Asser International Sports Law Blog

Editor’s note: Rhys Lenarduzzi is a final semester Bachelor of Law (LL.B) and Bachelor of Philosophy (B.Phil.) student, at the University of Notre Dame, Sydney, Australia. As a former professional athlete, then international sports agent and consultant, Rhys is interested in international sports law, policy and ethics. He is currently undertaking an internship at the T.M.C. Asser Institute with a focus on Transnational Sports Law.

Having considered the history and justifications for the FIFA training compensation and solidarity mechanisms in my previous blog, I will now consider these systems in the African context. This appears to be a worthwhile undertaking given these global mechanisms were largely a result of European influence, so understanding their (extraterritorial) impact beyond the EU seems particularly important. Moreover, much has been written about the “muscle drain” affecting African football and the need for such drain to either be brought to a halt, or, more likely and perhaps more practical, to put in place an adequate system of redistribution to ensure the flourishing of African football that has essentially acted as a nursery for European football for at least a century. In the present blog, I intend to draw on my experiences as a football agent to expand on how FIFA’s redistributive mechanisms function in practice when an African player signs in Europe via one of the many kinds of entities that develop or purport to develop talent in Africa. I will throughout address the question of whether these mechanisms are effective in a general sense and more specifically in relation to their operation in Africa.

1. The context: African players’ pattern of migration to Europe

There is a substantial body of work on player migration from Africa to Europe. The history of this movement is important context but just one element to the composition of this blog, so for a more comprehensive unpacking I recommend turning to Darby and Poli’s work. Briefly though, much of the movement began in the early 1900s, with an axiomatic nexus between African countries and their colonial ruler. These connections and channels live on and as one author noted, old colonial ties continue to structure the flow’.[1] This is of little surprise given the language advantages, cultural and economic connections between countries already in place, though some other explanations for the ongoing and evidently near exclusively one way flow are at play.

Economic prosperity has always been the drawcard for African footballers pursuing the European dream, though as Ungruhe submits, in modernity there is an additionally strong pull and distortion at play.[2] Here Ungruhe apportions considerable blame on Africans and the media painting a picture of football in Europe through the lives of players like Didier Drogba and Samuel Eto’o. The result for young African footballers is a ‘dream of being part of an imagined Euro-American modernity and aspirations of a good life as well as socio-cultural demands of ‘becoming a somebody’ in society.’[3] These dreams don’t always align with the realities and come at the cost of other educational or career pursuits.

Further and perhaps more obvious reasons for the movement is the relatively cheap labour costs an African player presents in opposition to the European player of equivalent footballing quality. Transfer fees, or more relevant to this blog, training compensation, is commonly waived (often in exchange for a less than ideal future sell-on arrangement) making the African player attractive in an economical sense. The way Africa acts as a nursery to European football clubs has been analogised by Darby to the mining of the imperialist colonial period, where the ‘sourcing, refinement, and export of raw materials’ can be compared to the ‘mining and export of indigenous football talent for consumption on the European football market.’[4] Though as has been noted above, this is ongoing and the movement continues to be one way, seemingly pointing to a neo-colonialist dimension to player movement, a term famously used in a Sepp Blatter interview (2003), along with such practice being labelled ‘social and economic rape’.

Though much is made of the movement being nearly exclusively one-directional historically and in a contemporary transfer market, the movement and environment surrounding such transfers might be more defensible if FIFA’s redistributive mechanisms were effective.

