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

FIFA’s provision on the protection of minors - Part 1: The Early Years. By Kester Mekenkamp.

Editor’s note: Kester Mekenkamp is an LL.M. student in European Law at Leiden University and an intern at the ASSER International Sports Law Centre. This blog is, to a great extent, an excerpt of his forthcoming master thesis. 


On 24 November 2016, a claim was lodged before a Zurich commercial court against FIFA’s transfer regulations by a 17-year-old African football player.[1] The culprit, according to the allegation: The provision on the protection of minors, Article 19 of the Regulations for the Status and Transfer of Players.[2] The claimant and his parents dispute the validity of this measure, based on the view that it discriminates between football players from the European Union and those from third countries. Besides to Swiss cartel law, the claim is substantiated on EU citizenship rights, free movement and competition law. Evidently, it is difficult to assess the claim’s chance of success based on the sparse information provided in the press.[3] Be that as it may, it does provide for an ideal (and unexpected) opportunity to delve into the fascinating subject of my master thesis on FIFA’s regulatory system aimed at enhancing the protection of young football players and its compatibility with EU law. This three-part blog shall therefore try to provide an encompassing overview of the rule’s lifespan since its inception in 2001. More...


The entitlement to Training Compensation of “previous” clubs under EU Competition Law. By Josep F. Vandellos Alamilla

Editor’s note: Josep F. Vandellos is an international sports lawyer associated to RH&C (Spain). He is also a member of the Editorial Board of the publication Football Legal and a guest lecturer in the ISDE-FC Barcelona Masters’ Degree in Sports Management and Legal Skills.


Article 6 of Annexe IV (Training compensation) of the FIFA-RSTP (Ed. 2016) contains the so-called “Special Provisions for the EU/EEA” applicable to players moving from one association to another inside the territory of the European Union (EU) or the European Economic Area (EEA).
The provisions regarding training compensation result from the understanding reached between FIFA and UEFA with the European Union in March 2001[1], and subsequent modifications introduced in the FIFA-RSTP revised version of 2005 to ensure the compatibility of the transfer system with EU law.[2]
This blog will focus on the exception contained in article 6(3) Annexe IV of the FIFA-RSTP. According to this article, when “the former club” fails to offer a contract to the player, it loses its right to claim training compensation from the players’ new club, unless it can justify that it is entitled to such compensation. Instead, the right of “previous clubs” to training compensation is fully preserved irrespective of their behaviour with the player.[3] From a legal standpoint, such discrimination between the “former club” and the “previous clubs” raises some questions that I will try to address in this paper. More...



The EU State aid and sport saga: The Real Madrid Decision (part 2)

This is the second and final part of the ‘Real Madrid Saga’. Where the first part outlined the background of the case and the role played by the Spanish national courts, the second part focuses on the EU Commission’s recovery decision of 4 July 2016 and dissects the arguments advanced by the Commission to reach it. As will be shown, the most important question the Commission had to answer was whether the settlement agreement of 29 July 2011 between the Council of Madrid and Real Madrid constituted a selective economic advantage for Real Madrid in the sense of Article 107(1) TFEU.[1] Before delving into that analysis, the blog will commence with the other pending question, namely whether the Commission also scrutinized the legality of the operation Bernabeú-Opañel under EU State aid law. By way of reminder, this operation consisted of Real Madrid receiving from the municipality the land adjacent to the Bernabéu stadium, while transferring in return €6.6 million, as well as plots of land in other areas of the city. More...

Resolution of Disputes Arising From Football Contracts in Turkey. By N. Emre Bilginoglu

Editor’s note: N. Emre Bilginoglu[1] is a lawyer based in Istanbul. His book entitled “Arbitration on Football Contracts” was published in 2015.


Introduction

With a total market value of approximately 911 million EUR, the Turkish Super League ranks as one of the prominent football leagues in Europe. Five of the eighteen teams that make up half of the total market value are based in Istanbul, a busy megalopolis that hosts a population of fifteen million inhabitants.[2] As might be expected, the elevated market value brings forth a myriad of disputes, mainly between the clubs and the players. However, other crucial actors such as coaches and agents are also involved in some of the disputes. These actors of the football industry are of all countries, coming from various countries with different legal systems.

One corollary of rapid globalisation is the development of transnational law, which is quite visible in the lex sportiva.[3] Like foreign investors, foreign actors of the sports industry look for some legal security before signing a contract. FIFA does protect these foreign actors in some way, providing players and coaches legal remedies for employment-related disputes of an international dimension. But what if the legal system of the FIFA member association does not provide a reasonable legal remedy for its national actors?[4] More...


