On Wednesday 26 May 2021 from 16.00-17.00 CET, the Asser International Sports Law Centre, in collaboration with Dr Marjolaine Viret (University of Lausanne), is organising its fifth Zoom In webinar on the Court of Arbitration for Sport (CAS) from the perspective of the European Court of Human Rights (ECtHR).

We have the pleasure to be joined by Prof. Helen Keller, former Judge at the ECtHR and a prominent dissenter to the majority’s ruling in the Mutu and Pechstein case.

The ECtHR decision in the Mutu and Pechstein case rendered on 2 October 2018 is widely seen as one of the most important European sports law rulings. It was also the first decision of the Strasbourg court dealing with a case in which the CAS had issued an award. The applicants, Adrian Mutu and Claudia Pechstein, were both challenging the compatibility of CAS proceedings with the procedural rights enshrined in Article 6(1) of the European Convention on Human Rights (ECHR). The court famously declined to conclude that the CAS lacked independence or impartiality, but did find that, insofar as Claudia Pechstein was concerned, she was forced to undergo CAS arbitration and, therefore, that CAS proceedings had to fully comply with the procedural rights guaranteed in the ECHR. In particular, the court held that the refusal by CAS to hold a public hearing, in spite of Claudia Pechstein’s express request, was contrary to Article 6(1) ECHR. Beyond this case, as highlighted by the recent decision of Caster Semenya to submit an application to the ECtHR, the decision opens the way for a more systematic intervention of the Strasbourg court in assessing the human rights compatibility of CAS awards and more broadly of the transnational sports regulations imposed by international sports governing bodies.

Prof. Helen Keller will discuss with us the implications of the ECtHR’s Mutu and Pechstein decision and the potential for future interventions by the court in the realm of the lex sportiva.

The webinar will take the form of an interview followed by a short Q&A open to the digital public. 

Please note the discussion will NOT be recorded and posted on our Youtube channel. 

Register HERE!

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

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

The launch of the formal investigations

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

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

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

The Commission’s press release ordering the State aid recovery

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

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

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

The consequences of the negative and recovery decisions

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

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

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

Conclusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sport events, especially when they are of a global scale, have been facing more and more questions about their impact on local communities, the environment, and human rights. 

It has become clear that their social legitimacy is not a given, but must be earned by showing that sport events can positively contribute to society. During this half-day conference, we will debate the proposal of a European Social Charter for Sport Events in order to achieve this goal. 

In January 2021, a consortium of eight partners launched a three-year project, supported by the European Commission under the Erasmus+ scheme, aimed at devising a European Social Charter for Sport Events (ESCSE). The project ambitions to develop a Charter which will contribute to ensuring that sport events taking place in the European Union are socially beneficial to the local communities concerned and, more generally, to those affected by them. The project is directly inspired by the decision of the Paris 2024 bid to commit to a social charter enforced throughout the preparation and the course of the 2024 Olympics.

This first public event in the framework of the ESCSE project, will be introducing the project to a wider public. During the event we will review the current state of the implementation of the Paris 2024 Social Charter, discuss the expectations of stakeholders and academics for a European Social Charter and present for feedback the first draft of the ESCSE (and its implementing guidelines) developed by the project members. It will be a participatory event; we welcome input from the participants.

The Asser International Sports Law Centre, powered by the Asser Institute, is contributing to the project through the drafting of a background study, which we will introduce during the conference.

Please note that we can provide some financial support (up to 100 euros)  towards travel and/or accommodation costs for a limited number of participants coming from other EU Member States or the UK. To apply for this financial support please reach out to ConferenceManager@asser.nl.  `

Register HERE