2. Statistics of concern: FIFA redistribution mechanisms and Africa

Quantitative data in this space has historically been hard to come by. In fact, a breakdown of the parties that paid the due training compensation and solidarity contributions, a breakdown of those that did not meet their payment obligations, and the confederations in which the paying and the owing entities sit would be instructive but is currently missing. Nevertheless, the recently published Players’ Status Department Report and Global Transfer Market Report 2019 provide some interesting insights. For instance, the Players’ Status Department Report shows inter alia that clubs from CAF are very rarely a respondent in training compensation and solidarity mechanism claims,[5] the rather obvious result of being largely an export rather than import market. If we focus on 2018-2019 transfers to UEFA clubs (see fig.12), most transfers to these clubs are from within UEFA (8,108), whereas CONMEBOL to UEFA is second (836), then CAF to UEFA (581). Despite there being a gap between CONMEBOL and CAF transfers to UEFA, it is not nearly as significant as the gap between claims brought and resolved at FIFA, for both solidarity contributions and the training compensation mechanism. For instance, the solidarity contribution mechanism claims brought and resolved where CONMEBOL is the claimant and UEFA in the respondent (304) is approximately double that of CAF as claimant and UEFA as respondent (144) (see fig.12). The number of resolved claims with UEFA as respondent for training compensation disputes is again, approximately double, with CONMEBOL (131) and CAF (70). (see fig.19) This disproportionality between total transfers and disputes brought and resolved on the redistributive mechanisms, may point to African clubs being either unaware of their rights under these mechanisms or rendering themselves unable of achieving a remedy when falling victim to a more powerful club from Europe.

In 2018, it was reported that just USD$67.7m of the USD$351.5m due to be distributed in solidarity contributions, was actually paid. That is a mere 19.3% of what should have trickled down and perhaps just as alarming is that this percentage has been worsening. Africa, as a poorer continent than most and certainly a poorer continent than Europe to which it provides football talent more than it provides any other confederation, is arguably hurt most from this non-payment. Furthermore, the 2019 FIFA Global Transfer Market Report stated that USD$12.2 million in training compensation was paid,[6] which is a considerable distance from what was paid in solidarity contributions and light-years from what was supposed to be paid in solidarity contributions. So what might this say about these mechanisms in general and in the African context specifically, if one is to conclude that Africa provides a wealth of talent for Europe and other confederations and is hence in most need of redistribution for fulfilling the role of talent nursery?

3. The Operation of Training Compensation in the African Context

More than any other confederation, Africa has found itself with an array of different entities undertaking football training and education, most commonly referred to as academies. Not all have questionable intentions, however this range of non-conventional arrangements of registering or attaching young players to a particular entity is usually for profit. This often results in some regulatory gymnastics, and particularly in relation to both the training compensation and solidarity mechanisms when profit is on the line. I will borrow Darby’s four categories of training structures in Africa and apply my understanding of the industry. I would submit that we can look at these arrangements and form conclusions on how training compensation may operate in each scenario if a young player from either of these environments is recruited to Europe. I will keep the players and clubs involved in the following anecdotes anonymous, in the interest of confidentiality and professionalism. I will pay particular attention to scenarios (1) and (3) as what takes place in practice behind the scenes in these categories can be less obvious and perhaps more interesting for the purpose of this blog.

Darby’s four categories of training structures in Africa are;^{^[7]}

1) African academies, organized and run by African club sides or African national federations

2) Afro-European academies, which involve either a partnership between an existing academy and a European club or an arrangement whereby a European club takes a controlling interest in an African club[8]

3) Private or corporate-sponsored academies, which have well-established foundations and operate with the support and sponsorship of private individuals

4) Non-affiliated, improvised academies, which are set up on an ad hoc basis and involve poorly qualified staff and lack proper facilities[9]

3.1. Scenario 1: Training compensation and African club academies

In my experience as a football agent and that of my colleagues and competitors that I’ve spoken with on the topic, scenario (1) is the most likely to result in some redistribution, though it is still not always commonplace for clubs to stand their ground and demand training compensation. Instead, what regularly happens is a gamble of sorts, where African clubs waive their right to training compensation initially, in exchange for a percentage of future sell-on value. This can be pitched by a new club to be an amount that would be greater than what a club would receive in training compensation, but is simultaneously often a condition of a “take it or leave it” offer from a buying club, meaning that the player will no longer be of interest if they are not free. This “fee” or piece of future sell-on value is then at times contingent on things such as the new club’s success or first team appearances of the player in question. Unfortunately with the latter, there have been instances when clubs have stopped selecting the player in question when his number of appearances is coming close to the threshold of that clause.