The EU State aid and sport saga: The Real Madrid Decision (part 1)

Out of all the State aid investigations of recent years involving professional football clubs, the outcome of the Real Madrid case was probably the most eagerly awaited. Few football clubs have such a global impact as this Spanish giant, and any news item involving the club, whether positive or negative, is bound to make the headlines everywhere around the globe. But for many Spaniards, this case involves more than a simple measure by a public authority scrutinized by the European Commission. For them, it exemplifies the questionable relationship between the private and the public sector in a country sick of never-ending corruption scandals.[1] Moreover, Spain is only starting to recover from its worst financial crisis in decades, a crisis founded on real estate speculation, but whose effects were mostly felt by ordinary citizens.[2] Given that the Real Madrid case involves fluctuating values of land that are transferred from the municipality to the club, and vice versa, it represents a type of operation that used to be very common in the Spanish professional football sector, but has come under critical scrutiny in recent years.[3] More...

International and European Sports Law – Monthly Report – October 2016. By Kester Mekenkamp.

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. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.  


The Headlines
We are looking for an International Sports Law Intern (with a particular interest in the CAS)! More information can be found here.


The (terrible) State of the World Anti-Doping System

The fight against doping is still on top of the agenda after the Russian doping scandal. The national anti-doping organizations (NADOs) have reiterated their call for an in depth reform of the World Anti-Doping Agency at a special summit in Bonn, Germany. These reforms are deemed urgent and necessary to “restore confidence of clean athletes and those who value the integrity of sport” and secure “the public’s desire for a fair and level playing field”. The NADOs propose, amongst others things, to separate the investigatory, testing and results management functions from sports organizations, and to remove sports administrators from crucial anti-doping executive functions. More...




Case note: State aid Decision on the preferential corporate tax treatment of Real Madrid, Athletic Bilbao, Osasuna and FC Barcelona

On 28 September 2016, the Commission published the non-confidential version of its negative Decision and recovery order regarding the preferential corporate tax treatment of Real Madrid, Athletic Bilbao, Osasuna and FC Barcelona. It is the second-to-last publication of the Commission’s Decisions concerning State aid granted to professional football clubs, all announced on 4 July of this year.[1] Contrary to the other “State aid in football” cases, this Decision concerns State aid and taxation, a very hot topic in today’s State aid landscape. Obviously, this Decision will not have the same impact as other prominent tax decisions, such as the ones concerning Starbucks and Apple

Background

This case dates back to November 2009, when a representative of a number of investors specialised in the purchase of publicly listed shares, and shareholders of a number of European football clubs drew the attention of the Commission to a possible preferential corporate tax treatment of the four mentioned Spanish clubs.[2]More...



International and European Sports Law – Monthly Report – September 2016. By Kester Mekenkamp

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. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.


The Headlines

September hosted the very last bit of the sport summer 2016, most notably in the form of the Rio Paralympic Games. Next to the spectacular achievements displayed during these games, in the realm of sports law similar thrilling developments hit town. The first very much expected #Sportslaw highlight was the decision by the German Bundesgerichtshof in the case concerning SV Wilhelmshaven. The second major (less expected) story was the Statement of Objections issued by the European Commission against the International Skating Union.More...


Case note: TAS 2016/A/4474 Michel Platini c. Fédération Internationale de Football Association. By Marine Montejo

Editor's note: Marine Montejo is a graduate from the College of Europe in Bruges and is currently an intern at the ASSER International Sports Law Centre.

On 3 June 2015, Sepp Blatter resigned as President of FIFA after another corruption scandal inside the world’s football governing body was brought to light by the American authorities supported by the Swiss prosecutor office. Two months after Michel Platini announced he would be a candidate for the next FIFA Presidential election, on 25 September 2015, the Swiss prosecutor opened an investigation against S. Blatter on an alleged disloyal payment he authorised to M. Platini. On 8 October 2015, the FIFA Ethics Committee announced both of them were provisionally suspended upon their hearings, a suspension that was later confirmed by CAS. In the end, M. Platini was sanctioned with an eight years ban from all football activities, later reduced to a six years ban by FIFA Appeal Commission on 24 February 2016. In the meantime, he withdrew his candidacy to become the next FIFA President. On 9 May 2016, after M. Platini appealed this sanction, the CAS confirmed the suspension but reduced it to four years, leading to his resignation from the UEFA presidency and the announcement of his intention to challenge the CAS award in front of the Swiss Federal Tribunal.

On 19 September, the CAS finally published the full text of the award in the dispute between M. Platini and FIFA. The award is in French as M. Platini requested that the procedure be conducted in that language. You will find below a summary of the ‘highlights’ of the 63-page decision. More...

