle-down effect is not warranted. The recent corruption scandals surrounding former FIFA vice-president Jack Warner, have highlighted the risks of this development aid getting lost in the pockets of corrupted local football officials. If FIFA is serious about football development, and not only interested in PR, it should overhaul its development funding scheme, both in terms of absolute numbers and of its institutional set-up.

 

Graph 5: FIFA Development related expenses in USD million (Adjusted to inflation) 2003-2013

 

On the other hand, FIFA’s own personnel costs have grown over the last 10 years (Graph 6) from 37 USD million in 2003, to 103 USD million in 2013. FIFA employs 400 staff members at its administrative centre in Zurich. The administration of FIFA is a costly enterprise. In 2013 the operating expenses reached 219 USD million (Graph 8), this includes the personnel expenses (Graph 6), but not the football governance expenses (the Committees and Congress expenses in Graph7 and legal expenses), overall the operating cost reaches 276 USD million! Those costs, especially the one dubbed other operating costs (Graph8) are relatively obscure. What do they include? Personnel (102 USD million in 2013), information technology, buildings and maintenance (22 USD million in 2013), taxes and duties (17 USD million in 2013), depreciation and amortization (12 USD million in 2013), communications (31 USD million in 2013) and other non determined expenses (32 USD million in 2013); but without providing any more details about the concrete content of those categories. This lack of explanation can only play in the hand of those that dismiss FIFA altogether as an organization interested solely in its own wealth and well-being. One is left puzzled by the amount of the operating costs, which are neither disbursed for the organization of specific events (those are the event-related expenses in Graph 4), nor for the organization of important meetings (those are the Congress and Committees expenses in Graph 7). It may be that the FIFA building’s toilet are made of gold or that its canteen is a three-star Michelin restaurant, but if so we would like to know.

 

 

Graph 6: FIFA Personnel Expenses in USD million (Adjusted to inflation) 2003-2013


 

Graph 7: FIFA Committees and Congress Expenses in USD million (Adjusted to Inflation) 2003-2013


Graph 8: FIFA Other Operating Expenses in USD million (Adjusted to inflation)

 

Finally, FIFA has constituted a richly dotted war chest. Over the last 10 years of economic success it has amassed huge financial reserves (Graph 9), reaching up to 1453 USD million in 2013. Money lying still at a Swiss bank instead of being invested in the development of football. This money is making money for FIFA through the interests it produces. However, one can wonder why FIFA would need to hold onto such a mountain of cash, instead of redistributing in (in one way or another) to the ‘football family’. This perceived need is illustrative of the transformation of FIFA into a proper business, far remote from the interests of football and its actors.

 

Graph 9: FIFA reserves in USD million (Adjusted to inflation)

 

Conclusion: Follow the money…

We have tried to follow FIFA’s money, in order to better understand if some of the criticisms raised against the management of FIFA were justified. From a macro point of view one fact needs to be highlighted: FIFA has been making a lot more money over the last 10 years and very few of this additional money has been redistributed via its football development schemes. In fact, it is the only stream of outgoings that has seen its share in FIFA’s overall expenses drastically cut from 25% to 15% over the last 10 years. FIFA should take its development programmes seriously if it is to continue relying on them to argue its good faith and willingness to contribute to global welfare.

Moreover, one characteristics of FIFA’s financial report is the lack of transparency and readability of the data. One is challenged to figure out what certain categories concretely mean. FIFA is spending a lot for things that cannot be traced easily. At a micro-level, there is an urgent need for external observers to be able to go through the detailed account of FIFA. One of the trigger for rumoured, but also probably for real, instances of corruption lies in the fact that the supervisory mechanisms provided by public scrutiny (through the press and other institutions) is rendered moot by the accounting walls built by FIFA to isolate its spending from the public’s eye.

Eventually, FIFA must let us (and help us to) follow its money. This would be a giant step towards countering the corruption allegations being made and also legitimating the role of FIFA as the governing institution of world football. If the ‘football family’ is able to see and control the path followed by FIFA’s money, the trust in FIFA as an institution will most likely improve.

 

 


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Asser International Sports Law Blog | Unpacking Doyen’s TPO Deals: In defence of the compatibility of FIFA’s TPO ban with EU law

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Unpacking Doyen’s TPO Deals: In defence of the compatibility of FIFA’s TPO ban with EU law

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).