Scenario (1) type clubs can appear to be the most legitimate entities of the four categories to claim training compensation, though perhaps the following two anecdotes taken from my practice will shed light on how the mechanism operates in practice, with particular attention to it’s waiver and the ‘hindrance effect’[10] it might have. For instance, a former youth national team captain from Ghana had been on the edge of a transfer to a myriad of small-medium size clubs in Europe. The interest had been intense since his 16^th birthday and the plan was for him to move at 18 when the regulations permitted. However, due to a short-term injury around age 18, the interest for an immediate transfer diminished. The player recovered and struggled to generate the same interest in Europe as before, but became of interest in Australia, where the strategy would have been to play at a club within a country that was arguably a better stepping stone to Europe than his current club. When the interest was from Europe, his club was open to waiving training compensation in exchange for a future sell-on benefit and saw this as a safer bet. However,when the interested club was an Australian one, the training club saw the chances of the player moving on to Europe as less likely and the chance to profit substantially from future sell on fees unlikely, hence it refused to waive the training compensation. The player is still at the same club years later, in his mid-twenties and with little prospects of playing outside of his home nation. The result in this instance is that the player's career was strongly affected by the training compensation mechanism, his training clubs and community will never be the beneficiaries of redistribution, and the Australian club who was only interested if the player was free missed out on a player who wanted to come to the club. Can such a strong restriction on a player’s ability to move to seek employment as a professional player outside of his home country really be justified by the redistributive goal of the training compensation mechanism? Especially, when in many cases this mechanism is being waived and perhaps not considered necessary by FIFA itself.

In another example of a scenario (1) legitimate club with a youth academy involving the ‘hindrance effect’, an arguably unfortunate outcome can result if a training club refuses to waive its rights to training compensation. Indeed, often only a small group of big clubs with well above average financial resources can afford the entire bill for compensation between the ages of 12 and 21. I recall a top youth prospect from Mali who had attracted lots of interest from clubs in Europe following strong performances at both the under 17 and the under 20 World Cup. Yet, training compensation due had acted as a hindrance until he had a strong season around age 20. The player’s training club(s) in Mali had stood their ground and insisted training compensation be paid if the player was to transfer. Here, it took a relatively big club that regularly plays Champions League or Europa League football with the financial resources to pay it. The club has an enormous squad, many international players, and would not generally be thought of as an ideal destination for a youth prospect as they have a history of parking players. Since his signing, the player has played little football as loan options have fallen through and he has been unable to find himself in the first team. In this case the player's development has stagnated, having ended up at a big club, and not at other more suitable destinations despite interest and offers, nearly exclusively because training compensation acted as a barrier for him to be signed by a club that most would deem a more appropriate stepping stone.

3.2. Scenario 3: Training compensation and African private academies

Scenario (3) has become an incredibly common environment for young African footballers to find themselves in, given the abundance of these academies throughout the continent. Players enter these entities either by paying their way if they have the means and aspirations but lack the talent or having been scouted for their above average potential. This creates for an interesting dynamic come transfer time and considerable controversy. These academies are generally created for profit but are of course non-FIFA entities, requiring they get creative if a player becomes the subject of interest from Europe. Some less than ideal sequences of events can follow from this arrangement. Examples include academies affiliating themselves with clubs through ‘under the table’ arrangements, handing the player back to a FIFA recognised club before transferring, or having the player registered at that club for the duration of their stay with the academy to simplify a transfer if it eventuates, perhaps then attracting training compensation to the club but more likely arranging an agreement like those alluded to above, where compensation for training a player will only be realised down the track on future sell-on fees. Academies want immediate money as well though so there are instances where a club will pay to have the players current registration and share a percentage of future sell on fees with the academy. There are a number of other arrangements however one can probably get the picture, that the FIFA training compensation mechanism is regularly being circumvented or tweaked significantly so as to make a deal happen, rather than having it fall through. In this instance, the academies are paid in some form now or later, as well as the clubs that help them facilitate the transfer.