International and European Sports Law – Monthly Report – August 2016. By Kester Mekenkamp.

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. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.    


The Headlines

For the world of Sport, the elsewhere known “sleepy month” of August turned out to be the total opposite. Having only just recuperated from this year’s Tour de France, including a spectacular uphill sprint on bicycle shoes by later ‘Yellow Jersey’ winner Chris Froome, August brought another feast of marvellous sport (and subsequent legal drama): The 2016 Olympic Games in Rio de Janeiro.More...


Asser International Sports Law Blog | Blog Symposium: Why FIFA's TPO ban is justified. By Prof. Dr. Christian Duve

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

Blog Symposium: Why FIFA's TPO ban is justified. By Prof. Dr. Christian Duve

Introduction: FIFA’s TPO ban and its compatibility with EU competition law.
Day 1: FIFA must regulate TPO, not ban it.
Day 2: Third-party entitlement to shares of transfer fees: problems and solutions
Day 3: The Impact of the TPO Ban on South American Football.
Day 4: Third Party Investment from a UK Perspective. 

Editor’s note: Finally, the last blog of our TPO ban Symposium has arrived! Due to unforeseen circumstances, FIFA had to reconsider presenting its own views on the matter. However, FIFA advised us to contact Prof. Dr. Christian Duve to author the eagerly awaited blog on their behalf. Prof. Dr. Christian Duve is a lawyer and partner with Freshfields Bruckhaus Deringer LLP and an honorary professor at the University of Heidelberg. He has been a CAS arbitrator until 2014. Thus, as planned, we will conclude this symposium with a post defending the compatibility of the TPO ban with EU law. Many thanks to Prof. Dr. Duve for having accepted this last-minute challenge!


This blog article outlines FIFA’s reasons to introduce Art. 18ter FIFA Regulations on the Status and Transfer of Players (RSTP) which bans third-party ownership of players’ economic rights (TPO). In recent years, TPO was perceived as a threat to the integrity of football competitions within the international football community[i] and has become an area of concern for FIFA. Nevertheless Art. 18ter RSTP has been heavily criticized mainly by the proponents of TPO and a complaint has been filed with the European Commission by the Spanish and the Portuguese Leagues for an alleged violation of EU competition law. In the following it will be shown that such criticism does not sufficiently take into consideration the specific characteristics of the practice of TPO as well as football in general. It explains the rationale behind Art. 18ter RSTP which

-      fosters the integrity of competition which is a priority topic for FIFA,

-      promotes the independence of clubs by preventing third parties’ influence in sporting decisions,

-      leads to stable squads,

-      provides an opportunity for investors to invest in the clubs rather than in single players,

-      leads to financially healthier clubs.

Hence, with the introduction of Art. 18ter RSTP, FIFA pursues legitimate aims which justify the ban of the TPO practice.


1.              FIFA’s Way to Art. 18ter RSTP

TPO covers various situations in which a third party invests in the economic rights of a player in order to receive a compensation with regard to a future transfer. Whilst it is widely used in South America and in Southern Europe as an alternative funding possibility, especially to finance investments in sporting talent,[ii] TPO is explicitly prohibited in England, France and Colombia.[iii] The English ban on TPO was introduced in 2008 after the commotion caused by the Tévez case in 2006 where the contract between Tévez and West Ham United contained a provision giving a third party owner the right to decide on the transfer and the transfer fee of the player without any right to veto by the club.

FIFA has introduced a new rule Art. 18bis RSTP which prohibits clubs to enter into contracts that are liable to jeopardise the club’s independence, its policies or the performance of its teams and freedom of decision-making in employment and transfer-related matters and came into force on 1 January 2008.[iv] However, after having mandated two studies providing data and information on TPO in several countries in 2013 and 2014, it was felt that Art. 18bis RSTP was not sufficient and did not address this subject in an appropriate manner. Therefore FIFA decided to introduce a new Art. 18ter RSTP as from 1 May 2015.

The main provision of Art. 18ter RSTP reads:

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

It has been criticized that Art. 18ter RSTP prevents and restricts competition in the market for capital investment in football in a way that is not proportionate for attaining its legitimate objective and that Art. 18ter RSTP is therefore incompatible with EU Competition law. However, such criticism does not sufficiently take into consideration the specific characteristics of football as will be shown in this blog.


2.              The Rationale of Art. 18ter RSTP

First and foremost, Art. 18ter RSTP protects the integrity of the game itself by allowing for the necessary freedom in the contractual relationship between a club and a player, to determine whether and when the player is fielded as well as to decide independently and for sporting reasons only whether and when they are transferred.