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Asser International Sports Law Blog | International and European Sports Law – Monthly Report – July and August 2017. By Tomáš Grell

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

International and European Sports Law – Monthly Report – July and August 2017. By Tomáš Grell

 Editor's note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser.

 

The Headlines

ISLJ Annual Conference on International Sports Law 

On 26 and 27 October 2017, the T.M.C. Asser Institute in The Hague will host the first ever ISLJ Annual International Sports Law Conference. This year's edition will feature panels on the Court of Arbitration for Sport, the world anti-doping system, the FIFA transfer regulations, human rights and sports, the labour rights of athletes, and EU law and sport. We will also welcome the following distinguished keynote speakers:

  • Miguel Maduro, former Advocate General at the European Court of Justice and former head of the FIFA's Governance Committee;
  • Michael Beloff QC, English barrister known as one of the 'Godfathers' of sports law;
  • Stephen Weatherill, Professor at Oxford University and a scholarly authority on EU law and sport;
  • Richard McLaren, CAS Arbitrator, sports law scholar and former head of the World Anti-Doping Agency's investigation into the Russian doping scandal.

You will find all the necessary information related to the conference here. Do not forget to register as soon as possible if you want to secure a place on the international sports law pitch! [Please note that we have a limited amount of seats available, which will be attributed on a 'first come, first served' basis.]


FC Red Bull Salzburg and RB Leipzig given the green light to participate in the 2017/2018 UEFA Champions League

In July, UEFA published the decision on eligibility of FC Red Bull Salzburg and RB Leipzig to participate in the 2017/2018 edition of the UEFA Champions League, handed down by the Adjudicatory Chamber of the UEFA Club Financial Control Body ('CFCB') on 16 June 2017. Having examined the clubs' submissions and, in particular, taking note of multiple personal and other changes made by FC Red Bull Salzburg, the CFCB Adjudicatory Chamber concluded that the company Red Bull did not have a decisive influence over the Austrian club in the sense of Article 5.01(c)(iv) of the UEFA Champions League Regulations 2015-2018 Cycle, 2017/2018 Season. Simultaneously, the CFCB Adjudicatory Chamber held that FC Red Bull Salzburg was not able to exercise by any means a decisive influence in the decision-making of RB Leipzig (or vice versa) at the time when the decision in question was delivered. In the end, both clubs were given the green light to participate in the 2017/2018 edition of the UEFA Champions League as the CFCB Adjudicatory Chamber believed it would not threaten the integrity of the UEFA's flagship club competition.

 

The CAS award in International Ski Federation v. Therese Johaug and the Norwegian Olympic and Paralympic Committee and Confederation of Sports

On 22 August 2017, the CAS published its award rendered in the dispute featuring the International Ski Federation, the Norwegian cross-country skier Therese Johaug and the Norwegian Olympic and Paralympic Committee and Confederations of Sports ('NIF'). By way of reminder, the seven-time world champion tested positive for Clostebol in September 2016. Consequently, the NIF Adjudication Committee imposed a 13-month period of ineligibility on Johaug, effective as of 18 October 2016. Not satisfied with the length of the sanction, the International Ski Federation filed an appeal with the CAS on 6 March 2017, asking the latter to lengthen Johaug's ban to at least 16 months. Despite the Norwegian's otherwise clean anti-doping record, the CAS eventually sided with the International Ski Federation and lengthened Johaug's ban to 18 months, effective as of 18 October 2016. As a result, she will now miss the 2018 Winter Olympic Games in Pyeongchang.

 

Sara Errani banned from professional tennis for two months

The Italian female tennis player Sara Errani is currently serving a two-month ban imposed on her by an Independent Tribunal appointed under Article 8.1 of the 2017 Tennis Anti-Doping Programme. This sanction is a direct consequence of an out-of-competition doping control test which took place on 16 February 2017 and revealed the presence of Letrozole in the body of the former French Open finalist. Apart from not being eligible to enter any tournament before 3 October 2017, Errani is also obliged to return prize money she earned at events played during the period between 16 February 2017 and 7 June 2017, given that all her results achieved during the said period were disqualified. It should be noted, however, that the Italian Anti-Doping Agency reportedly petitioned the CAS to lengthen Errani's ban, and thus it will be the CAS that will have the final word on the matter.