For instance, a star of a recent under 17s World Cup from Nigeria had spent the majority of his youth at one of the more famous scenario (3) type academies. When interest flooded in following the World Cup, there was nearly a year worth of assessing what would be the best move for the player. A lot of the interest was from medium sized clubs and from destinations outside of the big 5 leagues, and these destinations were arguably a better stepping-stone. However, most of these preferable destinations demanded the player be free or they would not make an offer and some of this interest hinged on an assumption the player would be free given he was the product of a private academy and not a FIFA recognised club.[11] After much dispute and controversy with the academy trying to get in the way of a deal or be the beneficiaries of such a deal, the player managed to get away free from the academy and sign for free with a club. It is difficult to emphasise how tricky it was to fend off attempts from this academy to stop the deal or be a part of it, as well as how important it was that the player be free for a more suitable deal to eventuate. The player has already transferred again within Europe to a bigger club, as he was able to get plenty of first team football to display his abilities. This can sound great for the player and the clubs, but what about the far-reaching societal benefits that training compensation and solidarity is geared towards achieving? In many, perhaps most, analogous cases, the academy would have successfully got in the way of the deal or benefitted from it. In both cases, the deal that happened, or the scenario that usually happens as unpacked above, the objectives of the redistributive mechanisms are bypassed. The ‘hindrance effect’ would have almost certainly played a part in this players journey had compensation been due, or a big club that could afford compensation may have come forward, though it would then have been unlikely that the player would have played first team football to the same extent, and his career might have faltered.

My experience shows that the fact that training compensation can be waived has turned it into a subject of speculation and market negotiation between the more powerful European club and the economically vulnerable African club. The latter are often happy to forego their claim for training compensation if it is necessary to close a deal that would include some future potential benefit. Thus, it can hardly be said that African clubs can rely on this right to training compensation to guarantee stable funding to support their investment in educating players. Furthermore, while being relatively ineffective as a mechanism of redistribution, it nevertheless acts as a hindrance on the movement of African football players. Hence, the continent experiences the worst of both worlds, limited training compensation for its clubs and limited freedom of movement for its players.

4. Africa’s missing solidarity contributions

The solidarity mechanism is mandatory and cannot be waived like the training compensation mechanism, though as is clear from the gap between what is paid and what ought to have been, there are issues with regard to its implementation. In the African context, there are a number of reasons why payments are not made. On the one hand, it is clear that the differing capacity of administration and the quality of legal advice accessible to African clubs plays a role. Sometimes African clubs are simply unaware that they are even owed solidarity. Further, if they are aware, the task of taking on a European club in a legal battle can be too expensive or too daunting to pursue, ultimately rendering this an access to justice issue as well.

On the other hand, as is true of both solidarity and training compensation mechanisms, funds are channelled through the national association and this has been problematic on occasions. I was once involved in a situation with a club within an African league with a notoriously controversial national body. The club was due to receive solidarity contributions given a player it had registered between the ages of 12 and 21 had signed with a club from one of the big 5 leagues for a fee into the tens of millions of euros. The African club had changed names but remained the same legal entity between the time the player had been at the club and his subsequent transfer. This was common knowledge to the football community within this African country and the national federation. It appeared on this occasion that the national governing body was attempting to argue the club ‘ceased to participate in organised football’ per Annex 5(2)3 of the RSTP which outlines that an association is entitled to receive the proportion of solidarity contribution, though it shall be reserved for youth football development programmes in the association. Given this particular associations track record, suspicions linger as to what the money would have been used for.

It is clear that in general a lot of solidarity money is lost or not paid, and it ultimately does not reach the African grassroots where it is needed most. It seems some, if not most, of this loss can be attributed to the costs attached to the process of obtaining this solidarity funds. If FIFA were serious about redistribution, it would ensure that solidarity transfers be almost automatic. Otherwise all the talk about solidarity is hypocritical at best, as those who need it the most are the least likely to enjoy it.

5. Concluding remarks

This blog has highlighted various issues that surface in the African context with regard to FIFA’s redistributive systems. While on the face of it solidarity between the richest European football clubs and African training clubs can only be applauded, it remains to be seen whether the current regulatory set-up achieves the desired solidarity.