Second, with regard to financial aspects of the clubs, critics undervalue that Art. 18ter RSTP is limited to a prohibition of an investment in a club’s players and does not in any way limit an investment in the clubs themselves leading to financially healthier clubs.

2.1           Art. 18ter RSTP Fosters the Integrity of Football

Art. 18ter RSTP pursues several legitimate aims, inter alia, the integrity of competition (2.1.1.), the independence of clubs (2.1.2.) and the stability of squads (2.1.3.).

2.1.1      Integrity of Competition

The protection of the integrity of the game is not only one of FIFA’s main objectives according to Art. 2 e) of the FIFA Statutes, it was also recognized by the European Commission as a legitimate aim justifying limitations on competition.

With regard to the UEFA rule on the “Integrity of the UEFA Club competitions: Independence of clubs” establishing a ban on the ownership of several clubs participating in the same competition by the same person or company, the European Commission held that the ban was in any case a necessary rule to ensure its legitimate aim of protecting the integrity of sporting competitions by “protecting the uncertainty of the results and giving the public the right perception as to the integrity of the […] competitions with a view to ensure their proper functioning“.[v] Previously, a Court of Arbitration for Sport (CAS) decision has also confirmed the validity of this limitation and found that “when commonly controlled clubs participate in the same competition, the «public’s perception will be that there is a conflict of interest potentially affecting the authenticity of results»” and that “that ownership of multiple clubs competing in the same competition represents a justified concern for a sports regulator and organizer”.[vi]

The danger of such conflicts of interests is, however, not limited to club owners, it extends to investors, agents and coaches. Similar to the situations in which a third party has interests in several clubs participating in the same competition, conflicts of interests can also arise in cases where third parties own shares in economic rights of several players of different teams which are competing against each other.[vii] Especially if a player in which a third party has an economic interest competes against a club that is owned by the same investor, there is a significant potential for such conflicts. Even within the same team, the risk of having the same owner of a number of players presents a competitive integrity risk.[viii]

In any case and irrespective of an actual conflict, a conflict may at least be perceived by the public in connection with TPO. Such perception leads to a loss of confidence in the integrity of the competition and damages the image of the sport. In the light of the increasing threat of match manipulation, the involvement of third-party owners creates a danger to the reputation of the competition that could weaken the football world. The integrity of the game is therefore only guaranteed if players and clubs are not influenced by third parties owning the players’ economic rights with the aim to maximize their investment.[ix]

2.1.2      Independence of Clubs

To ensure the independence of its Members’ affiliated clubs is one of FIFA’s objectives pursuant to Art. 18 para. 2 of the FIFA Statutes. The second TPO study found that “the spread of TPO in the majority of the cases may be closely related to a partial takeover of the clubs’ control by actors seeking primarily short-term profit and speculating on the purchase and sale of economic rights, regardless of sporting concerns”[x]. TPO potentially has an impact on player selection on the field of play and creates complications for transfer negotiations as the clubs’ sporting interests (e.g. of holding a player despite a lucrative offer or of letting a player go without being offered a lucrative transfer fee) may conflict with investors seeking a profitable return on their investment.

Even though interests may coincide if the investor speculates for a rise in the player’s market value (e.g. Santos FC refusing Chelsea FC’s offer for Neymar), one prominent example of conflicting interests is the Tévez case in which West Ham United was deprived of any rights with regard to a future transfer of the player. More recently, contract renewal negotiations with Zambrano, a key player of Eintracht Frankfurt, are jeopardized by a third party whose entitlement to future transfer compensation for Zambrano is to be bought by Eintracht.[xi] 

Overall, the more clubs are depending on TPO financing, the more negotiating power third party investors have. The second TPO study mentions the purchase of economic rights at preferential prices, pre-emptive rights on new players or even greater influence on transfer policy.[xii] Moreover, with players’ economic rights in the hands of various investors the fragmentation of interests within a club increases. The independence of clubs can only be guaranteed by preventing a partial takeover of the clubs’ control by third parties especially with regard to transfers.