 

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Asser International Sports Law Blog | (A)Political Games: A Critical History of Rule 50 of the Olympic Charter - By Thomas Terraz

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

(A)Political Games: A Critical History of Rule 50 of the Olympic Charter - By Thomas Terraz

Editor’s note: Thomas Terraz is a fourth year LL.B. candidate at the International and European Law programme at The Hague University of Applied Sciences with a specialisation in European Law. Currently he is pursuing an internship at the T.M.C. Asser Institute with a focus on International and European Sports Law.

 

Since its inception, the Olympic Movement, and in particular the IOC, has tirelessly endeavored to create a clean bubble around sport events, protecting its hallowed grounds from any perceived impurities. Some of these perceived ‘contaminants’ have eventually been accepted as a necessary part of sport over time (e.g. professionalism in sport),[1] while others are still strictly shunned (e.g. political protest and manifestations) and new ones have gained importance over the years (e.g. protection of intellectual property rights). The IOC has adopted a variety of legal mechanisms and measures to defend this sanitized space.  For instance, the IOC has led massive efforts to protect its and its partners’ intellectual property rights through campaigns against ambush marketing (e.g. ‘clean venues’ and minimizing the athletes’ ability to represent their personal sponsors[2]). Nowadays, the idea of the clean bubble is further reinforced through the colossal security operations created to protect the Olympic sites.

Nevertheless, politics, and in particular political protest, has long been regarded as one of the greatest threats to this sanitized space. More recently, politics has resurfaced in the context of the IOC Athletes’ Commission Rule 50 Guidelines. Although Rule 50 is nothing new, the Guidelines stirred considerable criticism, to which Richard Pound personally responded, arguing that Rule 50 is a rule encouraging ‘mutual respect’ through ‘restraint’ with the aim of using sport ‘to bring people together’.[3] In this regard, the Olympic Charter aims to avoid ‘vengeance, especially misguided vengeance’. These statements seem to endorse a view that one’s expression of their political beliefs at the Games is something that will inherently divide people and damage ‘mutual respect’. Thus, the question naturally arises: can the world only get along if ‘politics, religion, race and sexual orientation are set aside’?[4] Should one’s politics, personal belief and identity be considered so unholy that they must be left at the doorstep of the Games in the name of depoliticization and of the protection of the Games’ sanitized bubble? Moreover, is it even possible to separate politics and sport?  

Even Richard Pound would likely agree that politics and sport are at least to a certain degree bound to be intermingled.[5] However, numerous commentators have gone further and expressed their skepticism to the view that athletes should be limited in their freedom of expression during the Games (see here, here and here). Overall, the arguments made by these commentators have pointed out the hypocrisy that while the Games are bathed in politics, athletes – though without their labor there would be no Games – are severely restrained in expressing their own political beliefs. Additionally, they often bring attention to how some of the most iconic moments in the Games history are those where athletes took a stand on a political issue, often stirring significant controversy at the time. Nevertheless, what has not been fully explored is the relationship between the Olympic Games and politics in terms of the divide between the ideals of international unity enshrined in the Olympic Charter and on the other hand the de facto embrace of country versus country competition in the Olympic Games. While the Olympic Charter frames the Games as ‘competitions between athletes in individual or team events and not between countries’, the reality is far from this ideal.[6] Sport nationalism in this context can be considered as a form of politics because a country’s opportunity to host and perform well at the Games is frequently used to validate its global prowess and stature.

To explore this issue, this first blog will first take a historical approach by investigating the origins of political neutrality in sport followed by an examination of the clash between the ideal of political neutrality and the reality that politics permeate many facets of the Olympic Games. It will be argued that overall there has been a failure to separate politics and the Games but that this failure was inevitable and should not be automatically viewed negatively. The second blog will then dive into the Olympic Charter’s legal mechanisms that attempt to enforce political neutrality and minimize sport nationalism, which also is a form of politics. It will attempt to compare and contrast the IOC’s approach to political expression when exercised by the athletes with its treatment of widespread sport nationalism.