I have seen first-hand that training compensation acts as a real hindrance for the professional career of African footballers. Players suffer from being unable to go to clubs of suitability, and it is clear that the mechanism has become a regular bargaining chip in the wider transfer market, where a waiver in exchange for a future sell-on fee may be as common an occurrence as actual payment of a training compensation. In practice and because it can be waived, the training compensation is part and parcel of a speculative transfer market rather than an effective instrument of solidarity between clubs. Moreover, insofar as the solidarity mechanism is concerned, its effectiveness seems to be blunted by the administrative burden that comes with its implementation. All too commonly, African clubs have simply too little means to be able to ensure the rights they should derive from it. Ultimately, from the training compensation mechanism arises a transactional dilemma, whilst in the event of non-payment of solidarity contributions, arises an administrative predicament.

There is a neo-colonial flavour to the fact that the training compensation can be waived. Indeed, (European) buyers are often in a strong bargaining position, as they can (collectively) put pressure on training clubs with ‘take it or leave it’ options. In doing so, they shift some of the risks related to the future development of the player back onto the shoulders of African clubs. Instead of getting an immediate fee for training the player, the African clubs get only a potential opportunity of a future fee that will be dependent on a player’s capacity to adapt to his new club and a myriad of other factors. One could see this as a free choice, yet, such a view would paper over the massive power imbalance between European clubs and African ones. If the objective of FIFA’s regulations is truly to foster solidarity and redistribution then they ought to be devised in a way that takes better account of this power imbalance between clubs from different parts of the world. African clubs must be able to systematically claim their training compensation fee without fearing to miss out on a transfer entirely, and to seamlessly receive the solidarity contributions owed. If not, it becomes extremely hard to justify burdening the (African) players’ right to move and take employment around the world. Indeed, one is left to wonder whether FIFA’s redistributive mechanisms could not be entirely uncoupled from the players’ movement and from the transfer market.

[1] Raffaele Poli, ‘Migrations and Trade of African Football Players: Historic, Geographical and Cultural Aspects’ (2006) Vol. 41, No. 3 The Other Game: The Politics of Football in Africa, at 409.

[2] Christian Ungruhe, 'Mobilities At Play: The Local Embedding Of Transnational Connections In West African Football Migration' (2016) 33 The International Journal of the History of Sport.

[3] Ibid 1770.

[4] Paul Darby, 'Out of Africa: The Exodus of Elite African Football Talent to Europe' (2007) 10 WorkingUSA 445-446.

[5] CAF was not even listed in Fig.11 of the report “Confederation of respondent club for claims resolved in 2019/2020”.

[6] 2019 FIFA Global Transfer Market Report, 12.

[7] Paul Darby, et al, Football Academies and the Migration of African Football Labor to Europe (2007) 31 Journal of Sport & Social Issues, 149-150.

[8] Scenario (2) is ultimately an example of European clubs being commercially savvy and the entire arrangement is to avoid costs or fees like training compensation. This probably needs little more explanation as one can see that a European club may essentially be paying themselves if they are the main stakeholder in the African club or academy from which their new player has graduated.

[9] Scenario (4) academies are arguably the most detrimental in terms of their societal effects. They often purport to be a channel for ambitious players but lack the quality of facility and coaching, let alone contacts or ability to spring board players onto bigger and better things. They are never the recipient of redistribution given they are not FIFA recognised yet take money for their services and cannot fulfil promises.

[10] Jakub Laskowski, 'Solidarity Compensation Framework In Football Revisited' (2018) 18 The International Sports Law Journal, 168, 178, 182.

[11] The player spent a small amounts of time registered to a club to be eligible for the national team.

This is part two of the blog on the Willem II and MVV State Aid decisions. Where part one served as an introduction on the two cases, part two will analyze the compatibility assessment made by the Commission in two decisions.