2.1.3      Stability of Squads

The aforementioned clash of interests between investors speculating on the purchase and sale of players’ economic rights and clubs reoccurs when it comes to the frequency of transfers. Whereas an investor makes money out of transfers, a club may be more interested in building a stable team and team cohesion for sporting reasons. The Demographic Study of CIES in 2014 found that “in general, the number of transfers carried out by teams during the current season is at an all-time high” and stated that “the increasing speculation surrounding players’ transfers is also visible through the progressive drop in the number of club-trained players, which has attained its lowest level since 2009”.[xiii] Pursuant to the same study, players recruited from January 2013 onwards represented 41.3% of squads on average (10.2 signings per club). At the same time, the best performing clubs generally have the most stable squads. For instance, FC Barcelona has the most stable squad among European top division teams. Its Players have been for 5.5 years in the first team squad on average pursuant to the Demographic Study of CIES in 2014.[xiv]

Leagues and club representatives stressed in the Second TPO study that the increasing gaps between clubs in terms of stability contribute to the general decline in the competitive balance both at national and international level.[xv] FIFA’s overall objective to promote football, laid down in Art. 2 a) of the FIFA Statutes, is endangered by such contractual instability caused by TPO.

2.2           Art. 18ter RSTP Provides an Incentive for Investment in Clubs

Football clubs play the central role with regard to the aforementioned legitimate aims. In order to achieve those objectives, appropriate financing mechanisms are fundamental for football clubs. It is undisputed that clubs need external sources. A solution that takes sufficiently into account the role of the clubs and their needs can only be to finance clubs directly. By prohibiting the TPO of single players’ economic rights, Art. 18ter RSTP creates an incentive for investors to invest in the clubs themselves.

Admittedly, some football clubs have been affected by financial difficulties and thus do not seem to be attractive for investors at first sight. In this context, however, it must be taken into account that clubs that seek regular access to talent by means of TPO are becoming even more and more dependent on the regular injection of funds from external investors which may lead to a “vicious circle of debt and dependence”.[xvi] With a club selling its players’ economic rights to third parties, the value of the respective club’s assets decreases. As a result, it is even harder to find potential investors interested in financing the club.[xvii] Therefore TPO cannot be a sustainable financing option. Improving the overall financial health of club football is a major concern for football associations. Therefore the UEFA Financial Fair Play Regulations (FFP) were established to prevent professional football clubs from excessive spending. Although the regulations only contain disclosure requirements with regard to TPO, they were released in view of a TPO ban.[xviii]

Overall, critics therefore have to take into account that Art. 18ter RSTP prohibits only one single form of investment whilst it promotes at the same time investment in the clubs specifically tailored to the overarching aim of fostering the integrity of the game.


3.              Conclusion

Art. 18bis RSTP has already targeted the aforementioned legitimate aims. However, this provision may be easily circumvented by inserting a clause into the TPO agreement stating that it does not permit any exercise of influence by the third party within the club’s employment and transfer-related matters, policies or performance of its team. In practice, the engaged third parties will interfere with a club’s sporting decisions in many cases despite such a contractual clause. Interviewees in the second TPO study reported that in practical terms, many third­party investors do influence the transfer of players.[xix] Therefore, there is a consensus among football stakeholders that TPO should be restricted. The legitimate aims underlying Art. 18ter RSTP can be achieved most effectively by a total ban of the TPO practice. Whereas critics point to the lack of financing options caused by the prohibition of TPO, this blog has argued that in the specific context of football competitions the integrity of the game benefits from direct investments in the clubs.


[i] Cp. FIFA Circular no. 1420 of 12 May 2014.

[ii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 3.

[iii] Moreover, Poland has a rule which is interpreted by its football association as prohibiting third parties to hold a player’s economic rights with an exception for former clubs, cp. TPO study I, p. 3, 17 et. seq.

[iv] Art. 18bis RSTP, as introduced in 2008, reads:

1.   No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.

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

[v] European Commission, Rejection Decision of 25 June 2002, Case COMP/37 806: ENIC/ UEFA, para. 47.

[vi] Arbitration CAS 98/200 AEK Athens and SK Slavia Prague / Union of European Football

Associations (UEFA), award of 20 August 1999, para. 48 (available at http://jurisprudence.tas-cas.org/sites/CaseLaw/Shared%20Documents/200.pdf).

[vii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p.  9, 81.

[viii] Cp. Third-party ownership of players’ economic rights, Part I., Centre international d’étude du sport, p. 33.

[ix] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 81 et. seq.

[x] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 8.

[xi] Available at: http://www.fr-online.de/eintracht-frankfurt/carlos-zambrano-eintracht-frankfurt-zambrano-deal-gefaehrdet,1473446,29843342.html.

[xii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 88.

[xiii] Available at http://www.football-observatory.com/demographic-study-2014-now.

[xiv] Available at http://www.football-observatory.com/demographic-study-2014-now.

[xv] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 78.

[xvi] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 9.

[xvii] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 88.

[xviii] Available at http://www.uefa.com/community/news/newsid=2064391.html.

[xix] Third-party ownership of players’ economic rights, Part II., Centre de droit et d’économie du sport et Centre international d’étude du sport, June 2014, p. 88.

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