1.     Constructing the Political Neutrality of the Olympics

The roots of political neutrality in many ways can be traced back to the Olympic Truce, a tradition that started in Ancient Greece.[7] The idea of creating a temporal space where nations are at peace is in a way an attempt to separate Games from the political squabbles of the world, and this tradition has continued to the modern day.  Pierre de Coubertin envisioned a space ‘to bring the youth of all countries periodically together for amicable trials of muscular strength and agility’.[8] In accomplishing this goal, the Olympic Movement  applies a principle of political neutrality,[9] which includes that the IOC must ‘promote its political neutrality’,[10] ‘oppose any political or commercial abuse of sport and athletes’,[11] requires new members of the IOC to ‘act independently of commercial and political interests’,[12] and NOCs must ‘resist’ political pressures that ‘may prevent them from complying with the Olympic Charter’.[13] Lastly, international sport is deeply grounded in the idea of universality in which a sport, regardless of where it is played, is played by the same rules, meaning that the sport rules (the rules of the game) are not influenced by the politics or decisions of a particular state (i.e. sport autonomy).[14]

Coubertin also saw the Games as a ‘sacred enclosure’ for the athletes of the world,[15] symbolizing the conceptual genesis of the sanitized space within the modern Games. In these early days of the Games, Coubertin also believed that protecting the ‘sacred enclosure’ also meant keeping women out.[16] While women were first able to participate in the 1900 Olympic Games, albeit in a limited way and resistance to their participation continued,[17] politics remained a black sheep. Avery Brundage, IOC President (1952-1972), also persisted in advocating to keep women out of the Games but was especially a staunch defender of ‘two major Olympic ideals, i.e. amateurism and the non-politicisation of sport’.[18] For him it was not just necessary to keep politics out, but to also ‘actively combat the introduction of politics in the Olympic movement’ and was ‘adamant against the use of the Olympic Games as a tool or as a weapon by an organization’.[19] With Brundage leading the IOC, political neutrality was placed front and center and thus Olympic rules began to reflect this new priority. The 1956 Olympic Charter was the first to include the ‘Information for cities which desire to stage the Olympic Games’ which specifically required that invitations ‘must state that no political demonstrations will be held in the stadium or other sport grounds, or in the Olympic Village, during the Games, and that it is not the intention to use the Games for any other purpose than for the advancement of the Olympic Movement’. This would slowly evolve into the current Rule 50: ‘No kind of demonstration or political, religious or racial propaganda is permitted in any Olympic sites, venues or other areas’. It is interesting to note that the only earlier explicit mention of politics in the Olympic Charter was the 1946 Olympic Charter which was concerned by ‘the nationalization of sports for political aims’ where there would be ‘a national exultation of success achieved rather than the realization of the common and harmonious objective which is the essential Olympic law’.[20] As will be further elaborated in the second blog, it seems as though the IOC has now placed greater priority on enforcing Rule 50 compared to its rules concerning sport nationalism. All things considered, the IOC perceives and projects itself as a neutral entity, which is further confirmed through its governing rules[21] and even its seat in Switzerland further reflects this self-perception.[22]


2.     Failing to Keep Politics Out of the Games

At this point, it is worth exploring some examples that elucidate how politics have continually found a way into the ‘clean’ Olympic bubble through a variety of agents: be it the general public, the athletes, the IOC or states (both the host and participants).

While perhaps often overlooked when discussing politics in the Games, public protests are important to study, especially because there have been many instances of host nations suppressing such public gatherings. For example, in the 2008 Beijing Games, after great international pressure, the Chinese government had set specific zones for Olympic protests. However, protesters were required to submit an application and could be rejected if the protest would ‘harm national, social and collective interests or public order’. In the end, all seventy-seven applications were denied and some of those who applied were arrested, detained and/or put into forced labor.[23] Similarly, at the 2014 Sochi Olympic Games, the IOC proudly welcomed the announcement of special protest areas, despite the fact the zones were placed ‘20 minutes by train from the nearest Olympic venue’ and ultimately only attracted a handful of protesters.[24]

Moreover, in the months leading to the Sochi Games, anti-LGBT laws were passed and a ‘crackdown on civil society unprecedented in the country’s post-Soviet history’ ensued. Despite these repressive measures, athletes stood defiant, and after the IOC made an exception to Rule 50 allowing political expression during press conferences, many athletes used this platform to take a stand.[25] This shows how athletes can sometimes be a critical source for political protest and dissent amidst an atmosphere of suppression, and history has repeatedly demonstrated how athletes can have a vital role in promoting human rights and raising awareness concerning sensitive issues. One simply has to point to the infamous moment when Tommie Smith and John Carlos raised their fists on the podium in protest or when Vera Caslavska turned her head away while the Soviet anthem played. There is little doubt that there has been an extensive history of athlete protest at the Games, and athletes will likely continue raising the problems close to their hearts irrespective of the restrictions they face.