The compatibility of the aid to MVV and Willem II (re-)assessed

Even though it was the Netherlands’ task to invoke possible grounds of compatibility and to demonstrate that the conditions for such compatibility were met, the aid granted to both Willem II and MVV was never notified. The Netherland’s failure to fulfill its notification obligation, therefore, appears to be at odds with the Commission’s final decision to declare the aid compatible with EU law. Yet, a closer look at the Commission’s decision of 6 March 2013 to launch the formal investigation shows that the Commission was giving the Netherlands a ‘second chance’ to invoke grounds that would lead to a justification of the measures. In paragraph 74, the Commission itself reached the conclusions that the clubs in question faced financial difficulties, consequently indicating that the Rescue and Restructuring Guidelines might apply. In fact, the Commission even suggested possible compensatory measures, which are very much related to “the peculiar nature of professional football”[1]. These suggested compensatory measures included:

- limiting the club’s number of registered players for a season or several seasons;

- accepting a cap on the relation between salaries and turnover;

- banning the payment of transfer fees for a certain period;

- offering additional expenditure on “pro bono” activities to the benefit of the community and training of amateurs.[2]

Furthermore, it invited the Dutch authorities “to provide all useful information allowing the Commission to decide whether the aid measures can be considered compatible with the Guidelines”.[3]

The observations and information submitted by the Netherlands between March 2013 and July 2016 proved more than sufficient for the Commission to carry out its compatibility assessment. As was insinuated in the decision to launch a formal investigation, the Rescue and Restructuring Guidelines proved fundamental to this assessment.

Willem II and MVV as firms in financial difficulties

This first condition of the Guidelines was easily complied with. As regards Willem II, in the accounting year 2008/2009, it made a loss of €3.9 million on a turnover of €11.4 million. Meanwhile, its own equity decreased from €4.1 million to €200.000. The losses increased to €4.4 million on a turnover of €9.9 million for the 2009/2010 season, while its own equity decreased further from €200.000 to minus €2.1 million.[4]

MVV clearly was financially not doing much better. As the Commission itself summarizes in the MVV decision, “in 2008/2009, MVV made a loss of €1.1 million and its own equity was minus €3.8 million. By March 2010 additional losses amounting to €1.3 million had occurred and the own equity had dropped to minus €5.17 million. In April 2010, MVV was no longer able to pay salaries and other current expenditure and was on the brink of bankruptcy.”[5]

Another consequence of being in financial difficulties relates to the licensing system put in place by the Dutch football federation KNVB. As is explained in paragraph 11 of the decision to open a formal investigation, one of the obligations for clubs under the current system is submitting three financial reports a year to the KNVB. On the basis of these reports clubs are scaled in three categories (I: insufficient, II: sufficient, III: good). Clubs in category I may be obliged to present a plan for improvement in order to reach categories II or III. If the club fails to comply with the plan, sanctions may be imposed by the KNVB, including an official warning, a reduction of competition points and – as ultimate sanction – withdrawal of the licence.[6] At the time the State aid was granted, both Willem II and MVV were scaled in the insufficient category I.

Willem II and MVV as small enterprises or medium-sized enterprises

This particular assessment is important for the two conditions below, i.e. the introduction of restructuring plans and compensatory measures. Depending on the size of the firm (or enterprise), different conditions apply. Willem II employed 53 people in 2012 and had an annual turnover of €11.4 million in 2008/2009.[7] Pursuant to the Annex of the Commission Recommendation concerning the definition of micro, small and medium-sized enterprises, Willem II just managed to be considered a medium-sized enterprise.[8]

MVV, on the other hand, is considered a small enterprise. In the season 2009/2010 it had 38 employees and in the season 2010/2011 it had 35 employees. Its turnover and balance sheet total remained well below €10 million in both years.[9]

Restructuring plans

Though not initially communicated to the Commission, both rescue measures were subject to certain restructuring conditions. In principle, these consisted of reducing personnel costs, by introducing new managements, selling players, and signing players free of transfer payments. In the case of Willem II, in the two years following the rescue measure personnel costs were reduced by 30%.[10] The effects of MVV’s restructuring plan were even better, since it managed to book profits for the three seasons following the aid and was scaled in the highest category (III) by the KNVB in the beginning of the season 2011/2012.[11]

Compensatory measures

For the compensatory measures it is important to take into account point 41 of the Rescue and Restructuring Guidelines. Under this provision, small enterprises, such as MVV, are not required to take compensatory measures. However, this exception did not apply to Willem II. The Commission noted more expenditure of Willem II for public benefit by the training of amateurs and a reduction of the number of registered players from 31 to 27. Similarly, no transfer payments were made during the restructuring period.[12] Potentially as a result of this, Willem II was relegated to the second league in 2011 and again in 2013. In the end, the Commission concluded that “the compensatory measures required by the Guidelines were taken, which had the effect of weakening Willem II's competitive position in professional football”.[13]