Politics also permeate the Games through the IOC itself as it is continually faced with political decisions, including the recognition of national Olympic committees,[26] decisions concerning participation of athletes,[27] and the awarding of the Games to a city. The latter has often embroiled the Games in controversies, such as the Salt Lake City bid scandal in which a ‘Special US Senate commission found some 1,375 separate expenditures totaling nearly $3 million’ to try and ‘sway individual IOC members’.[28] The scandal prompted several internal investigations in which ten IOC members ‘either resigned or were expelled’. The current Tokyo Games have not been without controversy as a Japanese businessman admitted to giving gifts to IOC members while lobbying for the Games after having received $8.2 million dollars from the Tokyo bid committee. Taken together, it could be argued that this is a real source of ‘dirty’ politics and a greater threat to the concept of a clean or ‘sacred’ space for the Games. Finally, you’ll find a lot of politics inside the IOC, where some commentators have described the rise to power of IOC Presidents as resembling ‘the ascent of a conventional politician’.[29]

Lastly, countries participating and hosting the Games are also able to introduce politics to the Games through boycotts,[30] hosting the Games to promote internal and geo-political interests, and using one’s performance at the Games for political gain and geo-political posturing. Concerning the first, a decision to boycott is always tied to some political goal, as a boycott usually seeks to instigate political change or send a specific political message, such as disapproval of certain political decisions or even an entire political system. For instance, the 1980 Moscow Olympics had 60 countries, led by the US, boycotting the Games in response to the USSR’s invasion of Afghanistan.[31] Indeed, this kind of political wrangling and posturing heavily plagued the Cold War period. It was also during this time that the ‘Soviet Union and the United States attempted to proclaim the superiority of their political and socioeconomic systems by winning the most Olympic gold medals’.[32] A country’s performance at the Games became an indication of one’s geo-political power status, and the idea that ‘sport for sport’s sake is not a goal; rather it is the means to obtaining other goals’ gained more traction. [33] It could be argued that this trend started even before the Cold War. For instance, at the 1936 Berlin Olympics, the Nazis were obsessed with trying to demonstrate ‘German superiority’, which included the incredibly calculated efforts to make the Games into a propaganda spectacle.[34] In this sense, hosting the Games is a unique way to boost a nation’s image and send political messages on a world stage as a sort of ‘soft power strategy’.[35] This kind of sport nationalism is pure politics, and the IOC has long recognized it, as first enshrined in the 1946 Olympic Charter, as a threat to the fundamental goals of the Olympic Games.


3.     Conclusion

Despite the IOC’s attempts to create a ‘clean’ apolitical bubble, politics are structurally embedded within the Games due to the array of actors representing a variety of interests that are involved in its planning and execution. In this sense, the Games can never truly take place within an impenetrable bubble that is somehow separated from the societal context in which it takes place.  The ‘opposite assumptions, that sport was both “above and below” the political dimensions of social life’ is simply untenable.[36] In spite of this, the IOC maintains strict restrictions, through Rule 50, on the free speech of athletes and of the fans and continues to pedal the myth of a pure and sanitized Olympic Games. Instead, I believe political expression should not be regarded as a sly specter infiltrating itself within the Games, defiling the ‘sacred enclosure’ but rather something innate to any free society. Perhaps, in the end, a more genuine ‘mutual respect’ could be achieved if individuals were authorized to openly express their identity and convictions without fear of reprisal even in the face of deep rooted differences.[37]  Regardless, politics and the Games remain naturally entangled, and the next blog in this series will unravel the double standard of the IOC when addressing sport nationalism and athletes’ political expression at the Games.


[1] For many years, amateurism was a key criterion in order to participate in the Olympics.

[2] See my recent blog on Rule 40 Olympic Charter.

[3] Richard Pound also views the idea of the Games as a sort of ‘bubble’ in which the Games create ‘ a special phenomenon during which, even if the world as a whole is not working well, there is an oasis at which the youth of the world can gather for peaceful competition, free from the tensions which their elders have created and with which they will be required to cope before and after the Games’ (emphasis added).

[4] The full quote is as follows: ‘First, this is not a new rule and, second, it is one wholly consistent with the underlying context of the Olympic Games, during which politics, religion, race and sexual orientation are set aside.’ Richard Pound, ‘Free Speech for Olympic Athletes’ (IOC, 11 February 2020) <www.olympic.org/news/free-speech-for-olympic-athletes> accessed 1 April 2020.

[5] See book written by Richard Pound, ‘Inside the Olympics: A Behind-the-Scenes Look at the Politics, the Scandals and the Glory of the Games’ (Wiley 2006).