Aid limited to a minimum

Since the aid measures rescued both football clubs from bankruptcy without creating equity surplus, the Commission believed the amount of aid granted limited to what was necessary. Furthermore, the Commission highlighted that the restructuring plans were to a large extent financed by external contributors just as the Rescue and Restructuring Guidelines requested. Private entities had agreed to lend €2.25 million to Willem II for the restructuring, which is well over the 40% of €2.4 million (the total amount of State aid granted) required for medium-sized enterprises under the Guidelines.[14] In the case of MVV, several private creditors decided to waive (part of) their debt, which amounted to €2.25 million. This amount is more than 25% of the €5.8 million granted by the Netherlands, the minimum requirement for a small enterprise like MVV.[15]

One time, last time

The Commission believes this condition to be fulfilled, as the Netherlands specified that Willem II and MVV did not receive rescue or restructuring aid in the ten years before the aid measures, nor will it award any new rescue or restructuring aid to the clubs during a period of ten years.[16]

Conclusion

At the time of writing, the non-confidential versions of the positive decisions regarding State aid granted in favour of the Dutch professional football clubs FC Den Bosch and NEC Nijmegen are not published. Nonetheless, this does not prevent us from drawing the following lessons from the Willem II and MVV decisions.

First of all, these decisions show that there is no need to draft sector specific guidelines for State aid to professional football clubs in difficulty. The Rescue and Restructuring Guidelines are all the Commission needs in order to carry out the compatibility assessment. This approach is radically different when compared to the Commission’s decisional practice for the State aid to sport infrastructure cases between 2011 and 2013.[17] Only after the Commission dealt with ten different cases, was its approach (to a large extent) codified in Article 55 of the 2014 General Block Exemption Regulation.[18]

In this regard it is important to highlight that the Commission seems to take into account “the peculiar nature of professional football”[19] when assessing the compatibility of State aid measures under the Rescue and Restructuring Guidelines. For example, it showed demonstrated its awareness of the UEFA Club Licensing and Financial Fair Play Regulations [20] as well as national (KNVB) licensing rules when assessing the compensatory measures taken by Willem II. Moreover, it clearly endorsed the decision taken by the club not to make transfer payments during the restructuring period, since this prevents the club from spending money it might not have, while simultaneously limiting the club’s competitiveness on the field.

A further lesson that can be drawn from these decisions is that, in my opinion, the threshold to ‘pass the compatibility test’ under the Rescue and Restructuring Guidelines is quite low. With regard to the condition that the club needs to be in financial difficulties in order to get the State aid, it is clear that granting State aid to professional football clubs in financial difficulties is one of the most (if not the most) common form of State aid in the sector. This was the case for the five Dutch clubs scrutinized by the Commission, as well as the three clubs from Valencia of which the non-confidential version of the decision still needs to be published. Other clubs like FC Twente and Sporting de Gijón have also received State aid over financial difficulties, even though the Commission did not investigate these measures (yet).[21] In other words, a majority of the cases are assessable under these Guidelines.

The condition that the beneficiary football club needs to stick to a restructuring plan in order to receive the State aid is key. As is elucidated in the two decisions, the restructuring plans consisted of selling players, reducing the costs of wages and not paying transfer fees for new players for a period of three years. In my view, these conditions are rather proportionate when considering that the clubs in question were on the verge of bankruptcy prior to the State aid measures. In fact, one could argue that FIFA’s transfer ban imposed on FC Barcelona for international transfers of minors, or excluding FC Dynamo from the next UEFA club competition for which the club would otherwise qualify in four seasons (i.e. the 2015/16, 2016/17, 2017/18 and 2018/19 seasons) for breaching UEFA’s FFP Regulations,[22] are harsher than the restructuring conditions accepted by the Commission.