[6] Rule 6 Olympic Charter.

[7] Although the extent of this truce is disputed. See Kristine Toohey and Anthony James Veal, The Olympic Games: A Social Science Perspective (CAB International 2007) 19-20.

[8] ‘Peace Through Sport’ (IOC) <https://www.olympic.org/pierre-de-coubertin/peace-through-sport> accessed 1 April 2020.

[9] Fundamental Principles of Olympism, Olympic Charter, point 5.

[10] Rule 2 Olympic Charter.

[11] ibid.

[12] Rule 16 Olympic Charter.

[13] Rule 27 Olympic Charter.

[14] Christopher H Hill, Olympic Politics (Manchester University Press 1996).

[15] Jules Boykoff, Power Games: A Political History of the Olympic Games (Verso 2016) 13.

[16] ‘The Olympic Games must be reserved for men’ – Coubertin quoted in Boykoff (n 15) 17; ‘as to the admission of women to the Games, I remain strongly against it’ – Coubertin quoted in Dikaia Chatziefstathiou and Ian P. Henry, Discourses of Olympism: From the Sorbonne 1894 to London 2012 (Springer 2012) 124.

[17] Boykoff (n 15) 59.

[18] ‘Avery Brundage’ (IOC 2011) <https://stillmed.olympic.org/AssetsDocs/OSC%20Section/pdf/LRes_19E.pdf> accessed 1 April 2020.

[19] Boykoff (n 15) 83.

[20] This was also one of Brundage’s greatest concerns. Boykoff (n 15) 84.

[21] See Rule 2 (5) and (11) Olympic Charter and Rule 16 (1.3) Olympic Charter.

[22] See why Lausanne hosts so much of the Olympic Movement: Rebecca Ruiz, ‘Swiss City Is ‘the Silicon Valley of Sports’’ (The New York Times, 22 April 2016) <www.nytimes.com/2016/04/23/sports/olympics/switzerland-global-sports-capital-seeks-new-recruits.html> accessed 1 April 2020.

[23] Boykoff (n 15) 170; See also ‘China: Police Detain Would-Be Olympic Protesters’ (Human Rights Watch, 13 August 2008) <www.hrw.org/news/2008/08/13/china-police-detain-would-be-olympic-protesters> accessed 1 April 2020.

[24] It is also worth noting that of the two protests, one concerned the difficulties Russians faced who were born into World War Two, and the other was a pro-Putin demonstration. On the protest zone see also David Herszenhorn, ‘A Russian Protest Zone Where Almost No One Registers a Complaint’ (The New York Times, 13 February 2014) <www.nytimes.com/2014/02/14/world/europe/a-russian-protest-zone-where-almost-no-one-registers-a-complaint.html> accessed 1 April 2020.

[25] Boykoff (n 15) 204.

[26] Hill (n 14) 36. For example, concerning the recognition and naming of the Chinese Taipei Olympic Committee.

[27] For example, decisions that affect participation of transgender and intersex athletes definitely have a political element. Simply by taking into account the discrepancy in jurisdictions concerning gender identity, the guidelines acknowledge the international political context in which the guidelines operate. See point 1 (b).

[28] Boykoff (n 15) 151.

[29] Hill (n 14) 2 and 60.

[30] Boykoff (n 15) 128.

[31] ibid 127-128.

[32] Andrew Strenk, ‘What Price Victory? The World of International Sports and Politics’ [1979] 445 The Annals of the American Academy of Political and Social Science 128; James Nafziger, 'International Sports Law: A Replay of Characteristics and Trends’ [1992] 86 The American Journal of International Law 489; J. Weston Phippen, ‘The Olympics Have Always Been Political’ (The Atlantic, 28 July 2016) <www.theatlantic.com/news/archive/2016/07/putin-olympic-ban/492047/> accessed 1 April 2020; Boykoff (n 15) 82.

[33] Quoting Erich Honnecker (GDR’s head of state - 1971-1989), Strenk (n 31).

[34] Boykoff (n 15) 69.

[35] Jonathan Grix, ‘Sport Politics and the Olympics’ [2013] 11 Political Studies Review 15.

[36] Lincoln Allison, The Changing Politics of Sport (Manchester University Press 1993) 5.

[37] ‘Rule 50 is a reminder that, at the Olympic Games, restraint is an element of that mutual respect.’ Pound (n 4).

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