The same can be said about the need to take compensatory measures. The measures taken by Willem II (reducing the number of employees and players, and reducing the cost of wages to 48% of the turnover) could be considered a direct consequence of the abovementioned restructuring plans. The only additional compensatory measure taken by Willem II was increasing expenditure of the club for the training of amateurs, though the decision does not specify what this implied in practice.

Perhaps the only condition that could be problematic for some football clubs is the “one time, last time” criterion. Under this condition, the public authorities cannot rescue Willem II and MVV again until at least 2020. Although Willem II and MVV are currently in category III and II on the KNVB’s scale respectively, falling back to category I before 2020 could have dramatic consequences.

Be that as it may, now that the Commission’s approach for the assessment of State aid to professional football clubs in financial difficulties is out in the open, public authorities and football clubs alike should use this knowledge to their own advantage. They should remember that the Commission is willing to accept rescue aid and that the restructuring conditions are far from impossible to match. One can even wonder whether a club like FC Twente would have turned to Doyen when it was facing financial difficulties, if it had been aware of the conditions imposed by the European Commission for receiving compatible State aid under the Rescue and Restructuring Guidelines.

[1] Commission Decision on State Aid SA.40168 of 4 July 2016 implemented by the Netherlands in favour of the professional football club Willem II in Tilburg, para. 50.

[2] Commission Decision SA.33584 of 6 March 2013 – The Netherlands Alleged municipal aid to the Professional Dutch football clubs Vitesse, NEC, Willem II, MVV, PSV and FC Den Bosch in 2008-2011, para. 80.

[3] Ibid, para. 77.

[4] SA.40168, para. 45.

[5] Commission Decision on State Aid SA.41612 of 4 July 2016 implemented by the Netherlands in favour of the professional football club MVV in Maastricht, para. 13.

[6] SA.33584, para. 11.

[7] SA.40168, para. 9.

[8] A firm is not considered a small enterprise i fit has more than 50 employees and an annual turnover of more than €10 million. See footnote 27.

[9] SA.41612, para. 9.

[10] SA.40168, para. 48.

[11] SA.41612, para. 52.

[12] SA.40168, para. 51. Indeed, according to www.transfermarkt.de, Willem II only paid a mere €20.000 for the signing of Kevin Brands in July 2012.

[13] Ibid.

[14] SA.40168, para. 52.

[15] SA.41612, para. 54.

[16] SA.40168, para. 55 and SA.41612, para. 61.

[17] Commission Decision of 9 November 2011, SA.31722 – Hungary - Supporting the Hungarian sport sector via tax benefit scheme; Commission Decision of 2 May 2013, SA.33618 Uppsala arena; Commission Decision of 15 May 2013, SA.33728 Multiarena in Copenhagen; Commission Decision of 20 March 2013, SA.35135 Multifunktionsarena der Stadt Erfurt; Commission Decision of 20 March 2013, SA.35440 Multifunktionsarena der Stadt Jena; Commission Decision of 18 December 2013, SA.35501 Financement de la construction et de la renovation des stades pour l’EURO 2016; Commission Decision of 2 October 2013, SA.36105 Fuβballstadion Chemnitz; Commission Decision of 20 November 2013, SA.37109 Football stadiums in Flanders; Commission Decision of 9 April 2014, SA.37342 Regional Stadia Development in Northern Ireland; and Commission Decision of 13 December 2013, SA.37373 Contribution to the renovation of ice arena Thialf in Heerenveen.

[18] For a deeper analysis of whether sport-specific guidelines are necessary, see Oskar van Maren, “EU State Aid Law and Professional Football: A threat or a Blessing?”, European State Aid Law Quarterly, Volume 15 1/2016, pages 31-46. To find out how sector-specific rules for State aid are usually articulated, 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.

[19] SA.40168, para. 50.

[20] In paragraph 51 of SA.40168, the Commission referred to a UEFA rule, which holds that the cost of salaries should not exceed 70%.

[21] For more information of the precarious financial situation of these two clubs, see our previous blogs: “Unpacking Doyen’s TPO Deals: FC Twente's Game of Maltese Roulette”, and “TPO and Spanish football, friends with(out) benefits?”.

[22] For more information on the FC Dynamo case, see our blog “UEFA’s FFP out in the open: The Dynamo Moscow Case”.

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